Coats Group Plc · LSE:COA
Coats — FY2012 Earnings Presentation
54 slides from Coats's earnings presentation, Feb 27, 2013
Slide 1: GPG Group and Coats plc Results presentation for year ending 31 December 2012
GPG Group and Coats plc Results presentation for year ending 31 December 2012 27 February 2013
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 1. GPG Group strategy update 2. GPG Group results highlights 3. Coats overview, strategy and outlook 4. Investment portfolio (excluding Coats) 5. Appendices 1. GPG – additional background 2. Coats – additional background © GPG Group and Coats plc | Financial results for year ending 31 Decembe
Slide 4: GPG Group Strategy Update
GPG Group Strategy Update
Slide 5: Strategy update
Strategy update GPG will be re-launched as Coats – target completion remains the second half of 2013 (subject to internal and external events) A transition plan has been in train for several months and incorporates the following key initiatives: – Reconstitution of the Board to ensure it has the
Slide 6: GPG Group Results Highlights
GPG Group Results Highlights
Slide 7: GPG Group results highlights
GPG Group results highlights GPG total group highlights Shareholders’ funds £434m (31 December 2011: £602m); reduction driven primarily by: – Shareholder returns of £25m (31 December 2011: £92m) – £76m charge in respect of the Coats EC Fine – IAS19 Group pension (Coats and GPG) actuarial losses £4
Slide 8: GPG Group – elements of reported loss
GPG GROUP– ELEMENTS OF REPORTED LOSS GPG Group – elements F O R of T H reported E P E R I O D loss for the period £m £m Continuing activity Coats - Profit after tax before exceptionals 34 - EC fine and interest (76) - Other exceptional items (28) (70) Parent Group - Overheads (21) - Foreign exchange
Slide 9: GPG – simplified balance sheet
G P G ––Ssimplified GPG I M P L I F I E D B Abalance L A N C E S Hsheet EET 31 Dec 2012 31 Dec 2011 £m £m £m £m Operating subsidiaries (book value) - 50 Associated undertakings and joint ventures (book value) - 212 Fixed asset investments available for sale - 202 Held for sale assets 222 66 Current
Slide 10: GPG Group movements in shareholders’ funds
GPG – MOVEMENTS IN SHAREHOLDERS’ FUNDS GPG Group movements in shareholders’ funds £m £m Opening shareholders' funds 602 Shareholder returns – Share buyback (25) Loss for the period EC Fine, including related interest (76) Other profits 73 (3) Movements in unrealised gains reserve Net gains realised
Slide 11: Group employee benefits
Group employee GPG PEN benefits SION SCHEM E A N A LY S I S Movement in the IAS19 deficits since the 2011 year end includes 31 Dec 31 Dec the impact of changes in the discount rate applied to the scheme IAS19 deficit 2012 2011 liabilities (based on AA rated corporate bond interest rates) and the £
Slide 12: Overhead analysis and progress
Overhead analysis OVERHEAD A N A LY S I S &and P R Oprogress GRESS Headcount at 31 December 2012 - 15 executive Year ended Year ended management and administration employees: 31 Dec 2012 31 Dec 2011 £m £m – 3 dedicated investment professionals One-off advisors' fees relating to the - 9 strategic r
Slide 13: Summary and Financial Performance
Summary and Financial Performance
Slide 14: 2012 summary
2012 summary Trading remained largely as anticipated – despite tough market conditions Reported full year sales down 3% but up 2% on constant currency basis H2 2012 saw improvement in revenue (4%1) and operating profit (16%1) on H2 2011. Operating margins rose from 7.2% to 8.0% Reorganisatio
Slide 15: Full year financial performance
Full year financial performance 2012 2011 Before Before $'m exceptional Exceptional Total exceptional Exceptional Total Revenue1 1653 1653 1702 1702 Operating profit / (loss) 127 (132) (5) 144 (12) 132 Profit / (loss) before tax 111 (167) (56) 136 (12) 124 Profit / (loss) after tax 61 (164) (103) 89
Slide 16: Underlying operating performance
Underlying operating performance Total revenue1 950 Six months ended Twelve months ended 850 $'m December YoY%2 December YoY%2 750 YoY YoY YoY YoY 9% 3% 1% 4% 650 Operating profit1 550 815 803 819 834 450 Industrial 58.3 +14% 110.8 (6)% H1 2011 H2 2011 H1 2012 H2 2012 Crafts 8.8 +35% 16.2 (10)% Indu
Slide 17: Industrial performance
Industrial performance Asia & Australasia Industrial performance by region 1 Strong sales growth in second half 2012 20112 YoY% YoY% Continuing inflationary pressures $'m H2 Impacted by EMEA end-user markets Revenue EMEA Asia & Australasia 625 609 3% 6% Tight inventory control by retailers E
Slide 18: Crafts performance
Crafts performance EMEA Crafts performance by region Handknitting key growth driver 2012 2011 1 YoY% YoY% $'m H2 Reorganisation activity on schedule Revenue Remains loss making – but $4m lower EMEA 168 160 5% 9% than 2011. 2013 restructuring to facilitate Americas 311 291 7% 7% further improve
Slide 19: Income statement
Income statement Exceptional items in PBT 2012 2011 – EC fine $120m Before Before $'m exceptional Exceptional Total exceptional Exceptional Total – Reorganisation costs $39m Revenue 1653 1653 1702 1702 – US Environmental $8m Operating profit/(loss) 127 (132) (5) 144 (12) 132 Share of profit of JVs
Slide 20: Reorganisation
Reorganisation Reorganisation activity Reorganisation activity by Division Reorganisation activity on track – 2012 2011 within the $75m outlined in November $'m 2012 Industrial 12.1 0.9 Announced the restructuring of EMEA Crafts 27.8 13.7 Crafts to drive margin improvement. Expect adverse top-li
Slide 21: Retirement and other post-employment defined benefit liabilities
Retirement and other post-employment defined benefit liabilities Funding As at As at $'m 31.12.12 31.12.11 UK scheme triennial valuation on going – UK funded scheme (262) (251) agreement expected in the first half of 2013 US funded defined scheme 37 34 Anticipated that the contributions will inc
Slide 22: Cash flow and leverage
Cash flow and leverage Cash flow (before EC fine) 200 96% cash conversion1 180 7 11 Net working capital % sales reduced from 20 160 17.6% to 17.1% 2 140 Capex at 0.7x depreciation – expected to 39 be below 1x in medium term 120 Free cash flow $45m ($66m pre reorg) $m 100 27 Leverage and liqu
Slide 23: Strategy and Outlook
Strategy and Outlook
Slide 24: Group sales in 2012
Group sales in 2012 Three discrete segments and a global footprint Sales by Division Sales by region * $1.7bn $1.7bn 33%Crafts Asia and $0.5bn $0.7bn Australasia 17% Industrial: Apparel and EMEA $0.4bn Footwear $1.2bn 67% 21% Americas $0.6bn Speciality 16% FY 2012 FY 2012 * Sales are by origin, not
Slide 25: Clothing retail sales and GDP link
Clothing retail sales and GDP link There is a strong link between clothing retail sales and GDP growth; in the US, clothing retail sales growth is approximately 1.5 times GDP growth Source: GDP: Actual - Consensus forecasts; Projected – IMF / CRS: US - Census Bureau, EU15 - Eurostat, JP – METI / Ana
Slide 26: Speciality overview - ‘GDP+’
Speciality overview - ‘GDP+’ A highly fragmented GDP+ market with significant share gain potential Market characteristics Coats strategic agenda Speciality universe approx. $30bn in size, Within $1.8bn market space, Coats is the leader driven by consumer and government in its current speciality
Slide 27: Innovation pipeline
Innovation pipeline We are gaining market share through product and service innovations Coats Colour Express – world’s fastest, most accurate web based colour sampling service Coats Fusion – a fusible yarn that securely attaches seams and buttons via stitching and bonding Coats Ultrabloc – a w
Slide 28: Global key accounts
Global key accounts We work with the world’s leading brands across our apparel, footwear and speciality businesses © GPG Group and Coats plc | Financial results for year ending 31 December 2012 Page 28
Slide 29: The leading global player in textile crafts
The leading global player in textile crafts The crafts offer covers many product types and brands – creative and hobby, plus care and repair. By aggregate, we are already the global leader, but significant growth opportunities exist in individual markets and segments. Handknitting & Crochet Needlecr
Slide 30: Crafts – global leader with opportunities
Crafts – global leader with opportunities Significant growth opportunities exist in individual markets and segments Market characteristics Coats strategic agenda Multiple categories meeting ‘care and repair’ Coats is the market leader and the only global and creative/ recreational needs; estimat
Slide 31: Market share growth
Market share growth Market share increase in key segments and core markets delivered over last three years Coats market share 2010-2012 (%) Industrial Division Crafts Division 26.0 26.5 25.1 21.0 21.2 21.2 22 20.2 19.3 18.0 16.0 16.0 Apparel Footwear Speciality Crafts & Accessories Source: Internal
Slide 32: Strategic hand of cards
Strategic hand of cards 1 Global market leader with robust and defendable business model 2 Well invested asset base with global footprint, reorg programme concluding 3 Technology and innovation capability that differentiates 4 Experienced management team with relevant strength and depth 5 Solid cash
Slide 33: Our three Market Goals
Our three Market Goals The Coats of 2015… The leading The leading global global player in player in speciality textile crafts threads and yarns The leading value added partner to the global apparel and footwear industries …based on a core of world class skills and infrastructure in the enabling unit
Slide 34: Prospects for 2013
Prospects for 2013 • Modest economic growth expected in North America; Asia growth should remain strong; EMEA likely to be subdued • Year on year improvement expected in Industrial sales, partially driven by growth in Speciality (non-apparel and footwear) markets together with product and service in
Slide 35: Investment Portfolio (Excluding Coats)
Investment Portfolio (Excluding Coats)
Slide 36: Value realisation strategy
Value realisation strategy Disposals £ million NZ$ million 2011 Disposals CSR 43 84 Generation and use of funds to date Chrysalis 15 29 Pertama 13 26 Alinta Energy (now Redbank Energy) 11 21 Marshalls 6 12 • Net proceeds from 1 January 2012 to Maryborough SF 6 12 NIB Holdings 5 9 22 February 2013 £3
Slide 37: Remaining investment portfolio
Remaining investment portfolio TOWER INVESTMENT PORTFOLIO (22 February 2013) • Tower has confirmed it has obtained High Court orders in relation to its proposed return of approximately NZ$120m of capital to shareholders Market Investments (excluding Coats) Shareholding Value • GPG’s share of that re
Slide 38: Appendices: GPG background
Appendices GPG background
Slide 39: Detailed pensions analysis
Detailed pensions analysis Appendix 2: Detailed Pensions Analysis Summary of GPG defined benefit pension schemes under IAS19 Coats GPG UK US Other Total Staveley Brunel Group £m £m £m £m £m £m £m Funded schemes Assets - Equities 568.9 43.3 8.3 620.5 84.4 65.9 770.8 - Bonds 711.1 105.1 11.0 827.2 92.
Slide 40: Detailed pensions analysis
Detailed pensions analysis IAS 19 roll forward - 2012 Coats GPG UK US Other Total Staveley Brunel Group £m £m £m £m £m £m £m Included in Coats’ EBITDA current service cost Opening position 1 January 2012 (161.5) 21.7 (61.8) (201.6) (33.5) (30.7) (265.8) £7.5m Income Statement (pre tax) Current servi
Slide 41: Appendices: Coats background
Appendices Coats background
Slide 42: Coats plc – introduction
Coats plc – introduction • No. 1 in sewing thread – largest global manufacturer with +20% market share • No. 1 in textile crafts – largest global player in the market • No. 2 in global zips – second largest supplier to global brands • Only truly global supplier of thread and speciality yarns Coats i
Slide 43: Coats facts
Coats facts • 1 in 5 garments around the world are held together using Coats’ thread • 75 million car airbags are made using Coats’ thread every year • Coats produces enough yarn to knit 65 million scarves a year • Coats produces enough thread to reach around the Equator every 11 minutes • 300 milli
Slide 44: Geographical reach
Geographical reach Coats is ‘at home’ in most countries across the world, with more than 20,000 employees across six continents and 70+ factories and 80 other facilities around the world Countries in which Coats operates Manufacturing sites © GPG Group and Coats plc | Financial results for year endi
Slide 45: Heritage
Heritage Coats is a company with more than 250 years of history 1750s 1812 1826 1896 1986 1990s 2000 2004 James & Clark’s James Merged with Acquired by M&A to strengthen Strategic review: Acquisition Patrick sewing Coats Clark family Vantona Viyella: thread position and non-core by GPG Clark begin t
Slide 46: Vision, goals and principles
Vision, goals and principles Coats vision Goals that will help us • Profitable sales growth achieve our vision • Increased productivity We will be the world leader • Positive teamwork in value added engineered yarns and threads for Principles – the way we • Freedom to operate industrial and consumer
Slide 47: Coats Industrial
Coats Industrial Coats Industrial Division provides thread, yarn and zips for industrial customers in apparel, footwear and speciality markets Industrial 2012 sales: $1.2bn • Apparel • Footwear • Zips • Speciality • Other - Automotive - Embroidery - Bedding and furniture - Trims 10 Key Segments - Wi
Slide 48: Coats Crafts
Coats Crafts Coats provides consumer textile crafts and reaches end-consumers via retailers in a number of Crafts segments Crafts 2012 sales: $0.5bn • Handknitting • Consumer sewing Crafts brands include: • Embroidery • Haberdashery • Crochet • Lifestyle fabrics • Kits • Zips • Other - Kite flying t
Slide 49: Coats is a responsible company
Coats is a responsible company ‘Coats is proud to be a responsible company. But what does responsible mean? To be successful now and in the future, we need not only to be mindful of our financial and operational performance, but also to recognise the role our business plays within society, as part o
Slide 50: Managing responsibly
Managing responsibly We operate to the Employing around Reducing our Supplying high 20,000 people in safe greenhouse gas quality, safe highest ethical and working conditions in emissions by over products for the employment over 70 countries 40% since 2000 manufacture of over standards across w
Slide 51: Behaving responsibly across our businesses
Behaving responsibly across our businesses Our products are manufactured with the We strive to minimise our impact on the utmost focus on quality, reliability and value Seven strategic CR global and local environment for money themes • Our product safety standards are the • Since 2000 we have reduce
Slide 52: Our people
Our people The way we work to achieve our vision is guided by Coats’ strength and market five principles leadership is based on the quality and commitment of Freedom to operate our people Delivery (keep our promises) Openness and honesty Customer led innovation Energy for change Our overal
Slide 53: Health and safety
Health and safety We insist on the highest standards of health and safety across all of our operations. In 2012 we had 0.51 recordable accidents per 100 full time employees, compared with the USA Textile Mills average of 3.5 (OSHA, 2011). © GPG Group and Coats plc | Financial results for year ending
Slide 54: Further information
Further information Coats plc For more www.coats.com information: Coats Industrial www.coatsindustrial.com Coats Crafts www.coatscrafts.com © GPG Group and Coats plc | Financial results for year ending 31 December 2012 Page 54