REG - Coats Group PLC - 2022 Full Year Results
02/03/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230302:nRSB5948Ra&default-theme=true
RNS Number : 5948R Coats Group PLC 02 March 2023
2 March 2023
Coats Group plc
2022 Full Year Results
10% organic revenue growth, 22% organic adjusted operating profit growth and
strong free cash flow
Coats Group plc ('Coats,' the 'Company' or the 'Group'), the world's leading
industrial thread and footwear components manufacturer, announces its audited
results for the year ended 31 December 2022.
Continuing operations FY 2022 FY 2021 (4) FY 2022 vs FY 2021
Reported CER Organic
Revenue $1,584m $1,447m 9% 16% 10%
Adjusted (1)
Operating profit $235m $198m 19% 27% 22%
Basic earnings per share 8.2c 7.2c 14%
Free cash flow $114m $124m
Net debt (excl. lease liabilities) $394m $147m
Reported (2)
Operating profit $181m $178m 2% 9% 9%
Basic earnings per share (5) 4.8c 5.8c (18)%
Net cash generated by operating activities $96m $129m
Final dividend per share 1.73c 1.50c
Strategic Highlights
· Another year of excellent strategic progress alongside strong results
· Acquisition of Texon and Rhenoflex establishes market leader in footwear
components; acquisitions trading in line with expectations, and integration
and delivery of expected cost synergies on-track
· Strategic projects delivered accelerated in-year savings of $20 million, ahead
of expectations; project scope now also expanded with total savings up from
$50 million to $70 million by 2024 for $50 million cash cost
· Ongoing focus on product innovation with 17 new products brought to market and
continuing strong growth from recycled products, with CER revenue increasing
37% to $127 million
· Substantially delivered against ambitious 2022 Sustainability goals, with
significant improvement in all areas; new 2026 targets to drive further
momentum to our approved 2030 Science Based Targets and Net Zero
· Significant progress in de-risking UK pension scheme; £350 million buy-in
transaction completed in December 2022
· Agreement with UK pension scheme trustees on a switch off/on mechanism for
future cash contributions, as a result of material improvements in the funding
position; gives rise to potential significant Group free cash flow benefits
Financial Highlights
· Strong Group organic revenue growth of 10% (9% on a reported basis), ahead of
targeted medium-term growth of c.6%:
o Apparel & Footwear (A&F): full year organic revenue growth of 9%,
driven by exceptional first half performance, prior to some industry
destocking, particularly in Q4
o Performance Materials (PM): full year organic revenue growth of 13% with all
three sub-segments delivering growth
· Continued competitive gains in thread with market share up >100bps to
estimated c.24%
· Adjusted operating profit increased to $235 million (reported $181 million),
in line with market expectations, reflecting strong pricing and mix fully
offsetting inflation, as well as part-year contribution from acquisitions and
strategic projects
· Adjusted operating margin up 120bps to 14.8% with A&F and PM both
contributing to the increase
· Adjusted EPS increased 14% to 8.2c, reflecting strong trading performance and
delivery of strategic project savings. Basic EPS 4.8c (2021: 5.8c), included
impact of exceptional and acquisition-related items
· Strong free cash flow of $114 million as a result of increased operating
profits and good capital expenditure and working capital management
· Year-end net debt (excluding lease liabilities) of $394 million after
acquisitions, with proforma leverage of 1.4x,(3) comfortably within 1-2x
target range
· Proposed final dividend of 1.73 cents, +15%, resulting in full year dividend
of 2.43 cents, +15%; reflects the strong set of results, organic growth and
margin potential, as well as the Board's confidence in the medium term
Full Year Outlook in Line with the Board's Expectations
· Expect to deliver another year of strategic and operational progress.
Destocking by customers has continued into the early part of the year,
primarily in Apparel markets and to a lesser extent in Footwear
· Continue to proactively respond to macroeconomic environment and inflationary
pressures using our well-defined and tested playbook, focusing on cash, costs,
self-help initiatives, deep customer relationships and tactical pricing
actions
· Continue to anticipate full year 2023 performance in line with the Board's
expectations, with second-half weighting, underpinned by the contribution from
acquisitions, associated synergies and strategic projects
Commenting on the results Rajiv Sharma, Group Chief Executive, said:
"Coats produced a strong set of results in 2022, a year which was
characterised by high inflation and supply chain disruption. Organic revenue
growth was 10%, above our targeted medium-term growth of around 6%, and
organic adjusted operating profit increased 22%.
"We made further excellent progress in transforming the Group during the year,
and this has made Coats a stronger, fitter and more focused Group, enhancing
our leading market positions in industrial thread and footwear component
markets. The 2022 acquisitions of Texon and Rhenoflex have not only
significantly strengthened our position in the attractive footwear market but
also increased our medium-term organic growth and margin potential.
"Our strategic projects, aimed at increasing the efficiency and effectiveness
of our operations, have been successfully progressed at speed during the year
and we have today, in a period of macroeconomic uncertainty, increased our
total targeted 2024 adjusted operating profit savings to $70 million, from the
previous $50 million.
"As a result of the transformational work done to date, the Group remains very
well-positioned in its markets with a focus on growing brands. In addition,
Coats has global leadership, a wide geographic footprint, scale, product and
quality differentiation and a pipeline of innovative and sustainable products.
Consequently, we remain excited about the growth and margin opportunities
across the Group over the medium term."
( )
(1.) Adjusted measures are non-statutory measures (Alternative Performance
Measures). These are reconciled to the nearest corresponding statutory measure
in note 14. Constant Exchange Rate (CER) metrics are 2021 results restated at
2022 exchange rates. Organic figures are results on a CER basis and excluding
contributions from Texon and Rhenoflex acquisitions.
(2.) Reported metrics refer to values contained in the IFRS column of the primary
financial statements in either the current or comparative period.
(3.) Leverage calculated on a proforma and frozen GAAP basis and therefore excludes
the impact of IFRS 16 on both adjusted EBITDA and net debt and includes a full
12 months of EBITDA for Texon and Rhenoflex.
(4.) Restated to reflect the results of the Brazil and Argentina business, divested
in 2022, as a discontinued operation.
(5.) From continuing operations.
( )
Conference Call
Coats Management will present its full year results in a webcast at 09.00 GMT
today (Thursday, 2 March 2023). The webcast can be accessed via
www.coats.com/investors/fy2022. The webcast will also be made available in
archive form on www.coats.com (http://www.coats.com) .
Enquiry details
Investors Chris Dyett Coats Group plc +44 (0)79 7497 4690
Media Richard Mountain / Nick Hasell FTI Consulting +44 (0)20 3727 1374
About Coats Group plc
Coats is a world leader in thread manufacturing and structural components for
apparel and footwear, as well as an innovative pioneer in performance
materials. These critical solutions are used to create a wide range of
products, including ones that provide safety and protection for people, data
and the environment. Headquartered in the UK, Coats is a FTSE250 company and a
FTSE4Good Index constituent. Revenue in 2022 was $1.6 billion. Trusted by
the world's leading companies to deliver crucial, innovative, and sustainable
solutions, Coats provides value-adding products including apparel, accessory
and footwear threads, structural footwear components, fabrics, yarns and
software applications. Customer partners include companies from the apparel,
footwear, automotive, telecoms, personal protection, and outdoor goods
industries. With a proud heritage dating back more than 250 years and spirit
of evolution to constantly stay ahead of changing market needs, Coats has
operations across some 50 countries with a workforce of 17,000, serving its
customers worldwide. Coats connects talent, textiles, and technology, to make
a better and more sustainable world. Worldwide, there are three dedicated
Coats Innovation Hubs, where experts collaborate with partners to create the
materials and products of tomorrow. It participates in the UN Global Compact
and is committed to Science Based sustainability targets for 2030 and beyond,
with an aspiration of achieving net-zero by 2050. Coats is also committed to
achieving its goals in Diversity, Equity & Inclusion, workplace health
& safety, employee & community wellbeing, and supplier social
performance. To find out more about Coats visit www.coats.com
(https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.coats.com%2F&data=05%7C01%7C%7Cd427f915c4a04c7a281808db0a8c12ed%7C048ff72770274cd0b672f075b0bdb973%7C0%7C0%7C638115368955536325%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=84xJl8cQryEvN50TOkTQnuGQiFTmWNiC4iTooOH29u0%3D&reserved=0)
.
Cautionary statement
Certain statements in this full year report are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these expectations
will prove to have been correct. Because these statements contain risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. We undertake no obligation to
update any forward-looking statements, whether as a result of new information,
future events or otherwise.
Group Chief Executive's review
Purpose and Strategy
Coats is the world's leading industrial thread and footwear components
company. Our purpose is to connect talent, textiles and technology to make a
better and more sustainable world, with a strategy to accelerate profitable
sales growth by leveraging innovation, sustainability, digital technologies
and our global scale to create world class products and services, delivering
value to our stakeholders.
2022 Full Year Results Overview
Introduction
We made further excellent progress in transforming the Group during the
year. We purchased Texon and Rhenoflex, significantly enhancing our position
in the attractive footwear market and increasing our medium-term organic
growth and margin potential. The integration of those businesses is on-track
with efficiency savings starting to come through at the year end, in line with
plan. Our strategic projects, announced at the start of 2022, and which will
increase the efficiency and effectiveness of our operations, have been
accelerated with greater in-year cost savings achieved as a result ($20
million versus the initially guided $5-$10 million). We have also now expanded
the scope of these projects, with our total targeted adjusted operating profit
savings by 2024 increasing to $70 million, from the previous $50 million.
In addition, we have also substantially delivered against our ambitious 2022
sustainability targets, exceeding these in some areas, with further details in
the Sustainability section below. We have challenged ourselves again by
setting further ambitious milestones for delivery in 2026, building on our
achievements to date. The milestones will help us continue the momentum to
our 2030 Science Based Target Initiative (SBTi) approved targets, and our
commitment to be Net Zero by 2050.
We delivered revenue of $1,584 million in the year, an increase of 16% on a
constant currency basis. This increase reflects the acquisitions of Texon
and Rhenoflex in the year and strong Group organic revenue growth of 10%,
above our c.6% medium term target growth. This organic revenue growth
reflects our outstanding trading performance in H1, which was driven by
industry restocking and buffer buying in the face of supply chain disruption,
and strong pricing and mix, alongside improving market demand. As
anticipated, year-on-year performance slowed during the second half, in part
due to the strong 2021 comparator results, as well as a softening in demand
due to macroeconomic factors, with some destocking. This was most noticeable
in Apparel markets in Q4 but also impacted Footwear towards the end of the
year. Reported Group revenue, including adverse currency movements, grew 9%.
Apparel & Footwear delivered organic revenue growth of 9%, reflecting the
demand profile across the year described above. The 2022 Texon and Rhenoflex
acquisitions traded in line with our expectations. Performance Materials
delivered a strong performance, growing 13% organically, with its three
sub-segments all delivering good organic growth. As previously announced,
and reflecting the changing shape of the Group, we will report from 1 January
2023 a revised three division structure: Apparel, Footwear and Performance
Materials.
In recent years our Apparel & Footwear business has grown faster than the
underlying market by taking market share. This trend has continued in the
year with an organic increase in market share of over 100bps, to an estimated
c.24%. We have also achieved significant customer successes in Performance
Materials, as we bring new innovative products to market. Our ability to
gain market share is testament to the success of our strategy, including our
strong customer relationships, with a focus on growing, premium brands. This
is, in part, a result of our global scale, the premium quality of our products
and our ability to offer value-add technical services. Our investment in
innovation across all our businesses enables us to bring new and
differentiated products to market. We have a particular focus on products
made from recycled or biomaterials, where we are the market leader. Our
significant multi-year investment in making our operations more sustainable,
an investment many of our smaller competitors cannot replicate, is a real
differentiator for many of our customers, who have made their own
environmental commitments. This investment is consistent with the increasing
trend for consumers to buy sustainable products supported by a sustainable
supply chain, and we have continued to rapidly grow our revenue from
sustainable products. We are confident that we will continue to grow our
market share in future.
The year was also characterised by high inflation and supply chain disruption,
although this has moderated in places, as we progressed through the year. Our
pricing actions and proactive self-help efficiency programmes have continued
to fully offset inflationary pressures in the supply chain for raw materials,
labour, energy and freight costs. In the second half, the rate of inflationary
increases for raw materials and freight, stabilised or moderated, although
input prices remain well ahead of the prior year and are likely to remain
elevated for some time.
Despite these significant operational challenges, adjusted operating profit
increased 27% on a constant currency basis to $235 million. This reflects the
effectiveness of our pricing initiatives, an enhanced mix, the contribution
from Texon and Rhenoflex, the initial benefits from our strategic projects as
well as ongoing operating efficiencies. The Group adjusted operating margin
increased by 120bps to 14.8%. Both Apparel & Footwear and Performance
Materials contributed to this increase. Operating profit increased 2% to
$181 million, after strategic project costs and acquisition-related items.
We generated strong adjusted free cash flow of $114 million reflecting the
increased operating profit alongside well- controlled capital expenditure and
working capital management. Year-end net debt (excluding lease liabilities)
was $394 million, with proforma leverage of 1.4x net debt/EBITDA after our
2022 acquisitions, comfortably within our target range of 1-2x net
debt/EBITDA.
We have made excellent progress in recent years to reduce and de-risk the
funding deficit within the Coats UK Pension Scheme. A further significant
step was achieved in December 2022, with the trustee purchasing a c.£350m
bulk annuity policy from Aviva. This partly de-risks our UK defined benefit
scheme by fully funding all financial and demographic risks for approximately
20% of scheme liabilities. In addition, and as a result of the significantly
improved funding position and de-risking actions, we have reached agreement
with the Pension Scheme Trustees on a mechanism to switch off / switch on the
regular cash contributions to the Scheme. This will be based on monthly
estimates of the latest funding position, and gives rise to the potential for
significant free cash flow benefits from lower or eliminated cash
contributions, if the Scheme remains fully funded on its technical provisions
basis. On a medium term basis and when market conditions permit, we aim to
remove the Scheme from the Group's balance sheet in a cost effective manner.
Acquisition of Texon and Rhenoflex
During the year we acquired Texon International Group Limited (Texon) in July
2022 and Rhenoflex GmbH (Rhenoflex) in August 2022 for a combined
consideration of $355 million. This is equivalent to a post-synergy multiple
of around 8x EBITDA. As a result of these acquisitions, on a proforma
full-year basis, around a quarter of our total revenue is now in higher growth
footwear markets. We estimate medium term market growth of 7-8% per annum,
ahead of the medium term Group target of c.6%.
Texon and Rhenoflex are leading footwear and accessories solutions providers,
bringing a range of products, including heel counters, toe puffs and insoles,
which complement Coats' existing footwear threads business. Together, the
three businesses are the leading, global component supplier to the highly
attractive footwear market, within a fragmented supply chain. There is a
strong focus in the business on fast-growth, premium-priced quality, sports
and athleisure brands.
The combined business has an enhanced portfolio of highly differentiated and
innovative components, which are predominantly brand specified. These
include a leading portfolio of sustainable products, including recycled and
plant based components, which are increasingly in demand for new and long-life
footwear products. The acquisitions present exciting opportunities to
cross-sell the broad range of complementary components within the business to
an expanded customer base. Early conversations with customers have been
encouraging, as they can benefit from our ability to supply a wider range of
premium, engineered components. This would enable them to consolidate their
supply chain with a longstanding and trusted supplier. The acquisitions
continue to trade in line with our expectations.
The Group remains on-track to deliver an initial $11 million of annualised
cost efficiencies from the integration of the combined business by the end of
2023. These efficiencies principally relate to the elimination of duplicated
roles, consolidation of back-office functions and procurement efficiencies
resulting from increased scale. Good progress has been made in the year, with
the business now operating under a single, energised leadership team. By the
end of 2022, we had already delivered run-rate cost efficiencies of $3
million.
Focusing the Portfolio on Attractive Markets
As announced in May 2022, and in line with our strategy to accelerate
profitable sales growth, we completed the disposal of our business in Brazil
and Argentina. We also exited direct operations in South Africa and all
operations in Russia during the first half.
On 31 January 2023, we completed the divestment of our small business
operations in Mauritius and Madagascar. Production in these countries has
become increasingly focused on domestic and regional customers with the more
international customer base gradually migrating their production elsewhere.
Strategic Projects
We have a strong track record of managing our costs lower and delivering
operating efficiencies, and we continued to focus on costs during the year. To
this end, we announced a number of new strategic projects in March 2022.
These will improve margins by optimising the portfolio and footprint, enhance
the overall cost base efficiency, and mitigate structural labour availability
issues in the US.
We have accelerated project implementation, delivering in-year efficiencies in
2022 ahead of our expectations ($20 million versus the initially guided $5-$10
million). In addition, we now expect to deliver total savings of $70 million
by 2024, a significant increase on the $50 million we had previously guided.
The additional $20 million savings will primarily arise from expanding the
scope of our strategic projects, with a focus on the transformation of our
Asian operations, in particular in China and India. The total exceptional
cash cost of the projects is expected to be $50 million (previously $35
million).
Optimising the portfolio and footprint and mitigating structural US labour
availability issues
We have in-train a number of initiatives to further optimise our portfolio and
footprint, including mitigating structural labour availability issues in the
US. We have exited legacy facilities and technology in the US and
established a new state- of-the-art facility in Huamantla, Mexico, while also
making significant investment in our existing plant at Orizaba, Mexico.
These sites are operational, following fit-out and recruitment and training of
the workforce, with overall project timing on-track. In addition, we expect to
commission a second new plant in Mexico by the end of the first half of 2023,
which will further improve efficiency and US labour availability issues.
As part of this project, we have installed new, proprietary technology which
reduces the number of manufacturing processes, while increasing our
flexibility to meet customer needs. The development of a new employee-friendly
and digitally controlled bonding process, underpinned by our proprietary
infra-red bonding equipment, is a key enhancement to our operations. We have
also installed the latest compressed air system resulting in lower energy
intensity. To date, the project has enabled us to deliver increased output for
key growth segments. Wherever possible, we have re-used equipment from our
US plants, reducing the capital requirements of the project and reducing
scrap.
Due to their timing and nature, the costs and benefits of these projects are
expected to accrue predominantly during 2023 and 2024.
In addition, we have continued to consolidate our footprint in other
geographies. Following the announcement of the closure of our warehouse in
Poland in the first half, which was completed in August, we exited our
warehouse in Hungary at the end of the year. This has enabled us to
consolidate our European thread operations in Romania in a modern,
purpose-built facility.
Improving the overall cost base efficiency
A further focus is on improving the overall cost base efficiency of the Group,
and we commenced a project in the first half with particular emphasis on our
higher cost UK and US locations. The objective is to move a number of our
corporate and overhead activities closer to our operations and customers,
making us at once more efficient and more effective. Following the progress
delivered in the first half, we have continued to accelerate implementation of
the project and have delivered total savings in 2022 of $20 million. These
savings are ahead of our initial expectations of $5-10 million for the year,
and ahead of our increased expectations of $15 million set out at the H1 2022
results. The project is continuing into 2023, with further savings expected
in line with our original overall expectations.
Strategic Enablers: Innovation, Sustainability and Digital
Our strategic enablers of Innovation, Sustainability and Digital underpin our
strategy to accelerate profitable sales growth while delivering sustainable
stakeholder value. We made further progress during the year, as follows.
Innovation
We innovate to deliver differentiated, highly-engineered products that will
deliver profitable growth. Our innovation is inextricably linked to
sustainability, as many of the key market trends have sustainability at their
core. These include the sourcing of natural and recycled materials for
production, more efficient production techniques, the production of
lightweight, protective and multi-use products and technologies that enhance
the ability to recycle end-of-life products. Our success in bringing
innovative new products to market that drive revenue and margin growth is
based on a number of critical factors. These include the use of technology
roadmaps, and our close relationships and collaboration with customers.
During the year we launched 17 (2021: 21) new products which delivered a
combined $34 million (2021: $37 million) of incremental revenue across the
Group in their first year. All of our businesses contribute to the pipeline
of new and innovative products, with a few examples from across the Group:
· EcoCycle: a ground breaking, water dissolvable concept using a blend of water
based polymer and substrate. This enables the easy and low-cost separation of
textile and non-textile components in end-of-life garments, facilitating
re-use;
· Eco B: a recycled polyester thread that allows synthetic plastic-based fibres
to behave more like natural fibres, such as wool;
· Rhenoprint™ multizone: a process for manufacturing structural components
that generates zero waste. It allows for adjustment of the amount of
material used to create a more refined product affording greater levels of
comfort and stability;
· Ecostrobe: footwear components made entirely from recycled plastic, without
quality or performance loss. The fully recycled nature of the product appeals
to customers, as it facilitates end-of-life material re-use;
· StremX: a composite strength member for fibre optic cables made of a mix of
organic and inorganic fibres. The product enables production of lighter,
thinner cables as a result of greater tensile strength and crimping
characteristics. It is also very cost-effective to manufacture;
· FlamePro Splash Protect: a metal molten splash protective fabric engineered to
be lightweight, soft, flexible and durable. It ensures protection against
radian heat, flame, metal splash and other smelting hazards due to its thermal
resistant and metal-shedding design. FlamePro Splash Protect is durable
after laundry with good wash fastness, so extending the life of the garment.
During the year, Performance Materials opened a new and significantly larger
plant in Spain for the manufacture of products for the global
telecommunications industry. The plant has a new innovation centre
specialising in the development of products for applications in
telecommunications and oil and gas markets.
Our new product pipeline remains strong. We will continue to develop our
innovation credentials to deliver sustainable, tailored solutions in line with
customer requirements.
Sustainability
A key part of our company purpose is to make a better and more sustainable
world, and we aim to set benchmark performance for our industry. Not only
does this help people and the planet, it also makes good business sense. It
enables us to differentiate our offerings and position ourselves to be a
supplier of choice in the rapidly growing market for sustainable apparel and
footwear products. In addition, by using less resources, including less
energy and water, we are aligned with broader sustainability trends but also
reducing our costs.
We are continuing towards our long-term commitment of being Net Zero by 2050,
initially by following a pathway to our 2030 SBTi goals. As part of these
SBTi goals, we will reduce scope 1 and 2 emissions by over 46% by 2030 (with
scope 3 reduced by 33%), with 70% of our global energy consumption coming from
renewables. In addition, no Coats products will be made using new
oil-extraction materials such as virgin polyester and nylon. We will also
adopt a circularity approach, creating products and packaging solutions that
enable recycling and reuse, within our own operations and across the wider
garment industry.
Our shorter term 2022 targets were set in 2019. These were set at ambitious
levels to challenge us to address at speed the key sustainability issues
within the business. We are proud of what we have achieved during the
period to the end of 2022, substantially delivering against our goals, and we
have met or exceeded the targets for many. In particular, our energy
intensity has been reduced from the 2018 baseline, achieving 143% of the 7%
target. Our target of 80% of employees working within a Great Place to Work
certification has also been exceeded, achieving 108% of the target. We also
achieved our 25% waste reduction target.
We have delivered significant improvement in all areas although, in a few
cases, we fell just short of our targets. We targeted a 40% reduction in
water intensity and achieved 95% of the target. We are also just short of
our target of 100% compliance with industry driven Zero Discharge of Harmful
Chemicals (ZDHC) effluent standards, delivering a significantly improved 92%
ZDHC compliance performance in the year. We have put in place detailed plans
to remedy the remaining issues, which arose at a small number of plants.
We continued to rapidly increase sales of our range of 100% recycled products,
driven by market demand, where we are the clear global market leader. Our
revenue increased in the year by 37% to $127 million (2021: $93 million) at
CER. We remain focused on ensuring all our premium polyester threads are
made from 100% recycled material by 2024, and we are making good progress
towards this.
We have now set further medium-term sustainability milestones, using 2022 as
the new baseline. This will enable us to continue on the path to our 2030 SBTi
approved targets and our 2050 Net Zero commitment. These specific,
measurable and, once again, ambitious 2026 targets continue to focus on
people, water, emissions and waste reduction, as well as product innovation
and materials transition. We have added two new 2026 target areas. These
relate to an increase in the number of female leaders in the business as well
as to reductions in scope 1 and scope 2 emissions. These 2026 targets will
enable us to continue to drive our sustainability momentum.
We had previously earmarked $10 million to fund the scaling up of green
technologies and materials that are relevant to our industry supply chain.
During the year, we allocated our first tranche of this money to investment in
water-free dyeing technology, with other exciting ideas under consideration.
The re-purposing of our Asia Innovation Hub in Shenzhen, China to focus on the
application of biomaterials has now been completed, following investment in
top talent in a range of technologies, including textile engineering, polymer
chemistry and dyeing, coating and bonding.
We also submitted our Carbon Disclosure Project (CDP) Climate Change and Water
questionnaire during the year, receiving a B- and B rating respectively,
reflecting our 2021 performance. We aim to improve on this in future
surveys.
Digital
By adopting and promoting digital technologies we are able to facilitate
closer links with our customers, increase our operational agility and the
efficiency of our operations and those of our customers.
During the year, we enhanced our digital customer ecosystem, ShopCoats,
through which customers can use automated bulk and sample ordering and status
management. We supported valuable key accounts through system integration,
refreshed our front-end order system and used Microsoft Dynamics Customer
Relationship Management software to enhance our sales and customer service
systems. These tools give us speed, agility, lower cost and increased customer
satisfaction.
In addition, our Coats Digital business, part of Apparel & Footwear, sells
software which enables fashion brands, sourcing companies and manufacturers to
optimise, connect and accelerate business critical processes seamlessly.
This includes design and development, method-time-cost optimisation,
production planning and control, fabric optimisation and shop floor
execution. Orders for this software have increased during the year,
reflecting the growing importance of digital business in driving efficiency
and business improvement.
As part of the Rhenoflex acquisition in 2022, we acquired the proprietary
Rhenoprint™ 3D printing capability. This unique process for developing and
producing footwear components provides leading brands a print-to-order
solution, according to individual needs. The process facilitates enhanced
shoe performance and characteristics, while delivering product as part of a
completely waste-free process.
Dividend
We have delivered a strong set of results in the year and, as a result of our
ongoing transformation, we are well-positioned in our markets with growth and
margin opportunities. Consequently, the Board is pleased to propose a final
dividend of 1.73 cents per share, a 15% increase on the prior year. Subject
to approval at the forthcoming AGM, the final dividend will be paid on 25 May
2023 to ordinary shareholders on the register at 28 April 2023, with an
ex-dividend date of 27 April 2023. Alongside the interim dividend of 0.70
cents per share, this makes a total dividend of 2.43 cents per share for the
year, an increase of 15%.
The Board will continue to review the level of dividend payment to
shareholders, as we continue to deliver margin and earnings growth, alongside
strong cash generation.
Full Year Outlook in Line with the Board's Expectations
Following a year of excellent progress in transforming the business, market
share gains and increased profitability, we expect to deliver another year of
strategic and operational progress. Destocking by customers has continued into
the early part of the year, primarily in Apparel markets and to a lesser
extent in Footwear markets, however we continue to proactively respond to the
macroeconomic environment and inflationary pressures using our well-defined
and tested playbook that focuses on cash, costs, self-help initiatives, deep
customer relationships and tactical pricing actions.
As a result, we continue to anticipate that full year 2023 performance will be
in line with the Board's expectations, with a weighting to the second half.
This performance will be underpinned by the contribution from acquisitions, in
addition to associated synergies and efficiencies from strategic projects.
Coats has global leadership, a wide geographic footprint, scale, product and
quality differentiation and a pipeline of innovative and sustainable products.
This will enable revenue growth ahead of market. Looking further ahead, as
a result of the transformational work completed to date, we remain
well-positioned to grow earnings and cash.
Operating Review
Continuing operations 2021 (3) 2021 CER (1) inc/(dec) Organic (4) inc/(dec)
2022 CER (1) Inc / (dec)
$m $m $m % % %
Revenue
By segment
A&F 1,163 1,048 988 11% 18% 9%
PM 420 399 373 5% 13% 13%
Total 1,584 1,447 1,361 9% 16% 10%
By region
Asia 912 850 826 7% 10% 6%
Americas 341 314 311 9% 10% 9%
EMEA 331 283 225 17% 48% 25%
Total 1,584 1,447 1,361 9% 16% 10%
Adjusted operating profit (2)
By segment
A&F 201 171 162 18% 24% 18%
PM 34 27 23 26% 47% 47%
Total adjusted operating profit 235 198 185 19% 27% 22%
Exceptional and acquisition related items (54) (20)
Operating profit 181 178
Adjusted operating margin (2)
By segment
A&F 17.3% 16.3% 16.4% 100bps 90bps 140bps
PM 8.1% 6.8% 6.2% 130bps 190bps 190bps
Total 14.8% 13.7% 13.6% 120bps 120bps 150bps
1 Constant Exchange Rate (CER) are 2021 results restated at 2022 exchange rates.
2 On an adjusted basis which excludes exceptional and acquisition-related items.
3 Restated to reflect the results of the Brazil and Argentina business as a
discontinued operation.
4 Organic on a CER basis excluding contributions from Texon and Rhenoflex
acquisitions
2022 Operating Results Overview
Group revenue of $1,584 million increased 9% on a reported basis, 16% on a CER
basis (which includes the initial impact of the Texon and Rhenoflex
acquisitions), and 10% on an organic basis. This was driven by pricing actions
which fully offset ongoing heightened inflationary pressures, market share
gains and a strong market recovery during H1. As anticipated, year-on-year
performance slowed during the second half, in part due to the 2021 comparator
strengthening, as well as a softening in demand due to macroeconomic factors,
with some destocking. This was most noticeable in Apparel markets in Q4 but
also impacted Footwear towards the end of the year.
Group adjusted operating profit of $235 million increased 27% on a CER basis
(2021: $198 million reported), with operating margins up 120bps to 14.8%
(2021: 13.7%). On a reported basis operating profit was $181 million (2021:
$178 million) after $54 million of strategic project costs and
acquisition-related items.
Adjusted earnings per share ('EPS') for the year increased by 14% to 8.2 cents
(2021: 7.2 cents) as operating profits grew significantly due to the strong
trading performance and the delivery of savings from the strategic projects,
alongside a reduction in the underlying effective tax rate. There was some
offset from higher interest costs. Reported EPS of 4.8 cents (2021: 5.8
cents) was 18% lower, including the impact of exceptional and acquisition
related items.
Apparel & Footwear ('A&F')
Coats is the global market leader in supplying premium sewing thread and
footwear structural components to the A&F industries. We are the trusted
value-adding partner, providing critical supply chain components and services,
and our portfolio of world-class products and services exist to serve the
needs and requirements of our customers and brand owners. Coats is also the
global market leader in footwear structural components. Our highly engineered
products have strong brand component specification, primarily targeted at the
attractive athleisure, performance, and sports markets. The combination of
Coats, Texon and Rhenoflex in this market has enabled us to accelerate our
innovation and sustainability.
Our A&F business benefited from market share gains and strong pricing/mix
fully offsetting inflationary pressures, along with post-COVID-19 industry
inventory restocking, buffer buying in the face of supply chain disruption and
continued underlying market recovery during H1. As anticipated, year-on-year
performance slowed during the second half, in part due to the 2021 comparator
strengthening, as well as a softening in demand due to macroeconomic factors,
with some destocking. This was most noticeable in Apparel markets in Q4 but
also impacted Footwear towards the end of the year. Despite these industry
dynamics we have continued to leverage our key customer relationships, strong
sustainability credentials, market-leading product ranges and technical
services, and our flexibility and agility in a turbulent supply chain
environment.
Revenue of $1,163 million (2021: $1,048 million) reflected strong growth of
18% on a CER basis (11% reported), which included the initial contribution of
the Texon and Rhenoflex acquisitions, which were acquired in July and August
2022 respectively. Excluding acquisitions, organic growth was 9% for the
full year with H2 adversely impacted, following the exceptional H1 (organic
growth 21%), as a result of the changing market conditions described above,
and strengthening comparators. The performance in the year reflects the
flexibility of our global footprint and our ability to support customers
during the COVID-19 recovery and ongoing uncertainty in global supply chains.
Our global accounts programme, in which we dedicate customer relationship
resources to our key brands and retailers, saw significant new customer and
programme wins, which contributed to further overall share gains; this has
included a new programme win with a major European retailer in relation to a
sportwear brand launch where we are the nominated recycled thread supplier.
We have also been able to further leverage our technical advisory and fast
sampling service to deliver notable further sales successes in a number of
Asian markets.
All of our geographic regions (Asia, Americas and EMEA) benefited from
positive end market sentiment during H1, led by our ongoing ability to supply
product. Market trends towards Sports and Athleisure, as well as
casualisation, continued to accelerate. In addition, increasing online
activity, a shift towards premium products and supply chain digitisation
trends also continued during the year. Supplier consolidation, nearshoring and
the need for agility were also prominent trends and, unsurprisingly, customers
continue to place increasing emphasis on their sustainability agendas.
Despite the slowdown in the second half of the year, largely driven by
macroeconomic factors and resulting destocking, these longer-term trends
remain and are opportunities to underpin further accelerated medium-term
growth and share gains.
All A&F's sub-segments delivered organic revenue growth in 2022; A&F
thread was up 9%, Zips and Trims was up 16%, and Coats Digital was up 3%.
Adjusted operating profit of $201m (2021: $171m) increased 24% vs 2021.
Adjusted operating margin was up 90bps to 17.3% (2021: 16.4% at CER).
Excluding the marginally dilutive initial impact of acquisitions (which are
expected to be accretive, post synergies), A&F margins were up organically
140bps year-on-year to 17.8%. This was as a result of excellent commercial
and operational delivery, pricing and procurement actions fully offsetting
heightened inflationary pressures, alongside strategic project benefits and
general cost discipline.
Performance Materials ('PM')
We are experts in the design and supply of a diverse range of technical
products that serve a variety of strategic end use markets. Building on over
250 years of leadership in thread, we incorporate specific design features to
be able to provide highly engineered solutions for our customers. The segment
operates across Personal Protection, Composites and Performance Threads.
Personal Protection offers multi-hazard industrial applications for
industrial, energy, firefighting and military wear. Composites provides
products and solutions for fibre optic cables and oil & gas piping sectors
and light weighting solutions for automotive components, while Performance
Threads has applications in a range of sewn products like safety-critical
airbags and seat belts, outdoor goods, household products like bedding and
furniture, hygiene-sensitive consumer goods like feminine hygiene and tea
bags.
From 2022, the Group has disclosed PM in three sub-segments. Personal
Protection (in 2022, 43% of divisional revenue), Composites (18% of revenue)
and Performance Thread (39% of revenue). The medium-term growth rates
expected for each sub-segment are high single digits for Personal Protection,
low double-digits for Composites, and global GDP growth for Performance
Thread. The overall medium-term growth target for the division is a
mid-high single digit growth CAGR (6-9%), as in the Revised Segmental
Reporting section below.
There were new customer wins across all sub-segments, such as the nomination
for our FlamePro Splash Protect fabric from a leading US-based manufacturer of
protective garments for the molten metal industries and from an energy and
data management provider for our extruded coated nylon, composite products
used in cables for the energy and automotive segments.
Overall, PM revenue grew 13% to $420 million (2021: $399m) on an organic and
CER basis (5% on a reported basis), which was driven primarily by price
increases to offset inflation. Revenue growth performance vs 2021 was
underpinned by strong demand in Composites (up 21%) despite some H1 supply
chain issues in EMEA, and Personal Protection (up 19%), again due to strong
demand but also operational improvements in the US yarns business. Performance
Thread increased 4% vs 2021 despite weaker consumer demand in its Household
and Recreation markets, and ongoing labour availability issues in the US.
These operational constraints are being addressed via our strategic
projects. In H2, overall demand has remained resilient across end markets.
Adjusted operating profit increased 47% on an organic and CER basis to $34
million (2021: $27 million). At an adjusted operating margin level, PM
margins were up on an organic and CER basis by 190 bps to 8.1% (2021: 6.2%).
While still impacted in the US by labour availability issues and labour
inflation, US margins have improved significantly due to the positive impact
of actions taken. Excluding the US business, PM margins were c.12%, slightly
lower than 2021 (13%), as a result of specific temporary supply chain
disruption issues within EMEA in H1, which have now been resolved.
Revised Segmental Reporting from 1 January 2023
As mentioned above, in July and August 2022 we completed the acquisitions of
Texon and Rhenoflex respectively. This has made us the global leader in
footwear components, alongside our existing global leadership position in
industrial thread.
As a result of these acquisitions, and as announced at our Capital Markets Day
in 2022, our new organisational and reporting structure, effective 1 January
2023, is comprised of three divisions; Apparel, Footwear and Performance
Materials. The new Footwear segment will consist of the existing Coats
footwear thread business (currently part of A&F), and the acquired
footwear components businesses, Texon and Rhenoflex.
We will report our financial results on the new segmental basis from our HY23
results.
As announced at our 2022 Capital Markets Day, the medium-term sales growth
CAGR for the new operating segments are anticipated to be 3-4% for Apparel,
c.8% for Footwear, and 6-9% for Performance Materials, resulting in Group
growth of c.6%. The goal for the Group 2024 adjusted operating margin is
c.17%, comprising 15-16% for Apparel, >20% for Footwear, and 13-14% for
Performance Materials.
Geographical Performance
We saw strong revenue growth in all regions driven primarily by pricing
actions, mix and positive end market sentiment during H1.
Our Asia revenue, 58% (2021: 59%) of Group, increased 6% CER to $912 million
(2021: $850 million), despite some headwinds. While Vietnam and India
delivered strong growth, following COVID-19 disruption in 2021, the market in
China was impacted by COVID-19 disruption during H1 2022. Overall, Asian
markets experienced significant demand and supply volatility throughout the
year, with our performance underpinned by agility, customer focus and
self-help initiatives.
Our Americas revenue, 22% (2021: 22%) of Group, increased 9% CER to $341
million (2021: $314 million), with a particularly strong performance in
Colombia and Central America. In addition, our US Personal Protection
business performed well, with strong demand and operational delivery improving
significantly.
In EMEA, 21% (2021: 20%) of Group, revenue increased 25% CER to $331 million
(2021: $283 million). This was driven by positive momentum in PM in
telecommunication composites and transportation, as fibre optic sales remained
robust. In A&F, Zips saw strong demand. Organic revenue growth also
benefited from the weakening Turkish Lira, as we continued to price largely in
USD, as well as from the adoption of hyperinflation accounting in that
country.
In the Americas and EMEA, we also benefited from increased nearshoring, with
customers bringing production closer to their end-markets, and this trend
gathered momentum through the year.
Financial Review
Revenue
Group revenue increased 9% on a reported basis and 16% on a CER basis. On an
organic basis revenue increased 10%, which excludes the Texon and Rhenoflex
acquisitions. All commentary below is on an organic basis unless otherwise
stated.
Operating Profit
At a Group level, adjusted operating profit increased from $198 million in
2021 to $235 million (including acquisitions) and adjusted operating margins
increased 120bps to 14.8%. The table sets out the movement in adjusted
operating profit during the year.
$m Margin %
2021 adjusted operating profit 198 13.7%
Volumes impact (direct and indirect) (34)
Price/mix 128
Raw material inflation (60)
Freight inflation (10)
Other cost inflation (e.g. labour, energy) (48)
Productivity benefits (manufacturing and sourcing) 22
Strategic projects savings 20
Other SD&A savings 16
Others (e.g. FX) (6)
Contribution from Texon and Rhenoflex acquisitions 9
2022 adjusted operating profit 235 14.8%
Exceptional and acquisition related items (54)
2022 reported operating profit 181
In the first half of the year, there were volume tailwinds as a result of the
significant demand recovery in the period. In the second half, as
anticipated, we saw a slow-down, particularly in Apparel. The direct and
indirect volume impact of this, together with the increasingly strong 2021
comparators (due to the exceptional demand conditions, which continued into H1
2022), resulted in a direct and indirect volume headwind in the year.
In part as a result of increasing oil prices in the latter part of 2020, and
throughout 2021 and 2022, we experienced year-on-year inflationary pressures
for a number of major cost categories, most notably raw materials, freight and
other costs such as labour and energy. As in previous years, we were able to
fully offset these headwinds, by means of productivity benefits and increased
pricing. These inflationary pressures continued throughout 2022, albeit with
some flattening out and price moderation in certain areas in the latter part
of the year. There was early evidence of this, for example, in relation to
some raw materials and freight.
Selling, Distribution and Administration costs have continued to be well
controlled, despite ongoing inflationary impacts. These are below last year
as we reduced our costs, particularly in the face of more challenging
conditions in H2. We have also benefited from $20 million of savings in the
year, in relation to our strategic projects announced in early 2022, and these
are ahead of our initial expectations for the year. We have increased the
total efficiencies we expect to deliver by 2024 by $20 million through
expanding the scope of the projects, in particular focusing on our Asian
operations, and we now expect to deliver a total of $70 million incremental
benefits.
Our 2022 acquisitions, Texon and Rhenoflex, delivered a $9 million
contribution to adjusted operating profit post-acquisition. This was in
line with our acquisition business case, and we moved quickly in the year to
deliver the anticipated synergies ($11 million total by 2024) with run-rate
savings at the year-end of $3 million.
As a result of these factors, the Group's adjusted operating margins increased
by 120bps to 14.8% on a CER basis (2021: 13.6%). Excluding the Texon and
Rhenoflex acquisitions, the Group margin increased 150bps to 15.1%.
On a reported basis, Group operating profit (including exceptional and
acquisition-related items) increased to $181 million (2021: $178 million).
This includes exceptional items, and a breakdown is provided below.
Exceptional and acquisition-related items are not allocated to segments, and
as such the segmental profitability referred to above is on an adjusted basis.
Foreign exchange
The Group reports in US Dollars and translational currency impacts can arise,
as its global footprint generates significant revenue and expenses in a number
of other currencies. In 2022, this was a headwind of 7% on revenue and 8% on
adjusted operating profit. These adverse translation impacts were primarily
due to depreciation in the year in the Euro and the Indian Rupee and to the
adoption of hyperinflation accounting in Turkey. At year-end exchange rates we
expect a c.1% translation headwind for revenue and adjusted operating profit
in 2023 (excluding any future hyperinflation impact, which cannot be forecast
with accuracy).
Non-operating Results
Adjusted earnings per share ('EPS') increased by 14% to 8.2 cents (2021: 7.2
cents) as operating profits grew significantly, increasing from $198 million
to $235 million (due to the strong trading performance and the delivery of
savings from the strategic projects). This was alongside a reduction in the
underlying effective tax rate of 29% (2021: 30%). There was some offset from
higher interest. Reported EPS of 4.8 cents (2021: 5.8 cents) was 18% lower,
including the impact of exceptional and acquisition related items.
The increase in adjusted profit before tax was due to the increase in adjusted
operating profit ($37 million increase). This was partially offset by the
net finance charge which was $8 million higher year-on-year (see further
details below). There was a small (c.0.1 cents) dilutive impact from the two
acquisitions completed during the year, which is not expected to recur in
2023, as the business case and synergies are delivered.
Net finance costs increased to $30 million (pre-exceptional) (2021: $21
million). The key drivers were a $9 million increase in interest on bank
borrowings due to increasing interest rates on the floating elements of debt,
and additional interest on the $240 million acquisition facility taken out in
July to fund the Texon acquisition. In addition, there was a $6 million
adverse movement on foreign exchange, largely as a result of Sterling weakness
towards the year end, when we hedge a number of costs and cash flows,
including scheduled UK pension contributions. These were partially offset by a
$4 million decrease in interest on pension scheme liabilities, as a result of
an IAS19 basis surplus at 31 December 2021. There was also a $2 million
credit due to the indexation of non-current assets in Turkey as a result of
the adoption of hyperinflation accounting.
The adjusted taxation charge for the year was $60 million (2021: $53 million).
Excluding the impact of exceptional and acquisition-related items, the
effective tax rate on pre-tax profit was 29% (2021: 30%). The reported tax
rate was 37% (2021: 34%), after exceptional and acquisition related items.
Profit attributable to minority interests increased by 13% to $22 million
(2021: $20 million) and was predominantly related to Coats' operations in
Vietnam and Bangladesh, in which it has controlling interests.
Exceptional and Acquisition-related Items
Net exceptional and acquisition-related items before taxation were $55 million
(2021: $20 million). These include strategic project costs of $31 million (of
which $5 million are non-cash impairments) and acquisition-related items of
$24 million.
Strategic project costs of $31 million relate to the commencement of a number
of strategic initiatives during 2022; and primarily consist of severance costs
of $22 million, non-cash right-of-use asset impairment charges in relation to
UK and US office exits of $5 million, and legal / advisor / closure costs of
$5 million, offset by a profit of $1 million from the sale of property.
These significant actions have supported the acceleration of project benefits,
as mentioned earlier, with $20 million of incremental adjusted operating
profit delivered in 2022.
Acquisition-related items of $24 million consisted of the provisional
amortisation charges from the newly recognised intangible assets from the
Texon / Rhenoflex acquisitions ($8 million), related transaction costs ($13
million) and the amortisation of intangible assets acquired in previous
acquisitions ($3 million).
Discontinued items
In May 2022, Coats completed the disposal of its business
in Brazil and Argentina to Reelpar SA, an entity backed by a Sao Paulo
Private Equity Firm.
As a result of the strategic exit from Brazil and Argentina, the operating
results of these businesses prior to sale have been reported within
discontinued operations during the current (2022 operating losses of $3
million) and prior years. This has resulted in an overall increase to the
Group adjusted operating margin of around 50bps.
As a result of the transaction, we have disposed of $49 million of net assets
(of which $45 million relates to working capital) for a cash payment to the
purchaser and fees of $20 million. In addition, $15 million of historic
foreign exchange losses have been recycled to discontinued operations. The
Group's statutory profit of $7 million in the year (2021: $109 million) is
stated after the loss on disposal from this divestment.
The exit from the Brazil and Argentina business is in line with Coats'
strategic initiatives, announced in March 2022, to accelerate profitable sales
growth and transform the company.
Cash flow
The Group delivered $114 million (2021: $124 million) of adjusted free cash
flow in the year. Free cash flow is measured before annual pension deficit
recovery payments, acquisitions, disposals and dividends, and excludes
exceptional items.
Adjusted free cash flow performance was strong, albeit slightly below 2021,
which benefited from some significant, favourable non-recurring items,
including non-payment of 2020 staff bonuses. We managed net working capital
closely, although there was a $22 million outflow (2021: $14 million
outflow). This result was achieved after a significant investment in
inventory to underpin service levels during an exceptional period of demand,
supply chain disruption and inflationary pressure, which particularly impacted
the first half. We continued our disciplined approach to payables and
receivables management through the year.
Capital expenditure was $34 million (2021: $31 million), as we continued to
maintain a selective approach to investing in growth opportunities, as well as
in strategic projects. We anticipate 2023 capital expenditure to be in the
$30-40 million range, as we continue to invest in support of our growth
strategy and in our environmental performance.
Minority dividends of $18 million (2021: $17 million) were paid, as cash was
repatriated from joint ventures to the Group. Tax paid was $55 million (2021:
$48 million).
The Group delivered an overall free cash outflow of $247 million (2021: $33
million inflow). This primarily reflects the adjusted free cash inflow of
$114 million, offset by:
· UK pension payments of $43 million (being $32 million of ongoing deficit
recovery payments and administrative expenses, and $11 million catch-up of
deferred 2020 payments which are now fully completed);
· Dividend payments of $33 million;
· Exceptional and acquisition related payments, mainly relating to strategic
projects of $23 million;
· Acquisition transaction payments of $12 million;
· Disposals and discontinued operations of $26 million relating to the Brazil
and Argentina business: payments to the purchaser and fees of $20 million and
$9 million cash outflow from discontinued operations, net of the $3 million
overdraft disposed of;
· Net cash paid to acquire the Texon business, which consisted of $235 million
cash payment, offset by $17 million cash within the business at the time of
acquisition.
The Rhenoflex acquisition, which consisted of a $120 million cash payment, was
largely funded by an over-subscribed £92 million equity raise.
Net debt (excluding lease liabilities) at 31 December 2022 was $394 million
(31 December 2021: $147 million). Including lease liabilities, net debt was
$500 million (31 December 2021: $246 million).
Pensions and other post-employment benefits
The net surplus for the Group's retirement and other post-employment defined
benefit liabilities (UK and other Group schemes), on an IAS19 financial
reporting basis, was $105 million as at 31 December 2022, which was $84
million higher than 31 December 2021 ($21 million surplus). This increase was
primarily due to movements on the UK scheme.
The Coats UK Pension Scheme, which is a key constituent of the Group defined
benefit liabilities, had a surplus on an IAS 19 basis at 31 December 2022 of
$181 million (31 December 2021: $108 million). The increase in the surplus
during the year of $73 million predominantly relates to net actuarial gains of
$45 million. This is from an increased discount rate due to significantly
higher corporate bond yields reducing liabilities, but this was partially
offset by asset losses due to the high degree of hedging in place in the
portfolio. There were also employer contributions (excluding administrative
expenses) of $38 million, including $11 million of catch-up payments.
UK funding update
We continue to maintain strong and collaborative relations with the Scheme
Trustees around strategic planning and have established a joint working group
between the Company and Trustees to review further opportunities for
de-risking the scheme, beyond the significant positive progress that has
already taken place.
As part of this constructive planning the Trustee of the Coats UK Pension
Scheme completed a partial buy-in transaction in December 2022 by purchasing a
c.£350 million bulk annuity policy from Aviva which insures benefits payable
under the scheme in respect of c.3,700 pensioner and dependant members. These
members represent roughly 20% of the scheme's liabilities.
The purchase of this policy sees all the Scheme's financial and demographic
risks fully hedged for the covered liabilities. The Scheme will receive a
regular stream of income that matches the pension payments for the covered
members, making it a precise liability hedging asset. This further de-risks
the Scheme and reduces future balance sheet volatility. It builds on the
significant positive steps taken to de-risk the Scheme in recent years,
resulting in 90% of the Scheme's inflation / interest rate exposure having
previously been hedged.
The Aviva buy-in is consistent with Coats' aspiration of fully insuring the
Scheme and removing it from the Group balance sheet, in a cost effective
manner.
When the Technical Provisions (funding) deficit for the Scheme was last
formally assessed at 31 March 2021, as part of the triennial valuation cycle,
it showed a £193 million deficit. As a result of this valuation, future
contributions were maintained at the previously agreed levels of £22 million
($27 million) per annum (indexing) up until 2028, which was expected to result
in the pay-down of the deficit slightly earlier than originally planned. The
Group agreed to continue to pay the Scheme administrative expenses and levies
of around $5 million per annum.
Updates since then indicate that the funding deficit has fallen significantly
and is now approaching fully funded on a technical provisions basis. This
significant improvement has been due to employer contributions, favourable
movements in the market (increasing discount rates) and the de-risking actions
that we and the Trustees have taken, for example the buy-in transaction
referred to above.
As a result of this significantly improved funding position, and reflective of
the collaborative working relationship with the Trustees, we have agreed a
mechanism to switch off / switch on the regular cash contributions to the
scheme based on monthly estimates of the latest funding position. As such,
if the scheme remains in surplus for a consecutive number of months cash
contributions will cease entirely until any trigger on the downside (i.e. a
return to deficit) has been hit. At this point, contributions on a
pre-agreed basis would resume. Given the latest funding position, this has
the potential to significantly reduce or eliminate the existing levels of
contributions made into the Scheme, and thereby increase free cash flows
generated by the Group, within the short to medium term.
Balance sheet and liquidity
Group net debt (excluding lease liabilities) at 31 December 2022 was $394
million ($500 million including lease liabilities), an increase on 31 December
2021 ($147 million). This reflects disciplined cash management as noted
above, offset by the acquisition-related items, payments in relation to the
sale of the Brazil / Argentina business, ongoing pension deficit repair
payments, shareholder dividends and exceptional cash costs in relation to
strategic projects.
As previously reported, the Texon acquisition, which was completed in July
2022, was funded by a $240 million temporary acquisition facility. In January
2023, we successfully refinanced this acquisition facility via the US Private
Placement (USPP) market with $250 million of notes split between 5 and 7 years
tenor at highly competitive interest rates (between 5.3% and 5.5%). This
maintains our total committed debt facilities at $835 million with well
diversified source and tenor; being $360 million revolving credit facility,
$225 million of original USPP notes (2024 and 2027 tenors), and the new $250
million of USPP notes (2028 and 2030 tenors). The committed headroom on our
banking facilities was approximately $250 million at 31 December 2022.
At 31 December 2022, our proforma leverage ratio (net debt to EBITDA; both
excluding lease liabilities) was 1.4x and remains well within our 3x covenant
limit, and in the middle of our target leverage of 1-2x. Our interest cover
covenant also continued to have significant headroom at 31 December 2022 at
19.0x vs a covenant limit of 4x. These covenants are tested twice annually in
June and December and monitored throughout the year.
Going concern
On the basis of current financial projections and the facilities available,
the Directors are satisfied that the Group has adequate resources to continue
for at least the next 12 months and, accordingly, consider it appropriate to
adopt the going concern basis in preparing the financial statements. Further
details of our going concern assessment, financial scenarios and conclusions
are set out in note 1.
Consolidated income statement
For the year ended 31 December
2022 2021*
Notes Before Exceptional Total Before Exceptional Total
exceptional and US$m exceptional and US$m
and acquisition and acquisition
acquisition related acquisition related
related items related items
items (see note 3) items (see note 3)
US$m US$m US$m US$m
Continuing operations
Revenue 1,583.8 - 1,583.8 1,446.7 - 1,446.7
Cost of sales (1,087.1) (9.9) (1,097.0) (979.3) - (979.3)
Gross profit 496.7 (9.9) 486.8 467.4 - 467.4
Distribution costs (126.1) (3.8) (129.9) (125.1) - (125.1)
Administrative expenses (135.7) (41.4) (177.1) (144.6) (19.5) (164.1)
Other operating income - 1.2 1.2 - - -
Operating profit 234.9 (53.9) 181.0 197.7 (19.5) 178.2
Share of profits of joint ventures 1.1 - 1.1 1.2 - 1.2
Finance income 4 2.6 - 2.6 0.4 - 0.4
Finance costs 5 (32.3) (1.1) (33.4) (21.8) - (21.8)
Profit before taxation 206.3 (55.0) 151.3 177.5 (19.5) 158.0
Taxation 6 (60.1) 3.7 (56.4) (53.3) 0.2 (53.1)
Profit from continuing operations 146.2 (51.3) 94.9 124.2 (19.3) 104.9
(Loss)/profit from discontinued operations 13 (3.7) (83.9) (87.6) (5.2) 8.9 3.7
Profit for the year 142.5 (135.2) 7.3 119.0 (10.4) 108.6
Attributable to:
EQUITY SHAREHOLDERS OF THE COMPANY 120.2 (134.9) (14.7) 99.3 (10.4) 88.9
Non-controlling interests 22.3 (0.3) 22.0 19.7 - 19.7
142.5 (135.2) 7.3 119.0 (10.4) 108.6
Earnings/(loss) per share (cents) 7
Continuing operations:
Basic 4.80 5.84
Diluted 4.77 5.82
Continuing and discontinued operations:
Basic (0.98) 6.10
Diluted (0.97) 6.07
Adjusted earnings per share 14 (d) 8.17 7.17
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
Consolidated statement of comprehensive income
Year ended 31 December 2022 2021
US$m US$m
Profit for the year 7.3 108.6
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains on retirement benefit schemes (note 15) 59.8 212.8
Tax on items that will not be reclassified (1.4) (1.0)
58.4 211.8
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (31.9) (17.0)
Items reclassified to profit or loss:
Exchange differences transferred to income statement on sale of business (note 15.0 -
13)
Other comprehensive income and expense for the year 41.5 194.8
Net comprehensive income and expense for the year 48.8 303.4
Attributable to:
EQUITY SHAREHOLDERS OF THE COMPANY 27.5 284.2
Non-controlling interests 21.3 19.2
48.8 303.4
Consolidated statement of financial position
31 December 31 December
Notes 2022 2021
US$m US$m
Non-current assets
Goodwill 12 124.7 26.2
Other intangible assets 12 488.7 256.7
Property, plant and equipment 256.3 244.5
Right-of-use assets 96.5 91.6
Investments in joint ventures 13.1 12.0
Other equity investments 5.9 6.0
Deferred tax assets 24.4 20.7
Pension surpluses 15 222.7 159.7
Trade and other receivables 20.2 28.7
1,252.5 846.1
Current assets
Inventories 211.4 250.1
Trade and other receivables 286.3 302.7
Pension surpluses 15 2.0 5.2
Cash and cash equivalents 11 (g) 172.4 107.2
672.1 665.2
Total assets 1,924.6 1,511.3
Current liabilities
Trade and other payables (278.4) (346.8)
Current income tax liabilities (20.2) (16.5)
Bank overdrafts and other borrowings 11 (g) (16.7) (19.2)
Lease liabilities 11 (g) (19.0) (17.8)
Retirement benefit obligations:
- Funded schemes 15 (27.6) (41.9)
- Unfunded schemes 15 (5.0) (6.1)
Provisions (18.2) (8.1)
(385.1) (456.4)
Net current assets 287.0 208.8
Non-current liabilities
Trade and other payables (26.3) (24.2)
Deferred tax liabilities 12 (65.3) (6.8)
Borrowings 11 (g) (550.1) (235.1)
Lease liabilities 11 (g) (86.4) (81.2)
Retirement benefit obligations:
- Funded schemes 15 (3.3) (5.6)
- Unfunded schemes 15 (83.4) (90.2)
Provisions (25.4) (27.7)
(840.2) (470.8)
Total liabilities (1,225.3) (927.2)
Net assets 699.3 584.1
Equity
Share capital 8 99.0 90.1
Share premium account 8 111.4 10.5
Own shares 8 (0.1) (0.5)
Translation reserve (121.9) (105.7)
Capital reduction reserve 59.8 59.8
Other reserves 246.3 246.3
Retained profit 270.7 252.5
EQUITY SHAREHOLDERS' FUNDS 665.2 553.0
Non-controlling interests 34.1 31.1
Total equity 699.3 584.1
Consolidated statement of changes in equity
For the year ended 31 December 2022
Share Own Capital Retained Non-
Share premium shares Translation reduction Other profit/ controlling Total
capital account reserve reserve reserves (loss) Total interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
Balance as at
1 January 2021 90.1 10.5 (3.2) (89.2) 59.8 246.3 (23.8) 290.5 28.4 318.9
Profit for the year - - - - - - 88.9 88.9 19.7 108.6
Other comprehensive income and expense for the year - - - (16.5) - - 211.8 195.3 (0.5) 194.8
Dividends - - - - - - (27.6) (27.6) (16.5) (44.1)
Movement in own shares - - 2.7 - - - (0.8) 1.9 - 1.9
Share based payments - - - - - - 3.9 3.9 - 3.9
Deferred tax on share schemes - - - - - - 0.1 0.1 - 0.1
Balance as at 90.1 10.5 (0.5) (105.7) 59.8 246.3 252.5 553.0 31.1 584.1
31 December 2021
(Loss)/profit for the year - - - - - - (14.7) (14.7) 22.0 7.3
Other comprehensive income and expense for the year - - - (16.2) - - 58.4 42.2 (0.7) 41.5
Application of IAS 29 (note 1) - - - - - - 5.0 5.0 - 5.0
Dividends - - - - - - (32.9) (32.9) (18.3) (51.2)
Issue of ordinary shares 8.9 100.9 - - - - - 109.8 - 109.8
Purchase of own shares by Employee Benefit Trust - - (2.1) - - - - (2.1) - (2.1)
Movement in own shares - - 2.5 - - - (2.5) - - -
Share based payments - - - - - - 4.6 4.6 - 4.6
Deferred tax on share schemes - - - - - - 0.3 0.3 - 0.3
Balance as at 99.0 111.4 (0.1) (121.9) 59.8 246.3 270.7 665.2 34.1 699.3
31 December 2022
Consolidated statement of cash flows
For the year ended 31 December 2022 2021
Note US$m US$m
Cash inflow from operating activities
Cash generated from operations 11 (a) 176.5 189.0
Interest paid 11 (b) (25.5) (12.5)
Taxation paid 11 (c) (54.6) (47.9)
Net cash generated by operating activities 96.4 128.6
Cash outflow from investing activities
Investment income 11 (d) 0.5 0.3
Net capital expenditure and financial investment 11 (e) (31.6) (30.3)
Acquisitions of businesses 11 (f) (271.2) -
Disposal of business 11 (f) (17.0) -
Net cash absorbed in investing activities (319.3) (30.0)
Cash inflow/(outflow) from financing activities
Issue of ordinary shares 8 109.8 -
Purchase of own shares by Employee Benefit Trust (2.1) -
Dividends paid to equity shareholders (33.0) (27.4)
Dividends paid to non-controlling interests (18.3) (16.5)
Payment of lease liabilities (18.1) (22.1)
Borrowings settled on completion of acquisitions 12 (62.5) -
Drawdown of term loan acquisition facility 11 (g) 240.0 -
Net increase in other borrowings 79.2 8.4
Net cash generated from/(absorbed in) financing activities 295.0 (57.6)
Net increase in cash and cash equivalents 72.1 41.0
Net cash and cash equivalents at beginning of the year 90.8 52.1
Foreign exchange losses on cash and cash equivalents (5.2) (2.3)
Net cash and cash equivalents at end of the year 11 (g) 157.7 90.8
Reconciliation of net cash flow to movement in net debt
Net increase in cash and cash equivalents 72.1 41.0
Drawdown of term loan acquisition facility 11 (g) (240.0) -
Net increase in other borrowings (79.2) (8.4)
Change in net debt resulting from cash flows 14 (e)
(Free cash flow) (247.1) 32.6
Net movement in lease liabilities during the year (13.0) (33.0)
Movement in fair value hedges 5.2 3.0
Other non-cash movements (1.0) (1.3)
Foreign exchange gains/(losses) 2.2 (0.8)
(Increase)/decrease in net debt (253.7) 0.5
Net debt at the start of the year (246.1) (246.6)
Net debt at the end of the year 11 (g) (499.8) (246.1)
Notes to the consolidated financial information for the year ended 31 December
2022
1. Basis of preparation
The financial information set out in this statement does not constitute the
Coats Group plc's statutory accounts for the years ended 31 December 2022 or
2021. The financial information for the year ended 31 December 2021 and 2022
is derived from the statutory accounts for 2021 (which has been delivered to
the Registrar of Companies) and 2022 (which will be delivered to the Registrar
of Companies following the AGM in May 2023). The auditors have reported on the
2021 and 2022 accounts; their report was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under Sections 498(2) or 498(3) of the Companies Act 2006.
The Group's financial statements for the year ended 31 December 2022 have been
prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006, and complies with the
disclosure requirements of the Listing Rules of the UK Financial Conduct
Authority. The accounting policies adopted by the Group are consistent with
those set out in the 2021 Annual Report. A full list of accounting policies
will be presented in the 2022 Annual Report. For details of new accounting
policies applicable to the Group in 2022 and their impact please refer below.
Whilst the financial information included in this statement has been compiled
in accordance with the recognition and measurement principles of applicable
International Financial Reporting Standards ('IFRS'), this statement does not
itself contain sufficient information to comply with IFRS. Full financial
statements that comply with IFRS are included in the 2022 Annual Report; these
will be available to shareholders in March 2023.
Critical accounting judgements and key sources of estimation uncertainty
The principal accounting policies adopted by the Group are set out in 2022
Annual Report. Certain of the Group's accounting policies inherently rely on
subjective assumptions and judgements, such that it is possible over time the
actual results could differ from the estimates based on the assumptions and
judgements used by the Group. Due to the size of the amounts involved, changes
in the assumptions relating to the following policies could potentially have a
significant impact on the result for the year and/or the carrying values of
assets and liabilities in the consolidated financial statements:
In the course of preparing the financial statements, the below critical
judgements and key sources of estimation uncertainty have had a significant
effect on the amounts recognised in the financial statements for the years
ended 31 December 2022. The critical accounting judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the consolidated
financial statements for the year ended 31 December 2021, except for the
critical accounting judgement relating to the sale of the Brazil and Argentina
business in 2022 set out below.
Critical judgements in applying the Group's accounting policies
Exceptional and acquisition related items
Judgement is used to determine those items which should be separately
disclosed as exceptional and acquisition related items to provide valuable
additional information for users of the financial statements in understanding
the Group's performance. This judgement includes assessment of whether an item
is of sufficient size or of a nature that is not consistent with normal
trading activities. Please see note 3 for further details.
UK pension surplus recognition
The Group has recognised a net defined benefit pension surplus for the Coats
UK Pension Scheme under IAS 19 of $180.7 million at 31 December 2022 (2021:
$108.0 million). Judgement has been applied when interpreting the scheme rules
to determine whether the Group can recognise this surplus asset amount on the
statement of financial position or whether any economic benefits available as
a refund are contingent upon factors beyond the Group's control and instead
require an adjustment to be made to restrict the amount of the surplus
recognised and reflect a liability arising from future committed contributions
to the Coats UK Pension Scheme under IFRIC 14. The Group has determined that
it has an unconditional right to a refund of the surplus assuming the gradual
settlement of liabilities over time and therefore has recognised the full
amount of the net defined benefit pension surplus. Please see note 15 for
further details.
Critical judgements in applying the Group's accounting policies (continued)
In management's judgement the Brazil and Argentina business which was sold in
May 2022 represents a separate major geographical area and therefore its
results for 2022 have been presented as a discontinued operation with 2021
comparative amounts represented to reclassify the results of the Brazil and
Argentina business from continuing operations to discontinued operations (see
below for further details).
Key sources of estimation uncertainty
The key assumptions concerning the future, and other sources of estimation
uncertainty at the balance sheet date, that may have a significant risk of
causing material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are discussed below.
UK retirement benefit obligations
The UK retirement benefit surplus recognised in the consolidated statement of
financial position is the net of the fair value of scheme assets less the
present values of the defined benefit obligations at the year end. Key
assumptions involved in the determination of the present values of the defined
benefit obligations include discount rates, beneficiary mortality and
inflation rates. Changes in any or all of these assumptions could materially
change the employee benefit surplus recognised in the consolidated statement
of financial position.
Sensitivities regarding the discount rate and inflation assumptions used to
measure the liabilities of the UK pension scheme are set out in note 15.
New IFRS accounting standards, interpretations and amendments adopted in the
year
Except for the changes arising from the adoption of new accounting standards,
interpretations and amendments (as detailed below), the same accounting
policies, presentation and methods of computation have been followed in the
financial information set out in this statement as applied in the Group's
annual financial statements for the year ended 31 December 2021.
During the year, the Group adopted the following standards, interpretations
and amendments:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
· Annual Improvements to IFRS Standards 2018-2020;
· Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS
16); and
· Reference to the Conceptual Framework (Amendments to IFRS 3).
The adoption of these standards and amendments has not had a material impact
on the financial statements of the Group.
Discontinued operations
On 10 May 2022 the Group announced the agreement to sell its business in
Brazil and Argentina to Reelpar SA, an entity backed by a Sao Paulo Private
Equity Firm. The sale was completed on 26 May 2022, the date which control
passed to the acquirer. The results of the Brazil and Argentina business are
presented as a discontinued operation in the consolidated income statement for
the year ended 31 December 2022. Amounts for year ended 31 December 2021 in
the consolidated income statement have been represented to reclassify the
results of the Brazil and Argentina business from continuing operations to
discontinued operations. Note 13 provides further details of the sale.
Going concern
The Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, they continue to adopt the
going concern basis in preparing the consolidated financial statements.
In assessing the Group's going concern position, the Directors have considered
a number of factors, including the current balance sheet position and
available liquidity, the principal and emerging risks which could impact the
performance of the Group and compliance with borrowing covenants.
In order to assess the going concern status of the Group management has
prepared:
· A base case scenario, aligned to the latest Group budget for 2023 as well as
the Group's updated Medium Term Plan for 2024;
· A severe but plausible downside scenario, which assumes that the global
economic environment is severely depressed over the assessment period; and
· A reverse stress test flexing sales to determine what circumstance would be
required to either reduce headroom to nil on committed borrowing facilities or
breach borrowing covenants, whichever occurred first.
The severe but plausible downside scenario includes certain further management
actions that would be deployed if required (for example further reduction in
costs).
The reverse stress test also includes further controllable management actions
that could be deployed if required. The outcome of the reverse stress test was
that the interest cover covenant would be breached, however, at the breaking
point in the test the Group still maintained a comfortable level of liquidity
on committed borrowing facilities. The Directors consider the likelihood of
the condition in the reverse stress test occurring to be remote.
Liquidity headroom
As at 31 December 2022 the Group's net debt excluding leases liabilities was
$394.4 million (2021: $147.1 million). Following the completion of the new US
Private Placement and repayment of the acquisition facility in February 2023,
the Group's committed debt facilities total $835 million across its Banking
and US Private Placement group, with a range of maturities from late 2024
through to 2030. As of 31 December 2022, based on the facilities in place at
that date, the Group had around $250 million of headroom against these
committed banking facilities.
In both the base case and the severe but plausible downside scenario liquidity
is comfortable throughout the assessment period.
Covenant testing
The Group's committed borrowing facilities are subject to ongoing covenant
testing. Covenants are measured twice a year, at full year and half year and
are measured under frozen accounting standards and therefore exclude the
effects of IFRS 16. The financial covenants under the borrowing agreements are
for leverage (net debt / EBITDA) less than 3.0 and interest cover (EBITDA /
interest charge) to be in excess of 4.0.
All banking covenants tests were met comfortably at 31 December 2022, with
leverage of 1.4x and interest cover of 19.0x. The base case forecast indicates
that banking covenants will be comfortably met throughout the assessment
period. Under the severe but plausible downside scenario covenant compliance
is still projected to be achieved throughout the assessment period, although
with reduced but adequate headroom.
Conclusion
In conclusion, after reviewing the base case, the severe but plausible
downside scenario and considering the remote likelihood of the scenario in the
reverse stress test occurring, the Directors have formed the judgement that,
at the time of approving the consolidated financial statements, there are no
material uncertainties that cast doubt on the Group's going concern status and
that it is appropriate to prepare the consolidated financial statements on the
going concern basis.
Principal exchange rates
The principal exchange rates (to the US dollar) used are as follows:
2022 2021
Average Sterling 0.81 0.73
Euro 0.95 0.85
Chinese Renminbi 6.73 6.45
Indian Rupee 78.59 73.92
Turkish Lira * 16.57 8.89
Period end Sterling 0.83 0.74
Euro 0.93 0.88
Chinese Renminbi 6.90 6.35
Indian Rupee 82.72 74.47
Turkish Lira 18.69 13.32
* Cumulative inflation rates over a three-year period exceeded 100% in
Turkey in Q2 2022 and is considered as hyperinflationary and as a result IAS
29 "Financial Reporting in Hyperinflationary Economies" has been applied for
the first time for the year ended 31 December 2022. In accordance with IAS 29,
the financial statements of the Company's subsidiary in Turkey are translated
into the Group's US Dollar presentational currency at the 31 December 2022
year end exchange rate. Monetary assets and liabilities are not restated. All
non-monetary items recorded at historical rates are restated for the change in
purchasing power caused by inflation from the date of initial recognition to
the year end balance sheet date. The income statement of the Company's
subsidiary in Turkey is adjusted for inflation during the reporting period.
Comparative amounts in the Group's financial statements are not restated. The
translation adjustment resulting from the initial application of IAS 29 of
$5.0 million was recognised in equity and a net monetary gain of $1.9 million
was recognised within finance income on non-monetary items held in Turkish
Lira. The inflation rate used is the consumer price index published by the
Turkish Statistical Institute, TurkStat. The movement in the price index for
the year ended 31 December 2022 was 64%.
2. Segmental analysis
Operating segments are components of the Group's business activities about
which separate financial information is available that is evaluated regularly
by the chief operating decision maker (the Group Executive Team) in deciding
how to allocate resources and in assessing performance. The Group's customers
throughout the year ended 31 December 2022 were grouped into two segments
Apparel & Footwear and Performance Materials which have distinct different
strategies and differing customer/end-use market profiles.
Effective 1 January 2023 the Group's new organisational structure and
reporting structure will consist of three divisions: Apparel, Footwear and
Performance Materials. The Group will report its financial results on this new
segmental basis from half year 2023 and, from 1 January 2023, this will be the
basis on which financial information is reported internally to the chief
operating decision maker (CODM) for the purpose of allocating resources
between segments and assessing their performance. As at December 2022, this
internal reorganisation had not occurred with segment results grouped into two
segments Apparel & Footwear and Performance Materials to which the CODM
was provided financial information on which to assess performance and allocate
resources.
Segment revenue and results
Performance Materials
Apparel & Footwear
Total
Year ended 31 December 2022 US$m US$m US$m
Continuing operations
Revenue 1,163.4 420.4 1,583.8
Segment profit 200.8 34.1 234.9
Exceptional and acquisition related items (note 3) (53.9)
Operating profit 181.0
Share of profits of joint ventures 1.1
Finance income 2.6
Finance costs (33.4)
Profit before taxation from continuing operations 151.3
Performance Materials
Apparel & Footwear
Total
Year ended 31 December 2021* US$m US$m US$m
Continuing operations
Revenue 1,048.1 398.6 1,446.7
Segment profit 170.7 27.0 197.7
Exceptional and acquisition related items (note 3) (19.5)
Operating profit 178.2
Share of profits of joint ventures 1.2
Finance income 0.4
Finance costs (21.8)
Profit before taxation from continuing operations 158.0
Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Exceptional and acquisition
related items are not allocated to segments. In addition, no measures of total
assets and total liabilities are reported for each reportable segment as such
amounts are not regularly provided to the chief operating decision maker. The
accounting policies of the reportable operating segments are the same as the
Group's accounting policies.
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
Disaggregation of revenue
The following table shows revenue disaggregated by primary geographical
markets with a reconciliation of the disaggregated revenue with the Group's
reportable segments.
2022 2021*
Year ended 31 December US$m US$m
Continuing operations
Primary geographic markets
Asia 911.8 849.7
Americas 340.6 313.8
EMEA 331.4 283.2
Total 1,583.8 1,446.7
Continuing operations
Apparel & Footwear 1,163.4 1,048.1
Performance Materials 420.4 398.6
Total 1,583.8 1,446.7
Timing of revenue recognition
Goods transferred at a point in time 1,573.6 1,435.6
Software solution services transferred over time 10.2 11.1
Total 1,583.8 1,446.7
The software solutions business is included in the Apparel & Footwear
segment.
Revenue from Texon and Rhenoflex totalling $87.2 million for the period to 31
December 2022 from their respective acquisition dates (see note 12) is
included in the amount above for the Apparel & Footwear segment of which
$34.4 million is included in Asia, $1.2 million is included in Americas and
$51.6 million is included in EMEA.
The Group had no revenue from a single customer which accounts for more than
10% of the Group's revenue.
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
3. Exceptional and acquisition related items
The Group's consolidated income statement format is presented before and after
exceptional and acquisition related items. Adjusted results exclude
exceptional and acquisition related items on a consistent basis with the
previous reporting period to provide valuable additional information for users
of the financial statements in understanding the Group's performance and
reflects how the performance of the business is managed and measured on a
day-to-day basis. Further details on alternative performance measures are set
out in note 14.
Exceptional items may include significant restructuring associated with a
business or property disposal, litigation costs and settlements, profit or
loss on disposal of property, plant and equipment, non-actuarial gains or
losses arising from significant one off changes to defined benefit pension
obligations, regulatory investigation costs and impairment of assets.
Acquisition related items include amortisation of acquired intangible assets,
acquisition transaction costs, contingent consideration linked to employment
and adjustments to contingent consideration.
Judgement is used by the Group in assessing the particular items, which by
virtue of their scale and nature, are presented in the income statement and
disclosed in the related notes as exceptional items. In determining whether an
event or transaction is exceptional, materiality is a key consideration and
qualitative factors, such as frequency or predictability of occurrence, are
also considered. This is consistent with the way financial performance is
measured by management and reported to the Board.
Total exceptional and acquisition related items charged to profit before
taxation for the year ended 31 December 2022 were $55.0 million (2021: $19.5
million) comprising exceptional items for the year ended 31 December 2022 of
$31.2 million (2021: $3.7 million) and acquisition related items for the year
ended 31 December 2022 of $23.8 million (2021: $15.8 million). Taxation in
respect of exceptional and acquisition related items is set out in note 6.
Exceptional items
Exceptional items charged/(credited) to operating profit during the year ended
31 December 2022 are set out below:
2022 2021*
Year ended 31 December US$m US$m
Exceptional items:
Strategic project costs:
- Cost of sales 9.9 -
- Distribution costs 3.8 -
- Administrative costs 18.7 3.7
32.4 3.7
Profit on sale of property:
- Other operating income (1.2) -
Total exceptional items charged to operating profit from 31.2 3.7
continuing operations
Strategic project costs - At the end of 2021 the Group commenced a strategic
project to improve margins by optimising the portfolio and footprint,
improving the overall cost base efficiency, and mitigating structural labour
availability issues in the US. During the year a new facility was established
in Mexico, manufacturing processes were transferred from the US and a legacy
facility in the US was exited. In EMEA thread operations in Romania were
consolidated in a purpose-built logistics facility and warehouses in Poland
and Hungary were exited. Corporate and overhead activities in the UK and US
were moved closer to the Group's operations and customers. As a result of
these activities, exceptional restructuring costs totalling $32.4 million were
incurred during the year ended 31 December 2022 which included severance costs
of $22.5 million, non-cash impairment charges of tangible fixed assets and
right-of-use assets of $4.7 million and $5.2 million of legal, advisers,
closure and related costs.
The Group accelerated the implementation of this strategic project during the
year ended 31 December 2022, delivering in-year efficiencies in 2022 ahead of
the Group's expectations. In addition, the Group expect to deliver total
savings of $70 million by 2024, a significant increase on the $50 million the
Group previously expected to deliver. The additional $20 million savings will
primarily arise from the transformation of Asian operations, in particular in
China and India.
During the previous year ended 31 December 2021, exceptional strategic project
costs of $3.7 million were incurred which included advisers' costs of $0.9
million, impairment charges relating to plant and equipment in North America
of $2.0 million and closure and related costs of $1.7 million. This was offset
by an exceptional credit of $0.9 million relating to the closure of a small
business in Australia in a prior year.
Profit from sale of property - During the year ended 31 December 2022 a profit
of $1.2 million was made from the sale of a property in Poland as part of the
above strategic project.
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
Acquisition related items
Acquisition related items are set out below:
2022 2021
Year ended 31 December US$m US$m
Acquisition related items:
Administrative expenses:
Acquisition transaction costs 11.9 12.4
Amortisation of acquired intangible assets 10.8 3.3
Acquisition earnouts and contingent consideration - 0.1
22.7 15.8
Finance costs:
Acquisition transaction costs 1.1 -
Total acquisition related items before taxation 23.8 15.8
Acquisition transaction costs charged to administrative expenses during the
year ended 31 December 2022 of $11.9 million include transaction costs
relating to the acquisitions of Texon and Rhenoflex (see note 12).
Acquisition transaction costs charged to finance costs during the year ended
31 December 2022 of $1.1 million relate to the $240.0 million term loan
acquisition facility used to finance the acquisition of Texon (see note 12).
During the year ended 31 December 2021, the Group pursed several acquisition
opportunities and as a result incurred transaction costs of $12.4 million.
Acquisition transaction costs and amortisation of intangible assets acquired
through business combinations are not included within adjusted operating
profit and adjusted earnings per share. These costs are acquisition related
and management consider them to be capital in nature and are not included in
profitability measures by which management assess the performance of the
Group.
Excluding amortisation of intangible assets acquired through business
combinations and recognised in accordance with IFRS 3 "Business Combinations"
from adjusted results also ensures that the performance of the Group's
acquired businesses is presented consistently with its organically grown
businesses. It should be noted that the use of acquired intangible assets
contributed to the Group's results for the years presented and will contribute
to the Group's results in future periods as well. Amortisation of acquired
intangible assets will recur in future periods. Amortisation of software is
included within operating results as management consider these costs to be
part of the trading performance of the business.
The Group has made acquisitions in prior years with earn-outs to allow part of
the consideration to be based on the future performance of the businesses
acquired and to lock in key management. Where consideration paid or contingent
consideration payable in the future is employment linked, it is treated as an
expense and part of statutory results. However, all consideration of this type
is excluded from adjusted operating profit and adjusted earnings per share, as
in management's view, these items are part of the capital transaction.
4. Finance income
2022 2021*
Year ended 31 December US$m US$m
Income from investments 0.1 0.1
Net monetary gain arising from hyperinflation accounting (see note 1) 1.9 -
Other interest receivable and similar income 0.6 0.3
2.6 0.4
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
5. Finance costs
2022 2021*
Year ended 31 December US$m US$m
Interest on bank and other borrowings 18.9 10.4
Interest expense on lease liabilities 4.9 5.2
Net interest on pension scheme assets and liabilities 0.5 4.1
Other finance costs including unrealised gains and losses on foreign exchange 9.1 2.1
contracts
33.4 21.8
Other finance costs for the year ended 31 December 2022 include acquisition
related transaction costs of $1.1 million incurred in connection with the
$240.0 million term loan acquisition facility used to finance the acquisition
of Texon (see note 3).
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
6. Tax on profit from continuing operations
2022 2021*
Year ended 31 December US$m US$m
UK Corporation tax at 19% (2021: 19%) - -
Overseas tax charge (56.2) (55.0)
Deferred tax (charge)/credit (0.2) 1.9
Total tax charge (56.4) (53.1)
The overseas tax charge includes withholding tax charges and other taxes not
based on profits for the year ended 31 December 2022 of $13.3 million (2021:
$12.1 million).
For the year ended 31 December 2022 the tax credit in respect of exceptional
and acquisition related items was $3.7 million (2021: $0.2 million). This
includes exceptional tax credits of $2.0 million relating to exceptional
strategic projects and $1.7 million relating to the unwinding of tax
liabilities on the amortisation of intangible assets acquired as a result of
the acquisitions of Texon and Rhenoflex during the year ended 31 December 2022
(refer to note 12).
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
7. Earnings/(loss) per share
The calculation of basic earnings per ordinary share from continuing
operations is based on the profit from continuing operations attributable to
equity shareholders and the weighted average number of Ordinary Shares in
issue during the year, excluding shares held by the Employee Benefit Trust but
including shares under share incentive schemes which are not contingently
issuable.
The calculation of basic earnings/(loss) per ordinary share from continuing
and discontinued operations is based on the profit/(loss) attributable to
equity shareholders. The weighted average number of ordinary shares used for
the calculation of basic earnings per ordinary share from continuing and
discontinued operations is the same as that used for basic earnings per
ordinary share from continuing operations.
For diluted earnings per ordinary share, the weighted average number of
ordinary shares in issue is adjusted to include all potential dilutive
ordinary shares. The Group has two classes of dilutive potential Ordinary
Shares: those shares relating to awards under the Group Deferred Bonus Plan
which have been awarded but not yet reached the end of the three year
retention period and those long-term incentive plan awards for which the
performance criteria would have been satisfied if the end of the reporting
period were the end of the contingency period.
2022 2021*
Year Ended 31 December US$m US$m
Profit from continuing operations attributable to equity shareholders 72.9 85.2
(Loss)/profit from continuing and discontinued operations attributable to (14.7) 88.9
equity shareholders
Profit from continuing operations attributable to equity shareholders for the
year ended 31 December 2022 of $72.9 million (2021: $85.2 million) comprises
the profit from continuing operations for the year ended 31 December 2022 of
$94.9 million (2021: $104.9 million) less non-controlling interests for the
year ended 31 December 2022 of $22.0 million (2021: $19.7 million) as reported
in the income statement.
2022 2021
Year Ended 31 December Number of shares m Number of shares m
Weighted average number of ordinary shares in issue for basic earnings per 1,516.0 1,457.1
share
Adjustment for share options and LTIP awards 9.3 5.9
Weighted average number of ordinary shares in issue for diluted earnings per 1,525.3 1,463.0
share
2022
2021*
Year Ended 31 December cents cents
Continuing operations:
Basic earnings per ordinary share 4.80 5.84
Diluted earnings per ordinary share 4.77 5.82
Continuing and discontinued operations:
Basic (loss)/earnings per ordinary share (0.98) 6.10
Diluted (loss)/earnings per ordinary share (0.97) 6.07
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
8. Issued share capital
During the year ended 31 December 2022 the Company issued 145,240,000 Ordinary
shares of 5p each in connection with an equity placing as set out below. The
par value of the shares issued was $8.9 million. The proceeds raised net of
costs were $109.8 million and were used to fund the acquisition of Rhenoflex
GmbH (see note 12). During the year ended 31 December 2021 the Company issued
493,113 Ordinary shares of 5p each following the exercise of awards under the
Group's share based incentive plans.
Number of
Shares US$m
At 1 January 2022 1,452,570,385 90.1
Issue of ordinary shares 145,240,000 8.9
At 31 December 2022 1,597,810,385 99.0
The own shares reserve of $0.1 million at 31 December 2022 (2021: $0.5
million) represents the cost of shares in Coats Group plc purchased in the
market and held by an Employee Benefit Trust to satisfy awards under the
Group's share based incentive plans. The number of shares held by the Employee
Benefit Trust at 31 December 2022 was 805,501 (2021: 2,020,306).
9. Dividends
2022 2021
Year Ended 31 December US$m US$m
2022 interim dividend paid - 0.70 cents per share 11.1 -
2021 final dividend paid - 1.50 cents per share 21.8 -
2021 interim dividend paid - 0.61 cents per share - 8.8
2020 final dividend paid - 1.30 cents per share - 18.8
32.9 27.6
The proposed final dividend of 1.73 cents per ordinary share for the year
ended 31 December 2022 is not recognised as a liability in the consolidated
statement of financial position in line with the requirements of IAS 10 Events
after the Reporting Period and, subject to shareholder approval, will be paid
on 25 May 2023 to ordinary shareholders on the register on 28 April 2023, with
an ex-dividend date of 27 April 2023.
10. US environmental matters
As noted in previous reports, in December 2009, the US Environmental
Protection Agency ('EPA') notified Coats & Clark, Inc. ('CC') that CC is a
'potentially responsible party' ('PRP') under the US Superfund law for
investigation and remediation costs at the 17-mile Lower Passaic River Study
Area ('LPR') in New Jersey in respect of alleged operations of a predecessor's
former facilities in that area prior to 1950. Over 100 PRPs have been
identified by EPA. In 2011, CC joined a cooperating parties group ('CPG') of
companies formed to fund and conduct a remedial investigation and feasibility
study of the area.
CC has analysed its predecessor's operating history prior to 1950, when it
left the LPR, and has concluded that it was not responsible for the
contaminants and environmental damage that are the primary focus of the EPA
process. CC also believes that there are many parties that will participate in
the LPR's remediation, including those that are the most responsible for its
contamination.
In March 2016, EPA issued a Record of Decision selecting a remedy for the
lower 8 miles of the LPR at an estimated cost of $1.38 billion on a net
present value basis. In September 2021, EPA issued a Record of Decision
selecting an interim remedy for the upper 9 miles of the LPR (involving
targeted removal of contaminants and ongoing monitoring to assess whether
additional contaminant removal would be necessary), at an estimated cost of
$441 million on a net present value basis.
EPA has entered into an administrative order on consent ('AOC') with
Occidental Chemical Corporation ('OCC'), which has been identified as being
responsible for the most significant contamination in the river, concerning
the design of the selected remedy for the lower 8 miles of the LPR.
Maxus Energy Corporation ('Maxus'), which provided an indemnity to OCC that
covered the LPR, has been granted Chapter 11 bankruptcy protection, but OCC
remains responsible for its remedial obligations even in the absence of Maxus'
indemnity. The approved bankruptcy plan created a liquidating trust to pursue
potential claims against Maxus' parent entity, YPF SA, and potentially others,
which could result in additional funding for the LPR remedy.
While the ultimate costs of the remedial design and the final remedy for the
full 17-mile LPR are expected to be shared among more than a hundred parties,
including many who are not currently in the CPG, the allocation of remedial
costs among those parties in a settlement or court ruling has not yet been
finally determined.
In March 2017, EPA notified 20 parties not associated with the disposal or
release of any contaminants of concern as being eligible for early cash out
settlements. As expected, EPA did not identify CC as one of the 20 parties.
EPA invited approximately 80 other parties, including CC, to participate in an
allocation process to determine their respective allocation shares and
potential eligibility for future cash out settlements. In the allocation, CC
presented factual and scientific evidence that it is not responsible for the
discharge of dioxins, furans or PCBs - the contaminants that are driving the
remediation of the LPR - and that it is a de minimis or even smaller de
micromis party. The allocation process concluded in December 2020. The
EPA-appointed allocator determined that CC is in the lowest tier (Tier 5) of
allocation parties, and is responsible for only a de micromis share of
remedial costs.
On 30 June 2018, OCC filed a lawsuit against approximately 120 defendants,
including CC, seeking recovery of past environmental costs and contribution
toward future environmental costs. OCC released claims for certain past costs
from 41 of the defendants, including CC, and is not seeking recovery of those
past costs from CC. OCC's lawsuit seeks resolution of many of the same issues
addressed in the EPA sponsored allocation process, and does not alter CC's
defences or CC's continued belief that it is a de micromis party.
In 2015, a provision totalling $15.8 million was recorded for remediation
costs for the entire 17 miles of the LPR and the estimated associated legal
and professional costs in defence of CC's position. The provision for
remediation costs was based on CC's estimated share of de minimis costs for
(a) EPA's selected remedy for the lower 8 miles of the LPR and (b) the remedy
for the upper 9 miles proposed by the CPG, which was later substantively
adopted by the EPA. This charge to the income statement was net of insurance
reimbursements and was stated on a net present value basis. During the year
ended 31 December 2018, an additional provision of $8.0 million was recorded
as an exceptional item to cover legal and professional fees. The Group will
continue to mitigate additional costs as far as possible through insurance and
other avenues.
At 31 December 2022, the remaining provision, taking into account insurance
reimbursement, was $9.2 million (2021: $11.2 million). The process concerning
the LPR continues to evolve and these estimates are subject to change based
upon legal defence costs associated with the EPA process and OCC's lawsuit,
the share of remedial costs to be paid by the major polluters on the river,
and the share of remaining remedial costs apportioned among CC and other
companies.
In 2022, CC and other parties entered into a settlement with EPA in which the
settling parties agreed to pay $150 million toward remediation of the full
17-mile LPR in exchange for a release for those matters addressed in the
settlement. CC's share of the cash-out settlement is consistent with a de
micromis share of total remedial costs for the full 17-mile LPR. EPA has
indicated it will seek the balance of LPR remedial costs from OCC and a small
number of other parties that EPA has determined were not eligible to
participate in a cash-out settlement. These work parties (and not the cash-out
parties) would be responsible for remedial costs over-runs. The settlement
does not address claims for natural resource damages by federal natural
resource trustees. The Group believes that CC's share, if any, of such costs
would be de micromis.
In late 2022, the cash-out settlement for the full 17-mile LPR was lodged with
the court by the Department of Justice (DOJ) on behalf of EPA. Court approval
is necessary for the settlement to go into effect, and OCC has indicated that
it will oppose such approval. The Group expects that DOJ and EPA will assert
that the settlement is just and reasonable and that it should be approved by
the court, and courts have generally deferred to EPA's judgment on such
matters. However, it is nonetheless possible that the court may not approve
the settlement. It is also possible that the court may approve the settlement
but permit OCC's litigation against the settling parties to continue in whole
or in part. Because of these continued uncertainties, the Group is maintaining
its current provision for the LPR for the present time.
Coats believes that CC's predecessor did not generate any of the contaminants
which are driving the current and anticipated remedial actions in the LPR,
that it has valid legal defences which are based on its own analysis of the
relevant facts, that the EPA-appointed allocator correctly concluded that it
has a de micromis share of the total remediation costs, and that OCC and
other parties will be responsible for a significant share of the ultimate
costs of remediation. As this matter evolves, the provision may be reduced if
the settlement is approved by the court and if the court bars further
litigation against CC and other settling parties. It is nonetheless still
possible that additional provisions could be recorded and that such provisions
could increase materially based on further decisions by the court,
negotiations among the parties and other future events.
Following the sale of the North America Crafts business, including CC,
announced on 22 January 2019, Coats North America Consolidated Inc. (the
seller) retains the control and responsibility for the eventual outcome of the
ongoing LPR environmental matters, including the rights to the related
insurance reimbursements.
11. Notes to the consolidated cash flow statement
a) Reconciliation of operating profit to cash generated
from operations
2022 2021*
Year Ended 31 December US$m US$m
Operating profit 181.0 178.2
Depreciation of owned property, plant and equipment 26.5 27.3
Deprecation of right-of-use assets 19.4 19.4
Amortisation of intangible assets 12.6 6.0
Decrease/(increase) in inventories 43.6 (66.8)
Decrease/(increase) in debtors 10.4 (38.2)
(Decrease)/increase in creditors (76.2) 91.5
Provisions and pension movements (41.6) (34.5)
Foreign exchange and other non-cash movements 8.8 13.0
Discontinued operations (8.0) (6.9)
Cash generated from operations 176.5 189.0
b) Interest paid
2022 2021*
Year Ended 31 December US$m US$m
Interest paid (24.8) (11.0)
Discontinued operations (0.7) (1.5)
(25.5) (12.5)
c) Taxation paid
2022 2021*
Year Ended 31 December US$m US$m
Overseas tax paid (54.6) (47.8)
Discontinued operations - (0.1)
(54.6) (47.9)
d) Investment income
2022 2021
Year Ended 31 December US$m US$m
Dividends received from joint ventures 0.5 0.3
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
e) Capital expenditure and financial investment
2022 2021*
Year Ended 31 December US$m US$m
Purchase of property, plant and equipment and intangible assets (33.8) (30.5)
(Purchase)/sale of other equity investments (0.1) 0.1
Disposal of property, plant and equipment 2.8 0.8
Discontinued operations (0.5) (0.7)
(31.6) (30.3)
f) Acquisitions and disposals of businesses
2022 2021
Year Ended 31 December US$m US$m
Acquisition of businesses (note 12) (271.2) -
Disposal of business (note 13) (17.0) -
(288.2) -
g) Summary of net debt
2022 2021
Year Ended 31 December US$m US$m
Cash and cash equivalents 172.4 107.2
Bank overdrafts (14.7) (16.4)
Net cash and cash equivalents 157.7 90.8
Borrowings (552.1) (237.9)
Net debt excluding lease liabilities (394.4) (147.1)
Lease liabilities (105.4) (99.0)
Total net debt (499.8) (246.1)
On 20 July 2022, the Group fully drew down on a new $240 million term loan
acquisition facility to fund the purchase of Texon (see note 12). This
facility was to mature in July 2024, and the Group had an option to extend
this term by a further nine months to May 2025.
In February 2023, the Group completed the refinancing of this acquisition
facility via the US Private Placement (USPP) market with $250 million of
notes. $150 million 5.26% Series A Senior Notes are due on 16 February 2028
and $100 million 5.37% Series B Senior Notes are due on 16 February 2030.
For financial covenant purposes, the Group's leverage is calculated on the
basis of net debt without IFRS 16 lease liabilities and at the Coats Group
Finance Company Limited level. Net debt excluding IFRS 16 lease liabilities at
the Coats Group Finance Company Limited level at 31 December 2022 for covenant
purposes was $399.9 million (31 December 2021: $148.0 million).
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
12. Acquisitions
The Group completed two acquisitions during the year obtaining control of both
Texon and Rhenoflex, leading manufacturers of structural footwear components
supplying the world's leading footwear brands. Both have operations in Asia
and Europe and are complementary additions to Coats' existing footwear
business with opportunities to leverage existing footprints and combine
expertise in the attractive athleisure footwear market.
· On 20 July 2022, the Group acquired the entire share capital of Torque Group
International Fortune Limited ('Texon') for $211.0 million. On completion, the
Group immediately settled all Texon's external bank debt of $24.4 million such
that the total cash outflow was $235.4 million.
· On 23 August 2022, the Group also purchased the entire share capital of
Rhenoflex GmbH ('Rhenoflex') for $81.5 million. On completion, the Group
immediately settled all of Rhenoflex's external bank debt of $38.1 million
such that the total cash outflow was $119.6 million.
The Texon transaction was funded through a new $240.0 million term loan
acquisition facility and the Rhenoflex transaction was predominately financed
through an equity raise of $109.8 million net of costs.
These acquisitions have been accounted for as business combinations using the
acquisition method in accordance with IFRS 3 'Business Combinations.' For each
acquisition, a provisional assessment of the fair values of identified assets
acquired and liabilities assumed has been undertaken with assistance provided
by external valuation specialists.
In the provisional accounting, adjustments are made to the book values of the
net assets of the companies acquired to reflect their provisional fair values
to the Group. Previously unrecognised assets and liabilities at acquisition
are included. As part of this exercise, accounting policies are aligned with
those of the Group and as the acquisitions were made in the second half of the
year and given their global footprint, the fair values presented below are
provisional as these assessments will be completed within 12 months from each
relevant acquisition date. The provisional fair values of the identifiable
assets and liabilities of Texon and Rhenoflex as at their respective
acquisition dates were as follows:
Provisional fair value recognised on acquisition of Provisional fair value recognised on acquisition of Provisional
Texon Rhenoflex Total
US$m US$m US$m
Assets
Acquired intangible assets
- Customer relationships 107.1 51.7 158.8
- Brands and trade names 26.7 14.2 40.9
- Technology 26.3 14.2 40.5
160.1 80.1 240.2
Computer software 0.1 0.5 0.6
Property, plant and equipment 14.4 9.3 23.7
Right-of-use-assets 4.9 4.3 9.2
Investments in joint ventures 0.7 - 0.7
Deferred tax assets 2.6 0.7 3.3
Inventories 20.6 20.3 40.9
Trade and other receivables 26.0 13.8 39.8
Cash and cash equivalents 16.8 4.5 21.3
246.2 133.5 379.7
Liabilities
Trade and other payables (28.8) (12.7) (41.5)
Deferred tax liabilities (28.5) (26.3) (54.8)
Borrowings (24.4) (38.1) (62.5)
Lease liabilities (4.9) (4.3) (9.2)
Retirement benefit obligations (7.6) (2.7) (10.3)
Provisions (5.3) (2.1) (7.4)
(99.5) (86.2) (185.7)
Total identifiable net assets acquired at fair value 146.7 47.3 194.0
Goodwill recognised on acquisition (provisional) 64.3 34.2 98.5
Purchase consideration paid 211.0 81.5 292.5
The fair value assessed for intangible customer relationship assets was $107.1
million for Texon and $51.7 million for Rhenoflex. In both cases this will be
amortised over a fifteen-year useful economic life. As fair value level one
observable market prices are not available for these assets, management
engaged external professional valuation advisors to assist in identifying and
valuing these assets The excess earnings method was used to value these
customer relationships which considers the use of other assets in the
generation of projected cash flows to isolate the economic benefit generated
by the relationships.
The fair value assessed for brands and trade names was $26.7 million for Texon
and $14.2 million for Rhenoflex and for technology was $26.3 million for Texon
and $14.2 million for Rhenoflex. The relief from royalty method was used to
value both the technology and the trade names which will be amortised over a
useful economic life of ten years. The relief from royalty method looks at the
savings from owning the trade name and technology compared to paying royalties
for their use based on comparable market royalty rates.
The net deferred tax position reflected adjustments related to the deferred
tax impact of the fair value uplifts on acquired intangible assets and other
fair value adjustments at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on the laws that were enacted
or substantively enacted. Deferred tax liabilities recognised as a result of
the acquisition of Texon and Rhenoflex total $54.8 million. The Group's total
deferred tax liabilities at 31 December 2022 were $65.3 million (2021: $6.8
million).
Fair value adjustments were also made to uplift property, plant and equipment
by a total of $3.5 million for Texon. Other adjustments were made to decrease
pension obligations on an IAS 19 basis by $2.1 million and $0.7 million at the
acquisition dates for Texon and Rhenoflex respectively. Due to their
contractual dates, the fair value of receivables acquired approximated to the
gross contractual amounts receivable. There was no material expected credit
losses for either acquisition and these receivables have materiality been
settled between the respective acquisition dates and the 31 December 2022
year-end date. There are no material contingent liabilities recognised in
accordance with paragraph 23 of IFRS 3.
Provisional goodwill of $64.3 million for Texon and $34.2 million for
Rhenoflex represents the premium attributable to purchasing separately
established businesses with assembled workforces, opportunities for synergies
and exploitation of the general technological capabilities and knowledge base
of each company. Goodwill is not expected to be deductible for tax purposes.
Goodwill is not amortised but tested annually for impairment. For the purposes
of annual impairment testing the combined provisional goodwill has initially
been allocated to a new Structural Footwear Components cash generating unit.
This initial allocation will be reviewed during 2023 following further
integration of Structural Footwear Components with the pre-existing Coats
footwear and thread business.
Provisional goodwill and intangible assets acquired for Texon and Rhenoflex
totalled $338.7 million. From their respective acquisition dates to 31
December 2022, amortisation charges for acquired intangible assets amounted to
$5.6 million for Texon and $2.1 million for Rhenoflex.
From their acquisition dates, the contribution to revenues in the year to 31
December 2022 was $57.2 million for Texon and $30.0 million for Rhenoflex. The
contribution to operating profit excluding exceptional items and amortisation
of acquired intangible assets in the year to 31 December 2022 was $5.8 million
for Texon and $3.4 million for Rhenoflex in the year to 31 December 2022. The
loss after tax in the year to 31 December 2022 (after exceptional items and
amortisation of acquired intangible assets) was $1.9 million for Texon and a
profit of $0.5 million for Rhenoflex.
If the acquisitions had taken effect at the beginning of the reporting period
(1 January 2022), the Group's revenues for the year ended 31 December 2022
would have been $85.9 million higher for Texon and $60.0 million higher for
Rhenoflex and the Group's profit after tax would have been $2.9 million higher
for Texon and $3.1 million higher for Rhenoflex, based on management
accounts.
Transaction costs totalling $12.6 million relating to the acquisitions of
Texon ($8.6 million) and Rhenoflex ($4.0 million) have been expensed and are
included in the consolidated income statement (see note 3). Transaction costs
of $11.5 million have been charged to administrative expenses and $1.1 million
has been charged to finance costs relating to the $240.0 million Texon term
loan acquisition facility.
Transaction costs paid in the year ended 31 December 2022 relating to these
acquisitions was $12.3 million and are included in cash flows absorbed in
operating activities in the consolidated cash flow statement. In addition
costs of $2.8 million were incurred in connection with the equity raise to
finance the acquisition of Rhenoflex which have been charged to the share
premium reserve.
The purchase consideration was paid in cash with the amounts included in the
statement of consolidated cash reconciled as follows:
Texon Rhenoflex Total
US$m US$m US$m
Purchase consideration paid to previous owners 211.0 81.5 292.5
Cash and cash equivalents acquired (16.8) (4.5) (21.3)
Acquisition of businesses - investing cash flows 194.2 77.0 271.2
External bank borrowings settled on completion - financing cash flows 24.4 38.1 62.5
Total cash out flow on respective acquisition dates 218.6 115.1 333.7
The repayment of the external bank borrowings of Texon and Rhenoflex on the
respective completion dates of the acquisitions is presented as financing cash
flows.
The total cash outflow for the acquisitions of Texon and Rhenoflex in the year
ended 31 December 2022 was $346.0 million (see note 14(e)) comprising the
total cash outflow on the respective acquisition dates of $333.7 million plus
transaction costs paid of $12.3 million.
13. Discontinued operations
Sale of Brazil and Argentina
On 10 May 2022 the Group announced the agreement to sell its business in
Brazil and Argentina to Reelpar SA, an entity backed by a Sao Paulo Private
Equity Firm. The sale was completed on 26 May 2022, the date which control
passed to the acquirer. Under the terms of the disposal, the Group paid $15.0
million to Reelpar S.A. to support restructuring of the business. During the
five years following the completion date earn-out payments are payable to the
Group in the event that certain operational cash flow targets are met by the
Brazil and Argentina business. No earn-out payments have been recognised by
the Group as at 31 December 2022.
a) Discontinued operations
The results of the discontinued operations are presented below:
2022 2021*
Year Ended 31 December US$m US$m
Revenue 26.3 66.8
Cost of sales (22.6) (49.8)
Gross profit 3.7 17.0
Distribution costs (3.8) (10.2)
Administrative expenses (3.3) (5.6)
Operating (loss)/profit (3.4) 1.2
Investment income - 4.2
Finance costs (0.3) (0.4)
(Loss)/profit before taxation (3.7) 5.0
Taxation - (1.3)
(Loss)/profit from discontinued operations for the year (3.7) 3.7
Loss on disposal (note 13 (b)) (68.9) -
Exchange loss transferred to income statement on disposal (15.0) -
Total (loss)/profit from discontinued operations (87.6) 3.7
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
Revenue reported above includes inter-company sales for the year ended 31
December 2022 of $1.6 million (2021: $3.6 million). External revenue of the
Brazil and Argentina business for the year ended 31 December 2022 was $24.7
million (2021: $63.2 million).
Exceptional items - discontinued operations
Exceptional items (charged)/credited to (loss)/profit from discontinued
operations are set out below:
2022 2021*
Year Ended 31 December US$m US$m
Brazil indirect taxes:
- Cost of sales - 5.8
- Finance income - 4.2
- Taxation - (1.1)
Loss on disposal (note 13(b)) (68.9) -
Exchange loss transferred to income statement on disposal (15.0) -
Total exceptional items - discontinued operations (83.9) 8.9
Brazil indirect taxes - In 2021 the Brazilian Supreme Federal Court concluded
its judgement that Brazilian ICMS (indirect tax on goods and services) should
not be included in the calculation basis of PIS (Program of Social
Integration) and COFINS (Contribution for the Financing of Social Security)
indirect taxes.
As a result, estimated refunds were recognised as exceptional items in the
results for the year ended 31 December 2021 of $5.8 million which was included
in cost of sales and in addition exceptional interest income was recognised
year ended 31 December 2021 of $4.2 million. The exceptional tax charge for
the year ended 31 December 2021 was $1.1 million. These refunds dated back to
2003 and the estimated tax credit amounts were expected to be utilised over a
period of approximately six years, once the business has received a favourable
Court ruling.
(Loss)/earnings per ordinary share from discontinued operations
The (loss)/earnings per ordinary share from discontinued operations is as
follows:
2022 2021*
Year Ended 31 December Cents Cents
(Loss)/earnings per ordinary share from discontinued operations:
Basic (loss)/earnings per ordinary share (5.78) 0.26
Diluted (loss)/earnings per ordinary share (5.74) 0.25
Cash flows from discontinued operations
The table below sets out the cash flows from discontinued operations:
2022 2021*
Year Ended 31 December US$m US$m
Net cash outflow from operating activities (8.7) (8.5)
Net cash outflow from investing activities (0.5) (0.7)
Net cash flows from discontinued operations (9.2) (9.2)
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
b) Loss on disposal
The major classes of assets and liabilities disposed relating to the Brazil
and Argentina business was as follows:
US$m
Property, plant and equipment 10.8
Inventories 26.9
Trade and other receivables 35.7
Cash and cash equivalents 0.7
Total assets 74.1
Trade and other payables (18.1)
Current income tax liabilities (1.2)
Bank overdrafts (2.5)
Retirement benefit obligations (2.0)
Provisions (0.9)
Total liabilities (24.7)
Net assets disposed 49.4
Consideration paid 15.0
Disposal costs 4.5
Exceptional loss on disposal - discontinued operations 68.9
The consideration paid on the date of disposal was $15.0 million and net of
cash and cash equivalents and bank overdrafts disposed was $13.2 million.
Disposal costs of $3.8 million were paid in the year ended 31 December 2022
and as a result the cash outflow in the year ended 31 December 2022 on the
sale of the Brazil and Argentina business was $17.0 million.
14. Alternative performance measures
The financial information in this statement contains both statutory measures
and alternative performance measures which, in management's view, provide
valuable additional information for users of the financial statements in
understanding the Group's performance.
The Group's alternative performance measures and key performance indicators
are aligned to the Group's strategy and together are used to measure the
performance of the business. A number of these measures form the basis of
performance measures for remuneration incentive schemes.
Alternative performance measures are non-GAAP (Generally Accepted Accounting
Practice) measures and provide supplementary information to assist with the
understanding of the Group's financial results and with the evaluation of
operating performance for all the periods presented. Alternative performance
measures, however, are not a measure of financial performance under
International Financial Reporting Standards ('IFRS') and should not be
considered as a substitute for measures determined in accordance with IFRS. As
the Group's alternative performance measures are not defined terms under IFRS
they may therefore not be comparable with similarly titled measures reported
by other companies. A reconciliation of alternative performance measures to
the most directly comparable measures reported in accordance with IFRS is
provided below.
a) Organic growth on a constant exchange rate (CER) basis
Organic growth measures the change in revenue and operating profit before
exceptional and acquisition related items after adjusting for acquisitions.
The effect of acquisitions is equalised by:
· removing from the year of acquisition, their revenue and operating profit; and
· in the following year, removing the revenue and operating profit for the
number of months equivalent to the pre-acquisition period in the prior year.
The effects of currency changes are removed through restating prior year
revenue and operating profit at current year exchange rates.
The principal exchange rates used are set out in note 1.
Organic revenue growth on a CER basis measures the ability of the Group to
grow sales by operating in selected geographies and segments and offering
differentiated cost competitive products and services.
Adjusted organic operating profit growth on a CER basis measures the
profitability progression of the Group. Adjusted operating profit is
calculated by adding back exceptional and acquisition related items (see note
3 for further details).
2022 2021*
Year Ended 31 December US$m US$m % Growth
Revenue from continuing operations 1,583.8 1,446.7 9%
Constant currency adjustment - (85.3)
Revenue on a CER basis 1,583.8 1,361.4 16%
Revenue from acquisitions(1) (87.2) -
Organic revenue on a CER basis 1,496.6 1,361.4 10%
2022 2021*
Year Ended 31 December US$m US$m % Growth
Operating profit from continuing operations(2) 181.0 178.2 2%
Exceptional and acquisition related items (note 3) 53.9 19.5
Adjusted operating profit from continuing operations 234.9 197.7 19%
Constant currency adjustment - (12.3)
Adjusted operating profit on a CER basis 234.9 185.4 27%
Operating profit from acquisitions(1) (9.2) -
Organic adjusted operating profit on a CER basis 225.7 185.4 22%
( )
(1) Revenue and operating profit from acquisitions relates to the acquisitions
of Texon and Rhenoflex (see note 12).
(2) Refer to the consolidated income statement for a reconciliation of profit
before taxation to operating profit from continuing operations.
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
b) Adjusted EBITDA
Adjusted EBITDA is presented as an alternative performance measure to show the
operating performance of the Group excluding the effects of depreciation of
owned fixed assets and right-of-use assets, amortisation and impairments and
excluding exceptional and acquisition related items.
Operating profit from continuing operations before exceptional and acquisition
related items and before depreciation of owned fixed assets and right-of-use
assets and amortisation (Adjusted EBITDA) is set out below:
2022 2021*
Year Ended 31 December US$m US$m
Profit before taxation from continuing operations 151.3 158.0
Share of profit of joint ventures (1.1) (1.2)
Finance income (note 4) (2.6) (0.4)
Finance costs (note 5) 33.4 21.8
Operating profit from continuing operations(1) 181.0 178.2
Exceptional and acquisition related items (note 3) 53.9 19.5
Adjusted operating profit from continuing operations 234.9 197.7
Depreciation of owned property, plant and equipment 26.5 27.3
Amortisation of intangible assets 1.8 2.7
Adjusted EBITDA including IFRS 16 depreciation of right-of-use assets 263.2 227.7
(Pre-IFRS 16 basis)
Depreciation of right-of-use assets 19.4 19.4
Adjusted EBITDA 282.6 247.1
(1) Refer to the consolidated income statement for a reconciliation of profit
before taxation to operating profit from continuing operations.
Net debt including lease liabilities under IFRS 16 at 31 December 2022 was
$499.8 million (2021: $246.1 million).
This gives a leverage ratio of net debt including lease liabilities to
adjusted EBITDA at 31 December 2022 of 1.8 (2021: 1.0).
Net debt excluding lease liabilities under IFRS 16 at 31 December 2022 was
$394.4 million (2021: $147.1 million).
This gives a leverage ratio on a pre-IFRS 16 basis at 31 December 2022 of 1.5
(2021: 0.6).
The Group's proforma leverage on a pre-IFRS 16 basis at 31 December 2022 is
1.4 after adjusting EBITDA to include Texon and Rhenoflex as if the
acquisitions had taken effect at the beginning of the reporting period (1
January 2022).
For the definition and calculation of net debt including and excluding lease
liabilities see note 11 (g).
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
c) Adjusted effective tax rate
The adjusted effective tax rate removes the tax impact of exceptional and
acquisition related items and net interest on pension scheme assets and
liabilities to arrive at a tax rate based on the adjusted profit before
taxation.
A significant proportion of the Group's net interest on pension scheme assets
and liabilities relates to UK pension plans for which there is no related
current or deferred tax credit or charge recorded in the income statement. The
Group's net interest on pension scheme assets and liabilities is adjusted in
arriving at the adjusted effective tax shown below and, in management's view,
were this not adjusted it would distort the alternative performance measure.
This is consistent with how the Group monitors and manages the effective tax
rate.
2022 2021*
Year Ended 31 December US$m US$m
Profit before taxation from continuing operations 151.3 158.0
Exceptional and acquisition related items (note 3) 55.0 19.5
Net interest on pension scheme assets and liabilities 0.5 4.1
Adjusted profit before taxation from continuing operations 206.8 181.6
Taxation charge from continuing operations 56.4 53.1
Tax credit in respect of exceptional and acquisition related items 3.7 0.2
Tax credit in respect of net interest on pension scheme assets and
liabilities 0.5 0.5
Adjusted tax charge from continuing operations 60.6 53.8
Adjusted effective tax rate 29% 30%
d) Adjusted earnings per share
The calculation of adjusted earnings per share is based on the profit from
continuing operations attributable to equity shareholders before exceptional
and acquisition related items as set out below. Adjusted earnings per share
growth measures the progression of the benefits generated for shareholders.
2022 2021*
Year Ended 31 December US$m US$m
Profit from continuing operations 94.9 104.9
Non-controlling interests (22.0) (19.7)
Profit from continuing operations attributable to equity shareholders 72.9 85.2
Exceptional and acquisition related items net of non-controlling interests 54.7 19.5
(note 3)
Tax credit in respect of exceptional and acquisition related items (3.7) (0.2)
Adjusted profit from continuing operations 123.9 104.5
Weighted average number of Ordinary Shares 1,515,999,205 1,457,076,765
Adjusted earnings per share (cents) 8.17 7.17
Adjusted earnings per share (growth %) 14%
The weighted average number of Ordinary Shares used for the calculation of
adjusted earnings per share for the year ended 31 December 2022 is
1,515,999,205 (2021: 1,457,076,765), the same as that used for basic earnings
per ordinary share from continuing operations (see note 7).
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
e) Adjusted free cash flow
Net cash generated by operating activities, a GAAP measure, reconciles to
changes in net debt resulting from cash flows (free cash flow) as set out in
the consolidated cash flow statement. A reconciliation of free cash flow to
adjusted free cash flow is set out below.
Consistent with previous periods, adjusted free cash flow is defined as cash
generated from continuing activities less capital expenditure, interest, tax,
dividends to minority interests and other items, and excluding exceptional and
discontinued items, acquisitions, purchase of own shares by the Employee
Benefit Trust and payments to the UK pension scheme.
Adjusted free cash flow measures the Group's cash generation that is available
to service shareholder dividends, pension obligations and acquisitions.
2022 2021*
Year Ended 31 December US$m US$m
Change in net debt resulting from cash flows (free cash flow) (247.1) 32.6
Acquisition of businesses (note 12) 346.0 -
Disposal of business (note 13) 17.0 -
Net cash outflow from discontinued operations 9.2 9.2
Payments to UK pension scheme 42.7 42.4
Net cash flows in respect of other exceptional and acquisition 22.5 12.2
related items
Issue of ordinary shares (note 8) (109.8) -
Purchase of own shares by Employee Benefit Trust 2.1 -
Dividends paid to equity shareholders 33.0 27.4
Tax inflow in respect of adjusted cash flow items (1.4) -
Adjusted free cash flow 114.2 123.8
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1).
f) Adjusted return on capital employed
Adjusted return on capital employed ('ROCE') is defined as operating profit
before exceptional and acquisition related items adjusted for the full year
impact of acquisitions divided by period end capital employed as set out
below. Adjusted ROCE measures the ability of the Group's assets to deliver
returns.
2022 2021*
Year Ended 31 December US$m US$m
Operating profit from continuing operations before exceptional and acquisition
related items adjusted for full year impact of acquisitions (1)
250.9 197.7
Non-current assets
Acquired intangible assets 366.6 36.8
Property, plant and equipment 256.3 235.1
Right-of-use assets 96.5 91.6
Trade and other receivables 20.2 20.4
Current assets
Inventories 211.4 229.6
Trade and other receivables 286.3 279.8
Current liabilities
Trade and other payables (278.4) (328.9)
Lease liabilities (19.0) (17.8)
Non-current liabilities
Trade and other payables (26.3) (24.2)
Lease liabilities (86.4) (81.2)
Capital employed 827.2 441.2
Adjusted ROCE 30% 45%
(1) Operating profit from continuing operations before exceptional and
acquisition related items for the year ended 31 December 2022 has been
adjusted to include Texon and Rhenoflex as if the acquisitions had taken
effect at the beginning of the reporting period (1 January 2022). Including
full year proforma results, rather than the actual consolidated results of
these acquired businesses, better reflects the return from the capital
position at the period end. Therefore this provides reliable and more relevant
information on the financial performance of the Group to a user of the
financial statements. Refer to note 3 for details of exceptional and
acquisition related items.
* Represented to reflect the results of the Brazil and Argentina business as a
discontinued operation (see note 1). Amounts for non-current assets, current
assets, current liabilities and non-current liabilities at 31 December 2021
exclude the discontinued Brazil and Argentina business.
( )
15. Retirement and other post-employment benefit arrangements
The net surplus for the Group's retirement and other post-employment defined
benefit arrangements (UK and other Group schemes), on an IAS 19 basis, was
$105.4 million as at 31 December 2022 (2021: $21.1 million). The increase in
the net surplus during the year ended 31 December 2022 is primarily due to
movements on the UK scheme.
The Coats UK Pension Scheme, which is a key constituent of the Group defined
benefit liabilities, had a surplus on an IAS 19 basis at 31 December 2022 of
$180.7 million (31 December 2021: $108.0 million). The increase in the surplus
during the year ended 31 December 2022 of $72.7 million predominantly relates
to net actuarial gains of $44.9 million (higher discount rate due to
significantly higher corporate bond yields offset to some extent by asset
losses due to the high degree of hedging in place in the portfolio) and
employer contributions (excluding administrative expenses) of $37.9 million.
This was offset by foreign exchange translation movements.
Sensitivities regarding the discount rate and inflation assumptions used to
measure the liabilities of the Coats UK Pension Scheme, along with the impact
they would have on the scheme liabilities, are set out below.
Interrelationships between assumptions might exist and the analysis below does
not take the effect of these interrelationships into account:
31 December
31 December 2021
2022
+0.25% -0.25% +0.25% -0.25%
US$m US$m US$m US$m
Discount rate (51.4) 53.9 (108.8) 115.0
Inflation rate 28.0 (30.1) 74.6 (72.0)
An increase of 1.0% in the discount rate would result in the Coats UK Pension
Scheme liabilities decreasing by $192.3 million (31 December 2021: $401.4
million). A decrease of 1.0% in the discount rate would result in the Coats UK
Pension Scheme liabilities increasing by $232.2 million (31 December 2021:
$502.7 million). The above sensitivity analysis (on an IAS 19 basis) considers
the impact on the scheme liabilities only and excludes any impacts on scheme
assets from changes in discount and inflation rates. As noted in the 2022
Annual Report, the Coats UK Pension Scheme is currently over 90% hedged
against interest rate and inflation rate movements. Therefore on a Technical
Provision basis, to the extent there is a change in the scheme liabilities due
to movements in discount and inflation rates there would be offsetting impacts
from the scheme assets due to the hedging in place.
If members of the Coats UK Pension Scheme live one year longer the scheme
liabilities will increase by $59.8 million (31 December 2021: $105.8 million).
In December 2022, the trustee board of the Coats UK Pension Scheme purchased a
circa £350 million bulk annuity policy from Aviva, which insures all the
benefits payable in respect of around 3,700 pensioner members (a "pensioner
buy-in"). This policy will see all financial and demographic risks, including
those related to longevity, covered for approximately 20% of Scheme members.
The bulk annuity policy is an asset of the Scheme. Under IAS 19 it is deemed a
qualifying insurance policy, due to it exactly matching the amount and timing
of benefits payable by the Scheme to the covered members. Under IAS 19, the
value of the bulk annuity policy is therefore set equal to the corresponding
IAS 19 liabilities for covered members; not the premium paid. Given the
favourable pricing at the point of transaction, the pensioner buy-in has no
material impact on the Group's balance sheet or future income statements on an
IAS 19 basis.
16. Post balance sheet events
On 20 February 2023 the Group announced completion of a $250 million issue of
US Private Placement notes (see note 11 (g) for further details).
17. Directors
The following persons were, except where noted, directors of Coats Group plc
during the whole of the year ended 31 December 2022 and up to the date of this
report:
D Gosnell OBE
R Sharma
N Bull
J Callaway
A Fahy (Resigned 18 May 2022)
H Lawrence (Appointed 7 November 2022)
H Lu
S Murray (Appointed 1 September 2022)
F Philip
J Sigurdsson
On behalf of the Board
D Gosnell
Chairman
1 March 2023
United Kingdom
The Pavilions, Bridgwater Road, Bristol, England, BS13 8FD Tel: 0208 210 5000
Registered in England and Wales No. 103548
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DZGGFMMMGFZZRecent news on Coats
See all newsREG - Coats Group PLC - Director/PDMR Shareholding
AnnouncementREG - Coats Group PLC - Director/PDMR Shareholding
AnnouncementREG - Coats Group PLC - Result of AGM
AnnouncementREG - Coats Group PLC - Trading Statement
AnnouncementREG - Coats Group PLC Aberdeen Group PLC - Holding(s) in Company
Announcement