Coats Group Plc · LSE:COA
Coats — Investor Day (October 2022)
44 slides from Coats's investor day presentation, Oct 11, 2022
Slide 1: Capital Markets Day: Introducing Coats Footwear
CAPITAL MARKETS DAY INTRODUCING COATS FOOTWEAR TUESDAY 11 OCTOBER 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 J
Slide 3: Agenda
AGENDA Rajiv Sharma 01 Overview Group CEO 02 The Market Adrian Elliott President, Apparel & Footwear 60 mins 03 Footwear champion Frank Boettcher MD, Texon & Rhenoflex 04 Value creation Jackie Callaway 05 Financial update Group CFO 80 mins 30 mins 06 Q&A 07 Expert booth sessions Footwear experts COA
Slide 4: Your Presenters
YOUR PRESENTERS Rajiv Jackie Adrian Frank Sharma Callaway Elliott Boettcher CEO CFO President, Apparel MD, Texon & Footwear & Rhenoflex COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 4
Slide 5: Coats Today
COATS TODAY 01 02 03 04 05 06 Global leader Now global Leader in Offsetting 34,000 Asia centric, in industrial leader in sustainability-led inflation through customers in agile supply thread footwear innovation pricing and 100 countries chain components self-help COATS GROUP PLC | 2022 CAPITAL MARKE
Slide 6: Transforming Group to Accelerate Profitable Sales Growth
TRANSFORMING GROUP TO ACCELERATE PROFITABLE SALES GROWTH 2011 revenue split 20212 revenue split (proforma) EBIT margin 8%1 11% 12.8% 25% 14% Factories4 70 50 $1.1bn3 $1.6bn3 50% Employees4 22,000 75% 25% 18,000 Warehouses 100 90 Apparel PM FW COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 1. Estimated C
Slide 7: Key Footwear Messages
KEY FOOTWEAR MESSAGES +7-8% Attractive Footwear market growth 3x increase Complementary capabilities in TAM 23% combined Strong competitive position share >20% mid-term Footwear Leading growth and profitability targets EBIT target COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 7 SOURCE: Coats leadership
Slide 8: An Attractive Market
AN ATTRACTIVE MARKET Market structure 88% of global footwear Strong brand component Focus on engineered production now in Asia specification – 90%+ products – highly brand specific differentiated Macro trends Performance and athleisure Sustainability & innovation – Brand-led supplier footwear – grow
Slide 9: Footwear Market Size and Segmentation
FOOTWEAR MARKET SIZE AND SEGMENTATION Attractive retail market Footwear market size Footwear retail market, $b Total addressable market, $b 4% volume 0.6 1.8 growth* 0.6 576 609 488 543 +7-8% value 0.6 growth* 2022 2023 2024 2025 Threads Structural Structural Post- FW insoles acquisition components
Slide 10: Accelerating Sales Growth
ACCELERATING SALES GROWTH Historical CAGR Medium-term CAGR Footwear c.8% 3-4% Apparel 3-4% Performance Materials 6-9% 6-9% Group c.4-5% c.6% COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 10 SOURCE: Coats leadership team
Slide 11: Creating the Global Footwear Champion
CREATING THE GLOBAL FOOTWEAR CHAMPION $205m1 $145m $77m Focus on premium quality, sports & athleisure brands Similar focus Sustainability & innovation at the core Strong SEA2 presence Complementary Threads leader Insoles products and Strong profitability ProWeave Upper RhenoprintTM capabilities Viet
Slide 12: The Footwear Opportunity
THE FOOTWEAR OPPORTUNITY COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 12
Slide 13: Footwear - Energetic, Passionate and Financially Attractive
FOOTWEAR - ENERGETIC, PASSIONATE AND FINANCIALLY ATTRACTIVE COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 13
Slide 14: Footwear - Energetic, Passionate and Financially Attractive
FOOTWEAR - ENERGETIC, PASSIONATE AND FINANCIALLY ATTRACTIVE COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 14
Slide 15: Accessories | Luxury, Sustainability and Modern-Day Lifestyle
ACCESSORIES | LUXURY, SUSTAINABILITY AND MODERN-DAY LIFESTYLE COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 15
Slide 16: An Attractive Market That Plays to Our Strengths
AN ATTRACTIVE MARKET THAT PLAYS TO OUR STRENGTHS Large and growing retail Outperforming Sports Importance of quality, market with solid margins and Athleisure brands innovation and sustainability 7-8% p.a. Up to 13% p.a. +65% of consumers growth ’22-25 growth for top brands preferring sustainable br
Slide 17: Favourable Market Structure
FAVOURABLE MARKET STRUCTURE Geographical Strong brand component Engineered Clear winning consolidation specification products category 88% of global footwear ~90% of top sportswear Highly technical products Sports and athleisure manufacturing in Asia brands specify suppliers (i.e., Nike Air Force 1
Slide 18: Acquisitions Open New Market Opportunities
ACQUISITIONS OPEN NEW MARKET OPPORTUNITIES Total addressable market, $bn 3.8 c.2.0 0.6 1.8 Other adjacencies 0.6 0.6 + + New Pre-acquisition Structural Structural Post-acquisition Knitted/woven Post Acquisition markets TAM (Threads) Footwear Insoles TAM uppers1 TAM (inc uppers) Components COATS GROU
Slide 19: Iconic Brands; Passionate Consumers
ICONIC BRANDS; PASSIONATE CONSUMERS Adidas Samba: timeless classic: 1949 Dr Martens: Revenue £0.3bn to >£0.9bn Nike Air Force 1: Launched 1982. Revenue >$0.8bn COATS GROUP PLC | 2022 CAPITAL MARKETS DAY OnRunning: Founded 2010, 19 2021 Revenue >$0.7bn
Slide 20: Global Footwear Component Champion
GLOBAL FOOTWEAR COMPONENT CHAMPION COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 20
Slide 21: Coats Footwear Threads
COATS FOOTWEAR THREADS No.1 Premium thread leader Quality products for >300 global brands 25% market share 48% of our combined footwear business COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 21 SOURCE: Coats leadership team
Slide 22: The World's Leading Footwear Components Supplier
THE WORLD’S LEADING FOOTWEAR COMPONENTS SUPPLIER Combining three successful businesses and creating the world’s leading Footwear components supplier COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 22
Slide 23: More Than the Sum of Its Parts
MORE THAN THE SUM OF ITS PARTS Heel grip Uppers Heel Interlining Counters Non-woven Insoles Leather Alternatives Fashion Cellulose Reinforcements Rhenoprint insoles Eyelets Toe Puffs Threads Zips Composites Yarns COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 23 SOURCE: Coats, Texon, Rhenoflex
Slide 24: Serving Leading Brands and 2,600 Vendors
SERVING 300 LEADING BRANDS AND 2,600 VENDORS COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 24 SOURCE: Coats, Texon, Rhenoflex leadership teams
Slide 25: Customer and Investor Value Creation
CUSTOMER AND INVESTOR VALUE CREATION COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 25
Slide 26: The World's Leading Footwear Components Partner
THE WORLD’S LEADING FOOTWEAR COMPONENTS PARTNER USP 01 02 03 04 05 Enhanced Accelerated Expanded Improved Deep product sustainability/ global technical customer portfolio innovation footprint support relationships Customer Benefits Better Faster delivery Speed to Higher Trust and products of ESG goa
Slide 27: Market Leading Products
MARKET LEADING PRODUCTS COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 27
Slide 28: Complementary Product Portfolio
COMPLEMENTARY PRODUCT PORTFOLIO1 EYELETS THREADS WOVEN UPPERS HEEL COUNTERS TOE PUFFS ORTHOPEDICS NON-WOVEN INSOLES CELLULOSE INSOLES COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 1. Picture excludes Coats yarns and composites and Rhenoflex Lifestyle 28 SOURCE: Coats, Texon, Rhenoflex
Slide 29: Attractive Prices and Premiums
ATTRACTIVE PRICES AND PREMIUMS Casual Performance HEEL HEEL COUNTERS COUNTERS 18c 10c THREADS THREADS 9c 20c TOE PUFFS 6c TOE PUFFS 9c COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 29 SOURCE: Coats, Texon, Rhenoflex leadership teams
Slide 30: Accelerated Sustainability & Innovation
ACCELERATED SUSTAINABILITY & INNOVATION lattice lite eco Sustainability Innovation Net zero by 2050 Recycled nylon threads EcoVerde 100% recycled Fibre-reinforced composites ProWeave Reform 2.0 >67% recyclable and renewable Verde Zero waste by 2025 Ecostrobe Proprietary zero-waste production 15 inno
Slide 31: Our Global Footprint
OUR GLOBAL FOOTPRINT 11 manufacturing plants1 Strong manufacturing, commercial and technical presence in all key markets Strengthening footprint in growing geographies Indonesia, Vietnam, India, Bangladesh Coats Texon Rhenoflex COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 31 SOURCE: Coats, Texon, Rhen
Slide 32: Leading Competitive Position
LEADING COMPETITIVE POSITION Thread Structural components Leading position in a highly c.23% fragmented market c.25% Coats Footwear now on a different scale Long tail of other, smaller players1 Other large players1 COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 1. Illustrative, based on estimated revenu
Slide 33: Customer Testimonials
CUSTOMER TESTIMONIALS COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 33
Slide 34: Superior Customer and Investor Value
SUPERIOR CUSTOMER AND INVESTOR VALUE Above market top line growth Leading profitability Enhanced product portfolio Connecting sales teams + + Accelerated sustainability Integrating G&A activities & innovation + + c.8% Leveraging procurement 20%+ Global footprint & support c.6% + 16% + Deep customer
Slide 35: Financial Update
FINANCIAL UPDATE COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 35
Slide 36: H1 Recap: Outstanding Results
H1 RECAP: OUTSTANDING RESULTS Accelerating sales and profits Price/mix Adjusted Strong cash Strategic Accelerating and self-help operating generation; projects sales growth programmes profit $125m 0.8x leverage1 momentum Offsetting Margins H1 $5m Up 19% Adj. FCF $30m inflation up 180bps FY $15m COAT
Slide 37: Acquisition Metrics
ACQUISITION METRICS Pre-synergies Post-synergies* Metrics Combined Combined EV/EBITDA Multiples 10x 8x Purchase price $354m ROIC (Dec-27E) 14% 16% Payback Period (years) c.8 c.7 IRR c.17% c.19% COATS GROUP PLC | 2022 CAPITAL MARKETS DAY * $11m announced synergies 37 Texon debt financed, and Rhenofle
Slide 38: Footwear Financials
FOOTWEAR FINANCIALS Proforma, 2021 Mid-term expectations Combined c8% Sales CAGR Sales $m 185 132 66 383 >20% EBIT margin EBIT >20% 13% 10% c.16% % COATS GROUP PLC | 2022 CAPITAL MARKETS DAY Note : The Coats footwear segmental split in these numbers are based on an initial desktop exercise which wil
Slide 39: Group Revenue Growth
GROUP REVENUE GROWTH Historical CAGR Mid-term goal Footwear c.8% 3-4% Apparel 3-4% Performance Materials 6-9% 6-9% Group 4-5% c.6% COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 39 SOURCE: Coats leadership team
Slide 40: Group EBIT Margin
GROUP EBIT MARGIN 2019 EBIT margins 2024 goal Footwear >20% 14.7%1 Apparel 15-16% Performance Materials 12.8%1 13-14% Group 14.3% c.17% COATS GROUP PLC | 2022 CAPITAL MARKETS DAY Note : Coats footwear segmental split based on Coats' estimates. Full segmental reporting (with comparatives) from 1 Jan
Slide 41: Capital Allocation Policy
CAPITAL ALLOCATION POLICY 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 | 2022 CAPITAL MARKETS DAY 41 SOURCE: Coa
Slide 42: Key Messages
KEY MESSAGES +7-8% Attractive Footwear market growth 3x increase Complementary capabilities in TAM 23% combined Strong competitive position share >20% mid-term Footwear Leading growth and profitability targets EBIT target COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 42 SOURCE: Coats leadership team, S
Slide 43: Q&A Session
Q&A SESSION 30 minutes COATS GROUP PLC | 2022 CAPITAL MARKETS DAY 43
Slide 44: Our Booth Presenters
OUR BOOTH PRESENTERS Group 3 Group 1 Group 2 Group 4 Sustainability Footwear Luxury & Lifestyle New Markets & Innovation Marco Sonya Paul Gunter De Gier Manolova Mallory Scharfenberger Bryan Alberto Paul Kim Garth Whitfield Meloni Jackson Roksana Matt Robert Mike Samborska- Neville Grüneberg Hitchen