TIDMCOA
RNS Number : 7389X
Coats Group PLC
24 February 2017
24 February 2017
Coats Group plc
2016 Full Year results
Coats Group plc ('Coats' or the 'Company'), the world's leading
industrial thread manufacturer, today announces its unaudited
results for the year ended 31 December 2016.
Highlights
-- Revenue up 2% on a CER basis to $1,457 million (down 1%
reported). Continued solid growth of 4% in Industrial Division
achieved through market share gains, offsetting 8% decline in
Crafts Americas.
-- Adjusted operating profit up 16% (up 13% reported) through
market share gains, cost productivity, controlled overheads and raw
material price benefits.
-- Adjusted EPS up 23% to 4.91c (reported EPS of 4.28c) with
higher operating profit and reduction in tax rate partially offset
by unrealised losses on foreign exchange hedges.
-- Adjusted free cash flow of $78 million (2015: $71 million) as
net working capital continues to be controlled effectively.
-- Return on capital employed increase of 600bps to 39% (2015:
33%) mainly as a result of higher profitability.
-- Acquired Gotex and Fast React; both performing well and ahead
of management expectations ($3m operating profit contribution in
2016).
-- Cessation of regulatory action for UK Coats and Brunel
pension schemes, representing approximately 90% of UK pension
liabilities and scheme members.
-- Rajiv Sharma became Group CEO on 1 January 2017, previously CEO Industrial Division.
-- The Board recommends a final dividend of 0.84 US cents per
share payable in May 2017, subject to shareholder approval, which
represents a pro forma full year 2016 dividend of 1.25 c per
share.
* Denotes a KPI 2016 2015 (2) Change CER Organic
change change
(1) (1)
------------------------------------- -------- --------- ------- -------- --------
Revenue reported $1,457m $1,472m (1)% 2% * 1%
Operating profit reported $153m $111m 38%
adjusted
(1) $158m $140m 13% 16% * 14%
Basic earnings
per share reported 4.28c (3.61)c n/a
adjusted
(1) 4.91c 4.00c * 23%
adjusted
Free cash flow (1) * $78m $71m 10%
Return on capital employed * 39% 33% 600bps
(ROCE) (1)
Dividend per share (pro-forma 1.25c -
full year)
1 Non-statutory measures (Alternative Performance Measures) are
reconciled to the nearest corresponding statutory measure in note
14.
2 Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 13)
Commenting on Coats full year 2016 results Rajiv Sharma, Group
Chief Executive, said:
'Coats delivered a strong performance in 2016 with operating
profit growth of 16%, despite challenging market conditions.
Uncertainty, volatility and pricing pressures characterised 2016.
Group organic sales growth of 1%, was delivered by share gains in
the Industrial Division, which was supported by the introduction of
new products and adoption of our digital tools. We delivered
productivity and procurement gains, and tightly managed our
overheads which had a positive operational gearing effect in the
Industrial Division. We completed the acquisitions of Gotex and
Fast React during the year, both of which have leading positions in
their markets and which are already delivering strong growth ahead
of management expectations under Coats' ownership. In the Crafts
division, challenging market conditions continued, especially
within the handknittings segment, although showed an improving
trend in the second half of the year, and cost actions were taken
to manage margins.
'Following the pensions settlement agreement with the Trustees
of the Coats UK and Brunel pension schemes and the cessation of
regulatory action by TPR related to those schemes, we have
recommended a final dividend of 0.84 US cents per share for 2016,
which equates to a pro-forma full year dividend of 1.25c per share.
It is our intention to pursue a progressive dividend policy.
'We enter 2017 on a solid footing however remain cautious about
market conditions. We expect to continue to deliver growth in line
with management's expectations through our initiatives to deliver
market share gains, productivity improvements and tight cost
control. We will also continue to focus on cash flow generation in
order to allow us to continue to reinvest in organic and inorganic
growth opportunities.'
Conference call
Coats Management will discuss this report in a webcast /
conference call with analysts and investors at 0900 GMT today (24
February 2017). The webcast can be accessed via
www.coats.com/investors/fy16. The conference call can be accessed
by dialling +44 (0)20 3059 8125 and using participant code 'Coats'.
The webcast will also be made available in archive form on
www.coats.com.
_________________________________________________________________________________________
Enquiry details
+44 (0)20 8210
Investors Rob Mann Coats Group plc 5175
Richard Mountain / Nick +44 (0)20 3727
Media Hasell FTI Consulting 1374
_________________________________________________________________________________________
This announcement contains inside information for the purposes
of the Market Abuse Regulation.
About Coats Group plc
Coats is the world's leading industrial thread manufacturer and
a major player in the Americas textile crafts market. At home in
some 60 countries, Coats employs 19,000 people across six
continents. Revenues in 2016 were US$1.5bn. Coats' pioneering
history and innovative culture ensure the company leads the way
around the world: providing complementary and value added products
and services to the apparel and footwear industries; applying
innovative techniques to develop high technology Performance
Materials threads and yarns in areas such as automotive, composites
and fibre optics; and extending the crafts offer into new markets
and online. Headquartered in the UK, Coats has a premium listing on
the London Stock Exchange. To find out more about Coats visit
www.coats.com.
Summary
In the following commentary all references to revenue are on a
CER basis and all references to operating profit are on an adjusted
CER basis, unless otherwise stated (Alternative Performance
Measures are reconciled to the nearest corresponding statutory
measure in note 14).
2016 2015 Reported 2015 CER (1) Organic
reported reported inc/(dec) CER (1) inc/(dec) (4)
inc/(dec)
------------------------------
$m $m % $m % %
--- ------- ------------ ---------- ---------- ----------- --------- ----------- -----------
Revenue (2)
Industrial 1,221 1,213 1% 1,176 4% 2%
Crafts 236 260 (9)% 256 (8)% (8)%
---------- ---------- ---------
Total 1,457 1,472 (1)% 1,432 2% 1%
Adjusted operating
profit (2, 3)
Industrial 154.7 135.2 14% 130.7 18% 16%
Crafts 10.8 14.9 (28)% 14.5 (26%) (26)%
UK pension admin (7.6) (10.2) (9.1)
---------- ---------- ---------
Group 157.9 139.9 13% 136.1 16% 14%
Adjusted operating
margin
Industrial 12.7% 11.2% 150bps 11.1% 160bps 150bps
Crafts 4.6% 5.7% (120)bps 5.7% (110)bps (110)bps
Group 10.8% 9.5% 130bps 9.5% 130bps 130bps
1 2015 figures restated at 2016 exchange rates
2 Includes contributions from bolt-on acquisitions made in the year
3 On an adjusted basis which excludes exceptional and acquisition
related items
4 On a CER basis excluding contributions from bolt-on acquisitions
Coats generated revenues of $1,457 million in 2016, a 2% CER
underlying growth on 2015 ($1,432 million). Industrial sales grew
4% driven by share gains in Apparel and Footwear, product
innovation, geographic expansion in Performance Materials
(previously Speciality), along with the impact of bolt-on
acquisitions. Organic sales growth in the Industrial Division of 2%
was marginally behind the 3% growth reported in H1 as mixed demand
from clothing retailers and manufacturers in US consumer durable
markets continued throughout the later part of the year. Crafts
sales fell 8% due to a sharp contraction in the US handknitting
market predominantly caused by a mild North American winter,
although this contraction slowed in the latter part of 2016 (H2
decline 4%).
Group adjusted operating profit increased 16% to $158 million
(2015: $136 million), although this was a lower growth rate than
the strong performance delivered in H1 of 24%. Industrial full year
adjusted operating profit grew 18% and margins were up 160 basis
points (bps) to 12.7% due to volume growth, lower raw material
prices, productivity and procurement improvements, and tight cost
control. Excluding acquisitions, Industrial adjusted operating
profit grew by 16%.
The 26% decline in Crafts Americas adjusted operating profit was
primarily due to lower US handknittings sales. Crafts Americas
margins decreased 110bps to 4.6% due to lower raw material prices
that benefited margins in H2 2015 but was partially offset by tight
cost control in a challenging market. The loss making UK Crafts
business has now been closed and is classified as discontinued. The
overhead reduction programme, initiated in 2015 following the sale
of EMEA Crafts, continued to deliver in line with management
expectations, although some savings are being reinvested to support
growth.
Performance on a reported basis was impacted by the relative
strength of the US Dollar compared to 2015, resulting in a 1%
reduction in reported revenues year on year (vs a 2% growth on a
CER basis), and 13% growth in adjusted operating profit (vs a 16%
growth on a CER basis). As the Company reports in US Dollars and
given that its global footprint generates significant revenues and
expenses in a number of other currencies, a translational currency
impact can arise. The main currency impact during the period was
the US Dollar against Sterling, Brazilian Real, Indian Rupee,
Mexican Peso, and Turkish Lira with a smaller absolute impact on
operating profit compared to revenues. Furthermore, if the reported
2016 results had been translated at exchange rates as at 31
December 2016 then Group revenue and adjusted operating profit
would have been $28m and $6m lower respectively.
Financial summary
Adjusted earnings per share ('EPS') increased 23% to 4.91 cents
(2015: 4.00 cents) with higher adjusted operating profits (16%
growth) and a reduction in tax rate (1% reduction in underlying
rate) partially offset by unrealised losses on forward foreign
exchange contracts of $5 million, in part due to the depreciation
of Sterling vs US Dollar. The Company generated a reported
attributable profit from continuing operations of $63.8m million
compared to $25.4 million in 2015, as a result of a lower level of
exceptional items ($23 million decrease in year net of tax), and
higher adjusted operating profit ($18 million increase in
2016).
In 2016 Coats generated an adjusted free cash flow of $78
million compared to $71 million in 2015. Higher operating profits
and stable capital expenditure more than offset a marginal outflow
in working capital in the year which included a year-on-year
reduction in sales days outstanding. Total net cash for the Group
at 31 December 2016 was $78 million, a year-on-year reduction of
$162 million, primarily due to $74 million foreign exchange losses
on the parent group balance, $36 million spend on acquisitions and
$99m UK pension scheme payments. Net cash of $78 million for the
Group consisted of parent Group cash $343 million (2015: $505
million) and operating net debt of $265 million (2015: $264
million). Group net assets reduced to $91 million (2015: $354
million), a reduction of $263m which was driven by $325 million of
actuarial losses on defined benefit pension schemes (2015: $67
million gain), offset partially by the Group's reported profit of
$71 million (2015: $39 million loss).
Return on capital employed increased to 39%, from 33% at 31
December 2015, due to higher operating profits along with a $13
million reduction in capital employed.
UK Pensions Regulator investigations
On 17 February 2017, it was announced that the Company had
signed binding settlement agreements with the Trustees of the UK
Coats Pension Plan and Brunel Holdings Pension Scheme. The Company
has received written assurances from the UK Pensions Regulator that
on completion of the settlement its regulatory action will
automatically cease in relation to these two schemes under the
warning notices that it issued to the Company in 2013 and 2014.
Following a series of Company determined corporate steps completion
will occur by early March 2017.
The UK Coats Pension Plan and Brunel Holdings Pension Scheme
represent approximately 90% of the Company's UK pension
liabilities(1) and schemes' members.
The Trustees of the Staveley scheme have not to date accepted
the Company's proposal regarding that scheme and currently the UK
Pension Regulator's investigation in connection with that scheme
remains open. The proposal remains open to the Trustee of the
Staveley scheme and the parent group cash will be used for this
purpose.
1 IAS19 position at 31/12/16
Strategic progress
As previously reported, in June 2016, Coats announced the
acquisitions of Gotex and Fast React Systems for an initial
consideration of $28 million and $7 million respectively. Gotex
designs and manufactures high-tech industrial yarns and tapes used
to protect, reinforce and insulate cables and pipes in the global
telecommunications, energy and oil and gas sectors. Gotex's market
leading fibreglass technology and products will complement Coats'
existing fibre optic product range, while Coats will support Gotex
in further expanding into high-growth markets. Fast React is a
provider of software solutions and expertise to manufacturers and
retailers in the global apparel and footwear industries. This will
enable Coats Global Services to offer an even wider range of
operational improvement tools to customers and follows the
successful acquisition of GSD in 2015, which has more than doubled
like for like sales in 2016 when compared to the 8 months of
post-acquisition ownership in 2015.
Both Gotex and Fast React are performing strongly and ahead of
management expectations having delivered $3m of operating profit in
the year since acquisition by leveraging Coats' global reach and
strong customer relationships.
Following on from the disposal of the EMEA Crafts business last
year, Coats has closed its loss-making UK Crafts operations which
is classified as discontinued operations. See note 13 for more
details.
Post Balance Sheet event
On 22 January 2017, the main distribution centre for the US
Crafts business in Albany, Georgia suffered significant damage
following a tornado strike, including one building which housed
sourced products for yarns, threads and crafting implements. The
decision had been taken to close the centre at the time and there
were no injuries to Coats' personnel. Although buildings in the
centre are leased, our initial estimate is that the tornado has
damaged a significant proportion of the stock as well as causing
disruption to our logistics activities. Given the extent of the
damage temporary alternative premises have been found but
operations are not expected to be fully back to normal until later
in Q2.
The Group's insurance policies are expected to be sufficient to
cover both the loss of inventory and physical assets. Although
sales will be adversely impacted in the first half, lost profits as
well as the incremental costs of re-establishing operations are
included in the Group's business interruption insurance cover.
Corporate changes
As previously reported, on 24 June 2016, the Company de-listed
from the New Zealand and Australian stock exchanges and now has a
single listing on the London Stock Exchange.
Simon Boddie joined the Company in July 2016 as Chief Financial
Officer and Executive Director and in October 2016 Fran Philips
joined as a Non-Executive Director.
On 1 January 2017, Rajiv Sharma, previously CEO Industrial
Division, took over as Group Chief Executive. Key focus areas of
future strategy will relate to simplification activity, innovation
and further development of digital capabilities all of which will
be an evolution of the existing successful strategy. As such, since
the start of 2017 certain strategic changes to the Group have been
announced with immediate effect. These include renaming of the
Speciality business to Performance Materials, in order to better
reflect the present and future state of this key growth area of the
business. In addition, there has been consolidation of the previous
Management Board, Industrial and Crafts Leadership Teams into a
single body; the Group Executive Team.
Dividend
Coats has a track record of delivering good levels of free cash
through profitable sales growth, delivering self-help initiatives
and investing in organic growth opportunities. The Board aims to
use this free cash flow to appropriately fund its pension schemes,
self-finance bolt-on acquisitions, and make returns to
shareholders. Over time, and as underlying earnings and cash flows
increase, the Board intends to pursue a progressive dividend
policy.
Following the pensions settlement agreement with the Trustees of
the UK Coats and the Brunel pension schemes and the cessation of
regulatory action by the UK Pensions Regulator (TPR) related to
those schemes, the Board has decided to commence the payment of
ordinary dividends. The Board proposes to pay an ordinary final
dividend of 0.84 US cents per share, subject to shareholder
approval, on 30 May (payment date) to shareholders on the register
on 5 May (record date), with an ex-dividend date of 4 May.
If the pensions settlement had been in place throughout the
financial year an interim dividend of 0.41 c would have also been
paid during 2016. Therefore, the pro-forma full year dividend of
1.25 c per share represents dividend earnings cover (on an adjusted
EPS basis) of 3.9x times and cash cover, post pensions recurring
deficit contribution payments, of 2.6x.
The ordinary final dividend will be paid in cash, in Sterling,
converted at the closing exchange rates on 10 May. Shareholders
will also have the option to have the dividend paid in either US
dollars, Australian dollars, or New Zealand dollars. Details of
these options will be sent to shareholders during March 2017 and
elections for alternative payment to Sterling must be received by 8
May. If no response is received, the default payment currency of
the dividend will be Sterling.
Outlook
We enter 2017 on a solid footing however remain cautious about
market conditions. We expect to continue to deliver growth in line
with management's expectations through our initiatives to deliver
market share gains, productivity improvements and tight cost
control. This growth is likely to be weighted to the second half of
the year due to strong profit growth in H1 2016, and may also be
subject to further foreign exchange headwinds on translation that
have been seen in recent periods. We will also continue to focus on
cash flow generation in order to allow us to continue to reinvest
in organic and inorganic growth opportunities.
Operating Review
In the following commentary all references to revenue are on a
CER basis and all references to operating profit are on an adjusted
CER basis, unless otherwise stated
Industrial
2016 2015 Reported 2015 CER (1) Organic
Reported Reported inc/(dec) CER (1) inc/(dec) (6)
inc/(dec)
-----------------------
$m $m % $m % %
----------------------- ---------- ---------- ----------- --------- ----------- -----------
Revenue (2)
By business
Apparel and Footwear
(3) 975 979 0% 949 3% 2%
Performance Materials
(5) 246 233 6% 227 9% 3%
---------- ---------- ---------
Total 1,221 1,213 1% 1,176 4% 2%
By region
Asia 720 715 1% 700 3% 3%
Americas 249 266 (6)% 254 (2)% (2)%
EMEA 252 231 9% 221 14% 7%
---------- ---------- ---------
Total 1,221 1,213 1% 1,176 4% 2%
Segment profit
(2,4) 154.7 135.2 14% 130.7 18% 16%
Segment margin
(2,4) 12.7% 11.2% 150bps 11.1% 160bps 150bps
1 2015 like-for-like restates 2015 figures at 2016 exchange rates
2 Includes contribution from bolt-on acquisitions made during
the period
3 Includes accessories, zips and trims and global services
4 On an adjusted basis which excludes exceptional and acquisition
related items.
5 Previously named Speciality
6 On a CER basis excluding contributions from bolt-on acquisitions
Revenue in Apparel and Footwear (A&F) grew 3% in 2016 on a
CER basis. H2 sales growth reduced marginally to 2% following 3%
growth in H1. In a challenging pricing environment sales growth was
driven by market share gains as the underlying market growth was
adversely impacted by softer retailer demand throughout the year.
Coats' ability to continue to take market share was driven by
several factors including deepening its relationships with
retailers and brand owners through its global accounts programme,
and with manufacturers, through the increasing adoption of digital
services. Two years after the Company rolled out an eCommerce
platform it is now live in over 25 countries, used by over 12,000
customers (manufacturers) and accounts for over 70% of our total
thread orders. It has also enabled a reduction in back office
headcount. In addition, market share gains were realised through
the launch of innovative new products, for example in the denim and
active sportswear segments.
Performance Materials(5) revenue grew 9% in the year on a CER
basis, including contributions from bolt-on acquisitions, with
organic growth of 3% which was impacted by challenging market
conditions in US consumer durable markets, in traditional markets
such as outdoor goods, where destocking was prevalent. Emerging
markets continued to deliver good sales growth through geographic
expansion of existing products, such as furniture and upholstery.
The business also continued to grow sales in new, innovative
products, for example in the fibre optics sector and protective
clothing, and entered new end-markets such as carbon composites.
This resulted in H2 growth of 13% driven by incremental acquisition
revenue (Gotex) along with an improvement in organic growth to 4%
(H1 3% growth).
By region, full year revenue in Asia grew by 3% which is in line
with H1 performance, with demand remaining solid in A&F despite
some specific market headwinds (for example India demonetisation in
H2). In the Americas revenues were marginally down with solid
growth in A&F sales in Latin American markets such as Mexico
and Colombia offset by the continued slowdown in some US consumer
durable markets. Sales in EMEA rose 14% (7% excluding acquisitions)
which was a continuation of strong H1 growth, following a
challenging 2015, with growth in key A&F markets and strong
performance in Performance Materials(5) .
Industrial operating profit increased 18% to $155 million (2015:
$131 million) and margins increased 160bps to 12.7%. This reflected
good volume growth driving a positive operational gearing impact, a
reduction in material costs due to the lower average oil price
compared to 2015 (although this benefit started to subside in H2),
ongoing productivity savings, non-raw material procurement
improvements along with benefits from business reorganisation
activity (for example the 2015 Mexico production site relocation).
These factors more than offset the challenging pricing environment
allowing strong improvements in gross margin, and control of its
cost base despite the structural wage and energy inflation that the
Group faces across the many countries in which it operates.
Acquisitions
As previously reported, in June 2016, Coats completed the
acquisition of Gotex, a company that designs, manufactures and
sells a range of innovative, high performance industrial textiles
to serve industries such as telecommunications (fibre optic
cables), energy and oil and gas. Based near Barcelona, Spain, Gotex
is a market leader in coated fibreglass yarns with proprietary
technology that enables manufacturing at significantly higher
speeds than conventional technology. This will complement Coats'
aramid product range and strengthen Coats' presence in fibre
optics. Coats will support Gotex in further expanding into
high-growth markets by leveraging Coats' unrivalled geographic
footprint, breadth of global customer relationships and strong
corporate brand. In 2015, Gotex generated sales of approximately
EUR14 million. The initial consideration was US$28 million, with a
further payment of up to US$4 million after a two-year period,
contingent on Gotex achieving certain performance targets.
In addition, in May 2016, Coats acquired Fast React, a UK based
provider of software solutions and expertise to manufacturers and
retailers in the apparel and footwear industries to improve their
operational efficiency. The business generated revenues of
approximately GBP4 million in 2015 ($5 million). The initial
consideration was US$7 million, with further payments of up to US$4
million over a three-year period, contingent on Fast React
achieving certain performance targets. The transaction enables
Coats Global Services to offer an even wider range of productivity
improvement tools to customers and follows the acquisition of GSD
in May 2015.
Both Gotex and Fast React have performed well under Coats
ownership, having delivered $16m of sales and $3m of operating
profit in 2016 by leveraging Coats global reach and strong customer
relationships.
Crafts
2016 2015 Reported 2015 CER (2)
Reported Reported(1) inc/(dec) CER (1,2) inc/(dec)
--------------------
$m $m % $m %
-------------------- ---------- ------------- ----------- ----------- -----------
Revenue
By business
Handknittings 121 141 (14)% 140 (13)%
Needlecrafts (3) 115 119 (4)% 116 (1)%
Total 236 260 (9)% 256 (8)%
By region
North America 176 198 (11)% 198 (11)%
Latin America 60 62 (2)% 58 4%
Total 236 260 (9)% 256 (8)%
Segment profit (4) 10.8 14.9 (28)% 14.5 (26)%
Segment margin (4) 4.6% 5.7% (120)bps 5.7% (110)bps
1 Restated to exclude the results of UK Crafts
2 2015 like-for-like restates 2015 figures at 2016 exchange rates.
3 Includes other textile craft products such as consumer sewings
and lifestyle fabrics.
4 Pre- exceptional items.
Crafts Americas revenues declined 8% to $236 million on a CER
basis in 2016 (2015: $256 million). Handknitting sales declined 13%
due to a sharp decline in the US handknitting market. Based on
feedback from Coats major customers, the mild North American winter
was a contributing factor in H1, while systems issues at a key
customer also negatively impacted demand. In H2 there was a
continued improvement in handknitting sales volumes resulting in a
reduced CER decline of 5%. Revenue in Needlecrafts decreased 1% but
with continued growth in Coats' lifestyle fabrics sales during the
period. Revenues in Latin America grew 4%, with marginal volume
growth supported by pricing gains.
Following the continued decline in North America sales and raw
material price increases, profit in Crafts Americas for the year
reduced to $11 million (2015: $15 million) and margins decreased by
110bps to 4.6%. Margin downside was limited by cost actions, such
as reducing discretionary spend and tightly controlling
overheads.
UK Crafts
Following the disposal of the EMEA Crafts business in 2015,
Coats has closed its loss-making UK Crafts operations which is
reported as a discontinued item in the full year 2016 results. In
2016 the business generated revenues of $8.8 million and an
operating loss of $4.5 million. The closure has no impact on the
ongoing Americas Crafts business.
Financial review
Overhead reduction programme
As previously reported, following the disposal of EMEA Crafts in
July 2015, Coats reviewed elements of its cost base to establish
the appropriate cost structure for a smaller and less complex
Group. As a result, $14.1 million of restructuring costs were
recognised in 2015. The programme continued to deliver in line with
management expectations during 2016 and full benefits are expected
to be realised by H1 2017, although a significant proportion of
these savings will be reinvested to support the Group's growth
plans.
Exceptional and acquisition related items
Net exceptional and acquisition related items before taxation
and discontinued items were $4.6 million in 2016. These are related
to Gotex and Fast React transaction costs, the amortisation of
intangible assets acquired, and contingent consideration linked to
continued employment. In 2015 net exceptional costs before taxation
and discontinued items totalled $29.9 million and mainly related to
the consolidation of Coats' Mexican operations, the initial
provision for the overhead reduction programme and a provision for
remedial work on the Lower Passaic River ('LPR'), New Jersey, USA.
There are no further significant developments in relation to LPR to
report. See note 10 for further details.
Non-operating results
Net finance costs in the period were $31.6 million, marginally
up from $31.2 million in 2015. There was a reduction in interest on
borrowings from $17 million to $14 million in 2016 partly due to
fixed interest rate swaps coming to an end. There was approximately
$5 million of unrealised losses on forward foreign exchange
contracts in part due to the depreciation of Sterling vs US Dollar.
With the movement of all the parent group cash (committed to
support the Company's pension schemes) to Pound Sterling from New
Zealand, Australian and US Dollars in H2 2015, interest income on
the balance declined to $2 million in 2016 (2015: $5 million).
IAS19 pensions interest charges reduced from $17 million to $14
million as a function of the lower pensions accounting deficit at
the end of 2015.
The taxation charge for 2016 was $46.8 million (2015: $43.7
million) resulting in a reported tax rate of 38% (2015: 54%).
Excluding exceptional and acquisition related items, the impact of
IAS19 finance charges and foreign exchange gains/losses on the
parent group cash balance, the underlying effective rate on pre-tax
profits reduced by 100bps to 34% (2015: 35%). This was driven by a
reduction in unrelieved losses, together with a favourable change
in profit mix for the period.
Profit attributable to minority interests increased to $11.9
million (2015: $11.2 million) and is predominantly related to
Coats' operations in Vietnam and Bangladesh (in which it has
controlling interests).
Adjusted EPS increased 23% to 4.91 cents (2015: 4.00 cents). The
higher operating profit and improvements in the underlying tax rate
were partially offset by the $5m unrealised loss on forward foreign
exchange contracts. Reported EPS of 4.60 cents compares to 1.81
cents in 2015 (for continuing operations); last year's result was
impacted by a higher level of exceptional costs (there was a
reported loss per share of 3.61 cents in 2015 due to a loss on
discontinued items related to the EMEA Crafts business).
Total other comprehensive income and expense for the year was
significantly impacted by actuarial losses in relation to the
Group's defined benefit pension schemes of $325 million (2015: $67
million gain), as a result of changes to actuarial assumptions and
asset returns.
Investment
Capital expenditure during the year, in addition to ongoing
maintenance requirements, focused on new product development,
process improvements, capacity expansion, health and safety, and
environmental spend. The latter, which includes building effluent
treatment plants, helps ensure Coats maintains its strong corporate
responsibility credentials in the Industry. Total capital spend
amounted to $40 million (2015: $44 million) and was 1.0 times
depreciation and amortisation.
In order to support our future growth strategy and reinforce our
strong environmental compliance credentials we have made the
decision to increase our capital expenditure in 2017 to around 1.5
times depreciation. This spend is expected to be weighted towards
the second half of the year. This investment will be funded by our
operating cash flow which will continue to benefit from the
management and discipline which has been in place in recent
years.
Cash flow
Coats generated a $78 million adjusted free cash inflow in 2016,
compared to $71 million in 2015.
EBITDA (defined as pre-exceptional operating profit before
depreciation and amortisation) was $199 million, up from $183
million in 2015 (on a reported basis) due to the factors that
contributed to the increase in pre-exceptional operating profit
outlined earlier in the report.
There was a $3 million net working capital outflow in 2016
(2015: $19 million outflow). The movement in net working capital in
the year was mainly due to increases in inventory in order to
enhance service levels and lower trade creditors as we continued
the implementation of a revised and consistent payment approach to
suppliers to ensure we treat all parties in the supply chain in an
ethical and sustainable way. These reductions were offset by lower
debtors (reduction in sales days outstanding offsetting increased
trading activity) and the timing of payments to other operating
related creditors (for example rebate and indirect taxes payment
timings).
Interest paid decreased to $14 million (2015: $15 million) as a
result of a reduction in interest rates on borrowings. Tax paid
increased year-on-year from $49 million to $58 million in 2016 as a
result of higher profitability and increased withholding taxes from
the repatriation of locally held cash around the Group. Payments to
minority interests increased year-on-year to $13 million (2015: $10
million), also as a result of the increase in repatriating cash
held locally around the Group.
There was an $84 million free cash outflow in 2016 (2015: $21
million outflow). This included UK pension recovery payments
including administrative expenses of $99 million (2014: $34
million), of which approximately $19 million was paid to the Coats
Plan, $53 million to the Staveley scheme (of which $46 million was
a non-recurring contribution), and $27 million was paid to the
Brunel scheme (of which $20 million was a non-recurring
contribution). There was a $3 million outflow (2015: $8 million)
relating to the purchase of own shares for the Employee Benefits
Trust. This was to cover the continuing requirements for a
share-based long term incentive scheme (in line with the standards
of a FTSE 250 company) for senior employees, that more clearly
aligns their interests with those of shareholders. Exceptional
items included $4 million spent on the pensions investigation
(2015: $9 million), and $8 million on the overhead reduction
programme. In addition, $36 million was spent on the acquisition of
Gotex and Fast React (2015: $6 million in relation to the GSD
acquisition).
Overall, net cash for the Group reduced by $162 million in the
year to $78 million. This predominantly consisted of $84 million
free cash outflow (as referred to above), and $77 million foreign
exchange movements ($74 million of which is in relation to parent
group cash).
Balance sheet
As referred to above, the Company had a net cash position of $78
million at 31 December 2016 (31 December 2015: $241 million). This
included parent group cash, held in Sterling and committed to
support the Group's three UK pension schemes (Sterling liabilities)
of $343 million, compared to $505 million at the end of 2015. The
reduction was primarily due to $80 million of pensions recovery
payments (including administrative expenses) made to the Brunel and
Staveley schemes in 2016 and, in US Dollar terms, due to the
depreciation of Sterling ($74 million), although there is no real
impact as the cash is matched to the Sterling denominated
liabilities.
The Coats operating business had a net debt position of $265
million at the end of 2016 (see note 11), a marginal increase of $1
million from 31 December 2015 ($264 million). An important metric
for the operating business is the leverage ratio of net debt
(excluding parent group cash) to EBITDA. Net debt at 31 December
2016 was 1.3 times EBITDA for the year (1.4 times at 31 December
2015).
Pensions and other post-employment benefits
The net obligation for the Group's retirement and other
post-employment defined benefit liabilities, on an IAS19 financial
reporting basis, was $627 million as at 31 December 2016, up from
$469 million at 31 December 2015. The increase in liabilities in
the year of $158 million primarily consisted of actuarial losses of
$325 million and Income Statement charges of $31 million, offset by
cash payments into the UK schemes of $99 million and foreign
exchange gains on Sterling liabilities of $94 million.
The deficits in the Group's UK defined benefit schemes, namely
the UK Coats Plan, and Brunel and Staveley schemes, increased to
$576 million (GBP467 million) from the position at 31 December 2015
($423 million, GBP286 million). This was primarily due to an
increase in liabilities largely driven by a 110bps decrease in the
discount rate to 2.5% (derived using a yield curve approach, based
on Sterling AA corporate bonds) as well as a 35bps increase in the
rate of inflation to 3.3% (based on a market implied long term
rate). The increase in liabilities was partially offset by a better
than expected increase to asset values. Furthermore, in US Dollars
the value of the UK net deficits have declined due to the weakening
of Sterling over 2016. The reduction in the Staveley deficit was
due to the GBP34 million payment made as part of the deficit repair
plan agreed earlier this year. A GBP15m payment was also made to
the Brunel scheme in the second half of 2016.
IAS19 deficit 31 Dec 31 Dec 31 Dec 31 Dec
2016 2015 2016 2015
$m $m GBPm GBPm
Coats Plan 467 264 378 179
Brunel 64 72 52 48
Staveley 45 87 37 59
------- ------- ------- -------
UK defined benefit
schemes 576 423 467 286
------- ------- ------- -------
Other Coats net
employee benefit
obligations 51 46
Total 627 469
------- -------
Pensions
Investigations
Further to its announcement of 16 December 2016, it was
announced on 17 February 2017 that the Company had signed binding
settlement agreements with the Trustees of the UK Coats Pension
Plan and the Brunel Holdings Pension Scheme. The Company has
received written assurances from the UK Pensions Regulator that on
completion of the settlement its regulatory action will
automatically cease in relation to these two schemes under the
warning notices that it issued to the Company in 2013 and 2014.
Following a series of Company determined corporate steps completion
will occur by early March 2017.
The UK Coats Pension Plan and the Brunel Holdings Pension Scheme
represent approximately 90% of the Company's UK pension
liabilities(1) and schemes' members.
The Trustee of the Staveley scheme has not to date accepted the
Company's proposal regarding that scheme and currently the UK
Pension Regulator's investigation in connection with that scheme
remains open. The proposal remains open to the Trustee of the
Staveley scheme and the parent group cash will be used for this
purpose.
The Company made proposals to the Trustees of each of the three
UK schemes (including the Staveley Scheme), on a comparable basis,
comprising (1) upfront payments totalling GBP329.5 million ($406
million) from the Company's parent group cash (inclusive of the
agreed Recovery Plan contributions paid to the Brunel and Staveley
schemes since 1 January 2016); and (2) annual deficit recovery
contributions totalling GBP17.5 million ($22 million) including
estimated administration expenses and levies.
The principal commercial terms of the Settlement with the UK
Coats Pension Plan and Brunel Holdings Pension Scheme are:
-- Financial support on the basis of a combined technical
provisions deficit as at 1 April 2015 of GBP485 million ($598
million) to be repaired by:
a) upfront payments totalling GBP255.5 million ($315 million)
from the Company's parent group cash paid directly into the schemes
(inclusive of the agreed Recovery Plan contributions paid to the
Brunel scheme since 1 January 2016); and
b) annual deficit contributions totalling GBP14.5 million ($18
million), including estimated administration expenses and levies to
be paid until 2028.
-- The schemes will have access to sponsor support from Coats
for future funding needs together with a Company guarantee.
-- The next triennial valuation date for these schemes is to be 31 March 2018.
As a result of the settlement with the UK Coats and Brunel
schemes, the principal impacts on the financial statements are
anticipated to be as follows:
-- Cash flow: In 2017, the UK pension deficit reduction payments
(including administrative expenses) are expected to be in the
region of GBP257 million ($317 million) (2016: $99 million), being
GBP255.5 million ($315 million) agreed settlement with the UK Coats
and Brunel schemes less certain scheduled recovery payments made
during 2016 of GBP20 million ($25 million), along with the latest
agreed on-going payments including expenses of GBP21 million ($26
million). These anticipated deficit recovery payments will not
impact adjusted free cash flow.
-- IAS 19 deficits (UK schemes): on a pro-forma basis (factoring
in only cash payments made into the schemes as part of the UK Coats
and Brunel settlements), the 31 December 2016 IAS 19 deficits for
the Group of GBP467 million ($576 million) would reduce to GBP232
million ($286 million) following the upfront payments of GBP235
million ($290 million) made into the UK Coats and Brunel schemes
following completion of the settlements on those schemes.
-- Parent group cash: in line with the above, on a pro-forma
basis, the Group net cash balance of GBP278 million ($343 million)
as at 31 December 2016 would reduce to GBP43 million ($53 million)
following the upfront payments of GBP235 million ($290 million)
made into the UK Coats and Brunel schemes following completion of
the settlements on those schemes. Cash remains reserved for the
Staveley scheme settlement, in line with previous
announcements.
The impacts on adjusted free cash flow, operating profit and
adjusted EPS are not expected to be significant.
1 IAS19 position at 31/12/16
Triennial funding valuations
As noted above the next triennial funding valuations for the UK
Coats and Brunel schemes have an effective date of 31 March 2018
and will need to be agreed by 30 June 2019. The Staveley Scheme's
triennial funding valuation has an effective date of 31 December
2016 and would need to be agreed by 31 March 2018.
Coats Group plc
Consolidated income statement
For the year ended 2016 2015 *
31 December
Before Before
exceptional Exceptional exceptional Exceptional
and and and and
acquisition acquisition acquisition acquisition
related related related related
items items Total items items Total
Notes Unaudited Unaudited Unaudited Audited Audited Audited
US$m US$m US$m US$m US$m US$m
Continuing operations
Revenue 1,457.3 - 1,457.3 1,472.5 - 1,472.5
Cost of sales (892.3) - (892.3) (921.2) (16.5) (937.7)
Gross profit 565.0 - 565.0 551.3 (16.5) 534.8
Distribution costs (197.2) - (197.2) (196.8) - (196.8)
Administrative
expenses (210.1) (4.6) (214.7) (215.3) (21.1) (236.4)
Other operating
income 0.2 - 0.2 0.7 9.2 9.9
Operating profit 157.9 (4.6) 153.3 139.9 (28.4) 111.5
Share of profits
of joint ventures 0.8 - 0.8 1.5 (1.5) -
Investment income 4 4.3 - 4.3 10.5 - 10.5
Finance costs 5 (35.9) - (35.9) (41.7) - (41.7)
Profit before
taxation 3 127.1 (4.6) 122.5 110.2 (29.9) 80.3
Taxation 6 (47.2) 0.4 (46.8) (46.2) 2.5 (43.7)
Profit from
continuing
operations 79.9 (4.2) 75.7 64.0 (27.4) 36.6
Discontinued
operations
Loss from
discontinued
operations 13 (3.3) (1.2) (4.5) (13.2) (62.8) (76.0)
Profit/(loss)
for the year 76.6 (5.4) 71.2 50.8 (90.2) (39.4)
Attributable to:
EQUITY SHAREHOLDERS
OF THE COMPANY 64.7 (5.4) 59.3 39.6 (90.2) (50.6)
Non-controlling
interests 11.9 - 11.9 11.2 - 11.2
76.6 (5.4) 71.2 50.8 (90.2) (39.4)
Earnings per share
(cents) 7
Continuing operations
Basic 4.60 1.81
Diluted 4.53 1.81
Continuing and
discontinued
operations
Basic 4.28 (3.61)
Diluted 4.22 (3.61)
Adjusted earnings
per share 14 4.91 4.00
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
Coats Group plc
Consolidated statement of comprehensive income
Year ended 31 December 2016 2015
Unaudited Audited
US$m US$m
Profit/(loss) for the year 71.2 (39.4)
Items that will not be reclassified
subsequently to profit or loss:
Actuarial (losses)/gains on retirement
benefit schemes (324.8) 67.2
Tax on items that will not be reclassified 0.1 (3.4)
----------- ---------
(324.7) 63.8
Items that may be reclassified subsequently
to profit or loss:
Losses on cash flow hedges arising during
the year (0.9) (1.7)
Transferred to profit or loss on cash
flow hedges 1.3 3.0
Exchange differences on translation
of foreign operations 1.3 (66.2)
Exchange differences transferred to
profit or loss on sale of businesses - 7.5
Exchange differences transferred to
profit or loss on sale of investment - (0.5)
1.7 (57.9)
Other comprehensive income and expense
for the year (323.0) 5.9
----------- ---------
Net comprehensive income and expense
for the year (251.8) (33.5)
----------- ---------
Attributable to:
--------------------------------------------- ----------- ---------
EQUITY SHAREHOLDERS OF THE COMPANY (263.0) (44.0)
---------------------------------------------- ----------- ---------
Non-controlling interests 11.2 10.5
(251.8) (33.5)
----------- ---------
Coats Group plc
Consolidated statement of financial position
31 December 31 December
Notes 2016 2015
Unaudited Audited
US$m US$m
Non-current assets
Intangible assets 291.8 261.2
Property, plant and equipment 265.9 273.0
Investments in joint ventures 11.0 10.8
Available-for-sale investments 1.1 1.5
Deferred tax assets 18.1 12.5
Pension surpluses 50.8 52.5
Trade and other receivables 16.1 16.4
------------ ------------
654.8 627.9
Current assets
Inventories 205.8 204.0
Trade and other receivables 248.4 261.9
Available-for-sale investments 0.2 0.2
Pension surpluses 6.7 6.6
Cash and cash equivalents 11(e) 476.5 649.9
Non-current assets classified 0.2 -
as held for sale
------------ ------------
937.8 1,122.6
Total assets 1,592.6 1,750.5
------------ ------------
Current liabilities
Trade and other payables (310.8) (320.7)
Current income tax liabilities (8.9) (12.5)
Bank overdrafts and other
borrowings (7.7) (20.2)
Retirement benefit obligations:
- Funded schemes (309.6) (33.9)
- Unfunded schemes (6.2) (6.2)
Provisions (17.1) (44.4)
------------ ------------
(660.3) (437.9)
Net current assets 277.5 684.7
------------ ------------
Non-current liabilities
Trade and other payables (15.8) (12.4)
Deferred tax liabilities (31.7) (33.0)
Borrowings (390.6) (389.1)
Retirement benefit obligations:
- Funded schemes (272.0) (394.1)
- Unfunded schemes (96.4) (94.2)
Provisions (34.8) (35.8)
(841.3) (958.6)
Total liabilities (1,501.6) (1,396.5)
------------ ------------
Net assets 91.0 354.0
------------ ------------
Equity
Share capital 8 127.0 127.0
Share premium account 11.6 11.6
Own shares 8 (10.5) (7.6)
Translation reserve (121.1) (123.1)
Capital reduction reserve 85.2 85.2
Other reserves 250.9 250.5
Retained loss (274.6) (14.3)
EQUITY SHAREHOLDERS' FUNDS 68.5 329.3
------------------------------------------- ------------ ------------
Non-controlling interests 22.5 24.7
------------ ------------
Total equity 91.0 354.0
------------ ------------
Coats Group plc
Consolidated statement of changes in equity
For the year ended 31 December 2016
Share Capital Non-
Share premium Own Translation reduction Other Retained controlling
Capital account Shares Reserve reserve Reserves Loss Total interests
US$m US$m US$m US$m US$m US$m US$m US$m US$m
Audited
Balance as at
1 January
2015 127.0 11.6 - (64.6) 85.2 249.2 (32.1) 376.3 24.3
Net
comprehensive
income and
expense
for the year - - - (58.5) - 1.3 13.2 (44.0) 10.5
Dividends - - - - - - - - (10.1)
Purchase of
own
shares - - (7.6) - - - - (7.6) -
Share based
payments - - - - - - 4.6 4.6 -
-------------- --------- -------- -------- ------------ --------- ---------- ---------- ------- -----------
Balance as
at
31 December
2015 127.0 11.6 (7.6) (123.1) 85.2 250.5 (14.3) 329.3 24.7
-------------- --------- -------- -------- ------------ --------- ---------- ---------- ------- -----------
Unaudited
Net
comprehensive
income and
expense
for the year - - - 2.0 - 0.4 (265.4) (263.0) 11.2
Dividends - - - - - - - - (13.4)
Purchase of
own
shares - - (2.9) - - - - (2.9) -
Share based
payments - - - - - - 5.1 5.1 -
Balance as
at
31 December
2016 127.0 11.6 (10.5) (121.1) 85.2 250.9 (274.6) 68.5 22.5
-------------- --------- -------- -------- ------------ --------- ---------- ---------- ------- -----------
Coats Group plc
Consolidated cash flow statement
For the year ended 31 December 2016 2015
Unaudited Audited
Note US$m US$m
Cash inflow from operating
activities
11
Net cash inflow from operations (a) 79.4 108.9
Interest paid (14.0) (15.3)
Taxation paid (57.9) (49.3)
---------- ---------
Net cash generated by operating
activities 7.5 44.3
---------- ---------
Cash outflow from investing
activities
11
Investment income (b) 4.0 10.0
Net capital expenditure and 11
financial investment (c) (38.7) (31.9)
11
Acquisitions and disposals (d) (40.4) (26.1)
Net cash absorbed in investing
activities (75.1) (48.0)
---------- ---------
Cash outflow from financing
activities
Purchase of own shares (2.9) (7.6)
Receipts from exercise of share 0.2 -
options
Dividends paid to non-controlling
interests (13.4) (10.1)
Net increase in debt and finance
leasing 3.3 1.3
---------- ---------
Net cash absorbed in financing
activities (12.8) (16.4)
---------- ---------
Net decrease in cash and cash
equivalents (80.4) (20.1)
Net cash and cash equivalents
at beginning of the year 631.4 710.4
Foreign exchange losses on
cash and cash equivalents (80.7) (58.9)
---------- ---------
Net cash and cash equivalents 11
at end of the year (e) 470.3 631.4
---------- ---------
Reconciliation of net cash
flow to movement in net cash
Net decrease in cash and cash
equivalents (80.4) (20.1)
Net increase in debt and lease
financing (3.3) (1.3)
---------- ---------
Change in net cash resulting
from cash flows
(Free cash flow) (83.7) (21.4)
Other non-cash movements (1.6) (3.1)
Foreign exchange losses (77.1) (55.8)
---------- ---------
Decrease in net cash (162.4) (80.3)
Net cash at start of year 240.6 320.9
---------- ---------
11
Net cash at end of year (e) 78.2 240.6
---------- ---------
Coats Group plc
Notes to the consolidated financial information for the year
ended 31 December 2016
1. Basis of preparation
The preliminary financial information (the 'financial
information') set out in this report is based on Coats Group plc's
unaudited consolidated financial statements, which are prepared in
accordance with International Financial Reporting Standard ('IFRS')
as adopted by the European Union, and complies with the disclosure
requirements of the Listing Rules of the UK Financial Services
Authority. The accounting policies adopted by the Group have been
applied consistently to all periods presented.
The financial information set out in this report does not
constitute the Coats Group plc's statutory accounts for the years
ended 31 December 2016 and 2015. The financial information for the
year ended 31 December 2015 is derived from the statutory accounts
for that year which have been filed with the Registrar of
Companies. The audit report on those accounts did not contain
statements under Sections 498(2) or 498(3) of the Companies Act
2006. The audit opinion contained in that report was unmodified.
The audit of the statutory accounts for the year ended 31 December
2016 is not yet complete. Those accounts will be finalised on the
basis of the financial information presented by the Directors in
this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting.
Whilst the financial information included in this report has
been compiled in accordance with the recognition and measurement
principles of applicable IFRS, this report does not itself contain
sufficient information to comply with IFRS. Coats Group plc expects
to publish full consolidated financial statements that comply with
IFRS; these will be available to shareholders in March 2017.
New standards, interpretation and amendments adopted by the
Group
The same accounting policies, presentation and methods of
computation are followed in the preliminary financial information
as applied in the Group's annual audited financial statements for
the year ended 31 December 2015.
Discontinued operations
Following on from the disposal of the EMEA Crafts business in
2015, Coats closed its loss-making UK Crafts operations with the
business ceasing operations during the second half of 2016. The
results of the UK Crafts business have been reported as a
discontinued operation. Accordingly, prior year amounts in the
consolidated income statement have been reclassified to
discontinued operations. Note 13 provides details on the results of
the UK Crafts business
Going concern
At 31 December 2016 the Group had cash and cash equivalent
totalling $476.5 million (2015: $649.9 million). The Group also has
various actual and contingent liabilities. The Board expects to be
able to meet these obligations from existing resources. Further
information on the net cash position of the Group is provided in
note 11(e).
Giving due consideration to the nature of the Group's business
and taking account of the following matters: the financing
facilities available to the Group; the Group's foreign currency
exposures; the binding settlement agreement with the Trustees of
the UK Coats Pension Plan and Brunel Holdings Pension Scheme
announced on 17 February 2017, the proposed settlement offer open
to the Trustee of the Staveley scheme; and also taking into
consideration the cash flow forecasts prepared by the Group and the
sensitivity analysis associated therewith, the directors consider
that the Company and the Group are going concerns and this
financial information is prepared on that basis.
Principal exchange rates
The principal exchange rates (to the US dollar) used are as
follows:
2016 2015
----------------------------- ------- -------
Average Sterling 0.74 0.65
Euro 0.90 0.90
Brazilian Real 3.48 3.34
Indian Rupee 67.16 64.12
----------------- ----------- ------- -------
Period end Sterling 0.81 0.68
Euro 0.95 0.92
Brazilian Real 3.25 3.96
Indian Rupee 67.92 66.15
2. Operating segments
The Group has two reportable segments: Industrial and Crafts.
Both segments includes businesses with similar operating and market
characteristics. These segments are consistent with the internal
reporting as reviewed by the Coats Group plc Board (the 'Chief
Operating Decision Maker').
Segment revenue and results
Year ended 31 December 2016:
Unaudited
Industrial Crafts Total
US$m US$m US$m
------------------------------------------- ----------- ------- --------
Revenue 1,221.2 236.1 1,457.3
----------- ------- --------
Segment profit 154.7 10.8 165.5
----------- -------
UK pension scheme administrative expenses (7.6)
--------
Operating profit before exceptional and
acquisition related items 157.9
Exceptional and acquisition related items (4.6)
Operating profit 153.3
Share of profit of joint ventures 0.8
Investment income 4.3
Finance costs (35.9)
--------
Profit before taxation from continuing
operations 122.5
--------
Year ended 31 December 2015 *:
Audited
Industrial Crafts Total
US$m US$m US$m
------------------------------------------- ----------- ------- --------
Revenue 1,212.5 260.0 1,472.5
----------- ------- --------
Segment profit 135.2 14.9 150.1
----------- -------
UK pension scheme administrative expenses (10.2)
--------
Operating profit before exceptional and
acquisition related items 139.9
Exceptional and acquisition related items (28.4)
Operating profit 111.5
Share of profit of joint ventures -
Investment income 10.5
Finance costs (41.7)
--------
Profit before taxation from continuing
operations 80.3
--------
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
3. Exceptional and acquisition related items
The Group's consolidated income statement format includes
results before and after exceptional and acquisition related
items.
Exceptional items
Exceptional items are set out below:
2016 2015
Unaudited Audited
US$m US$m
------------------------------------------------ ----------- --------
Exceptional items:
Cost of sales:
US environmental costs - 13.2
Reorganisation costs - Mexico - 3.3
- 16.5
Administrative expenses:
Capital incentive plan charge - 1.3
UK Pensions Regulator ('tPR') investigation
costs - 5.7
Reorganisation costs - overhead reduction
programme - 14.1
- 21.1
Other operating income:
Profit on the sale of property - (9.2)
---------- --------
Total exceptional items charged to operating
profit - 28.4
Share of profits of joint ventures:
Loss on disposal of joint venture - 1.5
Total exceptional items before taxation - 29.9
---------- --------
There were no exceptional items from continuing operations
during the year ended 31 December 2016. Exceptional items in 2015
were as follows:
- costs related to the consolidation of Coats' Mexican
operations from three site to two were $3.3 million. The gain on
disposal of the property in Mexico was $9.2 million thereby
generating an overall positive contribution of $5.9 million;
- with the sale of EMEA Crafts in 2015, Coats undertook a review
of elements of its cost base, including costs previously allocated
to that business, to establish the appropriate cost structure for a
smaller and less complex Group. Costs incurred on this overhead
reduction programme in the year ended 31 December 2015 were $14.1
million;
- US environmental costs were $13.2 million which included a
provision for the remedial work on the Lower Passaic River, New
Jersey, USA (see note 10 for further details);
- the Group provided for an additional $5.7 million in relation
to costs in connection with the UK Pensions Regulator ('tPR')
investigations;
- a loss on disposal of $1.5 million was recognised on the sale
of Coats' share in a Philippines joint venture; and
- other exceptional costs of $1.3 million related to the capital incentive plan.
Judgement is used by the Group in assessing the particular
items, which by virtue of their scale and nature, should be
presented in the income statement and disclosed in the related
notes as exceptional items. In determining whether an event or
transaction is exceptional, quantitative as well as qualitative
factors such as frequency or predictability of occurrence are
considered.
Acquisition related items
Acquisition related items are set out below:
2016 2015
Unaudited Audited
US$m US$m
---------------------------------------------- ---------- --------
Acquisition related items:
Administrative expenses:
Acquisition transaction costs 0.9 -
Contingent consideration linked to employment 2.4 -
Amortisation of acquired intangibles 1.3 -
Total acquisition related items before 4.6 -
taxation
========== ========
During the year ended 31 December 2016, the Group completed the
acquisitions of Gotex S.A. and Fast React Systems Limited (see note
12 for further details).
4. Investment income
2016 2015
Unaudited Audited
US$m US$m
------------------------------------------ ----------- ----------
Interest receivable on Parent Group cash
* 2.2 4.9
Other interest receivable and similar
income 1.6 4.9
Income from other investments 0.5 0.7
----------- ----------
4.3 10.5
=========== ==========
* Cash relating to the realisation of investments previously
held by Coats Group plc.
5. Finance costs
2016 2015
Unaudited Audited
US$m US$m
------------------------------------------------- ------------ ---------
Interest on bank and other borrowings 14.4 16.8
Net interest on pension scheme assets
and liabilities 13.6 17.1
Foreign exchange losses on Parent Group
cash * - 3.2
Other finance costs including unrealised
gains and losses on foreign exchange contracts 7.9 4.6
------------ ---------
35.9 41.7
============ =========
* Cash relating to the realisation of investments previously
held by Coats Group plc.
6. Taxation
2016 2015
Unaudited Audited
US$m US$m
UK taxation based on profit for
the year:
Corporation tax at 20% (2015: 20.25%) 5.3 5.5
Double taxation relief (5.3) (5.5)
----------- ---------
Total UK taxation - -
Overseas taxation:
Current taxation 59.5 57.6
Deferred taxation (9.8) (10.9)
----------- ---------
49.7 46.7
Prior year adjustments:
Current taxation 0.1 (5.0)
Deferred taxation (3.0) 2.0
------ ------
(2.9) (3.0)
----------- ---------
46.8 43.7
=========== =========
7. Earnings 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 ended 31
December 2016 of 1,386,628,130 (2015: 1,400,765,325), excluding
shares held by the Employee Benefit Trust but including shares
under the Deferred Annual Bonus Plan 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/(loss) per Ordinary Share from continuing and discontinued
operations is the same as that used for basic earnings per Ordinary
Share from continuing operations.
Diluted earnings per Ordinary Share are calculated using the
weighted average number of Ordinary Shares during the year ended 31
December 2016 of 1,407,148,372 which includes dilutive potential
ordinary shares. The Group has two classes of dilutive potential
Ordinary Shares: those share options granted to employees where the
exercise price is less than the average market price of the
Company's Ordinary Shares during the year 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.
For the year ended 31 December 2015 there was no difference
between basic and diluted earnings per share.
8. Issued share capital
There were no changes in issued share capital during the year
ended 31 December 2016.
Number of
Shares US$m
At 1 January 2016 and at 31 December
2016 1,407,612,282 127.0
-------------- -------
The own shares reserve of $10.5 million at 31 December 2016
(2015: $7.6 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 2016 was 25,746,861 (2015: 17,625,636).
9. Dividends
No dividends were paid during the year (2015: $nil).
The proposed final dividend of 0.84 cents per ordinary share for
the year ended 31 December 2016 is not recognised as a liability in
the consolidated financial information and, subject to shareholder
approval, will be paid on 30 May 2017 to shareholders on the
register at the close of business on 5 May 2017.
10. US environmental matters
As noted in previous reports, the US Environmental Protection
Agency ('EPA') has 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. Approximately 52 PRPs are currently members of
a cooperating parties group ('CPG') of companies, formed to fund
and conduct a remedial investigation and feasibility study of the
area. CC joined the CPG in 2011.
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
that are not currently funding the study of the river, including
those that are the most responsible for its contamination.
In April 2014, the EPA released a Focused Feasibility Study and
Proposed Plan (FFS) for the lower 8 miles of the LPR. The FFS
analyses a series of remedial alternatives.
In March 2015, CC and other companies submitted a petition to
EPA, asserting that they are de minimis parties and seeking a
meeting to commence settlement discussions.
In March 2016, EPA issued a Record of Decision selecting a
remedy for the lower 8 miles of the LPR pursuant to the FFS at an
estimated cost of $1.38 billion on a net present value basis. The
EPA's Record of Decision did not include a remedial decision for
the upper 9 miles of the LPR. The EPA may consider the CPG's
proposed remedial alternative for the upper 9 miles, or it may
select a different remedy. Discussions with EPA regarding the
nature and timing of such a decision are ongoing.
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 eight miles of the FFS. Maxus Energy
Corporation ('Maxus'), which provided an indemnity to OCC, filed
for bankruptcy protection in June 2016, but OCC is expected to pay
its share of the remedial costs even if Maxus obtains some degree
of protection in the bankruptcy proceeding, and objections have
been filed opposing such protection. While the ultimate costs of
the remedial design and the nal remedy are expected to be shared
among hundreds of parties, including many who are not currently in
the CPG, the allocation of remedial costs among those parties has
not yet been determined.
In 2015, a provision of $9.0 million was recorded for
remediation costs for the entire 17 miles of the LPR. This
provision was based on CC's estimate of its de minimis share of
costs for EPA's selected remedy for the lower 8 miles of the LPR
and the remedy proposed by the CPG for the upper 9 miles. A
separate provision of $6.8 million was recorded for associated
legal and professional costs in defence of CC's position. Both of
these charges to the income statement were net of insurance
reimbursements and were stated on a net present value basis. As at
31 December 2016, $3.4 million of this provision had been utilised.
The process concerning the LPR continues to evolve and these
estimates are subject to change based upon the scope of the remedy
selected by EPA, 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. The total charge to
the income statement, net of insurance reimbursements, for the year
ended 31 December 2016 was $nil (31 December 2015: $12.8
million).
Coats believes that CC's predecessor did not generate any of the
contaminants which are driving the current and anticipated remedial
actions in the LPR, that it has valid legal defences which are
based on its own analysis of the relevant facts, that it is a de
minimis party, and that additional parties not currently in the CPG
will be responsible for a signi cant share of the ultimate costs of
remediation. However, as this matter evolves, CC could record
additional provisions and such provisions could increase materially
based on further decisions by EPA, negotiations among the parties,
and other future events.
11. Notes to the consolidated cash flow statement
a) Reconciliation of operating profit to net cash inflow from operations
2016 2015 *
Unaudited Audited
US$m US$m
--------------------------------------------- ----------- ---------
Operating profit 153.3 111.5
Depreciation 31.9 34.5
Amortisation of intangible assets 8.8 9.0
Reorganisation costs (see note 3) - 17.4
Exceptional profit on sale of property
(see note 3) - (9.2)
Other operating exceptional and acquisition
related items (see note 3) 4.6 20.2
----------- ---------
Pre-exceptional operating profit before
depreciation and amortisation (EBITDA) 198.6 183.4
(Increase)/decrease in inventories (3.7) 4.3
Decrease/(increase) in debtors 5.9 (11.9)
Decrease in creditors (5.7) (11.0)
Provision movements (113.3) (47.5)
Foreign exchange and other non-cash
movements 2.5 3.2
Discontinued operations (4.9) (11.6)
----------- ---------
Net cash inflow from operations 79.4 108.9
=========== =========
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
b) Investment income
2016 2015
Unaudited Audited
US$m US$m
---------------------------------------- ----------- ---------
Interest and other income 3.0 8.2
Dividends received from joint ventures 1.0 1.8
4.0 10.0
=========== =========
c) Capital expenditure and financial investment
2016 2015 *
Unaudited Audited
US$m US$m
---------------------------------------------- ----------- ---------
Acquisition of property, plant and equipment
and intangible assets (40.1) (44.1)
Disposal of available-for-sale investments 0.3 0.1
Disposal of property, plant and equipment 1.1 12.9
Discontinued operations - (0.8)
----------- ---------
(38.7) (31.9)
=========== =========
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
d) Acquisitions and disposals
2016 2015 *
Unaudited Audited
US$m US$m
---------------------------------------- ----------- ---------
Acquisition of business (36.3) (5.5)
Investment in joint venture (0.4) -
Net receipt from sale of joint venture - 1.1
Discontinued operations (3.7) (21.7)
(40.4) (26.1)
=========== =========
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
e) Summary of net cash
2016 2015
Unaudited Audited
US$m US$m
---------------------------------------- ----------- ---------
Parent Group cash and cash equivalents
* 343.1 504.6
Other group cash and cash equivalents 133.4 145.3
----------- ---------
Total cash and cash equivalents 476.5 649.9
Bank overdrafts (6.2) (18.5)
----------- ---------
Net cash and cash equivalents 470.3 631.4
Other borrowings (392.1) (390.8)
Total net cash 78.2 240.6
=========== =========
* Cash relating to the realisation of investments previously
held by Coats Group plc.
12. Acquisitions
In June 2016, the Group acquired 100% of the voting equity of
Gotex S.A. ('Gotex'), a company based in Spain that designs,
manufactures and trades a range of innovative, high performance
industrial textiles to serve industries such as telecommunications
(fibre optic cables), energy and oil and gas. Gotex is a market
leader in coated fibreglass yarns with a proprietary technology
that enables manufacturing at significantly higher speeds than
conventional technology. This will complement Coats' aramid product
range and strengthen Coats' presence in fibre optics. Coats will
support Gotex in further expanding into high-growth markets by
leveraging Coats' geographic footprint, breadth of global customer
relationships and strong corporate brand.
The Group also acquired 100% of the voting equity of Fast React
Systems Limited ('Fast React'), a UK based provider of software
solutions and expertise to manufacturers and retailers in the
apparel and footwear industries to improve their operational
efficiency. The acquisition, which was completed in May 2016,
enables the Group to offer an even wider range of productivity
improvement tools to customers and follows the acquisition of GSD
in May 2015.
The consideration transferred net of cash and cash equivalents
acquired for Gotex and Fast React was $28.4 million and $7.1
million respectively.
In addition to the consideration paid there is a contingent
consideration payable up to EUR2.0 million ($2.2 million) for
Gotex. The consideration payable is determined by the revenue and
gross margin achieved in the year ended 31 December 2017. The
provision as at the date of acquisition of $1.1 million represented
the fair value of the estimated amount payable based on
expectations of performance.
Contingent deferred consideration amounts are also payable that
have been treated as remuneration. For these amounts to be paid, in
addition to financial targets being met, certain employees must
also remain with the Group. Amounts are therefore charged to the
income statement over the period of service they relate to. For
Gotex up to EUR2 million is payable covering the service period of
two years from acquisition. For Fast React up to GBP3 million is
payable dependent on the performance over a three year period to 31
March 2019 as well as continued service of certain employees. The
charge to the income statement for the year ended 31 December 2016
was $2.4 million (see note 3).
The provisional fair values of the identifiable assets and
liabilities of Gotex and Fast React as at the date of acquisition
were as follows:
Provisional Provisional
fair value fair value
recognised recognised
on on
acquisition acquisition
of of Provisional
Gotex Fast React Total
US$m US$m US$m
---------------------------------------- ------------- ------------- ------------
Assets
Intangible assets 15.5 4.5 20.0
Property, plant and equipment 0.9 0.1 1.0
Inventories 3.0 - 3.0
Trade and other receivables 4.4 4.0 8.4
Cash and cash equivalents 2.4 4.0 6.4
------------- ------------- ------------
26.2 12.6 38.8
Liabilities
Trade and other payables (3.3) (5.5) (8.8)
Deferred tax liabilities (4.0) (0.8) (4.8)
------------- ------------- ------------
Total identifiable net assets acquired
at fair value 18.9 6.3 25.2
Goodwill recognised on acquisition
(provisional) 13.0 4.8 17.8
------------- ------------- ------------
31.9 11.1 43.0
============= ============= ============
Purchase consideration paid 30.8 11.1 41.9
Contingent purchase consideration
estimated to be paid 1.1 - 1.1
------------- ------------- ------------
Total consideration 31.9 11.1 43.0
============= ============= ============
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 and accounting
policies are aligned with those of the Group where appropriate. Due
to their contractual dates, the fair value of receivables acquired
(shown above) approximate to the gross contractual amounts
receivable. The amount of gross contractual receivables not
expected to be recovered is immaterial. There are no material
contingent liabilities recognised in accordance with paragraph 23
of IFRS 3 (revised).
The fair value of identified net assets of Fast React include
customer related intangibles of $2.3 million, brands and trade
names of $0.9 million and technology related intangibles of $1.3
million. Goodwill arising from the acquisition has been
provisionally valued at $4.8 million.
The fair value of identified net assets of Gotex include
customer related intangibles of $3.8 million, brands and trade
names of $0.5 million and technology related intangibles of $11.2
million. Goodwill arising from the acquisition has been
provisionally valued at $13.0 million.
The goodwill arising from the acquisitions represents:
- the technical expertise of the acquired workforce;
- the opportunity to leverage this expertise across the Group;
and
- the ability to exploit the Group's existing customer base.
None of the goodwill arising on the acquisitions is expected to
be deductible for tax purposes.
From the date of acquisition, Gotex contributed $11.7 million to
revenues and $2.0 million to the profit before tax from continuing
operations of the Group. Fast React contributed $3.8 million to
revenues and $0.5 million to the profit before tax from continuing
operations of the Group.
If the acquisitions had taken place at the beginning of the
year, it is estimated that revenue from continuing operations for
the year ended 31 December 2016 would have been $19.1 million for
Gotex and $6.3 million for Fast React and the profit after tax from
continuing operations for the year ended 31 December 2016 would
have been $2.8 million for Gotex and $0.8 million for Fast React,
based on unaudited management accounts.
Transaction costs relating to the acquisitions of Gotex and Fast
React totalling $0.9 million have been expensed and are included in
administrative expenses in the consolidated income statement (see
note 3). Transaction costs paid in the year ended 31 December 2016
were $0.8 million and are included in cash flows absorbed in
investing activities in the consolidated cash flow statement.
13. Discontinued operations
Following on from the disposal of the EMEA Crafts business in
2015, Coats closed its loss-making UK Crafts operations with the
business ceasing operations during the second half of 2016. The
results of the UK Crafts business have been reported as a
discontinued operation and prior year amounts in the consolidated
income statement have been reclassified to discontinued
operations.
The results of discontinued operations are presented below. All
amounts for the year ended 31 December 2016 relate to the UK Crafts
business and amounts for the year ended 31 December 2015 relate to
the EMEA Crafts and UK Crafts businesses unless stated.
2016 2015
Unaudited Audited
US$m US$m
----------------------------------------- ----------- ---------
Revenue 8.8 64.9
Cost of sales (6.7) (32.6)
----------- ---------
Gross profit 2.1 32.3
Distribution costs (3.8) (31.6)
Administrative expenses (2.8) (13.7)
----------- ---------
Operating loss (4.5) (13.0)
Investment income - 0.1
Finance costs - (0.3)
----------- ---------
Loss before taxation (4.5) (13.2)
Tax on loss - -
----------- ---------
Loss for the year (4.5) (13.2)
Loss on disposal - (55.8)
Exchange loss transferred to profit
or loss on disposal - (7.5)
Exchange gain transferred to profit
or loss on sale of legacy investment - 0.5
----------- ---------
Total loss from discontinued operations (4.5) (76.0)
----------- ---------
The UK Crafts results for the year ended 31 December 2016
include exceptional closure related costs of $1.2 million included
in administrative expenses. Included in discontinued results above
for the year ended 31 December 2015 are revenue and operating loss
of $17.1 million and $0.5 million respectively for the UK Crafts
business.
The loss per ordinary share from discontinued operations is as
follows:
2016 2015
Unaudited Audited
Cents Cents
------------------------------------------- ----------- ---------
Loss per ordinary share from discontinued
operations:
Basic and diluted (0.32) (5.42)
The table below sets out the cash flows from discontinued
operations:
2016 2015
Unaudited Audited
US$m US$m
--------------------------------------------- ----------- ---------
Net cash outflow from operating activities (4.9) (11.6)
Net cash outflow from investing activities (3.7) (22.5)
Net cash flows from discontinued operations (8.6) (34.1)
=========== =========
14. Alternative performance measures
Alternative performance measures included in this preliminary
announcement are non-GAAP (Generally Accepted Accounting Practice)
measures and provide supplementary information to assist with the
understanding of the Group's financial results and with the
evaluation of operating performance for all the periods presented.
Non-GAAP amounts, however, are not a measure of financial
performance under IFRS and should not be considered as a substitute
for measures determined in accordance with GAAP. A reconciliation
of non-GAAP financial measures to the most directly comparable GAAP
financial measures is included below. The non-GAAP measures set out
below are key performance indicators (KPIs) and have been chosen by
the Board to measure the Group's progress, development and ongoing
performance.
a) Organic growth
Organic growth measures the change in revenue and operating
profit(1) after adjusting for acquisitions. The effect of
acquisitions is equalised by:
-- removing from the year of acquisition, their revenue and operating profit(1) ; and
-- in the following year, removing the revenue and operating
profit(1) for the number of months equivalent to the
pre-acquisition period in the prior year.
The effects of currency changes are removed through restating
prior year revenue and operating profit(1) at current year exchange
rates.
2016 2015 *
Unaudited Audited
US$m US$m % Growth
-------------------------------------- ------------ --------- ---------
Revenue from continuing operations 1,457.3 1,472.5 (1%)
Constant currency adjustment - (40.3)
------------ --------- ---------
Revenue at constant currency 1,457.3 1,432.2 2%
Revenue from acquisitions (16.4) -
------------ --------- ---------
Organic revenue at constant currency 1,440.9 1,432.2 1%
============ ========= =========
2016 2015 *
Unaudited Audited
US$m US$m % Growth
--------------------------------------- ------------ --------- ---------
Operating profit 153.3 111.5 38%
Exceptional and acquisition related
items (note 3) 4.6 28.4
------------ --------- ---------
Adjusted operating profit from
continuing operations(1) 157.9 139.9 13%
Constant currency adjustment - (3.8)
------------ --------- ---------
Operating profit at constant
currency(1) 157.9 136.1 16%
Operating profit from acquisitions(1) (2.8) -
------------ --------- ---------
Organic operating profit at constant
currency(1) 155.1 136.1 14%
============ ========= =========
(1) Before exceptional and acquisition related items
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
b) Adjusted earnings per share
The calculation of adjusted earnings per share is based on the
profit from continuing operations attributable to equity
shareholders before exceptional and acquisition related items and
foreign exchange gains and losses arising on cash relating to the
realisation of investments previously held by Coats Group plc as
set out below.
2016 2015 *
Unaudited Audited
US$m US$m
------------------------------------------------ ------------ ---------
Profit from continuing operations 75.7 36.6
Non-controlling interests (11.9) (11.2)
------------ ---------
Profit from continuing operations attributable
to equity shareholders 63.8 25.4
Exceptional and acquisition relates items
(note 3) 4.6 29.9
Foreign exchange losses on Parent Group
cash ** - 3.2
Tax credit in respect of exceptional and
acquisition related items (0.4) (2.5)
------------ ---------
Adjusted profit from continuing operations 68.0 56.0
------------ ---------
Weighted average number of Ordinary Shares 1,386,628,130 1,400,765,235
Adjusted earnings per share (cents) 4.91 4.00
===== =====
Adjusted earnings per share (growth %) 23%
=====
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
** Cash relating to the realisation of investments previously
held by Coats Group plc.
The weighted average number of Ordinary Shares used for the
calculation of adjusted earnings per share for the year ended 31
December 2016 is 1,386,628,130 (2015: 1,400,765,325), the same as
that used for basic earnings per Ordinary Share from continuing
operations (see note 7).
c) Adjusted free cash flow
Net cash generated by operating activities, a GAAP measure,
reconciles to changes in net cash resulting from cash flows (free
cash flow) as set out in the consolidated cash flow statement. A
reconciliation of free cash flow to adjusted free cash flow is set
out below:
2016 2015 *
Unaudited Audited
US$m US$m
------------------------------------------------ ----------- ---------
Change in net cash resulting from cash
flows (free cash flow) (83.7) (21.4)
Acquisition of business (note 12) 36.3 5.5
Net cash flows from discontinued operations
(note 13) 8.6 34.1
Net cash outflow in respect of reorganisation
costs 8.0 10.4
Net cash inflow from property disposals - (9.9)
UK Pensions Regulator ('tPR') investigation
costs 3.7 8.9
Payments to UK pension schemes 99.1 33.8
Net cash flows in respect of other exceptional
items 4.2 1.3
Purchase of own shares by Employee Benefit
Trust 2.9 7.6
Receipts from exercise of share options (0.2) -
Tax (inflow)/outflow in respect of adjusted
cash flow items (0.8) 0.7
----------- ---------
Adjusted free cash flow 78.1 71.0
=========== =========
* Restated to reflect the results of the UK Crafts business as a
discontinued operation (see note 1).
d) Return on capital employed
Return on capital employed ('ROCE') is defined as operating
profit before exceptional and acquisition related items divided by
period end capital employed as set out below:
2016 2015
Unaudited Audited
US$m US$m
------------------------------------- ----------- ---------
Operating profit before exceptional
and acquisition related items 157.9 139.9
----------- ---------
Non-current assets
Property, plant and equipment 265.9 273.0
Trade and other receivables 16.1 16.4
Current assets
Inventories 205.8 204.0
Trade and other receivables 248.4 261.9
Current liabilities
Trade and other payables (310.8) (320.7)
Non-current liabilities
Trade and other payables (15.8) (12.4)
----------- ---------
Capital employed 409.6 422.2
----------- ---------
ROCE 39% 33%
=========== =========
15. Post balance sheet event
On 22 January 2017, the main distribution centre for the US
Crafts business in Albany, Georgia suffered significant damage
following a tornado strike, including one building which housed
sourced products for yarns, threads and crafting implements. The
decision had been taken to close the centre at the time and there
were no injuries to Coats' personnel. Although buildings in the
centre are leased, our initial estimate is that the tornado has
damaged a significant proportion of the stock as well as causing
disruption to our logistics activities. Given the extent of the
damage temporary alternative premises have been found but
operations are not expected to be fully back to normal until later
in Q2.
The Group's insurance policies are expected to be sufficient to
cover both the loss of inventory and physical assets. Although
sales will be adversely impacted in the first half, lost profits as
well as the incremental costs of re-establishing operations are
included in the Group's business interruption insurance cover.
16. Directors
The following persons were, except where noted, directors of
Coats Group plc during the whole of the year ended 31 December 2016
and up to the date of this report:
M Clasper CBE
M N Allen
R Anderson
S Boddie (Appointed 4 July 2016)
N Bull
P Forman (Resigned 31 December 2016)
D Gosnell
R Howes (Resigned 6 April 2016)
F Philip (Appointed 1 October 2016)
A Rosling CBE
R Sharma
On behalf of the Board
M. Clasper
Chairman
24 February 2017
United Kingdom
------------------------------------------- -------------
1 The Square, Stockley Park, Uxbridge, Tel: 020 210
UB11 1TD 5000
Registered in England No. 103548
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DMGZZGFRGNZZ
(END) Dow Jones Newswires
February 24, 2017 02:01 ET (07:01 GMT)
Coats (LSE:COA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Coats (LSE:COA)
Historical Stock Chart
From Apr 2023 to Apr 2024
