Coats Group Plc · LSE:COA
Coats — FY2021 Earnings Presentation
34 slides from Coats's earnings presentation, Mar 3, 2022
Slide 1: Accelerated Sales Growth with Strong Profit Delivery and Cash Generation
ACCELERATED SALES GROWTH WITH STRONG PROFIT DELIVERY AND CASH GENERATION 2021 FULL YEAR RESULTS THURSDAY 3 MARCH 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 01 Highlights 02 Markets and our FY 21 performance 03 Strategic enablers 04 FY 21 financial performance 05 Key highlights and outlook 06 Appendices COATS GROUP PLC | 2021 FULL YEAR RESULTS 3
Slide 4: Highlights
HIGHLIGHTS Accelerating revenue growth 29% (6% vs 2019) Strong A&F thread market share growth up 2% to 23% EcoVerde (recycled thread) up 159% to $96m 21 new products with $37m revenues Strong cash generation, 0.7x leverage Final dividend proposed of 1.50 cents per share, up 15% Continued growth expe
Slide 5: Strategic Projects: $50 Million Incremental Adjusted Operating Profit
STRATEGIC PROJECTS $50 MILLION INCREMENTAL ADJUSTED OPERATING PROFIT Strategic projects commenced to improve margins ⎼ Optimising the portfolio and footprint ⎼ Improving overall cost base efficiency Incremental adjusted operating profit of $50m anticipated by 2024 Exceptional cash costs expected to
Slide 6: FY 2021 Market and Our Performance
FY 2021 MARKET AND OUR PERFORMANCE COATS GROUP PLC | 2021 FULL YEAR RESULTS 6
Slide 7: Apparel & Footwear Market Overview 2021
APPAREL & FOOTWEAR MARKET OVERVIEW 2021 DEMAND RECOVERY ALONGSIDE CHALLENGING BACKDROP Strong market recovery – not yet back to 2019 Unprecedented supply chain volatility A&F global retail sales (US$tn) Customers are ⎼ China 7% above 1.8 +15.5% 1.7 pre-pandemic level Switching sourcing ⎼ USA recover
Slide 8: Apparel & Footwear Our 2021 Performance
APPAREL & FOOTWEAR OUR 2021 PERFORMANCE STRONG MARKET SHARE GAINS AND MARKET OUTPERFORMANCE Continuing momentum and growth ahead of market Our customer focus is delivering results Quarterly sales trend (vs 2019) 20% 23% thread market share 10% 0% -10% Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21
Slide 9: Performance Materials Market Overview 2021
PERFORMANCE MATERIALS MARKET OVERVIEW 2021 GROWTH ACROSS END MARKETS, STRONG 2022 OUTLOOK Personal Protection (c.40% PM revenue) Composites (c.25% PM revenue) Performance Thread (c.35% PM revenue) Car production recovering; Increase in worker safety standards Rapid expansion of fibreoptic network no
Slide 10: Performance Materials Our 2021 Performance
PERFORMANCE MATERIALS OUR 2021 PERFORMANCE STRONG CUSTOMER SHARE WINS Growth vs 2019 with volume recovery Growing scale in all three segments Customer share wins and price increases Quarterly sales trend vs 2019 (Organic) Personal Protection 30% Salomon launches premium Marathon shoe Order book extr
Slide 11: Supply Resilience and Agility
SUPPLY RESILIENCE AND AGILITY SUPPORTING OUR CUSTOMERS AND KEEPING EMPLOYEES SAFE Sourcing pressures identified early Strongest health and safety performance Service levels maintained actions put in place on record Manufacturing output During lockdown in selected markets in Raw materials maintained
Slide 12: Strategic Enablers
STRATEGIC ENABLERS COATS GROUP PLC | 2021 FULL YEAR RESULTS 12
Slide 13: Sustainability: Pioneering a Sustainable Future
2021 PILLAR TARGET SUSTAINABILITY: PROGRESS PIONEERING A WATER Water Intensity (22)% SUSTAINABLE FUTURE Energy Intensity (6.9)% Strong progress in 2021 across all ENERGY five pillars Certified renewables 7% 2022 targets for social and energy EFFLUENT achieved one year ahead of target* & EMISSIONS ZD
Slide 14: Sustainability: Accelerating Our Journey
SUSTAINABILITY: ACCELERATING OUR JOURNEY Significantly increased ambitions to evolve sustainability strategy, increase momentum, and enhance competitive advantage $10m earmarked to fund the scaling up of green technologies and materials that are relevant to our industry supply chain Our Innovation H
Slide 15: Sustainability: Delivering Competitive Advantage
SUSTAINABILITY DELIVERING COMPETITIVE ADVANTAGE COATS GROUP PLC | 2021 FULL YEAR RESULTS 15
Slide 16: Innovation: Rich Pipeline of Opportunities
INNOVATION RICH PIPELINE OF OPPORTUNITIES Our innovation focus areas INCREMENTAL Personal Protection NEW PRODUCTS Growth in flame retardant protective wear and multi-hazard protection 2019: 25, $16m 2020: 22, $13m Composites 2021: 21, $37m Trend towards light-weighting for cars and sports footwear,
Slide 17: FY 2021 Financial Performance
FY 2021 FINANCIAL PERFORMANCE COATS GROUP PLC | 2021 FULL YEAR RESULTS 17
Slide 18: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS POSITIVE MOMENTUM CONTINUES Accelerating Pricing and self- Adjusted Strong cash Strategic sales growth help programmes operating profit generation; projects; material offsetting inflation $193m 0.7x leverage improvement in margins COATS GROUP PLC | 2021 FULL YEAR RESULTS 18
Slide 19: Key Financial Metrics
KEY FINANCIAL METRICS POSITIVE MOMENTUM CONTINUES – STRONG OPERATIONAL PERFORMANCE Reported Vs 2019 2021 2020 CER1 Organic1 change Organic1 Revenue ($ million) Apparel & Footwear 1,094 823 33% 33% 33% 5% Performance Materials 409 341 20% 21% 19% 8% Group 1,504 1,163 29% 29% 29% 6% Adj. operating Pro
Slide 20: Group Operating Profits and Margins
GROUP OPERATING PROFITS AND MARGINS UNDERPINNED BY VOLUME GROWTH 9.5% margin 12.8% margin 22 ($m) 37 (25) 129 (20) (17) (9) 193 (34) 111 2020 Volume impact Price/mix Productivity Raw material Freight inflation Other inflation Other (e.g. FX) SD&A normalisation 2021 (direct and indirect benefits infl
Slide 21: Segmental Margins
SEGMENTAL MARGINS STRONG RECOVERY IN A&F MARGINS PM MARGINS IMPACTED BY US LABOUR ISSUES A&F margins in 2021 up 340bps APPAREL AND FOOTWEAR 15.0% (%) - Excellent commercial and operational delivery 14.7% 15.0% - Pricing and procurement initiatives more than 11.6% offsetting inflationary pressures an
Slide 22: Income Statement
INCOME STATEMENT 2021 2020 EPS RECOVERY DRIVEN BY HIGHER $m Reported Reported PROFITABILITY AND NORMALISING TAX RATE Adjusted operating profit 193 111 Exceptional / acquisition related items Exceptional / acquisition related items (14) (7) – Acquisition opportunities and strategic projects – With so
Slide 23: Cash Flow and Leverage
CASH FLOW AND LEVERAGE $m 2021 2020 STRONG CASH GENERATION Adjusted free cash flow 113 28 FY 2021 CASHFLOW ($m) Pensions (42) (11) 224 (15) (31) Acquisitions - (37) (13) 13 (48) 113 Dividends paid to equity shareholders (27) - (17) Exceptionals and other (11) (3) EBITDA Working Capex Interest Taxati
Slide 24: UK Pension Scheme: Triennial Update
UK PENSION SCHEME: TRIENNIAL UPDATE CONTRIBUTION LEVELS UNCHANGED UK triennial valuation Technical Provisions Future contributions Balance sheet successfully deficit £193m remain at £22m pa position completed ahead of £59m below 2018 until 2028 $108m surplus schedule valuation (£25m incl admin (2020
Slide 25: Strategic Projects - Financial Impacts
STRATEGIC PROJECTS - FINANCIAL IMPACTS Overall financials 2022 impacts – $50m incremental adjusted operating profit by 2024 – EBIT benefits of – EBIT benefits to be broadly evenly weighted between cost base around $5-10m optimisation and footprint optimisation – the latter largely benefitting – Cash
Slide 26: 2022 Modelling Guidance
2022 MODELLING GUIDANCE Area Guidance Raw material inflation We anticipate inflationary pressures to be offset by pricing and other self help productivity measures Other non raw material inflation – in line with past track record Freight cost inflation Sourcing and productivity savings c.$20m Strate
Slide 27: Key Highlights and Outlook
KEY HIGHLIGHTS AND OUTLOOK COATS GROUP PLC | 2021 FULL YEAR RESULTS 27
Slide 28: Highlights
HIGHLIGHTS Accelerating revenue growth 29% (6% vs 2019) Strong A&F thread market share growth up 2% to 23% EcoVerde (recycled thread) up 159% to $96m 21 new products with $37m revenues Strong cash generation, 0.7x leverage Final dividend proposed of 1.50 cents per share, up 15% Continued growth expe
Slide 29: Outlook
OUTLOOK The strong end to the year has continued into the start of 2022, and despite some evidence of stock replenishment from customers during this period, we expect continued growth for 2022 as a whole. We remain confident in our ability to offset inflationary pressures through pricing and product
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 All other locations +44 203 936 2999 Participant access code 093355 COATS GROUP PLC | 2021 FULL YEAR RESULTS 30
Slide 31: Appendices
APPENDICES COATS GROUP PLC | 2021 FULL YEAR RESULTS 31
Slide 32: Our Purpose and Strategy
OUR PURPOSE AND STRATEGY TO CONNECT TALENT, TEXTILES AND TECHNOLOGY TO MAKE A BETTER, MORE SUSTAINABLE WORLD Profitable sales growth Underpinned by 01 A&F increasing our market share our strategic enablers PM leading with innovation, operational efficiencies Digital Continuing to strengthen the core
Slide 33: Dividend and Capital Allocation
DIVIDEND AND CAPITAL ALLOCATION The Group aims to use the free cash flow it The Board has set out clear allocation policies generates to balance its various capital demands Grow earnings and free cash flow by delivering on our 3 strategic goals – which will be used for Whilst maintaining its strong
Slide 34: Geographical Revenue Split
GEOGRAPHICAL REVENUE SPLIT Vs 2020 Vs 2020 Vs 2019 Strong recovery across all regions $m 2021 2020 CER1 Organic1 Organic1 change % change% change% Asia - Driven by key A&F markets Asia 846 629 33% 33% 6% - Region recovering from Covid, despite India and Vietnam lockdowns in Q2/Q3 - China and Banglad