Coats Group Plc · LSE:COA
Coats — FY2022 Earnings Presentation
35 slides from Coats's earnings presentation, Mar 2, 2023
Slide 1: 10% Organic Revenue and 22% Operating Profit Growth, with Strong Free Cash Flow
10% ORGANIC REVENUE AND 22% OPERATING PROFIT GROWTH, WITH STRONG FREE CASH FLOW 2022 FULL YEAR RESULTS THURSDAY 2 MARCH 2023 COATS GROUP PLC | 2022 FULL YEAR RESULTS 1
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
Slide 3: Agenda
AGENDA 01 Highlights 02 Financial Performance 03 Segment Performance 04 Strategic Update 05 Summary and Outlook 06 Appendices COATS GROUP PLC | 2022 FULL YEAR RESULTS 3
Slide 4: Highlights
HIGHLIGHTS Strong organic revenue (10%) and adjusted EBIT growth (22%) STRONG PERFORMANCE, TRANSFORMATION ONGOING >100bps gains in thread with market share to estimated c.24% Acquisitions of Texon and Rhenoflex Strategic projects momentum; benefits increased from $50m to $70m Substantially delivered
Slide 5: FY 2022 Financial Performance
FY 2022 FINANCIAL PERFORMANCE COATS GROUP PLC | 2022 FULL YEAR RESULTS 5
Slide 6: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS Organic sales Price/mix and self-help Adjusted operating Strong cash generation; growth ($150m) offsetting profit $235m; margins Adj. FCF $114m; Up 10% inflation ($118m) up 120bps to 14.8% 1.4x leverage1 Strategic projects; Successful $250m USPP Pension scheme Pension contri
Slide 7: Key Financial Metrics
KEY FINANCIAL METRICS ACCELERATED SALES AND MARGIN GROWTH FY 2022 FY 2021 Reported change CER1 Organic1 Revenue ($ million) Apparel & Footwear 1,163 1,048 11% 18% 9% Performance Materials 420 399 5% 13% 13% Group 1,584 1,447 9% 16% 10% Adj. operating profit ($ million) Apparel & Footwear 201 171 18%
Slide 8: Group Operating Profit and Margin
GROUP OPERATING PROFIT AND MARGIN STRONG PRICING AND SELF-HELP OFFSETTING INFLATION ($m) 14.8% margin 13.7% margin $150m price and productivity benefits more than offsetting $118m inflation COATS GROUP PLC | 2022 FULL YEAR RESULTS 8
Slide 9: Proactive Responses Offsetting Industry Trends
PROACTIVE RESPONSES OFFSETTING INDUSTRY TRENDS INFLATIONARY PRESSURES MITIGATING ACTIONS Price / mix Raw materials $60m Moderating from 2022 highs $128m Differentiation and premium positions Other incl. labour & energy Productivity & Procurement $48m Remains a headwind at higher $22m Operational and
Slide 10: Segmental Margins
SEGMENTAL MARGINS IMPROVING MARGINS IN BOTH SEGMENTS APPAREL & FOOTWEAR (%) A&F margins up 100bps 16.3% 17.3% 17.3% 14.7% 11.6% - Excellent commercial and operational delivery - Pricing and procurement initiatives offsetting inflationary pressures - Strategic project benefits and general cost discip
Slide 11: Income Statement
INCOME STATEMENT STRONG EPS GROWTH DRIVEN BY OPERATING PROFIT PERFORMANCE Exceptional / acquisition related items $m FY 20222 FY 20212 – Strategic projects - $31m ($5m non-cash) – Acquisition related items - $24m Adjusted operating profit 235 198 Exceptional / acquisition related items (54) (20) Fin
Slide 12: Cash Flow and Leverage
CASH FLOW AND LEVERAGE STRONG CASH GENERATION FY 2022 CASHFLOW ($m) $m FY 2022 FY 2021 Adjusted free cash flow 114 124 Pensions (43) (42) Acquisitions (346) - Other exceptional (23) (12) Disposals and discontinued operations (26) (9) Dividends paid to equity shareholders (33) (27) FY 2021 Equity rai
Slide 13: UK Pensions Progress: Funding Update
Significant improved funding UK PENSIONS deficit PROGRESS – Last triennial valuation – March 2021: £193m FUNDING UPDATE funding deficit – Latest estimate – January 2023: approaching fully funded – Driven by employer contributions, favourable market movements, and de-risking actions (incl. buy-in) Fu
Slide 14: UK Pensions Progress: De-risking Update
£350m buy-in transaction UK PENSIONS completed PROGRESS – Fully hedges financial and life expectancy risks DE-RISKING UPDATE for c.20% of total scheme liabilities – 90% of interest / inflation risks now hedged – Further reduced funding deficit – Completed with Aviva in December 2022 Future journey –
Slide 15: 2023 Modelling Guidance
2023 MODELLING GUIDANCE Area Guidance Moderation in raw materials and freight inflation from 2022 highs, with prices returning to 2019 levels. Energy inflation to remain at higher levels, in particular in Europe. Continued levels of inflation on the remainder of our cost base e.g. labour. Inflation
Slide 16: FY 2022 Segment Performance
FY 2022 SEGMENT PERFORMANCE COATS GROUP PLC | 2022 FULL YEAR RESULTS 16
Slide 17: Three New Divisions from 1 January 2023
THREE NEW DIVISIONS FROM 1 JANUARY 2023 REFLECTS CHANGING SHAPE OF THE GROUP Performance New structure Apparel Footwear Materials facilitates Revenue1 50% 25% 25% End-to-end accountability Revenue Growth2 3-4% c.8% 6-9% Customer intimacy EBIT Margin3 15-16% >20% 13-14% Speed & agility Customers 25,0
Slide 18: Apparel & Footwear 2022 Performance
APPAREL & FOOTWEAR 2022 PERFORMANCE GROWING MARKET SHARE YEAR-ON-YEAR Strong revenue growth Proactively responding to market conditions Profitable customer wins 18% CER growth 9% organic growth Continuous improvement and operational excellence Portfolio actions completed Early and effective pricing
Slide 19: Performance Materials 2022 Performance
PERFORMANCE MATERIALS 2022 PERFORMANCE REVENUE GROWTH AND MARGIN IMPROVEMENT POTENTIAL Strong organic Self-help delivers margin Continuing revenue growth improvement customer successes Sub-segments Revenue Organic Strategic projects benefits in 2023 Airbag thread on EV platforms Growth and 2024 Pers
Slide 20: FlamePro Splash
FLAMEPRO SPLASH COATS GROUP PLC | 2022 FULL YEAR RESULTS 20
Slide 21: Sustainability
SUSTAINABILITY SUBSTANTIALLY DELIVERED AGAINST AMBITIOUS 2022 TARGETS; NEW TARGETS SET % ACHIEVEMENT 2022 2026 PILLAR 2022 TARGET PILLAR METRIC VS TARGET BASELINE TARGET Increase in Water WATER 40% Reduction 95% WATER 25% 33% increase Recycling Rate Reduction in ENERGY 7% Reduction 143% ENERGY 212 k
Slide 22: Strategic Update
STRATEGIC UPDATE COATS GROUP PLC | 2022 FULL YEAR RESULTS 22
Slide 23: Texon and Rhenoflex
TEXON AND RHENOFLEX WELL-POSITIONED IN FOOTWEAR COMPONENTS MARKETS 7-8% 23% ~13% >65% c.1,000 combined growth share growth consumers people Large Clear Focus on Preference Talented, addressable market outperforming for innovative market of number 1 sports and sustainable people $1.8bn athleisure bra
Slide 24: Transformational Footprint Projects
TRANSFORMATIONAL FOOTPRINT PROJECTS UK Germany Ukraine Russia Poland Distribution centre Distribution centre US (Hendersonville) Hungary US (Sevier) Partial downsizing Spain Romania Manufacturing and distribution Italy China Mexico (Orizaba and Huamantla) Vietnam Brazil Indonesia Acquisitions – Texo
Slide 25: Strategic Projects
STRATEGIC PROJECTS ACCELERATED PROGRESS & TOTAL SELF-HELP BENEFITS INCREASED TO $70M Benefits Cash Cost March 2022 $50m $35m Original Scope March 2023 $70m $50m Delivered $20m benefits (originally Expanded Scope $5-10m) in 2022 COATS GROUP PLC | 2022 FULL YEAR RESULTS 25
Slide 26: Transforming the Business
TRANSFORMING THE BUSINESS MARGIN EXPANSION POTENTIAL 2019 EBIT margins1 2022 EBIT margins 2024 margin goal Apparel 15-16% 14.7% 17.3% Footwear >20% Performance Materials 12.8% 8.1% 13-14% Group 14.3% 14.8% c.17% Note : Coats footwear segmental split based on Coats' estimates. Full segmental reportin
Slide 27: Summary and Outlook
SUMMARY AND OUTLOOK COATS GROUP PLC | 2022 FULL YEAR RESULTS 27
Slide 28: Highlights
HIGHLIGHTS Strong organic revenue (10%) and adjusted EBIT growth (22%) STRONG PERFORMANCE, TRANSFORMATION ONGOING >100bps gains in thread with market share to estimated c.24% Acquisitions of Texon and Rhenoflex Strategic projects momentum; benefits increased from $50m to $70m Substantially delivered
Slide 29: Outlook
OUTLOOK IN LINE WITH BOARD EXPECTATIONS Expect to deliver another Continue to proactively respond Continue to anticipate full year year of strategic and operational to the macroeconomic 2023 performance in line with the progress environment and inflationary Board’s expectations, with pressures using
Slide 30: The Q&A Session Will Begin Shortly
THE Q&A SESSION WILL BEGIN SHORTLY If you would like to ask a question, please dial United Kingdom 0800 640 6441 United Kingdom (local) 020 3936 2999 United States 1 855 9796 654 United States (local) 1 646 664 1960 All other locations +44 20 3936 2999 Participant access code 214629 COATS GROUP PLC
Slide 31: Appendices
APPENDICES COATS GROUP PLC | 2022 FULL YEAR RESULTS 31
Slide 32: Apparel Market Overview 2022
APPAREL MARKET OVERVIEW 2022 WELL-POSITIONED AT PREMIUM AND SUSTAINABILITY END OF THE MARKET Market recovered to above 2019 levels Strong foundations Top three opportunities Apparel global retail sales (US$tn) Industry growth and EBIT Sustainability 1.3 1.3 1.4 1.1 margins recovered 5% y-o-y increas
Slide 33: Footwear Market Overview 2022
FOOTWEAR MARKET OVERVIEW 2022 STRONG MEDIUM-TERM GROWTH IN SPORTS AND ATHLEISURE Good Medium Term Growth Market Resilience Footwear retail market, $bn 4% Some de-stocking by major footwear volume growth* brands commencing late 2022 543 576 609 488 De-stocking anticipated to be +7-8% value comparativ
Slide 34: Performance Materials Market Overview 2022
PERFORMANCE MATERIALS MARKET OVERVIEW 2022 WORKING IN DIVERSE MARKETS – GOOD GROWTH EXPECTATIONS Personal Protection Composites Performance Thread Industrial Work Wear Telecommunications Industrial Applications TRENDS FY22 Firefighter Energy Household & Recreation Military Transportation Slowdown in
Slide 35: Focus on Innovation
FOCUS ON INNOVATION TRANSITION TO RECYCLED AND SUSTAINABLE MATERIALS INCREMENTAL NEW PRODUCTS 2020: 2021: 2022: 22, $13m 21, $37m 17, $34m Bringing new, innovative products to market Apparel Footwear Performance EcoCycle: Ecostrobe: Materials low-cost separation components FlamePro: flame of compone