Coats Group Plc · LSE:COA
Coats — FY2019 Earnings Presentation
36 slides from Coats's earnings presentation, Mar 5, 2020
Slide 1: 2019 full year results presentation
2019 full year results presentation Thursday 5 March 2020
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 2019 full year results presentation Introduction Financial performance Business review and outlook © Coats Group plc | 2019 full year results presentation | 5 March 2020 Page 3
Slide 4: Introduction: another year of significant strategic and financial progress
Introduction: another year of significant strategic and financial progress Strong margin Pharr HP and cash acquisition growth Progress in Strong Delivering innovation balance sheet self-help and to fund future initiatives sustainability growth © Coats Group plc | 2019 full year results presentation
Slide 5: Financial performance
Financial performance Simon Boddie
Slide 6: Overview
Overview Reported $m unless otherwise stated 2019 CER 1 Organic 1 change Revenue 1,389 (2)% 1% 1% Operating profit 2 198 2% 5% 6% Operating margin % 14.3% 50bps 50bps 60bps EPS (cents) 2 7.0 1% Free cashflow 3 107 11% ROCE 42.3% (30)bps Dividend per share (cents) 1.85c 11% KPI 1 On a CER basis (2018
Slide 7: Operating review: continued margin progression
Operating review: continued margin progression Revenue CER 1 Organic 1 $m 2019 2018 change % change % Asia 3% growth – strong performance in key A&F markets Americas 5% decline – difficult trading conditions in Latin Asia 800 777 3% 3% America Crafts (albeit improving in H2) and lower Transporta
Slide 8: Segmental overview
Segmental overview Revenue growth across both segments 2019 2018 1 Organic 4 change % though slower in H2 due to macro Revenue 2 ($m) impacts Apparel and footwear 1,063 1,053 1% Apparel and footwear profit up 9% Performance materials 326 321 1% slightly ahead of the overall Group Total 1,389 1,3
Slide 9: Income Statement
Income Statement • Exceptional / acquisition related items $m 2019 reported 2018 reported - Significantly reduced year-on-year Adjusted operating profit 198 195 - 2019 includes $8m of final C4G spend, $2m Exceptional / acquisition related items (7) (48) acquisition related costs, partially offset by
Slide 10: Cash flow and leverage
Cash flow and leverage $107m adj. free cash flow: 11% year-on-year growth $m 2019 2018 underpinned by operating profit growth, controlled NWC, Adj free cash flow 107 96 lower tax and interest spend Pensions (27) (24) Capex spend $44m (2018: $48m): 1.2x depreciation and Discontinued 32 7 amortisa
Slide 11: Coronavirus update
Coronavirus update • Monitoring situation closely – priority is employee safety, business continuity and supporting our global customer base • Impact to date for Coats is China operations (mainly A&F) • 12% group sales • 4 out of 50 facilities: all now back open – full capacity expected by end of Ma
Slide 12: Robust financial delivery: key takeaways
Robust financial delivery: key takeaways Strong Continued cash Balance margin delivery sheet expansion optionality $107m FCF +60bps 11% ROCE dividend 42% growth © Coats Group plc | 2019 full year results presentation | 5 March 2020 Page 12
Slide 13: Business review
Business review Rajiv Sharma
Slide 14: Coats today: the world's leading industrial thread manufacturer
Coats today: the world’s leading industrial thread manufacturer A lean and focused B2B business Apparel and Performance Customers include Materials Customers include Footwear (A&F) Apparel, footwear and High technology threads accessories thread and yarns for a variety of Zips and trims produc
Slide 15: Apparel and Footwear: $1bn business and global market leader
Apparel and Footwear: $1bn business and global market leader Apparel and Footwear Threads Coats Digital Zips and Trims c.2% c.$100m 2019: 21% Estimated +1% Coats share: (2011: 17%) Large opportunity - $400bn factory gate prices Increase margins and 2019 Coats c.$900m cash sales: $1bn+ addressable ma
Slide 16: Apparel and Footwear – 2019 review: ongoing share gains in thread
Apparel and Footwear – 2019 review: ongoing share gains in thread 1% revenue growth: 2% on like-for-like basis Mixed retailer sentiment – US-China trade wars exacerbating Continued market share gains in thread – High quality products at speed – Customer service at the core of our offering Co
Slide 17: Performance Materials: five attractive and different end-use segments
Performance Materials: five attractive and different end-use segments Building scale and presence Household and Other Industrial Personal Protection Telecoms and Energy Transportation Recreation Applications Includes Personal Protection Telecoms Trims and safety critical Bedding & Quilting Tea Bags
Slide 18: Personal Protection: now a market leader in North America
Personal Protection: now a market leader in North America $1bn addressable market attractive growth drivers (mid-high single digits) Digital blend innovation – flame/cut resistant products for extreme personal protection End uses include fire protection, cut resistance, thermal protection, def
Slide 19: Telecoms and Energy: market fundamentals remain attractive
Telecoms and Energy: market fundamentals remain attractive Thread based solutions for the Telecoms and Oil & Gas sectors $0.4bn addressable market Water-blocking and coated textile fibre technology solutions Reinforcing, insulating and protecting optical fibre and power cables incl. steel repl
Slide 20: Innovation: network of innovation hubs now operational
Innovation: network of innovation hubs now operational Building on our existing innovative culture Innovation infrastructure / ecosystem now largely in place, three global hubs, new talent hired Driving incremental sales, $16m in 2019 as hubs begin to impact Strong pipeline, further incremen
Slide 21: Sustainability: significant commercial differentiator – on track for 2022 targets
Sustainability: significant commercial differentiator – on track for 2022 targets “We expect our partners to have clear goals and targets in this space. Coats is doing a great job” Coats customer 2022 targets This is the right thing to do – aligned to Coats’ 2019: foundations in place to deliver
Slide 22: Acquisitions: building a strong track record
Acquisitions: building a strong track record May 2015 May 2016 June 2016 December 2017 February 2019 February 2020 Six deals now completed in chosen focus areas of Coats Digital and Performance Materials – business cases on track $120m total consideration delivering (pro-forma) incremental annua
Slide 23: Outlook
Outlook • We enter 2020 as a lean and agile organisation, having delivered significant positive strategic change through 2019 • We are well placed to take advantage of the fast-paced and rapidly changing modern world, by capturing the many opportunities this presents to Coats as a truly global busin
Slide 24: In summary
In summary Good Our market delivery in fundamentals mixed remain strong macros Innovation, Delivering digital and Investing in self-help sustainability most initiatives key to ongoing attractive success opportunities © Coats Group plc | 2019 full year results presentation | 5 March 2020 Page 24
Slide 25: Appendices
Appendices
Slide 26: Financial guidance
Financial guidance Area Guidance Capital expenditure • $45-55m in 2020 (including Pharr HP) Foreign exchange • Based on 31/12/19 rates, minimal FX translation effect expected in 2020 • Primary FX rates to consider (local operations reporting their books in these currencies); INR, CNY, TRL, EUR, BRL
Slide 27: 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 28: Apparel and Footwear: a global leader – winning with the winners
Apparel and Footwear: a global leader – winning with the winners Unrivalled customer connections $1bn sales 4,000 brands 30,000 direct Operational scale with with 4% customers global CAGR* reach → Consistent Compelling, share gains in value adding thread products and services threads, engineered yar
Slide 29: Understanding the thread market landscape
Understanding the thread market landscape Size and structure A critical component in a Segmentation Consistent but moderate market global, agile industry Economy to premium growth $$$ 21%* 10-12 regional + Market value* ‘000s Specification local players $4.2bn # 2 and 3 Open spec Specified players 1
Slide 30: Software solutions – a clear opportunity to add value for our partners
Software solutions – a clear opportunity to add value for our partners Market opportunity Our solutions Case study Significant value chain waste Up to 25% of $400bn factory gate prices Market leader in Highly transactional production planning 20 million+ orders from Brands/Retailers on (key to servi
Slide 31: Pioneering a sustainable future: committed to leadership
Pioneering a sustainable future: committed to leadership, building on excellent progress to date 5 key priorities, with clear and ambitious 2022 targets, to drive accelerated progress WATER ENERGY EFFLUENT & SOCIAL LIVING EMISSIONS SUSTAINABLY Managing a precious Renewables for a Safe and sustainabl
Slide 32: Our key production steps
Our key production steps © Coats Group plc | 2019 full year results presentation | 5 March 2020 Page 32
Slide 33: Proven resilience to macro shocks: the Global Financial Crisis case study
Proven resilience to macro shocks: the Global Financial Crisis case study Our industry was not immune in the GFC – however, after an immediate de-stocking there was a rapid bounce back – reflecting the nature of the fundamentally critical products we supply (eg clothing and footwear) – Coats came ou
Slide 34: Cost base
Cost base Full year 2019 pre-exceptional costs Materials: raw materials (polyester, nylon, cotton) and intermediates (grey thread); direct materials (dyes, cones) and bought-in finished goods (craft products) Labour (mfg): ongoing inflationary pressures in the locations in which we operate Ene
Slide 35: 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 36: For more information
For more information Rob Mann Head of Investor Relations +44 20 8210 5175 rob.mann@coats.com