Coats Group Plc · LSE:COA
Coats — H1 2014 Earnings Presentation
36 slides from Coats's earnings presentation, Aug 13, 2014
Slide 1: GPG Group and Coats plc Results presentation for half year ending 30 June 2014
GPG Group and Coats plc Results presentation for half year ending 30 June 2014 13 August 2014
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 GPG – Update – Pensions and overheads Coats – Highlights – Financial performance – Outlook Appendices – Coats strategy – Pensions © GPG Group and Coats plc | Results presentation for half year ending 30 June 2014 Page 3
Slide 4: GPG Update, pensions and overheads
GPG Update, pensions and overheads
Slide 5: Update
Update Group performance Net attributable profit of £8m (H1 2013: £9m loss from continuing activities) Net asset backing per share of 28.4p (31 December 2013: 31.5p) Coats Net profit attributable to GPG of £11m (US$19m) (H1 2013: £4m (US$7m)) Cash Parent Group cash maintained (30 Jun 2014: £
Slide 6: Pensions
Pensions Main driver for increased IAS19 deficits since year end 2013 was an tPR investigations update increase in liabilities largely due to a 30bps decrease in discount rate, Brunel and Staveley: discussions ongoing with tPR and which more than offset a 10bps decrease in the inflation rate rel
Slide 7: Overhead costs
Overhead costs tPR Costs being carefully managed while GPG continues to Overheads (£m) 2 H1 2014 H1 2013 focus on achieving a successful and efficient completion of the investigations tPR advisory costs 3 - 2 Costs incurred in H1 2014 fully covered by the £8m provision made at the end of 2013 fo
Slide 8: Coats Highlights and H1 2014 financial performance
Coats Highlights and H1 2014 financial performance
Slide 9: H1 2014 highlights
H1 2014 highlights Revenue of $837m, up 2% y-o-y on a like-for-like basis, flat on a reported basis Operating profit up 5% like-for-like before exceptional items, up 3% reported Strong performance across the Industrial Division; Crafts impacted by reduction in fashion handknitting demand and o
Slide 10: Delivering positive sales growth…
Delivering positive sales growth… Industrial Double digit sales growth in key markets: share gains and market growth in India, Turkey, USA and Vietnam New product introduction: Hemseal, Coats Protect and Insectiban (in North America) Speciality grew 10%: geographic expansion and entry into new
Slide 11: … and increased productivity
… and increased productivity Industrial Procurement savings and manufacturing productivity: y-o-y gains >$5m Mix of incremental improvements and capital investments eg Bio mass plant for steam generation at Indian factory Overall manufacturing waste reduced by 25% Expanded network of lean an
Slide 12: Financial performance
Financial performance H1 2014 H1 2013 Before Before $m Exceptional Exceptional exceptional Total exceptional Total items 1 items 1 items items Revenue 837 - 837 840 - 840 Operating profit 65 (2) 63 64 (4) 59 Profit before tax 52 (2) 50 43 (4) 39 Profit after tax 27 (2) 25 16 (4) 11 Attributable prof
Slide 13: Underlying operating performance
Underlying operating performance Revenue Operating profit and margin 1 Group 900 YoY 2% H1 2014 H1 2013 YoY% 864 850 837 817 823 Operating profit ($m) 800 Industrial 66.5 53.7 24% 750 H2 2012 H1 2013 H2 2013 H1 2014 Crafts (1.2) 8.7 N/A Industrial YoY 5% Group 65.3 62.4 5% 650 622 605 600 591 566 Op
Slide 14: Industrial performance
Industrial performance Revenue Industrial performance by region and end use Asia & Australasia 1,2 $m H1 2014 H1 2013 2 YoY% Good growth driven by domestic and export demand in both Apparel and footwear and Speciality Revenue (by region) Americas Asia & Australasia 335 317 5% North American grow
Slide 15: Crafts performance
Crafts performance Revenue Crafts performance by region and end use Americas $m H1 2014 H1 2013 2 YoY% Sales impacted following decline in demand for Sashay handknitting fashion product in North America Revenue (by region) Growth in Latin America driven by both Handknittings and Americas 141 146
Slide 16: Income statement
Income statement H1 2014 H1 2013 Attributable profit before $m Before Exceptional Before Exceptional exceptional items up $10m due to: exceptional items 1 Total exceptional items 1 Total items items Operating profit increase ($2m) Revenue 837 - 837 840 - 840 Lower pension finance costs Operating
Slide 17: Exceptional items
Exceptional items Reorganisation activity substantially $m H1 2014 H1 2013 completed in 2013; no exceptional Reorganisation - (15) reorganisation charges incurred in H1 2014 Property gain on disposal 1 18 Operating profit includes ~$4m of costs US antitrust settlement - (7) that have not been cl
Slide 18: Taxation
Taxation Reported tax rate of 49% H1 2014 H1 2013 $m Tax PBT % Tax PBT % Half year rate based on expected full As reported (25) 50 49% (27) 39 71% year 2014 rate Exceptional items - 2 - 4 Underlying tax rate1 reduced by 10 percentage points y-o-y to 44%, primarily reflecting higher profitabili
Slide 19: Retirement and other post-employment defined benefit liabilities
Retirement and other post-employment defined benefit liabilities UK IAS19 deficit increased by $56m from As at As at Balance sheet ($m) 30 Jun 14 31 Dec 13 year end 2013 (up $15m since end of UK funded scheme Q1 2014) Equities 787 954 Bonds 1,466 1,265 Increase since end of 2013 due to: Other 32
Slide 20: Cash flow and leverage
Cash flow and leverage H1 2014 cash flow $m H1 2014 H1 2013 EBITDA 89 89 $27m adjusted free cash outflow (H1 2013: $23m) Working capital (43) (48) Improved NWC control reduced H1 cash outflow by $5m Capex and investing activities (15) (13) Capex at 0.7x depreciation1 Interest (11) (13) Inter
Slide 21: H2 2014 outlook
H2 2014 outlook Consumer demand • Regional variations expected to continue: broadly positive in Asia with softness in apparel thread demand from some US brands; solid growth in North America and Europe; and relatively flat situation in Latin America Inflation • Raw material costs expected to trend m
Slide 22: Appendices
Appendices Coats strategy GPG pensions Coats pension schemes
Slide 23: Who we are
Who we are With a rich heritage dating back to the 1750s, Coats is the world’s leading industrial thread and consumer textile crafts business employing 20,000 employees in over 70 countries across six continents • Group revenues of US$ 1.7bn in 2013 • World’s leading industrial thread producer • Lea
Slide 24: Five elements to our value
Five elements to our value Focus on sales, earnings and Strong and defendable free cash flow 5. Cash 1. Global core business growth generative; market leader consistent with robust growth fundamentals 4. Experienced 2. Defined Leadership, people and systems to management growth Targeting known deliv
Slide 25: Global market leader…
Global market leader… Coats Coats is Thousands of 1 in 5 produces operations 100million garments enough yarn 3 times take place car airbags are around the to knit larger than the every made using world is held next largest Coats’ thread together using 70million day every year thread Coats’ thread sc
Slide 26: … servicing several markets and global customers…
… servicing several markets and global customers… End applications Industrial customers Crafts products include include include © GPG Group and Coats plc | Results presentation for half year ending 30 June 2014 Page 26
Slide 27: … and stable underlying trends
… and stable underlying trends Strong link between clothing retail sales and GDP growth. For the US, clothing retail sales growth is approximately 1.8 times GDP growth US GDP growth vs consumer retail sales growth (2000-2013) CRS: Clothing Retail Sales Source: IMF, US Census Bureau © GPG Group and C
Slide 28: Defined growth strategy to achieve three Market Goals
Defined growth strategy to achieve three Market Goals The Coats of 2015… The leading The leading value added global player in partner to the Speciality global apparel threads and and footwear yarns industries The leading global player in textile crafts …based on a core of world class skills and infr
Slide 29: Strategy supported by a global, world class asset base…
Strategy supported by a global, world class asset base… • Well invested asset base • Restructured manufacturing footprint: reduced number of plants in higher cost Europe and North America Countries in which Coats operates Manufacturing sites Truly global footprint with more than 70 manufacturing fac
Slide 30: … key differentiators providing a platform for growth…
… key differentiators providing a platform for growth… Flamepro For use in personal protective equipment Coats Protect Ultrabloc World’s first anti- microbial thread Product Blocks water from seeping into fibre optic cables innovation ‘Make it Coats’ portal Service enhancements Corporate Colour Expr
Slide 31: … and a highly engaged and safe workforce
… and a highly engaged and safe workforce Global employee engagement survey results Global recordable accident rate Upper quartile performance 80% 77% 72% Industry norm 66% Consistently better than the OSHA average 2010 2011 2012 2013 © GPG Group and Coats plc | Results presentation for half year en
Slide 32: Leading to revenue and operating profit growth
Leading to revenue and operating profit growth Group revenue - $m Group operating profit - $m (pre-exceptional) 1,704 2009 - 2013 2009 - 2013 133 4.9% CAGR 9.9% CAGR * 96 1,408 2009 2013 2009 2013 * 2013 includes an additional $7m pension administrative expenses charge due to an accounting rule chan
Slide 33: Conclusion
Conclusion • Global market leader with robust fundamentals; strong and defendable core • Defined growth strategy − A&FW: market share growth and Global Services offering − Speciality: focus on existing segments and sector and geographic growth − Crafts: marketing opportunities in b2b and b2c, region
Slide 34: GPG: IAS19 positions
GPG: IAS19 positions Coats GPG £m Group UK US Other Total Staveley Brunel Opening position 1 January 2014 (78.0) 28.4 (72.8) (122.4) (28.0) (27.8) (178.2) Included in Coats’ Income Statement (pre tax) operating profit Current service cost (1.2) (0.9) (1.6) (3.7) - - (3.7) are pension Administrative
Slide 35: Coats pension schemes: income statement & cashflow impact
Coats pension schemes: income statement & cashflow impact UK funded scheme US funded Scheme RoW Total $m H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 Service charge 2 2 2 2 2 2 6 6 Administrative expenses 3 3 1 1 - - 4 4 Operating profit impact 5 5 3 3 2 2 10 10 Finance charge / (
Slide 36: Further information
Further information For more For GPG For Coats plc information Prism Cosec Jaideep Thatai Company Secretary Head of Investor Relations +44 20 3008 6446 +44 20 8210 5086 / +44 7827 882 405 enquiries@gpgplc.co.uk jaideep.thatai@coats.com GPG plc Coats plc www.gpgplc.com www.coats.com Coats Industrial