Coats : Discover our Year in Review and download the full Annual Report 2021 PDF

Coats Group plc Annual Report 2021

ACCELERATING AND TRANSFORMING

Strategic report

Corporate governance

Financial statements

Other information

Contents

Strategic report

1. 2021 full year results and highlights
2. Coats at a glance

4	Investment case
6	Chair's statement
8	Group Chief Executive's statement
10	Our strategic goals
12	Our sustainability strategy
14	Market trends
16	Business model
18	Key performance indicators
20	Stakeholder engagement
24	S172 statement
26	Working responsibly
38	Our climate disclosures

Introduction

WE ARE ACCELERATING PROFITABLE SALES GROWTH AND TRANSFORMING COATS FOR THE FUTURE

46	Principal risks and uncertainties
60	Operating review
64	Financial review

Corporate Governance

68	Chair's introduction
72	Board of Directors
75	Corporate Governance
83	Audit and Risk Committee Report
89	Nomination Committee Report
92	Directors' Report
95	Directors' responsibilities statement

Coats is the world's leading industrial thread company. The pioneering history and innovative culture of Coats enable the delivery of its purpose to connect talent, textiles and technology to make a better and more sustainable world.

We provide complementary and value-adding products, services and software solutions

to the apparel and footwear industries.

We also apply innovative techniques to develop high technology performance materials threads, yarns, fabrics and

composites in areas like personal protection, telecoms, energy, transportation,

and household and recreation.

This report details how we deliver our purpose to support our customers, their industries, our shareholders, our people and the communities in which we operate.

96 Remuneration Committee Report

Financial statements

1. Independent Auditor's Report

1. Primary financial statements

1. Notes to the financial statements

1. Company financial statements

1. Notes to Company financial statements

Other information

1. Group structure

1. Five-yearsummary
2. Shareholder information

Our vision is to be the global textiles leader and trusted partner delivering innovation, digital and sustainable solutions with lasting value to all stakeholders.

Find out more online:	Sustainability Report:
X See our online 'Year in Review' at	X To read our Sustainability Report, and for more
coats.com/ar2021	on our policies, their impact and our approach to
X A full copy of this Annual Report can also be	'Pioneering a sustainable future', go to
coats.com/sustainability
downloaded from coats.com/investors

• Throughout this document you will see references to where supporting information can also be found online atcoats.com

Coats Group plc

Strategic report

2021 full year results and highlights

NEW PRODUCTS	29%	1.50C	$96M
LAUNCHED
$37 million of
21incremental revenue	Revenue growth	Proposed final dividend	EcoVerde sales up 159%

Revenue ($m)
2021
				1,504
2020
				1,163
2019
				1,389
Adjusted operating prot ($m)
2021
					193
2020
				111
2019
					198
Operating prot ($m)
2021
				179
2020
				103

Financial performance

				CER	Organic
	2021	2020	Change	change	change
Continuing operations
Revenue*	$1,504m	$1,163m	29%	29%	29%
Adjusted1
Operating profit*	$193m	$111m	75%	74%	75%
Basic earnings per share	6.8c	2.4c
Free cash flow*	$113m	$28m
Net debt (excl. IFRS 16)	$147m	$181m
Reported2
Operating profit	$179m	$103m	74%	74%	74%
Basic earnings per share	6.1c	1.8c
Net cash generated by
operating activities	$129m	$66m
Final dividend per share	1.50c	1.30c

2019		191

Key Performance Indicators

*Indicates our KPI measures. See pages 18-19 for more details and historical performance.

1. Adjusted measures are non-statutory measures (Alternative Performance Measures). These are reconciled to the nearest corresponding statutory measure in note 12. Constant Exchange Rate (CER) are 2020 and 2019 results restated at 2021 exchange rates. Organic vs 2020 on a CER basis includes like-for-like contributions from Pharr HP (post acquisition date of February 2020). Organic vs 2019 on a CER basis includes like-for-like contributions from ThreadSol (post acquisition date of February 2019) and excludes contribution from Pharr HP (acquired in February 2020). Revenue figures are an IFRS measure; however CER and Organic growth rates constitute Alternative Performance Measures.
2. Reported refers to values contained in the IFRS column of the primary financial statements in either the current or comparative period.
3. Leverage calculated on a frozen GAAP basis, and therefore excludes the impact of IFRS 16 on both adjusted EBITDA and net debt.

Alternative Performance Measures - see note 35.

Highlights

• Accelerating Group sales growth of 29%
  (6% vs 2019) with continued momentum:
• • Apparel & Footwear: 33% sales growth (5% vs 2019); demand recovery and positive end market sentiment across US, Europe and Asia
  • Performance Materials: 19% organic sales growth (8% vs 2019)
• Strong thread market share gains in A&F (up 2% to 23%) and customer share wins in PM, as customers prioritise reliability and flexibility of supply, sustainable products, quality, speed, and innovation
• EcoVerde revenues up 159% to $96 million; significantly enhanced sustainability ambitions announced
• Continued innovation focus; 21 new products contributing $37 million incremental revenue

• Adjusted operating profit $193 million (reported $179 million); inflationary pressures absorbed by successful pricing actions and self-help productivity programmes
• A&F adjusted operating margins 15%1; PM adjusted operating margins 7%1, or 14%1 excluding the US
• Adjusted EPS of 6.8c per share (reported 6.1c per share), vs 2.4c per share in 2020
• Strong cash generation; net debt (excl. lease liabilities) of $147 million and strong adjusted free cash flow of $113 million; 0.7x leverage3; building resilience and creating a strong platform for growth
• Final dividend of 1.50 cents per share proposed, +15% vs 2020 final dividend given the strong 2021 performance and a sign of the Board's confidence into 2022

Annual Report and Accounts 2021

1

Strategic report

Corporate governance

Financial statements

Other information

Coats at a glance

Coats is the world's leading industrial thread company. We are headquartered in the UK and a FTSE 250 constituent with global operations generating revenues of $1.5bn in 2021.

$1.5BN

Group revenues

12.8%

Operating margins

0.7X

Leverage

We deliver innovative, value-adding and premium product and service solutions for our c.40,000 global customers to meet specified design requirements. Our products are a critical component in global industries like Apparel and Footwear (A&F) and Performance Materials (PM) including products for the Personal Protection industry, Composites and Performance Threads for multiple but focussed end-use sectors.

Sustainability is at the core of our business values, and we continuously strive to support our customers in achieving their

2021 revenue by division

sustainability goals. Whilst we continued to see regional Covid outbreaks during 2021 we were able to use our flexible business model and supply chains to maintain robust financial performance.

Headquartered in the UK and quoted on the London Stock Exchange, we have a global sales presence and digital platforms that enable us to serve customers wherever they are located.

Our unrivalled global reach and footprint serve as one of our competitive advantages.

2021 revenue by region

2021			2021
Revenue	Revenue
$1.504m	$1.504m
		73% Apparel
		& Footwear			56% Asia
		27% Performance			25% Americas
		Materials			19% EMEA

Our Sustainability strategy

During 2021 we added ambitious new targets to our Sustainability strategy, which focus on transitioning to sustainable materials, net-zero emissions and promoting circularity in all

we do. These new goals map our high-level sustainability journey and run in tandem with the strategy launched in 2019 that focussed on the key issues facing our business, which continue to be our high-priority targets for delivery in 2022 and beyond.

For more information refer to page 12.

Our five sustainability pillars are:

Water

Energy

Effluent

Social

Materials

HQ

Innovation Hub

Manufacturing Site

Presence

Where we operate

6	c.40,000	>250
Operating in six continents	Customers globally	Years of textiles experience

2	Coats Group plc

Strategic report

Apparel & Footwear

$1,094M

2021 revenue

$164M

2021 operating profit

15.0%

Margin

Overview

We are the trusted value-adding partner, providing critical supply chain components and services to the $1.4tn global apparel and $350bn footwear industries. Our portfolio of world-class products and services exist to serve the needs and requirements of our customers and brand owners.

Main customer markets

We ultimately supply products and services to global brands across many markets such as mid-market, premium lifestyle, value/mass, fast fashion, luxury/affordable luxury, footwear, and apparel tailoring.

30,000

Apparel and footwear manufacturers

4,000

Retailers and brands

Product type	End uses	Key Coats brands
Apparel & Footwear and	Sport/athleisure, denim, ladieswear, menswear,	Epic, Dual Duty, Seamsoft, Nylbond, Gral, Gramax,
accessories threads	children's wear, leather wear, workwear, footwear,	Astra, Sylko, Knit, EcoVerde, Eloflex and Drybond
(c.85% of sales)	and intimates and underwear
Zips, trims and crafting	Zips, interlinings, reflective tapes, and crafting products	Opti, Signal and Connect
(c.14% of sales)	(Latin America)
Software solutions	Enabling supply chain productivity gains, increasing	Coats Digital - including FastReactPlan, VisionPLM,
(c.1% of sales)	speed of supply and facilitating compliance	GSDCost, Intellocut and Intellobuy

Performance Materials

$409M

2021 revenue

$29M

2021 operating profit

7.1%

Margin

Overview

We are experts in the design and supply of a diverse range of technical products that serve a variety of strategic end-use markets. Derived from our longstanding global market- leading A&F thread expertise, which has been built up over 250 years, we are able

to innovate to provide highly engineered solutions to meet our customer needs by incorporating specific design features into various thread and yarn-based products.

Main customer markets

We develop high-technology Performance Materials including products for the Personal Protection industry, Composites and Performance Threads for multiple but focussed end-use sectors.

8,500

PM customers

End-use sector	End uses	Key Coats brands
Personal Protection	Combining comfort, safety and protection	Firefly, FlamePro and Armoren
(c.40% of sales)	- fire retardant and cut resistant threads and yarns
Composites	Telecoms and Energy, Automotive, Footwear	Gotex, Synergex, LatticeTM, Ultrabloc, Aptan XU, Gral
(c.25% of sales)		Binder and Protos Ripcord
Performance Threads	High-performance threads and yarns for the	Gral, Helios, Gral Quilt, Protos Fil, Epic, Gramax,
(c.35% of sales)	Automotive and Household & Recreation industries	Admiral and Neophil
	as well as other technical industrial applications such
	as feminine hygiene

Annual Report and Accounts 2021

3