Slide 1: Strong Margin Performance, 17% Achieved in H2 – 2023 Full Year Results
STRONG MARGIN PERFORMANCE, 17% ACHIEVED IN H2 2023 FULL YEAR RESULTS Thursday 7 March 2024
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 Financial Performance 03 Divisional Performance 04 Strategic Update 05 Summary and Outlook 06 Appendices COATS GROUP PLC | 2023 FULL YEAR RESULTS 3
Slide 4: Highlights
HIGHLIGHTS STRONG MARGIN AND FREE CASH FLOW, CONTINUING MARKET SHARE GAINS Continued outperformance - market share gains in Apparel and Footwear of c.200bps each 2024 Group adjusted EBIT margin target of 17% achieved in H2 Clear global market leader in 100% recycled thread products - revenue +44% to
Slide 5: Positioned to Accelerate into the Recovery
POSITIONED TO ACCELERATE INTO THE RECOVERY GETTING FITTER Positioned Winning in the Market Controlling the Controllables for Growth Market Programme Effective pricing Further synergies; Portfolio mix share gains1 and customer strategy Footwear footprint improvements wins consolidation (e.g. zips) In
Slide 6: Market Context
MARKET CONTEXT INVENTORY NORMALISING, GRADUAL RECOVERY ANTICIPATED IN 2024 GLOBAL APPAREL & FOOTWEAR WHAT BRANDS ARE SAYING BRANDS INDEXED INVENTORIES 170 160 150 Normalisation of inventories through H2 “Puma: Together with sustained demand for PUMA products in 2023 this led to a further normalisati
Slide 7: Great Place to Work
GREAT PLACE TO WORK ONE OF THE WORLD’S BEST 25 PLACES TO WORK COATS GROUP PLC | 2023 FULL YEAR RESULTS 7
Slide 8: Financial Performance
FINANCIAL PERFORMANCE
Slide 9: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS 2024 margin target Pricing/ Strategic delivered – despite Self-help/ projects and lower volumes Inflation synergies Well controlled Strong free Pensions interest cash flow contributions and tax $131m switched off 1.Estimated. COATS GROUP PLC | 2023 FULL YEAR RESULTS 9
Slide 10: Key Financial Metrics
KEY FINANCIAL METRICS EBIT MAINTAINED DESPITE INDUSTRY VOLUME PRESSURES FY 2023 FY 20224 Reported change CER1 Organic3 Revenue ($ million) Apparel 689 818 -16% -12% -12% Footwear 368 300 23% 24% -16% Performance Materials 336 420 -20% -17% -17% Group 1,394 1,538 -9% -6% -14% Adj. EBIT2,5 ($ million)
Slide 11: Group EBIT and Margin
GROUP EBIT AND MARGIN HOLDING PRICING AND SELF-HELP ACTIONS OFFSETTING INFLATION 15.1% margin 16.7% margin $51m price and productivity benefits more than offsetting $6m inflation 1.Estimated. COATS GROUP PLC | 2023 FULL YEAR RESULTS 11
Slide 12: Divisional Margins
DIVISIONAL MARGINS GROUP MARGIN GOAL OF 17% ACHIEVED IN H2 – ONE YEAR AHEAD OF TARGET APPAREL (%) Apparel margins up 150bps YOY to 17.5% 17.5% 16.0% – 2024 target margin of 15-16% exceeded, despite volume headwinds – Pricing and procurement initiatives offsetting inflationary pressures – Strategic p
Slide 13: Income Statement
INCOME STATEMENT EARNINGS MAINTAINED YOY DESPITE INDUSTRY VOLUME HEADWINDS Exceptional / acquisition related items $m 20231 20221 – Strategic projects – $18m (net of $6m property profit) Adjusted EBIT 233 233 – Footwear integration cost - $6m Exceptional / acquisition related items -49 -52 – Acquisi
Slide 14: Cash Flow and Leverage
CASH FLOW AND LEVERAGE STRONG CASH GENERATION UNDERPINNED BY WORKING CAPITAL FOCUS 2023 CASHFLOW ($m) $m FY 2023 FY 2022 Adjusted free cash flow 131 114 Pensions (49) (43) Acquisitions - (346) Other exceptional (13) (22) Disposals and discontinued operations (5) (27) Dividends paid to equity shareho
Slide 15: Pensions
PENSIONS FUNDING AND DE-RISKING UPDATE Significant progress made in recent years Future De-risking Activated ‘off’ trigger in December 2023 – c.£2m per month cash saving in 2024 582 Excellent progress on de-risking journey – 20% of liabilities insured Scheme funding deficit (£m) Cash paid to pension
Slide 16: Reinvesting to Compound Growth
REINVESTING TO COMPOUND GROWTH CAPITAL ALLOCATION Acquisitions Paying a Reinvesting in Supporting in line with progressive organic growth pensions disciplined dividend strategy WHILST MAINTAINING A STRONG BALANCE SHEET (TARGET LEVERAGE RATIO OF 1-2X NET DEBT EBITDA) COATS GROUP PLC | 2023 FULL YEAR
Slide 17: 2024 Modelling Guidance
2024 MODELLING GUIDANCE Area Guidance Modest levels of raw material, freight and energy inflation after some deflation in 2023. Continued levels of inflation on the remainder of our cost base e.g. labour. Inflation, sourcing and productivity savings In line with our past track record – we anticipate
Slide 18: Divisional Performance
DIVISIONA V4 PERFORMA b “ -
Slide 19: Apparel: FY23 Performance
APPAREL: FY23 PERFORMANCE MARKET SHARE GAINS AND MARKET OUTPERFORMANCE Sales Trend Improving Trend in H2 Half-year Absolute Sales 1 Margin up 150bps YOY to 17.5%, target achieved a year early 450 400 Gradual Millions (USD) Sales significantly outperforming the market 350 recovery 300 underway Sequen
Slide 20: Footwear: FY23 Performance
FOOTWEAR: FY23 PERFORMANCE PREPARED FOR THE RECOVERY, 2024 MARGIN TARGET ACHIEVED Sales Trend Texon & Rhenoflex; Exceeding Synergies Half-year Absolute Sales 1 Efficiencies driving Footwear margin performance; 2024 target of 20% surpassed 225 Cycle Millions (USD) Ahead of expectations; integration s
Slide 21: Higher Growth Business in Attractive Markets
HIGHER GROWTH BUSINESS IN ATTRACTIVE MARKETS A STRONG TRACK RECORD OF ACQUISITION VALUE CREATION Financial highlights Strategic highlights Pre-acquisition 12% Created global leader Expands presence in EBIT Margin 01 in footwear 04 high-growth premium (%) FY23 actual 16% footwear market Accelerated i
Slide 22: Performance Materials: FY23 Performance
PERFORMANCE MATERIALS: FY23 PERFORMANCE INSOURCING AND US CUSTOMER PHASING - FOCUS ON SELF-HELP ACTIONS Delivering in Sales Trend Self-help Driving Margin Improvement Challenging Markets Half-year Absolute Sales1 Adjusted EBIT Margin Transforming operations: Solving US labour issues, transferring pr
Slide 23: Strategic Update
STRATEGIC UPDATE
Slide 24: Our Approach to Growth & Acquisitions
OUR APPROACH TO GROWTH & ACQUISITIONS ACCELERATE AND TRANSFORM Organic growth M&A opportunities Capex invested in higher growth segments Accretive targets of scale; strong strategic fit; & to optimise operational performance high EBITDA margins & attractive synergies Higher-growth Three pillars of H
Slide 25: Strategic Projects
STRATEGIC PROJECTS DELIVERING SIGNIFICANT EFFICIENCIES What we are delivering COST BASE EFFICIENCY – On track for $70m savings by 2024 as guided – $37m savings delivered in FY 23, $57m cumulatively delivered since 2022 – Cash cost to deliver now expected to be $35-$40m, considerably less than previo
Slide 26: Optimisation of the Footprint
OPTIMISATION OF THE FOOTPRINT UK Germany Estonia Poland Ukraine Russia US (Hendersonville) Hungary US (Sevier) Partial downsizing Spain Romania US (McAdenville) Italy China Turkey Mexico (Orizaba and Huamantla) Vietnam Mexico (Toluca) Brazil Indonesia South Africa Madagascar and FY22: Divestment/Clo
Slide 27: Sustainability
SUSTAINABILITY SUBSTANTIALLY DELIVERING AGAINST AMBITIOUS 2026 TARGETS Energy Materials Waste Water 39% reduction in Proportion of 37% reduction in 14% increase Scope 1 & 2 emissions sustainable materials waste to landfill in rate of water in 2023 increased to 29% recycling COATS GROUP PLC | 2023 FU
Slide 28: Summary and Outlook
SUMMARY AND OUTLOOK
Slide 29: Highlights
HIGHLIGHTS STRONG MARGIN AND FREE CASH FLOW, CONTINUING MARKET SHARE GAINS Continued outperformance - market share gains in Apparel and Footwear of c.200bps each 2024 Group adjusted EBIT margin target of 17% achieved in H2 Clear global market leader in 100% recycled thread products - revenue +44% to
Slide 30: Outlook
OUTLOOK GRADUAL MARKET RECOVERY; CONFIDENT OF 17% MARGIN • Expect to make good progress in 2024 underpinned by modest revenue growth, with a weighting to H2, as Apparel and Footwear gradually recover, and with increasing tender activity in Performance Materials. • Our continued focus on controlling
Slide 31: The Q&A Session Will Begin Shortly
If you would like to ask a question, please dial THE Q&A United Kingdom +44 800 358 1035 SESSION United Kingdom (local) +44 20 3936 2999 WILL BEGIN United States United States (local) +1 855 979 6654 +1 646 664 1960 SHORTLY Participant access code 573832 COATS GROUP PLC | 2023 FULL YEAR RESULTS 31
Slide 32: Appendices
APPENDICES
Slide 33: Sustainability; a Key Commercial Differentiator
SUSTAINABILITY; A KEY COMMERCIAL DIFFERENTIATOR AT THE HEART OF OUR BUSINESS 2022 2023 2026 Pillar Metric ACTUAL TARGET Baseline 22% reduction from ENERGY Reduction in Scope 1&2 emissions 182 kTonnes1 39% reduction 2022 baseline MATERIALS % non-virgin oil-based materials 25%1 29% 60% Increase in Wat
Slide 34: Apparel Overview
APPAREL OVERVIEW GLOBAL LEADER IN APPAREL THREAD WITHIN A FRAGMENTED MARKET Leading Market Share Strong Market Positioning (% of Coats revenue) c.251% Long tail of other, Premium smaller players1 Mid-market #2 and 3 competitors1 Value Real Competitive Advantage Well-Positioned for Key Market Trends
Slide 35: Footwear Overview
FOOTWEAR OVERVIEW GLOBAL LEADER IN FOOTWEAR THREAD AND STRUCTURAL COMPONENTS Leading Market Share Sole-source Positions Specified for Life of Product Threads Structural Components Long tail of other, International sports c.29%1 c.25%1 smaller players2 brand specified1 Other large Other players2 c.80
Slide 36: Performance Materials Overview
PERFORMANCE MATERIALS OVERVIEW BUILDING PRESENCE IN THREE ATTRACTIVE MARKET SUB-SEGMENTS Personal Protection Composites Performance Thread Global adoption of safety standards 5G / cloud computing / data centres GDP+ growth KEY DRIVERS Requirements for enhanced protection Drilling: on-shore / offshor
Slide 37: Update on Pricing, Self-Help and Inflation
UPDATE ON PRICING, SELF-HELP AND INFLATION SIGNIFICANT MARGIN UNDERPINNING DESPITE DEFLATION PRICING POWER CONTINUES $19m Raw materials $18m Price/mix Productivity benefits $6m Freight $33m (manufacturing and sourcing) $(31)m Labour & energy $6m COST INCREASES $51m OFFSET FROM ACTIONS COATS GROUP PL