Coats Group Plc · LSE:COA
Coats — H1 2024 Earnings Presentation
35 slides from Coats's earnings presentation, Aug 1, 2024
Slide 1: Continued Growth, 18% EBIT Margin, Full Year Upgrades
CONTINUED GROWTH, 18% EBIT MARGIN, FULL YEAR UPGRADES 2024 HALF YEAR RESULTS Thursday 1st August 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 | 2024 HALF YEAR RESULTS 3
Slide 4: Highlights
HIGHLIGHTS RETURN TO GROWTH, STRONG MARGIN PROGRESSION AND FREE CASH FLOW CER revenue up 8% on a further improving trend, Apparel & Footwear returning to growth Continued outperformance – market share gains in Apparel & Footwear Group adjusted EBIT margin of 18%, ahead of 2024 margin target of 17% S
Slide 5: Benefiting from the Recovery
BENEFITING FROM THE RECOVERY WELL POSITIONED FOR THE FUTURE Winning in the Market Controlling the Controllables Planning Ahead Market Programme Effective pricing Disciplined Footprint share gains1 and customer strategy cost control optimisation wins Increasing revenue Winning with BAU self-help Stra
Slide 6: Financial Performance
FINANCIAL PERFORMANCE
Slide 7: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS Acquisition Strategic Projects – 8% revenue growth 18% EBIT margins – synergies further savings ahead of 2024 target $22m identified Continued progress Strong free on pensions de-risking, Interim dividend cash flow 27% EPS growth contributions of 0.93 cents $59m switched off
Slide 8: Key Financial Metrics
KEY FINANCIAL METRICS ACCELERATED SALES AND MARGIN GROWTH H1 2024 H1 20231 Reported change H1 2023 CER CER2 Revenue ($m) Apparel 376 334 12% 329 14% Footwear 198 184 7% 184 7% Performance Materials 167 177 -5% 173 -3% Group 741 695 7% 686 8% Adj. operating profit ($m) Apparel 72 53 34% 52 37% Footwe
Slide 9: Group Operating Profit and Margin
GROUP OPERATING PROFIT AND MARGIN POSITIVE VOLUMES, AND CONTINUED BENEFITS FROM STRATEGIC PROJECTS AND SYNERGIES ($m) 18.0% margin 15.5% margin 1.Estimated. 1.Estimated. COATS GROUP PLC | 2024 HALF YEAR RESULTS 9
Slide 10: Divisional Margins
DIVISIONAL MARGINS APPAREL AND FOOTWEAR MARGINS WELL AHEAD OF 2024 GUIDANCE APPAREL (%) 19.1% Apparel margins up 310bps YOY to 19.1% – 2024 target margin of 15-16% exceeded 18.4%* 16.0% – Volume recoveries driving efficiencies – Strategic project benefits, procurement savings, and one-off exchange g
Slide 11: Income Statement
INCOME STATEMENT 27% EARNINGS PER SHARE GROWTH Exceptional / acquisition related items $m H1 241 H1 231 – Strategic projects – $4m Adjusted EBIT 133 108 – Footwear integration cost - $1m Exceptional / acquisition related items (15) (16) – Acquisition related items – $11m EBIT 118 92 Finance costs up
Slide 12: Cash Flow and Leverage
CASH FLOW AND LEVERAGE STRONG CASH GENERATION DRIVEN BY IMPROVED PROFITABILITY H1 24 CASHFLOW ($m) $m H1 24 H1 23* Adjusted free cash flow 59 51 Pensions (3) (17) Other exceptional (10) (5) Disposals and discontinued operations (1) (1) Dividends paid to equity shareholders (31) (28) Other (6) (3) EB
Slide 13: Pensions
PENSIONS FUNDING AND DE-RISKING UPDATE, FURTHER PROGRESS ACHIEVED Significant progress made in recent years De-risking update Activated ‘off’ trigger in December 2023 – no payments required to be made in 2024 – annualised saving c.$30m 582 20% of liabilities insured via buy-in in December Scheme fun
Slide 14: 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 | 2024 HALF YEAR
Slide 15: 2024 Modelling Guidance
2024 MODELLING GUIDANCE Area Guidance A return to modest inflation levels of raw materials in H2 after some deflation in 2023 and H1 2024. Continued levels of inflation for the remainder of the cost base e.g. labour, energy and freight. Inflation In line with past track record – we anticipate net in
Slide 16: Divisional Performance
DIVISIONAL”. PERFORMANG > —_ me,
Slide 17: Apparel: HY24 Performance
APPAREL: HY24 PERFORMANCE CUSTOMER FOCUS DELIVERING RESULTS Sales Trend Outperforming the Market Quarterly Absolute Sales 1 Continued market share gains – customer and programme wins 200 Millions (USD) 150 Clear market leader in 100% recycled threads – Group sales up 141% to $159m 14% 100 CER growth
Slide 18: Footwear: HY24 Performance
FOOTWEAR: HY24 PERFORMANCE DESTOCKING CYCLE COMPLETE, RETURN TO ROBUST GROWTH Sales Trend Delivering Profitable Growth and Market Share Quarterly Absolute Sales 1 Market share gains & cross-selling success with global leading footwear brands 120 Millions (USD) 100 Operational excellence - margin up
Slide 19: Performance Materials: HY24 Performance
PERFORMANCE MATERIALS: HY24 PERFORMANCE SEQUENTIAL GROWTH; IMPROVING TRENDS Sales Trend Operational Impacts on Margin Regional Sales and Margins Quarterly Absolute Sales1 Adjusted EBIT Margin2 Strong growth in Asia sales (+14%) with EBIT margin > 20% 120 110 10.5%* EMEA at PM target margin level 100
Slide 20: Strategic Update
STRATEGIC UPDATE
Slide 21: Strategic Projects
STRATEGIC PROJECTS ACCELERATED ADDITIONAL BENEFITS, FOR NO EXTRA COST Delivering Efficiencies Benefits Cash Cost March 2022 Original Scope $50m $35m March 2023 Expanded Scope $70m $50m June 2024 New Scope $75m $50m (by 2025) COATS GROUP PLC | 2024 HALF YEAR RESULTS 21
Slide 22: Our New Footwear Facility
OUR NEW FOOTWEAR FACILITY FIRST FULLY INTEGRATED PRODUCTION FACILITY COATS GROUP PLC | 2024 HALF YEAR RESULTS 22
Slide 23: Sustainability
SUSTAINABILITY OUTSTANDING ENGAGEMENT SCORE OF 85% IN ‘YOUR VOICE MATTERS’ SURVEY Energy Materials Waste Water People 49% reduction in Proportion of 86% reduction in 16% increase in 28% females in senior Scope 1 & 2 emissions sustainable materials waste to landfill rate of water recycling leadership
Slide 24: Summary and Outlook
SUMMARY AND OUTLOOK
Slide 25: Highlights
HIGHLIGHTS RETURN TO GROWTH, STRONG MARGIN PROGRESSION AND FREE CASH FLOW CER revenue up 8% on a further improving trend, Apparel & Footwear returning to growth Continued outperformance – market share gains in Apparel & Footwear Group adjusted EBIT margin of 18%, ahead of 2024 margin target of 17% S
Slide 26: Transforming Coats
TRANSFORMING COATS A STRONGER, BETTER BUSINESS Coats re-listed Pension settlement Coats enters Innovation Supply chain flexibility & Covid-19 on LSE reached FTSE 250 Hubs management 2015 Gotex Patrick Yarn ThreadSol North America Commits to Net acquisition Mill acquisition acquisition Crafts disposa
Slide 27: Outlook
OUTLOOK FULL YEAR GUIDANCE RAISED • The Group continues to make good progress and has delivered a first half out-turn above our expectations. As such the Board now expects a full year performance modestly above current market expectations1, as these trends continue. • Whilst a level of uncertainty i
Slide 28: 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 738141 Press *1 to ask a question, *2 to withdraw yo
Slide 29: Appendices
APPENDICES COATS GROUP PLC | 2024 HALF YEAR RESULTS
Slide 30: Sustainability; a Key Commercial Differentiator
SUSTAINABILITY; A KEY COMMERCIAL DIFFERENTIATOR AT THE HEART OF OUR BUSINESS 2022 H1 24 2026 Pillar Metric Baseline ACTUAL TARGET 22% reduction from ENERGY Reduction in Scope 1&2 emissions 182 kTonnes1 49% reduction 2022 baseline MATERIALS % non-virgin oil-based materials 28%2 41% 60% Increase in Wa
Slide 31: 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 32: 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 33: 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 competitors2 Value Real Competitive Advantage Well-Positioned for Key Market Trends
Slide 34: 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 specified2 Other large Other players2 c.80
Slide 35: 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