Coats Group Annual Report 2020

FY2020 Annual Report · Coats Group
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COATS GROUP PLC
ANNUAL REPORT 2020

Connecting 
talent, textiles 
and technology
to make a better and more 
sustainable world

 
 
 
 
 
CONNECTING TALENT, TEXTILES AND TECHNOLOGY

OUR PURPOSE IS TO CONNECT TALENT, TEXTILES AND 
TECHNOLOGY TO MAKE A BETTER AND MORE 
SUSTAINABLE WORLD

Coats is the world’s leading industrial thread company. Coats’ pioneering history and innovative 
culture ensure the Company leads the way around the world. We provide complementary and 
value-adding products, services and software solutions to the Apparel & Footwear (A&F)
industries. We apply innovative techniques to develop high technology Performance Materials 
(PM) threads, yarns and fabrics in areas such as Transportation, Telecoms and Energy, and 
Personal Protection.

A key part of our Company purpose is to make a better and more sustainable world.

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.

We are achieving this by focusing on three key areas:

•  Talent – our people are our greatest asset and we continue to invest in their development to 

enhance their specialised skills and acquire new ones through our ever-growing digital learning 
platform and peer-to-peer sessions led by internal experts

•  Textiles – we develop innovative textile solutions to enhance people’s lives, touching 

everything from sewing thread to fibre optic cables

•  Technology – we embrace new, emerging and disruptive technologies to penetrate markets 
with new and improved textile applications and material solutions that are more sustainable 
and functional

Find out more online:

  For a more visually engaging way to read about our progress in the year see our online ‘Year 

in Review’ at coats.com/ar2020

  A full copy of this Annual Report can also be downloaded from coats.com/investors

  Throughout this document you will see references to where supporting information can also 

be found online at coats.com

Sustainability Report:

  To read our Sustainability Report, and for more on our policies, their impact and our 

approach to ‘Pioneering a sustainable future’, go to coats.com/sustainability

CONTENTS

Strategic report 
1 

 2020 full year results 
and highlights 
Coats at a glance
Chairman’s statement

2 
4 
6  Market trends
8 
10 
12 

Business model
 Investment case
 Group Chief Executive’s 
statement

14  Our strategic goals
15  Key performance indicators
17  Stakeholder engagement
23  Working responsibly
34  Principal risks and uncertainties
45  Operating review
48  Financial review

Corporate Governance
52  Chairman’s introduction 
56  Board of Directors
59  Corporate Governance Report
 Audit and Risk Committee 
66 
Report 

71  Nomination Committee Report 
74  Directors’ Report
78 

 Directors’ responsibilities 
statement
 Remuneration Committee 
Report

79 

Independent Auditor’s Report

Financial statements
96 
108  Primary financial statements
114   Notes to the financial 

statements

180  Company financial statements
183   Notes to Company financial 

statements

Other information
185  Group structure
195  Five-year summary
196  Shareholder information

Strategic reportCorporate governanceFinancial statementsOther information2020 FULL YEAR RESULTS 
AND HIGHLIGHTS

Continuing operations: 
Revenue ($m)

Financial performance

Continuing operations3

2020 

2019 

Change

 CER 
change1

 Organic
 change1

Revenue

Adjusted1

$1,163m

$1,389m

(16)%

(14)%

(19)%*

     Operating profit

$111m

$198m

(44)%

(43)%

(43)%*

     Basic earnings per share

     Free cash flow 

     Net debt (excl. IFRS 16)

2.4c

$28m*

$181m

7.0c

$107m

$150m

Reported2,3 

Operating profit

$103m

$191m

(46)%

(45)%

(44)%

Basic earnings per share

1.8c

6.7c

Net cash generated by operating 
activities

Final dividend per share

$66m

1.30c

$144m

nil

Highlights
•  Improving sales momentum with Group organic sales exit rate down 5% for November 

and December (versus down 26% H1 2020 and down 15% four months to October 2020), 
following the impact of Covid earlier in the year.

•  Continued share gains in Apparel & Footwear and customer wins in Performance Materials 

as customers’ priorities pivot to reliability, speed and flexibility during Covid.

•  Continued Innovation focus despite Covid disruption; 22 new products launched in the year, 
generating $13 million of incremental revenue, and with a rich pipeline of opportunities.

•  Adjusted operating profit of $111 million, ahead of previous expectations, with solid recovery 

in H2; ability to significantly flex cost base leading to resilient margins of 12.2% in H2 
(6.4% H1).

•  Further advancement on Sustainability agenda; increased demand for EcoVerde product range 
with revenues up 6x year-on-year; signed up to Science Based Targets initiative, specifically 
to achieving net-zero emissions by 2050.

•  Net debt (excl. IFRS 16) of $181 million, 1.2x leverage4; committed facility headroom of 

$330 million.

•  Proposed final dividend of 1.30 cents per share as a result of the strength of the balance  

sheet, the encouraging recovery, and the Board’s confidence in the strategy and outlook for 
the Group.

2020

2019

2018

1,163

1,389

1,415

 Adjusted operating profit ($m)

2020

2019

2018

Operating profit ($m)

2020

2019

2018

111

198

195

103

191

147

Key Performance Indicators
We have indicated with * those 
measures we consider KPIs. See 
pages 15–16 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 37. Constant exchange rate (CER) 
figures are 2019 results restated at 2020 exchange 
rates. Organic figures are results on a CER basis and 
excluding contributions from bolt-on acquisitions 
(Pharr HP and ThreadSol). 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. All figures on a continuing basis, unless otherwise 

stated. 

4. 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 37  
on pages 176–179.

Coats Group plc Annual Report and Accounts 2020

1

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
COATS AT A GLANCE

COATS IS THE WORLD’S LEADING INDUSTRIAL THREAD 
COMPANY. HEADQUARTERED IN THE UK, WE OPERATE 
GLOBALLY AND IN 2020 GENERATED REVENUES OF $1.2BN 

What we do

$1.2bn Group revenues

9.5% operating margins

1.2x leverage 

We deliver innovative and value add product and service 
solutions for our c.40,000 global customers to meet the design 
specifications they require. 

Our products are a small but critical component in international 
global industries such as Apparel & Footwear, Telecoms and 
Energy, Personal Protection and Automotive industries. 

Sustainability is at the heart of our core business values.  
We look to do business at all times in an ethical manner, 
respectful of our environment, and delivering peace of mind 
for our customers. Each year we aim to produce more from 
less of the planet’s resources.

2020
Revenue
$1.163m

71% Apparel & Footwear
29% Performance Materials

2020
Revenue
by Region
$1.163m

Whilst our industry was significantly impacted by Covid during 
2020 we were able to use our flexible business model to maintain 
robust financial performance. 

27% Americas
54% Asia
19% EMEA

Where we 
operate 

100

Sales in around countries

c.40,000

Customers globally

250

Years of textiles experience

How we operate:  
Our Sustainability 
Strategy 

Headquartered in the UK and 
quoted on the London Stock 
Exchange, we have a global 
sales presence and digital 
platforms to enable us to serve 
customers wherever they are 
located. Our unrivalled global 
reach and footprint serve as one 
of our competitive advantages. 

HQ

HQ

Innovation Hub

Innovation Hub

Manufacturing Site

Manufacturing Site

Presence

Presence

We launched our strategy in 2019 with challenging targets 
for 2022 and 2024. We have continued to make good progress 
towards these goals notwithstanding the considerable disruption 
caused by Covid, but not all the actions that we planned for 
2020 were achievable in the circumstances. This was especially 
the case with our Social targets (for details go to coats.com/
sustainability).

While this means that we have more to achieve in the time 
remaining to deliver on our targets, we are holding to our 
commitments and not extending the strategy horizon or 
reducing our ambition. Action plans have been revised 
to accelerate progress in 2021.

Our strategy ‘Pioneering a 
sustainable future’ focuses  
on five priority areas:

WATER

ENERGY

EFFLUENT & EMISSIONS

SOCIAL

LIVING SUSTAINABLY

2

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationAPPAREL & FOOTWEAR

2020 revenue: $823m

2020 operating profit: 
$96m

(11.6% margin)

We are the trusted value-adding partner, providing critical supply 
chain components and services to the $1.8tn (pre-Covid) global 
Apparel & Footwear industry. Our portfolio of world class 
products and services exist to serve the needs and requirements 
of our customers and brand owners. 

Our industry was significantly impacted by Covid during 2020, 
as large-scale lockdown activities impacted a number of our end 
customers. Local lockdown activities also impacted our supply 
chain, and our own operations, particularly during Q2.

Main customer markets

We ultimately supply products 
and services to premium 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 & Footwear manufacturers
4,000
Retailers & brands

Product type

End uses

Key Coats brands

Apparel & Footwear and 
accessories threads
(c.85% of A&F sales)

Sport / athleisure, denim, ladieswear, menswear, 
children’s wear, leather wear, workwear, footwear, 
and intimates and underwear

Epic, Dual Duty, Seamsoft, Nylbond, Gral, Gramax, 
Astra, Sylko, Knit and EcoVerde

Zips, trims and crafting
(c.14% of sales)

Zips, interlinings, reflective tapes, and crafting 
products (Latin America)

Opti, Signal and Connect

Software solutions
(c.1% of sales)

Enabling supply chain productivity gains, increasing 
speed of supply and facilitating compliance

Coats Digital – including FastReactPlan, VisionPLM, 
GSDCost, Intellocut and Intellobuy

PERFORMANCE MATERIALS

2020 revenue: $341m

2020 operating profit: 
$15m

(4.4% margin)

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 Apparel 
& Footwear thread expertise, which has been built up over 250 
years, we are able to provide highly engineered solutions to meet 
our customers’ needs by incorporating specific design features 
into various thread and yarn-based products. 

Covid caused disruption during 2020 to a number of our end use 
markets, although due to diverse customer / end-use, business 
was not impacted quite as severely as Apparel & Footwear.

Main customer markets

These include highly engineered 
applications for the Telecoms and 
Energy sector, Personal Protection 
clothing and solutions for the 
Transportation sector.

c.7,000
PM customers

End-use sector

End uses

Key Coats brands

Telecoms and Energy
(c.15% of PM sales)

Personal Protection
(c.40% of sales) 

Transportation
(c.10% of sales) 

Protective layers for cables / steel replacement 
composites 

Gotex, Ultrabloc, Aptan XU, Gral Binder, Protos 
Ripcord and Dabond Ultrabloc

Combining comfort, safety and protection – fire 
retardant and cut resistant threads and yarns

High performance threads and yarns for various 
parts of the automotive industry 

Firefly, Flamepro and Armoren

Neophil, Synergex, Lattice and Webflex

Household and Recreation
(c.20% of sales) 

Everyday consumer applications, including 
bedding, quilting and outdoors

Gral Quilt, Protos Fil, Epic, Gramax and Admiral

Other Industrial Applications
(c.15% of sales)

Various technical applications for light / strong / 
flexible / innovative threads

Astra FH, Stricose, Admiral FH, Prolene, Gral 
and Helios

Coats Group plc Annual Report and Accounts 2020

3

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCHAIRMAN’S STATEMENT

‘WE CONNECT TALENT, TEXTILES AND 
TECHNOLOGY TO MAKE A BETTER 
AND MORE SUSTAINABLE WORLD. 

WE ENTER 2021 WITH RENEWED 
RESILIENCE AND FORTITUDE 
AS WE COME OUT OF THIS 
EXTRAORDINARY YEAR.’ 

Dear Shareholder,
Our business has been operating continuously for over 250 years 
including through two world wars, but this year has been one of 
the most testing times in our history. Despite the great challenges 
of 2020, we have been guided by our values and core priorities and 
we have made real progress. The Coats workforce has shown great 
resilience and rallied together in this crisis and we have delivered 
beyond all expectations. The manner in which our colleagues have 
been galvanised to act with pace and determination has ensured 
that we emerge stronger and I pay testament to the hard work 
and adaptability of all our employees across the entire Coats family.

Purposeful business 
Our people have demonstrated exceptional agility in keeping the 
supply chain going and meeting our customer needs. In this time 
of crisis, we have managed to stay on the front foot, introducing 
new products, gaining market share, and bringing in new 
customers. We are now coming back stronger and more 
competitive, refocusing our activities to meet the needs of our 
current and future customers. Never has our purpose – Connecting 
Talent, Textiles and Technology to Make a Better and More 
Sustainable World – seemed so relevant. The lens is now firmly 
focused on purposeful business, and customers and wider society 
are now demanding more transparency on responsible business 
practices. Since the establishment of Coats, ethical behaviour has 
been core to everything we have done – from offering free 
schooling to the workers at our first factory in Paisley, to most 
recently going out into the community in India to help deal with 
the health crisis – ethical and sustainable business practice has 
been in our DNA and our culture right from the start.

Performance 
Coats has a long heritage which has relied on its ability to  
respond and evolve with the times, adopting key technologies.  
We have a strong leadership team who have been the drivers in 
ensuring that the business is ready for the digital age. We were able 
to pivot so swiftly to the new ways of working since we had already 
implemented digitisation as a strategic priority for the business. In 
an industry which is traditionally behind the game on digital tools, 
we had already taken a big step forward. This digital preparedness 

was coupled with the robust risk management practices we had  
in place. Our business continuity planning exercises prepared us for 
potential disruption in the supply chain and were put to good use 
at the start of the crisis when we executed our contingency plans. 
Another truly outstanding aspect of our performance has been  
cash management, a testament to Coats’ agility, perseverance  
and digital approaches. 

In my final year as Chairman of the business, I have been both 
proud and saddened. I am very proud of our health and safety 
agenda as an industrial company, and there is no doubt in my mind 
that the impacts in this area have ensured that the business could 
respond immediately to the challenges it faced as the pandemic hit. 
The speed at which we implemented industry-leading health and 
safety responses is down to the fact that health and safety has 
always been at the top of our agenda. We moved quickly, adopting 
best practice, deploying these methods across our global sites. The 
speed of collaboration, and our trust in each other, meant that best 
practice was passed from China and Vietnam to all our sites in Asia 
and then to all our clusters simultaneously. We applied meticulous 
discipline to ensure that our employees remained safe within our 
factory gates and introduced cutting-edge safety tools, such as 
the roll out of our artificial intelligence enabled health and safety 
cameras. As the pandemic worsened, we went outside the factory 
gates and took these best practices and resource investment to help 
families in the communities in which we operate. However, despite 
all our best efforts, we have lost colleagues to the virus, and our 
thoughts and prayers have been with them and their families.

The Board
It has been a privilege to serve Coats as Chairman. When I arrived 
in 2014, I set out with a real desire to have a Board from multiple 
industries and geographies, that had multiple experiences, as  
well as gender and ethnic diversity. There is now real diversity in 
every respect on the Coats Board and I think it has made for better 
decision making and I am really proud of that. I firmly believe that 
different perspectives and different experiences ensure that wiser 
decisions are made when applying judgements in complex situations. 
I am therefore very pleased to welcome our first female Executive 
Director, Jackie Callaway, our new Chief Financial Officer Designate, 
to the Board. Simon Boddie has served as Chief Financial Officer 
since 2016 and will retire from the Company and the Board with 
effect from 31 March 2021, at which point Jackie will become  
Chief Financial Officer. Jackie brings rich and diverse experience 
to the Board and I warmly welcome her to Coats. I would like to  
pay tribute to Simon for his significant contribution since joining the 
Board as an Executive Director. The Board and the wider organisation 
have benefited greatly from his extensive knowledge and experience 
and his presence will be greatly missed.

4

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationDividend
The Board is mindful of the importance of income to shareholders 
and as a result of the strength of the Group’s balance sheet, the 
encouraging recovery out of the Covid pandemic, and its confidence 
in the strategy and outlook for the Group, is pleased to propose 
a final dividend of 1.30 cents per share (2019 final dividend: nil). 
Subject to approval at the forthcoming AGM, the final dividend 
will be paid on 25 May 2021 to ordinary shareholders on the 
register at 30 April 2021, with an ex-dividend date of 29 April 2021.

Going forward, the Board will continue to aim to use the free 
cash flow the Group generates to fund its pension schemes, 
self-finance bolt-on acquisitions, and make returns to shareholders. 
As underlying earnings and cash flows continue to recover from 
the impact of Covid, the Board intends to return to its previously 
published progressive dividend policy.

Looking ahead
I would like to take this opportunity to thank my fellow Board 
members for being continuously engaged throughout this crisis. 
I remain immensely grateful to the leadership team for their 
stalwart performance during this time and, above all, I thank  
all my colleagues across the business who have been resolute  
during one of the toughest years in our history. Thank you for 
your commitment, your hard work and determination to succeed, 
these strengths have been and will continue to be instrumental 
to our success. 

Mike Clasper
Chairman

3 March 2021

‘COATS HAS A LONG HERITAGE 
WHICH HAS RELIED ON ITS 
ABILITY TO RESPOND AND 
EVOLVE WITH THE TIMES, 
ADOPTING KEY TECHNOLOGIES.’

The company I joined was a jewel hidden within an investment 
group. In my time at Coats, it has risen to join the FTSE 250 once 
again, is listed on the FTSE4Good and is a participant in the  
UN Global Compact. The pension litigation resolution removed 
uncertainty in the minds of our investors and allowed the Company 
to consider bolt-on acquisitions to accelerate growth. Our Apparel 
& Footwear business is flourishing and the Performance Materials 
business has been expanded and developed, with the acquisition 
of Gotex, Pharr and Patrick Yarns. Together with our innovation 
programmes, there is huge potential for growth and exciting 
times lie ahead for Coats.

I will miss the Coats family, the openness with which myself and 
the rest of the Board have been invited to the annual conferences, 
where I engaged with both senior leaders and young talent coming 
up through the Company, with almost every nationality and ethnic 
group represented. In my day-to-day role, I have enjoyed visiting 
our many sites across the world, from Bursa, Turkey, to Ho Chi 
Minh City, to our plant outside Jakarta, and Sevier in North Carolina, 
to name just a few. In each Coats site, I see the same place –  
the same culture, the same respect for rigorous health and safety 
approaches, the same attitude to customers, to people 
development and to diversity.

Chairman succession
I am delighted with my replacement, David Gosnell, who has 
served on the Coats Board for five years as an Independent 
Non-Executive Director. I have worked with David very closely over 
the last five years and he has been a great support to both me and 
the business throughout this time. I am confident that he has the 
right combination of experience and talent to lead the Board going 
forward. I hand over the mantle, secure in the knowledge that we 
have a strong leadership team performing at a very high level. I am 
certain that alongside our Chief Executive Officer, Rajiv Sharma, 
David will leverage the fact that we have a platform from which 
we can build back stronger, and there has already been signs of 
this in the last few months.

Coats Group plc Annual Report and Accounts 2020

5

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationMARKET TRENDS

What markets do we serve?

Apparel & Footwear (A&F)
Coats is the global market leader in supplying premium thread  
to the A&F industries, and is estimated to be over twice the size  
of the nearest thread competitor. The global thread market is 
estimated to be c.$4bn (pre-Covid) and whilst thread represents 
only 1-2% of the cost of a typical garment, it is a critical component 
in the performance and efficiency of the production process. We 
are one of the few global players of a key supply chain component 
in the $1.5tn global apparel and c.$350bn footwear industries 
which are projected to grow at low single digits in the medium 
term. Whilst Covid had a significant impact on the industry in 2020, 
we expect growth rates to normalise to previous levels medium 
term. We also provide software solutions to customers which help 
drive speed, productivity, efficiency, and savings in their operations.

Performance Materials (PM)
We are global experts in the design and supply of highly 
engineered, high performance technical threads, yarns and 
composites used in a range of industries including personal 
protection, transportation, household and recreation, telecoms and 
energy, and other industrial end-uses. We estimate the addressable 
market (i.e. into which we currently or could realistically serve near 
term) is c.$2.9bn (pre-Covid), of which c.$2.3bn relates to highly-
engineered end uses (e.g. personal protection, telecoms and energy, 
and transportation), and hence we estimate we have a market share 
of around 10%. We anticipate upper single digit medium-term 
organic percentage growth (post-Covid), with growth weighted 
towards higher technology end uses.

Trends that are impacting our businesses:

1. Covid
The onset of Covid during 2020 had a significant impact on our 
industry. During Q2 almost half our manufacturing footprint was 
subject to enforced mandatory government closures, alongside 
significant demand disruption to our customers. Our industries had 
to pivot quickly to respond with a heightened focus on speed and 
reliability alongside an ongoing focus on quality, innovation, 
responsibility and compliance. As a business we are in the process  
of identifying and adapting to any potential lasting structural effects 
on our industry, but as the largest, most adaptable and advanced 
player we are well positioned to respond to these potential changes 
and to be a net beneficiary.

Trend #1: Our response in the year 
We quickly pivoted to focus on four key priorities: the health  
and safety of our employees, cash management, customer 
support and maintaining critical elements of our supply chain.  
We procured PPE for our global facilities, implemented protocols 
ensuring social distancing, enhanced hygiene and sanitation, 
invested in new touchless technology and enhanced medical  
care for affected individuals.

2. Speed to market
Changes in our industry mean speed to market is increasingly 
important, with dramatically reduced times between the catwalk 
and the high street. Consumers now demand more than just the 
traditional two season cycle, which has put tremendous pressure 
on the full garment supply chain. Not only do all participants need 
to act faster to respond to shorter lead times, they need to act 
smarter, focusing on productivity, whilst doing this in a way that 
does not compromise quality or compliance. Our unrivalled global 
footprint means we are uniquely placed, across the entire 
component supply chain, to manufacture and distribute consistently 
high-quality products to service retailers’ multi-location sourcing 
strategies. We also have industry-leading digital tools such as our 
web-based service Coats Colour Express, the fastest thread 
sampling service in the world. As detailed above, the impact of 
Covid during the year has further amplified the need for reliable  
and quick supply in our industry.

Trend #2: Our response in the year 
Despite the Covid crisis, our global scale and flexibility allowed us 
to pivot our operations and to quickly and reliably deliver products 
and services to customers where they needed them.

3. Innovative uses of threads, yarns and fabrics
Consumers are demanding more innovative products in every 
area of their lives and so new thread-based application end uses 
continue to be identified. As a global market leader, we are at 
the forefront of innovating smart thread and yarns to enhance the 
functionality or performance of products in multiple end markets. 
This is a core competency in Performance Materials where we have 
developed and grown sales in many new products such as flame 
retardant threads used in protective wear, water swellable yarns 
that protect fibre optic cables, and composites that deliver high 
performance, lightweight solutions in industries such as oil and 
gas (e.g. deep water pipes) and automotive. In A&F, we continue 
to partner closely with global brands to support their ambitious 
innovation agendas. We listen to their requirements and work 
with them to develop solutions. 

Trend #3: Our response in the year 
We have three Innovation Hubs around the world which reduce 
innovation lead times for customers. Our innovation ecosystem 
gives us dedicated capacity to develop new product solutions as 
well as products in collaboration with customers. Despite Covid, 
the pace of innovation has not wavered and we launched 22 new 
products this year, delivering incremental sales of $13m. We also 
saw continued increased commercial interest from the automotive 
industry in our innovative carbon composite solution – this 
provides a lightweight, low waste, steel replacement solution.  
We now have our first commercial orders with this product  
and are looking to drive further scale.

6

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information6. Increasing adoption of digital services
Digital solutions and services play an ever-increasing role in  
everyday life and this is replicated in our industry. We have been  
at the forefront of digital innovation by component suppliers to the 
global garment industry for several years now. We have a market-
leading online proposition and apply digital technology and services 
proactively to benefit both our internal operations and as a service 
offering for our customers. Our Coats Colour Express service is the 
fastest thread sampling service in the world and Opti Express is  
a revolutionary zip sampling service. Our Online Business teams 
provide high levels of service and technical support to customers,  
as well as enabling customers to place, monitor and pay for their 
orders using our market-leading eCommerce platform. 

Trend #6: Our response in the year 
In 2020 we launched Coats Fast Start, a digitally enabled initiative 
which supports manufacturers switching parts of their production 
facilities and supply chains to PPE production. We also launched  
a strategic collaboration with Res.Q and Serai, providing access  
to a range of interconnected digital solutions over a single digital 
platform, reducing inefficiencies by connecting multiple 
standalone systems. This drives real-time data and end-to-end 
transparency across the supply chain, increasing efficiency, and 
reducing cost and the need for face-to-face contact. Our 
customer-facing eCommerce platform saw adoption reach 85% 
(proportion of thread orders) This allows us to engage with our 
customers online to deliver speed, convenience, transparency and 
efficiency. Our foundation in the digital space was a significant 
differentiator in our offering during 2020 when Covid forced 
many interactions to be performed virtually.

For more information about our market environment refer to 
coats.com/investors

4. Operating sustainably, increasing standards
The global A&F market is under increased pressure to be more 
sustainable, which requires improvements from their supply 
chains. We continue to maintain our leadership position as a 
major component supplier by pursuing ambitious targets related 
to Environmental, Social and Governance (ESG) issues. Industry 
momentum has been relatively unaffected by Covid as supply 
chain compliance and reliability remain critical. As a result, a 
growing share of stakeholders are demanding more sustainable 
products and becoming increasingly focused on operating in a 
compliant and ethical way. Entire supply chains are under pressure 
not just to conform to local requirements but also to higher 
international standards.

Increasingly, ESG standards are being used by investors as a critical 
part of their assessment criteria. These challenges present a need  
to drive change at scale and also an opportunity for long-term value 
creation. This goes to the heart of Coats’ values and standards. Our 
sustainability programme gives us competitive advantage and helps 
us build our reputation and our relationships with key stakeholders. 
Specifically regarding climate change, we treat this as a principal risk 
which means it is considered at Board level and we developed our 
mitigation approach during 2020. For details refer to coats.com/
sustainability, and pages 28–33 in this report.

Trend #4: Our response in the year 
Our 100% recycled thread, EcoVerde, saw significant traction, 
especially with brands aligned to our ambitious sustainability 
targets. Our sales of recycled thread increased 6x year-on-year, 
despite Covid headwinds.

5. Growth of the urban middle class in Asia 
Globally, the A&F thread market is expected to grow by low  
single digits percentage over the medium term, but this is projected 
to be higher in Asia. Not only will Asian consumers demand more 
garments, but more affluent consumers will demand higher-end 
garments, so we expect regional sales from our factories in Asia to 
increase over time. Demand for PM threads and yarns is increasing 
due to the pace of urbanisation (e.g. the rollout of fibre optic cable 
networks) and economic growth, which means consumers purchase 
more products needing high performance materials (e.g. leisure 
goods and automotive). In automotive, demand is driven by the 
need to conserve energy with lightweight materials. In personal 
protection, demand is being driven by increasing levels of worker 
protection, industry regulation and the need for comfort with 
multi-hazard protection.

Trend #5: Our response in the year 
Our China domestic strategy was reviewed by the Board during 
the year and we have approved plans for capital and operational 
expenditure in order to drive forward our strategic growth 
ambitions from 2021.

Coats Group plc Annual Report and Accounts 2020

7

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationBUSINESS MODEL

OUR PURPOSE

Why we exist
To connect talent, textiles and  
technology to make a better and  
more sustainable world

OUR VISION  
AND STRATEGY

What we are  
working to achieve
To be the world’s leading industrial textiles 
company delivering innovation,  
digital solutions and sustainable value 
to all stakeholders

OUR  
FOUNDATIONS

Underpinning our  
business model
Safety | Governance

Environment | Climate

Performance | Technology

OUR PRINCIPLES

Shaping the way  
we work
Energy for change

Respectful & inclusive

Freedom to operate

Openness & honesty

Positive teamwork

Our capabilities

Sales and 
marketing

•  A network of customer and supplier 

relationships

•  Close interactions with leading global 
retailers, brands and manufacturers

•  Ability to respond quickly to specific 
needs, pressures and aspirations

Technical

•  Technical support for customers with 
thousands of technical interventions 
on the shop floor of our customers as 
well as digital and technological 
interventions

New product /
process 
innovation

•  A culture of innovation

•  Innovation hubs providing spaces 
to collaborate with customers 

•  An R&D team working with 

customers to understand their needs 
and develop new product solutions

Manufacturing •  Consistent quality and colour

•  Manufactured to high ethical, labour 

and environmental standards

•  Tested and measured against 

stringent quality and safety standards

Digital

•  Industry-leading set of digital services 
including colour sampling, online 
training, e-commerce and supply 
chain management

8

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationOur key strengths

The value we create

Customer 
relationships

•  Strong relationships across all levels of 
our customers’ organisations provide 
deep market insight

Employees

•  30,000 apparel, footwear and 

accessories customers

•  4,000 retailers and brands globally

•  8,500 customers in our Performance 

Materials

Workforce

Customers

Global asset 
base

•  Uniquely positioned to deliver 
consistently high service levels 
on a short lead time basis

•  Manufacturing on 50 sites, on six 

continents, with 100+ warehouses, 
the majority of which are connected 
by a global ERP system

Customers

Shareholders

People

•  Diverse international workforce 
of nearly 17,000 employees

Shareholders

•  Innovative and solution-focused 

Environment

culture

•  Highly engaged and committed 

employees

Suppliers

•  Diverse and global supplier base 

•  Proactively review market 

developments

•  Careful monitoring and managing 

of supply chain

Environment

Communities

•  Transition to recycled inputs where 

Communities

possible

Responsibility •  ‘Doing the right thing’ is in our DNA

Suppliers

•  Strong ESG and sustainability 

credentials

•  Ethical reputation amongst suppliers 

to the global garment industry

Suppliers

We adjusted our 
people priorities to 
focus on our 
number one priority 
– health and safety 

c.40,000 customers 
served

We are committed 
to the safety, rights 
and wellbeing of our 
employees. Our 
aspiration is to create 
a culture that nurtures 
innovative, solutions-
focused performance

As customer 
expectations evolve, 
we are continuing to 
focus on responsibly 
sourced, sustainably 
produced products

We are committed 
to delivering superior 
returns and aim to 
deliver long-term 
value

Return to dividend
Maintained strong 
balance sheet 
through Covid

74% of effluent 
compliant with 
ZDHC standards

We are developing 
ways to work more 
sustainably including 
producing less waste, 
lower carbon 
emissions and less 
water / energy usage

We create jobs for 
local communities and 
contribute to local 
economic and social 
development, the 
impact of which is 
often felt after our 
operations have ended

Provided Covid 
information about 
the pandemic, 
safety equipment 
and other donations 
to support 
communities

>$0.7bn paid to 
suppliers

We look for the right 
balance of global, 
national and local 
capability and create 
local supply chains 
wherever we can

Coats Group plc Annual Report and Accounts 2020

9

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationINVESTMENT CASE

There are six elements to our investment case – each element is a strength in itself but together they combine to set us apart from 
our competitors, giving us a solid platform from which we can innovate, grow and deliver consistently strong shareholder returns. 

Throughout 2020 we continued to review each element of our investment case and looked to align these more closely to the future 
core operations of our key business segments and the ongoing integration of recent acquisitions.

Element

Which provides us as 
an organisation with:

Key attributes  
of this element

Highlights

1.  Global market leader 

in Apparel & 
Footwear (A&F)

2.  Leading player  
in Performance  
Materials market

3.  Focus on digital, 
innovation and 
sustainability

A strong and defendable core 
business representing some 
71% of Group sales.

Ability to build scale through 
technology, innovation and 
acquisition. Representing some 
29% of Group sales.

Global leader in A&F thread 
market, consistently increasing 
market share in a stable market 
(pre/post-Covid).

Global presence in multiple 
but focused end use sectors; 
building scale both organically 
and inorganically. 

Leading the response to meet 
changing industry needs – 
speed, personalisation, 
innovation, cost, quality, 
responsibility and sustainability.

Performance Materials offer 
products that guarantee 
performance and safety, 
and solve industry problems 
through applying our 
vast textile expertise. 

Innovation in developing or 
acquiring new competencies 
and technologies – such as 
carbon and glass composites.

-21%

-14%

Revenue decline due to 
significant Covid impacts

Organic revenue decline due to 
significant Covid impacts

Continued market share gains 
and customer wins

Notable customer 
wins (e.g. in Transportation)

+6x

Increased demand for our 
EcoVerde product range

Encouraging and improving 
trend with year-on-year organic 
sales exit rate down only 2% in 
November / December

Ability to focus on the 
continuing challenges from 
macro trends that are shaping 
the world and give us the tools 
to enable us to deliver value to 
all our stakeholders.

Thinking ‘beyond the stitch line’ 
to collaborate with internal and 
external stakeholders to 
repurpose our products into 
new ones and use machine 
learning and AI for new ways 
of operating – fit for the 
digital age.

Innovation and big, bold 
game-changing ideas are crucial 
to our success.

Industry leader in sustainability 
agenda, giving us competitive 
advantage as well as to support 
our customers’ ambitious 
sustainability agendas.

At the start of 2021 we signed 
up to the Science Based Target 
initiative (SBTi), specifically to 
1.5°C commitment and a 
longer-term commitment to 
achieving net-zero emissions 
by 2050

Continued Innovation focus – 
launched 22 new products, 
generating $13m of incremental 
revenue and with a rich pipeline 
of opportunities

10

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
For more information visit coats.com/investor.

Element

Which provides us as 
an organisation with:

Key attributes  
of this element

Highlights

4.  Track record of  

delivering continuous 
improvements and 
operational excellence

Focused improvement 
programmes and experienced 
management to deliver 
margin and other financial 
improvements.

Ensuring the Group is ‘fit for 
purpose’ and agile in the 
modern high-paced world.

Productivity gains and 
procurement initiatives.

Investing in energy / waste 
reduction to improve 
operational efficiencies.

General cost and cash discipline 
around the organisation, 
in order to mitigate the impacts 
of Covid and safely navigate.

5.  Track record of  
delivering free 
cash flow

6.  Value-adding  
acquisitions

Strong cash flow generation  
and high Return on Capital 
Employed (ROCE).

Ability to build scale in the 
strategic focus areas which 
are currently fragmented 
competitively.

Balancing key cash demands 
of organic investment, 
pension schemes and 
shareholder returns.

Continuing to identify strategic 
acquisitions, including value-
adding bolt-on acquisitions 
principally in the areas of 
highly engineered Performance 
Materials and software solutions 
for the Apparel & Footwear 
industry.

-$47m

1.2x

Reduction in cost base (e.g. 
discretionary spend) in response 
to Covid impacts and lower 
demand 

1.2x leverage (net debt 
excluding IFRS 16 / adjusted 
EBITDA) maintained at low end 
of target 1–2x range

Completion of Pharr HP 
acquisition delivering 
further scale and presence 
in the attractive US Personal 
Protection growth market

$16m

Productivity benefits across 
manufacturing and sourcing

$330m

Committed facility headroom 
of $330m providing significant 
liquidity (as at 31 December 
2020)

Coats Group plc Annual Report and Accounts 2020

11

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationGROUP CHIEF EXECUTIVE’S STATEMENT

‘DURING 2020 WE FOCUSED ON 
FOUR KEY PRIORITIES: THE HEALTH 
AND SAFETY OF OUR EMPLOYEES 
AND FAMILIES, CASH MANAGEMENT, 
SUPPORTING OUR CUSTOMERS 
AND MAINTAINING THE CRITICAL 
ELEMENTS OF OUR SUPPLY CHAIN.  
WE HAVE DELIVERED A STRONG 
OPERATIONAL PERFORMANCE 
DESPITE A VERY DIFFICULT 
GLOBAL BACKDROP.’

Dear Shareholder,
In response to the emergence of Covid, we quickly pivoted to  
focus on four key priorities: the health and safety of our employees 
and their families, cash management, supporting our customers  
and maintaining the critical elements of our supply chain. We 
moved quickly to procure PPE for all our facilities worldwide. We 
implemented protocols to ensure social distancing and enhanced 
hygiene and sanitation. We invested in new touchless technologies, 
enhanced medical care for affected individuals, as well as 
maintaining our operating platform and safeguarding jobs. 
Our culture and values meant that we worked as a team and 
I am proud of how the whole Coats family pulled together.

We entered 2020 with a robust balance sheet, with healthy levels of 
cash generation, and with comfortable headroom on our banking 
covenants. This meant we were in a strong position to manage 
through the period of Covid uncertainty, and we maintained a 
relentless focus on cash management, which included cash 
collections, reducing capital expenditure and cutting discretionary 
spend. As a result of these actions we saw encouraging cash 
generation in the second half, and ended the year as we started; 
with a robust balance sheet and comfortable headroom which 
gives us the platform and optionality to invest in the most 
attractive opportunities in the Covid recovery phase.

As we recover out of Covid, and in order to continue to support 
our longer-term growth strategy and further reinforce our strong 
environmental compliance credentials, we anticipate capital 
expenditure to be in the $35–40 million range for 2021. This 
includes around $7 million (alongside $5 million operating costs) 
in relation to supporting strategic growth initiatives primarily in 
our Asian operations.

Our customers remain at the heart of our approach and we will 
continue to dedicate ourselves to supporting our partners. Our 
long-standing and deep customer relationships with retailers and 

brands, and the ‘peace of mind’ we provide as a supplier have all 
remained crucial, as supply decisions factor in quality, reliability 
and reputation, and more increasingly speed and flexibility, as time 
to market has decreased. We continued to leverage our global 
footprint, flexibility, innovation and sustainability credentials and 
digital tools to deliver exceptional customer service, and saw 
continued share gains from customers in Apparel & Footwear (A&F) 
such as emerging online athleisure brands, growing Chinese 
sportswear players, and major manufacturing groups across Asia, 
as well as customer wins across all industry segments in 
Performance Materials (PM). We would not have been able to 
deliver this service to our customers without close collaboration 
with, and support from, the critical elements of our supply chain 
as we worked through the crisis together. These entrenched 
relationships, further strengthened through our shared Covid 
experience, place us well to succeed together in the recovery phase.

2020 results overview
We saw improving sales momentum through the second half, 
with the Group organic sales exit rate down 5% year-on-year for 
November and December versus down 26% in H1 2020 and down 
15% for the four months to October 2020. We saw continued 
market share gains in A&F and customer wins in PM as priorities 
pivoted even more towards reliability, speed and flexibility during 
Covid. Adjusted operating profit was ahead of our previous 
expectations, with a solid recovery in the second half. Our ability 
to significantly flex our cost base meant our margins were resilient. 
Our balance sheet remains strong and we ended the year with 
gearing of 1.2x, which provides strategic optionality.

Purpose and strategy
We aim to connect talent, textiles and technology to make a  
better and more sustainable world. In A&F we will grow our market 
share by delivering innovative and value-adding product and service 
solutions to our global customer-base. In PM we are leading with 
innovation, developing highly-engineered products to create 
textile-based industry solutions for existing and new markets. We 
are also strengthening the core of our business by becoming even 
more customer-centric: this means we must relentlessly focus on 
the industry imperatives of speed, personalisation, innovation, cost, 
quality, reliability and sustainability. We are also investing in our 
employees so they can develop to their full potential within a safe, 
respectful and inclusive workspace. We will also maintain our 
disciplined use of capital to fund inorganic opportunities to build 
scale, and to acquire new capabilities, technology and talent. This 
strategy is underpinned by our strategic pillars of Digital, Innovation 
and Sustainability.

Strategic pillars: Digital, Innovation and Sustainability
Our strategic pillars of Digital, Innovation and Sustainability underpin 
our strategy and give us a competitive advantage. As with many 
existing trends, the Covid crisis has highlighted even further the 
critical need for digital adoption in our industry. We have benefited 

12

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationGROUP CHIEF EXECUTIVE’S STATEMENT
CONTINUED

model for change in the area of climate change. For example, our 
continued commitment to upgrading our effluent treatment plants 
means that 74% of our effluent is now compliant with the Zero 
Discharge of Hazardous Chemicals standard both for effluent and 
sludge, up from 34% in 2019.

Dividend
As the Chairman has said, the Board is mindful of the importance 
of income to shareholders and as a result of the strength of the 
Group’s balance sheet, the encouraging recovery out of the Covid 
pandemic, and its confidence in the strategy and outlook for the 
Group, is pleased to propose a final dividend of 1.30 cents per share 
(2019 final dividend: nil). Subject to approval at the forthcoming 
AGM, the final dividend will be paid on 25 May 2021 to ordinary 
shareholders on the register at 30 April 2021, with an ex-dividend 
date of 29 April 2021.

Going forward, the Board will continue to aim to use the free cash 
flow the Group generates to fund its pension schemes, self-finance 
bolt-on acquisitions, and make returns to shareholders. As 
underlying earnings and cash flows continue to recover from the 
impact of Covid, the Board intends to return to its previously 
published progressive dividend policy.

Outlook
Throughout 2020 the Group moved quickly and prudently to 
put in place measures to underpin our future success and, through 
2021, we will continue to invest in order to win the Covid recovery. 
We have a strong balance sheet, which provides strategic 
optionality and positions us well to navigate the ongoing 
challenging environment.

We remain cautious around the recovery profile of our various 
global end markets and will be vigilant regarding inflationary 
pressures within the supply chain. Notwithstanding this uncertainty 
we are encouraged by our improved trading performance towards 
the end of last year as well as in the first two months of this year, 
and the Board expects to see continued recovery through 2021.

Rajiv Sharma

Group Chief Executive

3 March 2021

from being ahead of the curve in this space as a result of our 
previous investments; both in terms of customer facing tools  
(e.g. sampling and online ordering) and a fully integrated and global 
ERP environment allowing us to align supply chains to the volatile 
environment caused by Covid. As part of our ‘factory of the future’ 
roadmap we complemented our camera network with Intenseye, 
a software using artificial intelligence and machine-learning to 
identify events and actions which could pose a risk to our 
employees, such as not wearing PPE or not social distancing. 
During 2020, we continued our investment in factory automation 
with a state-of-the-art pilot in one of our facilities in China, 
which we are expecting to complete by June 2021.

We remain focused on delivering high levels of customer service 
and creating innovative new solutions for our customers in order 
to deliver incremental market share over time. We launched 22 new 
products in the year, across both A&F and PM, and these delivered 
incremental sales of $13 million. Examples include a new engineered 
thread product for optimum down-jacket quality and a PFC-free 
environmentally friendly thread for outdoor performance-wear.

In PM we continued to build our Composites business with 
solutions for automakers, sporting goods manufacturers and the 
energy sector. For example, Coats used its unique expertise to work 
with one of the major US automakers to develop a carbon fibre 
composite that can replace existing steel load floors with 
comparable or better crash performance. This composite technology 
has many advantages compared to traditional fabrics such as 
reduced part cycle time, reduced investment and labour costs, 
minimised direct material costs and minimised waste and lower part 
costs, as well as a significant reduction in overall carbon fibre use. 

Our innovation pipeline to deliver further incremental revenues in 
the future remains strong and we will continue to accelerate our 
innovation credentials and solutions in order to deliver tailored 
customer solutions to meet their design requirements.

We made good progress on our Sustainability agenda and 
are moving towards our 2022 targets, as set out in our latest 
Sustainability Report, despite some obvious disruption from Covid 
during the year. Demand for our EcoVerde product range (100% 
recycled threads) continued to increase at pace and revenues were 
up 6x year-on-year (to $37 million). We also recently committed 
to set science-based emissions reduction targets, across the entire 
value chain, that are consistent with keeping global warming to 
1.5°C above pre-industrial levels. We have also committed to 
developing a long-term target to reach net-zero emissions by 2050, 
the highest level of ambition on climate under the Science Based 
Target initiative (SBTi). A key part of our Company purpose is to 
make a better and more sustainable world. We have already laid  
out an ambitious set of targets in our sustainability strategy. Making 
commitments like this to address our emissions builds on our 
sustainability strategy and demonstrates our resolve to be a role 

Coats Group plc Annual Report and Accounts 2020

13

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationOUR STRATEGIC GOALS 

WE HAVE THREE STRATEGIC GOALS TO WORK TOWARDS IN ORDER TO 
ACHIEVE OUR VISION 

To connect talent, textiles and technology to make a better and more sustainable world. 

Goal

Description

Relevant risks

1.  PROFITABLE 

SALES 
GROWTH

Apparel & Footwear
Increasing our market share by delivering innovative and 
value-adding product and service solutions to our global 
customer base.

Performance Materials
Lead with innovative developments in highly engineered 
products creating textile-based industry solutions for 
attractive and growing end markets.

2.  CONTINUING 

TO 
STRENGTHEN 
THE CORE

Employee investment
Continued investment in the development of our 
employee capabilities so they can reach their full 
potential in a safe, respectful and inclusive workplace.

Customer centricity
Maintain focus to ensure we meet industry demand for 
speed, personalisation, innovation, cost, quality, 
reliability and sustainability in support of critical elements 
within the supply chain.

*Ever-increasing customer expectations

*Appropriate talent and capability development

*Economic and geopolitical

*Health and safety

*Ever-increasing customer expectations

*Appropriate talent and capability development

*Cyber

*Climate change

*Environmental non-performance

*Health and safety

*Bribery and anti-competitive behaviour

3.  VALUE 

CREATION

Disciplined use of capital to fund inorganic opportunities 
to build scale and acquire new capabilities, technology 
and talent.

*Mergers and acquisition scale ambition

*Appropriate talent and capability development

*Economic and geopolitical

*Refer to Principal Risks and Uncertainties on pages 34–44.

Our goals are underpinned by the following strategic pillars:

DIGITAL

INNOVATION

SUSTAINABILITY

To stay relevant, we recognise the need to 
evolve in new directions. This requires us to 
think ‘beyond the stitch line’ to collaborate 
with internal and external stakeholders, to 
repurpose our products into new areas and 
use machine learning and artificial 
intelligence to inform new ways of 
operating, fit for the digital age.

Innovation is at the heart of everything we 
do. We recognise that big, bold, game-
changing ideas are crucial to our success.

We continue to accelerate our innovation 
credentials and solutions to deliver tailored 
customer solutions to meet their design 
requirements.

Sustainability has long been at the core of 
how we do business and is a key driver of 
our strategic decisions. Our sustainability 
agenda is important to all our stakeholders. 
Not only does it give us a competitive 
advantage, but it also allows us to help our 
customers with their own sustainability 
agendas.

For details refer to coats.com/sustainability, 
and pages 28–33 in this report.

14

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationKEY PERFORMANCE INDICATORS

Approach in 2020
MONITORING PERFORMANCE TO MEASURE THE GROUP’S PROGRESS TODAY 
AND ONGOING PERFORMANCE TOMORROW
During 2020 we continued to monitor our performance and progress using the consistent range of key performance indicators used in the 
prior year, each of which is a non-GAAP measure. For further details of how these financial Alternative Performance Measures are 
reconciled to the nearest corresponding statutory measure, see note 37 on page 176.

KPI

Definition

Why we measure this 

Performance
(% Year-on-year)

2020 – (19%)
2019 – 1%
2018 – 3%

Annual organic growth in sales 
at like-for-like exchange rates.

Measures the ability of the 
Company to grow sales by 
operating in selected geographies 
and segments and offering 
differentiated, cost competitive 
products and services.

Annual organic growth in 
operating profit, adjusted for 
exceptional and acquisition 
related items, at like-for-like 
exchange rates.

Measures the underlying 
profitability progression of the 
Company.

2020 – (43%)
2019 – 6%
2018 – 23%

Annual growth in reported EPS 
from continuing activities, 
excluding exceptional and 
acquisition related items.

Measures the underlying 
progression of the returns 
generated for shareholders.

2020 – (65%)
2019 – 1%
2018 – 21%

2020 commentary

Significant impact on 
volumes due to Covid 
across both A&F and PM. 
Improving trend in H2.

Covid volume impact 
underpinned by quick 
and decisive action on 
cost base (e.g. 
discretionary trend).

Lower adjusted operating 
profits and higher 
underlying effective tax 
rate.

Cash generated from 
continuing activities less capital 
expenditure, interest, tax, 
dividends to minority interests 
and other items, and excluding 
exceptional and discontinued 
items, acquisitions, and UK 
pension recovery payments.

Pre-exceptional operating 
profit from continuing 
operations for the year divided 
by capital employed (property, 
plant and equipment plus net 
working capital) at year end.

Number of work-related 
injuries and illnesses per 100 
Full Time Employees (FTEs) per 
year that are considered 
recordable by the US 
Occupational Safety and 
Health Administration (OSHA).

Measures the Company’s 
underlying cash generation that is 
available to service shareholder 
dividends, pension obligations and 
acquisitions.

2020 – 28
2019 – 107
2018 – 96
All figures are in $(m)

Lower adjusted 
profits mitigated by tight 
cost control in all areas of 
the business.

Measures the ability of the 
Company’s assets to deliver 
returns.

2020 – 22
2019 – 42
2018 – 43

Lower adjusted operating 
profits alongside well 
controlled asset base.

Measures the performance of the 
Company in delivering a safe and 
healthy working environment for 
employees.

2020 – 0.59
2019 – 0.50
2018 – 0.62
Work related injuries per 100 
FTEs 2018 figure restated for 
delayed impact incidents

Broadly in line with 
previous years, however 
challenges were faced in 
H2 as a result of factories 
reopening and the 
subsequent ramping up 
of production in Q4.

Coats Group plc Annual Report and Accounts 2020

15

Revenue growth1

Linked to our  
strategic goal

 1

Adjusted operating 
profit growth2

Linked to our  
strategic goal

 1    2

Adjusted earnings  
per share growth

Linked to our  
strategic goal

 2

Adjusted free cash 
flow4

Linked to our  
strategic goal

 2

Return on capital 
employed (ROCE)

Linked to our  
strategic goal

 2    3

Recordable accident 
rate (RAR)

Linked to our  
strategic goal

2

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationKEY PERFORMANCE INDICATORS 
CONTINUED

KPI

Definition

Why we measure this 

Employee 
engagement score

Set a number global surveys 
using the Glint platform.

Linked to our  
strategic goal

 2    3

Measures the Company’s 
performance in delivering an 
effective and efficient workplace 
culture and how proud and willing 
people are to work towards 
achieving common goals.

Performance
(% Year-on-year)

2020 N/A
2019 N/A
2018 83%

2020 commentary

Whilst it remains a KPI, 
we moved to a 
‘continuous listening’ 
model in 2019. These 
pulse surveys were 
evermore critical during 
2020 given the upheaval 
caused by Covid.

Paying for Performance
The incentive plans used to reward the Directors and our senior managers include Performance Measures linked to our Key Performance 
Indicators. For more detail see the Directors’ Remuneration Report on pages 79–95.

SUSTAINABILITY KEY PERFORMANCE INDICATORS

KPI

Definition

Why we measure this 

Performance

2020 commentary 

Water Intensity

Target of 40% 
reduction by 2022

Energy Intensity

Target of a 7% 
reduction by 2022

Effluent quality

Target is for 100% by 
2022

Litres of water used per kilo of 
finished production.

Water is a precious and often 
scarce resource.

kWh of energy used per kilo of 
finished production.

Energy is a significant cost to us.

Percentage of effluent that is 
compliant to ZDHC 
Foundational standards for 
effluent and sludge.

We need to make sure that water 
we use is returned to the 
environment in a good state.

Employment 
certification

Target is for 80% by 
2022

Waste %

Target is to reduce 
waste % by 25% by 
2022

Sales of recycled 
material

Target is for 100% by 
2024

Percentage of employees in 
Coats units that have a Great 
Place to Work (GPTW) or 
equivalent certification.

Percentage of materials used 
by Coats that are classified as 
waste at some point in our 
processes.

Percentage of premium 
product sales that are made 
with recycled material.

Employee engagement is critical to 
our operations.

Waste generates lost value.

Recycled materials are more 
resource efficient.

1. Revenue growth excludes contribution from acquisitions made during the period. 

2. Adjusted operating profit growth excludes contribution from acquisitions made during the period. 

2020 – 78 
2019 – 83
2018 – 83
Litres per kilo of production

2020 – 8.9 
2019 – 9.2
2018 – 9.2
kWh per kilo of production

2020 – 74%
2019 – 34%
% effluent that is compliant 
with standards

(note that in 2018 sludge was 
not in the standards)

2020 – 6% 
2019 – 19%
% of global employees  
covered by a GPTW certificate

2020 – 14% 
2019 – 16%
2018 – 15%
Waste as a percentage of 
materials used

2020 – 13%
2019 – 2%
2018 – 0%
% of premium product sales 
made with recycled material

We achieved a 6% 
reduction in 2020

We achieved a 3% 
reduction in 2020

74% of our effluent was 
ZDHC compliant by 2020

We could not make 
progress in 2020, but will 
recover momentum in 
2021.

We have made good 
progress towards our 
2022 target.

We are making good 
progress towards our 
2024 target.

16

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationSTAKEHOLDER ENGAGEMENT

HOW WE CREATE VALUE FOR OUR STAKEHOLDERS
Responsible business practice is at the core of everything we do. For over two centuries our purpose has remained the provision of good 
service and the creation of long-term value for all our stakeholders. In order to create this value, it is important to first identify who our 
stakeholders are and understand what matters to them.

Shareholders

Environment

Customers

OUR 
STAKEHOLDERS

Communities

Suppliers

Workforce

Honest and regular engagement with our shareholders and wider stakeholders is a vital ingredient of building the sustainable business we 
are so proud to be a part of.

As a Company, we recognise that our responsibilities go far beyond delivering excellent returns to our shareholders. For us it is as much 
about confirmation that we are doing the right thing as it is about healthy profits. Our reputation as a Group is founded on always meeting 
the highest ethical standards. 

Coats Group plc Annual Report and Accounts 2020

17

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationSTAKEHOLDER ENGAGEMENT 
CONTINUED

Employees

Our 17,000 strong 
workforce is at the heart of 
making our business a 
success and we recognise 
that listening to and 
engaging with our 
employees is essential to our 
continued success.

How the Board engaged in 2020
Workforce engagement has always been a key priority for the Board and Fran Philip, Non-Executive 
Director, has been the Board representative for workforce engagement since March 2019. Site visits were 
not possible during 2020 but Fran attended our two Diversity and Inclusion Network calls, had four virtual 
meetings with our Cluster Managing Directors, as well as with representative groups from each of our 
Clusters. She presented her findings to the Board. 

In 2020, to close the feedback loop, we published a film internally in which Monica McKee, Chief HR 
Officer, interviewed Fran about her work in 2019 and plans for 2020. Feedback from employees is also 
heard via our pulse survey results which are shared with the Board bi-annually.

What we learnt
The themes from Fran’s meetings with employees showed that they felt well taken care of during Covid 
because the company acted quickly and early to protect people and the business. It has been stressful for 
our employees to understand the new world but they are staying connected virtually both professionally 
and socially and want this to continue. 

What we are going to do in 2021
Fran will continue with her virtual meeting programme, with the aim of resuming face-to-face meetings in 
H2 if circumstances and safety allow. She will feed back to the Board in July and December.

Customers

We have been helping to 
connect and form the fabric 
of daily life on our planet for 
over 250 years, and our 
global footprint provides 
unrivalled access to markets 
and customers.

How the Board engaged in 2020
The Board does not routinely interact directly with our customers. Our primary method of understanding 
our customer needs is through feedback from management and the Board receives regular reporting on 
customer outcomes and customer related strategic initiatives throughout the year. Feedback from 
customers is generally obtained through our Innovation Hubs, trade shows, and customer visits. However, 
in response to Covid, management teams adapted communications to include a range of digital initiatives 
to continue to meet customer and market demands using a series of educational and informative webcasts 
and satisfaction surveys. The feedback from these sessions was positive. 

What we learnt
During the pandemic many of our customers switched to manufacturing PPE, which we were able to 
support through our participation in the PPE Gerber taskforce. Looking ahead, the challenge for our 
customers is predicting the future of retail, including the continuing rise of e-commerce, and how supply 
chains post-Covid can be de-risked. We also learnt that speed and agility are key in times of uncertainty 
and the ability to adapt and offer solutions to support customers is a critical industry differentiator. 
The ‘road to normal’ will take some time to travel and our customers will need agile solutions to help 
them navigate through the storm.

What we are going to do in 2021
We intend to continue our focus on areas of improvement that have been identified through improved 
education programmes and smarter use of technology.

18

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationShareholders

The Board maintains and 
values regular dialogue with 
shareholders throughout 
the year.

Environment

Coats is working proactively 
with customers and 
suppliers to help them to 
improve the sustainability of 
their products, and to 
minimise the environmental 
impact of our industry.

How the Board engaged during 2020
The Chairs of the Board Committees engage with shareholders as and when appropriate and in 2020 the 
Chair of the Remuneration Committee liaised with investors in relation to the Remuneration Policy. You 
can read more about this in the Remuneration Committee Report on page 79. The traditional face-to-face 
methods of interacting with our shareholders were quickly made obsolete in 2020 as the Covid pandemic 
led to blanket limitations on travel. We quickly embraced virtual formats for all investor interactions, which 
included results roadshows, investor conferences as well as ad hoc group calls on specific topics (e.g. broker 
arranged ‘fireside chats’). Whilst we do not expect the virtual format to ever fully replace face-to-face 
interactions, the quantum of investors we have been able to reach around the globe has increased as a 
result of us fully embracing the virtual format. In addition, we have been able to facilitate wider 
shareholder access to our Board / management through this virtual forum.

What we have learnt
Regular communication with our shareholders and prospective shareholders is even more important during 
turbulent times like those experienced in 2020. We released regular market updates during the peak of the 
pandemic and proactively engaged with our key shareholders to keep them updated on the developments 
in the business.

What are we going to do in 2021
As the world begins to normalise post-Covid, and as physical travel begins to return to normal levels, we 
will look to return to a balance of physical meetings, whilst embracing the new virtual formats that became 
the norm during 2020. This will allow us to leverage the benefits from both physical interaction and the 
efficiency benefits of virtual interactions.

Other key focus areas for 2021 will be to 1) introduce our new CFO (Jackie Callaway) and Chairman (David 
Gosnell) to our investor base, and 2) to continue to engage on key industry / investment case focus areas, 
such as ESG.

How the Board engaged in 2020
The increasing risk from climate change and the work done to assess this risk has led to a significant 
increase in the Board’s engagement with the environment during 2020. In addition, the Board continued 
to engage in decisions around effluent controls and also supported the development of innovative new 
products designed to facilitate circular processing within the textile industry, where we have been working 
closely with key customers. The combined individual experiences and contacts of each Board member, 
outside their direct Board commitments, has also helped to inform such decisions, ensuring that the 
increasing interest in environmental issues from all other stakeholders is fully represented in Board 
discussions and in the Company strategy. We published our second Sustainability Report which detailed 
the progress towards our ambitious targets for 2022 and 2024 and included our first Communication on 
Progress (COP) as Participants of the United Nations Global Compact, and identified the environmentally-
focused Sustainable Development Goals that Coats aspires to contribute to. At the start of 2021, Coats 
signed up to the Science Based Targets initiative under the more challenging Business Ambition for 1.5°C 
target and is committed to developing emissions targets that align to a low carbon future. Work already 
started with suppliers in 2020 to map our Scope 3 raw materials emissions and this will continue in 2021.

What we learnt
Our approach to protecting the environment is much more than just doing the right thing in the 
communities in which we operate. It is about enhancing our business and creating new opportunities to 
be more efficient and to innovate, developing better products and building stronger relationships with our 
customers, investors and stakeholders. We have to have long-term strategies in this area and, increasingly, 
look at the full life cycle impacts of our products.

What we are going to do in 2021
The key areas of work this year will be around the development of Science Based Targets for emissions, 
ensuring that our use of chemicals and effluent treatment processes are delivering on our targets and 
ensuring that we are moving to product types that have a reduced environmental impact. A lot of these 
activities have to be done in concert with other organisations and we will support management to work 
collaboratively with external bodies. More details on the activities fully supported by the Board can be 
found in our Sustainability Report (refer to coats.com/sustainability).

Coats Group plc Annual Report and Accounts 2020

19

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationSTAKEHOLDER ENGAGEMENT 
CONTINUED

Communities

We operate in 50 countries 
across six continents and 
seek to understand and 
respect the needs of the 
communities in which  
we operate and to work 
together with them to  
our mutual benefit.

How the Board engaged in 2020
Coats needs to work in partnership with the communities in which it operates. Our employees often come 
from those communities and we share the environment around ourselves and the resources it contains. 
The Board recognises the importance of working with communities, but does not have a lot of direct 
interaction with them, relying instead on information and feedback from management. 

Normally within Coats there are a large number of community engagement projects that happen within 
our businesses, but the need to restrict social interactions because of Covid has obviously severely limited 
these activities in 2020. After an initial focus on ensuring our employee health, safety and wellbeing, we 
extended our activities to our communities, providing information about the pandemic and how to combat 
it and also provided safety equipment and other donations to support communities. The Board discussed 
and was supportive of these actions.

What we learnt
Coats has longstanding and fruitful relationships with many communities in the countries where it has 
operations. During Covid these links have been strengthened through our supporting activities. We have 
seen the ability of the Company to act very rapidly to meet urgent needs – this was shown through the 
pandemic, but also in response to Hurricane Ida flooding in Honduras. 

Having had plans, pre-pandemic, to engage with a global partner to enhance our ability to deliver and 
measure high impact community interventions we are reviewing if this is still the most appropriate route 
forward for the company.

What we are going to do in 2021
As we emerge from the pandemic we will be seeking to identify the most appropriate form of community 
engagement activities for the Company given that the situation facing communities around the world and 
consequently their needs might have been heavily impacted by the pandemic. Our strong commitment to 
engage proactively with communities continues. More detail on community activities can be found in our 
Sustainability Report and online (refer to coats.com/sustainability).

Suppliers 

We believe it is important 
that our suppliers are not 
only price competitive but 
also have a strong 
compliance, quality, service, 
sustainability and innovation 
ethos.

How the Board engaged in 2020
Our long-term supplier partnerships are an important part of being able to innovate and offer trusted value 
to our customers. The Board maintains oversight of the management of our most important suppliers and 
our operating subsidiary boards regularly review and report on their performance. The Board and the 
operating subsidiary boards review the actions we have taken to prevent modern slavery and associated 
practices in any part of our supply chain and approve our Modern Slavery Statement each year. One of the 
key pillars supporting this statement is our Supplier Code. We continue to engage with suppliers about our 
Supplier Code, and in particular with those identified as requiring improvement. During the pandemic we 
liaised continuously with suppliers to ensure that our payments were aligned to their requirements.

What we learnt
We have found that a focus on compliance-related issues is generally welcomed by our suppliers who do 
not see that this is an imposition, but regard it as helpful to ensure that their business is resilient. Training 
on our Supplier Code ensures standard processes are being followed and the refresher workshops we offer 
to suppliers are valued. Sustainability is an important part of any business strategy and suppliers are keen 
to work with us on this.

What we are going to do in 2021
We will continue our engagement with our suppliers, providing support and guidance to ensure adherence 
with our Supplier Code, including running new workshops. The supplier portal will allow suppliers to 
measure their performance through a KPI scorecard and through our Innovation Hubs we will continue to 
drive supplier-led innovation. Our work on Scope 3 emissions will also extend the scope of our engagement 
with our suppliers. 

20

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationSECTION 172 STATEMENT  

As a Board, we seek to ensure that the decisions that we take in the boardroom in the interests of promoting the success of our Group are 
made with the appropriate consideration of our relationships with, and our impact on, our various stakeholders. The Board’s intent is always to 
maintain high standards of business conduct and governance in all of the Company’s operations, which is critical in maintaining our reputation 
for doing the right thing. We do not underestimate the importance of understanding our stakeholder expectations and needs to achieve our 
strategy and accordingly our long-term sustainable success. 

On pages 18–20 we outline the ways that the Board has engaged with our six groups of stakeholders, what was learnt and how their input 
has shaped our decisions and what we will do as a result of this engagement. On pages 34–44 you can read about the ways we considered 
our stakeholders and the long-term impact of our decisions and our need to maintain high standards of business when considering our 
Principal and Emerging risks. Below, you can see how we ensure the correct balance of inputs into the decision making process and how the 
Board is able, in good faith, to make decisions that balance the factors set out in S172 (S172 Factors).

Leadership and management receive training on Directors’ duties and best practice tips for writing Board papers to ensure awareness  
of the Board’s responsibilities

 Board information

Board papers identify key stakeholders and relevant 
information relating to them

Our Board continually engages with stakeholders. Read more 
on pages 18–20

Board strategic discussion

S172 Factors considered in the Board’s discussions on strategy, 
including how they underpin long-term value creation and the 
risk implications for business resilience

Group’s culture helps ensure that there is proper consideration 
of the potential impacts of decisions

Chair ensures decision making is sufficiently informed by S172 
Factors and appropriately balances the interests of the various 
stakeholders

The Board reviews and probes the information presented and 
receives assurance where appropriate

Board decision

Outcomes of decisions assessed and further engagement and 
dialogue with stakeholders

Actions taken as a result of Board engagement

Coats Group plc Annual Report and Accounts 2020

21

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationSECTION 172 STATEMENT 
CONTINUED

Case studies 

Key strategic matter

Board information

Board strategic discussion

Board decision

Covid  
response

Review of Group  
purpose

In March 2020, a meeting 
was convened to 
specifically discuss the 
impact of Covid and this 
was a Board topic for the 
remainder of the year.
Detailed pre-read covering 
stakeholders and scenario 
planning was circulated 
in advance.

 •  Overview of key areas of pre-read
•  Review of supply and customer 

insights in Performance Materials 
and Apparel & Footwear segments
•  Review of financial impact scenarios 
and consideration of how these 
would impact the Group and key 
stakeholders in both the long and 
short term. The discussion also 
considered how to appropriately 
address the needs of the wider 
communities in which we operate

Detailed proposals 
presented at separate 
Board meetings that 
included key stakeholder 
feedback on Coats’ core 
reason for being.

 •  Review of long-term fit with 

strategic aims, our reputation and 
business plan

•  Consideration of views of 
stakeholders including the 
importance of sustainability to 
community and the environment

 The Board agreed a set of key Group 
priorities focusing on continuing to 
ensure the health and safety of 
employees and contractors, supporting 
customers, maintaining critical aspects of 
our supply chain and providing supplies 
and training to our employees and the 
communities in which we operate.

 The Board agreed the revised Group 
purpose ‘to connect talent, textiles
and technology to make a better and 
more sustainable world’ focusing on the 
connections between our employees, 
customers and suppliers and our 
long-term value creation aims for 
our shareholders. 

The Board has had regard to S172 Factors in all of its key decisions and you can read more about these as set out below:

S172 factor

Page More information

S172 factor

Page More information

The likely 
consequences of 
any decision in 
the long term

The interests of  
the company’s 
employees

The need to foster  
the Company’s 
business relationships 
with suppliers, 
customers and others

6 
8
10 
12 
14 
15 
34

8 
15 
17 
23
28

34 
52 
79

6 
8 
10 
14 
34 
45

Market trends
Business model
Investment case
Group Chief Executive’s statement
Our strategic goals
Key performance indicators
Principal risks and uncertainties

Business model
Key performance indicators
Stakeholder engagement
Working responsibly
Sustainability Report (refer to coats.com/
sustainability)
Principal risks and uncertainties
Corporate Governance Report
Remuneration Committee Report

Market trends
Business model
Investment case
Our strategic goals
Principal risks and uncertainties
Operating review

The impact of the 
Company’s operations on 
the community and the 
environment

The desirability of the 
Company maintaining a 
reputation for high 
standards of business 
conduct

The need to act fairly as 
between members of the 
Company

8 
15 
17 
23 
28

34

8 
14 
15 
17 
23
28

34 
66

8 
10 
15
17

Business model
Key performance indicators
Stakeholder engagement 
Working responsibly 
Sustainability Report (refer to coats.com/
sustainability) 
Principal risks and uncertainties

Business model
Our strategic goals
Key performance indicators
Stakeholder engagement
Working responsibly
Sustainability Report (refer to coats.com/
sustainability)
Principal risks and uncertainties
Audit and Risk Committee Report

Business model
Investment case
Key performance indicators
Stakeholder engagement

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WORKING RESPONSIBLY

Highlights of 2020
•  We deployed a structured response 
two weeks before the pandemic 
was declared

•  Acting early to control the entry of 

Covid into our facilities and 
stopping the spread of the virus

•  Widening our focus on health and 
safety into the communities in 
which we operate

•  Rolling out new technology to 
further embed our health and 
safety culture by predicting 
potential incidents so we can stop 
them from occurring

•  Using our new employee survey 
tool to pulse our employees on 
how they are during Covid

•  Moving all of our learning and 
development into a virtual 
environment

Priorities for 2021
•  Build manager capabilities, 

commercial and manufacturing 
excellence

•  Roll out career mapping to help our 

employees own their career 
development

•  Roll out Coats Link, our employee 
mobile app, to all employees for 
communication and access to our 
self-service tools

•  Continue to develop and evolve 

health, safety and wellbeing plans 
for each Cluster

PEOPLE

IN 2020, FOLLOWING THE RAPID SPREAD OF COVID 
AROUND THE WORLD, WE HAD TO QUICKLY ADJUST 
OUR PEOPLE PRIORITIES TO FOCUS ON OUR NUMBER 
ONE PRIORITY – HEALTH AND SAFETY

Health, safety and wellbeing
Health and safety has always been our number one priority and this has stood us in good stead as 
we rose to the challenges presented to us by Covid.

Our strong health and safety culture meant that we were quickly able to deploy a structured 
response to Covid – Preparedness, Prevention, Response, Recovery (PPRR) – and we did this two 
weeks before the pandemic was declared. Our cautious and proactive approach to keeping our 
employees safe continued throughout the year. Actions included:

•  Rolling out artificial intelligence technology to our existing health and safety cameras to 

identify potential at-risk conditions and situations

•  Encouraging employees to wear face masks and demonstrate their creativity through a Face 

Mask Fashion Show competition

•  Closing all standalone offices to allow us to focus on the safety of our manufacturing employees

•  Identifying and implementing social distancing best practice in all of our sites

•  A global approach to re-opening manufacturing sites as lockdowns lifted including policies and 
guidelines about social distancing, hand sanitising, temperature screening, disinfecting, and 
re-setting factory layouts to include one-way systems and to allow for social distancing

•  Restrictions on travel and visitors to our sites

•  Using an internally developed mobile app to track and trace cases, enabling us to support any 
employees who contracted the virus, identify any employees at risk of catching it and prevent 
it spreading

•  Introducing risk assessments for sales and customer visits

•  Distributing over 29,000 health and safety kits to all employees, contractors and temporary 

workers with items to help keep them safe from the virus

•  Regular awareness training and education sessions to help keep employees safe

•  Deploy our Living Wage action plan

•  Creating a recovery matrix to carefully remove controls as the pandemic eases

It should be noted that the standardised risk prevention controls we had in place proved highly 
effective in minimising employee exposure inside the workplace, but despite these efforts, 14 
employees contracted Covid outside the workplace and sadly died. 

Coats Group plc Annual Report and Accounts 2020

23

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationWORKING RESPONSIBLY
CONTINUED

3,000+ 

Employees accessed  
online training 

40% 

Increased training hours  
in Minerva (our digital 
learning library)

189 

Learning Zones virtual 
training sessions

23 

Learning Zones virtual 
training topics

Our health and safety efforts did not stop with our employees, we also extended them into the 
community, for example, by providing health and safety kits for our local communities, delivered 
22 sessions in multiple languages offering information and support about Covid and, in India, 
provided hand wash stations to primary schools and police stations, Covid testing booths and 
sanitary gloves to health care professionals.

In addition to our Covid-specific actions, we also rolled out artificial intelligence technology to  
our existing health and safety cameras to identify potential at-risk conditions and situations.  
The technology supplements our existing hazard identification processes in categories such as 
slips, trips and falls, forklift movements or walkway obstructions; and can also help to protect  
our employees from Covid by checking that face masks are always used and social distancing  
is adhered to.

One effect of focusing all resources on managing the pandemic was that our programme of 
normal activities under our Journey to Zero strategy was interrupted early in the year, and as  
a result we saw an increase in incidents in our plants, with a consequent rise in the recordable 
incident rate. However, we have the processes and resources in place to understand where the 
issues are and in 2021, as well as continuing our fight against Covid, we will refocus our efforts 
on our Journey to Zero strategy, which was seeing encouraging results on our leading and 
lagging indicators before Covid struck.

Learning and Development 
During Covid we took the decision to move all our training online. In 2020 our training portfolio 
consisted of continuing our most successful long-term programmes, introducing new courses to 
supplement those and specific Covid-related courses.

In 2020, our employees increased their training hours in Minerva, our digital learning library,  
by nearly 40%. More than 3,000 employees accessed 1,700 online courses across 13 topics 
including growth mindset, conflict management, improving performance and change 
management. Our Management Capability Development programme has also continued with 
two cohorts in EMEA and the US taking part in the blended learning programme consisting of 
eLearning, webinars, psychometric assessments and coaching. In 2020 Our Supervisory Skills 
training remained in place with short webcasts on 12 topics from ‘Building the Team’ to  
‘Relating to Others’.

MORE THAN 3,000 EMPLOYEES ACCESSED 1,700 
ONLINE COURSES ACROSS 13 TOPICS

We have built on our Learning Zones concept that launched in 2019 and delivered 280 training 
hours in seven languages in 2020 via this very successful format. As well as general topics such  
as Emotional Intelligence and Collaborative Negotiations we offered Covid-specific courses such 
as Productive Remote Learning. Significantly, for the first time, we extended one of our courses 
‘Wellbeing for Coats Families’ to family members of our employees to support them during the 
Covid pandemic. 

New for this year has been Subject Matter Expert training which is a series of peer-to-peer 
sessions led by internal experts. We ran 14 sessions for more than 300 participants across topics 
such as Project Management and Data Analytics. 

24

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationBOARD ENGAGEMENT WITH THE WORKFORCE
Introduction
Fran Philip was appointed Board Representative for Workforce Engagement in March 2019. In that year she was able to meet with 
a number of employee groups face to face. In 2020, due to the Covid pandemic, Fran shifted nearly all of her meetings online and 
took the opportunity to talk to even more employees about their experience of working at Coats and what matters to them.

EMPLOYEES
Workforce

FRAN PHILIP

NED, Board  
Representative  
for Workforce  
Engagement 

THE BOARD

The process
•  Due to uncertainty of the Covid pandemic, most meetings  

were postponed to H2

•  Fran had a face-to-face meeting in February with employees  

in the UK about Coats’ culture

•  Fran had four virtual meetings with our Cluster MDs

•  Fran hosted 20 virtual sessions with more than 250 employees 

in 21 countries, 35 locations 

•  Fran also attended our two Diversity and Inclusion Network 

calls in the year which were each attended by a global group  
of around 200 employees

•  Fran summarised her findings to the Board in July and 

December 2020 

Focus during the period
The focus of the employee engagement sessions naturally related 
to Covid. The topics of discussion can be grouped into four key 
areas with health and safety as an overarching theme.

•  Coats response to the pandemic – employees were impressed 
with the speed and decisiveness of our response, they felt a 
sense of clarity, saw the advantages of Coats being a global 
organisation and were positive about communication

•  Support – employees felt cared for during the pandemic.  
In particular, they were impressed that there were no job  
losses, that training was more accessible than ever, that Coats 
distributed health and safety kits to all employees and that the 
care did not stop at employees but was extended to employee 
families and the community

•  Need for connectivity – employees spoke about the  

importance of connectivity not just at work but also in their 
personal lives, virtual coffee hours received positive feedback  
as a way for people to catch up with each other and socialise. 
There was also recognition that all the investments that Coats 
had made in technology in previous years gave the Company  
a huge advantage

•  High stress – employees spoke about the difficult and 

challenging circumstances that came with Covid and the 
ever-changing rules and protocols, the fear they felt, and the 
different types of stress that were present whether they  
were working from home or on site, furloughed or continued 
working throughout

Actions in response
Looking forward to 2021, in response to feedback in the employee 
engagement sessions, we will look to build on the following areas:

•  Technology and working from home support

•  Recognition

•  Communication

•  Virtual learning

•  Sharing of ideas

In H1 2021, Fran will continue with her virtual meeting  
programme with the aim of resuming face-to-face meetings in  
H2 if circumstances and safety allow. She will feed back to the 
Board in July and December.

Coats Group plc Annual Report and Accounts 2020

25

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationWORKING RESPONSIBLY
CONTINUED

91% 

Employees agreed / 
strongly agreed that they 
understand the Company’s 
priorities, tactics and 
actions

89%

Employees agreed they  
are confident in the future 
of Coats

14 

Office reopening surveys 
conducted around  
the world

65% 

Expected number of 
employees to be working 
in a hybrid approach

Communication
Our well embedded internal communications strategy meant that the foundations were in place 
to adapt to the new and fast-changing circumstances presented to us by the Covid pandemic. 
The communications strategy needed to support Covid required a dramatic reduction in the usual 
timescale of communications development and production to ensure messaging was available as 
soon as it was agreed. While making use of our long standing and successful communications 
channels we also introduced new channels and platforms and creativity to enable agile 
communications delivery while achieving our objective of developing timely, relevant, informative 
and engaging messages for everyone. 

For the first time in 2020, using new technology, we widened our existing regular leadership 
team conference calls to all wired employees to help align everyone with our Group-wide 
priorities and share progress against them. We also used these calls as an opportunity to remind 
people how to stay safe during Covid. 

In addition to these wider conference calls we introduced a new eNewsletter called Navigating 
the Storm: Winning the Recovery to provide regular updates to our people on each of our 
priorities. This was accompanied by a briefing pack to support leaders to share the updates  
with our front line employees.

Also in 2020 we piloted a new employee mobile app. Forming part of our wider employee 
experience strategy, the app has the potential to allow us to directly communicate two way with 
all our employees in their own language. In the app we are able to share both global news and 
locally targeted content as well as increasing engagement through interaction on our virtual 
community wall and providing access to our self-service HR tools such as annual leave booking.

Listening to our people
In 2020 we had planned to run a full Employee Engagement Survey as well as move to a model 
of ‘continuous listening’ via a series of pulse surveys. Unfortunately, due to Covid we had to 
postpone the full engagement survey to protect the safety of our frontline employees who do 
not have access to their own computers. However, we ran a series of pulse surveys with our wired 
employees. In the early months of the pandemic we asked them about our response to Covid, 
our communication, whether they have the resources they need and about their wellbeing. 
Results across the board were positive as they were in the other surveys that we ran – one to test 
understanding of, and alignment with, our Company’s priorities, and for some of our locations 
we also ran surveys to find out how people feel about returning to the office.

Thanks to our investment in technology over the last few years we were well placed to make  
the change to flexible working at the beginning of 2020. During the year we also formalised  
our approach to this by publishing our Global Flexible Working Guidelines. Based on the feedback 
we received in the pulse surveys we expect around 65% of our office-based employees to  
be working in a hybrid approach and splitting their time between working in the office  
and remotely.

26

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information45 

In the recent Hampton-
Alexander Review, Coats  
is now ranked 45 in the 
FTSE 250 category, with 
40% women on the  
Board, in addition to 
34.2% combined  
Executive Committee  
and direct reports 

Diversity and Inclusion 
Our aim is to promote a workplace environment that is inclusive, respectful and diverse. We 
believe that diversity of all sorts in the workplace should be encouraged and supported, and as 
such, we remain committed to increasing the diversity of our workforce and despite the Covid 
pandemic, continued to take action in this area. 

Inclusion has been evermore important during Covid and our approach drove even greater 
inclusion by inviting more people to participate in calls and meetings using Teams and reaching 
out to families of employees and the communities in which they live. With so many people 
working from home it was important that people remained connected and we were able to 
support this through our communications as well as through our Learning Zone sessions and 
encouraging line managers to keep in touch with their teams regularly. Throughout all of the 
training courses we ran in 2020 we ensured that there was a good representation of both men 
and women. In addition, we continued to run our Diversity and Inclusion Network calls and held 
two in the second half of the year. These were well attended and covered subjects such as our 
response to the Black Lives Matter movement and how we were supporting inclusion. Fran Philip, 
our Non-Executive Director who is the Board Representative for Workforce Engagement attended 
both these calls as well as meeting virtually with our Managing Directors and holding more than 
20 virtual sessions with representative groups from all our clusters.

Highlighting our commitment to diversity, we were delighted that in 2020 our Brazil team was 
recognised as a great place to work for women. We are also proud of our progress on gender 
diversity. The recently published Hampton-Alexander Review of FTSE Women Leaders has ranked 
Coats at number 45 in the FTSE 250 category.

OUR AIM IS TO PROMOTE A WORKPLACE 
ENVIRONMENT THAT IS INCLUSIVE, RESPECTFUL AND 
DIVERSE

Looking forward to 2021
As we look forward to 2021, as well as continuing our laser-like focus on health and safety we will 
aim to roll out some of the wider employee experience initiatives that we needed to postpone 
while we navigate the Covid storm and resulting economic shock. These will include career 
mapping to support employees to own their career development; embedding flexible working; 
rolling out our employee mobile app to support wider two-way communication and access to 
self-service HR tools; continued development of our pulse and engagement surveys for all 
employees; expanding our community engagement activities; and continuing our online learning 
offer as well as bringing a renewed focus to building manager capability. We expect all these 
actions to culminate in Great Place to Work (GPTW) certification and awards. Our target is to 
have over 80% of our employees working in GPTW certified locations by 2022. In 2020, because 
of Covid restrictions, we achieved 6%.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

Highlights for 2020
•  Developing our first products to 

promote circularity 

•  Committing to developing Science 

Based Targets

•  Strong absolute and relative 
progress in FTSE4Good Index

Priorities for 2021
•  Develop and get approval for 

Science Based Targets

•  Accelerate progress towards targets 

post-Covid impacts

•  Develop full circular economy 

strategy

•  Prepare for external verification of 

data

Comparison of top material issues in 
2019 and 2017 materiality assessments 
in ranked order:

2019

2017

Environmental 
compliance

Environmental 
footprint

Talent attraction

Energy

Water

Water

Energy

Environmental 
footprint

Waste

Health and safety

Business ethics

Resource scarcity

Materials

Waste

Employee 
engagement

Brand 
management

Child labour

Forced labour

Transparency  
and reporting

Environmental 
compliance

SUSTAINABILITY

Sustainability Strategy
We launched our five pillar sustainability strategy; Pioneering a Sustainable Future, in 2019, 
through our Annual Report, our first standalone Sustainability Report and on our website.  
We have now completed two years of that ambitious four year strategy, and are documenting 
here, in our third Sustainability Report and on our website our progress towards our targets  
while also reviewing the strategy itself. Our strategy was originally based on our 2017  
materiality assessment. 

We do these assessments biennially and in 2019 we completed a new review and found that, 
while there had been some significant changes in the materiality of some issues, the strategy  
still reflected well the material issues for our business and our stakeholders. Normally we would 
not anticipate doing another assessment till late in 2021 but, because of the significance of global 
and industry events in 2020, we have brought the next review forward to early 2021, especially 
so that we can factor in the emerging longer term impacts such as those of the Covid pandemic 
and growing climate change awareness into the assessment at an early stage. It was already 
noticeable that in our 2019 assessment both employee and community related issues gained in 
importance, as did climate change, and we have already been reinforcing actions in these areas  
as a result. We expect the events of the last year to lead to a further strengthening of these 
trends. The new assessment will follow the same process as the 2019 one, developing a list  
of issues, assessing them for relevance to our commercial goals (Profitable Sales Growth, 
Strengthening the Core and Value Creation) and for importance to each of our key stakeholder 
groups (Employees, Customers, Shareholders, the Environment, Communities and Suppliers).  
The mapping of our top 10 issues, as identified in our 2019 assessment, to our sustainability 
strategic pillars is shown below. 

Our Priority Areas

WATER  
Managing  
a precious 
 resource wisely

ENERGY  
Renewables for  
a sustainable 
future

EFFLUENT & 
EMISSIONS 
Working for a 
cleaner world

SOCIAL 
Safe and 
sustainable 
workplaces and 
communities

LIVING 
SUSTAINABLY 
Protecting  
our planet

2019 Materiality Assessment top ten issues

Water 
consumption

Energy 
consumption

Environmental 
compliance, 
Environmental 
footprint

Talent attraction, 
Business ethics, 
Employee 
engagement

Materials, Waste, 
Brand 
management

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationWater usage
(litres per kg of production)

2020

2019*

2018*

78

83

83

*  2018 and 2019 restated to exclude NA Crafts and 
include HP Pharr (acquired on 10 February 2020).

Energy use 
(Kwh per kg of production)

2020

2019*

2018*

8.9

9.2

9.2

*  2018 and 2019 restated to exclude NA Crafts and 
include HP Pharr (acquired on 10 February 2020).

Renewable energy 
(% of total energy used in year)+

2020

2018*

2016

2014

31%

31%

29%

24%

+  Based on supplier information, partially certified.

*  2018 restated to exclude NA Crafts and include 

HP Pharr (acquired on 10 February 2020). Prior years 
not restated.

Emissions intensity 
(tonnes CO2e/$m sales)

2020

2019*

2018*

2017

200

192

200

206

*  2019 and 2018 data has been restated to exclude 

NA Crafts (sold on 20 February 2019 and to include 
HP Pharr (acquired on 10 February 2020). 2017 has not 
been restated.

In 2019 we joined the United Nations Global Compact (UNGC) as a Participant, after our Board 
confirmed their full commitment to the Ten Principles of the UNGC, and to promoting action to 
deliver the United Nations Sustainable Development Goals (SDGs). This year the Board has 
reconfirmed their commitment to the UNGC Principles and the SDGs and the Company has 
renewed its Participant membership. During the year the Company actively participated in a wide 
range of activities organised by the UNGC Network UK, and is a member of a number of working 
groups within the Network.

Our 2019 Sustainability Report was our first formal Communication on Progress (COP) as UNGC 
Participants, and our 2020 Sustainability Report is our second COP, formally renewing our 
commitment and reporting on our actions and outcomes in support of the Principles, covering 
human rights, labour, the environment and anti-corruption and on the seven SDGs that we 
believe we can materially impact: 3 Good health and wellbeing, 5 Gender equality, 6 Clean  
water and sanitation, 7 Affordable and clean energy, 8 Decent work and economic growth,  
12 Responsible consumption and production and 13 Climate action.

Water
We use water mainly for dyeing our products. It is used both as a medium for applying dyes, 
rinses and washes to our threads, but also, as steam, for heating these same processes. Elsewhere 
in our processes we use it for humidification, chilling and curing processes. We believe that in the 
long term much of the water use in dyeing can become unnecessary through the development  
of new, waterless dyeing technologies and our investment in Twine in 2018 was partly aimed at 
helping them to develop digital dyeing technology, which is one promising waterless technology. 
We now have one Twine dyeing machine in our Turkish Innovation Centre which is being used  
to do joint development work with Twine, leading towards the industrial integration of their 
technology into our industry. 

Alongside supporting these new technologies, our goal is to continue to reduce our use of water 
in order to safeguard this vital resource. Our ambitious goal is to reduce our water use intensity 
(litres per kilo of production) by 40% by 2022 against our 2018 baseline. We are aiming to do this 
by identifying areas where water use is excessive or unnecessary and by modifying processes to 
reduce their reliance on water. Our goal was always challenging, requiring an acceleration of 
progress compared to the 28% water use reduction we achieved in the period from 2013 to 
2018. We are pleased that we have managed to maintain progress notwithstanding the pandemic 
disruption to our business in 2020, but we recognise that we were not able to complete all the 
projects that we had planned and hence make as much progress as we had anticipated. We have 
continued to refine and improve our water balance analyses of water consumption enabling us  
to identify savings opportunities at unit level and to share good practices between units. By 2020 
our water usage dropped by 6% against 2018. Because many of our plants were operating at 
reduced rates during the pandemic, water use efficiency was negatively impacted and this figure 
consequently understates the actual progress made.

Energy
Our energy use is split fairly evenly between electrical energy (mainly used for powering process 
motors) and fuels that we burn to generate heat for use, mainly, in dyeing. Spinning and twisting 
uses the bulk of our electrical energy to power the large motors used in those processes. Dyeing, 
which requires high processing temperatures, and uses large pumps for water circulation and also 
a lot of energy for drying, is our most energy intensive process overall, as it consumes most of our 
fuel energy plus a substantial part of the electrical energy. Finishing winding and yarn coating 
processes and ancillary activities such as warehouses and offices make up the remainder.

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Many of the energy saving projects that we planned to do during 
2020 were completed notwithstanding the pandemic disruptions, 
but some important projects did have to be suspended and will be 
actioned in 2021. Against our target of a 7% reduction in energy 
use (kWh per kilo produced) by 2022 compared to 2018 (which 
compares to a 22% reduction in the six years to 2018) we registered 
a 3% improvement in 2020. However, this result slightly overstates 
the underlying progress. Because of the production imbalance 
during the year, we were obliged to compensate for the reduction 
in our own spinning output by additional external sourcing of 
semi-finished products, so some energy consumption that we 
would normally register in-house has transferred to our suppliers. 
This is already correcting itself as our production balance recovers 
and will see a small part of the apparent energy progress made  
in 2020 reverse during 2021. Nevertheless, we are confident that 
the work already done and our plans will enable us to achieve  
our target. 

Also within our energy pillar there is a target to shift as much as 
possible of our sources of energy to certified renewables. All our 
energy contract renegotiations are now used as an opportunity to 
switch to renewables, and we are making progress. During 2020  
we negotiated a contract for supply of all of our Mexican electricity 
needs (about 7% of our global demand in a normal year) from 
certified renewable sources from mid 2021, and we have also signed 
agreements in Romania for certified renewable electricity and in 
Colombia where the supplier has committed to provide us with 
certificates when they are available, (the energy we use there  
is from hydro plants and most are not yet certified renewable).  
As the situation in each country is different we have to assess  
the appropriate approach to take country by country. 

Effluent and Emissions
As a significant user of energy, Greenhouse Gas (GHG) emissions 
are a key and growing concern for us. Our approach to managing 
the risks around climate change are described in the risk section of 
this report. To ensure that we are doing our bit to avoid damaging 
climate change we have committed to the Science Based Targets 
initiative (SBTi) under the more challenging Business Ambition for 
1.5°C target and will be working to develop our absolute emissions 
targets under this commitment during 2021. This will ensure that 
we have targets that are in line with the higher ambition Paris COP 
21 targets of a 1.5°C temperature increase. The shift of our  
energy to renewable sources will undoubtedly be at the core  
of our roadmap to achieving these targets. In 2020 we achieved  
a reduction of 3% in GHG emissions intensity and a reduction  
of 20% in absolute GHG emissions compared to 2018. Because  
of the reduction of production in 2020 caused by the pandemic  
the absolute emissions reduction is not representative of the 
improvement, while the emissions intensity is also impacted 
marginally by the production imbalance noted above in the  
energy section.

While our long-term vision is to cease to use water for dyeing, as 
long as we continue to use water-based technology we will need  
to carefully manage our effluent to avoid detrimental impacts on 
the environment and to ensure that the water we discharge can be 
used by others where necessary. Since 2011 all of our units have 
been working to a stringent, internal set of effluent standards. We 
have now, since 2019, replaced these with the Zero Discharge of 
Hazardous Chemicals (ZDHC) standards. We joined ZDHC in 2016  
as we recognised that this association was gathering momentum 
across the textile industry offering, for the first time, the goal of 
creating common standards that would be applicable across the 
whole industry. Our target is to have all units meeting the ZDHC 
standards by 2022, and thanks to the work already done over 75% 
of our effluent was compliant by the end of 2020 (60% in 2019). 
Late in 2019 the ZDHC standard was updated to include sludge test 
results as well as effluent. Parts of standard effluent treatment 
processes are aimed at precipitating out from the effluent those 
chemicals that cannot be eliminated. These then end up in the 
sludge, so sludge results can be less compliant than effluent. 
Nevertheless, in 2020 92% of our sludge was compliant with ZDHC 
targets, giving us an overall compliance rate of 74%. While there  
is a continued investment programme in our effluent plants, 
continuing to address the sludge is as much about finding ways to 
avoid putting the chemicals in the water in the first place and we 
have a programme underway with our main dye and chemical 
suppliers to explore new processes that achieve this. Ensuring that 
all our units are capable of meeting the required limits is important, 
but it is equally important to ensure that effluent treatment plants 
are working consistently and to ensure this we installed, during 
2018, automated measurement systems in all of our key units. 
These take measurements of core parameters every 30 seconds and 
issue automated warnings if the systems begin to approach control 
levels. We also piloted, in 2019, a system that automatically shuts 
off discharge if a standards breach is likely and plan to install this 
across other units in 2021.

Social
Due to Covid, we increased the focus placed on the health and 
safety of our employees and the communities in which they live, 
and as a result have extensively reported on our social activities 
under the Working Responsibly – People section. Refer to  
pages 23–27. 

Living Sustainably
We have two core targets here. The first is to convert all of our 
premium polyester products to using recycled raw materials by 
2024. Notwithstanding significant supply and demand disruptions 
caused by the pandemic in 2020 we were able to continue to make 
strong progress, and achieve a level of 13% compared to 2% in 
2019. This has been achieved mainly by using high quality recycled 
material from drinks bottles. We still have a long way to go to reach 
our target and to get there we will almost certainly need to start 

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Our goal is to make our sustainability reporting as clear and 
transparent as possible, and we fully support the aims of the 
Taskforce on Climate-related Financial Disclosures (TCFD) and are 
progressively including their recommendations into our reporting. 
During 2020 we have been developing Board and management 
governance structures and these will be completed during 2021  
as we deepen our focus in this area. Having done a first iteration  
of scenario risk analysis the initial impact of this on our strategy is 
apparent through our commitment to Science Based Targets, but 
the full integration will happen on the back of the deeper financial 
analysis we will do in 2021. Our adoption of scenario-based risk 
analysis at a qualitative level during 2020 has shown that our risk 
management process is robust and the second iteration with a more 
financial focus will embed this into our processes further. Finally, we 
are already committed to developing full emissions disclosure and 
targets during 2021 and the financial analysis in the risk review will 
determine if there are other metrics apart from emissions that we 
need to be tracking. With the above actions underway we are 
confident that we will be able to make full TCFD disclosures in 2021.

We want to make it as easy as possible for all of our stakeholders to 
understand the sustainability profile of our business. Each year we 
are broadening the scope of our reporting and making it easier for 
interested parties to find the information that they need. A full data 
pack that contains all our published sustainability data is available to 
download on the sustainability section of our website. We have 
used the Global Reporting Initiative (GRI) reporting guidelines since 
2011 and this year again we report against the latest version, the 
GRI Standard. A full mapping of our report against the GRI Standard 
is available on our website, and we have also developed and made 
available again this year a mapping of our data against common 
Environmental, Social and Governance (ESG) criteria.

using waste from other sources, our goal being to use textile  
waste and hence work in a circular economy. We are already 
working on projects in this area, but there are still many significant 
hurdles to overcome.

Waste reduction is our other target, with a goal of reducing  
by 25% in 2022 from our 2018 baseline. The completion of  
the introduction of a new and comprehensive waste reporting 
catalogue in 2020 has caused us to restate our baseline including  
a number of non-product or process related wastes that were  
not captured previously. During 2020 we have reduced our  
waste percentage against this revised baseline by 8%. 

Sustainability management
Sustainability at Coats is led by the Board and is championed by the 
Group Chief Executive and the whole Group Executive Team (GET). 
Delivery of the strategy is managed by the Sustainability Delivery 
Team (SDT). This is led by 3 members of the GET, the Chief Legal & 
Risk Officer and Group Company Secretary, the President, Business 
Operations and the President, Apparel & Footwear. The Head of 
Sustainability manages the SDT which comprises around 25 other 
members from a range of functional areas working in four 
subteams. Each of these has a designated area of responsibility  
for delivery of SDT workstreams or representation for stakeholders 
in the SDT. There are then a large number of people in the 
organisation associated to the SDT via their participation in  
projects related to sustainability. We are clear that delivery of our 
Sustainability Strategy requires the participation and support of  
the whole organisation. The SDT meets monthly, and there are a 
number of subteam meetings as per the needs of their workplans. 
Underpinning all of our sustainability efforts is a deep commitment 
to running our business in an ethical, responsible and transparent 
way. We expect our employees and our suppliers to behave ethically 
in all their dealings relating to our business. All our senior employees 
and those with customer or supplier facing roles receive regular 
training in ethics and compliance, including on modern slavery. 
These training programmes, available in 12 languages, form part  
of the induction for new starters and are done biennially for all 
relevant employees. This training was repeated in 2020, and was 
delivered to over 4,200 employees during the year. We support the 
United Nations Guiding Principles on Business and Human Rights in 
all our operations. Underpinned by our global policies, we uphold 
the requirements of the United Nations Declaration of Human 
Rights and the Convention on the Rights of the Child, the core 
International Labour Organisation Conventions and The 
Organisation for Economic Co-operation and Development 
Guidelines for Multinational Enterprises. We uphold the aims  
of the California Transparency in Supply Chains Act of 2010 and  
the UK Modern Slavery Act 2015 and publish on our website  
a statement on our actions to prevent modern slavery in our 
operations and in our supply chain.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

Non-Financial Information Statement

Policy

Description

Health and Safety Policy

This policy outlines our commitment and actions for the prevention of injury and ill health, and 
ensuring health and safety excellence across our business. 

Ethics Code 

The purpose of the Ethics Code is to ensure that employees across Coats have a clear understanding 
of the principles and ethical values that the Company wants to uphold. It applies to all employees in 
all Coats Group companies globally.

Whistleblowing Policy 

The policy outlines the reasons for maintaining high standards of ethical and legal business conduct 
and describes the procedures for reporting acts which are thought to contravene these standards. 
Also outlined are the actions to be taken by the Company.

Employment Standards 

As a global employer, Coats strives to follow ethical employment standards and believes the human 
rights of its employees at work are an absolute and universal requirement. Coats subscribes to the 
United Nations Universal Declaration of Human Rights and the Convention of the Rights of the Child.

Equal Opportunities 
Statement 

The Company supports equal opportunities in employment and considers it to be an integral part of 
our employee relations policy.

Modern Slavery statement 
(including a statement on 
transparency in supply 
chains)

This statement has been prepared for the year ending 31 December 2020 and is in accordance with 
the requirements of the UK Modern Slavery Act 2015 and the California Transparency in Supply 
Chains Act of 2010. Furthermore, we support the United Nations Guiding Principles on Business and 
Human Rights throughout all our operations.

Living Wage Policy

The Committee also reviewed and approved the adoption of a policy to establish a minimum Living 
Wage, as an enhancement to any local legally mandated requirements, across all of our locations and 
based on sourcing data from independent organisations.

Anti-bribery and Anti-
corruption Policy 

This policy outlines the control of actual and suspected corruption and bribery within Coats, and  
the processes to be followed in the event of actual or suspected instances of corruption or bribery 
being discovered.

Gifts and Entertainment 
Policy 

This policy sets forth the rules related to employees accepting and offering gifts, entertainment, 
hospitality and meals from and to current customers, suppliers, joint venture partners, brand 
representatives and others conducting (or proposing to conduct) business, directly or indirectly,  
with Coats.

Competition Law Policy 

This policy supports Coats’ commitment to observing and complying with all applicable competition 
laws, rules and regulations wherever it operates around the world while acting with the highest 
ethical standards, in an open and honest way.

Supplier Code 

The Supplier Code outlines our expectations required of suppliers and covers labour practices, 
environmental management, responsible sourcing of materials and products, and business conduct. 

Restricted Substances List

Conflict Minerals Policy 

As part of Coats Product Safety programme, we require that all Coats’ suppliers of raw materials, 
dyes, chemicals and packaging materials meet the highest standards appropriate for their end use.  
A comprehensive list of restricted chemicals is revised and reissued to all of our material suppliers 
every year. 

Coats is committed to the responsible sourcing of all raw materials and purchased goods and we 
continually review our approach to ethical and sustainable supply chain management. This policy 
refers specifically to our approach to avoiding ‘Conflict Minerals’ entering our supply chain and 
supplements our wider supply chain management standards.

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Policy

Description

Environmental Policy 

Animal Welfare Policy 

t
n
e
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n
o
r
i
v
n
E

We take our responsibility to the environment very seriously and this policy lays out our approach. 
Coats senior management has defined objectives and targets to ensure that we deliver on this policy 
and additional details on progress can be found in our Sustainability Report.

Materials sourced from animals are present in a tiny proportion of our products (less than 0.01% of 
sales). Nevertheless, the policy covers all the materials and products we buy, and special attention is 
given to Angora and Merino wool, as they can raise specific ethical concerns.

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationPRINCIPAL RISKS AND UNCERTAINTIES

EFFECTIVE RISK MANAGEMENT IS ESSENTIAL TO SMARTLY
AND PRUDENTLY ACHIEVING OUR STRATEGIC GOALS 

Overview
Risk is inherent in all business activities and as a global industrial 
manufacturer, we maintain a comprehensive risk management 
framework that serves to identify, assess and respond to such risks. 

Our approach is focused on the timely identification of risks and 
related opportunities, combined with their appropriate mitigation 
and escalation. We have embedded throughout the Group the 
structural means to identify, prioritise and manage the risks involved 
in all of our activities, including through consideration of those risks 
on a combined basis (as was clearly the case when considering  
and managing the various potential impacts of Covid).

This enables us to run our business effectively and deliver our 
strategy in the knowledge that the likelihood and / or impact 
associated with such risks is understood and managed within  
our risk tolerance.

Governance structure
The Group is constantly alert to new and emerging risks. We 
operate a formal governance structure to manage risk across  
the Group and assign clear accountability for managing our risks. 
Overall responsibility for reviewing the Group’s risk profile and 
setting risk tolerance, as well as assessing the Group’s principal risks, 
rests with the Board. However, the management of risk using our 
common risk management framework is embedded throughout  
our global manufacturing, distribution, sales and other business 
operations, as well as our enabling functions, with all our employees 
having an important role to play. The current unpredictable 
environment presents us with heightened levels of risk. In order to 
address that as swiftly and efficiently as possible the membership  
of the Group Risk Management Committee has been extended to 
include the Managing Directors of the seven geographical clusters 
within the Group (which will further enhance the joining up of the 
top-down and bottom-up approach set out in the chart below). 
Additional relevant subject matter experts are invited to contribute 
to discussions on specific issues such as cyber security, effluent 
treatment, specific people-related issues etc.

Top-down
Define risk 
tolerance, 
monitor 
exposure 
oversight of risk 
management

The Board*
•  Overall responsibility for identification of  

risk, effectiveness of risk management and 
reviewing the Group’s risk profile

•  Setting risk tolerance generally and, in 
particular, for each of the principal risks

•  Monitoring risk experience

Audit and Risk Committee (ARC)
•  Supports Board in monitoring the effectiveness 
of the systems of risk management and internal 
control

•  Reviews reports from Group Risk Management 
Committee (GRMC), Group Executive Team 
(GET), Group Internal Audit (GIA) and the 
external auditor relating to effectiveness

Group Risk Management Committee (GRMC)
•  Responsible for formulating risk management 
strategies and policies and monitoring risk 
management throughout the Group

Business Units / Senior Management /  
Risk Champions
•  Regularly review a broad range of individual 

current strategic and operational risks

•  Monitoring of key risk indicators
•  Report and provide feedback to GRMC, 
Audit and Risk Committee and the Board

Identify, 
monitor, 
report

Bottom-up

Enabling Functions
•  Responsible for identifying, managing and 

mitigating appropriate sets of risks

Key

Report for evaluation

Direct and monitor

*The Board has appropriate regard for all the factors set out in S172 of the 
Companies Act 2006 in its consideration of risk and other matters. You can 
read more about this on pages 21–22 in the S172 Statement.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCulture 
The Board is keenly aware that the effectiveness of our risk 
management is dependent not only on systems and processes  
but also on behaviours. At Coats, there is a culture of openness  
and transparency in how we make decisions and manage risk. 
During 2020, we continued to review and reinforce our Ethics Code 
and supporting policies, training, communications and compliance 
activities – this also included further training and auditing in relation 
to our comprehensive Supplier Code.

Our focus on reinforcing ethical business behaviour and compliance 
has been enhanced through an ongoing Coats Ethical Culture 
programme ‘Doing the Right Thing’ at both Group and local levels. 
Ethics and integrity, along with health and safety, are at the core  
of our organisation’s DNA, and we continue to embed our ethical 
culture in order to mitigate against potential scenarios which could 
put the organisation at risk. Employees are proactively encouraged, 
through training, discussions and other means, to act with integrity 
and to question any unethical behaviour.

Ethics training has continued throughout 2020 and we have been 
even more inclusive. As we moved to a remote working 
environment, we took advantage of the technology we have and 
we leveraged the opportunities of remote working. We increased 
the number of people attending our training sessions and since 
there was no necessity to travel, we extended training to more 
people across the business. Our programme of ‘Doing the Right 
Thing’ continued with the use of different forms of technology.  
We used tools such as Teams and Yammer to communicate with  
our workforce which drove greater understanding, engagement  
and transparency amongst employees across the Group.

Risk tolerance structure 
Our well established and embedded risk tolerance structure  
is determined using four categories which are listed below:
•  Very Risk Averse: where we are very cautious and seek to 

minimise the financial and reputational risk as far as possible. 
Mitigation costs are accepted albeit that they might exceed  
the potential loss

•  Risk Averse: where we are cautious and seek to reduce  
the financial and reputational risk. Mitigation actions are 
proportional and based on cost effectiveness

•  Somewhat Risk Tolerant: where we are willing to take some 
financial and reputational risk to achieve our objectives. 
Mitigation actions are again proportional and based on  
cost effectiveness

•  High Degree of Risk Tolerance: where we are willing to take 
significant financial risk to achieve our objectives. Mitigation 
involves an active management of risk-return trade-offs

Identification and management of risk 
Understanding the risks that our business is exposed to, and 
deploying strategies that ensure residual exposures remain within 
acceptable parameters, is key to managing our business well. Our risk 
framework is based around four categories of principal risks (strategic, 
external, operational and legacy), as well as key and emerging risks 
which are used to build the Group Risk Register which is managed by 
our GRMC. Minutes from this Committee are reviewed by the Audit 
and Risk Committee (ARC). We also ensure that, beyond specific risk 
deep dives, risks are appropriately considered in the decisions that are 
made at Boardroom level – see S.172 on pages 21–22.

During 2020, the ARC and the Board received a number of 
presentations from senior executives on a number of risks including 
the principal risks, and gave input on the steps planned to mitigate 
these risks. The risks are considered not only in isolation but also the 
correlation between risks and the likelihood of one risk occurring  
at the same time as another or even triggering it, and the potential 
combined impact of that and any further mitigating actions that  
can be taken. In 2020, the Board reviewed the effectiveness of the 
Company’s risk management and internal controls. A significant 
amount of recurring reviews over the Group’s key internal controls 
and mitigating actions, including their linkage to managing the 
Group’s principal risks appropriately took place. Examples include: 
standing and regular updates from the CEO / Group Executive Team 
to the Board on H&S, People, Performance, M&A and legal matters. 
There are also regular Board deep dives into specific risks, e.g. Cyber 
Security in July; Economic Risk in September; and Climate Change in 
October. The identified principal risks for the Group form a key part 
of the work performed in the above reviews to ensure that the most 
pertinent risks are being regularly monitored on a day-to-day basis, 
with findings on this reported to the ARC and Board for review, 
input and direction. Based on the principal and key risks of the 
organisation, our Group Internal Audit (GIA) team updates and 
embeds the relevant Group risks in its audit process, for instance, 
compliance with anti-bribery and corruption requirements as well  
as health and safety requirements.

Every quarter, GIA reviews the Group Risk Register and local Risk 
Registers from the cluster management committees. This review 
includes an assessment of the risk management practices of the 
business units / clusters in areas such as the frequency and adequacy 
of the cluster risk management committee meetings, minutes of the 
meetings and following through on actions contained in the local 
risk register. This provides an assurance that the risk management 
exercise is carried out regularly throughout the Group and that  
the risks are reviewed and kept up to date by the respective 
stakeholders. These updates / key highlights are then presented  
and discussed in the GRMC meetings. Taking the insights from  
these GIA and business unit / cluster risk management activities  
and focusing on the risks that may impact the strategic objectives  
of Coats, the Board has defined 11 principal risks, as well as a 
number of key and emerging risks within that Group Risk Register. 

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

These risks, and the steps we have taken to mitigate these risks, are detailed on the following pages. Throughout the year, the Board has 
kept each of the principal risks under review with support from the GET and the GRMC. The Board also undertook a comprehensive 
assessment of the principal risks facing the Group, along with the current levels of risk tolerance for each of those risks. Due to the ever-
changing global risk environment, the following risks have been updated since the last report:

PROMOTED

PROMOTED

PROMOTED

Climate change risk has moved from being categorised as an emerging risk to a principal risk to better reflect  
its primary importance for the Group and its various stakeholders.

Risk of ever-increasing customer expectations has moved from being categorised as a key risk to a principal risk  
to reflect its important role in the Group’s strategic growth ambitions.

M&A scale ambition risk has moved from being categorised as a key risk to a principal risk to reflect its important 
role in the Group’s strategic growth ambitions.

FROM DECREASING 
TO INCREASING

The risk trend for health and safety has increased from decreasing to increasing in light of Covid. 

DEMOTED

Risk of supplier non-performance and / or unavailability and / or price increases of raw materials has been demoted  
in light of the manner in which the executive team managed and mitigated this risk. 

Our principal risks, along with a summary of the measures we have put in place to manage and mitigate them, are set out in the table 
below. As stated above, the Board will continue to keep these principal risks, as well as the appropriateness of this list and the constantly 
changing broader risk environment, under ongoing review.

Principal risk

Risk trend

Action / mitigation

1. Strategic

Mergers and 
Acquisitions 
(M&A) 
scale ambition risk in 
light of the Group’s 
increasing ambition 
in scale of its 
acquisition 
programme and its 
ability to source and 
satisfactorily acquire 
suitable targets.

Increasing

All M&A projects are overseen and closely monitored by the Board and by senior executive 
management. The Board has approved a set of criteria to evaluate acquisition opportunities  
against, which include both financial and non-financial parameters. Clear M&A processes have  
been developed and include identification and evaluation of opportunities, specified roles and 
responsibilities for all aspects of M&A projects along with focused project management resources 
during both execution and integration phases. In addition to internal resources, use is made of 
external advisors in specialist areas such as negotiation, financing and due diligence. Post-completion /
integration reviews are conducted to ensure that learnings are identified and built into subsequent 
projects as part of a continuous improvement process.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationPrincipal risk

Risk trend

Action / mitigation

Increasing

Risk of ever-
increasing 
customer 
expectations
and the Group’s 
continuing ability to 
meet and exceed 
those expectations 
as part of its 
strategic growth 
ambitions.

In this fast-changing world, the Group has continued to invest in understanding and exceeding our 
customer expectations. In order to fully understand what our customers expect in terms of product, 
service, price and experience, we carry out hundreds of customer engagements each day. In 2020, 
these engagements ranged from senior leader face-to-face meetings; attending brand and retailer 
supplier summits; joining virtual customer and innovation forums; communicating with industry 
associations; working with external consultancies; and sharing industry-specific studies. We also 
conduct regular customer surveys and we track complaints on an ongoing basis. We take these 
learnings and build differentiation for our customers as a value-adding partner focusing on specific 
drivers to deliver for our customers. With the ever-increasing demand for speed, we developed the 
new Speedline capability in South-East Asia, and throughout the pandemic we enhanced material 
supply management and software solutions for more rapid production planning. We have focused  
on personalisation as we continue to lead the market in the agile supply of complex product and 
colour palettes to meet the increasing consumer and retail trend for personalised offerings.

Our innovation ecosystem gives us dedicated capacity to develop new product solutions as well as 
products in collaboration with customers. In 2020, we launched 22 new products across multiple 
industry segments (from personal protection to oil and gas to sports and athleisure). Our leading 
Technical Services teams helped our customers to improve productivity and optimise product costs 
through significant customer engagements, pivoting quickly to virtual support. We launched a lattice 
composite solution which allows customers to adopt lightweight technologies at more affordable 
prices by virtually eliminating material waste. We developed digital tools like our Synthesizer App 
which reduces customer development costs by simulating high performance yarn properties for flame 
retardant and cut resistant fabrics. We also provide bespoke production lines and manufacturing 
solutions for highly engineered products as diverse as those used in energy markets, to those used  
in feminine hygiene markets.

Coats is known for the quality of its products and services, and we continued to help customers to 
improve seam quality and garment performance resulting in lower returns through our technical 
services offering and high-quality products. We work responsibly as a business, supporting brands 
and retailers with supply chain transparency, both with our trusted product supply and our Coats 
Digital software solutions portfolio. A key part of our Company purpose is to make a better and more 
sustainable world and we have continued to invest in helping our customers meet their sustainability 
goals, both as a trusted and responsible industry leader in ESG, and with our product portfolio of 
recycled threads and zips, Cradle to Cradle and circular economy R&D.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

Principal risk

Risk trend

Action / mitigation

Stable

Appropriate talent 
and capability 
development risk
Risk of failure to 
attract and retain 
talent and capability 
given business 
changes and growth 
in new areas.

Increasing

2. External

Economic and 
geopolitical risk 
arising from political 
and demand 
uncertainty

– across both key 
Asian and developed 
markets 

– including risks to 
free trade 
conventions. 

This year the Board and senior management teams heightened their focus on talent development  
and wellbeing during the Covid crisis. We pivoted all of our in-house learning to 100% virtual learning 
which included our Manager Capability Development and Supervisory Skills Programme with sessions 
still being held globally in various clusters. To provide and enhance critical targeted capability 
development, we created Learning Zone sessions which promoted topics on improving productivity 
whilst remote working; balancing work life and family life; and sessions were also available on 
promoting mental wellbeing for employees and their families. These were provided in local languages 
in all of our clusters. 

For the first time we conducted surveys using the Glint platform. We initiated two lifecycle surveys on 
onboarding and exits. We conducted a series of pulse surveys on: Covid and wellbeing; our five Coats 
Priorities; and cluster office re-openings to gauge and action the views of our employees on these 
topics. Our annual employee engagement survey has been delayed to 2021 to ensure that we have 
the best process for ensuring safety in our manufacturing sites to deploy the survey. Additionally, we 
have launched a new subject matter expert programme. These are peer-to-peer webinars led by our 
employees who have specialist skills in specific areas throughout the business. These webinars will 
become a valuable source of technical expertise and enable us to build a resource library accessible  
for all of our workforce.

The Covid pandemic has had a significant impact on GDP in our markets and demand for our 
products in 2020. Whilst demand has subsequently recovered, albeit not to 2019 levels, increased 
uncertainty over the global economic environment remains. To the extent that the pandemic has a 
longer and more prolonged impact on the global economic environment, there may be a further 
negative impact on consumer spending and further potential disruption to our operations and supply 
chain. In the longer term there are also implications for regional supply chains. In addition, risks to  
free trade, from ongoing US / China trade discussions, and the potential consequences for economic 
growth, add to this uncertainty. The Group continues to monitor the Covid pandemic and its impact 
on the global economic environment as well as other aspects of economic risk, and any direct or 
indirect influence on our business. 

The Group closely monitors the impact of the Covid pandemic on demand as well as monitoring the 
implications of other areas of economic risk on the Group. Our global reach and local knowledge give 
us the agility and insights needed to operate and develop our business prudently and successfully 
during periods of economic volatility. Additionally, the Group’s global footprint allows us to quickly 
respond to any changes in regional supply chains that may arise as a result of the pandemic.

As a global industrial manufacturing company with no UK manufacturing facilities and minimal direct 
sales in the UK, Coats is of the view that there will be limited direct adverse impacts on the Group 
from the UK leaving the European Union (Brexit). Both the UK and the European Union, however, are 
significant markets for both Apparel & Footwear and Performance Materials. Therefore, any impact  
on sales and future growth expectations for these markets could have an indirect consequence for 
our business. Many years of exposure to emerging markets have given us experience of operating and 
developing our business successfully during periods of economic and political volatility. We continually 
monitor and analyse economic and demand indicators to ensure that our supply chain remains flexible 
and our product portfolio remains relevant. This analysis provides a key input to our product 
development, business planning and pricing strategies. The Group’s international footprint and 
comprehensive portfolio also provide a mitigating balance in our exposure to both European Union 
and non-European Union markets.

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Risk trend

Action / mitigation

Stable

Cyber risk 
Risk of cyber 
incidents leading to 
corruption of 
applications, critical 
IT infrastructure, 
compromised 
networks, 
operational 
technology and / or 
loss of data.

In 2020, Coats, like many other global organisations, saw a dramatic shift in where our employees 
worked from, due to the Covid pandemic. This required us to make changes to some of our 
procedural and technical controls to address the changing risk landscape. Part of our adjustments 
included refining our policies and procedures, such as updates to our Acceptable Use Policy and 
updated Work From Home guidance. We educated our workforce on how their diligence and 
adherence to processes was even more important than previously as employees were outside the 
traditional perimeter protections. This awareness training was not just a single mandatory annual 
training but rather a more comprehensive set of awareness engagements that included live calls, 
videos, weekly and monthly newsletters, as well as computer-based training delivered through  
our Learning Management System (LMS). Our phishing simulations were already an established 
process and we continued these along with targeted follow-up to those who failed to properly 
identify the simulated phishing messages to further educate them on how to identify and handle 
phishing messages.

Coats was able to identify two main attack vectors which, though not new, saw dramatic increases  
in exploitation attempts: phishing and brute-force login attempts. In our 2019 report, we reported 
enabling of multifactor authentication (MFA) which proved to be an effective control against the 
brute-force attempts. For 2020, we added additional controls to enhance our security posture, in 
addition to raising awareness through the above programmes. An example control was additional 
conditional access controls to block login attempts from high-risk countries or countries where we 
have no physical presence. Additionally, in early Q2 we applied two pre-planned technical controls  
to further protect corporate data. This enabled more comprehensive blocking of access to public  
cloud storage sites as well as implementing further controls to restrict data being copied to USB 
storage devices. What this allowed us to do was better maintain control of our data from a global 
perspective without allowing it to be copied to unmanaged locations where we could lose visibility 
and / or manageability.

As reported in the 2019 report, Coats has employed a managed Security Operations Center (SOC). 
We have continued to work with our managed SOC provider to verify that the organisation is 
protected and properly monitored. We are pleased with the partnership and plan to continue the 
relationship in 2021 with potential enhancements to make certain that Coats is able to continue  
to detect and properly respond to the new threats while still managing current protection levels. 

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

Principal risk

Risk trend

Action / mitigation

Climate change 
risk
arising from either 1. 
the impact of failing 
to sufficiently 
address the need to 
decarbonise the 
company’s 
operations and 
reduce emissions, 
leading principally to 
commercial and 
reputational risks 
(potentially causing 
loss of sales and 
share price pressure) 
and the financial risk 
of emissions taxes or 
other legislative 
changes, or 2. the 
physical impact of 
climate change on 
the company’s 
operations and 
business model and 
that of its customers 
in the textile supply 
chain.

Increasing

During 2020 we undertook our first in-depth risk analysis on climate change. After reviewing the 
analysis and in recognition of the risk’s primary importance for the Group and its various stakeholders, 
the Board agreed that this is a principal risk that will be subject to ongoing Board review.

The analysis has been carried out using the Taskforce on Climate-related Financial Disclosures (TCFD) 
methodology, published as a technical supplement to their 2017 report. We developed three scenarios 
for our business based on publicly available data prepared for the next Intergovernmental Panel on 
Climate Change (IPCC). The first one is a low carbon scenario with significant short term 
decarbonisation and achievement of net-zero emissions by mid-century, alongside good global 
collaboration and continued economic growth and reduced regional inequalities. The second is a  
high carbon but low growth scenario, with increasing regional inequalities and low levels of global 
cooperation. The third is a fossil-fueled, high growth scenario with consequent very high emissions 
levels. For this first iteration, the analysis has been qualitative and we are planning to continue the 
work done in 2020 by developing quantitative financial analysis which will allow us to report fully  
in line with TCFD recommendations in our next assessment in 2021.

The primary short-term risks revolve around the commercial and reputational risks of not taking 
concerted action to reduce climate change, together with the risk of increasing emissions taxes. If not 
adequately mitigated, these risks could lead, respectively, to loss of customer specifications and hence 
loss of sales, share sales by investors and hence downward pressure on share price, and increased 
operational costs, and hence lower margins. Physical risks to our plants and supply chains, and 
potentially significant geographic shifts in our customer footprint, caused by wider industry 
reorganisation and withdrawal from areas most impacted by climate change, are longer term,  
and likely to impact on us from 2030 onwards in the high carbon scenarios.

The main opportunities are the commercial and reputational opportunities from being a leader in 
moving to a low emissions model and some growing product areas, especially around light-weighting.

We have analysed a broad range of mitigating actions and have identified those that have the  
most important impact on the identified risks. Many of these, such as having proactive and ethical 
communications, a low carbon product strategy, developing products for circular business models and 
investing in new technologies, are currently underway within Coats, and only need to be dialled up  
to be more focused on the climate change risks. The one very significant new action that needs to be 
taken is to develop achievable emissions reduction targets that are in line with the 2015 Paris COP 21 
low carbon targets. In order to address this, Coats has committed to the SBTi, at the more challenging 
Business Ambition for 1.5°C level. We have also committed to developing a long-term target to reach 
net-zero emissions by 2050, the highest level of ambition on climate under the SBTi. This initiative  
is supported by the United Nations Global Compact, the World Resources Institute, CDP (formerly 
Carbon Disclosure Project) and WWF (formerly World Wide Fund for Nature). SBTi is the low emissions 
programme that has received most support within the textile industry, and hence is the appropriate 
programme for Coats to join. Having made this commitment we now have two years to develop and 
have approved plans to reduce our absolute emissions in line with the COP 21 target.

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Risk trend

Action / mitigation

Stable

Environmental 
non-performance 
risk
given changing 
standards and 
increased scrutiny 
resulting in 
disruption of existing 
business, fines and / 
or reputational 
damage.

Our Sustainability Strategy, launched in 2019, is fundamental to our mitigation plan for this risk as 
many of the actions required are part of that strategy implementation. As for the last two years, the 
progress on delivery of our strategy is detailed in our 2020 Sustainability Report that is published 
simultaneously with our Annual Report. Covid did impact our progress with actions during the year 
because of plant closure and other disruptions, and also because we had to halt any activities that 
required internal or external visitors on our sites. This impacted plant audits and effluent testing 
routines. During Q4 we were able to resume normal activities in some locations, but there are 
ongoing disruptions in some sites and these are likely to continue in early 2021. Detailed below  
are the principal actions taken during 2020 that impact on this risk.

We are implementing a harmonised global system to effectively manage our energy and 
environmental impacts in a documented, systematic way. This includes an environmental 
management system (EMS) aligned to ISO 14001 and an energy management system aligned  
to ISO 50001 with many elements of the EMS now digitised.

We improved our monitoring and measurement platform for sustainability reporting to incorporate  
a digital analytical tool that assists us to perform deep dives on sustainability metrics down to 
manufacturing site level. This allows us to target underperforming sites whilst using best practice  
from those sites consistently meeting interim targets. Together with the sustainability projects tracking 
application, these tools will help us meet our 2022 sustainability targets for water, energy and waste.

We completed Environmental Health and Safety (EHS) legal compliance audits and raised findings and 
compliance actions for all of our global manufacturing units using our compliance tracking application 
thereby improving our compliance to EHS legal requirements. We also manage all environmental 
permits and licences we hold in each country we operate in on the permits management application.

Our environmental incident application ensures that we have a consistent and transparent way of 
managing environmental incidents that occur and implementing corrective and preventative actions  
to prevent reoccurrence through a risk-based approach.

Online analytical monitoring equipment provides real-time data for our effluent treatment plants that 
discharge direct to natural waterways to ensure we meet local permit conditions and Zero Discharge 
of Hazardous Chemicals (ZDHC) limits and to meet our 2022 effluent treatment plant targets.

We already had robust business continuity plans (BCPs) in place before the pandemic. These were 
tested and stood up well during Covid in what was clearly a live stress test. But in the spirit of 
continuous improvement, we identified and collated all the lessons learned from Covid and used  
these to refresh the BCPs to make them even more robust.

Our global Business Continuity Plan includes environmental emergency preparedness and response 
plans and we have added an environmental aspects and impacts application to our digitised, global 
environmental management system. The environmental aspects and impacts register is essentially  
a global environmental risk register for the business.

These environmental and governance measures have contributed to us making further upward 
progress in the FTSE4Good Index.

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationPRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED

Principal risk

Risk trend

Action / mitigation

3. Operational

Health and 
Safety risk
The risk of (i) safety 
incident(s) leading to 
injury or fatality 
involving our 
employees or other 
interested parties 
such as contractors, 
visitors, onsite 
suppliers, etc. along 
with potential 
resulting prosecution, 
financial costs, 
business disruption 
and / or reputational 
damage; and / or (ii) 
physical and mental 
health issues, 
including as a result 
of the Covid 
pandemic, impacting 
wellbeing, 
engagement, 
productivity and 
talent retention.

Bribery and anti- 
competitive 
behaviour risk
The risk of breach of 
anti-corruption law 
or competition law 
resulting in material 
fine and / or 
reputational 
damage.

Increasing

The Board has continued to receive and discuss with management – as a priority at each Board 
meeting – detailed reviews of health and safety performance and monitoring of progress against 
established annual health and safety targets and objectives. Senior management and employees 
throughout the Group likewise remain intently focused on creating an injury-free work environment.

Following the great safety successes of our Journey to Zero strategy launched in 2019, the deeply 
embedded health and safety culture served as a solid foundation and it continued with nearly 40,000 
preventive actions completed, and 518,000 H&S training hours in 2020. It also enabled a rapid and 
effective response to the Covid pandemic.

The widespread Covid pandemic posed significant health risk to the Coats workforce throughout  
the year. These risks were quickly mitigated through world-wide implementation of a pandemic 
response plan based on the international emergency management principles of Preparedness, 
Prevention, Response and Recovery (PPRR). The PPRR plan was implemented and deployed two weeks 
before the pandemic was declared and included comprehensive case tracing. All health and safety 
efforts were focused on two main fronts, (1) prevention of virus spread within the workplace, and (2) 
prevention of transmission to employees from outside of the workplace. The early action we took  
to change working practices, introduce safety measures and track contacts to four levels meant that 
we did not have a single confirmed case of infection transmission happening in our operations, and  
a small handful of infections where the source is unconfirmed and could have occurred on site. The 
results of our prevention efforts within the workplace were widely successful and will continue into 
2021. Despite these efforts, 14 of our employees contracted Covid outside of the workplace and  
sadly died. 

In 2021, continuing our effective pandemic response and recovery will be our primary focus. 
Additionally, the Group has set specific targets and objectives to reduce other health and safety  
risks as well. The Journey to Zero campaign will continue and the Group will continue to refine this 
approach to identify and mitigate key health and safety risks and to further increase the Group’s  
focus on creating an injury-free environment. See pages 23–27 for more information.

The Group continues to maintain clear and well publicised policies and processes, spanning bribery 
and anti-competitive behaviour along with a number of other ethics issues, including in relation to 
partners, contractors and suppliers. These are reinforced through a comprehensive Supplier Code 
(covering initial due diligence processes, onboarding, training, ongoing compliance and auditing). 
These policies are reviewed annually. There is extensive online and face-to-face training and regular 
communications through a range of channels, including through our global ethical culture champions 
network. During the pandemic, the ethical culture champions were asked to emphasise key ethical 
messages in light of the potential heightened risk of corruption during these uncertain times. A 
sub-committee of the GRMC comprising key business and functional leaders meets quarterly to 
consider a range of ethics risks (including key risk indicators for those risks), legislative and regulatory 
developments and mitigation plans. 

The Group actively maintains a whistleblower system, enabling employees and others who are aware 
of, or suspect, unethical behaviour to report it confidentially. Awareness of the system, together with 
the risks and the policies, has been increased through an ongoing Ethical Culture Campaign which 
operates at a Group and local level. See pages 23–27 for more details. Raising awareness of this risk  
is a priority for the Group and it was encouraging that the Group Communications team won the 
Gold award for Best Use of Social Media at Communicate Magazine’s Internal Communications and 
Engagement Awards for Global Ethics Day 2020, demonstrating that the Group is at the forefront  
of proactive engagement in its ethical business training for employees across the business. 

Stable 

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Risk trend

Action / mitigation

Stable

The funded UK pension scheme is overseen by its Trustee Board, which is required to have the 
appropriate knowledge and understanding in this area. Independent professional Trustee Directors  
are appointed to the Trustee Board to provide additional expertise. In particular, professional 
investment advice is taken as necessary; investment strategy aligns with funding objectives; and 
scheme assets are diversified accordingly.

The Group has agreed ongoing annual deficit recovery payments effective from 1 April 2019 and 
these are payable until 31 December 2028. The Scheme’s next triennial valuation will have an effective 
date of 31 March 2021. The impact of Covid has been largely mitigated through diversification,  
risk management and interest rate hedging. The Coats UK Pension Scheme is currently over 85% 
(2019: 80%) hedged against interest rate and inflation movements by reference to the Technical 
Provisions liability.

The Group and the Trustee Board routinely review de-risking of the scheme through liability 
management and investment strategies. The de-risking framework in place also enables the pension 
scheme to take advantage of any out-performance. 

See note 10 on pages 134–143 for more details.

Stable

The Board continues to monitor developments very closely and oversees the strategy in relation to  
the Lower Passaic River proceedings.

4. Legacy risks

Pension scheme 
deficit funding risk
Risk of potential 
volatility in UK 
pension gross 
liabilities and total 
assets leading to 
increased annual 
cost of repair plan to 
fund deficit (which 
could impact one or 
more of free cash 
flow and dividend 
payments).

Lower Passaic 
River legacy 
environmental 
matter risk
Detail of the Lower 
Passaic River legacy 
environmental 
matter can be found 
in note 28 on pages 
158–159.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationPRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED

The Group’s strategic objectives and associated principal risks are 
underpinned by an annual budget and Medium Term Plan process, 
which comprise financial projections for the next three years 
(2021–2023). The Medium Term Plan represents a common process 
with standard outputs and requirements at the Group level. The 
Board reviews the Medium Term Plan annually. Although this period 
provides less certainty of outcome, the underlying methodology is 
considered to provide a robust planning tool against which strategic 
decisions can be made.

The Directors have taken into account the Group’s current position 
and the potential impact of the principal risks as set out on pages 
36–43 as well as other risks that could crystallise during the medium 
term. The Directors also considered the Brexit risk which sits within 
the Group’s principal Economic Risk, but for the reasons set  
out on page 38 in the principal risks table, did not include that  
element within the set of risks specifically modelled in preparing  
this statement.

After assessing the potential impact of the principal risks, a severe 
but plausible scenario relating to the global economic environment 
was modelled. The Directors have also taken into account a number 
of assumptions that they consider reasonable within these 
assessments including:

•  The assumption that funding facilities will continue to be 

available throughout the period under review: the core US 
private placement borrowings are due in 2024 and 2027,  
the revolving facility matures in 2022 and it has been assumed 
that the revolving facility will be successfully renewed in 2021;

•  The assumption that following a material risk event, the Group 

would adjust capital management to preserve cash; and

•  The assumption that the Group will be able to mitigate risks 

effectively through other available actions.

Based on this assessment, the Directors have a reasonable 
expectation that the Group will be able to continue in operation 
and meet its liabilities as they fall due over the period of  
the assessment.

Key risks 
In addition to these principal risks, the Group has also identified  
a number of key risks. These are monitored by the GET and the 
GRMC, who receive regular updates, and periodic deep dives,  
on them from the risk champions assigned to each risk.

An example of such a key risk is the risk of disruption to our 
business operations as a result of events such as pandemics,  
fire or water shortages, or natural catastrophes (flood, hurricane, 
monsoon, earthquake, etc.). Discussions on this risk, and the steps 
taken to mitigate it, include regularly stress testing the business 
continuity plans prepared by units and functions across the Group 
to ensure we are able to respond quickly and effectively to any  
such event.

The recent outbreak of Covid resulted in these business continuity 
plans being activated, including the immediate implementation  
of procedures to protect our employees and anyone entering our 
premises, and actions to limit the financial impact on the business 
and proactively leverage our global footprint and supply chain  
to provide the best possible service to our customers.

The list of key risks also includes a number of potential disruptive 
risks arising from, for example, new competitors and new 
technology. The GET, GRMC and Board, as appropriate, continue  
to monitor these potential disruptive risks and also the opportunities 
that these may present. See page 44 for more information. 

Emerging risks 
The 2018 UK Corporate Governance Code, which came into effect 
from 1 January 2019, requires Boards to assess emerging risks in 
addition to principal risks. In adherence with this, we have 
integrated emerging risks into our current risk management 
practices monitoring the internal and external business environment 
to identify and review new and emerging risks to the Group.

The Board and management continue to remain alert to emerging 
risks. These are identified through internal discussions and 
experiences as well as conversations with external third parties and 
insights from observing and reflecting on the broader environment 
in which the Group operates.

Long Term Viability Statement 
In accordance with provision 31 of the revision of the 2018  
UK Corporate Governance Code, the Directors have assessed  
the longer-term viability of the Group over the period to  
December 2023.

The Directors’ assessment has been made with reference to the 
Group’s current position and prospects, as detailed in the Strategic 
Report. This takes into account the Group’s business model, 
strategy, approach to allocating capital and the potential impact of 
the principal risks and how these are managed. The Directors have 
also considered committed finance facilities which, following the 
refinancing exercise concluded in December 2017, have maturities 
which range from approximately 21 months to over five years.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationOPERATING REVIEW

Revenue2
By segment

Apparel and Footwear
Performance Materials
Total

By region

Asia
Americas
EMEA
Total

Adjusted operating profit2,3
By segment

Apparel and Footwear
Performance Materials
Total adjusted operating profit
Exceptional and acquisition related items
Operating profit5

Adjusted operating margin2,3,4
By segment

Apparel and Footwear

Performance Materials

Total

2020

$m

2019

$m

Inc/(dec)

% 

 2019  
   CER1

$m

CER1 
inc/(dec)

Organic1  
inc/(dec)

% 

% 

823
341
1,163

629
315
219
1,163

96
15
111
(7)
103

1,063
326
1,389

800
323
266
1,389

156
42
198
(7)
191

(23)%
5%
(16)%

(21)%
(3)%
(17)%
(16)%

(39)%
(64)%
(44)%

(46)%

1,038
318
1,356

790
306
259
1,356

(21)%
7%
(14)%

(20)%
3%
(15)%
(14)%

(21)%
(14)%
(19)%

(20)%
(19)%
(15)%
(19)%

155
41
195

(38)%
(63)%
(43)%

(38)%
(61)%
(43)%

(45)%

(44)%

11.60% 14.70% (310)bps

14.90% (330)bps

(330)bps

4.40% 12.80% (840)bps

12.80% (830)bps

(700)bps

9.50% 14.30% (470)bps

14.40% (490)bps

(420)bps

1 2019 figures at 2020 exchange rates. Organic on a CER basis excluding contributions from bolt-on acquisitions (Pharr HP and ThreadSol).

2 Includes contribution from bolt-on acquisitions made during the period.

3 On an adjusted basis which excludes exceptional and acquisition-related items.

4 Organic adjusted operating margin: Group 10.2%, Performance Materials 5.8%.

5 Reported operating profit margin 8.9%

2020 Results overview
Group revenues decreased 16% on a reported basis, as all markets 
were impacted adversely by the Covid pandemic. On a CER basis, 
Group revenues reduced 14%, which was 2% better than the 
reported rate of decrease as a result of year-on-year currency 
translation headwinds (notably Brazilian Real, and Turkish Lira). On 
an organic CER basis, revenues declined 19% as a result of the 5% 
contribution from the acquisition of Pharr High Performance Yarns 
(Pharr HP) which was completed in February. In the second half  
of the year we saw a continued improving trend in demand with 
organic revenues down 12%, including most recently an exit rate in 
November/December of 5% down year-on-year on an organic basis.

Group adjusted operating profit decreased 43% to $111 million on  
a CER basis (2019: $195 million on a CER basis). Adjusted operating 
margins were down 490bps to 9.5% (2019: 14.4% on a CER basis) 
and included an improving trend in the second half (H2 12.2%). 

Group organic adjusted operating profit also declined 43%, in line 
with the CER decline due to the small loss made by Pharr HP in the 
period since ownership, as the volume impacts seen at a Group level 
also impacted Pharr HP.

Excluding the expected dilutive effect on overall Group margins 
from Pharr HP (4% operating margin business pre-acquisition), 
Group organic operating margins decreased by 420bps to 10.2%  
(vs a 490 bps reduction to 9.5% on a CER basis).

Adjusted earnings per share (EPS) for the year decreased to 2.4 
cents (2019: 7.0 cents). This reduction was due to the significant 
decline in adjusted profit before tax (down 50% year-on-year),  
and the increase in the effective tax rate to 39% (2019: 29%).

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Apparel & Footwear (A&F)
A&F segment overview
Our Apparel & Footwear business demonstrated market leading 
resilience and agility as the industry suffered the significant impact 
of Covid which saw large scale order cancellations from retailers, 
manufacturing slowdowns and accelerated high street bankruptcies. 
We pivoted quickly to supporting our customers, to cash 
management and to ensuring a safe operational environment for 
our employees and then, as conditions improved, to customer 
engagement and service leadership. Revenues were 21% below 
2019 but in spite of this we broadly maintained price, realised 
customer wins and made progress in the China domestic market.  
As the year progressed, sales started to improve, with the exit rate 
down 7% (on a CER basis) for November and December vs down 
29% in H1 2020 and down 15% in the four months to October 
2020. Our relationships with key customers, retail segments and 
geographies position us strongly to win the recovery.

During the course of 2020 several recent market trends accelerated. 
These include the polarisation of demand (for example due to 
casualisation and digital online adoption), demand shift from  
West to East with the domestic China Apparel & Footwear market 
expected to outgrow both Western Europe and North America by 
2024, continued supplier consolidation, an enhanced sustainability 
focus with recyclable fibres and threads to become part of 
‘standard’ demand, nearshoring, changing customer needs  
(‘speed’) and aggressive digitisation of the supply chain.

Customers need to build greater resilience in their sourcing 
networks, to rebalance their supply chains geographically, to 
fast-track digital investments and to increase their commitment  
on sustainability. Coats, as the global leader and trusted partner of 
the industry’s biggest names, is uniquely positioned to benefit from 
these accelerated trends. They align to our existing strengths and 
further confirm our operating model as we leverage our global 
footprint, flexibility, innovation and sustainability credentials and 
digital tools to deliver exceptional customer service.

A&F revenue
Revenues in our A&F business were down 21% (down 23% 
reported) as a result of the impacts of Covid seen firstly during H1  
as wider global lockdown measures took hold. As the pandemic 
spread around the globe, we saw large scale order cancellations / 
deferrals from brands and retailers which had a significant impact on 
demand from late March and throughout Q2. In April and May the 
business was also significantly impacted by lockdown measures in 
some of our key markets including India and Bangladesh. However, 
as global lockdown measures eased, we saw an encouraging and 
consistent improvement in demand throughout the second half as 
production restarted at manufacturers and confidence gradually 
returned. Demand through our second half peak season was 
encouraging, and most recently we saw a further improvement  
in the November / December exit rate of 7% down year-on-year.

Despite the very difficult market conditions we faced from Covid,  
we took a customer focused approach throughout the year in order 
to support our partners and provide reliable sourcing. Our long 
standing and deep customer relationships with retailers and brands 
and the ‘peace of mind’ we provide as a supplier is even more 
important at times such as this, as supply decisions increasingly 
factor in quality, reliability, reputation and sustainability credentials. 
A number of our existing key competitive differentiators have  
come even more to the forefront, such as our speed of supply,  
both through geographical proximity of our sites to our customers 
(Coats has the largest manufacturing footprint globally with c.40 
A&F sites) and our digital tools (e.g. the Coats digital sampling tool 
and online ordering platform) which take human touch points out  
of the supply process.

Our global footprint also proved advantageous as country-wide 
lockdowns meant even more accelerated shifts in country sourcing 
patterns and this was seen throughout the year, such as during  
the initial Q1 shutdowns in China, which saw accelerated shifts in 
volumes to Vietnam. Furthermore, our in-house technical expertise 
provided significant support to our customers, and our industry 
reputation for reliability (including compliance and sustainability) 
meant we became even more of a trusted partner during this 
difficult period. Whilst revenues were significantly impacted,  
our approach yielded a number of customer share gains.

By sub-segment, we saw a broadly consistent impact across our 
portfolio. A&F thread revenues (c.85% of segment revenue) were 
down 21% year-on-year, and Zips and Trims revenues (c.10% of 
segment revenues) were down 22%, both in line with the wider 
segment sales decline. Latin America Crafts (4% of A&F sales) 
performed resiliently, with revenues down 10% year-on-year,  
and with growth in the second half of the year. Our Coats Digital 
business (1% of A&F revenue) was down 30% year-on-year, 
primarily due to the impact of Covid, but current booking levels  
are showing an encouraging improving trend.

A&F profit and margin
Adjusted operating profit for A&F declined 38%, compared to the 
Group decline of 43% and organic adjusted operating margin was 
down 330bps to 11.6% compared to the Group decline of 420bps 
to 10.2%.

A&F margins were less impacted in the year despite higher volume 
declines as a result of Covid, due to the relative larger scale of the 
A&F business and the ability to greater flex the manufacturing 
footprints of these sites accordingly to limit the downside volume 
impact. This led to significant margin normalisation within A&F in 
the second half (H2 operating margin: 15.2%), albeit included some 
benefit from non-recurring items in relation to discretionary cost 
saving actions.

46

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationPerformance Materials (PM)
PM segment overview
Our PM business operates in five key market segments; Telecoms 
and Energy (15% of segment sales), Personal Protection (40%), 
Transportation (10%), Household and Recreation (20%), and Other 
Industrial Applications (15%). Revenues were heavily impacted by 
Covid during the year, albeit to a lesser extent than in Apparel & 
Footwear, due to the portfolio of end uses that the business is 
exposed to.

PM organic growth since 2013 of mid-high single digits (excluding 
2020 which was impacted by Covid) has been driven by strong 
growth in Personal Protection and Telecoms and Energy. In February 
2020 we acquired Pharr HP, which is exposed to a number of 
cyclical end uses. The Personal Protection segment is a naturally 
volatile component of the business due to its end-uses, but it 
remains a structural medium-term growth driver for PM, 
underpinned by attractive industry fundamentals such as increased 
worker protection, industry regulation as well as the need for 
comfort with multi-hazard protection. The cyclicality in Personal 
Protection has been exacerbated by Covid disruption which has led 
to a slowdown in spending on flame-retardant protective garments 
for military and firefighters as capital is redeployed to address  
the pandemic.

Other end uses such as Telecoms and Energy, Transportation  
and Household and Recreation performed resiliently, returning to 
strong growth in the latter part of the year. Our customer focused 
approach continued to yield benefits with a number of notable 
customer wins, for example in the Transportation sector with 
customers such as a major European Tier 1 automotive supplier  
as part of a new platform for a well-known German OEM, where 
we won the thread contract for a new front-wheel drive platform 
vehicle programme which we expect to last c.10 years.

In 2021, we will continue to lead with innovation, developing  
highly-engineered products to create solutions for our customers  
in both existing and new markets. We expect that the recovery  
in PM will be driven by trends such as the 4G and 5G roll out 
(Telecoms and Energy) and increasing demand for light-weighting 
and electrification from automotive customers (Transportation).  
This will be offset somewhat by a slower recovery in Personal 
Protection, as this is partly dependent upon the recovery of  
both military and firefighter spend.

PM revenue
PM revenues grew 7% on a CER basis (5% reported), consisting  
of an organic decline of 14% and a 21% contribution from the 
acquisition of Pharr HP which was acquired in February. As with 
A&F, PM was significantly impacted throughout the year by the 
demand and supply disruption from Covid but has also seen an 
encouraging and improving trend with year-on-year organic sales 
exit rate down only 2% in November / December.

Organic sales growth performance in the year was underpinned  
by relatively robust performance in Household and Recreation as 
demand for home-based products remained resilient during the 
year (e.g. bedding). Transportation revenue showed an encouraging 
improving trend, returning to growth in the second half of the year, 
as the industry saw some restocking alongside the impact of new 
customer wins. In addition, the Other Industrial Applications 
end-use sub-segment performed well as demand for products used 
in a number of these niche areas remained robust (e.g. feminine 
hygiene). Telecoms and Energy, having had a slower Q3 returned  
to growth in Q4 as demand returned quickly to the sector. Sales in 
Personal Protection were slower in the second half as set out above.

PM profit and margin
Organic adjusted operating profit declined 61%, compared to the 
Group decline of 43% and at an organic adjusted operating margin 
level, PM margins were down 700bp to 5.8%, compared to the 
Group decline of 420bps to 10.2%.

PM organic margins (down 700bps to 5.8%) were affected by 
significant volume impacts from Covid, the relatively lower scale 
compared to A&F, some negative customer/product mix, as well  
as industry labour availability issues in the US in H2. Furthermore, 
the dilutive effect of Pharr HP (140bps on segment margins and 
70bps on Group margins) resulted in PM margins being 840bps 
down year-on-year to 4.4%. Whilst some recovery in 2021 is 
expected, margins will continue to be impacted by the relatively 
lower scale compared to A&F, industry labour availability issues  
in the US, and the Pharr HP margin dilution. As a result, it is 
anticipated that 2021 operating margins in PM will be in the mid  
to high single digits range.

Geographical performance
By geography, we saw broadly similar organic declines across all 
territories due to the Covid impact. Alongside the direct demand 
impact on our end-markets, we also saw significant supply 
disruption during Q2, with 18 of our c.50 manufacturing facilities 
being subject to enforced government closure at the peak of the 
global lockdowns in April. Since early May the vast majority of sites 
were open for the remainder of the year.

In Asia, which is predominantly an A&F business, we saw revenue 
decline by 20%, driven by key Apparel & Footwear markets, 
although performance varied quite widely country by country. For 
example, in India, there was a period of around six weeks where all 
six of our manufacturing facilities were subject to enforced closure, 
and demand was still being heavily impacted during Q2 and Q3; 
however, we saw an encouraging improvement in demand later in 
the year. Our China operations were significantly affected in Q1 as 
the initial Covid impact occurred, and continued to see some impact 
throughout Q2, but saw a relatively stronger recovery in H2 as the 
country started to recover out of the pandemic. Conversely, our 
Vietnam operations performed relatively well throughout 2020 as a 
result of being less impacted by the pandemic and being a reliable 

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FINANCIAL REVIEW

and attractive alternative sourcing solution to other key Asia A&F 
markets during the most significant disruption from the pandemic. 
Our Bangladesh operations were significantly impacted by the 
lockdowns in the European retail markets which they are reliant 
upon as well as rolling local lockdowns for a significant part of  
the year but showed encouraging signs of a recovery in H2.

Our America business showed organic declines of 19% in the year, 
which was initially driven by weak A&F sales in Latin America (in 
particular Mexico and Brazil), however in the second half of the year 
we saw a strong improvement particularly in the Crafting business 
which returned to year-on-year growth, as well as in Brazil and 
Mexico. Having performed relatively robustly in the first half, PM 
revenues were slower in the second half of the year mainly due  
to demand in the Personal Protection business (primarily a North 
America business), as referred to earlier.

In EMEA, revenue declined by 15%, driven by PM which performed 
slightly better than A&F, as well as near-shoring in A&F as customers 
sought to bring their supply chains closer to home. Certain markets 
were hit hard by the pandemic such as our Italian and German zips 
businesses. We saw encouraging signs of recovery in a number of 
markets in the second half, in particular within Telecoms and E 
nergy and in Transportation, and in markets such as Turkey, Spain, 
Hungary and Poland.

Revenues
Group revenues decreased 16% on a reported basis, as all markets 
were impacted adversely by the Covid pandemic. On a CER basis, 
Group revenues reduced 14%, which was 2% better than the 
reported rate of decrease as a result of year-on-year currency 
translation headwinds (notably Brazilian Real, and Turkish Lira).  
On an organic CER basis, revenues declined 19% as a result of the 
5% contribution from the acquisition of Pharr High Performance 
Yarns (Pharr HP) which was completed in February. All commentary 
below is on a CER basis unless otherwise mentioned.

As previously reported, Group H1 organic revenues were down 
26%, which was primarily driven by the impact of Covid in Q2 
where revenues at a Group level were down 45% on an organic 
basis, as we faced severe demand and supply impacts. In the second 
half of the year we saw a continued improving trend in demand 
with organic revenues down 12%, including most recently an exit 
rate in November / December of 5% down year-on-year on an 
organic basis.

Operating profit
At a Group level, adjusted operating profit decreased 43% to $111 
million on a CER basis (2019: $198 million on a reported basis) and 
adjusted operating margins were down 490bps to 9.5% (2019: 
14.3% on a reported basis). The table below sets out the movement 
in adjusted operating profit during the year:

$m

Margin %

2019 adjusted operating profit
Volumes impact (direct and indirect)
Pricing / Mix
Raw material deflation
Other inflation
Productivity benefits (manufacturing and 
sourcing)
Lower SD&A

2020 adjusted operating profit (organic)

Impact of Pharr HP dilution

2020 adjusted operating profit

Exceptional and acquisition related items

2020 reported operating profit

198
(144)
(7)
15
(13)

16
47

112

(1)

111

(7)

103

14.3%

10.2%

9.5%

8.9%

The direct and indirect volume impact of the Covid disruption, 
particularly in H1, was a significant headwind on margins in the 
year, as lower utilisation of factories led to an under recovery of 
manufacturing overheads. Management took quick and decisive 
actions over the manufacturing cost base to minimise the impact  
of these volume headwinds, and as activity increased in the second 
half this significantly reversed the H1 negative leverage impact on 
our operations, particularly in A&F. These actions included 
temporarily flexing our manufacturing footprint to ensure the lower 
volume levels were most efficiently run through the site network 
(including flexing opening days and numbers of shifts).

48

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationWe experienced negative mix in the period, in particular  
in PM, alongside broadly maintaining price despite raw material 
deflationary benefits from the lower oil price. Other structural 
inflationary pressures continued (e.g. wages and energy), which 
were again more than offset by productivity benefits across 
manufacturing and sourcing. In 2021, as a result of increasing  
oil prices in the latter part of 2020 we now expect to incur some 
year-on-year inflationary headwinds on raw material costs, in 
addition to the ongoing structural inflationary pressures we face.  
As in previous years we will look to offset these inflationary 
pressures with productivity benefits and pricing, although we  
also expect to see some pressure on freight costs as a result  
of container availability which may be more difficult to offset.

The above impacts, albeit predominantly the negative volume 
impact, severely impacted gross margins in the period which were 
down 300bps on an organic basis (480bps down on a CER basis 
including the anticipated initial dilutive effect of the Pharr HP 
acquisition). In addition to gross margin actions, we also moved 
decisively to underpin our SD&A cost base by minimising 
discretionary spend (for example travel, staff bonuses, Long Term 
Incentive Plans and consulting costs) and variable costs of selling, 
although we expect most of these savings to reverse in 2021.

Despite these significant actions, and largely as a result of the  
large volume decline in Q2, the Group’s operating margins were 
significantly impacted in H1 (H1 6.4%). However, as volumes 
returned to the business, we saw a significant increase in 
profitability with $76 million of adjusted operating profit delivered 
in H2 (at an operating margin of 12.2%).

Group organic adjusted operating profit declined 43% in the year, 
in line with the CER decline due to the small loss made by Pharr HP 
in the period since ownership, as the volume impacts seen at a 
Group level also impacted Pharr HP. Including the expected dilutive 
effect on overall Group margins from Pharr HP (4% operating 
margin business pre-acquisition), Group operating margins 
decreased by 490 bps to 9.5% on a CER basis (vs a 420bps 
reduction to 10.2% on an organic basis).

On a reported basis, Group operating profit (including exceptional 
and acquisition-related items) decreased 46% to $103 million  
(2019: $191 million). See below for a breakdown of these 
exceptional items, which primarily relate to non-cash impairment 
items. Exceptional and acquisition-related items are not allocated  
to segments, and as such the segmental profitability referred to 
above is on an adjusted basis only.

Foreign exchange
The Income Statement on a reported basis was impacted by the 
relative strength of the US Dollar compared to 2019. 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. This resulted in a decline  
of 16% in reported revenues year-on-year, which is a 2% translation 

headwind when compared to the 14% revenue decline on a CER 
basis. At an adjusted operating profit level, the translation impact was 
less where the reported decline of 44% compared to a 43% decline 
on a CER basis. The main currency impact on adjusted operating 
profit was the strengthening US Dollar against the Indian Rupee  
and Turkish Lira. At current exchange rates (31 December 2020) we 
expect a small translation tailwind on revenues for the Full Year 2021.

Free cash flow
The Group delivered an adjusted free cash flow of $28 million in  
the year (2019: $107 million) which despite being significantly down 
year-on-year was a robust performance in a period of significant 
operational disruption and reduced operating profits. Underpinning 
measures were quickly put in place, including reduced capital 
expenditure ($15 million in the year; 2019: $44 million), and a 
heightened focus on controlling working capital.

Acquisition of Pharr High Performance Yarns (Pharr HP)
On 10 February 2020, the Group completed the acquisition of the 
business and assets of Pharr HP, a market-leading manufacturer of 
high-performance engineered yarns based in North Carolina, US, 
and as such the results for this year include around ten months  
of Pharr HP results ($67 million revenue).

Whilst revenues for Pharr HP in the period were severely impacted 
by Covid due to overall demand in the US Personal Protection 
sector, we remain confident in the opportunity this acquisition 
presents us to continue to build a leadership position and scale  
in this sector which over the medium term is expected to deliver 
attractive growth (as noted earlier). Despite the impact of Covid we 
have progressed our integration plans with the wider PM business 
and Group, including implementing SAP into the business from 
1 January 2021.

Non-operating results
Adjusted earnings per share (‘EPS’) for the year decreased to  
2.4 cents (2019: 7.0 cents). This reduction was due to the significant 
decline in adjusted profit before tax (down 50% year-on-year),  
and the increase in the effective tax rate to 39% (2019: 29%). The 
50% decline in adjusted profit before tax was due to the decline in 
adjusted operating profit (44% at reported rates), and a net interest 
charge which was $3 million lower year-on-year (see below for 
further details).

Net finance costs in the year were $24.8 million (pre-exceptional),  
a $3.1 million decrease year-on-year (2019: $27.9 million). The key 
driver of the decrease in net finance costs in the year was a $3.3 
million reduction in interest on bank borrowings due to lower 
interest rates and lower corporate facility utilisation compared to 
2019. The $5.7 million mark-to-market foreign exchange loss on 
forward hedging contracts seen in the first half of the year (due  
to sterling weakness in H1) largely reversed in the second half as a 
result of subsequent sterling strengthening in the latter part of the 
year ($1.3 million loss at 31 December 2020) and only had a small 
adverse impact when compared to 2019.

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The taxation charge for the year was $37.4 million (2019: $50.5 
million). Excluding the impact of exceptional and acquisition-related 
items and the impact of IAS19 finance charges, the effective tax rate 
on pre-tax profit was 39% (2019: 29%). This rate increase was 
driven by the significant impact of Covid including withholding  
taxes that were still incurred at broadly historic levels as the payment 
of these amounts are not always directly linked to the lower level  
of operating profits. In addition, deferred tax assets in certain 
loss-making jurisdictions have not been recognised.

As the Group’s operations and profit mix normalise following  
the Covid crisis, the Group’s effective tax rate is expected to return 
to pre-crisis levels over time (2019 full year effective tax rate: 29%), 
and this was evidenced by the full year tax rate of 39% (H1 
estimated full year tax rate: 48%). In 2021, at the current rate  
of anticipated normalisation of profit mix we would anticipate  
a full year effective tax rate in the range of 32–34%.

The reported tax rate was 47% (2019: 30%), which includes the 
impact of exceptional and acquisition related items (including 
non-cash impairment charges incurred in the year due to Covid, 
which attracts zero tax relief).

Profit attributable to minority interests was $15.8 million and  
was predominantly related to Coats’ operations in Vietnam and 
Bangladesh (in which it has controlling interests). This was 21% 
below the 2019 level ($20.1 million) which reflects the relative 
strength of performance of those territories during the year (in 
particular Vietnam, which was relatively less impacted by the 
pandemic), compared to the wider Group.

Exceptional and acquisition-related items
Net exceptional and acquisition-related items before taxation  
were $6.8 million in 2020 (2019: $4.4 million). This consisted of a 
$4.9 million charge in relation to the non-cash impairment of assets 
(including Plant and Machinery) at certain smaller European markets 
whose short-term financial performance and medium-term outlook 
has been impacted by Covid, and acquisition related items of  
$4.0 million (2019: $2.2 million). These were offset by a $1.4 million 
profit ($2.8 million cash proceeds) in relation to the sale of surplus 
property in Korea (part of the Connecting for Growth 
reorganisation programme).

The acquisition-related items of $4.0 million consisted of the 
amortisation of intangible assets acquired ($3.2 million), and 
acquisition earnouts ($0.8 million).

In the taxation line, exceptional items of $2.2 million predominantly 
related to $1.9 million of deferred tax assets which are no longer 
recognised due to the impacts of Covid and $0.3 million tax on 
exceptional income in Brazil following a successful legacy tax  
claim last year.

Cash flow
The Group delivered $28 million of adjusted free cash flow in 2020 
(2019: $107 million). This free cash flow measure is before annual 
pension deficit recovery payments, acquisitions and dividends,  
and excludes exceptional items.

This adjusted free cash flow performance was lower than 2019 
($107 million) as a result of significantly lower adjusted operating 
profit, well controlled but higher net working capital outflows  
($26 million outflow vs $6 million outflow in 2019), with some 
offset from lower capital expenditure of $15 million (2019: $44 
million). Minority dividend payments of $18 million were incurred 
(broadly in line with 2019) as we accelerated the repatriation of cash 
from local operations to the Group in order to prudently manage 
corporate headroom and ensure comfortable levels of liquidity 
around the Group.

Tax paid was $46 million and in line with 2019, due to prior year  
tax settlements (for example a tax settlement in China that was 
provided for in 2019 and settled in Q1 2020) offsetting the benefit 
of the lower P&L tax charge.

The Group generated a free cash outflow of $23 million in the  
year (2019: $72 million inflow), which primarily reflects the adjusted 
free cash flow of $28 million referred to above, offset by the 
consideration paid for the Pharr HP acquisition of $37 million,  
as well as UK pension payments of $11 million.

As a result of the above free cash outflow, net debt (excluding  
the impact of IFRS 16) as at 31 December 2020 was $181 million 
(31 December 2019: $150 million). Including the impact of IFRS 16, 
net debt as at 31 December 2020 was $247 million (31 December 
2019: $215 million).

Capital expenditure
As previously noted, capital expenditure was significantly reduced  
in the year ($15 million) due to Covid, and was related to ongoing 
maintenance requirements, critical new product development, 
health and safety, and environmental spend.

As we recover out of Covid, and in order to continue to support  
our longer-term growth strategy and further reinforce our strong 
environmental compliance credentials, we anticipate capital 
expenditure to be in the $35–40 million range for 2021. This 
includes around $7 million (alongside $5 million operating costs)  
in relation to supporting strategic growth initiatives primarily in  
our Asian operations.

Pensions and other post-employment benefits
The net obligation for the Group’s retirement and other post-
employment defined benefit liabilities (UK and other Group 
schemes), on an IAS19 financial reporting basis, was $226 million  
as at 31 December 2020, which was higher than 31 December 2019 
($181 million). This increase is primarily due to movements on the 
UK scheme.

50

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationIn addition to these specific cash actions we focused even more 
closely on working capital management during the year (including  
a heightened focus on managing our customer credit risk), reflective 
of the difficult macro-economic environment. Our net working 
capital remained well controlled in the year, and we saw an 
encouraging normalisation in our working capital metrics in the 
second half. In 2021 we expect a marginal working capital outflow 
as we invest to support the Covid recovery. In addition, bad debt 
charges remained at a low level ($3.1 million; 2019: $0.2 million)  
as a proportion of Group revenue (below 1%), albeit higher than 
recent years, reflective of the macro-economic conditions through 
the year.

At 31 December 2020, our leverage ratio (net debt to EBITDA;  
both excluding IFRS 16) was 1.2x and remains well within our 3x 
covenant limit, and towards the lower end of our target leverage 
range of 1–2x. Our interest cover covenant also maintained 
significant headroom at 31 December 2020 at 8.5x vs a covenant  
of 4x. These covenants are tested twice annually at June and 
December, and are monitored throughout the year. Committed 
headroom on our banking facilities was $330 million at 
31 December, a further increase from the comfortable levels  
we reported in the H1 results.

Going Concern 
On the basis of current financial projections and the facilities 
available, the Directors are satisfied that the Group has adequate 
resources to continue for at least the next 12 months and, 
accordingly, consider it appropriate to adopt the going concern 
basis in preparing the financial statements. Further details of our 
going concern assessment, financial scenarios and conclusions  
can be seen in note 1.

Simon Boddie
Chief Financial Officer

3 March 2021

The Strategic Report comprising pages 1–51 was approved by the 
Board and signed on its behalf by the Group Chief Executive.

Rajiv Sharma
Group Chief Executive

3 March 2021

The Coats UK Pension Scheme, which is a key constituent of the 
Group defined benefit liabilities, shows a $129 million IAS19 deficit 
at 31 December 2020 (£94 million), which is $37 million higher than 
at 31 December 2019 ($92 million, £69 million). This increase 
predominantly relates to net actuarial losses of $37 million (lower 
discount rate assumption due to lower corporate bond yields which 
more than offset asset increases), $7 million employer contributions 
(excluding administrative expenses), with some offset from other 
items (e.g. FX). The IAS19 discount rate remains underpinned by  
AA corporate bond yield spreads, unlike the Technical Provisions 
basis of valuation (relevant for the triennial valuation process)  
which is linked to gilt yields. The company, in conjunction with  
the pension trustees, regularly monitors the funding position  
of the UK Pension Scheme.

In agreement with the trustees of the Coats UK Pension Scheme, 
and as part of the wider Covid underpinning actions, we agreed  
to defer the remaining deficit recovery payments for 2020 (April–
December inclusive), to provide an additional c.$21 million of 
headroom cover during this year. The catch up of these payments 
are currently anticipated to commence in mid-2021 and be evenly 
spread over a period of around 18 months. We continued to pay the 
scheme administrative expenses during this time (c.$5 million p.a.). 
As a result, total payments in 2021 are expected to be around  
$42 million (which includes $9 million in relation to the start  
of the catch-up of the 2020 deferred contributions).

The effective date for the next UK scheme triennial is 31 March 
2021, and this will be required to be finalised by no later than 
30 June 2022.

Balance Sheet and Liquidity
The Group continued to focus on cash, liquidity and working capital 
management as one of its priorities throughout the Covid crisis, in 
order to ensure it remained in a strong financial position, and to be 
well placed to navigate through the current environment safely and 
emerge even stronger when it passes.

Group net debt (excluding IFRS 16) as at 31 December 2020 was 
$181 million ($247 million including IFRS 16), which was higher  
than the same point in 2019 ($150 million), and reflects strong cash 
management, the acquisition of Pharr HP ($37 million), and UK 
pension payments ($11 million; being Q1 deficit recovery payments 
and full year administrative expenses). Excluding the acquisition  
of Pharr HP net debt reduced year-on-year.

When the Covid crisis initially hit, the Group moved quickly to take 
action to underpin liquidity and maintain comfortable levels of 
headroom. These actions include reducing our full year 2020 capital 
expenditure by c.65% to $15 million (2019: $44 million), cancelling 
our final FY19 dividend, and agreeing with our UK pension trustees 
the deferral of all remaining deficit recovery payments in the year 
from April (c.$21 million).

Coats Group plc Annual Report and Accounts 2020

51

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCHAIRMAN’S INTRODUCTION

Dear Shareholder,
Good governance is the thread that runs through the centre of 
Coats. 2020 has been a year of exceptional change and the Board’s 
role in providing effective leadership and delivering long-term 
sustainable value to our shareholders has never been more 
important. This year, we looked again at our purpose and you can 
read about how we reviewed this and the outcome on page 22. 
Having a clear and shared purpose, and a strong and consistent 
approach to governance, underpinned by our values and our 
culture, helped us work with all our stakeholders to weather  
the storm and deliver our strategic goals.

In 2019 the Group Risk Management Committee (‘GRMC’) agreed 
that climate change should be included in the Group Risk Register 
as an emerging risk. During 2020 the Company evaluated the 
impacts of climate change risks and opportunities on the business, 
strategy and financial planning and agreed that climate change 
should be recategorised as one of our principal risks. You can read 
more about the results of this evaluation and the implications  
on page 40.

This Governance section of the 2020 Annual Report contains an 
overview of the roles and responsibilities of the Board and its 
Committees together with a summary of the activities undertaken 
during the course of the year ended 31 December 2020.

Covid response and our stakeholders
Engagement with our stakeholders remains an important task for the 
Group and assists us in understanding their views. Our stakeholders’ 
views are a key consideration for the Board when making business 
decisions. The Board has considered the impact of Covid on all of our 
stakeholders and has endeavoured to communicate with each group 
throughout these difficult times. You can read more about how we 
have communicated with our workforce on page 25. Through our 
market announcements, we have ensured that all investors are 
informed of the impact the virus had, and is continuing to have, on 
our business. In March 2020 we announced that we would not be 
paying the final dividend for the 2019 financial year and in August 
2020 we announced that the interim dividend for the 2020 financial 
year would not be paid to shareholders. While these were very 
difficult decisions, these were part of the proactive steps we have 
taken to strengthen our balance sheet and maximise liquidity for the 
likely duration of the crisis and recovery period beyond. As a result 
of the steps that we took during 2020 and the encouraging 
recovery out of the pandemic, and given our confidence in the 
strategy and outlook for the Group, I am pleased that we are 
proposing a final dividend of 1.30 cents per share. 

Health & Safety
is our number 1
priority 

‘BY RESPONDING QUICKLY AND 
GETTING AHEAD OF THE CURVE, 
THE COATS TEAM HAS PREVENTED 
TRANSMISSION OF COVID WITHIN 
OUR FACTORIES AND HAS KEPT 
OPERATIONAL IMPACT TO A 
MINIMUM. OUR GOAL REMAINS TO 
ENSURE THAT OUR COATS FACTORIES 
AND OFFICES ARE THE SAFEST 
AND HEALTHIEST PLACES FOR 
OUR WORKERS.’
SEAN ALVAREZ 
GROUP HEALTH & SAFETY DIRECTOR

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCulture and goals
The Board strongly believes that good governance should be focused 
not only on how the Board itself operates effectively but also, and 
very importantly, on the culture within which all of our businesses 
and employees operate and conduct themselves on a day-to-day 
basis. The culture, values and ethics are set and monitored by the 
Board as set out on page 61 and led in our operations by the Chief 
Executive and the rest of our Group Executive Team (‘GET’) and 
senior management teams. The principles of good governance are 
embedded throughout Coats and manifest themselves in a number 
of different ways, including the following:

•  A strong health and safety culture. You can read more about  
the work we did to keep our people, customers, suppliers and 
visitors to our factories and offices safe on pages 23 and 24.

•  The requirement to observe good business practice, including 
abiding by all applicable laws and regulations that relate to  
our business.

•  The provision of mandatory training to all of our businesses on 

key legislation and regulations relating to our areas of operation.

•  A system of controls and checks underpinned by a rigorous 

Internal Audit function and in turn overseen by the Audit and 
Risk Committee.

•  Regular and embedded risk assessment and monitoring 

processes. Please see pages 34 to 44 for more detail about  
our approach to risk.

•  Encouraging and investigating any disclosures made either 
directly or through our whistleblowing hotline available to 
employees, subcontractors, suppliers, customers and the  
general public. Please see page 75.

Sustainability
Coats is a member of the FTSE4Good UK Index and I am pleased 
that we have moved further up the rankings into the top decile in 
2020. This recognition of our strong Environmental Social and 
Governance (‘ESG’) and Socially Responsible Investing (‘SRI’) 
credentials, as detailed in the Working Responsibly section on  
pages 23 to 33 of this Annual Report shows our demonstrable 
commitment to the environment and communities in which we 
operate. We have also published a separate Sustainability Report 
which can be found on our website (www.coats.com/sustainability). 
In this we have provided an update on the seven ambitious targets 
in the five priority areas of water, energy, effluent & emissions, 
social and living sustainably that we are aiming to achieve by 2022 
and our progress against these. As part of our Remuneration Policy, 
approved by shareholders at the AGM in 2020, to reflect the 
importance of the sustainability agenda to our business we now  
link management remuneration in part to our performance on key 
sustainability metrics.

Coats’ leadership ambitions in all our programmes, and the hard 
work that has gone into supporting these initiatives, are rightfully  
a source of pride to the Board.

Governance
We recognise that good governance requires Board ownership  
and accountability for driving the necessary behaviours and culture 
that we are striving to achieve at Coats. Underpinned by a strong 
purpose, good governance supports the sustainable growth and 
superior customer outcomes we are targeting.

This is the second year of reporting under the 2018 UK Corporate 
Governance Code (the ‘Code’) and I am pleased to confirm that 
Coats has applied the principles and complied with all of the 
provisions. The Companies (Miscellaneous Reporting) Regulations 
2018 (the ‘Regulations’) and the Code put more emphasis on 
engagement with stakeholders, diversity, remuneration structures 
and the strengthening of corporate culture. We have enhanced  
our disclosures on these throughout this report which I hope 
demonstrate the high levels of corporate governance maintained 
within Coats. 

Diversity and inclusion
The Code rightly continues to stress the importance of diversity  
in the composition of an effective Board. I continue to be 
committed to bringing diversity in its widest sense to the Board 
including gender, ethnicity, diversity of thought, tenure, age, 
experience, skills, and geographic, educational, social and 
professional background. 

Further details on the Board’s Diversity Policy and our wider 
approach to diversity and inclusion are contained in the Nomination 
Committee report set out on pages 71 to 73 of this Annual Report.

Board effectiveness
The way in which the Board has conducted its meetings has  
had to change during 2020, with meetings taking place via video 
conference. We reviewed the schedule of our Board and Committee 
meetings to make sure these were appropriately timed and you can 
read about the impact this had on page 64. We have worked hard 
to ensure that our ability to operate effectively has not been adversely 
impacted by the changed methods of meeting. In particular, I was 
impressed by our seamless transition to a virtual two-day strategy 
meeting in September. This year the Board undertook an internally 
facilitated effectiveness review in accordance with the requirements 
under the Code. The review highlighted a slight decrease in 
effectiveness in some areas relative to 2019, as an understandable 
consequence of the external environment, but given the context of 
the pandemic the results were pleasing overall. Details of the review, 
its outcomes and how this will inform the development of the 
Board’s objectives for 2021 can be found on page 65.

Coats Group plc Annual Report and Accounts 2020

53

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCHAIRMAN’S INTRODUCTION 
CONTINUED

Board composition and succession
I am delighted to welcome Jakob Sigurdsson and Jackie Callaway  
to the Board. Jakob has more than 20 years’ experience in large 
multinational companies. I look forward to introducing Jakob to 
shareholders at our upcoming AGM on 19 May 2021 if Covid 
restrictions allow. Jackie joined the Board as an Executive Director  
in December and brings 25 years’ of industry experience. Jakob’s 
and Jackie’s biographies are set out on pages 56 and 58 of this 
Annual Report. 

The 2020 AGM marked the retirement of Alan Rosling from the 
Board. I would like to thank Alan for his insightful guidance and 
contribution to the Board over the nine years of his tenure including 
setting up and chairing the Digital Advisory Council. 

Looking forward, Simon Boddie will step down on 31 March 2021.  
I would like to thank Simon for the excellent contribution he  
has made to Coats. Amongst his many achievements, he has 
strengthened the Finance function, successfully delivered a  
Group refinancing package, helped support the Connecting  
for Growth global transformation programme and improved  
our outsourcing effectiveness.

This is my last Corporate Governance report as Chairman of the 
Company. You can read more about the process used to identify 
and appoint my successor on page 73 of the Nomination 
Committee report. During my tenure, the ways in which we do 
business have changed, with a move to digital and an increased 
need for speed of delivery. These progressions have caused us to 
think and act differently, and develop our processes. I take pleasure 
in reflecting on our culture and the commitment to our high 
standards of governance that I see at every level and at every site  
in the organisation. I know that David Gosnell, who will succeed  
me as Chairman in May 2021, will continue to progress these  
areas to further enhance our already high standards. 

Mike Clasper
Chairman

3 March 2021

‘BEING A SOCIALLY RESPONSIBLE 
COMPANY IS IMPORTANT, NOT ONLY 
FOR A COMPANY’S BRAND AND 
LEGACY, BUT INCREASINGLY FOR 
CUSTOMERS, EMPLOYEES AND  
THE BOTTOM LINE.’ 
ECHO LU, NON-EXECUTIVE DIRECTOR

The UK Corporate Governance Code  
Compliance Statement
Coats complied with all the relevant principles and provisions of 
the 2018 UK Corporate Governance Code (the ‘Code’) during the 
course of the year ended 31 December 2020.

Other information relating to the corporate governance 
structures is set out over the following pages.

Board leadership and Company purpose
Promoting the long-term sustainable success of 
the Company
Generating value for shareholders
Contributing to wider society
Purpose, values and strategy, and how these
and our culture are aligned
Resources available to allow Coats to meet its 
objectives and measure performance against 
them
Control framework
Stakeholder engagement
Workforce policies and practices

Division of responsibilities
The Chairman
Division of responsibilities
Non-Executive Directors
Information and support

Composition, succession and evaluation
Succession planning
Board diversity
Board evaluation

Audit, risk and internal control
Independence and effectiveness of internal and 
external audit functions
Fair, balanced and understandable reporting
Principal risks

Remuneration
Remuneration policies and practices support 
strategy and promote long-term sustainable 
success
A formal and transparent procedure for 
developing policy on executive remuneration

Read more
Page 10

Page 9
Page 17

Page 8
Pages 15

Page 69
Page 17
Page 32

Read more
Page 59
Page 59
Page 59
Page 62

Read more
Page 72
Page 71
Page 65

Read more
Page 69

Page 67
Page 34

Read more
Page 79

Page 79

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationHow governance supports strategy

Strategic goal
Value creation

(Read more on page 14)

(Read more on page 14)

Key stakeholders 

Strategic goal
Profitable sales growth 

Key stakeholders 

Shareholders

Customers

Suppliers

Workforce

The Board’s governance role
The Board approves the Group’s strategy and annual operating 
plan, reviews subsequent progress and makes decisions related 
to matters reserved for the Board in order to support the delivery 
of this strategy.

Areas of focus in 2020:
•  Regular review of the potential impact of the Covid pandemic 
on customers’ and consumers’ behaviour and the Group’s 
strategy and operations

•  Applying the Board’s strategic understanding of geopolitical 

and economic risks in international markets to the Company’s 
challenges

•  In-depth review of operations and strategy in Brazil, North 

America and China

•  In-depth review of the Apparel & Footwear strategy and 

operating model including focus on thread and Coats Digital 
and indepth review of Performance Materials strategy

•  Considering acquisitions and divestments as identified and 

determining appropriate course

•  Reviewing the Group’s dividend policy

Strategic goal
Continuing to strengthen the core

(Read more on page 14)

Key stakeholders

Workforce

Customers

Suppliers

Environment

Shareholders

The Board’s governance role
The Board reviews the strategy for sustainable growth and 
leverages its collective experience to advise on related matters.

Areas of focus in 2020:
•  Received an update on employee views and engagement

•  Review of effectiveness of adoption of new ways of working 

following the Connecting for Growth initiative

Shareholders

Customers

Suppliers

Workforce

The Board’s governance role
The Board reviews key proposals relating to business capability.

Areas of focus in 2020:
•  Regular review of people matters including succession  

and updates from the Designated Non-Executive Director 
meetings with employees on culture

•  Session at the Strategy Day considering innovation and 

innovation leadership behaviours 

•  Ensuring the Company remains at the forefront of  

developing and embedding best practice in responsible 
business behaviour

•  Considering and monitoring the Group’s risk appetite and 

principal risks and uncertainties and conducting appropriate 
‘deep dive’ reviews of principal risks and health & safety, with 
a focus on commuting and ‘lost time’ accidents

‘EVERY COMPANY HAS FINITE 
RESOURCES SO IT’S ESSENTIAL  
THAT THE BOARD CHALLENGES 
MANAGEMENT AND HELPS THEM  
TO PRIORITISE KEY STRATEGIC 
PROJECTS.’
JACKIE CALLAWAY, 
CHIEF FINANCIAL OFFICER 
DESIGNATE

Coats Group plc Annual Report and Accounts 2020

55

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
 
 
 
 
 
BOARD OF DIRECTORS

Mike Clasper CBE 

Rajiv Sharma 

N

N

Position
Nationality
Tenure

Chairman
British
Appointed as a Non-Executive Director on 
20 February 2014, Chairman since 16 April 2014. 
Mike will retire from the Board and as Chairman 
of the Company in May 2021. 

Key skills and experience
•  Extensive executive and non-executive experience, including in 
general management and marketing for global companies

•  Long-term track record of value creation and change

External appointments
Chairman of SSP Group plc and Bioss, Trustee of Heart Cells 
Foundation, Governor of the Royal Shakespeare Company, Advisory 
Board member for Arora International. Previously Senior Independent 
Director at Serco Group plc and ITV plc, Chairman of Which? Ltd, 
Chief Executive Officer of BAA plc, Chairman of HM Revenue & 
Customs, President of the Chartered Management Institute and 
Operational Managing Director at Terra Firma. He has also held  
a number of senior management positions at Procter & Gamble.

Qualifications
Mike holds an MA in Engineering from the University of Cambridge.

Position
Nationality
Tenure

Group Chief Executive
Singaporean
Appointed as an Executive Director in  
March 2015, Group Chief Executive since 
1 January 2017

Key skills and experience
•  30 years’ global multi-industry leadership experience

•  Clear strategic mindset

External appointments
Rajiv joined Coats in November 2010 as Global CEO Industrial and 
was responsible for developing and executing a growth strategy.  
He has lived and worked in the US, Europe and Asia.

Non-Executive Director of Senior plc. Rajiv has been on the board of 
joint ventures at both GE and Shell and held management positions 
with Saab, Honeywell, GE and Shell.

Qualifications
Rajiv holds a degree in Mechanical Engineering, as well as an MBA 
from the University of Pittsburgh, USA.

See the Group Chief Executive’s statement on page 12.

Simon Boddie 

Jackie Callaway 

Position
Nationality
Tenure

Chief Financial Officer
British
Appointed as Chief Financial Officer on  
4 July 2016. Simon will retire from the Board  
in March 2021.

Key skills and experience
•  Strong financial expertise within an international emerging 

markets and digital context

•  Wealth of finance experience in large listed multinationals

External appointments
Non-Executive Director and chair of the Audit Committee of 
PageGroup plc, a specialist recruitment company, and a Non-
Executive Director of Learning Technologies Group plc, a provider of 
services and technologies for digital learning and talent management. 
Previously Group Finance Director at Electrocomponents plc. Formerly 
worked for Diageo, where he held a variety of senior finance 
positions, Hill Samuel Bank and Price Waterhouse.

Qualifications
Simon is a member of the Institute of Chartered Accountants in 
England and Wales and has an MA in Economics from the University 
of Cambridge.

Position
Nationality
Tenure

Chief Financial Officer Designate
New Zealander
Appointed as Chief Financial Officer Designate 
on 1 December 2020. 

Key skills and experience
•  Strong finance track record

•  Experience across multinational manufacturing and supply chain 

businesses

External appointments
Previously Chief Financial Officer of Devro plc, one of the world’s 
leading manufacturers of collagen products for the food industry. 
Prior to that was Group Financial Controller of Brambles Limited,  
the ASX top 20 supply chain logistics company.

Member of Australian Institute of Company Directors since 2017.

Qualifications
Jackie is a Fellow of the Chartered Accountants Australia and New 
Zealand and has a Bachelor of Business Management Studies from 
University of Waikato, New Zealand.

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Nicholas Bull 

A

N

Anne Fahy 

A

N

Position
Nationality
Tenure

Senior Independent Non-Executive Director
British
Appointed as a Non-Executive Director and 
Senior Independent Director on 10 April 2015

Key skills and experience
•  Global financial services and banking experience

Position
Nationality
Tenure

Independent Non-Executive Director
Irish
Appointed 1 March 2018

Key skills and experience
•  Experienced audit committee chairman with extensive financial 

and internal controls experience

•  International business experience and insights, especially in China

•  Global business and developing markets experience

•  Advocate for ESG and SRI matters at the Board

External appointments
Chairman of Fidelity China Special Situations plc, Chairman of 
Conran Holdings Ltd, Trustee of the Design Museum, Camborne 
School of Mines Trust, The Creative Education Trust and the Conran 
Foundation. Previously served as Chairman of De Vere, Chairman  
of the Advisory Board of Westhouse Securities and of Smith’s 
Corporate Advisory Limited. He had a global career in banking  
with Morgan Grenfell (subsequently Deutsche Bank), Société 
Générale and ABN AMRO.

Qualifications
Nicholas has a BSc in Chemistry from the University of Exeter and  
is a Fellow of the Institute of Chartered Accountants in England  
and Wales.

External appointments
Non-Executive Director and Chairman of the Audit Committee of 
SThree plc and Non-Executive Director of Nyrstar NV. Trustee of 
Save the Children; formerly a Non-Executive Director of Interserve. 
Previously at BP, Anne gained extensive experience of global 
business, developing markets, risk management, internal control, 
compliance and strategy development in the aviation, 
petrochemicals, trading and retail sectors.

Qualifications
Anne is a Fellow of the Institute of Chartered Accountants in  
Ireland and a Bachelor of Commerce in Economics, Accounting and 
Business from University College Galway, Ireland.

See the Audit and Risk Committee report on page 66.

David Gosnell OBE 

R

A

N

Hongyan Echo (‘Echo’) Lu 

R

N

Position

Nationality
Tenure

Independent Non-Executive Director. David will 
become Chairman of the Board in May 2021
British
Appointed 2 March 2015

Key skills and experience
•  Strong and deep supply and procurement background in global 

multinational companies 

Position
Nationality
Tenure

Independent Non-Executive Director
British / Chinese
Appointed 1 December 2017

Key skills and experience
•  Global business experience gained in different sectors in Europe, 

Asia and the US

•  Strong background in general management and track record of 

•  International and strategic mindset

delivering positive change

External appointments
Was previously Chairman of Old Bushmills Distillery Company Ltd 
and a Non-Executive Director of Brambles Ltd. David retired from 
Diageo plc in 2014 where he had most recently held the role of 
President of Global Supply and Procurement. Prior to joining Diageo, 
David spent 25 years at HJ Heinz in various operational roles.

Qualifications
David is a Fellow of Institute of Engineering and Technology and holds 
a Bachelor of Science degree in Electrical and Electronic Engineering 
from Middlesex University. He has completed Supply Chain 
Manufacturing – Drive Operational Excellence at INSEAD (Singapore).

See the Nomination Committee report on page 71.

See the Remuneration Committee report on page 79.

External appointments
Chief Executive Officer of Haulfryn Group Ltd, a UK leisure business, 
and a member of the Advisory Board for Women in Hospitality, 
Travel and Leisure. Previously Managing Director, International of 
Holland & Barrett International, Managing Director of Homebase Ltd 
as part of Home Retail Group plc. Echo spent ten years at Tesco plc 
in a variety of senior leadership roles. Echo was a Non-Executive 
Director of Dobbies Garden Centres.

Qualifications
Echo has a Bachelor of Arts in International Economy and Finance 
from Fudan University, Shanghai and a Master of Science in 
Industrial Relations and Human Resources from West Virginia 
University.

Coats Group plc Annual Report and Accounts 2020

57

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
BOARD OF DIRECTORS 
CONTINUED

Fran Philip 

R

N

Jakob Sigurdsson 

A

N

Position

Nationality
Tenure

Independent Non-Executive Director, Designated 
Non-Executive Director for workforce 
engagement
American
Appointed 1 October 2016

Key skills and experience
•  Extensive speciality retailing business experience

Position
Nationality
Tenure

Independent Non-Executive Director
Icelandic
Appointed 1 October 2020

Key skills and experience
•  International business experience across a diverse range of 

sectors with particular emphasis on growth in new or developing 
markets

•  Deep background in product innovation, design and 

•  Strong background in general management and track record of 

development

•  Workforce dynamics experience

External appointments
Non-Executive Director of Vera Bradley Inc., Totes Isotoner and Vista 
Outdoor Inc. Previously Fran worked for The Gap, Williams-Sonoma 
and The Nature Company, and LL Bean, where she initially served as 
Director of Product Development, Home Furnishings, going on to 
hold a number of roles including Vice President, Affiliated Brands, 
before becoming Chief Merchandising Officer until her retirement. 
Fran was previously a Non-Executive Director of Regent Holdings 
and an industry executive for Freeman Spogli.

Qualifications
Fran has a degree in English and Sociology from Bowdoin College, 
Maine, and an MBA from the Harvard Business School.

See the People section on page 25 for more information about 
workforce engagement.

Board profiles (excluding Executive Directors)

delivering positive change

External appointments
Chief Executive Officer of Victrex plc, an innovative world leader in 
high-performance polymer solutions. Jakob has more than 20 years’ 
experience in large multinational companies, both listed and private, 
including nine years with Rohm & Haas (now part of Dow Chemical) 
in the US, as well as Chief Executive of food manufacturer Alfesca in 
Europe and Chief Executive of Promens. 

Between September 2016 and June 2017, Jakob was Chief Executive 
Officer of VÍS, the largest Icelandic insurance and reinsurance 
company. He has held various Non-Executive roles and was a 
Member of the University of Iceland Council and a Non-Executive 
Director of the Icelandic Technology and Development Board.

Qualifications
Jakob has an BSc in Chemistry from the University of Iceland and  
an MBA from the Northwestern University.

Expertise

Length of service

Key to Committee memberships

Committee chair

Committee member

R

A

N

Remuneration

Audit

Nomination

17% Financial
17% Digital
39% Strategy
28% Retail

29% 0–3 years
57% 3–6 years
14% 6–9 years

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
 
CORPORATE GOVERNANCE

Leadership and engagement

The Board
The Board is collectively responsible for the long-term success of the Group and for ensuring leadership within a framework of effective 
controls. The key roles of the Board are:

•  setting the strategic direction of the Group;

•  overseeing implementation of the strategy by ensuring that the Group is suitably resourced to achieve its strategic aspirations;

•  providing entrepreneurial leadership within a framework of prudent and effective controls which enables risk to be assessed and 

managed;

•  ensuring that the necessary financial and human resources are in place for the Group to meet its objectives; and

•  setting the Group’s culture supported by its values.

Chairman
•  Primarily responsible for overall 

Senior Independent Director
•  Provides a sounding board to the 

Non-Executive Directors
•  Contribute to developing our strategy.

Chairman. 

•  Leads the appraisal of the Chairman’s 
performance with the other Non-
Executive Directors annually.

•  Acts as intermediary for other 

Directors, if needed.

•  Available to respond to shareholder 
concerns if contact through the 
normal channels is inappropriate.

•  Scrutinise and constructively challenge 
the performance of management in 
the execution of our strategy.

•  Bring their diverse expertise to the 
Board and Board Committees. 

•  Devote such time as is necessary to 

the proper performance of their duties

effectiveness of operation, leadership 
and governance of the Board.

•  Leads the Board, sets the agenda and 
promotes a culture of open debate 
between Executive and Non-Executive 
Directors. Ensures that there is a focus 
on Board succession plans to maintain 
continuity of skilled resource. 
Responsible for Chief Executive 
succession.

•  Provides advice and acts as a 

sounding board to the Board and 
management. Has regular contact and 
interaction with the Chief Executive.

•  Ensures effective communication with 

our shareholders.

Company Secretary
•  Provides support to the Board and 

ensures information is made available 
to the Board in a timely manner.

•  Supports the Chairman on meeting 

management arrangements including 
setting the agendas for the Board, 
administering Board effectiveness 
reviews, ensuring appropriate Board 
training and coordinating Board 
inductions.

•  Provides advice on corporate 

governance matters. All Directors  
have access to the advice of the 
Company Secretary. 

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCORPORATE GOVERNANCE 
CONTINUED

Governing documents

Articles of Association 
The Articles of Association set out  
the rules agreed between shareholders 
as to how the Company is run, including 
the powers and responsibilities of  
the Directors.

Coats’ Articles of Association are being 
updated for approval by shareholders at 
the AGM this year to incorporate best 
practice and current legal and 
governance standards.

Service contracts
Details of the Executive Directors’  
service contracts and the Chairman’s  
and the Non-Executive Directors’ letters 
of appointment are set out in the 
Directors’ Remuneration Report on page 
87. These documents are available for 
inspection at the registered office of the 
Company during normal business hours 
and at the AGM. These documents are 
reviewed regularly. 

Committee terms of reference
The Board is assisted by three Board 
Committees to which it delegates 
matters as appropriate. Each Committee 
has full terms of reference that are 
reviewed annually and have been 
approved by the Board and which can be 
found on our website at www.coats.
com/en/About/Corporate-Governance/
Board-Committees.

Directors’ indemnities
The Company maintains Directors’ and 
Officers’ liability insurance which 
provides appropriate cover for legal 
actions brought against its Directors. 
Each Director has been granted 
indemnities in respect of potential 
liabilities that may be incurred as a result 
of their position as an officer of the 
Company. A Director will not be covered 
by the insurance in the event that they 
have been proven to have acted 
dishonestly or fraudulently.

Delegated Authorities
The Coats Delegated Authorities policy is 
an internal document that sets out the 
delegations below Board level. It is 
reviewed and approved annually by the 
Board. It provides a structured framework 
to ensure the correct level of scrutiny of 
various decisions covering matters 
including contracts, capital expenditure, 
tax, treasury and HR decisions.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationThe role of the Board

Strategy
The Board is focused on strategic matters and has a forward-
looking agenda that considers economic, social, environmental 
and regulatory issues and any other relevant external matters that 
may influence or affect the Company’s achievement of its goals. 
The Board holds an annual strategy meeting as well as considering 
strategic matters at all Board meetings. In 2020, due to Covid, this 
meeting was held remotely and took place over two consecutive 
days. The Board considered a wide range of topics including both 
of our segments and people related matters. You can read more 
about the Company’s strategy on pages 14 to 16.

Culture
The Board sets the culture of the Group, as described on pages 23 
to 35, and uses a number of indicators to inform its regular 
assessment of whether the culture continues to be appropriate 
and whether there are any further actions that are necessary. In 
2020, monitoring mechanisms included updates from the 
Designated Non-Executive Director providing direct feedback from 
the workforce regarding the Group’s culture (read more on page 
25). At least quarterly people updates, including cultural points, 
were provided to the Board by the Chief HR Officer and an update 
was provided at every meeting on our health and safety culture as 
part of the Chief Executive’s report. 

Performance and monitoring
The Board evaluates and oversees current performance and is 
responsible for approving annual plans and budgets, results, 
dividends and announcements, including the going concern and 
viability statements.

Performance monitoring includes non-financial performance such  
as quality, health and safety, employee wellbeing, environmental 
and social measures and ethical business practice. 

Leadership and people
The Board is responsible for succession planning and the 
Remuneration Policy for Board roles, Executive Directors, the 
Company Secretary and senior management.

The Board engages directly with the wider workforce through a 
variety of channels and monitors policies, practices and behaviour 
and how they support strategy via reports given at Board meetings. 

Internal controls and risk management
The Board sets the Company’s risk appetite, assesses principal and 
emerging risks and reviews mitigation plans. Responsibility for 
monitoring the Company’s risk management and internal control 
systems is delegated to the Audit and Risk Committee.

You can read more about our principal and emerging risks on 
pages 34 to 44. 

Governance and stakeholders
The Board ensures that there is continued full compliance with the 
Code and with wider statutory and regulatory requirements. The 
Board acts fairly between stakeholders and engages in appropriate 
dialogue to obtain the views of stakeholders as a whole. You can 
read more about our engagement with stakeholders on page 17.

Health and safety and the environment
The Board is fully committed to providing a safe place in which our 
people, suppliers and visitors can work and ensures that we are a 
considerate neighbour. You can read more about our approach to 
our Sustainability Strategy on page 28 and about our approach to 
health and safety on page 23. 

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCORPORATE GOVERNANCE 
CONTINUED

Committees

Audit and Risk Committee
•  Oversees and monitors the  

Company’s financial statements, 
accounting processes and audits 
(internal and external).

•  Ensures that risks are carefully 

identified and assessed, and that 
effective systems of risk management 
and internal control are in place and 
appropriately monitored.

•  Reviews matters relating to fraud.

Nomination Committee
•  Reviews the structure, size  

and composition of the Board  
and its Committees.

•  Identifies and nominates suitable 

executive candidates to be appointed 
to the Board and reviews the  
talent pool.

•  Considers wider elements of 

succession planning below Board 
level, including diversity.

Remuneration Committee
•  Reviews and recommends the 
framework and policy for the 
remuneration of the Chairman,  
the Executive Directors, the  
Company Secretary and senior 
executives in alignment with  
the Group’s reward principles.

•  Reviews workforce remuneration  

and related policies and alignment of 
incentives and rewards with culture,  
to help inform setting of Directors’ 
Remuneration Policy.

•  Consults with shareholders on the 

Remuneration Policy. 

•  Considers the business strategy of  

the Group and how the Remuneration 
Policy reflects and supports that 
strategy.

See page 66 for more information

See page 79 for more information

See page 71 for more information

Other committees

Group Executive Team (‘GET’)
The GET is responsible for the 
operational delivery of the Group’s 
strategy. This includes day-to-day 
management of operations and 
responsibility for monitoring detailed 
performance of all aspects of  
our business.

See page 63 for more details on the 
members and their individual roles  
and responsibilities.

Disclosure Committee
The Disclosure Committee oversees the 
Company’s compliance with its disclosure 
obligations. The Committee is chaired by 
Group Chief Executive and its other 
members are the Chief Financial Officer, 
the Chief Financial Officer Designate and 
the Group Company Secretary.

Digital Advisory Council (‘DAC’)
The DAC was demobilised in March 2020 
as a result of the Covid pandemic.  
The DAC previously oversaw the Digital 
and Technology strategy for the Group. 
The Group’s focus is now on the 
execution of the Digital and Technology 
strategy which is being led by a member 
of the GET. The DAC will continue to 
provide inputs and insights to the Board 
and the GET on emerging digital and 
technology trends, digital business  
and change management.

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationGET members’ roles and responsibilities

Group Chief Executive
•  Responsible for executive management of the Group as a whole.

•  Delivers strategic and commercial objectives within the Board’s stated risk appetite  

Chief Financial Officer and Chief 
Financial Officer Designate
•  Responsible for fiscal control.

(see page 34 for more detail on key risks).

•  Leads the finance management teams.

•  Builds positive relationships with all the Group’s stakeholders (see page 17).

•  Oversees relationships with the 

Ronan Cox, President, Performance 
Materials
•  Responsible for delivering the  

overall strategy for Performance 
Materials, including commercial 
activities and developing talent,  
and Group innovation.

Adrian Elliott, President, Apparel  
and Footwear (‘A&F’)
•  Responsible for the overall strategy for 
A&F, including the development and 
delivery of value adding products and 
customer propositions. Also responsible 
for Coats Digital and Marketing. 

•  Sector review is on page 47.

•  Sector review is on page 46.

Stuart Morgan, Chief Legal & Risk 
Officer and Group Company Secretary
•  Responsible for legal and  

Michael Schofer, Chief Transformation 
and Digital Officer
•  Responsible for business transformation 

and Digital and Technology.

compliance, governance, risk 
management, sustainability, 
communications, and company 
secretarial matters. He has oversight  
of the Group Internal Audit function.

•  You can read more about the Group 
Internal Audit function’s work during 
the year on page 69.

investment community.

Monica McKee, Chief Human 
Resources Officer
•  Responsible for delivering the global HR 

strategy, including performance 
management, progression planning, 
reward and talent acquisition.

Paul Turner, President, Business 
Operations
•  Global accountability for business 
operations, including delivery of 
business operating profit and 
responsibility for health and safety, 
procurement and supply chain planning, 
together with manufacturing excellence, 
quality and environment.

As at 31 December 2020, our seven geographic Clusters were each led by a Cluster Managing Director, who reported to the GET, 
supported by a Cluster Management Committee. From 1 January 2021, an additional extended GET was formed to include these seven 
Cluster Managing Directors, the Managing Director of Coats Digital and the Group Financial Controller. 

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCORPORATE GOVERNANCE 
CONTINUED

Board and Committee attendance

Mike Clasper

Rajiv Sharma

Simon Boddie

Jackie Callaway2

Nicholas Bull

Anne Fahy

David Gosnell

Echo Lu

Fran Philip

Alan Rosling4

Jakob Sigurdsson5

Board

12/12

12/12

12/12

1/1

12/12

12/12

12/12

12/12

12/12

5/5

3/3

Audit  

and Risk

Nomination Remuneration

AGM1

–

–

–

–

5/5

5/5

5/5

–

–

3/3

1/1

2/2

2/2

–

–

2/2

2/2

2/2

2/2

2/2

2/2

0/0

–

–

–

–

–

–

3/43

4/4

4/4

2/2

–

1/1

0/1

0/1

0/0

0/1

0/1

1/1

0/1

0/1

0/1

0/0

1. In line with recommendations and government guidance, the 2020 AGM was held as a ‘closed door meeting’. Accordingly, to reduce risk to our Directors and shareholders, the minimum number of 

shareholders necessary to form a quorum attended the meeting. 

2. Jackie Callaway was appointed to the Board on 1 December 2020. 

3. David Gosnell did not attend the Remuneration Committee meeting held in November 2020 as the purpose of the meeting was to consider and agree the offer to be made to him as the next Chairman of 

the Board.

4. Alan Rosling stepped down from the Board on 11 June 2020.

5. Jakob Sigurdsson was appointed to the Board on 1 October 2020

Ensuring effective meetings and decision making through Covid
In order better to assess the impact of the Covid pandemic, to make timely and well-informed decisions and to provide strategic guidance 
on how the pandemic might impact our people, our business and our operations, the Board increased the frequency of its meetings 
scheduling additional meetings in March and August. The Board has met virtually from March 2020, using audio-video conferencing, to 
enable Directors located in different locations and time zones to participate in meetings, with senior executives providing updates and 
presentations. The length of Board meetings has increased and often has spanned two consecutive days not only to ensure appropriate 
time to consider the additional matters of focus in 2020 but also to recognise the different dynamic of meeting virtually. This allows the 
Board to continue to effectively perform and discharge its duties. The annual strategy meeting was held over two days to allow appropriate 
focus and regular breaks to reflect on the discussion that had taken place. Detailed pre-read was circulated for each area discussed in 
advance of the meeting and there was a rapid summary provided at the conclusion of the meeting to ensure alignment. The Directors have 
subsequently confirmed that they found the technology and format of the meeting worked well and was effective in achieving our usual 
high quality of discussion and agreement on next steps. In addition to the nine Board meetings, three Board calls were held to discuss 
business matters that the Chairman and Group Chief Executive decided should be considered by the Board.

All Directors received papers for meetings in advance. 

In addition to the scheduled meetings, the Senior Independent Director and the Non-Executive Directors meet once a year without the 
Chairman present in order to appraise his performance. The Chairman and the Non-Executive Directors attended a Board call without 
management present to discuss, amongst other things, reflections on the annual strategy meeting and the performance of key members  
of management. 

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationBoard evaluation

Formal evaluation is a valuable tool for improvement. With an external evaluation having been carried out in 2019, an internal evaluation  
of the Board and its Committees was conducted during 2020 in keeping with the guidance provided under the Code. 

Review of previous year’s 
evaluation findings and progress 
help define the scope for this 
year’s evaluation.

Evaluation undertaken by a 
combination of rating scale and 
open-ended questions on a 
no-names basis.

Recommendations for each of the 
Committees and the Board 
analysed and discussed and an 
action plan was agreed.

The 2020 internal evaluation of the Board and its Committees was led by the Chairman and comprised a questionnaire. The Board values 
the benefit of a full evaluation of its performance and believes it provides meaningful insight and objectivity to its Committees and 
Directors, enabling it to improve its leadership, effectiveness and focus. In line with the Code, the Board intends to carry out an internal 
evaluation in 2021.

The questionnaire sent to Board members focused on the areas identified for improvement last year and also considered the effectiveness 
of the new ways of working introduced in 2020 as a result of Covid. It also sought to obtain views on certain key corporate governance 
areas as well as to gauge its own effectiveness. The questionnaire asked Directors to provide an absolute and relative rating and accordingly 
allowed year-on-year tracking. This is especially important in 2020 when our meetings have predominantly been held remotely. Finally,  
it gave Directors an opportunity to provide their candid thoughts: what was being done well and what needed to be improved. Views  
were also sought on the Chairman and Senior Independent Director, as well as the workings of the Committees of the Board.

The questionnaire covered the following areas:

•  effectiveness of the Board and Committee meetings including ways of working and information flow during Covid; 

•  contributions of the Board and its Committees;

•  relationships with the GET around the direction and values of the organisation and the decision-making process;

•  delivery of strategy against performance measures;

•  clarity on the Company’s purpose and the Board’s oversight of values and culture;

•  risk management;

•  training and development;

•  consideration of each of our identified key stakeholder groups in Board decision making;

•  shareholder and stakeholder communications; and

•  succession and talent management.

In addition, the Chairman and the incoming Chairman held one-to-one meetings with each Director covering the themes outlined above, 
the dynamics of the Board, and the training and development needs of the Directors, the areas identified for focus in 2020 to consider  
if these had been appropriately progressed, as well as any other areas of concern. The results of the internal evaluation led to a detailed 
Board discussion as, understandably and predictably due to the impact of the changing external environment and the lack of face-to-face 
interaction resulting from Covid, some respondents noted that there was a decline in some areas of effectiveness relative to 2019. The 
Board’s ways of working in 2020 were rated highly by all respondents, with respondents noting that the Board has adapted well to virtual 
meetings. The areas identified by respondents for further focus in 2021 are set out below and the actions that are undertaken in relation  
to these will be provided in the next Annual Report. 

Outputs for 2020

Succession planning and talent development

Actions for 2021

People Strategy

Actions taken: Quarterly people updates provided greater insights 
into below GET level succession and diversity

Executive Succession Planning

Strategy

Inorganic M&A growth opportunities

Actions taken: Focus on Coats Digital, Apparel & Footwear and 
Performance Materials strategy during strategy meeting 

Continuing to focus on the full range of stakeholders in Board 
discussion and decisions

Coats Group plc Annual Report and Accounts 2020

65

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
AUDIT AND RISK COMMITTEE REPORT

Name

Member since

Anne Fahy (Chairman)

Nicholas Bull

David Gosnell

2018

2015

2015

Jakob Sigurdsson

1 October 2020

Principal objectives of the Audit 
and Risk Committee

•  To monitor the integrity of the Group’s financial reporting 

processes. 

•  To ensure that risks are carefully identified and assessed, and 
that sound systems of risk management and internal control 
are in place.

Key responsibilities
•  Oversee the accounting principles, policies and practices 

adopted in the Group’s accounts. 

•  Oversee the external financial reporting and associated 

announcements.

•  Oversee the appointment, independence, effectiveness and 
remuneration of the Group’s external auditor, including the 
policy on the supply of non-audit services.

•  Conduct a competitive tender process for the external audit 

when required.

•  Review the resourcing, plans, reports and effectiveness of 
Internal Audit, which is independent from the Group’s 
external auditor.

•  Ensure the adequacy and effectiveness of the internal control 

environment.

•  Monitor the Group’s risk management processes and 

performance.

•  Ensure the establishment and oversight of fraud prevention 

arrangements and reports under the whistleblowing policy in 
conjunction with the Board.

•  Ensure the Group’s compliance with the 2018 UK Corporate 

Governance Code.

•  Provide advice to the Board on whether the Annual Report 
and Accounts, when taken as a whole, is fair, balanced and 
understandable and provides all the necessary information for 
shareholders to assess the Company’s performance, business 
model and strategy.

Dear Shareholder,

On behalf of the Audit and Risk Committee, I am pleased to present 
its report for the year ended 31 December 2020. This report sets 
out how the Committee has discharged the duties delegated to it 
by the Board, and the key activities and findings during the year. 

The duties of the Committee remain unchanged; however the 
importance of these responsibilities and their discharge have 
become even more critical given the context of Covid and its impact 
on our business. Accordingly, we have continued to discuss and 
challenge the assumptions and judgements made by management 
in the preparation of published financial information paying special 
attention to going concern and viability analysis and disclosures and 
to oversee internal controls, ensuring these remain effective. The 
Committee has also worked with the Internal Audit function to 
ensure that their plans were revised and flexed to respond to the 
evolving Covid impacts and that their remote ways of working 
ensured appropriate coverage. Given the ongoing impact of Covid, 
the Committee decided to postpone the planned retender of the 
external auditor and you can read more about this on page 70. 

The Committee continues to have an annual work plan that is linked 
to the Group’s financial reporting cycle and ensures proper coverage 
of all required areas as well as identifying certain ‘deep dives’ that 
are considered in the context of the business’ evolving priorities. 
This year, the Committee reviewed Environmental, Social and 
Governance (‘ESG’) external reporting. As part of this review, the 
Committee noted the intention for ESG disclosures for the year 
ending 31 December 2021 to be subject to certain external 
assurance procedures and the evolution of the internal review 
processes that had already been undertaken to support this aim. 

This year the Committee undertook an internally facilitated 
effectiveness review, including reviews of the effectiveness of  
the internal and external audit functions, in accordance with the 
requirements under the UK Corporate Governance Code 2018  
(the ‘Code’) and you can read more about this on page 70. 

Alan Rosling stood down as a member of the Committee following 
his resignation from the Board at the Company’s AGM in May 2020. 
We thank him for his contributions. Jakob Sigurdsson joined the 
Committee upon his appointment to the Board in October 2020. 
We are looking forward to working with Jakob and Jackie Callaway, 
Chief Financial Officer Designate, in 2021.

Anne Fahy
Chairman, Audit and Risk Committee

3 March 2021

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationGoing concern and viability statements
The Committee reviewed the updated wording of the Group’s 
longer-term viability statement, set out on page 44. To do this,  
the Committee ensured that the model used was consistent with 
the approved Business Plan and that scenario and sensitivity testing 
aligned clearly with the principal risks of the Group. Committee 
members challenged the underlying assumptions used and reviewed 
the results of the detailed work performed. The Committee was 
satisfied that the analysis supporting the viability statement had 
been prepared on an appropriate basis. The Committee also 
reviewed the going concern statement, set out on page 76,  
and confirmed its satisfaction with the methodology including 
appropriateness of scenario and sensitivity testing. Due to the 
impact the Covid pandemic has had on the global economy and 
Coats’ trading performance in 2020 the Committee has given 
additional focus to ensuring that both the basis of preparation  
of the going concern and viability analysis and the external 
disclosures are prepared in line with current Financial Reporting 
Council guidance. The Committee reviewed and challenged the 
assumptions underlying the forecast models underpinning the  
going concern and longer-term viability statements including the 
appropriateness and relevance of the severe but plausible stress 
tests to ensure adequate liquidity and covenant compliance 
throughout the relevant periods. The assessment included a review 
of management’s work in conducting a robust assessment of key 
risks and mitigating strategies.

Fair, balanced and understandable
The Committee considered whether the Annual Report is  
‘fair, balanced and understandable’, in line with the requirements  
of the Code. The Committee members were consulted at various 
stages during the drafting process and gave input to the planning 
process, as well as having the opportunity to review the Annual 
Report as a whole and discuss, prior to the February 2021 
Committee meeting, any areas requiring additional clarity  
or better balance in the messaging. 

In this respect the Committee focused on ensuring consistency and 
completeness in non-financial reporting (for example, ESG), impact 
of Covid on the business, use of alternative performance measures 
and principal risks and uncertainties. On the basis of this work, 
together with the views expressed by the external auditor, the 
Committee recommended and, in turn the Board confirmed, that  
it could make the required statement that the Annual Report is  
‘fair, balanced and understandable’.

Highlights of 2020
•  Considering the implications of Covid on the Group’s financial 
statements and internal controls, with a focus on the going 
concern and long-term viability of the Group as well as 
whether the carrying value of tangible and intangible assets 
have been impaired as a result of Covid.

•  Ensuring that the Internal Audit function adapt to new ways 

of working following the travel restrictions of Covid.

•  Assessing the appropriate timing for the Group audit tender.

•  Deep dive into the Group’s controls and process around ESG 

reporting.

•  Improvements in internal controls assessment.

Areas of focus for 2021
•  Audit tender.

•  Ongoing impacts of Covid.

•  Transition in leadership of Chief Financial Officer.

•  Developing regulatory environment for audit.

Membership and meetings
During the year, the Committee met four times and met privately 
with the external auditor once. Details of individual Directors’ 
attendance can be found on page 64. In addition to the Committee 
members, the Group Chief Financial Officer, the Chief Legal & Risk 
Officer and Group Company Secretary, the Group Financial 
Controller, the Head of Group FP&A, the Head of Group Internal 
Audit, and the external auditor attended parts of these meetings by 
invitation. The Group Chairman and Group Chief Executive may also 
attend meetings. The Head of Secretariat acts as Secretary to the 
Committee. The Chairman of the Committee holds regular meetings 
with both internal and external auditors, and each has an 
opportunity to discuss matters with the Committee without 
management being present.

Meetings of the Committee are scheduled close to the end of the 
half and full year, as well as before the publication of the associated 
half and full year financial reports, so as to ensure the Committee is 
informed fully, and on a timely basis, on areas of significant risks 
and judgement.

The Committee received sufficient, reliable and timely information 
from management to enable it to fulfil its responsibilities.

The Board has confirmed that it is satisfied that Committee 
members possess an appropriate level of independence and depth 
of financial and commercial, including sectoral, expertise. For the 
financial year ended 31 December 2020, Anne Fahy and Nicholas 
Bull were the members of the Committee determined by the Board 
as having recent and relevant financial experience.

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationAUDIT AND RISK COMMITTEE REPORT 
CONTINUED

Significant issues relating to the financial statements
The Committee considered the following issues relating to the financial statements during the year. These include the matters relating to 
risks disclosed in the external auditor’s report:

Issue

Review and conclusion

Impairment of non-current 
tangible and intangible assets 
as a result of Covid

Pension matters – valuation 
of obligations and disclosure

US legacy environment 
provision

Taxation

Overall impact of Covid on 
financial statements including 
appropriateness and 
adequacy of disclosures

The Covid pandemic has caused an increased risk of impairment of assets where there have been 
interruptions to production and reductions in sales and profitability in the short term. There is also 
significant uncertainty over how quickly the global economy will recover following the pandemic. The 
Group’s total non-current assets at 31 December 2020 was $673.9 million. The Committee has considered 
management’s assessment of the indicators of impairment, the appropriateness of cash generating units, 
the assumptions underlying the impairment assessments as well as sensitivity analysis performed. A total 
impairment charge of $4.9 million was recorded during the year ended 31 December 2020.

At 31 December 2020, the Group’s IAS 19 Pension deficit was $225.8 million. The Committee reviewed  
the methodology for determining key assumptions underpinning the valuation of liabilities of the Group’s 
most significant pension schemes. The Committee also reviewed in detail the various aspects of the 
continuing obligations to the Group’s ongoing schemes. The Committee is satisfied that these, and the 
disclosures provided in note 10 to the financial statements, are appropriate.

The Group has recognised a provision, net of insurance reimbursements, of $12.6 million in respect  
of remediation and legal / professional costs for the Lower Passaic River. The Committee considered 
management’s position on the accounting and disclosure implications surrounding this environmental case, 
taking into account advice received from external counsel Sive Paget & Riesel P.C. Following the delivery of 
the US Environmental Protection Agency’s Record of Decision in March 2016, the Committee has continued 
to review whether subsequent events, including those impacting other parties considered to be responsible 
for the most significant contamination in the river, have triggered the requirement to remeasure the level of 
remediation provisioning previously established. The Committee is satisfied that there is no requirement to 
remeasure the remediation provision at 31 December 2020 and that the disclosures provided in note 28 to 
the financial statements are appropriate.

The Group operates in numerous jurisdictions around the world, with different regulations applying  
in different territories. This complexity together with intra-Group cross-border transactions give rise to 
inherent risks. In addition to reviewing the Group’s underlying effective tax rate which, as a result of Covid, 
increased from 29% to 39%, the Committee also considered the Group’s uncertain tax provisions and 
deferred tax assets, which amount in total to $15.0 million and $22.7 million respectively. The Committee  
is satisfied with the approach and disclosures adopted by management as reflected in the financial 
statements in note 9 to the financial statements.

The Covid pandemic has had a significant impact on the Group in 2020 with revenue down 16% and 
pre-exceptional profit attributable to the equity shareholders of the Group down 65% compared to 2019. 
As a result the pandemic has led to increased risk in certain accounting judgement areas, most notably 
impairment of tangible and intangible assets, the going concern status of the Group as well as the 
appropriateness and adequacy of disclosures in the financial statements. During the year the Committee 
considered management’s assessment of the implications of the pandemic on the financial statements, 
taking into account the latest FRC and other regulatory guidance. The Committee is satisfied that 
management has responded appropriately to the increased risk that resulted from the Covid pandemic  
and that the disclosures included in the financial statements are appropriate.

The Committee also received regular updates on provisions made for litigation and tax matters and the Committee considered the 
appropriateness of the methodology applied.

68

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationInternal control and risk management
The Board has overall responsibility for determining the nature  
and extent of its principal and emerging risks and the extent  
of the Group’s risk appetite, and for monitoring and reviewing  
the effectiveness of the Group’s systems of risk management  
and internal control. The principal risks and uncertainties facing  
the Company are addressed in the Strategic Report and in the table 
on pages 34 to 44 in this Annual Report. The Board has delegated 
to the Committee the responsibility for monitoring the effectiveness 
of the systems of risk management and internal control. 

The Committee receives reports on the effectiveness of internal 
control matters from management, Internal Audit and the external 
auditors, as part of its duty to review the Company’s internal control 
processes. This regular monitoring ensured timely identification of 
issues and formal tracking of remediation plans. During the year,  
the Committee reviewed detailed reports on internal controls  
over financial reporting and this included quantitative measures of 
success. Instances where the effectiveness of internal controls were 
considered insufficient, including in relation to operational findings 
in India and the oversight of third party contractors, were discussed 
during the year with updates being provided to the Audit and Risk 
Committee. Remediation plans are monitored closely on an  
ongoing basis.

At its December meeting the Committee, on behalf of the 
Company, also reviewed effectiveness of the Company’s risk 
management and internal control systems covering all material 
controls, including operational and compliance controls, and was 
satisfied that these systems operate effectively in all material 
respects with weaknesses remediated in a timely fashion. The 
Committee has also considered management’s assessment of the 
effectiveness of key controls during the pandemic and is satisfied 
that controls have continued to operate effectively throughout the 
period despite the challenge of a remote working environment.

The Committee reviews the minutes of the Group Risk Management 
Committee meetings regularly, and discusses matters arising there 
from with management.

Internal audit
The Head of Group Internal Audit agrees the Internal Audit 
function’s programme of work annually in advance with the 
Committee. This year the Committee reviewed the programme 
regularly to ensure this achieved appropriate coverage of key 
activities during the pandemic and that ways of working were 
optimised. At each Committee meeting, the Committee reviews  
key findings from internal audit reports, receives detailed reports 
from management where appropriate, and monitors the rate at 
which actions agreed with management are implemented. The 
Committee carries out an annual internal review of the effectiveness 
of the Internal Audit function to satisfy itself that the quality, 
experience and expertise of the function are appropriate for the 
business. Key themes considered in the internal audit reports 

throughout the year included compliance with environmental  
and regulatory requirements across locations, accuracy of payroll 
processing for workers including in remote locations as well as  
the state of compliances by some of Coats’ manpower contractors 
on key regulatory requirements. The Committee also discussed  
the impact of Covid on audit delivery as well as the use of data  
analytics by Group Internal Audit to provide assurance. In addition 
to the above, control weaknesses highlighted as part of an 
investigation were brought to the attention of the Committee  
and adequacy of implementation measures arising out of such 
investigations were also reviewed. Arising out of the Covid situation, 
the Committee also reviewed the processes in place that enable the 
Internal Audit function to continue to deliver independent assurance 
working remotely.

The Head of Group Internal Audit also consolidated and presented 
to the Committee a biannual review of in-country operational risks, 
which included a summary of any new risks that have arisen in the 
period with agreement on appropriate actions and interventions.

External audit
Independence
The Committee is responsible for reviewing the independence and 
objectivity of the Company’s external auditor, Deloitte LLP, agreeing 
the terms of engagement with them and the scope of their audit. 
Deloitte has a policy of partner rotation, which complies with 
regulatory standards, and, in addition, Deloitte has a structure 
of peer reviews for its engagements, which are aimed at ensuring  
that its independence is maintained.

Maintaining an independent relationship with the Company’s 
external auditor is a critical part of assessing the effectiveness of  
the audit process. Following publication of the FRC’s Revised Ethical 
Standard, the Committee has approved the Company’s updated 
policy on non-audit fees during the year ended 31 December 2020. 
The Committee also regularly reviews the level of audit and 
non-audit fees paid to Deloitte. The key principles of the policy  
on non-audit services are:

•  The Committee has approved a revised list of all permitted 

non-audit services following publication of the FRC’s Revised 
Ethical Standard. The auditor is prohibited from providing any 
services that are not included in the list of permitted non-audit 
services. Permitted services include audit-related services such  
as reviews of interim financial information or any other review  
of accounts required by law to be provided by the auditor.

•  Any service that is not on the list of permitted services, if in 
excess of $25,000, requires the approval of the Committee.

•  Engagements entered into prior to 15 March 2020 can be 

completed in line with the original terms as long as the non-audit 
work being provided under the transitional arrangements was 
envisaged at the time the engagement letter was signed.

Coats Group plc Annual Report and Accounts 2020

69

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationAUDIT AND RISK COMMITTEE REPORT 
CONTINUED

During 2020, the external auditor provided services in relation to the 
Group’s interim results and tax advisory services that were entered 
into prior to 15 March 2020. The external auditor has confirmed to 
the Committee that they did not provide any prohibited services  
and that they have not undertaken any work that could lead to  
their objectivity and independence being compromised.

Assessment of audit process
The scope of the external audit is formally documented by the 
auditor. They discuss the draft proposal with management before  
it is referred to the Committee which reviews its adequacy and 
holds further discussions with management and the auditor  
before final approval.

The non-audit fees in relation to the services supplied by the 
external auditor can be found in note 5 of the financial statements. 
The ratio is 85/15 audit to non-audit services. The non-audit services 
primarily relate to long-running tax compliance and advisory services 
in India and the Committee considered and approved a proposal  
for the external auditor to continue these works in India. In the case 
of each engagement, it was considered appropriate to engage  
Deloitte LLP for the work because of their existing knowledge  
and experience from prior Group engagements. The Committee 
discussed with, and received confirmation from, the external auditor 
that the audit team have not relied on the work performed by  
their tax teams as part of the audit and their objectivity and 
independence has been safeguarded.

In respect of the financial year ended 31 December 2020, the 
Committee assesses the performance and effectiveness of the 
external auditor, as well as their independence and objectivity,  
on the basis of meetings and a questionnaire-based internal review 
which was completed by the Committee members, regular 
attendees to the Committee and those Coats colleagues globally 
who interact most frequently with the external auditor. The 
summary of the results of the questionnaire has been reviewed by 
the Committee and appropriate feedback has been shared with  
the external auditor, noting that prior year feedback was acted on. 
The Committee is satisfied that it can recommend to the Board that 
the Board should propose to shareholders the reappointment of 
Deloitte LLP as auditor for the year ending 31 December 2021.

The lead partner is rotated every five years. Ed Hanson was 
appointed as the lead audit engagement partner in 2018.

The Code recommends that FTSE 350 companies put their external 
audit provider out to tender at least once every ten years. The EU 
Audit Regulation, effective across all Member States from the 
17 June 2016, enforces mandatory audit firm rotation after a period 
of maximum tenure, set at 20 years. Deloitte LLP was appointed the 
Company’s external auditor in 2003 and therefore a new audit firm 
must be appointed for the year ending 31 December 2023 at the 
latest. The Board previously intended for the audit tender to take 
place during 2020; however, the process was deferred as a result  
of Covid. The Board now intends to undertake a competitive tender 
process for the external audit during 2021, with the intention of the 
Board appointing a new audit firm for the year ended 31 December 
2022. The tender process will consider Big Four as well as non-Big 
Four audit firms. There are no contractual obligations that restrict 
the Company’s choice of external audit firm but the restrictions  
on audit rotation as set out in the EU Audit Regulation preclude 
Deloitte from the tender process.

Assessment of the effectiveness of the Committee
The Committee effectiveness in respect of the year ended 
31 December 2020 was evaluated as part of the internal review 
described on page 65. The key points that were identified in the 
previous year’s assessment were discussed by the Committee  
to ensure these were adequately addressed and the Chairman 
provided an update where appropriate.

Looking forward
As well as the regular cycle of matters that the Committee 
schedules for consideration each year and conducting the audit 
tender, we are planning over the next 12 months to:

•  review any matters relevant to the continued Covid situation;

•  continue to monitor legislative and regulatory changes that  

may impact the work of the Committee;

•  conduct a deep dive into key HR policies and controls; and 

•  consider the impact of proposed audit industry changes.

The Committee’s report was approved by a Committee of the  
Board of Directors on 3 March 2021 and signed on its behalf by:

Anne Fahy
Chairman, Audit and Risk Committee 

3 March 2021

70

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOMINATION COMMITTEE REPORT

Name

Member since

Dear Shareholder,

David Gosnell (Chairman)

Rajiv Sharma

Nicholas Bull

Mike Clasper

Anne Fahy

Echo Lu

Fran Philip

2015

2015

2015

2014

2018

2017

2016

Jakob Sigurdsson

1 October 2020

Principal objectives of the Nomination 
Committee

To make sure the Board comprises individuals with the necessary 
skills, knowledge and experience to ensure that it is effective in 
discharging its responsibilities and has oversight of all matters 
relating to corporate governance.

Key responsibilities
•  Reinforcing the culture and diversity expertise in the Board’s 

and senior management team’s composition and maintaining 
ongoing succession plans.

•  Considering ways to improve diversity in the pipeline for 

senior management roles.

•  Further strengthening of the senior management team.
•  Reviewing the Group’s talent management process.

Highlights of 2020
•  Recruitment of Jakob Sigurdsson and ensuring smooth Board 

succession and induction process.

•  Chief Financial Officer succession planning.

•  Chairman succession planning.

Areas of focus for 2021
•  Senior management succession planning and talent 

development.

•  Monitoring and fostering a successful performance culture.

•  Diversity and inclusion, within our ESG strategy, including 

improvements in gender balance and readiness for succession 
in our talent pipeline.

•  Smooth transition of Chairman and Chief Financial Officer roles.

I am pleased to welcome you to my first report as Chairman of  
the Nomination Committee following my appointment to the role  
in December 2020. There have been some significant changes to 
the Board during 2020, with the Nomination Committee playing  
an appropriately central role in the processes. In March 2020  
Alan Rosling announced that he would be stepping down and  
the Nomination Committee oversaw the recruitment of Jakob 
Sigurdsson. You can read more about that process on pages 72  
to 73. In April 2020 Simon Boddie announced that he would be 
retiring in March 2021 and the Nomination Committee oversaw  
the process to recruit his successor Jackie Callaway, who joined  
the Board as an Executive Director in December 2020. Finally,  
Mike Clasper announced his intention to stand down as Chairman 
of the Board at the next AGM, triggering the rigorous process that 
was undertaken to identify me as his successor. You can read more 
about this on page 73.

In addition to this busy agenda, the Committee has also  
dedicated time during the year to focus on the combined skill  
set and capabilities of the Directors to ensure their effectiveness  
in driving our strategy forward. It also continued to fulfil its core 
responsibilities of reviewing the structure of the Board and 
Committees and reviewing its own effectiveness.

Board Diversity Policy
Our objective of driving the benefits of a diverse Board, senior 
management team and wider workforce is underpinned by our 
Board Diversity Policy (the ‘Policy’), which can be viewed on our 
corporate website. The Board will continue to keep the Policy under 
review to ensure that it remains an effective driver of diversity in  
its broadest sense, having due regard to gender, ethnicity, social 
background, skill set and breadth of experience. We have a 
workforce diversity policy that is included in our Coats Key People 
Principles, which are also available on our website, and mirrors the 
intention of the Policy.

Diversity and inclusion have continued to be promoted across  
the business with a number of initiatives, including education  
and capacity building, resource groups, talent acceleration and 
development and leveraging data and analytics to help achieve  
our ambitions. In particular, as a by-product of Covid, the Company 
has a new flexible working policy. We hope that accommodating 
more flexible working practices will potentially allow access to a 
more diverse workforce. You can read more about the work that 
has been done in this area, and the benefits it brings to the Group, 
on page 27.

Coats Group plc Annual Report and Accounts 2020

71

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOMINATION COMMITTEE REPORT 
CONTINUED

The Committee continues to focus on these important areas  
and will continue to consider the various diversity factors set out  
in the UK Corporate Governance Code 2018 (the ‘Code’) and the 
Hampton-Alexander and Parker Reports appropriately. We have 
40% female representation on the Board and have two Directors 
from an ethnic minority background. I am proud of our progress on 
gender diversity. The recently published Hampton-Alexander Review 
of FTSE Women Leaders has ranked Coats at number 45 in the  
FTSE 250 category. The gender diversity across our Group is  
shown below. 

All employees

Senior managers

Board

Male

58%

77%

60%

Female

42%

23%

40%

You can see more information on the gender split across the  
Board, senior management team and the Group as a whole in our 
Sustainability Report, which is available on our website (www.coats.
com/sustainability).

Skills matrix
Building the right Board for the Group and the right pipeline means 
the Committee needs to ensure a good balance of competencies  
to address the challenges faced as they arise. 

The Committee and the Board considers the experience, skills, 
attributes and capabilities of existing Board members and senior 
management and challenges the skills matrix in the talent pool.  
It routinely:

•  reviews the competencies and skills of the Board, as a whole, 
should possess and seeks to build this into succession plans;

•  assess what competencies and skills each incumbent Director 

possesses; and

•  considers the character of Directors and their fit with the  

current Board culture, looking at wider attributes including 
self-awareness, integrity and high ethical standards.

Succession planning
The Committee, on behalf of the Board, regularly assesses the 
balance of Executive and Non-Executive Directors, and the 
composition of the Board in terms of skills, experience, diversity  
and capacity. The Board tenure tracker is regularly presented to  
the Committee to ensure that discussions are held well in advance 
of planned departures to allow appropriate skills gap identification 
and timely succession. Following Alan Rosling’s and Simon Boddie’s 
decisions to retire from the Board, the Committee drew up  
a candidate selection process.

Candidate section process

External advice:
The selection and engagement of independent recruitment 
consultants who have no other connection to the Company  
or individual Directors. Russell Reynolds was appointed from  
a shortlist of three potential consultants for the appointment  
of Jakob and Inzito was used for the appointment of Jackie. 

Consider:
The preparation of a longlist of potential candidates which  
takes into account the outcome of the Committee’s latest review 
of the composition and skill sets of the Board.

Select shortlist:
The selection of a shortlist of suitable candidates meeting the 
Committee’s criteria.

Interviews and meetings:
Interviews and meetings with the Chairman, Group Chief 
Executive, other Executive Directors, and with two Independent 
Non-Executive Directors.

Select candidate.

Take up references.

Appointment.

Induction:
See case study on page 73.

When making decisions on new appointments, Board members 
consider the skills, experience and knowledge already represented 
on the Board and the benefits of diversity, in all its forms including 
gender and ethnicity.

The Committee and Board have continued to monitor the  
Group Executive Team (‘GET’) and senior management talent pool 
to ensure that succession planning for business-critical roles is 
proactively reviewed. In October of this year, the Board received  
a detailed people update that considered the progress on CEO 
succession plans, which is reviewed at least annually. There was  
also a review of the succession plans for our below GET level roles. 
The Board made specific requests to focus on talent development  
to enhance this pipeline.

During the year the Committee discussed and approved a policy  
for senior managers to take on one external Non-Executive Director 
or equivalent role to allow them to build up their skills as future 
Board leaders. This has been embraced by members of the GET  
and several of the team are considering seeking opportunities.  
We believe that facilitating this development will result in a wider 
and more diverse talent pipeline in the future. 

72

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationInduction process – Q&A with Jakob Sigurdsson
The importance of induction and training is recognised by  
the Committee and the Company has established procedures 
whereby newly appointed Directors, including Non-Executive 
Directors, receive a formal induction.

What did your induction programme comprise?
There were deep dives into business units and key functions,  
an overview of risk management and internal control systems, 
principal risks, culture and purpose as well as pension matters.  
I also attended the annual strategy meeting.

Who did you meet?
All my fellow Board members on a one-to-one basis as well  
as with various members of senior management. I also had 
meetings with some of our advisers including our brokers.

What did you learn?
Coats serves a diverse range of geographic markets and sectors. 
There is also a technical transition that the industry is going 
through. In many ways Coats is in a unique position to capitalise 
on major trends in the industry, given its history, market presence 
and resources.

The induction programme for Directors is reviewed periodically 
and is considered to remain appropriate.

Chair succession process
When Mike announced his decision to retire at the 2021 AGM,  
it was agreed by the Board that Nicholas Bull would lead a selection 
committee to undertake necessary activities for identifying his 
successor. A robust process was undertaken following the 
identification of me as an internal candidate. Russell Reynolds  
was engaged, following the review of a shortlist of independent 
recruitment consultants, to benchmark me against external 
candidates and conduct a rigorous interview. Following further 
internal interviews, the selection committee recommended my 
appointment as Chairman with effect from the 2021 AGM of the 
Company. I confirm that I am independent on appointment and  
it was agreed that I would become Chair of the Nomination 
Committee with effect from the date of the announcement  
of my appointment. This allows me to lead the process for the 
appointment of my successor to the Chair of the Remuneration 
Committee, in line with the Code. 

Independence
During 2020, the Committee reviewed the balance of skills, 
experience and independence of the Board. For Non-Executive 
Directors independence in thought and judgement is vital to 
facilitating constructive and challenging debate in the boardroom 
and is essential to the operational effectiveness of the Coats Board 
and its Committees.

Prior to Jakob Sigurdsson being appointed as a Non-Executive 
Director, his significant commitments were disclosed, together with 
an indication of the time necessary to fulfil these, and these were 
appropriately considered and approved by the Board. During the 
course of the year, Board members informed the Chairman of any 
proposed new external appointments and these were considered 
and approved by the Board. The Committee is satisfied that the 
external commitments of its Chairman and members do not  
conflict with their duties as Directors of the Company and that any 
situational conflicts have been authorised in line with the process 
set out in the Company’s Articles of Association.

Committee performance and effectiveness
The Committee’s performance was evaluated as part of the  
internal effectiveness review, as described on page 65. The review 
was completed by all Committee members and routine meeting 
attendees. The results were broadly positive, with ways of working 
and dynamics scoring highly. The Committee will continue to 
increase its focus on succession planning in 2021 including at  
the GET level. 

As I sign off on my first report as Chairman of the Nomination 
Committee, I take pride in reflecting on the diversity and 
effectiveness of our Board as set out in these pages and I look 
forward to continuing to oversee progress in these areas during  
my tenure.

David Gosnell
Chairman, Nomination Committee

3 March 2021

Coats Group plc Annual Report and Accounts 2020

73

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationDIRECTORS’ REPORT

Coats Group plc (the ‘Company’) is the holding company of the 
Coats group of companies (the ‘Group’).

Annual General Meeting
The Annual General Meeting (‘AGM’) of the Company will be  
held on 19 May 2021 at 2.30pm at a location to be confirmed in 
the Notice of Meeting which will be available from the Company’s 
website, that will be in line with Covid meeting guidelines at  
that time.

Corporate Governance Statement
The Corporate Governance Statement, prepared in accordance with 
rule 7.2 of the Financial Conduct Authority’s Disclosure Guidance 
and Transparency Rules, comprises the following sections of the 
Annual Report: the ‘Strategic Report’; the ‘Corporate Governance 
Report’; the ‘Audit and Risk Committee Report’; the ‘Nomination 
Committee Report’; the ‘Remuneration Committee Report’; 
together with this Directors’ Report. As permitted by legislation, 
some of the matters required to be included in the Directors’ Report 
have been included in the Strategic Report by cross-reference 
including details of the Group’s financial risk management 
objectives and policies, business review, future prospects, 
stakeholder engagement, Section 172 Statement and environmental 
policy. The 2018 UK Corporate Governance Code is available from 
the Financial Reporting Council’s website (www.frc.org.uk).

Directors
The names and biographical details of the current Directors are 
shown on pages 56 to 58 of this Annual Report. Particulars of their 
emoluments and beneficial and non-beneficial interests in shares 
are given in the Directors’ Remuneration Report on pages 87 and 88.

The appointment and removal of Directors are governed by the 
Company’s Articles of Association and the Companies Act 2006. 
The Directors may, from time to time, appoint one or more 
Directors. In accordance with the provisions of the Code, all 
Directors, with the exception of Mike Clasper and Simon Boddie 
who are not standing for re-election, will retire and submit 
themselves for election or re-election at the forthcoming AGM. 

Directors’ Powers 
The Board manages the business of the Company under the  
powers set out in the Company’s Articles of Association. These 
powers include the Directors’ ability to issue or buy back shares. 
Shareholders’ authority to empower the Directors to make market 
purchases of up to 10% of its own ordinary shares is sought at the 
AGM each year (as set out in the Share Capital section below).  
The Company’s Articles of Association can only be amended, or 
new Articles adopted, by a resolution passed by shareholders in a 
general meeting by at least three quarters of the votes cast. As will 
be set out in the Notice of Meeting, a resolution to update the 
Article will be proposed at the AGM in 2021. You can read about 
the proposed changes in the explanatory note to that resolution.

In the event that a Director raises any concerns about the operation 
of the Board or management of the Company that cannot be 
resolved, a record would be kept in the Board minutes and this 
should also be noted in the Director’s resignation letter. Further 
discussion of the Board’s activities, powers and responsibilities 
appears within the Corporate Governance Report on pages 59  
to 62. Information on compensation for loss of office is contained  
in the Directors’ Remuneration Report on page 87.

Directors’ conflicts of interests
The Company has procedures in place for managing conflicts of 
interest, including situational conflicts of interest. Potential situational 
conflicts of interest are identified prior to appointment and the Board 
will consider and authorise these if appropriate. Should an existing 
Director become aware that they, or any of their connected parties, 
have an interest in an existing or proposed transaction with the 
Company, they should notify the Board in writing or at the next 
Board meeting. Internal controls are in place to ensure that any 
related party transactions involving Directors, or their connected 
parties, are conducted on an arm’s length basis. Directors have a 
continuing duty to update any changes to these conflicts.

Directors’ indemnities
The Directors of the Company have entered into individual deeds of 
indemnity with the Company which constitute ‘qualifying third party 
indemnity provisions’ for the purposes of the Companies Act 2006. 
The deeds indemnify the Directors, and the directors of the 
Company’s subsidiary companies, to the maximum extent permitted 
by law. The deeds were in force for the whole of the year, or from 
the date of appointment for those appointed during the year.  
In addition, the Company had Directors’ and Officers’ liability 
insurance cover in place throughout the year.

Share capital
Details of the Company’s issued share capital, together with  
details of the movements in the Company’s issued share capital 
during the year, are shown in note 26. The Company has one class 
of ordinary shares with a nominal value of 5 pence each (‘Ordinary 
Shares’), which does not carry the right to receive a fixed income. 
Each share carries the right to one vote at general meetings of the 
Company. There are no restrictions or agreements known to the 
Company that may result in restrictions on share transfers or voting 
rights in the Company. There are no specific restrictions on the size 
of a holding, on the transfer of shares, or on voting rights, all of 
which are governed by the provisions of the Articles of Association 
and prevailing legislation. Shareholder authority for the Company  
to purchase up to 144,605,058 (representing approximately 10% of 
the Company’s issued shares as at the latest practicable date before 
the publication of the notice of the Annual General Meeting held  
in June 2020) of its own Ordinary Shares was granted at the 2020 
AGM. No shares were purchased pursuant to this authority during 
the year.

74

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationShareholder authority for the Company to allot Ordinary Shares  
up to an aggregate nominal amount of £47,719,669 was granted  
at the 2020 AGM. No shares were allotted pursuant to this authority 
during the year. The issued share capital of the Company at 
31 December 2020 was approximately £72,603,863 divided into 
1,452,077,272 Ordinary Shares.

Since 31 December 2020, 36,672 new shares have been issued  
as a result of the exercise of share options by the Company’s share 
option scheme participants and the total issued share capital at 
3 March 2021 is 1,452,113,944 Ordinary Shares. The Company’s 
Ordinary Shares are listed on the London Stock Exchange. The 
register of shareholders is held in the UK. The number of Ordinary 
Shares of the Company in which the Directors were beneficially 
interested as at 31 December 2020 are set out in the Directors’ 
Remuneration Report on page 88.

Substantial interests
Information provided to the Company pursuant to the Financial 
Conduct Authority’s Disclosure Guidance and Transparency Rules 
(DTRs) is published on a Regulatory Information Service and on the 
Company’s website. The following information has been received,  
in accordance with DTR 5, from holders of notifiable interests in  
the Company’s issued share capital.

As at  
31 December 
2020*

As at  

3 March
2021*

Nature of 
holding

10.52%

10.52%

Direct

7.49%

7.49%

Indirect

5.31%

5.31%

Indirect

5.06%

4.99%

Indirect

Liontrust Investment  
Partners LLP

Kempen Capital  
Management N.V.

AXA Investment  
Managers

Mondrian Investment 
Partners Limited

Invesco 

5.07%

4.97%

Indirect

*  % holding based on total number of shares in issue at the time of respective notification.

The Company has not been notified of any other substantial 
interests in its securities. The Company’s substantial shareholders  
do not have different voting rights. The Group, so far as is known  
by the Company, is not directly or indirectly owned or controlled  
by another corporation or by any government.

Change of control
The Company is not party to any significant agreements that  
would take effect, alter or terminate upon a change of control  
of the Company following a takeover bid. However, the Group’s 
Revolving Credit Facility Agreement and US Private Placement would 
terminate upon a change of control of the Company. The Company 
does not have agreements with any Director or employee providing 
compensation for loss of office or employment that occurs because 
of a takeover bid, except for provisions in the rules of the 
Company’s share schemes which result in options or awards  
granted to employees vesting on a takeover.

Political donations
No contributions were made to political parties during the year 
(2019: £nil).

Whistleblowing procedure
A whistleblowing, ethics and fraud report is a standing agenda  
item that is presented quarterly at Board meetings. Coats has a  
well-publicised whistleblowing procedure, which can be found on 
our website. This is designed to empower all employees, contractors 
and anyone else who is aware of, suspects, or is concerned about 
potential misconduct, illegal activities, fraud, abuse of assets or 
other violations of Company policy / Ethics Code to report these 
confidentially. ‘Doing the right thing’ and ways to raise concerns  
are regularly communicated and discussed and are covered as part 
of the Global Ethics Day, held each year in October.

During the year ended 31 December 2020, there were 83 
whistleblowing concerns raised (2019: 119). Of these concerns 
raised, following investigation 22% of the closed cases were  
upheld and 8 cases are still under review (2019: 30%). In the case  
of substantiated concerns, disciplinary action was taken whenever 
there was any evidence of misdemeanour and training and 
enhanced controls were implemented wherever appropriate.

Concern is raised via 
whistleblowing procedure

Investigated by a team 
independent of the relevant 
operational business or 
function

Findings are presented to an 
appropriate member of the GET

Appropriate remedial actions 
are determined

Reports and outcomes are 
reviewed by the Board and the 
Audit and Risk Committee

Remedial actions may be 
recommended

Coats Group plc Annual Report and Accounts 2020

75

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationDIRECTORS’ REPORT 
CONTINUED

Going concern
As set out in the Audit and Risk Committee Report on page 67, 
more frequent reviews of liquidity and financial status have been 
undertaken during 2020 as a result of Covid. The Company’s 
business activities, together with the factors likely to affect its  
future development, performance and position are set out in  
the Chairman’s statement.

In addition, note 34 to the financial statements includes the  
Group’s objectives, policies and processes for managing its capital; 
its financial risk management objectives; details of its financial 
instruments and hedging activities; and its exposures to credit  
risk and liquidity risk. The Directors believe that the Group is  
well placed to manage its business risks successfully.

Environmental matters
The Group Risk Management Committee (‘GRMC’) agreed during 
2019 that climate change should be included in the Group Risk 
Register as a emerging risk and this has been promoted to a 
principal risk in 2020. This means that it is a Board level issue and 
therefore that evaluation of risks and opportunities and decisions  
on appropriate strategies and actions have Board oversight.  
The GRMC assesses risks and opportunities in detail and makes 
recommendations to the Board for review and decision.

The involvement of the Group in relation to the Lower Passaic River 
matter is reported in the Principal Risks section of this Annual 
Report and can be found on page 43. Further details are contained 
in note 28 to the financial statements.

The Board expects to be able to meet any actual and contingent 
liabilities from existing resources. Further information on the 
Group’s cash and borrowings is set out in note 30(f).

Greenhouse gas (‘GHG’) emissions
For the year ended 31 December 2020, Coats reported the 
following emissions:

The Directors are satisfied that the Company and Group has 
sufficient resources to continue in operation for the foreseeable 
future, a period of not less than 12 months from the date of this 
report. Accordingly, the Directors consider that the going concern 
basis of accounting is appropriate for the Company and the Group 
and the financial statements have been prepared on that basis.  
In assessing the Group’s going concern position, the Directors have 
considered a number of factors, including the current balance sheet 
position and available liquidity, the principal and emerging risks 
which could impact the performance of the Group and compliance 
with borrowing covenants. Further details are provided in note 1  
of the accounts. 

Results and dividends
The results of the Group are shown on page 108 and movements  
in reserves are set out in note 27 to the financial statements.

The Board is mindful of the importance of income to shareholders 
and, as a result of the strength of the Group’s balance sheet and  
the encouraging recovery out of the Covid pandemic, and given its 
confidence in the strategy and outlook for the Group, is pleased to 
propose a final dividend of 1.30 cents per share (2019 final dividend: 
nil). Subject to approval at the forthcoming AGM, the final dividend 
will be paid on 25 May 2021 to ordinary shareholders on the 
register at 30 April 2021, with an ex-dividend date of 29 April 2021. 

Going forward, the Board will continue to aim to use the Free Cash 
Flow the Group generates to fund its pension schemes, self-finance 
bolt-on acquisitions, and make returns to shareholders. As 
underlying earnings and cash flows continue to recover from  
the impact of Covid, the Board intends to return to its previously 
published progressive dividend policy.

Global thousands of tonnes of 
CO2e¹-²

Scope 1, Direct (Gas,  
Oil, Coal)

2020

49.5

2019

58.3

2018

64.5

Scope 2, Indirect (Electricity)

182.8

216.4

223.9

1. Based on IEA CO2 emissions from Fuel Combustion location based factors for Scope 2 

conversions, and the UK DEFRA GHG reporting guidance and factors for Scope 1 conversions. 

2. Emissions reported are from energy consumption in our global operations. 2018 and 2019 figures 

are restated to include Pharr HP (acquisition completed 11th February 2020).

This represents a decrease of 20% versus 2019 total emissions on  
a like-for-like basis. However, the bulk of this reduction is due to  
the fall in production caused by Covid shutdowns, as shown in the 
intensity table below. 

The methodology for Scope 1 direct emissions is to convert fuel 
consumed in kWh to GHG equivalent using DEFRA published global 
conversion factors. 

The methodology for Scope 2 indirect emissions is to convert the 
electricity or other purchased energy in each country from kWh to 
GHG equivalent using the country level conversion factors published 
by the IEA for each country for electricity and DEFRA conversion 
factors for other energy sources. Scope 2 emissions are therefore 
location based. The resultant figures are then consolidated globally. 

Emissions from our five UK office locations in 2020 were 62 tonnes 
CO2e and represented 0.03% of our global emissions.

Energy consumption

Millions kWh

Direct (gas, oil, coal)
Indirect (electricity, steam)

2020

283.2
393.4

2019

390.2
454.5

2018

410.9
462.0

Energy consumption in our five UK office locations in 2020 was 
313,000 kWh and represented 0.05% of our global energy 
consumption. 

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationGreenhouse gas emissions intensity per unit of production (kg per kg of dyed or finished product)

2020¹

3.1

2019³

3.2

20183,4 

3.2

2017

4.3

2016

4.6

2015

4.5

Greenhouse gas emissions intensity per sales value (tonnes per million $ sales)

2020¹

200

2019³

192

2018³ 

 200

2017

 206

2016

 219

2015

 208

1. 2014–2020 reported figures are based on IEA location based conversion factors for Scope 2 emissions. 

2. Scope 2 emissions for 2012–2013 continue to be calculated using DEFRA country level figures derived from IEA data. 

2014

5.1

2014

 201

2013²

5.3

2013²

 212

2012

5.6

2012

 226

3. 2018 and 2019 numbers, including sales used for these, have been restated compared to the 2019 report to include HP Pharr (acquisition completed on 10th February 2020), so 2020, 2019 and 2018  

are reported on a like-for-like basis.

4. To reflect the increasing growth of the undyed yarn business in our Company, from 2018 the production basis for these intensity calculations is based on finished production while for 2012–2017  

it continues to be based on dyed production. 

Further details on activities to reduce energy consumption and emissions can be found in the Working Responsibly section on pages 23 to 
31 and in our Sustainability Report which can be found on our website (www.coats.com/sustainability).

Auditor
A resolution to reappoint Deloitte LLP as auditor will be proposed  
at the 2021 AGM. More information about the consideration of  
an audit tender can be found on page 70 in the Audit and Risk 
Committee Report. As a result of Covid, it has been decided that  
it is in the best interests of the Company and the members to delay 
the tender of the audit such that the new auditors will be appointed 
to undertake the audit for the year ending 31 December 2022.

A statement in respect of the auditor, in accordance with Section 
418 of the Companies Act 2006, has been included below.

Disclosure of information to the auditor The Directors who held 
office at the date of approval of this Directors’ Report confirm that, 
so far as they are aware, there is no relevant audit information  
of which the Company’s auditor is unaware, and each Director  
has taken all reasonable steps to ascertain any relevant audit 
information and to ensure that the Company’s auditor is aware  
of that information.

Branches
The Company, through various subsidiaries, has branches in several 
different jurisdictions in which the business operates outside the UK. 
The full list of subsidiary companies can be found on page 185.

Other information
Other information relevant to this Directors’ Report, and which  
is incorporated by reference, including information required in 
accordance with the UK Companies Act 2006 and Listing Rule 
9.8.4R, can be located as follows:

Subject matter

Important events since the financial 
year-end

Page(s)

176

Likely future developments in the 
business

6 to 7, 13

Exposure to price risk, credit risk, 
liquidity risk and cash flow risk

164

Research and development

6 to 7

Information on financial instruments

164

Environmental policy

Employment of disabled persons

Employee involvement

Stakeholder engagement

28

32

23 to 27

17 to 22

Diversity policy

71 (and on our website)

This Directors’ Report was approved by order of the Board.

On behalf of the Board

Stuart Morgan
Company Secretary

3 March 2021

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationDIRECTORS’ REPORT 
CONTINUED

Directors’ responsibilities
The Directors are responsible for preparing the Annual Report  
and the financial statements in accordance with applicable law  
and regulations.

Company law requires the Directors to prepare such financial 
statements for each financial year. Under that law the Directors are 
required to prepare the Group financial statements in accordance 
with International Financial Reporting Standards (‘IFRSs’) as adopted 
by the European Union and Article 4 of the IAS Regulation and have 
elected to prepare the parent Company financial statements in 
accordance with United Kingdom Generally Accepted Accounting 
Practice (United Kingdom Accounting Standards and applicable 
law), including FRS 102 ‘The Financial Reporting Standard applicable 
in the UK and Republic of Ireland’. Under company law the Directors 
must not approve the financial statements unless they are satisfied 
that they give a true and fair view of the state of affairs of the 
Company and of the profit or loss of the Company for that period. 

In preparing the parent Company financial statements, the Directors 
are required to:

•  select suitable accounting policies and then apply them 

consistently;

•  make judgements and accounting estimates that are reasonable 

and prudent;

•  state whether applicable UK Accounting Standards have been 
followed, subject to any material departures disclosed and 
explained in the financial statements; and

•  prepare the financial statements on the going concern basis 
unless it is inappropriate to presume that the Company will 
continue in business.

In preparing the Group financial statements, International 
Accounting Standard 1 requires that Directors:

•  properly select and apply accounting policies;

•  present information, including accounting policies, in a manner 
that provides relevant, reliable, comparable and understandable 
information;

•  provide additional disclosures when compliance with the specific 
requirements in IFRSs is insufficient to enable users to understand 
the impact of particular transactions, other events and conditions 
on the entity’s financial position and financial performance; and

•  make an assessment of the Company’s ability to continue as  

a going concern.

The Directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the Company’s 
transactions and disclose with reasonable accuracy at any time  
the financial position of the Company and enable them to ensure 
that the financial statements comply with the Companies Act 2006. 
They are also responsible for safeguarding the assets of the 
Company and hence for taking reasonable steps for the prevention 
and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity  
of the corporate and financial information included on the 
Company’s website. Legislation in the United Kingdom governing 
the preparation and dissemination of financial statements may  
differ from legislation in other jurisdictions.

Directors’ responsibility statement
We confirm that to the best of our knowledge:

•  the financial statements, prepared in accordance with the 

relevant financial reporting framework, give a true and fair  
view of the assets, liabilities, financial position and profit or  
loss of the Company and the undertakings included in the 
consolidation taken as a whole;

•  the Strategic Report includes a fair review of the development 
and performance of the business and the position of the 
Company and the undertakings included in the consolidation 
taken as a whole, together with a description of the principal 
risks and uncertainties that they face; and

•  the Annual Report and financial statements, taken as a  

whole, are fair, balanced and understandable and provide the 
information necessary for shareholders to assess the Company’s 
position, performance, business model and strategy.

This responsibility statement was approved by the Board of Directors 
on 3 March 2021 and is signed on its behalf by:

Rajiv Sharma
Group Chief Executive

3 March 2021

78

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationREMUNERATION COMMITTEE REPORT

Committee Members

Name

Member since

David Gosnell (Chairman)

Echo Lu

Fran Philip

Alan Rosling

2015

2017

2016

2015 (until 11 June 2020)

Key objectives of the  
Remuneration Committee

•  Our main objectives are to have fair, equitable and 

competitive reward packages that support our vision  
and help ensure that rewards are performance based  
and encourage longer term shareholder value creation.

Key responsibilities
•  Developing and approving the Remuneration Policy.
•  Implementing the remuneration policy.
•  Ensuring the competitiveness of reward.
•  Designing the incentive plans.
•  Setting incentive targets and determining award levels.
•  Review workforce remuneration and related policies and  
the alignment of incentives and rewards with culture.

‘ALTHOUGH FINANCIAL 
PERFORMANCE SUFFERED 
NEGATIVELY BY COMPARISON WITH 
2019, THE LEADERSHIP TEAMS TOOK 
EFFECTIVE ACTION TO SAFEGUARD 
THE INTERESTS OF SHAREHOLDERS, 
STAKEHOLDERS, CUSTOMERS AND 
EMPLOYEES. THE COMMITMENT AND 
ENGAGEMENT OF ALL OUR PEOPLE AT 
ALL LEVELS HAS BEEN EXCEPTIONAL.’
DAVID GOSNELL,
CHAIRMAN OF THE 
REMUNERATION COMMITTEE

I am pleased to introduce the Directors Remuneration  
Committee Report for 2020. This report includes a summary of the 
Remuneration Policy, which was approved at the AGM on 11 June 
2020, and the Annual Report on Remuneration. A full version of the 
Remuneration Policy can be found at www.coats.com/governance.

Overview of 2020
The Remuneration Policy operated as intended during the year 
although business performance was obviously impacted by the 
challenging consequences of the Covid global pandemic. Although 
financial performance suffered negatively by comparison with 2019, 
the leadership teams took effective actions to safeguard the 
interests of employees, customers, shareholders and other 
stakeholders. The commitment and engagement of all of our 
people at all levels has been exceptional. Management focus 
pivoted very swiftly and effectively at the end of the first quarter  
of the year to manage the consequences of the pandemic. This was 
intended to keep all of our employees, customers and suppliers safe, 
to manage operations in a constantly changing environment as 
rolling lockdowns were implemented in several countries, to support 
and maintain an excellent service to our customers and to manage 
our financial performance so that Coats would weather the storm 
and emerge in a strong position to win the recovery.

The Board took the decision to reduce base fees and salaries by 
20% for the second quarter of the year and all fees and base 
salaries were frozen at their existing annual levels for the Board,  
the Group Executive Team and large sections of our employees. 

The annual bonus payment for the Executive Directors for 2020  
was limited to 7.5% of salary which was linked to the personal 
objective element of the annual bonus and primarily reflected the 
effectiveness of their actions in managing the consequences of the 
pandemic. The financial targets set for the 2020 annual bonus for 
Sales, EBIT and Free Cash Flow were not adjusted for any Covid 
impact and the performance for 2020, unsurprisingly, did not reach 
minimum threshold levels. The Committee exercised its discretion 
and awarded all of the 2020 bonus at 7.5% of salary in cash in 
consideration of the fact that Directors had voluntarily accepted  
a base pay reduction of 5% of salary and both Directors were 
comfortably ahead of their Minimum Shareholding Requirement.

The Long Term Incentive award granted to Executive Directors on 
28 February 2018 for the three-year performance period ended 
31 December 2020 did not achieve the performance conditions, 
primarily due to the unexpected negative impact of 2020 and 
therefore no awards vested. No adjustment to reflect the pandemic 
was made to any LTIP performance targets for this award. 

Coats Group plc Annual Report and Accounts 2020

79

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationREMUNERATION COMMITTEE REPORT 
CONTINUED

and also the potential for recovery from 2020 performance levels.  
In accordance with the details provided in last year’s Remuneration 
Report and the new approved Remuneration Policy the LTIP grant  
to the CEO in 2021 will be increased from 150% to 175%.

In March 2021 Simon Boddie will, as previously announced in  
April 2020, retire as Chief Financial Officer. Simon, as a retiree,  
will be treated as a good leaver in terms of all equity awards; his 
performance-related LTIP awards will be reduced pro-rata to reflect 
his period of employment and will still be subject to the original 
performance conditions. He will continue to abide by the post-
termination Minimum Shareholding requirement for a period  
of two years following his retirement. 

Simon Boddie’s successor, Jackie Callaway, was appointed as an 
external hire on terms that were consistent with the Remuneration 
Policy which includes pension benefits being aligned to the level 
with the rest of the UK employees. As stated in last year’s report the 
pension benefit for Rajiv Sharma will be aligned to the rest of the 
UK workforce by the end of the current Remuneration Policy and his 
pension contributions will be frozen at their current levels until then.

During 2021 the Remuneration Committee will continue to  
focus on the policies that apply to the rest of the organisation to 
ensure that the approach taken to remuneration and recognition  
for all employees consistently reflects the values and principles of 
the Company.

I would like to reaffirm our commitment to proactively engaging 
with shareholders on all issues regarding remuneration and to  
thank shareholders and the current and former members of the 
Committee for their support during my tenure as Chairman of  
the Remuneration Committee. 

David Gosnell
Chairman, Remuneration Committee
3 March 2021

On 6 March 2020 the Company granted Long Term Incentive 
awards literally days before the global economic impact of the  
Covid pandemic began to become apparent. The financial targets 
for this award have not been adjusted and were disclosed in the 
2019 Annual Report on Remuneration and in this report. The 
Committee will consider these targets in the future and ensure that 
the incentives support the interests of shareholders and strike an 
appropriate balance between stretching financial targets and the 
requirement to set achievable and motivational targets that enable 
the Company to retain the executives that it needs to achieve its 
long-term objectives. The Committee will, of course, consider the 
views of shareholders and consult appropriately should it use its 
discretion in the future.

During the year the Committee undertook a more detailed review 
of the remuneration policies applied to all employees globally and 
this is expected to continue in accordance with the responsibilities 
of the Committee to consider the alignment of pay for executives 
and senior management and the rest of the organisation. The 
Committee also reviewed and approved the adoption of a policy  
to establish a minimum Living Wage, as an enhancement to any 
local legally mandated requirements, across all of our locations  
and based on sourcing data from independent organisations.  
We are reassured that we have identified only a very small number 
of examples where our current levels of pay would be below this 
enhanced minimum and the company is taking action in 2021  
to increase pay accordingly. 

The Remuneration Policy was subject to an approval resolution at 
the AGM on 11 June 2020 and received overwhelming support from 
shareholders at 98.8% and I would like to thank shareholders for 
their support and comments during the consultation process that 
we undertook prior to the finalisation of the Remuneration Policy. 

Alan Rosling retired from the Board in June 2020 and I would like to 
thank him for his valued support and contribution to the Committee.

Outlook for 2021
The Company’s focus for 2021 will be to emerge stronger and 
benefit from any recovery as quickly as possible. In the short term 
there is a renewed focus on sales growth by supporting existing  
and new customers. The Committee decided to align the short-term 
annual bonus structure for 2021 to reflect this increased focus on 
profitable sales growth by equally weighting the measures for Sales 
and EBIT at 30% each (the weighting for 2020 was 10% Sales and 
50% EBIT); the weighting for Free Cash Flow will remain unchanged 
at 20%; Personal Objectives will also remain at 20%.

The Committee reviewed the measures and weightings for the Long 
Term Incentive Plan (LTIP) award that we would expect to grant in 
2021 and concluded that the current measures of EPS performance 
(40%), three-year cumulative Free Cash Flow (30%), Sustainability 
objectives (10%) and Total Shareholder Return (20%) were correctly 
aligned to the Company’s strategic objectives. The targets will be 
set to reflect the challenging and uncertain external environment 

80

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationREMUNERATION AT A GLANCE

The following is a summary of the key features of the Remuneration Policy that was approved at the AGM on 11 June 2020. The policy can 
be found at www.coats.com/governance. 

Components of remuneration applicable to 2021

Salary

Annual bonus

+

+

Pensions & benefits

LTIP

=

=

Fixed total
+
Variable total
=
Total remuneration

Annual base salary
Rajiv Sharma (CEO) 

£612,000

Jackie Callaway (CFO) 
Pension
Rajiv Sharma (CEO) 
Jackie Callaway (CFO) 

£380,000 

20% of salary
12% of salary

Annual bonus
Maximum opportunities for 2021
Rajiv Sharma (CEO) 
150% of salary
115% of salary
Jackie Callaway (CFO)  
Performance measures and weightings
30%
Sales 
30%
EBIT 
20%
Free Cash Flow 
20%
Individual objectives 

175% of salary
150% of salary

LTIP
Maximum opportunities for 2021
Rajiv Sharma (CEO)  
Jackie Callaway (CFO) 
Performance measures and weightings
Sustainability 
3-year EPS performance 
3-year cumulative 
Free Cash Flow
TSR vs FTSE250 
(ex. investment trusts)

10%
40%
30%

20%

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Policy

Executive Directors’ salaries are reviewed annually with effect from 1 July. Reference 
is made to market competitive levels of pay at relevant comparator companies, 
average salary increases applied elsewhere across the Group, individual performance 
and experience as well as any changes to the size and scope of the role.

Executive Directors appointed before January 2020 receive defined contributions 
pensions (and/or cash in lieu thereof) of up to 20% of salary; with effect from 
1 January 2020 the pension contributions were fixed at their current level and will  
not increase with any subsequent salary increase. In 2023 the pensions policy for 
current incumbents will be aligned to the benefits provided to the average of the  
rest of the UK workforce. Any new appointments will receive a benefit that is aligned 
to the average of the UK workforce (currently 12%). Other benefits may include  
the provision of private medical insurance, ill-health protection and/or life insurance  
and a cash-for-car-allowance. In addition, the Company may provide assistance in 
connection with the relocation of an Executive Director and, in the event of an 
international transfer, may provide tax equalisation.

Policy

Maximum award opportunity: 150% of base salary
Any bonus awarded for the Group Chief Executive for 2021 is subject to mandatory 
deferral of 50% and a deferral of 40% for the Chief Financial Officer. Deferred 
bonuses are converted into share awards and are released after a three year retention 
period. The performance measures, weightings and targets for the annual bonus  
are set by the Committee on an annual basis. Any bonuses paid are subject to malus 
and clawback.

Policy

Maximum LTIP award opportunity: 175% of base salary (200% in 
exceptional circumstances)
Awards may be made annually; with vesting conditional on three-year performance 
conditions. Any shares vesting after three years are also subject to an additional 
two-year holding period. Performance measures and targets are determined by the 
Committee, taking into account the balance of strategic priorities for Coats for the 
upcoming three-year performance period. Any LTIP shares awarded are subject to 
malus and clawback. 

Coats Group plc Annual Report and Accounts 2020

81

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
 
 
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020

ANNUAL REPORT ON REMUNERATION

This Annual Report on Remuneration has been prepared in accordance with the relevant provisions of the Companies Act 2006 and as 
prescribed in The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended (the Regulations). 
Where indicated data has been audited by Deloitte LLP.

The Annual Report on Remuneration will be subject to an advisory vote at the AGM on 19 May 2021. The current Remuneration Policy 
applicable to the year ended 31 December 2020 was approved by shareholders at the AGM on 11 June 2020 and can be found in the 
Corporate Governance section at www.coats.com/governance.

Executive Directors
Three Executive Directors were employed during 2020. Rajiv Sharma was originally appointed to the Board on 2 March 2015 and was 
appointed as Group Chief Executive with effect from 1 January 2017. Simon Boddie was appointed as Chief Financial Officer on 4 July 2016 
and will retire from the Board on 31 March 2021. Jackie Callaway was appointed as a Director on 1 December 2020 and will succeed Simon 
as Chief Financial Officer following his retirement.

Single total figure for Executive Directors’ remuneration for 2020 (audited information)

Annual bonus (cash 
& shares) £000

LTIP £000

Pension £000

Total £000

2020

2019

2020

2019

32.7

336.2

-

45.9

78.6

-

514.8

851.0

655.2

-

-

-

-

2020

87.2

3.8

2019

2020

2019

86.0

569.9 1,544.0

-

36.8

-

918.9

122.4

120.6

787.4 2,228.1

- 1,574.1

213.4

206.6 1,394.1 3,772.1

Simon Boddie

Jackie Callaway

Rajiv Sharma

Total

Simon Boddie

Jackie Callaway

Rajiv Sharma

Total

Base salary £000

Benefits £000

2020

2019

414.2

429.8

31.7

-

581.4

603.0

1,027.3 1,032.8

2020

35.8

1.3

37.7

74.8

2019

36.8

-

70.8

107.6

Total Fixed 
Remuneration £000

Total Variable 
Remuneration £000

2020

2019

2020

2019

537.2

552.6

32.7

991.4

36.8

-

-

-

741.5

794.4

45.9 1,433.7

1,315.5 1,347.0

78.6 2,425.1

The figures in the table above have been calculated on the basis of the following:

•  Benefits: this is the value of all benefits including a car allowance, private medical insurance, life insurance and income replacement 
insurance. A car allowance of £20,000 per annum is paid to Rajiv Sharma and an allowance of £15,000 per annum is paid to Simon 
Boddie and Jackie Callaway.

•  Annual bonus (cash and shares): is the total value of the annual bonus that is attributable to each year. Forty percent of any bonus 

outcome for 2019 was compulsorily awarded in shares under the terms of the Deferred Annual Bonus Plan. The bonus award for 2020 
was paid fully in cash as referred to in the Committee Chairman’s statement and on the next page. Jackie Callaway was not eligible for  
a bonus payment in 2020 as she joined the Company on 1 December 2020.

•  The LTIP values for 2019 have been re-stated to reflect the share price on the vesting dates of 6 March 2020 for Rajiv Sharma and Simon 
Boddie. The value shown also reflects the cash value of notional dividend equivalents payable on vested shares which are awarded as 
additional shares on exercise.

•  Pension: represents the value of all employer contributions to any pension plan or cash payments paid in lieu of a pension benefit.  

No Executive Director participates in any defined benefit pension arrangement.

•  Rajiv Sharma is a Non-Executive Director of Senior plc and received fees of £50,350 during the year. Simon Boddie is a Non-Executive 
Director of PageGroup plc and, from 1 October 2020 LTG plc. He received fees of £66,025 and £12,500 respectively during the year.  
The policy of the Board is that Directors are entitled to retain any fees in respect of external appointments.

82

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationAnnual bonus outcome 2020 (audited information)
The annual bonus for 2020 was determined in accordance with the details provided in the 2019 Directors’ Remuneration Report. Details of 
the bonus measures and opportunities are provided in the table below.

Annual bonus 2020

Performance Measure

Group Sales

Earnings Before Interest and Taxation (EBIT)

Free Cash Flow (adjusted) (FCF)

Individual objectives

Total

Maximum Bonus (% of salary)

Total (% of salary)

Weighting

10.0%

50.0%

20.0%

20.0%

100.0%

Bonus opportunity 
 (% of max bonus)

Performance achieved in 
2020 (% of max bonus)

Threshold

Target

Maximum Simon Boddie

Rajiv Sharma

0%

0%

0%

0%

0%

5.0%

25.0%

10.0%

10.0%

10.0%

50.0%

20.0%

20.0%

50.0% 100.0%

0%

0%

0%

6.5%

6.5%

115%

7.5%

0%

0%

0%

5%

5%

150%

7.5%

The measures were selected to incentivise a balance of outcomes that reflected the strategic priorities for the Group at the beginning of 
2020. In particular these were to achieve strong growth in trading profit through continued efficiency and growth in EBIT performance, 
ensure consistent and increasing level of cash generation from operations through strong working capital management, and achieve certain 
key strategic objectives which are detailed on the next page that were specific for each Executive Director.

Annual bonus 2020

Performance targets

Group Sales (US$m)

EBIT (US$m)

FCF (adjusted)

Individual objectives

Bonus 
targets $m

Performance 
achieved in 
2020

Threshold

Target

Maximum

1,485.0

1,523.1

1,561.2

1,190.6

200.0

88.0

210.5

98.0

221.0

108.0

111.2

26.5

Weighting

10.0%

50.0%

20.0%

20.0% Strategic objective

See table above

Targets are set in relation to budget for the upcoming financial year and the figures in the table above reflect the 2020 Plan exchange  
rates. The performance reflected in the table above reflects the figures disclosed in this Annual Report adjusted to exclude the impact  
of any exchange rate fluctuations during the year ($27.3m for Sales, $0.6m for EBIT, and $-1.5m for FCF respectively). For the 2020 annual 
bonus challenging individual objectives were established by the Committee for each Executive Director that reflected activities and initiatives 
intended to improve the performance of the Group. The objectives established and assessed for 2020 are reflected in the table on the  
next page. However, as the impact of Covid pandemic began to be felt in March 2020 the focus of the Board switched to managing the 
operational consequences of the pandemic. The Committee did not adjust the original targets for Group Sales, EBIT and FCF that were  
set at the beginning of 2020. As noted in the table above the financial impact of Covid resulted in no payments under the three financial 
elements of the bonus. The Committee determined an award under the individual objectives element for each Exeutive Director.

The payment awarded at 7.5% of salary was aligned to the payment (at the same percentage of salary) awarded to over 4,500 eligible 
employees globally and was linked to achieving a minimum level of EBIT performance of over $100m and an acceptable level of cash 
collection that resulted in a net debt to EBITDA ratio of no more than 2.2 times. The Committee exercised discretion to not award a 
proportion of bonus in shares because the level of bonus outcome was materially lower than normal due to circumstances that were 
beyond the control of management, because each Director had already exceeded their respective Minimum Shareholding Requirements 
and because each Executive Director had voluntarily agreed to incur a 5% annual base pay reduction in the period April to June 2020.

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CONTINUED

Personal objectives linked to 2020 bonus

At the beginning of the year the Committee determined that the following personal objectives would be linked to 20% of the annual 
bonus outcome. All objectives were equally weighted.

Rajiv Sharma 

Simon Boddie 

 To exceed planned sales growth by 3%; to leverage digital and data science to deliver a material basis points 
improvement in gross profit (precise target commercially sensitive);to close at least one acquisition and maintain a robust 
acquisition pipeline.

 To close at least one acquisition; to maintain a robust acquisition pipeline and to successfully integrate Pharr into Coats; 
to build management capability and strengthen the succession plans in the finance function; a specific objective 
regarding more detailed engagement with non-UK and specialist investors.

When the Committee assesses the extent to which each objective is achieved, consideration is given to the manner in which the objective 
was achieved, the quality of delivery or execution and the personal leadership and impact demonstrated by the Executive relating to each 
task. In general, to achieve the maximum for each objective an exceptional level of performance is expected with actions taken that are 
consistent with the Group’s values and culture of innovation and teamwork.

As explained earlier in this report Covid began to impact business operations in early 2020. Initially this impact was limited to Coats’ 
operations in China and then from March 2020 very swiftly impacted operations globally as the pandemic spread. The focus of 
management switched to managing the consequences of the pandemic on Coats operations. This focus centred around five priorities; 
health and safety, cash management, maximising sales, supporting our customers and maintaining critical elements of our supply chain. 
These priorities were communicated to all employees globally and formed the basis of the action planning to deal with the impact of Covid 
on operations. 

The Committee determined that the level of personal objective achievement for the Executive Directors would be linked to the extent to 
which the priorities were effectively managed and, assuming an acceptable level of performance versus the five priorities, that the value of 
any payment as a percentage of salary would be limited to what was paid to over 4,000 eligible employees globally. The payment to the 
wider workforce was in recognition for their efforts to effectively manage the consequences of the pandemic and the personal sacrifices 
(including salary reductions) that were made. The payment to eligible employees was subject to the Group achievement of a minimum of 
$100m for EBIT and the achievement of cash collection so that at the year end the net debt to EBITDA ratio was less than a multiple of 2.2. 
The level of payment awarded to eligible employees was 7.5% of salary and this was the payment determined by the Committee for the 
purposes of the bonus payments for the Executive Directors.

84

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationLong Term Incentive award vesting (audited information)
On 28 February 2018 Rajiv Sharma and Simon Boddie were granted Long Term Incentive Plan awards in the form of nil cost options over 
shares in respect of the performance period 1 January 2018 to 31 December 2020 (referred to as LTIP 2018).

The performance measures were based upon the Total Shareholder Return Performance (TSR), compound annual growth (CAGR) in 
Earnings Per Share and cumulative Free Cash Flow relating to Coats Group plc. In considering the outcome the Committee considered the 
sale of the Crafts North America business which was divested in February 2019; EPS growth targets remained unchanged although Crafts 
North America was removed from the 2017 base year for the purposes of the EPS CAGR calculation and the cumulative Free Cash Flow 
target was adjusted downwards by $15m to reflect the removal of the discontinued business in 2019 and 2020. The downward adjustment 
to the target was based on the most recent cash contribution of the discontinued business. The achievement of the Long Term Incentive 
Plan performance measures and the consequent vesting of the award is shown in the table below. The award has not vested.

LTIP 2018: Performance period 1 January 2018 to 31 December 2020

Measure

Weighting

Threshold

Mid

Maximum

Actual

Compound Annual Growth  
in Attributable Profit

Vesting % of total award

Cumulative Free Cash Flow over 3 years

Vesting % of total award

Total Shareholder Return versus the FTSE250 
excluding investment trusts

Vesting % of total award

Total

40.0%

40.0%

20.0%

100.0%

7.0%

10.0%

$290m

10.0%

10.0%

19.0%

$320m

25.0%

15.0%

40.0%

$350m

40.0%

-24.7%

0%

$239.8m

0%

Median 62.5th Percentile

Upper Quartile

39th Percentile

5.0%

25.0%

12.5%

56.5%

20.0%

100.0%

0%

0%

Share awards granted in 2020 (audited information)
The following share awards were granted to Executive Directors during the financial year ended 31 December 2020. The targets for 
achieving minimum performance for each measure, where these apply, are shown in the tables below.

Coats Group plc Long Term Incentive Plan

Executive Director

Date of grant

Number of 
options 
awarded

Face value at 
award date

Award value as 
a % of salary

Share price to 
calculate no of 
shares

% vesting for 
minimum 
performance

Performance 
period

Simon Boddie

6-Mar-20

1,110,356

£654,000

150%

£0.589

Rajiv Sharma

6-Mar-20

1,558,573

£918,000

150%

£0.589

25% 1 Jan 2020 to 
31 Dec 2022

25% 1 Jan 2020 to 
31 Dec 2022

Vesting date

6-Mar-23 

6-Mar-23

Coats Group plc Deferred Bonus Plan

Executive Director

Simon Boddie

Rajiv Sharma

Number of 
options 
awarded

Face value at 
award date

Award 
deferred cash 
value as a % of 
salary

Share price to 
calculate no of 
shares

228,310

£134,475

349,640

£205,938

30.8%

33.7%

£0.589

£0.589

Date of grant

6-Mar-20

6-Mar-20

Performance 
period

None

None

Vesting date

6-Mar-23

6-Mar-23

The share price used to calculate the number of options awarded under the terms of the Coats Group plc Long Term Incentive Plan and the 
Coats Group plc Deferred Annual Bonus Plan is based on the mid-market closing price for the day immediately preceding the grant date, 
which was £0.589 for 6 March 2020.

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CONTINUED

Coats Group plc Long Term Incentive Plan
Awards were granted on 6 March 2020 as nil cost options under the terms of the Coats Group plc Long Term Incentive Plan that was 
approved by shareholders on 22 May 2014. The LTIP awards will vest, subject to the achievement of performance measures, on the third 
anniversary of the date of grant. For Executive Directors an additional two-year holding period applies. The notional value of any dividends 
paid on any vested share during the period from grant to the end of the holding period is awarded as additional shares.

Coats Group plc Deferred Annual Bonus Plan
Any awards are not subject to additional performance measures but are subject to clawback in certain circumstances such as gross 
misconduct or a material mis-statement of results.

Long Term Incentive Plan awards performance measures
The performance measures applicable to awards granted in respect of the three-year performance period that commenced on 1 January 
2020 (LTIP 2020) are shown below. The table on the previous page reflects the performance measures for the award that relates to the 
three-year performance period that ended on 31 December 2020 (LTIP 2018).

LTIP 2020 Measures

Weighting

Threshold

Mid

Maximum

Compound Annual Growth (CAGR) in Earnings Per Share

Vesting % of total award

Cumulative Free Cash Flow over 3 years

Vesting % of total award

Total Shareholder Return versus the FTSE250 excluding 
investment trusts

Vesting % of total award

40.0%

30.0%

20.0%

5.0%

10.0%

$296m

7.5%

10.0%

25.0%

$326m

18.75%

15.0%

40.0%

$356m

30.0%

Median 62.5th Percentile

Upper Quartile

5.0%

12.5%

20.0%

Sustainability Goals (see details below)

10.0%

See below

Vesting % of total award

Total

100.0%

2.5%

25.0%

6.25%

62.5%

10.0%

100.0%

The Board will consider the growth in normalised EPS, adjusted to exclude the impact of exceptional costs such as property gains or  
losses and the impact of variation of the IAS19 (pensions finance) charge. Free Cash Flow targets are based on cumulative Free Cash Flow 
generated for each year of the performance period after maintaining the Company’s asset base i.e. operating cash flow minus capital 
expenditure, adjusted to reflect any exceptional items, disposals, acquisitions or property gains or losses. Targets are established on a basis 
that is before any UK pension scheme deficit repair contributions.

Total Shareholder Return is the total return to shareholders which includes share price growth and ordinary dividends (reinvested on the 
ex-dividend date). The performance measure is assessed against a comparator group consisting of the FTSE250, excluding investment trusts.

As disclosed in last year’s report Sustainability goals are included in the performance measures for the first time. The specific targets are:

Water: by 2022 to achieve a 40% reduction, from a 2018 baseline, of water usage per kilogram of thread production.

Energy: by 2022 to achieve a 7% reduction, from a 2018 baseline, of kWH per kilogram of product made.

Effluent and emissions: by 2022 to achieve compliance with Zero Discharge of Hazardous Chemicals effluent standards.

Social: to achieve Great Place to Work accreditation for locations that cover 80% of employees worldwide and to enable all employees to 
contribute to community support activities.

Sustainability: reduce waste by 25%, from a 2018 baseline, and progress towards achieving the 2024 goal that all premium polyester thread 
will be from 100% recycled meterial. 

The Committee retains the discretion to consider whatever adjustments it considers are fair and reasonable when considering performance 
against the targets shown. The Committee may adjust the level of vesting if it considers that the performance measures do not reflect the 
overall performance of the Company during the performance period or if there has been a material event such as an acquisition or disposal 
during the course of the performance period.

86

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNon-Executive Directors
In response to the Covid pandemic the fee levels for the Chairman and the Non-Executive Directors were reduced by 20% in the period 
April to June and there was no annual increase in 2020. The base fee of £60,000 per annum has remained at the same level since 
1 October 2013. 

Single total figure for Non-Executive Directors’ remuneration for 2020 (audited information)

Non-Executive Directors, excluding the Chairman, who are required to travel long haul (more than five hours one-way) to meetings are 
entitled to an additional travel allowance of £1,500 for each roundtrip subject to a maximum of five trips per annum. Additional fees may 
be paid for additional duties and time commitments that are undertaken outside the terms of appointment.

Base fee  

Supplementary  

fee £000

Benefits1 
£000

2020

2019

2020

2019

2020

Other fee2 

£000

2019

2020

Total  
£000

2019

Comments

Mike Clasper

Nicholas Bull

Anne Fahy

David Gosnell

Echo Lu

Fran Philip

2020

£000

2019

237.5

250.0

57.0

57.0

57.0

57.0

57.0

60.0

60.0

60.0

60.0

60.0

-

9.5

11.9

11.9

-

7.1

Alan Rosling

24.7

60.0

2.4

Jakob Sigurdsson

15.0

-

-

Total

562.2

610.0

42.8

50.0

-

10.0

12.5

12.5

-

7.5

7.5

-

-

-

-

-

-

-

-

-

-

3.8

3.3

0.3

3.2

0.4

-

-

-

11.0

-

-

-

-

-

1.5

1.5

-

3.0

-

1.5

1.5

1.5

1.5

7.5

237.5

253.8

66.5

68.9

68.9

57.0

65.6

74.8

 74.3

77.2

61.9

75.0

7.5

28.6

75.0 

-

15.0

-

21.0

608.0

692.0

Resigned 
11-Jun-20

Appointed 
1-Oct-20

1  The figure under benefits for Non-Executive Directors relates to business expense re-imbursements which are deemed to be taxable in the UK and include the tax paid by the Company directly to HMRC.

2  Fees under Other Fee represent the £1,500 per trip travel fee payable for Directors (excluding the Chairman) who travel longhaul to attend Board meetings. The travel fee is capped at a maximum of 

£7,500 per annum.

The base fee paid by Coats Group plc is £60,000 per annum for Non-Executive Directors and £250,000 for the Chairman.

A supplementary fee is paid to the Senior Independent Director (£10,000 per annum) and Chairs of the Audit and Risk Committee and 
Remuneration Committee (£12,500 per annum). Alan Rosling received an additional fee of £7,500 per annum fulfilling a role as Chair of  
the Company’s Digital Advisory Committee until his resignation and Fran Philip receives £7,500 per annum for undertaking additional 
responsibilities concerning employee engagement. 

Payments for loss of office (audited information)
There have been no payments for loss of office during the year. Alan Rosling resigned from the Board on 11 June 2020.

Payments to former Directors (audited information)

There were no payments to former Directors during the year.

Directors service agreements and appointment letters

All Executive Directors, Rajiv Sharma, Simon Boddie and Jackie Callaway, have service agreements which provide for a notice period from 
either side of twelve months. With the exception of Simon Boddie, who will retire from the Board and the Company on 31 March 2021, all 
of this notice is unexpired. No appointment letters for Non-Executive Directors, including the Chairman, contain a notice period. All service 
agreements and appointment letters for Directors are available for inspection at the Company’s registered office during normal hours of 
business and will also be available for inspection at the Company’s Annual General Meeting.

Coats Group plc Annual Report and Accounts 2020

87

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationSimon
Boddie

Jackie 
Callaway

Rajiv
Sharma

DIRECTORS’ REMUNERATION REPORT 
CONTINUED

Statement of Directors’ shareholding and share interests (audited information)
The interests of the Directors who held office during the year, and their closely associated persons (if any), in the shares, options and listed 
securities of Coats Group plc and its subsidiaries as at 31 December 2020, are set out below.

Shareholding requirement  

Shares  

in 2020

beneficially owned

Deferred bonus shares 
subject to vesting period

LTIP share options (subject 
to performance conditions)

Share options (no 
performance conditions)

Number of 
shares

Equivalent 
% of
salary3

Condition 
met?

Executive Director

01-Jan-201

31-Dec-202

01-Jan-201 31-Dec-202

01-Jan-201

31-Dec-202

01-Jan-201

31-Dec-202

1,450,000

200%

Yes

300,000

300,000 316,121 472,925 2,619,915 2,634,381 1,451,723 2,573,091

1,250,000

200%

No

-

75,078

-

-

-

-

-

2,050,000

200%

Yes

400,000 4,039,012 557,800 696,226 3,674,815 3,696,402 5,743,046

Chairman and Non-Executive Directors

Mike Clasper

Nicholas Bull

Anne Fahy

David Gosnell

Echo Lu

Fran Philip

Alan Rosling

Jakob Sigurdsson 

1. Or date of appointment, if later.

2. Or date of resignation, if earlier.

N/A 1,490,000 1,690,000

N/A

N/A

N/A

N/A

N/A

N/A

N/A

500,000

500,000

–

40,000

786,475 1,099,990

15,000

-

-

-

15,000

25,000

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

3. The target number of shares is based on the average share price for 2020 which was 58.67p.

The Executive Directors’ shareholding requirement must be met within five years of their appointment to the Board (2 March 2020 for  
Rajiv Sharma, 4 July 2021 for Simon Boddie and 1 December 2025 for Jackie Callaway). There is no requirement for Non-Executive Directors. 
For the purposes of achieving this target the total number of shares beneficially owned by the Executive Director or a closely associated 
person is considered as well as the estimated post-tax number of vested but unexercised share options or deferred bonuses that are not 
subject to a performance condition. All Long Term Incentive Plan awards granted to Executive Directors from 29 July 2016 onwards include 
a requirement to retain any vested shares (save for any shares that may be sold to satisfy income tax liabilities) until a minimum of the fifth 
anniversary of the date of grant.

88

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationDetails of scheme interests as at 31 December 2020 (audited information)
Rajiv Sharma

Award

Deferred bonus shares subject to vesting period

DABP18

DABP19

DABP20

Sub-total

LTIP share options (subject to performance conditions)

LTIP18

LTIP19

LTIP20

Sub-total

Share options (exercised during the year)

Vesting date

Retention 
period

Expiry date

No.

Status

Performance 
conditions?

4 -Mar-21

4-Mar-22

6-Mar-23

N/A

N/A

N/A

4-Mar-28

184,542

Unvested

4-Mar-29

162,044

Unvested

6-Mar-30

349,640

Unvested

696,226

4-Mar-21

4-Mar-23

4-Mar-28 1,044,578

Unvested

4-Mar-22

4-Mar-24

4-Mar-29 1,093,251

Unvested

6-Mar-23

6-Mar-25

6-Mar-30 1,558,573

Unvested

3,696,402

No

No

No

Yes

Yes

Yes

Award

LTIP14

LTIP15

DABP15

LTIP16

DABP16

LTIP17

DABP17

Sub-total

Vesting date

24-Feb-17

7-Apr-18

7-Apr-18

2-Mar-19

Retention 
period

Expiry date

Dividend 
equivalents

No.

Exercise 
date

Share price 
on exercise

N/A 24-Feb-25

749,781

–

17-Dec-20

£0.6940

N/A

N/A

7-Apr-25

1,612,359

18,474

17-Dec-20

£0.6940

7-Apr-25

482,925

5,533

17-Dec-20

£0.6940

N/A 26-Feb-26 2,448,595

58,136

17-Dec-20

£0.6940

26-Feb-19

N/A 26-Feb-26

449,386

10,515

17-Dec-20

£0.6940

5-Mar-20

27-Feb-22

27-Feb-27

1,472,432

88,700

17-Dec-20

£0.6940

5-Mar-20

N/A 27-Feb-27

211,214

12,723

17-Dec-20

£0.6940

7,426,692

194,081

All of the above share option exercises awards are nil priced share options. Details of each award were disclosed in each relevant Single 
Figure remuneration table in previous reports.

Awards subject to a retention period must be held until for the duration of the retention period although a proportion may be sold to cover 
personal tax obligations if an exercise occurs before the end of the retention period. Mr Sharma sold 47% of shares acquired on exercise 
from all awards and retained the balance.

Dividend equivalents are added to vested options at the point of exercise. The number of dividend equivalents is based on the cash value  
of dividends paid in the period from grant to vesting or, if applicable, from grant to any later retention period and the share price at the 
vesting date.

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DIRECTORS’ REMUNERATION REPORT 
CONTINUED

Simon Boddie

Award

Deferred bonus shares subject to vesting period

DABP18

DABP19

DABP20

Sub-total

LTIP share options (subject to performance conditions)

LTIP18

LTIP19

LTIP20

Sub-total

Share options (no performance conditions)

LTIP16

LTIP17

DABP17

Sub-total

Vesting date

Retention 
period

Expiry date

No.

Status

Performance 
conditions?

4-Mar-21

4-Mar-22

6-Mar-23

N/A

N/A

N/A

4-Mar-28

130,384

Unvested

4-Mar-29

114,231

Unvested

6-Mar-30

228,310

Unvested

472,925

4-Mar-21

4-Mar-23

4-Mar-28

744,578

Unvested

4-Mar-22

4-Mar-24

4-Mar-29

779,447

Unvested

6-Mar-23

6-Mar-25

6-Mar-30 1,110,356

Unvested

2,634,381

29-Jul-19

29-Jul-21

29-Jul-26 1,451,723

27-Feb-20 27-Feb-22 27-Feb-27 1,049,862

5-Mar-20

N/A 27-Feb-27

 71,506

Vested

Vested

Vested

2,573,091

No

No

No

Yes

Yes

Yes

No

No

No

No options have been exercised by any Director between the year end and the signing of this report. No other Directors have entered into 
any transactions since the year end.

The middle market price of Coats Group plc shares at 31 December 2020 was 68.2 pence and the range during the year was 36.5 pence  
to 79.6 pence.

Review of performance 
The graph (below left) shows the difference between investing £100 in the Company and the constituents of the FTSE All Share Index and 
FTSE 250 from 1 January 2011 to 31 December 2020. It is assumed dividends are reinvested over that period. The Board feels the FTSE All 
Share Index and the FTSE 250 each provide an appropriate comparator given the Company’s market capitalisation and its presence on the 
London Stock Exchange.

To enable comparison with the LTIP performance period an additional graph (below right) is shown on the same basis that reflects the  
three-year performance period ending 31 December 2020.

Historical TSR performance
Growth in the value of a hypothetical £100 holding
since 1 January 2011 (with all dividends reinvested)

Historical TSR performance
Growth in the value of a hypothetical £100 holding
since 1 January 2018 (with all dividends reinvested)

£300

£250

£200

£150

£100

£50

£0

£140

£120

£100

£80

£60

£40

£20

£0

01-Jan
2011

01-Jan
2012

01-Jan
2013

01-Jan
2014

01-Jan
2015

01-Jan
2016

01-Jan
2017

01-Jan
2018

01-Jan
2019

01-Jan
2020

01-Jan
2021

01-Jan
2018

01-Jan
2019

01-Jan
2020

01-Jan
2021

FTSE250 Index

FTSE All-Share Index

Coats

90

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationChief Executive total remuneration for the last 10 years1 

Executive Director

2011

2012

2013

2014

2015

2016

2017

2018

2019

1,017.0

1,760.3

2,566.9

3,356.7

2,228.1

2020

787.4

CEO single figure of  
remuneration (£k)

Annual bonus as a % of 
maximum opportunity

LTIP award as a % of  
maximum opportunity

–

–

–

–

–

–

–

–

–

–

–

–

Director’s remuneration – percentage change from 2019 to 2020

Executive Directors
Rajiv Sharma

Simon Boddie

Jackie Callaway

Non-Executive Directors
Mike Clasper

Nicholas Bull

Anne Fahy

David Gosnell

Echo Lu

Fran Philip

Alan Rosling

Jakob Sigurdsson

Average of all employees2

87.1% 77.0% 79.5% 66.7% 67.3%

5.0%

–

43.6% 60.0% 84.2% 95.8%

0%

Salary

Benefits3

Bonus

-3.6%

-3.6%

-46.8%

-91.1%

-2.7%

-90.3%

Appointed 1 December 2020

-5%

-5%

-5%

-5%

-5%

-5%

0%

0%

0%

0%

0%

0%

N/A

N/A

N/A

N/A

N/A

N/A

Resigned 10 June 2020

Appointed 1 October 2020

0%

0%

-51.4%

1  The Company did not have an Executive Director who performed the role of CEO until 2 March 2015, when the Company completed its transition from Guinness Peat Group plc to Coats Group plc.  

The increase in CEO remuneration from 2015 to 2016 is therefore largely influenced by the 2015 single figure data being part year data. The CEO figures for 2017, 2018 and 2019 reflect the appointment 
of Rajiv Sharma and in particular the increase in benefits reflect the relocation and expatriate support that was offered to him following his appointment as CEO on 1 January 2017.

2  The average of all employees reflects the total number of employees based in the UK. The UK has been chosen as the most appropriate comparator group because the CEO is based in the UK and the 
majority of Coats employees who are employed outside the UK are working in locations with very different inflationary and market pressures. The UK employee population includes employees across  
all levels of the organisation. A reduction of pay was applied in the second quarter of 2020 but this was matched by a ccrresponding reduction in hours.

3. The significant decrease for benefits in 2020 for the CEO arises because of the level of one-time relocation related benefits provided in 2019. 

4. Non-Executive Directors do not receive benefits-in-kind however, figures are disclosed in the benefits Single Figure table to reflect business expense payments that are regarded as taxable by the UK  
tax authority. Year-on-year variations in the reported taxable benefits value have been ignored for this purpose unless there is the provision of a material specific benefit or if the difference in benefit  
is greater than £5,000 from one year to the next.

Relative importance of spend on pay 
The table below shows the total pay for all of the Company’s employees compared to other key financial indicators.

Employee costs (US$m)

Distributions to shareholders1 (US$m)

Average number of employees

Revenues from continuing operations (US$m) – CER basis

Operating profit pre-exceptional (US$m) – CER basis

1. By way of dividends.

Year to 
31 December 
2020

Year to 
31 December 
2019

272.1

–

303.0

24.4

17,082

16,876

1,163.3

1,356.0

110.6

195.3

% change 

(10)%

(100)%

1%

(14)%

(43)%

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationDIRECTORS’ REMUNERATION REPORT 
CONTINUED

Additional information on number of employees, total revenues and profit has been provided for context. The figures for employee costs, 
average number of employees, revenues and operating profit in 2020 and 2019 have been stated on the basis of continuing operations 
only. Information for 2020 includes acquisitions made during the year. The figures for revenues and operating profit are on a constant 
exchange rate (CER) basis with amounts for 2019 restated at 2020 exchange rates.

CEO pay ratio
Coats is not required to publish a CEO pay ratio as the Group employs less than 250 employees in the UK. However, the Company publishes 
a disclosure on a voluntary basis.

Salary

Salary plus bonus

Total pay

Financial 
year

Calculation 
methodology

2019

2020

A

A

P25

21

20

P50

12

12

P75

8

7

P25

37

20

P50

20

12

P75

11

7

P25

58

20

P50

36

14

P75

19

7

Year on year change in CEO pay ratio

i

n
a
d
e
m
o
t

y
a
p
O
E
C

f
o
o
i
t
a
R

y
a
p

e
e
y
o
p
m
e

l

40

35

30

25

20

15

10

5

Salary
Salary plus bonus
Total pay

2019

2020

The ratio of pay has remained constant considering that no salary reviews were awarded during 2020 and the CEO ratios that reflect 
incentive pay have reduced considerably due to the much lower bonus outcome in 2020 and no vesting of long term incentive awards.  
The lower quartile, median and upper quartile employees were identified on the basis of full-time equivalent total remuneration and 
benefits in the twelve month period ending 31 December 2020 (this is referred to as methodology A according to the Regulations).  
This calculation methodology was selected as it was the closest comparative methodology to the basis on which the remuneration for the 
CEO is disclosed for the year ended 31 December 2020. The UK workforce is the most appropriate comparator group because the CEO  
is UK based and the pay of the global workforce is subject to very significant fluctuations due to local inflationary pressures and foreign 
exchange rate movements. 

The Committee has considered the pay data for the three individuals identified and concludes that the median ratio is a fair reflection  
of the movement of pay and reward within the UK workforce especially considering that the pay for all three individuals does not include  
any share-based incentive remuneration. In addition, the data was compared to the average of five individuals above and below their 
remuneration in terms of total compensation and mix of pay for the year to 31 December 2020 to ensure the percentile ranking for each 
individual was comparable to all individuals within that quartile grouping. No adjustments have been made to the remuneration other than 
to ensure that the remuneration is equivalent to a full-time employee and where a performance bonus is relevant an assumption, based on 
the average attainment for the element linked to personal performance has been assumed. The Committee is satisfied that any assumptions 
do not have a material impact on the selected reference employee nor on the calculated ratio. The remuneration details for the individuals 
are shown below.

Base pay

Base and bonus

Total remuneration

CEO

P25

P50

P75

£581,400

£28,500

£48,925

£85,500

£627,300

£30,750

£52,788

£92,250

£787,392

£38,574

£57,099

£106,906

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
 
 
 
 
 
A significant proportion of the CEO’s remuneration is appropriately linked to the Company’s performance and share price movements  
over time which may fluctuate materially over time. To enable a comparison to be made which reflects this element of variable pay a ratio 
has been calculated which reflects base pay and base pay and bonus.

Corporate Governance Code requirements
In order to satisfy Provision 40 of the Corporate Governance Code the Directors also reviewed the operation of the policy and considered 
the consistency of the Remuneration Policy with the remuneration policies elsewhere in the Group. The Committee reviewed the incentive 
pay structures operated throughout the Group and are satisfied that the design of the arrangements sought to achieve an acceptable 
balance between the overall financial performance of the Group, the various operating businesses and, where appropriate, individual 
performance. The Remuneration Committee and the full Board are made aware of, and consulted on, the Company’s Human Resources 
strategy and take seriously its obligations to have a greater degree of oversight on the operation of fair pay policies elsewhere in the Group. 
In particular, the Committee has established additional time to proactively support the Company’s projects such as the development and 
implementation of a global Living Wage policy as an enhancement to any local legal minimum wage legislation in response to a very 
constructive dialogue with one of the Company’s shareholders. One of the Committee’s members, Fran Philip, is the designated Director 
with responsibility for wider employee engagement and her influence will assist in developing this wider support.

Statement of implementation of Remuneration Policy for 2021
Base salaries for Executive Directors and fees for the Non-Executive Directors will be reviewed on 1 July 2021. The Chairman’s fee will 
remain £250,000 per annum from 1 July 2021 following David Gosnell’s appointment.

Rajiv Sharma will receive a base salary of £612,000 per annum; a fixed pension benefit of £122,400; a car allowance of £20,000 per 
annum; medical, life and income replacement insurance.

Jackie Callaway will receive a base salary of £380,000 per annum; a pension benefit of 12% per annum which will increase following  
any salary review; a car allowance of £15,000 per annum; medical, life and income replacement insurance. As part of the terms of her 
recruitment she will also be entitled during 2021 to a maximum cash payment of £100,000 as compensation for the loss of an annual 
bonus from her previous employer. The Committee will determine the amount of the payment in 2021 when it is possible to verify the 
extent of the loss incurred from information that will be publicly available. It is a condition of the payment that by 31 December 2021  
Jackie will have purchased Coats shares of equivalent value of the net compensation paid. The payment will be disclosed in next year’s report.

Simon Boddie will receive until his retirement on 31 March 2021 a base salary of £436,000 per annum, a fixed pension allowance of 
£87,200 per annum, a car allowance of £15,000 per annum, medical insurance, life insurance and income replacement insurance. He will  
be eligible for a pro-rata bonus for 2021 based on three months service which will be paid fully in cash. No further equity awards will be 
granted and he will be treated as a retiree for the purposes of all Long Term Incentive and Deferred Annual Bonus awards. 

In accordance with the Remuneration Policy approved by shareholders on 11 June 2020 the LTIP opportunity for the Chief Executive Officer 
will be increased from 150% to 175% and the maximum annual bonus opportunity will remain 150%. The maximum bonus opportunity 
for other Directors will be 115% and the LTIP opportunity for Jackie Callaway will be 150%; no LTIP award will be granted to Simon Boddie 
in 2021 and he will be regarded as a retiree for the purposes of all existing awards. The compulsory three-year deferral into shares of the 
2021 bonus outcome will be 50% for the Chief Executive Officer (Rajiv Sharma) and 40% for the Chief Financial Officer (Jackie Callaway). 
No deferral will be applied to any pro-rata bonus awarded to Simon Boddie following his retirement. A post-termination minimum 
shareholding requirement applies to all Executive Directors for two years following termination of employment based on 100% of the MSR 
or the actual shareholding at termination. 

The performance measures and weightings for annual and long term incentives are shown below. For the annual bonus the weightings  
for Sales will be increased from 10% to 30% and the EBIT measure will be decreased from 50% to 30%. As referred to in the Committee 
Chairman’s opening statement this is to reflect the Company’s focus for 2021 of maximising sales growth from 2020 to recover sales from 
existing customers and to gain market share. The Committee will ensure that any payment for the Sales measure is reflective of achieving 
an acceptable level of margin for the sales achieved.

Annual bonus

Measure

Sales

Earnings Before Interest and Taxation

Free Cash Flow

Individual objectives

Long Term Incentive

Weighting

Measure

30% Earnings Per Share

30% Free Cash Flow

20% Total Shareholder Return

20% Sustainability

Weighting

40%

30%

20%

10%

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationDIRECTORS’ REMUNERATION REPORT 
CONTINUED

Annual bonus targets are based on adjusted operating profit and adjusted free cash flow excluding the impact of any exchange rate 
fluctuations. The Company does not publish annual bonus targets in advance as these figures are considered commercially sensitive but  
will do so at the time the bonus award is disclosed.

The Long Term Incentive Plan awards granted in 2021 will be subject to the following targets:

Measure

EPS in 2023 (adjusted as described below)

Vesting % for EPS measure

Cumulative Free Cash Flow (US$m) over three years

Vesting % for FCF measure

Threshold

 6.0 cents

25%

$205m

25%

Mid

 7.0 cents

62.5%

$242.5m

62.5%

Maximum

 8.0 cents

100%

$280.0m

100%

Total Shareholder Return vs FTSE250 excluding investment trusts

Median 62.5th Percentile

Upper Quartile

Vesting % of each measure for TSR measure

25%

62.5%

100%

Straight line vesting occurs between Threshold, Mid and Maximum.

The cumulative Free Cash Flow target is subject to adjustment and is calculated before dividends and before any deficit repair contributions 
to UK pension schemes. EPS growth is based on EPS growth adjusted to exclude the impact of any variation in the pension finance charge.

The Committee recognises the important concerns of shareholders regarding Environmental, Social and Governance issues. Sustainability 
targets have been reflected in the Long Term Incentive measures since 2020, with a 10% weighting, to emphasise the importance of 
delivering the Company’s objectives and priorities in this area. Specifically these targets for the LTIP award in 2021 will be based on 
sustaining and maintaining in 2023 a reduction (versus a 2018 baseline) of 40% in water usage, a 7% reduction in energy usage and a 
25% reduction in waste; compliance with Zero Discharge of Hazardous Chemicals effluent standards; the achievement of Great Place to 
Work or equivalent accreditation in sites that cover at least 80% of our employees worldwide and providing opportunities for all employees 
to support community development activities and increasing the use of recycled material in our premium poyester threads. Further details 
including updates of our progress can be in this Annual Report and in our Sustainability Report available at www.coats.com/sustainability.

Consideration by the Directors of matters relating to Directors’ remuneration

The members of the Committee were: David Gosnell (Chairman), Echo Lu, Fran Philip and Alan Rosling (until June 2020). Echo Lu chaired 
one meeting that concerned the terms of appointment that would be offered to David Gosnell as Chairman of the Company; David Gosnell 
did not attend this meeting.

In reviewing remuneration arrangements the Committee considers the terms and conditions of employees across the Group. In this regard, 
Fran Philip, as a member of the Committee, is able to provide insight and support from her role as the designated director responsible for 
wider employee engagement.

The responsibilities of the Committee are set out in the Corporate Governance section of the Annual Report. The Committee also received 
assistance from Stuart Morgan (who also acted as Secretary to the Committee), Monica McKee (Group HR Director) and Brendan Fahey 
(Reward Director). No Directors are involved in deciding their own remuneration.

The Company received advice from Herbert Smith Freehills LLP in relation to legal matters relating to the Group’s incentive plans. Mercer- 
Kepler provided independent advice to the Company principally in relation to the design and performance targets set for the Group’s 
incentive plans, benchmarking of Executive Directors’ pay, review of the Directors’ Remuneration Report and regulatory developments in 
remuneration governance and practice. Mercer-Kepler received fees of £54,487 for time spent and materials used in providing advice to the 
Company during the period to 31 December 2020. Mercer-Kepler provide no other advice to the Company or any of the Directors and the 
Committee is satisfied that the advice provided was fair and objective. The Committee appointed Mercer-Kepler because of their extensive 
knowledge of Coats’ strategy and operations and development and supported the Committee in the transition from being a subsidiary of 
the Guinness Peat Group plc to Coats Group plc.

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationStatement of voting at the General Meeting
At the AGM of the Company on 11 June 2020 the results of the vote regarding Resolution 2 (to approve the Annual Report on 
Remuneration) were:

Votes for 

Votes against 

Number

860,050,547

%

98.8

Number

10,755,942

%

1.2

Votes 
total

Votes 
withheld 

870,806,489

61,888,506

At the AGM of the Company on 11 June 2020 the results of the vote regarding Resolution 3 (to approve the Directors Remuneration Policy 
were):

Votes for

Votes against

Number

933,453,843

 %

98.8

Number

11,759,000

%

1.2

Votes
total

945,212,843

Votes
withheld

78,764

A copy of the Remuneration Policy will be made available at www.coats.com/governance.

Assessment of the effectiveness of the Committee
During the year the Board undertook a review of the effectiveness of the Board and Board Committees, including the Remuneration 
Committee, in accordance with the requirements under the Code. The review involved a questionnaire of all of the Committee members 
and regular presenters to the Board. The overall conclusion is that the Committee is working well and is covering its remit with relatively  
few areas for improvement highlighted.

The Remuneration Report was approved by a Committee of the Board of Directors on 3 March 2021 and signed on its behalf by:

David Gosnell
Chairman, Remuneration Committee 

3 March 2021

Coats Group plc Annual Report and Accounts 2020

95

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COATS 
GROUP PLC

Report on the audit of the financial statements

1 Opinion

In our opinion

•  the financial statements of Coats Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the 
state of the group’s and of the parent company’s affairs as at 31 December 2020 and of the group’s profit for the year then ended;

•  the group financial statements have been properly prepared in accordance with international accounting standards in conformity  
with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as adopted by the 
European Union;

•  the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted 
Accounting Practice, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and  
Republic of Ireland”; and

•  the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:

•  the Consolidated Income Statement;

•  the Consolidated Statement of Comprehensive Income;

•  the Consolidated Statement of Financial Position;

•  the Consolidated Statement of Changes in Equity;

•  the Consolidated Statement of Cash Flows;

•  the Notes to the Financial Statements 1 to 37;

•  the Company Balance Sheet;

•  the Company Statement of Changes in Equity;

•  the Company Cash Flow Statement; and

•  the Notes to the Company Financial Statements 1 to 6.

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and 
international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the European 
Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable 
law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of 
Ireland” (United Kingdom Generally Accepted Accounting Practice).

2 Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities 
under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. 

We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the 
financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest 
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit 
services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther information3 Summary of our audit approach

Key audit matters

The key audit matters that we identified in the current year were:

•  Lower Passaic River Study Area litigation provision;

•  material assumptions underlying retirement benefit obligations; 

•  uncertain tax positions; and

•  impairment of fixed assets.

Due to the impact of the Covid pandemic, the level of audit effort, judgement and complexity in our 
assessment of management’s impairment review analysis of fixed assets has increased. Accordingly, this is  
a new key audit matter in the current year. 

The materiality that we used for the group financial statements was $6.5 million, which was determined on 
the basis of 0.6% of revenue. We have changed the basis on which materiality is determined in the current 
period to reflect the volatility in the results of the group arising from the impact of Covid. For further details 
refer to section 6 of this report.

Coats Group plc was subject to a full statutory audit by the group auditor. Due to the widespread nature  
of the group, the audit is subject to scoping decisions on overseas components. Our full-scope audit of 
components provided coverage of 67% of the group’s net assets, 71% of the group’s revenue and 79%  
of the group’s profit before tax from profit making components. 

We have identified impairment of fixed assets as an additional key audit matter as set out above.

Materiality

Scoping

Significant changes in our 
approach

4 Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group and parent company’s ability to continue to adopt the going concern basis of 
accounting included: 

•  Considering as part of our risk assessment the nature of the group, its business model and related risks including where relevant the 
impact of Brexit and Covid, the requirements of the applicable financial reporting framework and the system of internal control;

•  Assessing the sales and gross margin forecast in management’s base case against the historical trading results of the group, the latest 

economic forecasts, the latest customer order book and our understanding of management’s discussions with key customers;

•  Challenging management on the accuracy of the forecasted cost savings and the extent to which these are already demonstrated and 

within the management’s control; 

•  Testing the mechanical and logical accuracy of management’s assessment;

•  Assessing the consistency of management’s forecast covenant compliance calculation in relation to the facility agreements; and

•  Assessing the likelihood of management’s reverse stress test.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually 
or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern for a period of at least 
twelve months from when the financial statements are authorised for issue.

In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add or draw 
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to 
adopt the going concern basis of accounting. 

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of  
this report.

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther informationINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COATS 
GROUP PLC CONTINUED

5 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements 
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we 
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; 
and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and 
we do not provide a separate opinion on these matters.

5.1 Lower Passaic River Study Area litigation provision

Key audit matter 
description

Along with other textile manufacturers, and chemical producers, the group is subject to ongoing litigation 
proceedings by the US Environmental Protection Agency (EPA) with regard to environmental damage caused 
by historical operations of the group in the Lower Passaic River Study Area. 

How the scope of our 
audit responded to the 
key audit matter

In March 2016, the EPA issued a Record of Decision providing a basis for management to estimate a 
provision in respect of remediation and legal costs which amounts to $12.6 million (2019: $14.6 million),  
net of insurance proceeds, at 31 December 2020. This is currently considered by management to be the  
best estimate of the anticipated share of the future liability and legal fees, given the information available. 

Judgement is required to estimate what, if any, the group’s share of the total remediation costs is likely  
to be.

Refer to note 1 for the relevant accounting policy. The carrying value of the provision and background 
information to the matter is included in note 28 of the financial statements and management discuss the 
matter as a significant financial and reporting issue in the audit and risk committee report on page 68.

We obtained an understanding of the relevant control regarding the recognition of the provision and 
evaluated whether this had been implemented as designed. 

We evaluated management’s assumptions, including a review of evidence used in estimating the group’s 
share of total remediation costs for the Lower Passaic River Study Area, both in terms of appropriateness of 
recognition and the valuation thereof. We verified the material cash outflows relating to the utilisation of 
the element of the total provision that relates to legal costs and made enquiries of management to confirm 
whether any further correspondence had been received in connection with this matter.

We evaluated the competence of management’s external legal advisers. We considered the legal advice 
management had obtained in relation to litigation and directly challenged management’s judgements 
through inspecting the relevant third party legal confirmation and through discussion with the key external 
legal adviser and our internal environmental specialist.

Key observations

There were no material developments during 2020 that would result in a re-measurement of the underlying 
remediation provision. Management has properly taken into account the latest information available from 
their third party legal advisors. 

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther information5.2 Material assumptions underlying retirement benefit obligations

Key audit matter 
description

How the scope of our 
audit responded to the 
key audit matter

The retirement benefit obligations recognised in the statement of financial position in respect of defined 
employee benefits are the present values of the defined benefit obligations at the year-end less the fair 
value of any associated assets. The gross actuarial value of scheme liabilities of Coats Group plc at 
31 December 2020 was $3,589 million (2019: $3,276 million). 

The assumptions used in the valuation are relatively sensitive to small changes and can result in a material 
difference in the net deficit recognised of $225.8 million (2019: $181.3 million). Key assumptions involved in 
the determination of the present values of the UK and US defined benefit obligations include discount rates, 
mortality and inflation rates.

The carrying values of the group’s pension obligations as well as a sensitivity analysis relating to the group’s 
major defined benefit pension arrangements are included in note 10 of the financial statements and the 
accounting policy is detailed in note 1. Management identify UK retirement benefit obligations as a key 
source of estimation uncertainty in note 1 of the financial statements and discuss the matter as a significant 
financial and reporting issue in the audit and risk committee report on page 68.

We obtained an understanding of the relevant control over the pension assumptions and evaluated whether 
this had been implemented as designed.

We worked with our own pension specialists to challenge the assumptions underlying management’s 
calculation of the group defined benefit scheme. We have compared the key assumptions to industry 
benchmarks and prior year rates.

We evaluated the competence of the experts that management engaged to calculate the defined benefit 
pension obligations, by checking they are qualified and affiliated with the appropriate industry body; and 
we evaluated the sensitivity of the pension scheme liabilities to differences between our independent 
reasonable range for key assumptions and the key assumptions determined by management, both 
individually and in aggregate.

Key observations

The key assumptions used in the calculation of the retirement benefit obligations were within our 
reasonable ranges.

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coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther informationINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COATS 
GROUP PLC

5.3 Uncertain tax positions 

Key audit matter 
description

The group evaluates uncertain tax items, which are subject to interpretation and agreement of the position 
with the local tax authorities, and consequently agreement may not be reached for a number of years. 

Given the global operations of Coats, the group is exposed to a large number of tax jurisdictions and  
this exposure gives rise to a number of judgemental taxation positions, such as cross-border transactions. 
The group’s uncertain tax provisions at 31 December 2020 amount to $15.0 million (2019: $14.1 million).

There is a risk that there are matters excluded from the gross exposure calculation and there is judgement 
required to determine the amount to be provided against known exposures. We have therefore identified  
a key audit matter relating to the valuation of the central tax provision.

Refer to note 1 for the relevant accounting policy. The group’s effective tax rate reconciliation is provided  
in note 9 and the matter is discussed as a significant financial and reporting issue in the audit and risk 
committee report on page 68.

We obtained an understanding of the relevant controls over the central tax provision and evaluated whether 
these had been implemented as designed. 

We worked with our tax specialists in key jurisdictions to evaluate and challenge the appropriateness  
of judgements and assumptions made by management with respect to their assessment and valuation  
of the central tax provision. This included a review of applicable third party evidence and inspection of 
correspondence with tax authorities to assess the adequacy of the associated provision and disclosures.  
We also consider the tax provisions communicated by our full scope component auditors against the  
central tax provision.

How the scope of our 
audit responded to the 
key audit matter

Key observations

We are satisfied that the provisions raised in respect of the potential taxation exposures are appropriate.

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Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther information5.4 Impairment of fixed assets

Key audit matter 
description

In light of the impact of Covid, there is a heightened risk of impairment in respect of the group’s property, 
plant and equipment balance of $254.4 million, intangible assets balance of $288.6 million and right-of-use 
assets balance of $60.7 million at 31 December 2020.

How the scope of our 
audit responded to the 
key audit matter

Following the impact of Covid, management identified significant indicators of impairment for certain  
cash generating units at 30 June 2020. In line with the requirements of IAS 36 impairment of assets, 
management prepared full impairment reviews for each of these cash generating units at 30 June 2020.  
The group recognised an impairment charge of $5 million at 30 June 2020 in respect of plant and 
equipment and right-of-use assets.

Management has reassessed whether significant indicators of impairment exist at 31 December 2020 for 
any cash generating units. There is judgement required by management in determining whether indicators 
of impairment exist in respect of each of the cash generating units and therefore the completeness of cash 
generating units identified that require a full impairment review to be performed.

There is also judgement required by management in determining their future cash flow forecasts in respect 
of the units most at risk of a material impairment to the carrying value of plant and equipment, intangible 
assets and right-of-use assets, and whether this represents a key source of estimation uncertainty.

The carrying values of the group’s intangible assets and details of the stress test analysis management has 
performed on their value in use impairment assessments are included in note 13 of the financial statements 
and the accounting policy is detailed in note 1. The matter is further discussed as a significant financial and 
reporting issue in the audit and risk committee report on page 68.

We have completed the following procedures:

•  obtained an understanding of relevant controls relating to management’s impairment review and 

evaluated whether such controls had been implemented as designed;

•  tested the mechanical accuracy of the models and cash flow forecasts;

•  challenged the key assumptions used by management in their impairment review through comparison  

to historical performance and external evidence; 

•  considering the extent to which the possible effects of Covid should be included in the impairment 
models and assessing the impact of the pandemic with reference to the recent performance of 
 the group;

•  performed sensitivity and breakeven analysis on the forecasts to identify whether a cash generating  

unit is materially sensitive to reasonable changes in assumptions and challenge management’s  
downside valuations; 

•  engaged our internal valuation specialists to assess the appropriateness of the discount rates determined 

by management at year-end; and

•  engaged our real-estate specialists to assess the appropriateness of the property valuations obtained  

by management.

Key observations

We concur with management’s identification of units showing significant indicators of impairment. We also 
concur with the value of the impairment recognised by management. 

We concur with management’s conclusion that there is not a significant risk of a change in assumption 
occurring within 12 months of the reporting period that would result in a material change to the carrying 
value of non-current assets held by the group.

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther informationINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COATS 
GROUP PLC CONTINUED

6 Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions  
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work 
and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Materiality

$6.5 million (2019: $8.2 million)

$5.8 million (2019: $7.4 million)

Group financial statements

Parent company financial statements

Basis for determining  
materiality

Group materiality is based on 0.6% of revenue 
(2019: 5% of adjusted profit before tax).

Rationale for the  
benchmark applied

Revenue $1,163m

In the prior year, materiality was determined on the 
basis of 5% of adjusted profit before tax. As a result 
of the impact of Covid on group profitability, we 
have determined current year materiality on the basis 
of 0.6% of group revenue which is a consistent 
percentage in relation to the prior year financial 
years. This approach is a change from the prior year 
to reflect the volatility in the results of the group 
arising from the impact of Covid.

Parent company materiality equates to 0.6% of net 
assets, having been capped at 90% (2019: 90%)  
of group materiality.

The parent company is primarily an investment 
holding company and net assets is considered the 
most appropriate benchmark.

Group materiality
$6.5m

Component
materiality range
$2.6m to $3.9m

Audit and risk
committee reporting
threshold $0.3m

Revenue
Group materiality

6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected 
misstatements exceed the materiality for the financial statements as a whole.

Group financial statements

Parent company financial statements

Performance materiality

65% (2019: 70%) of group materiality

65% (2019: 70%) of parent company materiality

Basis and rationale for 
determining performance 
materiality

In determining performance materiality, we considered our history of auditing the entity, including the  
lack of significant deficiencies and errors identified in previous years. The reduced performance materiality 
reflects our consideration of the business disruption brought on by the ongoing global pandemic and the 
risk it poses to the group’s internal control environment.

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coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther information6.3 Error reporting threshold
We agreed with the audit and risk committee that we would report to the Committee all audit differences in excess of $0.3 million (2019: 
$0.4 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to 
the audit and risk committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7 An overview of the scope of our audit
7.1 Identification and scoping of components
Coats Group plc was subject to a full statutory audit by the group auditor. Due to the geographically widespread nature of the group,  
the audit is subject to scoping decisions on overseas components. We focused our group audit scope on 11 (2019: 11) overseas components 
spread across four continents, which were subject to full audits. Our involvement in their audits is as follows:

•  Given the global travel restrictions during 2020, we have not physically visited Coats components in the year. We have however visited 
10 of the 11 full scope components periodically over the previous three years and we have continued our remote interactions with our 
full scope component audit teams.

•  For all components, we held planning calls, maintained regular contact throughout the audit process, directed the audit procedures 

performed and reviewed the risk assessment and work of overseas component auditors.

Our audit work at these components was executed at levels of materiality set by the group engagement team, which were lower than the 
group materiality and range from $2.6 million to $3.9 million (2019: $3.3 million to $6.2 million).

The 11 overseas components and UK components subject to full audit scope account for 67% of the group’s net assets (2019: 75%), 79% 
of the group’s profit before tax within the group’s profit making components (2019: 79%) and 71% of the group’s revenue (2019: 77%). If 
including the specified procedures performed over the revenue in Pharr HP, we have obtained coverage over 76% of the group’s revenue.

Additionally, five components were subject to specified audit procedures. These components were selected in order to provide an 
appropriate basis for undertaking the audit work to address the risks of material misstatement identified above. Our oversight of these 
components was the same as for components subject to full audits, maintaining regular contact throughout the audit process. 

At the group level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were 
no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit or 
audit of specified account balances.

Revenue

Profit before tax

Net assets

71% Full audit scope
11% Specified audit procedures
18% Review at group level

79% Full audit scope
1% Specified audit procedures
20% Review at group level

67% Full audit scope
15% Specified audit procedures
18% Review at group level

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther informationINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COATS 
GROUP PLC CONTINUED

7.2 Our consideration of the control environment
Coats Group plc plc is reliant on the effectiveness of a  
number of IT applications and controls to ensure that financial 
transactions are processed and recorded completely and accurately. 
The financial reporting systems of the group is spread across four 
operating instances. 

The India component audit team relies upon controls across various 
operating cycles, which are dependent upon one of these instances; 
the general IT controls and relevant entity level controls of which  
we found to be operating effectively. As a result, we relied on the 
operating effectiveness of controls over the operating cycles of  
this component.

The rest of the in-scope components are independently reliant upon 
their respective operating instances within the group. Aligned with 
our planned audit approach we did not seek to place reliance upon 
the operating effectiveness of the general IT and entity level controls 
within these components. 

7.3 Working with other auditors
The same audit team is responsible for the audit work of the group 
and the component audits within the United Kingdom and the 
United States of America. 

The group audit team also supervises and provides oversight  
over eleven overseas components. The group audit team held 
regular communication with these component auditors ahead  
of and during the year-end audit process. Oversight of the 
component audit teams included reviewing their audit work  
via video conferencing.

At the Coats Group plc parent entity level we also tested the 
consolidation process and carried out analytical procedures to 
confirm our conclusion that there were no significant risks of 
material misstatement of the aggregated financial information  
of the remaining components not subject to audit or audit of 
specified account balances.

8 Other information
The other information comprises the information included in  
the annual report, other than the financial statements and our 
auditor’s report thereon. The directors are responsible for the other 
information contained within the annual report. Our opinion on the 
financial statements does not cover the other information and, except 
to the extent otherwise explicitly stated in our report, we do not 
express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, 
consider whether the other information is materially inconsistent 
with the financial statements or our knowledge obtained in the 
course of the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material 
misstatements, we are required to determine whether this gives rise 
to a material misstatement in the financial statements themselves. 

If, based on the work we have performed, we conclude that there  
is a material misstatement of this other information, we are required 
to report that fact.

We have nothing to report in this regard.

9 Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, 
the directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair 
view, and for such internal control as the directors determine is 
necessary to enable the preparation of financial statements that 
are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible 
for assessing the group’s and the parent company’s ability to 
continue as a going concern, disclosing as applicable, matters 
related to going concern and using the going concern basis of 
accounting unless the directors either intend to liquidate the group 
or the parent company or to cease operations, or have no realistic 
alternative but to do so.

10 Auditor’s responsibilities for the audit of the financial 
statements
Our objectives are to obtain reasonable assurance about  
whether the financial statements as a whole are free from  
material misstatement, whether due to fraud or error, and to issue 
an auditor’s report that includes our opinion. Reasonable assurance 
is a high level of assurance, but is not a guarantee that an audit 
conducted in accordance with ISAs (UK) will always detect a 
material misstatement when it exists. Misstatements can arise  
from fraud or error and are considered material if, individually or  
in the aggregate, they could reasonably be expected to influence 
the economic decisions of users taken on the basis of these  
financial statements.

A further description of our responsibilities for the audit of 
the financial statements is located on the FRC’s website at:  
www.frc.org.uk/auditorsresponsibilities. This description forms 
part of our auditor’s report.

11 Extent to which the audit was considered capable of 
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance 
with laws and regulations. We design procedures in line with our 
responsibilities, outlined above, to detect material misstatements 
in respect of irregularities, including fraud. The extent to which our 
procedures are capable of detecting irregularities, including fraud 
is detailed below.

11.1 Identifying and assessing potential risks related to 
irregularities
In identifying and assessing risks of material misstatement in respect 
of irregularities, including fraud and non-compliance with laws and 
regulations, we considered the following:

104

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther information•  the nature of the industry and sector, control environment  

and business performance including the design of the group’s 
remuneration policies, key drivers for directors’ remuneration, 
bonus levels and performance targets;

11.2 Audit response to risks identified
As a result of performing the above, we did not identify any  
key audit matters related to the potential risk of fraud or non-
compliance with laws and regulations. 

•  results of our enquiries of management , group internal audit 

Our procedures to respond to risks identified included the following:

•  reviewing the financial statement disclosures and testing to 

supporting documentation to assess compliance with provisions 
of relevant laws and regulations described as having a direct 
effect on the financial statements;

•  enquiring of management, the audit and risk committee and 

external legal counsel concerning actual and potential litigation 
and claims;

•  performing analytical procedures to identify any unusual or 
unexpected relationships that may indicate risks of material 
misstatement due to fraud;

•  reading minutes of meetings of those charged with governance, 
reviewing internal audit reports and reviewing correspondence 
with tax and licensing authority;

•  in addressing the risk of fraud in revenue recognition, we have 

substantively tested a sample to assess whether both the global 
and local rebates recognised are accurate and complete; and 

•  in addressing the risk of fraud through management override of 
controls, testing the appropriateness of journal entries and other 
adjustments; assessing whether the judgements made in making 
accounting estimates are indicative of a potential bias; and 
evaluating the business rationale of any significant transactions 
that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations 
and potential fraud risks to all engagement team members including 
internal specialists and significant component audit teams, and 
remained alert to any indications of fraud or non-compliance with 
laws and regulations throughout the audit.

and the audit and risk committee about their own identification 
and assessment of the risks of irregularities; 

•   any matters we identified having obtained and reviewed  

the group’s documentation of their policies and procedures 
relating to:

–  identifying, evaluating and complying with laws and 

regulations and whether they were aware of any instances  
of non-compliance;

–  detecting and responding to the risks of fraud and  

whether they have knowledge of any actual, suspected  
or alleged fraud;

–  the internal controls established to mitigate risks of fraud  

or non-compliance with laws and regulations;

•  the matters discussed among the audit engagement team 
including significant component audit teams, and involving 
relevant internal specialists, including tax, valuations, real estate, 
pensions, IT and industry specialists regarding how and where 
fraud might occur in the financial statements and any potential 
indicators of fraud.

As a result of these procedures, we considered the opportunities 
and incentives that may exist within the organisation for fraud and 
identified the greatest potential for fraud in the following area:  
the valuation of accrued customer rebates in relation to revenue 
recognition. In common with all audits under ISAs (UK), we are  
also required to perform specific procedures to respond to the risk 
of management override.

We also obtained an understanding of the legal and regulatory 
framework that the group operates in, focusing on provisions  
of those laws and regulations that had a direct effect on the 
determination of material amounts and disclosures in the financial 
statements. The key laws and regulations we considered in this 
context included the UK Companies Act, Listing Rules, pensions 
legislation and tax legislation.

In addition, we considered provisions of other laws and regulations 
that do not have a direct effect on the financial statements but 
compliance with which may be fundamental to the group’s ability  
to operate or to avoid a material penalty.

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther informationINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COATS 
GROUP PLC CONTINUED

14 Matters on which we are required to report by exception
14.1 Adequacy of explanations received and accounting 
records
Under the Companies Act 2006 we are required to report to you if, 
in our opinion:

•  we have not received all the information and explanations we 

require for our audit; or

•  adequate accounting records have not been kept by the parent 
company, or returns adequate for our audit have not been 
received from branches not visited by us; or

•  the parent company financial statements are not in agreement 

with the accounting records and returns.

We have nothing to report in respect of these matters.

14.2 Directors’ remuneration
Under the Companies Act 2006 we are also required to report  
if in our opinion certain disclosures of directors’ remuneration  
have not been made or the part of the directors’ remuneration 
report to be audited is not in agreement with the accounting 
records and returns.

We have nothing to report in respect of these matters.

15 Other matters which we are required to address

15.1 Auditor tenure
Following the recommendation of the audit and risk committee,  
we were appointed by the board of directors on 17 June 2003 to 
audit the financial statements for the year ending 31 December 
2003 and subsequent financial periods. The period of total 
uninterrupted engagement including previous renewals and 
reappointments of the firm is 18 years, covering the years ending 
31 December 2003 to 31 December 2020.

15.2 Consistency of the audit report with the additional 
report to the audit and risk committee
Our audit opinion is consistent with the additional report to the 
audit and risk committee we are required to provide in accordance 
with ISAs (UK).

Report on other legal and regulatory 
requirements

12 Opinions on other matters prescribed by the Companies 
Act 2006

In our opinion the part of the directors’ remuneration report to 
be audited has been properly prepared in accordance with the 
Companies Act 2006.

In our opinion, based on the work undertaken in the course of 
the audit:

•  the information given in the strategic report and the directors’ 
report for the financial year for which the financial statements 
are prepared is consistent with the financial statements; and

•  the strategic report and the directors’ report have been 

prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group 
and the parent company and their environment obtained in the 
course of the audit, we have not identified any material 
misstatements in the strategic report or the directors’ report.

13 Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in 
relation to going concern, longer-term viability and that part of the 
Corporate Governance Statement relating to the group’s compliance 
with the provisions of the UK Corporate Governance Code specified 
for our review.

Based on the work undertaken as part of our audit, we have 
concluded that each of the following elements of the Corporate 
Governance Statement is materially consistent with the financial 
statements and our knowledge obtained during the audit:

•  the directors’ statement with regards to the appropriateness 
of adopting the going concern basis of accounting and any 
material uncertainties identified set out on page 76;

•  the directors’ explanation as to its assessment of the group’s 
prospects, the period this assessment covers and why the 
period is appropriate is set out on page 44;

•  the directors’ statement on fair, balanced and understandable 

set out on page 67;

•  the board’s confirmation that it has carried out a robust 

assessment of the emerging and principal risks set out on 
page 76;

•  the section of the annual report that describes the review of 

effectiveness of risk management and internal control systems 
set out on page 69; and

•  the section describing the work of the audit and risk 

committee set out on page 66.

106

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther information16 Use of our report
This report is made solely to the company’s members, as a body,  
in accordance with Chapter 3 of Part 16 of the Companies Act 
2006. Our audit work has been undertaken so that we might state 
to the company’s members those matters we are required to state 
to them in an auditor’s report and for no other purpose. To the 
fullest extent permitted by law, we do not accept or assume 
responsibility to anyone other than the company and the company’s 
members as a body, for our audit work, for this report, or for the 
opinions we have formed.

Edward Hanson (senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor 
London, United Kingdom

3 March 2021

Coats Group plc Annual Report and Accounts 2020

107

coats.com/investorsStrategic reportCorporate governanceFinanacial statementsOther informationCONSOLIDATED INCOME STATEMENT

Year ended 31 December

Continuing operations:

Revenue

Cost of sales

Gross profit

Distribution costs

Administrative expenses

Other operating income

Operating profit

Share of profits of joint ventures

Finance income

Finance costs

Profit before taxation

Taxation

Profit from continuing operations

Profit/(loss) from discontinued operations

Profit for the year

Attributable to:

Equity shareholders of the company

Non-controlling interests

Earnings per share (cents):

Continuing operations:

Basic

Diluted

Continuing and discontinued operations:

Basic

Diluted

                                                            2020

                                                             2019

Before 
exceptional 
and 
acquisition 
related 
items 
 US$m

Exceptional 
and 
acquisition 
related 
items  

(see note 4)
 US$m

Notes

Before 
exceptional 
and 
acquisition 
related  
items 
 US$m

Exceptional 
and 
acquisition 
related  
items  
(see note 4) 
US$m

Total 
 US$m

–

0.4

0.4

(2.8)

(7.5)

2.9

(7.0)

–

2.6

–

(4.4)

–

(4.4)

(0.6)

(5.0)

(5.0)

–

(5.0)

2,3

1,163.3

–

1,163.3

1,388.7

(806.6)

356.7

(116.1)

(130.0)

–

110.6

0.6

0.7

(25.5)

86.4

(35.2)

51.2

–

51.2

35.4

15.8

51.2

(4.9)

(4.9)

–

(4.0)

1.4

(7.5)

–

0.7

–

(6.8)

(2.2)

(9.0)

–

(9.0)

(9.0)

–

(9.0)

2,4,5

16

6

7

5

9

32

11

(898.1)

490.6

(135.9)

(156.7)

–

198.0

1.1

1.7

(29.6)

171.2

(50.5)

120.7

0.1

120.8

100.7

20.1

120.8

(811.5)

351.8

(116.1)

(134.0)

1.4

103.1

0.6

1.4

(25.5)

79.6

(37.4)

42.2

–

42.2

26.4

15.8

42.2

1.81

1.81

1.81

1.81

Total
US$m

1,388.7

(897.7)

491.0

(138.7)

(164.2)

2.9

191.0

1.1

4.3

(29.6)

166.8

(50.5)

116.3

(0.5)

115.8

95.7

20.1

115.8

6.66

6.60

6.63

6.57

Adjusted earnings per share

37(d)

2.42

6.97

Notes on pages 114 to 179 form part of these financial statements.

108

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 

Profit for the year 

Items that will not be reclassified subsequently to profit or loss: 

Actuarial losses on retirement benefit schemes 

Tax on items that will not be reclassified 

Items that may be reclassified subsequently to profit or loss: 

Net changes in fair value of cash flow hedges

Transferred to profit or loss on cash flow hedges 

Exchange differences on translation of foreign operations

Other comprehensive income and expense for the year 

Net comprehensive income and expense for the year 

Attributable to: 

Equity shareholders of the company 

Non-controlling interests 

Notes on pages 114 to 179 form part of these financial statements.

 2020 
US$m

42.2

(39.7)

0.1

(39.6)

(2.4)

-

(13.3)

(15.7)

2019
 US$m

115.8

(31.1)

7.3

(23.8)

4.8

(0.3)

(7.7)

(3.2)

(55.3)

(27.0)

(13.1)

88.8

(28.9)

15.8

(13.1)

69.0

19.8

88.8

Coats Group plc Annual Report and Accounts 2020

109

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 

Non-current assets:

Intangible assets

Property, plant and equipment

Right-of-use assets

Investments in joint ventures

Other equity investments

Deferred tax assets

Pension surpluses

Trade and other receivables

Current assets:

Inventories

Trade and other receivables

Other equity investments

Pension surpluses

Cash and cash equivalents

Non-current assets classified as held for sale

Total assets

Current liabilities:

Trade and other payables

Current income tax liabilities

Bank overdrafts and other borrowings

Lease liabilities

Retirement benefit obligations:

– Funded schemes

– Unfunded schemes

Provisions

Net current assets

Notes

2020 
US$m

2019 
US$m

13

14

15

16

16

17

10

19

18

19

16

10

30(f)

32(b)

21

23

15

10

10

25

288.6

254.4

60.7

11.1

6.0

22.7

11.4

19.0

291.0

276.3

63.4

11.4

6.1

16.2

13.8

20.1

673.9

698.3

187.0

274.5

0.1

4.8

71.9

–

538.3

172.5

261.2

0.1

4.7

177.4

1.5

617.4

1,212.2

1,315.7

(255.7)

(284.4)

(13.9)

(22.8)

(16.4)

(35.3)

(7.1)

(8.2)

(17.8)

(43.8)

(14.1)

(27.5)

(6.2)

(12.8)

(359.4)

(406.6)

178.9

210.8

110

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONTINUED

31 December

Non-current liabilities:

Trade and other payables

Deferred tax liabilities

Borrowings

Lease liabilities

Retirement benefit obligations:

– Funded schemes

– Unfunded schemes

Provisions

Total liabilities

Net assets

Equity:

Share capital

Share premium account

Own shares

Translation reserve

Capital reduction reserve

Other reserves

Retained loss

Equity shareholders’ funds

Non-controlling interests

Total equity

Rajiv Sharma 
Group Chief Executive 

Simon Boddie
 Chief Financial Officer

Approved by the Board 3 March 2021

Company Registration No.103548 

Notes on pages 114 to 179 form part of these financial statements.

Notes

2020
US$m

2019
US$m

21

24

23

15

10

10

25

26

27

26, 27

27

27

27

27

27

(18.1)

(9.0)

(18.2)

(8.2)

(229.7)

(283.5)

(49.6)

(50.9)

(100.1)

(99.5)

(27.9)

(533.9)

(893.3)

(71.6)

(94.5)

(30.7)

(557.6)

(964.2)

318.9

351.5

90.1

10.5

(3.2)

(89.2)

59.8

246.3

(23.8)

290.5

28.4

318.9

89.6

10.5

(5.7)

(75.9)

59.8

248.7

(5.9)

321.1

30.4

351.5

Coats Group plc Annual Report and Accounts 2020

111

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share 
capital 
US$m

Share 
premium 
account 
US$m

Own 
shares 
US$m

Translation 
reserve 
US$m

Capital 
reduction 
reserve 
US$m

Other 
reserves 
US$m

Retained 
loss 
US$m

Non-
controlling 
interests 
US$m

Total 
US$m

Balance as at 1 January 2018

88.5

10.4

(6.8)

(68.5)

59.8

244.2

(56.7)

270.9

Profit for the year

Other comprehensive income and 
expense for the year

Dividends (see note 12)

–

–

–

–

–

–

Issue of ordinary shares 

1.1

0.1

Movement in own shares

Share based payments

Deferred tax on share schemes 

–

–

–

–

–

–

–

–

–

–

1.1

–

–

–

(7.4)

–

–

–

–

–

–

–

–

–

–

–

–

–

95.7

95.7

4.5

–

–

–

–

–

(23.8)

(24.4)

(1.1)

(0.2)

6.1

(1.5)

(26.7)

(24.4)

0.1

0.9

6.1

(1.5)

28.0

20.1

(0.3)

(17.4)

–

–

–

–

Total 
equity 
US$m

298.9

115.8

(27.0)

(41.8)

0.1

0.9

6.1

(1.5)

Balance as at  
31 December 2019

Profit for the year

Other comprehensive income and 
expense for the year

Dividends (see notes 12 and 27)

Issue of ordinary shares  
(see note 26)

Movement in own shares

Share based payments

Balance as at  
31 December 2020

89.6

10.5

(5.7)

(75.9)

59.8

248.7

(5.9)

26.4

321.1

26.4

30.4

15.8

351.5

42.2

–

–

–

–

0.5

–

–

–

–

–

–

–

–

–

–

–

–

2.5

–

–

(13.3)

–

–

–

–

–

–

–

–

–

–

(2.4)

(39.6)

(55.3)

–

–

–

–

–

(0.5)

(5.8)

1.6

–

–

(3.3)

1.6

–

(17.8)

(55.3)

(17.8)

–

–

–

–

(3.3)

1.6

90.1

10.5

(3.2)

(89.2)

59.8

246.3

(23.8)

290.5

28.4

318.9

Notes on pages 114 to 179 form part of these financial statements.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCONSOLIDATED STATEMENT 
OF CASH FLOWS

Year ended 31 December

Cash inflow from operating activities:

Cash generated from operations 

Interest paid

Taxation paid

Net cash generated by operating activities

Cash outflow from investing activities:

Investment income

Net capital expenditure and financial investment

Acquisitions and disposals of businesses

Net cash absorbed in investing activities

Cash outflow from financing activities:

Purchase of own shares 

Receipts from exercise of share options

Dividends paid to equity shareholders

Dividends paid to non-controlling interests

Payment of lease liabilities

Net decrease in borrowings

Net cash absorbed in financing activities

Net (decrease)/increase in cash and cash equivalents

Net cash and cash equivalents at beginning of the year

Foreign exchange (losses)/gains on cash and cash equivalents 

Net cash and cash equivalents at end of the year

Reconciliation of net cash flows to movements in net debt

Net (decrease)/increase in cash and cash equivalents

Net decrease in other borrowings

Change in net debt resulting from cash flows (free cash flow)

Increase in lease liabilities on adoption of IFRS 16

Net movement in lease liabilities during the period following the adoption of IFRS 16

Movement in fair value hedges

Other non-cash movements

Foreign exchange (losses)/gains

(Increase)/decrease in net debt

Total net debt at the start of the year

Total net debt at the end of the year

Notes on pages 114 to 179 form part of these financial statements.

Notes

2020 
US$m

2019 
US$m

30(a)

128.0

(16.1)

(46.3)

65.6

0.9

(12.3)

(36.9)

(48.3)

(3.1)

 –

(0.2)

(17.8)

(19.4)

(58.7)

(99.2)

(81.9)

135.9

(1.9)

52.1

(81.9)

58.7

(23.2)

–

(0.3)

 (5.4)

(0.7)

(2.1)

(31.7)

(214.9)

(246.6)

30(b)

30(c)

30(d)

30(e)

30(f)

30(f)

205.4

(15.2)

(46.3)

143.9

0.3

(39.1)

25.8

(13.0)

–

 0.2

(24.1)

(17.4)

(17.3)

(52.3)

(110.9)

20.0

115.7

0.2

135.9

20.0

52.3

72.3

(57.7)

(6.8)

 -

(0.7)

0.7

7.8

(222.7)

(214.9)

Coats Group plc Annual Report and Accounts 2020

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1 Principal accounting policies
The following are the principal accounting policies adopted in preparing the financial statements.

Critical accounting judgements and key sources of estimation uncertainty
The principal accounting policies adopted by the Group are set out in this note to the consolidated financial statements. Certain of the 
Group’s accounting policies inherently rely on subjective assumptions and judgements, such that it is possible over time the actual results 
could differ from the estimates based on the assumptions and judgements used by the Group. Due to the size of the amounts involved, 
changes in the assumptions relating to the following policies could potentially have a significant impact on the result for the year and/or  
the carrying values of assets and liabilities in the consolidated financial statements:

Critical judgements in applying the Group’s accounting policies
In the course of preparing the financial statements, no judgements have been made in the process of applying the Group’s accounting 
policies, other than those involving estimations (which are dealt with separately below) that have had a significant effect on the amounts 
recognised in the financial statements.

Key sources of estimation uncertainty
The key assumptions concerning the future, and other sources of estimation uncertainty at the balance sheet date, that may have  
a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year, are  
discussed below. 

UK retirement benefit obligations
The UK retirement benefit obligations recognised in the consolidated statement of financial position are the present values of the defined 
benefit obligations at the year end less the fair value of any associated assets. Key assumptions involved in the determination of the present 
values of the defined benefit obligations include discount rates, beneficiary mortality and inflation rates. Changes in any or all of these 
assumptions could materially change the employee benefit obligations recognised in the consolidated statement of financial position.  
The carrying values of the Group’s pension obligations as well as a sensitivity analysis relating to changes in discount rates, beneficiary 
mortality and inflation rates are included in note 10.

In preparing the consolidated financial statements for the year ended 31 December 2020, the critical accounting judgements made by 
management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied  
to the consolidated financial statements for the year ended 31 December 2019.

a) Accounting convention and format 
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted  
by the European Union and therefore comply with Article 4 of the EU IAS Regulations. The financial statements are prepared under the 
historical cost convention except for investments and derivatives which are stated at fair value, disposal groups which are held at fair value 
less costs to sell and retirement benefit obligations which are valued in accordance with IAS 19 Employee Benefits.

Except for the changes arising from the adoption of new accounting standards (as detailed in note 1), the same accounting policies, 
presentation and methods of computation have been followed in these consolidated financial statements as applied in the Group’s annual 
financial statements for the year ended 31 December 2019.

b) Basis of preparation
Subsidiaries
Subsidiaries are consolidated from the effective date of acquisition or up to the effective date of disposal, as appropriate. The effective  
date is when control passes to or from the Group. Control is achieved when the Group has the power over the investee and is exposed,  
or has the rights to variable returns from its involvement with the investee and has the ability to use its power to affect its returns. The 
existence and effect of potential voting rights that are currently exercisable or convertible are considered in determining the existence or 
otherwise of control. Where necessary, adjustments are made to the financial statements of subsidiaries to align their accounting policies 
with those used by the Group.

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Where subsidiaries are not 100% owned by the Group, the share attributable to outside shareholders is reflected in non-controlling 
interests. Non-controlling interests are identified separately from the Group’s equity, and may initially be measured at either fair value  
or at the non-controlling interests’ share of the fair value of the subsidiary’s identifiable net assets. The choice of measurement is made  
on an acquisition-by-acquisition basis. Changes in the Group’s interests in subsidiaries, that do not result in a loss of control, are accounted 
for as equity transactions. Where control is lost, a gain or loss on disposal is recognised through the consolidated income statement, 
calculated as the difference between the fair value of consideration received (plus the fair value of any retained interest) and the Group’s 
previous share of the former subsidiary’s net assets. Amounts previously recognised in other comprehensive income in relation to that 
subsidiary are reclassified and recognised through the income statement as part of the gain or loss on disposal.

Joint ventures
Joint ventures are entities in which the Group has joint control, shared with a party outside the Group. The Group reports its interests in 
joint ventures using the equity method.

Discontinued operations 
In January 2019 the Group announced the agreement to sell the North America Crafts business to Spinrite Acquisition Corp and the sale 
was completed on 20 February 2019, the date which control passed to the acquirer. 

Going concern
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less 
than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the consolidated 
financial statements.

In assessing the Group’s going concern position, the Directors have considered a number of factors, including the current balance sheet 
position and available liquidity, the principal and emerging risks which could impact the performance of the Group and compliance with 
borrowing covenants. In order to assess the going concern status of the Group management has prepared:

•  A base case scenario, aligned to the latest Group budget for 2021 as well as the Group’s Medium Term Plan for 2022 and 2023; 

•  A severe but plausible downside scenario, assumes that the global economic environment is severely depressed over the assessment 

period; and

•  A reverse stress test flexing sales to determine what circumstance would be required to either reduce headroom to nil on committed 

borrowing facilities or breach borrowing covenants, whichever occurred first. 

The severe but plausible downside scenario includes further management actions that would be deployed if required (for example further 
reduction in costs). 

The reverse stress test also includes further controllable management actions that could be deployed if required. The outcome of the 
reverse stress test was that the interest cover covenant would be breached, however, at the breaking point in the test the Group still 
maintained a comfortable level of liquidity on committed borrowing facilities. The Directors consider the likelihood of the condition  
in the reverse stress test occurring to be remote.

Liquidity headroom
The Group entered 2020 with a robust Balance Sheet, generating healthy levels of cash, and with comfortable headroom on banking 
covenants, which places the Group in a strong position to manage through this period of uncertainty. As at 31 December 2020 the Group’s 
net debt (excluding IFRS16 leases) was $180.6 million. The Group’s committed debt facilities total $575 million across both its Banking and 
US Private Placement group, with a range of maturities from late 2022 through to 2027, as of 31 December 2020 the Group has around 
$330 million of headroom against these committed banking facilities.

In both the base case and the severe but plausible downside scenario liquidity is comfortable throughout the assessment period. 

Coats Group plc Annual Report and Accounts 2020

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NOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

1 Principal accounting policies continued
Covenant testing
The Group’s committed borrowing facilities are subject to ongoing covenant testing. Covenants are measured twice a year, at full year and 
half year and are measured under frozen accounting standards and therefore exclude the effects of IFRS 16. The financial covenants under 
the borrowing agreements are for leverage (net debt / EBITDA) less than 3.0 and interest cover (EBITDA / interest charge) to be in excess  
of 4.0. 

All banking covenants tests were met comfortably at 31 December 2020, with leverage of 1.2x and interest cover of 8.5x despite the 
significant impact on Group profitability from Covid in Q2. The base case forecast indicates that banking covenants will be comfortably  
met at the June 2021 and December 2021 testing dates. 

Under the severe but plausible downside scenario covenant compliance is still projected to be achieved at both June 2021 and December 
2021, although with reduced but adequate headroom. 

Conclusion
In conclusion, after reviewing the base case, the severe but plausible downside scenario and considering the remote likelihood of the 
scenario in the reverse stress test occurring as well as having considered the uncertainty relating to Covid and the mitigating actions 
available, the Directors have formed the judgement that, at the time of approving the consolidated financial statements, there are no 
material uncertainties that cast doubt on the Group’s going concern status and that it is appropriate to prepare the consolidated financial 
statements on the going concern basis. 

c) Functional currency
The functional currency of Coats Group plc continued to be United States dollars (‘USD’) during the year ended 31 December 2020.

d) Foreign currencies
Foreign currency translation
The Group’s presentation currency is USD. Transactions of companies within the Group are recorded in the functional currency  
of that company. Currencies other than the functional currency are foreign currencies. 

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated 
in foreign currencies are translated at the rates of exchange ruling at the period end. All currency differences on monetary items are taken 
to the consolidated income statement with the exception of currency differences that represent a net investment in a foreign operation, 
which are taken directly to equity until disposal of the net investment, at which time they are recycled through the consolidated income 
statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate  
as at the date of initial transaction.

Group companies
Assets and liabilities of subsidiaries whose presentation currency is not USD are translated into the Group’s presentation currency  
at the rates of exchange ruling at the period end and their income statements are translated at the average exchange rates for the year.  
The exchange differences arising on the retranslation since 1 January 2004 are taken to a separate component of equity. On disposal of 
such an entity, the deferred cumulative amount recognised in equity since 1 January 2004 relating to that particular operation is recycled 
through the consolidated income statement. Translation differences that arose before the date of transition to IFRS in respect of all such 
entities are not presented as a separate component of equity.

Goodwill and fair value adjustments arising on acquisition of such operations are regarded as assets and liabilities of the particular 
operation, expressed in the currency of the operation and recorded at the exchange rate at the date of the transaction and subsequently 
retranslated at the applicable closing rates.

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The principal exchange rates (to the US dollar) used in preparing these financial statements are as follows:

Average

Period end

Sterling 

Euro

Brazilian Real

Chinese Renminbi 

Indian Rupee

Turkish Lira

Sterling

Euro

Brazilian Real

Chinese Renminbi 

Indian Rupee

Turkish Lira

2020

0.78

0.88

5.16

6.90

2019

0.79

0.90

3.95

6.91

74.11

70.41

7.02

0.73

0.82

5.19

6.53

73.04

7.43

5.78

0.75

0.89

4.02

6.96

71.35

5.95

e) Operating segments
Operating segments are components of the Group about which separate financial information is available that is evaluated by the  
Coats Group plc Group Executive Team in deciding how to allocate resources and in assessing performance. See note 2 for further details.

f) Operating profit
Operating profit is stated before the share of results of joint ventures, investment and interest income, finance costs and foreign exchange 
gains and losses from cash and cash equivalents used in investing activities.

g) Exceptional and acquisition related items
The Group has adopted an income statement format which seeks to highlight significant items within the Group results for the year. 
Exceptional items may include significant restructuring associated with a business or property disposal, litigation costs and settlements, 
profit or loss on disposal of property, plant and equipment, gains or losses arising from significant one off changes to the assumptions 
underlying the defined benefit pension obligations, regulatory investigation costs and impairment of assets. Acquisition related items 
include amortisation of acquired intangible assets, acquisition transaction costs, contingent consideration linked to employment and 
adjustments to contingent consideration. Please see note 4 for further details on why management consider these items to be exceptional.

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, 
materiality is a key consideration and qualitative factors, such as frequency or predictability of occurrence, are also considered. This is 
consistent with the way financial performance is measured by management and reported to the Board.

h) Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairments.

Subsequent expenditure
Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major 
inspection and overhaul expenditure, is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic 
benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in the income statement as an expense 
as incurred.

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CONTINUED

1 Principal accounting policies continued
Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of property, plant and equipment, 
and major components that are accounted for separately. Land is not depreciated. The estimated useful lives are as follows:

Freehold buildings

Leasehold improvements

Plant and equipment

Vehicles and office equipment

50 years to 100 years

10 years to 50 years or over the term of the lease if shorter

3 years to 20 years

2 years to 10 years

Assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each period end. 

i) Intangible assets
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the 
identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is recognised as an asset and tested for impairment  
at least annually. Any impairment is recognised immediately in the income statement. On disposal of a subsidiary, the attributable amount 
of goodwill is included in the determination of the profit or loss on disposal.

Goodwill is allocated to cash-generating units (‘CGUs’) for the purpose of impairment testing. CGUs represent the smallest group of assets 
that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Negative goodwill is recognised immediately in the income statement.

Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at 
the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation 
and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

The estimated useful lives (other than the Coats Brand) are as follows:

Brands and trade names

Technology

Customer relationships

5 years to 20 years

4 years to 10 years

9 years to 14 years

The useful life of the Coats Brand is considered to be indefinite.

Other intangibles
Acquired computer software licences and computer software development costs are capitalised on the basis of the costs incurred  
to acquire and bring to use the specific software and are amortised over their estimated useful lives of up to 5 years.

Intellectual property, comprising trademarks, designs, patents and product development which have a finite useful life, are carried at  
cost less accumulated amortisation and impairment charges. Amortisation is calculated using the straight-line method to allocate the  
cost over the assets’ useful lives, which vary from 5 to 10 years.

The amortisation charge for both acquired and other intangibles assets is included within the distribution costs and administrative expense 
lines in the consolidated income statement.

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Impairment of property, plant and equipment, right-of-use assets and intangible assets excluding goodwill
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to 
depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount 
may not be recoverable.

An impairment charge is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable 
amount is the higher of an asset’s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows 
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and 
the risks specific to the asset for which the estimates of future cash flows have not been adjusted. For the purposes of assessing 
impairment, assets are measured at the CGU level.

Research and development
All research costs are expensed as incurred.

An internally-generated intangible asset arising from development is recognised only if all of the following conditions are met:

•  an asset is created that can be separately identified;

•  it is probable that the asset created will generate future economic benefits; and

•  the development costs can be measured reliably.

Internally-generated intangible assets are amortised on a straight-line basis over their useful lives.

Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period  
in which it is incurred.

j) Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a 
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases 
with a lease term of 12 months or less) and leases of low value assets (defined as assets with a value of US$5,000 or less when new). For 
these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless 
another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted 
by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective 
interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever: 

•  the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability  

is remeasured by discounting the revised lease payments using a revised discount rate; 

•  the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,  

in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease 
payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and 

•  a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability  

is remeasured by discounting the revised lease payments using a revised discount rate.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before  
the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and  
impairment losses. 

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore 
the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 
37 ‘Provisions, Contingent Liabilities and Contingent Assets’. The costs are included in the related right-of-use asset, unless those costs are 
incurred to produce inventories.

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CONTINUED

1 Principal accounting policies continued
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers 
ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option,  
the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement  
date of the lease. 

Variable rents that do not depend on an index are not included in the measurement of the lease liability and the right-of-use asset.  
The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs.

k) Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the relevant 
financial instrument.

Financial assets
(i) Investments in equity securities
Investments in equity securities are recognised and derecognised on a trade date basis and are initially measured at fair value, plus  
directly attributable transaction costs and are remeasured at subsequent reporting dates at fair value, with movements recorded in other 
comprehensive income. Listed investments are stated at market value. Unlisted investments are stated at fair value based on directors’ 
valuation, which is supported by external experts’ advice or other external evidence.

(ii) Cash and cash equivalents 
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits maturing in 
less than three months. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents  
as defined above, net of outstanding bank overdrafts.

(iii) Trade and other receivables
Trade receivables are recognised at fair value (which ordinarily reflects the invoice amount) and carried at amortised cost, less an allowance 
for expected lifetime losses as permitted under the simplified approach in IFRS 9. Fully provided balances are not written off from the 
balance sheet until the Group has decided to cease enforcement activity.

Financial liabilities
(i) Trade payables
Trade payables are not interest-bearing and are recognised at fair value, and measured subsequently at amortised cost.

(ii) Borrowings
Interest-bearing loans and overdrafts are initially measured at fair value, net of direct issue costs. These financial liabilities are subsequently 
measured at amortised cost using the effective interest method, with interest expense recognised over the period of the relevant liabilities. 
Financial liabilities designated as hedged items in a fair value hedge are subsequently measured at fair value.

(iii) Compound instruments
The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance 
of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market 
interest rate for a similar non-convertible instrument, and this amount is recorded as a liability at amortised cost. The equity component  
is the fair value of the compound instrument as a whole less the amount of the liability component, and is recognised in equity, net of 
income tax effect, without subsequent remeasurement.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and 
characteristics are not closely related to those of the host contracts, and the host contracts are not measured at fair value with changes  
in fair value being recognised in the income statement.

(iv) Derivative financial instruments and hedge accounting
The Group’s activities expose it to the financial risks of changes in foreign exchange rates and interest rates.

The use of financial derivatives is regulated by the Board or that of the relevant operating subsidiary in accordance with their respective risk 
management strategies. Changes in values of all derivatives of a financing nature are included within investment income and finance costs 
in the income statement.

Derivative financial instruments are initially measured at fair value at contract date and are remeasured at each reporting date.

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The Group designates hedging instruments as either fair value hedges, cash flow hedges or hedges of net investments in foreign 
operations. Hedges of interest rate risk are accounted for as fair value or cash flow hedges.

At the inception of each hedge transaction the issuing entity documents the relationship between the hedging instrument and the hedged 
item and the anticipated effectiveness of the hedge transaction, and monitors the ongoing effectiveness over the period of the hedge. 
Hedge accounting is discontinued when the issuing entity revokes the hedging relationship, the hedge instrument expires, is sold, exercised 
or otherwise terminated, and the adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised through 
the income statement from that date. 

(v) Fair value hedges
Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recognised immediately through the income 
statement, together with any changes in the fair value of the related hedged items due to changes in the hedged risks. On discontinuation 
of the hedge the adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised through the consolidated 
income statement from that date.

(vi) Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred in equity. 
Once the related hedged item is recognised in the income statement, the amounts deferred in equity are recycled through the consolidated 
income statement. The gain or loss arising from any ineffective portion of the hedge is recognised immediately through the consolidated 
income statement.

(vii) Hedges of net investments in foreign operations
Gains and losses on hedging instruments relating to the effective portion of such hedges are recognised through the translation reserve, 
and recycled through the consolidated income statement on disposal of the respective foreign operations. The gain or loss arising from any 
ineffective portion of such hedges is recognised immediately through the consolidated income statement. 

l) Revenue
Revenue comprises the fair value of the sale of goods and services, net of sales tax and discounts and rebates, and after eliminating sales 
within the Group. Revenue is recognised as follows:

(i) Sales of goods
Sales of goods are recognised in revenue at a single point in time when control of the goods has been transferred to the buyer. The point  
in time at which control is deemed to have transferred varies depending on the commercial terms agreed with the buyer.

(ii) Sales of services
Sales of services are recognised in the period in which the services are rendered, as follows:

•  Software implementation and licensing income – performance obligations are satisfied over a period of time and therefore revenue is 
recognised by reference to the stage of completion at the period end. The Group uses labour hours expended to assess the stage of 
completion as it is deemed to be the most appropriate basis to measure progress.

•  Maintenance income – performance obligations are satisfied evenly over a fixed period of time and therefore revenue is recognised on  

a straight line basis over the maintenance period.

Advances received from customers are included within contract liabilities.

(iii) Income from sales of property
Income from sales of property is recognised on completion when legal title of the property passes to the buyer. 

m) Inventories
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location  
and condition are accounted for as follows:

Raw materials are valued at cost on a first-in, first-out basis.

The costs of finished goods and work in progress include direct materials and labour and a proportion of manufacturing overheads  
based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course 
of business, less estimated costs of completion and the estimated costs necessary to make the sale. Provision is made for obsolete, slow-
moving and defective inventories.

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CONTINUED

1 Principal accounting policies continued
n) Employee benefits
(i) Retirement and other post-employment obligations
For retirement and other post-employment benefit obligations, the cost of providing benefits is determined using the Projected Unit Credit 
Method, with actuarial valuations being carried out at the end of each reporting period by independent actuaries.

Remeasurement comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on scheme assets 
(excluding interest) are recognised immediately in the consolidated statement of financial position with a charge or credit to the 
consolidated statement of comprehensive income in the period in which they occur. Remeasurement recorded in the consolidated 
statement of comprehensive income is not recycled.

Current and past service costs, along with the impact of any settlements or curtailments, are charged to the consolidated income statement. 
The net interest expense on pension plans’ liabilities and the expected return on the plans’ assets is recognised within finance expense in 
the consolidated income statement.

In addition, pension scheme administrative expenses including the Pension Protection Fund (PPF) levy and actuary, audit, legal and trustee 
charges are recognised as administrative expenses.

The retirement benefit and other post employment benefit obligation recognised in the consolidated statement of financial position 
represents the deficit or surplus in the Group’s defined benefit schemes. Any surplus resulting from this calculation is limited to the present 
value of any economic benefits available in the form of refunds from the schemes or reductions in future contributions to the schemes and 
refunds expected from the schemes to fund other Group defined benefit schemes, in accordance with relevant legislation.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension plans on a mandatory, contractual 
or voluntary basis. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised 
as an asset to the extent that a cash refund or a reduction in the future payments is available.

(ii) Share-based compensation
Cash-settled 
Cash-settled share-based payments are measured at fair value (excluding the effect of non market based vesting conditions) at each 
reporting date. The fair value is expensed on a straight-line basis over the vesting period, with a corresponding increase in liabilities. 

Equity-settled 
The Group operates an equity-settled Long Term Incentive Plan for executives and senior management. Awards under this Plan  
are subject to both market-based and non-market-based vesting criteria. 

The fair value at the date of grant is established by using an appropriate simulation method to reflect the likelihood of market-based 
performance conditions being met. The fair value is charged to the consolidated income statement on a straight-line basis over  
the vesting period, with appropriate adjustments being made during this period to reflect expected vesting for non market-based 
performance conditions and forfeitures. The corresponding credit is to equity shareholders’ funds.

To satisfy awards under this Plan, shares may be purchased in the market by an Employee Benefit Trust over the vesting period.

(iii) Non-share-based long-term incentive schemes 
The anticipated present value cost of non-share-based incentive schemes is charged to the consolidated income statement on a  
straight-line basis over the period the benefit is earned, based on remuneration rates that are expected to be payable. 

(iv) Termination benefits 
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts 
voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to 
either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing 
termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the 
period end are discounted to present value. 

122

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information1 Principal accounting policies continued
o) Taxation
The tax expense represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income 
statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that 
are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the period end.

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and 
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxation is measured on a non-discounted 
basis. The following temporary differences are not provided for: goodwill not deducted for tax purposes, the initial recognition of assets or 
liabilities that affect neither accounting, nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will 
probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and 
liabilities, using tax rates enacted or substantively enacted at the period end. A deferred tax asset is recognised only to the extent that it is 
probable that future profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is 
no longer probable that the related tax benefit will be realised. Deferred tax liabilities are recognised for taxable temporary differences 
arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal 
of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets 
arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is 
probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected 
to reverse in the foreseeable future.

The carrying values of deferred tax assets are reviewed at each period end.

Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to other 
comprehensive income or equity, in which case the deferred tax is also dealt with in other comprehensive income or equity.

p) Government grants 
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them 
and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the 
Group recognises as expenses the related costs for which the grants are intended to compensate. 

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate 
financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

q) Borrowing costs 
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily 
take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets 
are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings 
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

r) Provisions
A provision is recognised in the consolidated statement of financial position when the Group has a legal or constructive obligation  
as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect  
is material, a provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments 
of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision 
due to the passage of time is recognised as a borrowing cost.

s) Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower  
than the unavoidable cost of meeting its obligations under the contract.

t) Restructuring
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring  
has either commenced or has been announced publicly. Future operating costs are not provided for.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

1 Principal accounting policies continued
u) Assets held for sale and discontinued operations
Non-current assets and businesses which are to be sold (‘disposal groups’) classified as held for sale are measured at the lower of  
carrying amount and fair value less costs to sell. Non-current assets (and disposal groups) are classified as held for sale if their carrying 
amount is expected to be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only 
when such a sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management 
must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date  
of classification.

Non-current assets are classified as held for sale from the date these conditions are met, and such assets are no longer depreciated. 

Discontinued operations are classified as held for sale and are either a separate business segment or a geographical area of operations  
that is part of a single coordinated plan to sell. Once an operation has been identified as discontinued, or is reclassified as discontinued,  
the comparative information in the Income Statement is restated.

Climate change
In preparation of the consolidated financial statements, consideration has been given to the impact of climate change on the Group’s key 
accounting policies, estimates and judgements. As noted in the principal risks and uncertainties on page 40 we are exposed to specific 
climate related risks. We are committed to emissions reductions in line with COP 21 targets and will be developing the detailed plans to 
achieve this during 2021. As such, the Group’s current assessment is that our climate change strategy does not have a material impact on 
the key accounting policies, estimates and judgements that form the basis of these consolidated financial statements.

New IFRS accounting standards, interpretations and amendments adopted in the year
During the year, the Group has adopted the following standards, interpretations and amendments: 

•  Amendments to References to the Conceptual Framework in IFRS Standards;

•  Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7);

•  Definition of a Business (Amendments to IFRS 3); and

•  Definition of Material (Amendments to IAS 1 and IAS 8).

The adoption of these standards has not had a material impact on the financial statements of the Group.

Amendments to IFRS 16 ‘Leases’ – Covid-Related Rent Concessions which is effective for annual periods beginning on or after 1 June 2020 
has not been early adopted in the financial statements of the Group.

New IFRS accounting standards and interpretations not yet adopted 
The following published standards and amendments to existing standards, which have not yet all been endorsed by the EU,  
are expected to be effective as follows: 

From the year beginning 1 January 2021:

•  Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).

From the year beginning 1 January 2022:

•  Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);

•  Annual Improvements to IFRS Standards 2018–2020;

•  Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); and

•  Reference to the Conceptual Framework (Amendments to IFRS 3).

The directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial 
statements of the Group in future periods, although the full assessment is not complete. 

124

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information2 Segmental analysis

Operating segments are components of the Group’s business activities about which separate financial information is available that  
is evaluated regularly by the chief operating decision maker (the Group Executive Team). The Group’s customers are grouped into two 
segments Apparel & Footwear and Performance Materials which have distinct different strategies and differing customer/end-use  
market profiles.

a) Segment revenue and results

Year ended 31 December 2020

Revenue

Segment profit

Exceptional and acquisition related items (note 4)

Operating profit

Share of profits of joint ventures

Finance income

Finance costs

Profit before taxation from continuing operations

Year ended 31 December 2019

Revenue

Segment profit

Exceptional and acquisition related items (note 4)

Operating profit

Share of profits of joint ventures

Finance income

Finance costs

Profit before taxation from continuing operations

 Apparel & 
Footwear  

Performance 
Materials  

US$m

822.7

95.5

US$m

340.6

15.1

Apparel & 
Footwear  
US$m

Performance 
Materials  
US$m

Total 
US$m

1,163.3

110.6

(7.5)

103.1

0.6

1.4

(25.5)

79.6

Total 
US$m

1,063.1

156.3

325.6

1,388.7

41.7

198.0

(7.0)

191.0

1.1

4.3

(29.6)

166.8

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Exceptional 
and acquisition related items are not allocated to segments to align to the reporting provided to the chief operating decision maker. In 
addition no measures of total assets and total liabilities are reported for each reportable segment as such amounts are not regularly 
provided to the chief operating decision maker.

The accounting policies of the reportable operating segments are the same as the Group’s accounting policies described in note 1. 

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

2 Segmental analysis continued
b) Geographic information

Year ended 31 December

Europe, Middle East & Africa (EMEA)

UK

Rest of EMEA

Americas

USA

Rest of Americas

Asia & Rest of World

India

China and Hong Kong

Vietnam

Other

Revenue by origin

Revenue by destination

Non-current assets

2020 
US$m

2019 
US$m

2020 
US$m

2019 
US$m

2020 
US$m

2019 
US$m

8.0

211.4

187.9

126.6

110.1

147.2

176.4

195.7

11.3

254.5

145.1

178.1

168.5

177.9

202.0

251.3

12.3

198.1

195.8

126.5

107.1

135.3

159.2

229.0

13.0

239.6

147.0

185.6

164.1

164.9

182.3

292.2

260.3

68.6

264.4

77.1

61.1

35.4

50.3

55.7

34.5

68.4

57.1

45.9

58.1

51.9

35.6

74.9

1,163.3

1,388.7

1,163.3

1,388.7

634.3

665.0

Non-current assets excludes derivative financial instruments, pension surpluses and deferred tax assets.

3 Revenue
An analysis of the Group’s revenue is as follows:

Year ended 31 December

Continuing operations:

Goods transferred at a point in time

Software solutions services transferred over time

Other operating income

Finance income

Discontinued operations:

Goods transferred at a point in time

Other operating income

The software solutions business is included in the Apparel & Footwear segment.

2020 
US$m

2019 
US$m

1,154.8

1,376.6

8.5

12.1

1,163.3

1,388.7

1.4

1.4

2.9

4.3

1,166.1

1,395.9

–

–

–

14.0

1.6

15.6

1,166.1

1,411.5

126

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information3 Revenue continued
Disaggregation of revenue
The following table shows revenue disaggregated by primary geographic markets which reconciles with the Group’s reportable segments:

Year ended 31 December

Continuing operations:

Asia

Americas

EMEA

Continuing operations:

Apparel & Footwear

Performance Materials

2020 
US$m

2019 
US$m

629.4

314.5

219.4

799.7

323.2

265.8

1,163.3

1,388.7

822.7

340.6

1,063.1

325.6

1,163.3

1,388.7

Revenue of Pharr HP of $66.8 million which was acquired in February 2020 (see note 31) is included in the amounts above for the Americas 
geographical market and the Performance Materials segment.

The Group had no revenue from a single customer, which accounts for more than 10% of the Group’s revenue.

4 Exceptional and acquisition related items
The Group’s consolidated income statement format includes results before and after exceptional and acquisition related items. Adjusted 
results exclude exceptional and acquisition related items to reflect the underlying performance of the business and to provide a more 
meaningful comparison of how the business is managed and measured on a day-to-day basis. Further details on alternative performance 
measures are set out in note 37. 

Exceptional items may include significant restructuring associated with a business or property disposal, litigation costs and settlements, 
profit or loss on disposal of property, plant and equipment, gains or losses arising from significant one off changes to the assumptions 
underlying the defined benefit pension obligations, regulatory investigation costs and impairment of assets. Acquisition related items 
include amortisation of acquired intangible assets, acquisition transaction costs, contingent consideration linked to employment and 
adjustments to contingent consideration.

Judgement is used by the Group in assessing the particular items, which by virtue of their scale and nature, are presented in the income 
statement and disclosed in the related notes as exceptional items. In determining whether an event or transaction is exceptional, materiality 
is a key consideration and qualitative factors, such as frequency or predictability of occurrence, are also considered. This is consistent with 
the way financial performance is measured by management and reported to the Board.

Total exceptional and acquisition related items charged to operating profit for the year ended 31 December 2020 were $7.5 million (2019: 
$7.0 million) comprising exceptional items for the year ended 31 December 2020 of $3.5 million (2019: $4.8 million) and acquisition related 
items for the year ended 31 December 2020 of $4.0 million (2019: $2.2 million).

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

4 Exceptional and acquisition related items continued
Exceptional items
Exceptional items charged/(credited) to operating profit during the year ended 31 December 2020 are set out below:

Year ended 31 December

Exceptional items:

Cost of sales:

Impairment charges

Brazil indirect taxes

Connecting for Growth programme reorganisation costs:

– Cost of sales

– Distributions costs

– Administrative costs

Profit from sale of property:

– Other operating income

2020 
US$m

2019 
US$m

4.9

–

–

–

–

–

 –

(3.5)

3.1

2.8

5.3

11.2

(1.4)

(2.9)

Total exceptional items charged to operating profit from continuing operations

3.5

4.8

Impairment charges – At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is 
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets are 
estimated in order to determine the extent of the impairment loss, if any. During the year ended 31 December 2020, following this review 
impairment charges totalling $4.9 million (2019: $nil) were made in smaller markets in EMEA ($4.1 million relating to property, plant and 
equipment and $0.8 million relating to right-of-use assets). The impairment charges are attributable to the increased economic uncertainty 
as a result of Covid. The impairment charges in these markets represent a full write down of property, plant and equipment and right-of-
use assets, except for owned land and buildings of $1.7 million which is not considered to be impaired. In determining the recoverable 
amount of these assets, the most recent trading activity was considered and projected cash flows reflected the economic uncertainty 
resulting from the Covid pandemic. None of the cash generating units for which an impairment charge was recognised during the year 
includes goodwill or intangible assets with indefinite useful lives.

Connecting for Growth programme – property disposals – During the year ended 31 December 2020 a profit of $1.4 million  
(2019: $2.9 million) was made from the sale of a property in a non-core market. This related to the strategic Connecting for Growth 
transformation programme which was completed during 2019.

Exceptional items in the year ended 31 December 2019 also included the following:

Connecting for Growth programme – Connecting for Growth was a two-year transformation programme designed to drive speed, 
agility, innovation and lower costs across the organisation. The programme finished in 2019. The programme focused on simplification 
across many aspects of the organisation and included transitioning from market-focussed support functions to realigned globally integrated 
support functions. 

Exceptional reorganisation costs of $11.2 million were incurred in the year ended 31 December 2019 comprising severance costs of  
$7.4 million, fixed asset disposals and write offs of $2.2 million and closure and other one-off costs of $1.6 million.

128

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information4 Exceptional and acquisition related items continued
Brazil indirect taxes – During the year ended 31 December 2019 a final and unappealable Supreme Court decision was received by one  
of the Group’s subsidiary companies in Brazil relating to payments of indirect taxes dating back to 2005. This Supreme Court decision 
grants the company the right to exclude Brazilian ICMS (indirect tax on goods and services) from the calculation basis of PIS (Program of 
Social Integration) and COFINS (Contribution for the Financing of Social Security) indirect taxes. As a result, estimated refunds were 
recognised in the results for the year ended 31 December 2019 with an exceptional credit of $3.5 million included in cost of sales and 
exceptional interest income recognised of $2.6 million. A further $0.7 million of exceptional interest income has been recognised during  
the year ended 31 December 2020 (see note 6). 

Legal filings have been advanced in respect of the Group’s other subsidiary in Brazil in respect of the same matter which dates back 
approximately 15 years but the Supreme Court ruling has not yet been received. This represents a contingent asset and no amounts have 
been recognised in the results for this. At this stage it is not practicable to quantify the potential amount of this contingent asset.

Exceptional items: Discontinued operations – During the year ended 31 December 2019 exceptional charges in relation to the sale  
of the North America Crafts business and included in discontinued operations were $0.6 million. See note 32. 

Acquisition related items
Acquisition related items are set out below:

Year ended 31 December

Acquisition related items:

Administrative expenses:

Acquisition earnouts and contingent consideration

Acquisition transaction costs

Amortisation of acquired intangible assets

Total acquisition related items before taxation

2020 
US$m

2019 
US$m

0.8

–

3.2

4.0

 (1.7)

1.0

2.9

2.2

The Group has made acquisitions with earn-outs to allow part of the consideration to be based on the future performance of the businesses 
acquired and to lock in key management. Where consideration paid or contingent consideration payable in the future is employment linked, 
it is treated as an expense and part of statutory results. However, all consideration of this type is excluded from adjusted operating profit 
and adjusted earnings per share as in management’s view, these items are part of the capital transaction.

Acquisition transaction costs and amortisation of intangible assets acquired through business combinations are not included within adjusted 
earnings. These costs are acquisition related and management consider them to be capital in nature and they do not reflect the underlying 
trading performance of the Group.

Excluding amortisation of intangible assets acquired through business combinations and recognised in accordance with IFRS 3 ‘Business 
Combinations’ from adjusted results also ensures that the performance of the Group’s acquired businesses is presented consistently with its 
organically grown businesses. It should be noted that the use of acquired intangible assets contributed to the Group’s results for the years 
presented and will contribute to the Group’s results in future periods as well. Amortisation of acquired intangible assets will recur in future 
periods. Amortisation of software is included within adjusted results as management consider these costs to be part of the underlying 
trading performance of the business. 

Coats Group plc Annual Report and Accounts 2020

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

5 Profit for the year (including discontinued operations)

Year ended 31 December

Profit for the year is stated after charging/(crediting):

Amortisation of intangible assets

Depreciation of owned property, plant and equipment

Depreciation of right-of-use assets

Profit on disposal of property, plant and equipment

Fees charged by Deloitte LLP

Group audit fees:

– Fees payable for the audit of the Company’s annual accounts 

– Fees payable for the audit of the Company’s subsidiaries

Other Deloitte services:

– Taxation services

– Other services

Total fees charged by Deloitte LLP

Research and development expenditure

Bad and doubtful debts

Net foreign exchange losses/(gains)

Rental income from land and buildings

Inventory as a material component of cost of sales

Inventory write-downs to net realisable value

6 Finance income

Year ended 31 December

Income from investments

Other interest receivable and similar income

2020 
US$m

2019  
US$m

7.2

30.5

18.3

(1.0)

0.6

1.5

0.1

0.2

2.4

6.4

3.1

3.2

(0.2)

487.1

4.5

2020 
US$m

0.1

1.3

1.4

8.0

29.9

15.2

(2.9)

0.6

1.5

0.3

0.2

2.6

5.6

0.2

(0.8)

(0.2)

555.5

2.8

2019 
US$m

0.1

4.2

4.3

Other interest receivable and similar income for the year ended 31 December 2020 includes exceptional income of $0.7 million (2019: $2.6 
million) relating to refunds for indirect taxes in Brazil (see note 4 for further details).

7 Finance costs

Year ended 31 December

Interest on bank and other borrowings

Interest expense on lease liabilities

Net interest on pension scheme assets and liabilities

Other finance costs including unrealised gains and losses on foreign exchange contracts

2020 
US$m

11.2

3.9

4.7

5.7

25.5

2019 
US$m

14.5

3.7

5.5

5.9

29.6

130

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information8 Staff costs
The average monthly number of employees was:

Year ended 31 December

Continuing operations1:

Manufacturing

Other staff

Discontinued operations2

Total number of employees

Comprising:

UK

Overseas

The total numbers employed at the end of the year were:

Continuing operations:

UK

Overseas

Total number of employees

1. The 2020 average number of employees for continuing operations includes 274 employees of Pharr HP which was acquired in February 2020 (see note 31).

2. The 2019 average number of employees for the discontinued North America Crafts business are for the period until disposal on 20 February 2019 (see note 32).

Year ended 31 December

Employee aggregate remuneration comprised (including directors)3:

Continuing operations:

Wages and salaries

Social security costs

Other pension costs (note 10)

Discontinued operations

3. This does not include any contingent consideration on acquisitions that is treated as an expense, due to it being linked to continued employment (see note 4).

9 Tax on profit from continuing operations

Year ended 31 December

UK Corporation tax at 19% (2019: 19%)

Overseas tax charge

Deferred tax credit/(charge)

Total tax charge

2020

2019

13,723

3,359

17,082

–

13,430

3,446

16,876

555

17,082

17,431

182

16,900

17,082

187

17,244

17,431

183

17,125

17,308

184

16,957

17,141

2020 
US$m

2019 
US$m

237.8

24.6

9.7

272.1

–

272.1

2020 
US$m

–

(43.0)

5.6

(37.4)

267.3

27.8

7.9

303.0

4.8

307.8

2019 
US$m

–

(48.3)

(2.2)

(50.5)

The overseas tax charge includes withholding tax charges and other taxes not based on profits for the year ended 31 December 2020  
of $12.5 million (2019: $14.4 million). Exceptional tax charges for the year ended 31 December 2020 were $2.2 million (2019: $nil) and 
includes a charge of $1.9 million following the write off of deferred tax assets which were recognised in previous periods but are no longer 
recoverable due to the impacts of Covid.

Coats Group plc Annual Report and Accounts 2020

131

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CONTINUED

9 Tax on profit from continuing operations continued
The deferred tax credit of $5.6 million for the year ended 31 December 2020 includes the exceptional charge of $1.9 million offset by 
deferred tax provision releases following remittance of dividends from subsidiaries, deferred tax credits arising from the expected recovery 
of current year losses in certain jurisdictions and other timing differences.

The tax charge for the year can be reconciled as follows:

                                                                                               2020

                                                                                      2019

Exceptional 
and 
 acquisition 
related 
items 
US$m

Other
adjustments1
US$m

Underlying 
US$m

91.1

(6.8)

(4.7)

Total 
US$m

79.6

Exceptional 
and 
acquisition 
related 
items 
US$m

Underlying 
US$m

Other
adjustments1
US$m

Total  
US$m

176.7

(4.4)

(5.5)

166.8

17.3

(1.3)

(0.9)

15.1

33.6

(0.8)

(1.0)

31.8

(0.7)

0.6

(0.4)

–

(1.5)

5.9

(0.6)

2.6

12.5

35.7

39%

0.3

1.3

–

–

–

(0.1)

–

–

–

–

 (0.5)

1.9

(0.4)

–

4.2

2.6

(0.1)

(0.6)

(1.5)

(6.4)

(1.1)

0.8

(0.6)

–

–

(0.3)

–

–

–

–

1.9

0.5

–

–

–

–

–

–

2.2

(32)%

(0.5)

11%

8.3

(0.6)

2.6

12.5

37.4

47%

3.6

(1.8)

1.4

14.4

50.9

29%

1.7

0.9

–

–

–

–

0%

–

–

–

(0.4)

7%

2.8

3.4

(0.7)

(0.6)

(6.4)

6.2

(1.8)

1.4

14.4

50.5

30%

Year ended 31 December

Profit before tax

Expected tax charge/(credit) 
at the UK statutory rate of 19% 
(2019: 19%)

Differences between overseas 
and UK taxation rate

Non-deductible expenses 

Non-taxable income

Local tax incentives 

Utilisation of unrecognised 
deferred tax assets

Potential deferred tax assets 
not recognised

Impact of changes in tax rates

Prior year adjustments

Withholding tax on remittances 
(net of double tax credits) and 
other taxes not based on profits

Income tax expense/(credit)

Effective tax rate

1. Other adjustments consist of net interest on pension scheme assets and liabilities of $4.7 million (2019: $5.5 million).

The Group’s underlying effective tax rate is higher than the blended rate of the countries we operate in primarily due to the impact of 
unrelieved tax losses in countries where we are not currently able to recognise deferred tax assets in respect of those losses and the impact 
of withholding taxes on the repatriation of earnings and royalties to the UK.

Excluding exceptional and acquisition related items and the impact of IAS 19 finance charges, the underlying effective rate on pre-tax 
profits was 39% (2019: 29%). The higher rate was driven by withholding tax being largely independent of profit before tax thereby 
receiving no relief from the lower profits as well as losses in jurisdictions we are unable to recognize an asset. 

The overseas tax rate for the year ended 31 December 2020 is lower than the UK tax rate for the same period whereas it was higher in 
2019. This reflects lower year on year profits and losses in jurisdictions where the tax rate is higher than the UK tax rate.

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Uncertain tax positions
The Group’s current tax liability includes a number of tax provisions, which although individually are relatively small, together they total 
$15.0 million (2019: $14.1 million). These provisions relate to management’s estimate of the amount of tax payable on open tax returns yet 
to be agreed with the local tax authorities. The Group evaluates uncertain tax items, which are subject to interpretation and agreement of 
the position with the local Tax Authorities and consequently agreement may not be reached for a number of years. Primarily the tax items 
for which a provision has been made relate to the interpretation of transfer pricing legislation and practices across the jurisdictions in which 
the Group operates.

The final outcome on resolution of open issues with the relevant local Tax Authorities may vary significantly due to the uncertainty 
associated with such tax items and the continual evolution and development of local Tax Authorities. There is a wide range of possible 
outcomes and any variances in the final outcome to the provided amount will affect the tax financial results in the year of agreement. 
However, it is not expected that a material adjustment would be required to these provisions within the next year.

The amount provided for uncertain tax positions has been made using the best estimate of the tax expected to be ultimately paid, taking 
into account any progress on the discussions with local Tax Authorities, together with expert in-house and third-party advice on the 
potential outcome and recent developments in case law, Tax Authority practices and previous experience. 

Taxation paid
During the year the Group made Corporate Income Tax payments in respect of continuing operations (including withholding and dividend 
distribution taxes) of $46.3 million (2019: $46.3 million). The amount of tax paid in each jurisdiction is as follows:

Year ended 31 December

UK

Vietnam 

China

Indonesia

India 

Bangladesh

Singapore

Brazil

Sri Lanka

Colombia 

Spain

Hong Kong

Morocco

Poland

Thailand

Pakistan

USA

Turkey

Others (16 countries each less than $0.5 million) 

Total Corporate Income Tax paid 

2020 
US$m

12.3

 14.0

3.0

2.7

2.5

2.2

1.7

 1.0

0.9

0.9

 0.9

 0.8

 0.7

0.6

0.6

0.2

-

 (0.5)

1.8

46.3

2019 
US$m

11.7

12.7

1.5

3.2

5.7

1.7

1.8

 (1.4)

1.1

0.7

 0.3

 0.1

 0.6

0.7

0.7

0.6

1.3

 1.5

1.8

46.3

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9 Tax on profit from continuing operations continued
The taxes paid in the UK and Singapore are primarily withholding taxes on royalties, group charges and dividends, deducted and paid at 
source in the following jurisdictions: 

Estonia

Indonesia 

Bangladesh

Vietnam

China

India

Thailand

Colombia

Others (each less than $0.5 million) 

Total withholding taxes paid 

2020 
US$m

2019 
US$m

2.8

2.7

1.5

1.2

0.9

 0.8

0.5

0.4

3.2

14.0

–

2.8

2.4

1.5

1.0

 2.3

0.2

0.6

2.7

13.5

10 Retirement and other post-employment benefit arrangements
a) Pension and other post-employment costs
Pension and other post-employment costs charged to operating profit for the year were (continuing and discontinued operations):

Defined contribution schemes

Defined benefit schemes – 

Coats US funded

Other funded and unfunded

Past service credit

Settlements

Administrative expenses for defined benefit schemes

Year ended  
31 December  
2019 
US$m

3.0

Year ended  
31 December 
2020 
US$m

3.7

US$m

1.8

4.2

US$m

1.9

3.4

6.0

(0.6)

–

4.9

14.0

5.3

(3.2)

0.1

5.5

10.7

Included in the table above are $nil (2019: $0.7 million) of past service costs that have been presented as exceptional items in the 
Consolidated Income Statement. Also included in the table above is a $nil (2019: $1.8 million) past service credit (non-cash) on the  
US post-retirement medical scheme relating to the discontinued NA Crafts business.

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b) Defined contribution schemes
The Group operates a number of defined contribution plans around the world to provide pension benefits. The total cost relating 
to discontinued operations is $nil (2019: $0.1 million).

c) Defined benefit schemes
The Coats UK Pension Scheme is administered by a trustee and holds assets held in funds that are legally separated from the Group and are 
subject to UK legislation with oversight from the Pensions Regulator. The trustee board is composed of representatives of both the Group 
and scheme members together with two independent trustees. The trustee board is required by law and the scheme’s rules to act in the 
interest of the scheme’s members and other stakeholders in the scheme (for example the Group). The trustee board is responsible for 
setting the scheme’s investment policy following consultation with the Group.

The sponsor of the Coats UK Pension Scheme is Coats Limited and the Company provides a guarantee to the Coats UK Pension Scheme.

In addition, the Group has the Coats North America Pension Plan (‘Coats US’) which is a defined benefit scheme the assets of which are 
held in funds that are legally separated from the Group. During the prior year the Group agreed to amend the Plan to close to new hires 
from 1 January 2020, and to cease future accrual for current employees from 1 January 2022. The amendment resulted in a $2.6 million 
past service credit in 2019.

Finally, the Group also operates various other pension and other post-retirement arrangements in most of the countries in which it operates 
(most significantly in Germany). Detailed disclosures in respect of the UK plans and the Coats US plan are given in this note as the defined 
benefit obligations under these schemes represent around 96% of all defined benefit obligations.

The Coats UK Pension Scheme operates an investment policy whereby a portion of the fund is invested in assets (Bonds and derivatives) 
that broadly match movements in the value of the scheme’s liabilities and a portion in assets that are anticipated to deliver a return in excess 
of the change in value of the liabilities.

The following disclosures do not include information in respect of schemes operated by joint ventures.

Coats Group plc Annual Report and Accounts 2020

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10 Retirement and other post-employment benefit arrangements continued
i) Principal risks
The Group is exposed to actuarial and investment risks, the principal risks are:

Risk

Description

Commentary

Interest rate risk

Inflation

Longevity risk

Investment risk

The present value of the defined 
benefit plan liabilities is calculated using 
a discount rate determined by reference 
to bond yields. A decrease in bond 
yield rates will increase defined  
benefit obligations.

The impact of the movement in discount rates are shown on page 143. The 
Trustees of the UK and US schemes hedge these sensitivities through physical 
bonds and derivatives. The Coats UK Pension Scheme is currently over 80% 
(2019: over 80%) hedged against interest rate movements by reference to 
the Technical Provisions liability.

The present value of the defined 
benefit liabilities are calculated by 
reference to assumed future inflation 
rates. An increase in inflation rates will 
increase defined benefit obligations.

The impact of the movement in inflation rates are shown on page 143. The 
Trustees of the UK and US schemes hedge these sensitivities through physical 
bonds, derivatives and real assets. The Coats UK Pension Scheme is currently 
over 80% (2019: over 80%) hedged against inflation rate movements by 
reference to the Technical Provisions liability.

The present value of the defined 
benefit plan liability is calculated by 
reference to the best estimate of 
member life expectancies. An increase 
in life expectancy will increase liabilities.

The scheme assets are shown on a 
mark-to-market basis. A decrease in 
asset values at a relevant measurement 
date, to the extent assets do not hedge 
liabilities, would lead to an increased 
disclosed deficit or reduced surplus.

The impact of an increase in life expectancy is shown on page 143. Currently 
this is not a risk that is hedged by the Group’s pension schemes.

The UK funded scheme is diversified by asset class, at individual securities 
level; geography; and by investment managers. To the extent that any assets 
are not Sterling denominated the scheme hedges the majority of this 
currency exposure back to Sterling.

The US scheme is fully funded and has a significant proportion of fixed 
income. The fixed income is invested directly to protect the funded status of 
the scheme. Trustees work with fixed income managers to consider the 
liabilities (including key period durations, credit spread duration and 
convexity) and have created a custom fix income benchmark to match the 
liabilities and protect the funded status.

In addition the schemes’ investment policies recognise the need to generate 
cash flows to meet members’ benefits as they fall due.

ii) UK funding commitments
The information provided below for defined benefit plans has been prepared by independent qualified actuaries based on the most recent 
actuarial valuations of the schemes, updated to take account of the valuations of assets and liabilities as at 31 December 2020. 

On 6 March 2019 Coats Limited and the Trustee of the Coats UK Pension Scheme agreed the first valuation of the Coats UK Pension 
Scheme with a 1 July 2018 effective date. This agreement resulted in ongoing annual deficit recovery payments of £20 million ($27 million 
at 31 December 2020 exchange rate) per annum increasing annually by the increase in the Retail Prices Index (first increase in January 2020) 
based on a Technical Provisions deficit of £252 million ($345 million). At 1 July 2018 the market value of assets were £2,109 million ($2,883 
million) and liabilities were £2,361 million ($3,228 million) resulting in the Technical Provisions deficit of £252 million ($345 million). As 
before the Group will also meet Scheme administrative expenses and levies estimated in future at £4 million ($5 million) per annum (i.e. 
total ongoing payments of $32 million per annum). The new deficit recovery payments were effective from 1 April 2019 and are payable 
until 31 December 2028. The Scheme’s next triennial valuation will have an effective date of 31 March 2021 to realign with the valuation 
cycle of the previous UK schemes. 

In agreement with the trustees of the Coats UK Pension Scheme, and as part of the wider Covid underpinning actions during H1 2020,  
the Group agreed to defer the deficit recovery payments for April-December 2020 inclusive (circa $21 million deferred). The catch up of 
these payments is currently anticipated to commence in mid-2021 and will be evenly spread over a period of 18 months.

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The actuarial valuation deficit above is used to determine the level of deficit repair contributions that the Group is required to pay into  
the Coats UK Pension Scheme. The actuarial valuation is different to the IAS 19 accounting valuation (set out below), which is based on 
accounting rules concerning employee benefits and shown on the consolidated statement of financial position. The actuarial valuations are 
generally based on the more prudent ‘Technical Provisions’ basis than that used for accounting purposes and as a result the actuarial deficits 
are generally higher than the accounting deficits. It should also be noted that the accounting deficit figures are calculated as at the balance 
sheet date of 31 December 2020. 

The most recent actuarial valuation for the Coats UK pension scheme had a 1 July 2018 effective date and the most recent actuarial 
valuation for the Coats US scheme was 31 December 2019.

iii) Principal assumptions
The principal assumptions for the UK and US schemes are as follows:

Principal assumptions at 31 December 2020

Rate of increase in salaries

Rate of increase for pensions in payment

Discount rate

Inflation assumption

Principal assumptions at 31 December 2019

Rate of increase in salaries

Rate of increase for pensions in payment

Discount rate

Inflation assumption

Coats UK 
Pension 
Scheme  

%

–

Various

1.3

3.0

Coats UK 
Pension 
Scheme  

%

–

Various

2.0

3.1

Coats US 
%

Other 
%

3.0

–

2.3

2.2

4.7

3.0

3.1

3.7

Coats US 
%

Other 
%

3.0

–

3.2

2.2

5.1

3.5

3.9

4.1

The rate of increase for pensions in payment for members of the combined Coats UK Pension Scheme vary in accordance with each 
member’s former scheme category and period of membership. For former Coats UK plan members the increases for pensions in payment 
are assumed to be at a rate of 3.0% (2019: 3.0%). For former Staveley scheme members, the majority of the increases for pensions in 
payment fall within the range 2.4%-3.0% (2019: 2.5%-3.0%). For former Brunel scheme members, the majority of the increases for 
pensions in payment fall within the range 3.0%-4.0% (2019: 3.0%-4.0%).

The assumed life expectancy on retirement is:

Year ended 
31 December 2020

Year ended 
31 December 2019

Coats UK 
Pension 
Scheme  
Years

Coats US 
Years

Coats UK 
Pension 
Scheme  
Years

Coats US 
Years

Retiring today at age 60:

Males

Females

Retiring in 20 years at age 60:

Males

Females

25.7

27.9

27.2

29.5

24.7

26.8

26.3

28.4

25.6

27.7

27.1

29.3

Coats Group plc Annual Report and Accounts 2020

24.8

27.0

26.6

28.7

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10 Retirement and other post-employment benefit arrangements continued
iv) Amounts recognised in the consolidated income statement
Amounts recognised in income in respect of these defined benefit schemes are as follows (both continuing and discontinued operations):

Year ended 31 December 2020

Current service cost

Past service credit

Administrative expenses

Interest on defined benefit obligations – unwinding of discount

Interest income on pension scheme assets

Effect of asset cap

Year ended 31 December 2019

Current service cost

Past service cost

Settlements

Administrative expenses

Interest on defined benefit obligations – unwinding of discount

Interest income on pension scheme assets

Effect of asset cap

Coats UK 
Pension 
Scheme  
US$m

Coats US  
US$m

Other 
US$m

(4.2)

0.6

–

(3.6)

(4.2)

1.0

(0.4)

(3.6)

(1.8)

–

(0.4)

(2.2)

(3.6)

6.3

(2.2)

0.5

Coats US 
US$m

Other 
US$m

(1.9)

2.6

–

(0.8)

(0.1)

(4.7)

7.4

(1.2)

1.5

(3.4)

0.6

(0.1)

(0.1)

(3.0)

(5.2)

1.3

(0.5)

(4.4)

–

–

(4.5)

(4.5)

(55.6)

54.0

–

(1.6)

Coats UK 
Pension 
Scheme 
US$m

–

–

–

(4.6)

(4.6)

(73.2)

70.6

–

(2.6)

Group 
US$m

(6.0)

0.6

(4.9)

(10.3)

(63.4)

61.3

(2.6)

(4.7)

Group 
US$m

(5.3)

3.2

(0.1)

(5.5)

(7.7)

(83.1)

79.3

(1.7)

(5.5)

Included in the table above is a current service cost for the year ended 31 December 2020 of $nil (2019: $0.3 million) which has been 
included in discontinued operations relating to the disposed North America Crafts business.

v) Amounts recognised in the consolidated statement of comprehensive income 
Actuarial gains and losses were as follows:

Effect of changes in demographic assumptions

Effect of changes in financial assumptions

Effect of experience adjustments

Remeasurement on assets (excluding interest income)

Adjustment due to surplus cap

Included in the statement of comprehensive income

Year ended  
31 December 
2020 
US$m

Year ended  
31 December  
2019 
US$m

(10.4)

50.7

(321.6)

(308.1)

13.7

286.3

(7.7)

(39.7)

(1.4)

278.9

(51.2)

(31.1)

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vi) Amounts recognised in the consolidated statement of financial position
The amounts included in the consolidated statement of financial position arising from the Group’s defined benefit arrangements 
are as follows:

Year ended 31 December 2020

Cash and cash equivalents

Equity instruments:

US

UK

Eurozone

Other regions

Debt instruments:

Corporate bonds (Investment grade)

Corporate bonds (Non-investment grade)

Government/sovereign instruments

Global real estate

Derivatives:

Total return, interest and inflation swaps

Assets held by insurance company:

Insurance contracts

Diversified investment fund

Other

Total market value of assets

Actuarial value of scheme liabilities

Net (liability)/asset in the scheme

Adjustment due to surplus cap

Recoverable net (liability)/asset in the scheme

Coats US 
US$m

7.6

Other 
US$m

2.8

Coats UK 
Pension 
Scheme 
US$m

251.2

108.0

7.8

16.5

44.9

956.5

303.5

1,122.5

286.6

(11.1)

2.9

–

120.9

3,210.2

28.2

3.5

10.0

16.0

113.1

4.0

78.4

–

0.1

0.5

–

(44.3)

217.1

Total 
US$m

261.6

137.4

 11.3

26.5

65.9

1.2

–

–

5.0

4.3

1,073.9

–

–

307.5

1,200.9

0.1

286.7

–

(11.0)

1.2

5.0

0.2

4.6

5.0

76.8

19.8

3,447.1

(3,338.7)

(121.0)

(128.8)

(3,588.5)

(128.5)

–

(128.5)

96.1

(80.5)

15.6

(109.0)

(3.9)

(141.4)

(84.4)

(112.9)

(225.8)

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10 Retirement and other post-employment benefit arrangements continued

Year ended 31 December 2019

Cash and cash equivalents

Equity instruments:

US

UK

Eurozone

Other regions

Debt instruments:

Corporate bonds (Investment grade)

Corporate bonds (Non-investment grade)

Government/sovereign instruments

Global real estate

Derivatives:

Total return, interest and inflation swaps

Assets held by insurance company:

Insurance contracts

Diversified investment fund

Other

Total market value of assets

Actuarial value of scheme liabilities

Net (liability)/asset in the scheme

Adjustment due to surplus cap

Recoverable net (liability)/asset in the scheme

The amounts are presented in the consolidated statement of financial position as follows:

Year ended 31 December

Non-current assets:

Funded

Current assets:

Funded 

Current liabilities:

Funded

Unfunded

Non-current liabilities:

Funded

Unfunded

Coats UK 
Pension 
Scheme 
US$m

118.2

119.1

10.3

30.8

47.1

Coats US 
US$m

7.3

Other 
US$m

4.5

Total 
US$m

130.0

30.7

3.4

9.1

15.0

0.8

150.6

–

–

4.7

13.7

39.9

66.8

1,014.7

108.1

4.9

1,127.7

272.4

901.5

267.4

(34.8)

6.7

72.6

113.2

2,939.2

(3,030.8)

(91.6)

–

(91.6)

1.4

65.5

–

0.1

0.5

–

(35.1)

206.0

(118.3)

87.7

(69.8)

17.9

–

–

0.2

273.8

967.0

267.6

–

(34.7)

1.1

7.1

0.2

8.3

79.7

78.3

23.5

3,168.7

(126.5)

(3,275.6)

(103.0)

(4.6)

(107.6)

(106.9)

(74.4)

(181.3)

2020 
US$m

2019 
US$m

11.4

13.8

4.8

4.7

(35.3)

(7.1)

(100.1)

(99.5)

(225.8)

(27.5)

(6.2)

(71.6)

(94.5)

(181.3)

The schemes disclosed as part of the ‘other’ column in the tables above include surplus positions of $0.6 million (2019: $0.4 million). 

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Movements in the present value of defined benefit obligations were as follows:

At 1 January

Current service cost

Increase in liabilities on settlements

Past service credit

Interest on defined benefit obligations – unwinding of discount

Actuarial losses on obligations

Contributions from members

Benefits paid

Exchange difference

At 31 December

Movements in the fair value of scheme assets were as follows:

At 1 January 

Interest income on scheme assets

Remeasurement on assets (excluding interest income)

Contributions from members

Contribution from sponsoring companies

Benefits paid

Administrative expenses paid from plan assets

Exchange difference

At 31 December

Administrative expenses paid from plan assets excludes those expenses paid directly by the Group.

The reconciliation of the effect of the asset ceiling is as follows:

Unrecognised surplus at 1 January

Interest cost on unrecognised surplus

Changes in the effect of limiting a net defined benefit asset to the asset ceiling (excluding interest)

Exchange difference

Unrecognised surplus at 31 December

Year ended 
31 December 
2020 
US$m

Year ended  
31 December 
2019 
US$m

(3,275.6)

(3,002.4)

(6.0)

–

0.6

(5.3)

(0.1)

3.2

(63.4)

(83.1)

(318.3)

(258.8)

(0.1)

178.5

(104.2)

(0.1)

183.8

(112.8)

(3,588.5)

(3,275.6)

3,168.7

2,855.5

61.3

286.3

0.1

13.0

79.3

278.9

0.1

28.5

(178.5)

(183.8)

(0.5)

96.7

(0.9)

111.1

3,447.1

3,168.7

74.4

2.6

7.7

(0.3)

84.4

21.4

1.7

51.2

0.1

74.4

Coats Group plc Annual Report and Accounts 2020

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vii) Assets without a quoted price in an active market
For the Coats UK Pension Scheme, all assets in the table above, except for cash and cash equivalents, do not have a quoted price in an 
active market. 

For the Coats US scheme, included in the tables above are $0.4 million (2019: $0.4 million) of US equity instruments, $113.1 million  
(2019: $108.1 million) of corporate bonds (Investment grade), $4.0 million (2019: $1.4 million) of corporate bonds (Non-investment grade), 
government/sovereign instruments of $15.2 million (2019: $24.2 million), $0.5 million (2019: $0.5 million) of insurance contracts and 
$44.1 million (2019: $35.0 million) of other liabilities without a quoted price in an active market. All other assets have a quoted price  
in an active market.

viii) Basis of asset valuation
Under IAS 19, plan assets must be valued at the bid market value at the balance sheet date. For the main asset categories:

•  Equities and bonds listed on recognised exchanges are valued at closing bid prices; 

•  Other bonds are measured using a combination of broker quotes and pricing models making assumptions for credit risk, market  

risk and market yield curves;

•  Global real estate assets are valued on either a fair value approach as provided by the investment manager or notional bid valuations 
provided by the investment managers due to investments being held within a single priced pooled investment vehicle. Valuations are 
prepared in accordance with the current RICS Valuation – Global Standards (1 July 2017) and the RICS Valuation – Professional Standards 
UK January 2014 (revised April 2015);

•  Certain unlisted investments, for example derivatives and insurance contracts, are valued using a model based valuation such as a 

discounted cash flow; and

•  Diversified investment funds are valued at fair value which is typically the Net Asset Value provided by the investment manager.

ix) Recoverability of plan surplus
The recoverable surplus on the Coats US scheme has been recognised in line with the benefit from contribution holidays, plus annual 
refunds expected from the scheme to fund the US post-retirement medical scheme in accordance with relevant US legislation. Following the 
disposal of North America Crafts, Coats retains the previously incurred pension obligations from the business. The pension scheme was in a 
surplus position of $96.1 million at 31 December 2020 of which a recoverable surplus of $15.6 million is recognised on the Balance Sheet. 

For the Coats UK Pension Scheme, which is in IAS 19 deficit, committed contributions to the plan at the balance sheet date are expected to 
put the scheme into an IAS 19 surplus position. The Group notes that in the event that a surplus emerges in the Coats UK Pension Scheme, 
it would have an unconditional right to a refund of the surplus assuming the gradual settlement of the liabilities over time and therefore no 
additional minimum funding requirement has been recognised.

x) Duration of plan liabilities
The weighted average duration of benefit obligations is 15 years (2019: 15 years) for the Coats UK scheme and 8 years (2019: 8 years) for 
the Coats US scheme.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information10 Retirement and other post-employment benefit arrangements continued
xi) Sensitivities
Sensitivities regarding the discount rate, inflation (which also impacts the rate of increases in salaries and rate of increase for pension in 
payments assumptions for the UK scheme) and mortality assumptions used to measure the liabilities of the principal schemes, along with 
the impact they would have on the scheme liabilities, are set out below. Interrelationships between assumptions might exist and the analysis 
below does not take the effect of these interrelationships into account:

Coats UK Pension Scheme discount rate

Coats US discount rate

Coats UK Pension Scheme inflation rate

Coats US inflation rate

Year ended 
31 December 
2020 
-0.25% 
US$m

+0.25% 
US$m

(127.3)

 135.2

(3.4)

89.6

–

3.5

(99.3)

–

Year ended 
31 December 
2019 
-0.25% 
US$m

112.9

2.5

(90.2)

–

+0.25% 
US$m

(113.6)

(2.4)

82.3

–

An increase of 1.0% in the discount rate would result in the Coats UK Pension Scheme and the Coats US scheme liabilities decreasing by 
$467.2 million and $13.5 million. A decrease of 1.0% in the discount rate would result in the Coats UK Pension Scheme and the Coats US 
scheme liabilities increasing by $594.6 million and $15.0 million. 

If members of the Coats UK Pension Scheme live one year longer the scheme liabilities will increase by $157.8 million (2019: $142.3 million). 
If members of the Coats US scheme live one year longer scheme liabilities will increase by $4.3 million (2019: $3.9 million), however, there 
would be no overall impact on the recoverable surplus. 

In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected  
unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability 
recognised in the consolidated statement of financial position. There was no change in the methods and assumptions used in preparing the 
sensitivity analysis from prior years.

Sensitivity of medical schemes to medical cost trend rate assumptions:

Effect on total service cost and interest cost components of other schemes

Effect on defined benefit obligation of other schemes

Year ended  
31 December  
2020 
-1% 
US$m

(0.1)

(1.4)

+1% 
US$m

0.1

1.6

Year ended  
31 December  
2019 
-1% 
US$m

(0.1)

(1.2)

+1% 
US$m

0.1

1.4

xii) Expected contributions for 2021
The total estimated amount to be paid in respect of all of the Group’s retirement and other post-employment benefit arrangements during 
the 2020 financial year (excluding administrative expenses paid by the Company) is $41.1 million. This includes $9 million of deficit repair 
contributions that were deferred in 2020 for the Coats UK Pension Scheme.

11 Earnings per ordinary share
The calculation of basic earnings per ordinary share from continuing operations is based on the profit from continuing operations 
attributable to equity shareholders and the weighted average number of Ordinary Shares in issue during the year, excluding shares  
held by the Employee Benefit Trust but including shares under share incentive schemes which are not contingently issuable.

The calculation of basic earnings per ordinary share from continuing and discontinued operations is based on the profit attributable to 
equity shareholders. The weighted average number of ordinary shares used for the calculation of basic earnings per ordinary share from 
continuing and discontinued operations is the same as that used for basic earnings per ordinary share from continuing operations.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

11 Earnings per ordinary share continued
For diluted earnings per ordinary share, the weighted average number of ordinary shares in issue is adjusted to include all potential  
dilutive ordinary shares. The Group has two classes of dilutive potential Ordinary Shares: those 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.

Year ended 31 December

Profit from continuing operations attributable to equity shareholders

Profit from continuing and discontinued operations attributable to equity shareholders

Year ended 31 December

Weighted average number of ordinary shares in issue for basic earnings per share

Adjustment for share options and LTIP awards

Weighted average number of ordinary shares in issue for diluted earnings per share

Year ended 31 December

Continuing operations:

Basic earnings per ordinary share

Diluted earnings per ordinary share

Continuing and discontinued operations:

Basic earnings per ordinary share

Diluted earnings per ordinary share

12 Dividends

Year ended 31 December

2019 interim dividend paid – 0.55 cents per share

2018 final dividend paid – 1.16 cents per share

2020 
US$m

26.4

26.4

2019 
US$m

96.2

95.7

2020 
Number 
of shares  

m

2019 
Number  
of shares  

m

1,455.6

1,443.8

1.4

13.7

1,457.0

1,457.5

2020 
cents

2019 
cents

1.81

1.81

1.81

1.81

2020 
US$m

–

–

–

6.66

6.60

6.63

6.57

2019 
US$m

7.8

16.6

24.4

The proposed final dividend of 1.30 cents per ordinary share for the year ended 31 December 2020 is not recognised as a liability in  
the consolidated statement of financial position in line with the requirements of IAS 10 Events after the Reporting Period and, subject to 
shareholder approval, will be paid on 25 May 2021 to ordinary shareholders on the register on 30 April 2021, with an ex-dividend date  
of 29 April 2021.

144

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationAcquired intangibles

Goodwill 
US$m

Brands & 
trade names 
US$m

Technology 
US$m

Customer 
relationships 
US$m

Total 
acquired 
US$m

Computer 
software 
US$m

13 Intangible assets

Cost

At 1 January 2019 

Currency translation differences

Additions

Reclassifications

Disposals

At 31 December 2019 

Currency translation differences

Additions

Disposals

24.9

–

1.0

–

–

243.9

–

0.1

–

(1.3)

25.9

242.7

1.0

0.3

–

–

0.6

–

13.3

(0.1)

3.8

–

–

17.0

1.1

–

–

At 31 December 2020

27.2

243.3

18.1

Cumulative amounts charged

At 1 January 2019

Currency translation differences

Reclassifications

Amortisation charge for the year

Disposals

At 31 December 2019

Currency translation differences

Amortisation charge for the year

Disposals

At 31 December 2020

–

–

–

–

–

–

–

–

–

–

1.9

0.1

–

0.2

(1.3)

0.9

–

0.4

–

1.3

Net book value at 31 December 2020

Net book value at 31 December 2019 

27.2

25.9

242.0

241.8

3.7

–

–

2.2

–

5.9

0.4

2.4

–

8.7

9.4

11.1

6.7

263.9

–

–

–

–

6.7

0.4

–

–

7.1

1.4

–

–

0.5

–

1.9

0.2

0.4

–

2.5

4.6

4.8

(0.1)

3.9

–

(1.3)

266.4

1.5

0.6

–

268.5

7.0

0.1

–

2.9

(1.3)

8.7

0.6

3.2

–

12.5

256.0

257.7

87.4

(0.4)

2.8

7.4

(2.6)

94.6

0.1

2.0

(9.9)

86.8

85.0

(0.4)

0.1

5.1

(2.6)

87.2

–

4.0

(9.8)

81.4

5.4

7.4

Total 
US$m

376.2

(0.5)

7.7

7.4

(3.9)

386.9

2.6

2.9

(9.9)

382.5

92.0

(0.3)

0.1

8.0

(3.9)

95.9

0.6

7.2

 (9.8)

93.9

288.6

291.0

The carrying value of Coats brands at 31 December 2020 and 31 December 2019 is $239.6 million. There is no foreseeable limit to  
the net cash inflows from royalties, which are generated from continued sales of thread resulting from the Coats brands, and those brands 
are therefore assessed as having indefinite useful lives. The recoverable amount of these brands has been estimated using the relief from 
royalty method to calculate the fair value and is re-assessed annually by reference to the discounted cash flow arising from the royalties 
generated by those brands. The valuation has been based on the latest budget and medium-term plan approved by the Board, covering  
the period to 31 December 2022, applying a pre-tax discount rate of 10.6% (2019: 10.0%) and long-term growth of 2.8% (2019: 2.8%). 
Management believes that no reasonable potential change in any of the above key assumptions would cause the carrying value to exceed 
its recoverable amount.

Coats Group plc Annual Report and Accounts 2020

145

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CONTINUED

13 Intangible assets continued
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (‘CGUs’) that are expected to benefit 
from that business combination. The acquisition of Pharr High Performance Yarns (“Pharr HP”) in February 2020 provided the Group with 
further scale and expertise within Personal Protection, a key end-use market in the Performance Materials operating segment. Following  
the acquisition of Pharr HP, the Group integrated a number of key business processes of Pharr HP with its existing Personal Protection 
businesses of Patrick Yarn and Coats American, as all three businesses serve the same Personal Protection market in the US and have similar 
product offerings as well as the capability to fulfil each other’s orders. As such, the Group views these businesses as three manufacturing 
sites serving the Personal Protection market in the US rather than separate businesses. As the cash inflows of Pharr HP, Patrick Yarn and 
Coats American are inter-dependent, the Group considers goodwill arising from the Pharr HP and Patrick Yarn acquisitions to be allocated 
to the single CGU of North America. This is consistent with the information used by the Board to monitor the goodwill arising from these 
acquisitions for impairment. Comparative information relating to Patrick Yarn for the year ended 31 December 2019 has been presented  
on a consistent basis. The carrying amount of goodwill has been allocated as follows:

Year ended 31 December

Gotex

North America 

Coats Digital

Other

2020 
US$m

13.9

2.6

8.9

1.8

27.2

2019 
US$m

12.9

2.3

8.6

2.1

25.9

The carrying value of the goodwill allocated to the CGUs has been tested for impairment during the year by comparing the carrying  
value of the CGU to their value in use. The value in use calculations were based on projected cash flows, derived from the latest budgets 
approved by the Board and factoring in the most recent trading activity. Projected cash flows are, discounted at CGU specific, risk adjusted, 
discount rates to calculate the net present value.

The calculation of ‘value in use’ is most sensitive to the following assumptions:

•  CGU specific operating assumptions that are reflected in the budget and medium-term plan periods for the financial year  

to December 2023;

•  discount rates; and

•  growth rates used to extrapolate risk adjusted cash flows beyond the medium-term period.

146

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information13 Intangible assets continued
CGU specific operating assumptions are applicable to the cash flows for the years 2021 to 2023 and relate to revenue forecasts and 
forecast operating margins. A short-term growth rate is applied to the December 2023 plan to derive the cash flows arising in 2024–2025 
and a long-term rate is applied to 2025 to determine a terminal value. Revenue growth and operating margin improvement assumptions in 
2024-2025 are as follows:

Gotex

North America 

Coats Digital

Revenue
growth 
%

5.0–10.0

6.2–7.0

25.7–30.4

Operating 
margin
improvement 
%

1.0

0.9–1.3

2.9–3.0

The discount rate is based on estimations of the assumptions that market participants operating in similar sectors to Coats would make, 
using the Group’s economic profile as a starting point and adjusting appropriately. The pre-tax base discount rate of 10.6% (2019: 10.0%) 
has been adjusted for economic risks that are not already captured in the specific operating assumptions. This results in the impairment 
testing using a pre tax discount rate of 13.3% for Gotex, 11.0% for North America, and 13.6% for Coats Digital.

The following scenarios would result in headroom being completely eliminated in the value in use impairment assessments:

•  the discount rate increasing by 600bps in Gotex, 270bps points in North America and 700bps in Coats Digital; or

•  cumulative 2021-2025 revenue is 29% lower in Gotex, 25% lower in North America and 30% lower in Coats Digital; or

•  cumulative 2021-2025 operating profit is 35% lower in Gotex, 36% lower in North America and 46% lower in Coats Digital.

In light of this, management believes that no reasonable potential change in any of the above key assumptions would cause the carrying 
value of any of the above CGUs to materially exceed their recoverable amount.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

14 Property, plant and equipment

Cost

At 1 January 2019

Currency translation differences

Subsidiaries bought externally

Additions

Transfer to non-current assets held for sale

Reclassifications

Disposals

At 31 December 2019 

Currency translation differences

Subsidiaries bought externally

Additions

Disposals

At 31 December 2020

Cumulative amounts charged

At 1 January 2019

Currency translation differences

Depreciation charge for the year

Impairment charge

Transfer to non-current assets held for sale

Reclassifications

Disposals

At 31 December 2019

Currency translation differences

Depreciation charge for the year

Impairment charge (see note 4)

Disposals

At 31 December 2020

Net book value at 31 December 2020

Net book value at 31 December 2019

Land and 
buildings 
US$m

Plant and 
equipment 
US$m

Vehicles and 
office 
equipment 
US$m

157.3

(0.5)

–

7.2

(2.4)

(0.2)

(1.1)

557.3

(8.6)

0.1

27.0

–

(1.3)

(11.9)

160.3

562.6

0.1

–

3.1

(0.4)

163.1

71.0

(0.9)

4.3

–

(0.9)

(0.1)

(1.0)

(5.5)

3.9

 7.9

(6.1)

562.8

381.9

(5.2)

21.6

1.2

–

(1.1)

(11.3)

72.4

387.1

0.2

5.0

0.1

(0.3)

77.4

85.7

87.9

(2.5)

21.8

3.7

(5.8)

404.3

158.5

175.5

93.7

(1.0)

–

4.4

–

(7.4)

(3.5)

86.2

(0.6)

–

 1.7

(10.8)

76.5

73.2

(1.0)

4.0

0.1

–

(0.1)

(2.9)

73.3

(0.2)

3.7

0.3

(10.8)

66.3

10.2

12.9

Total 
US$m

808.3

(10.1)

0.1

38.6

(2.4)

(8.9)

(16.5)

809.1

(6.0)

3.9

12.7

(17.3)

802.4

526.1

(7.1)

29.9

1.3

(0.9)

(1.3)

(15.2)

532.8

(2.5)

30.5

4.1

(16.9)

548.0

254.4

276.3

148

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information14 Property, plant and equipment continued

Analysis of net book value of land and buildings 31 December

Freehold

Leasehold improvements:

Over 50 years unexpired

Under 50 years unexpired

2020  
US$m

71.0

2.0

12.7

85.7

2019
US$m

72.6

2.0

13.3

87.9

15 Leases
The Group leases several assets including buildings, plants, vehicles and office equipment. The average lease term is 4 years (2019: 3 years). 
The Group’s consolidated balance sheet includes the following amounts relating to leases:

Right-of-use assets

Net carrying amount

At 1 January 2020

At 31 December 2020

Depreciation expense for the year ended

31 December 2019

31 December 2020

Land and 
buildings 
US$m

Plant and 
equipment 
US$m

Vehicles and 
office 
equipment 
US$m

47.5

49.7

9.3

12.9

9.8

6.4

2.5

2.2

Total 
US$m

63.4

60.7

15.2

18.3

2019
US$m

14.1

50.9

65.0

14.1

33.5

17.4

65.0

6.1

4.6

3.4

3.2

2020 
US$m

16.4

49.6

66.0

16.4

34.6

15.0

66.0

Additions to the right-of-use assets during the year ended 31 December 2020 were $16.2 million (2019: $22.2 million).

Lease liabilities 

Year ended 31 December

Current

Non-current

Maturity analysis

Payable within one year

Payable between one and five years

Payable after more than five years

The net increase in lease liabilities during the year ended 31 December 2020 was $1.0 million (2019: $7.3 million) which includes foreign 
exchange losses on lease liabilities of $0.7 million (2019: gains of $0.4 million). The total cash outflow for leases in the year ended 
31 December 2020 was $19.4 million (2019: $17.3 million).

Coats Group plc Annual Report and Accounts 2020

149

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NOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

15 Leases continued
The Group’s consolidated income statement includes the following amounts relating to leases:

Year ended 31 December

Depreciation expense

Interest expense on lease liabilities

Expenses relating to short term leases

Expenses relating to leases of low value assets

Expense relating to variable lease payments not included in the measurement of the lease liability

Impairment of right-of-use assets (see note 4)

Income from subleasing right-of-use assets

2020 
US$m

18.3

3.9

1.5

0.1

0.6

 0.8

(0.2)

2019
US$m

15.2

3.7

3.0

0.1

0.3

 -

(0.2)

The Group subleases some of its right-of-use assets. At the balance sheet date, the Group had contracted with tenants for receipt of the 
following minimum lease payments:

Year ended 31 December

Receivable within one year

Receivable between one and five years

16 Non-current investments

Year ended 31 December

Interests in joint ventures (see below)

Investments in equity securities:

Unlisted investments

Other investments included within current assets were $0.1 million at 31 December 2020 (2019: $0.1 million).

Interests in joint ventures

At 1 January 2020

Dividends receivable

Share of profit after tax

At 31 December 2020

Year ended 31 December

Share of net assets on acquisition

Share of post-acquisition retained profits

Share of net assets

150

Coats Group plc Annual Report and Accounts 2020

2020 
US$m

0.2

–

0.2

2020 
US$m

11.1

6.0

17.1

2020 
US$m

10.6

0.5

11.1

2019 
US$m

0.2

0.2

0.4

2019 
US$m

11.4

6.1

17.5

US$m

11.4

 (0.9)

 0.6

11.1

2019 
US$m

10.6

0.8

11.4

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information16 Non-current investments continued
The following table provides summarised financial information on the Group’s share of its joint ventures, relating to the period during which 
they were joint ventures, and excludes goodwill:

Year ended 31 December

Summarised income statement information:

Revenue

Profit before tax

Taxation

Profit after tax

Year ended 31 December

Summarised balance sheet information:

Non-current assets

Current assets

Liabilities due within one year

Net assets

17 Deferred tax assets

Year ended 31 December

Deferred tax assets

The Group’s deferred tax assets are included within the analysis in note 24.

The movements in the Group’s deferred tax asset during the year were as follows:

At 1 January

Currency translation differences

Acquisition/disposal of subsidiaries

Reclassified from deferred tax liability

Transfer to current tax

Credited/(charged) to the income statement

Credited to other comprehensive income and expense

Charged to equity

At 31 December

18 Inventories

Year ended 31 December

Raw materials and consumables

Work in progress

Finished goods and goods for resale

2020 
US$m

20.8

0.8

(0.2)

0.6

2020 
US$m

5.7

12.9

18.6

(7.5)

11.1

2020 
US$m

22.7

2020 
US$m

16.2

0.6

–

5.2

(0.2)

0.8

0.1

–

2019 
US$m

25.1

1.4

(0.3)

1.1

2019 
US$m

5.9

13.9

19.8

(8.4)

11.4

2019 
US$m

16.2

2019 
US$m

19.2

(0.4)

(0.7)

2.8

(0.3)

(3.4)

0.5

(1.5)

22.7

16.2

2020 
US$m

96.6

28.0

62.4

2019 
US$m

75.1

29.8

67.6

187.0

172.5

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CONTINUED

19 Trade and other receivables

Year ended 31 December

Non-current assets:

Income tax assets

Trade receivables

Other receivables

Derivative financial instruments

Current assets:

Trade receivables

Current income tax assets

Prepayments and accrued income

Derivative financial instruments

Other receivables

2020 
US$m

2019 
US$m

0.5

0.6

12.4

5.5

19.0

1.5

0.7

14.6

3.3

20.1

223.5

208.7

6.8

5.6

3.5

35.1

274.5

5.5

6.9

0.9

39.2

261.2

The fair value of trade and other receivables is not materially different to the carrying value.

Interest charged in respect of overdue trade receivables is immaterial.

Included within trade receivables is $6.2 million (2019: $5.8 million) relating to software solutions revenue contracts, for which performance 
obligations are fulfilled over a period of time (see note 21).

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which requires the use of the 
lifetime expected loss provision for all trade receivables. Credit risk is minimised due to the quality and short-term nature of the Group’s 
trade receivables as well as the fact that the exposure is spread over a large number of customers. An allowance has been made for 
expected losses on trade receivables of $10.2 million (2019: $8.1 million).

The Group monitors receivables for any significant increases in credit risk, and fully provides for trade receivables which are more than  
6 months overdue, unless there are specific circumstances which would indicate otherwise. For all other trade receivables, when determining 
expected losses, the Group takes into account the historical default experience and the financial position of the counterparties, as well as 
the future prospects considering various sources of information. The loss allowance has been determined as follows:

Expected loss rate

Gross carrying amount (US$m)

Loss allowance provision (US$m)

Expected loss rate

Gross carrying amount (US$m)

Loss allowance provision (US$m)

Current

0.6%

199.8

 1.1

Current

 0%

183.0

–

1-3 months 
past due

3-6 months 
past due

6 + months 
past due

Total 
2020

2%

23.5

0.5

25%

1.6

0.4

87%

9.4

8.2

234.3

10.2

1-3 months 
past due

3-6 months 
past due

6 + months 
past due

Total 
2019

0%

23.9

0.1

8%

2.5

0.2

96%

8.1

7.8

217.5

8.1

152

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information19 Trade and other receivables continued
The movements in the expected loss allowance are analysed as follows:

At 1 January

Currency translation differences

Charged to the income statement

Amounts written off during the year

At 31 December

20 Derivative financial instruments – assets
Derivative financial instruments within non-current and current assets comprise:

Year ended 31 December

Fair value through the income statement:

Forward foreign currency contracts

Interest rate swap contracts

Fair value hedges through the statement of comprehensive income:

Interest rate swap contracts

Amounts shown within non-current assets

Amounts shown within current assets

2020 
US$m

8.1

(0.4)

3.1

(0.6)

10.2

2019 
US$m

9.6

(0.4)

0.2

(1.3)

8.1

2020 
US$m

2019 
US$m

4.4

 4.6

-

9.0

5.5

3.5

2.9

 -

1.3

4.2

3.3

0.9

The fair values of these financial instruments are calculated by discounting the future cash flows to net present values using appropriate 
market interest and foreign currency rates prevailing at the year end.

21 Trade and other payables

Year ended 31 December

Amounts falling due within one year:

Trade payables

Amounts owed to joint ventures

Other tax and social security payable

Other payables

Accruals 

Contract liabilities

Derivative financial instruments

Employee entitlements (excluding pensions)

Amounts falling due after more than one year:

Other payables

Contract liabilities

Employee entitlements (excluding pensions)

Derivative financial instruments

2020 
US$m

2019 
US$m

158.5

170.7

12.4

8.0

29.7

32.1

6.5

-

8.5

255.7

16.1

0.6

1.1

0.3

18.1

16.2

5.6

35.8

37.7

5.8

0.3

12.3

284.4

15.0

0.5

1.5

1.2

18.2

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CONTINUED

21 Trade and other payables continued
The fair value of trade and other payables is not materially different to the carrying value.

Interest paid to suppliers in respect of overdue trade payables is immaterial.

Contract liabilities amounting to $5.8 million (2019: $6.6 million) which were outstanding at 31 December 2019 were released to revenue 
during the year ended 31 December 2020, with the remainder expected to be released in 2021.

22 Derivative financial instruments – liabilities
Derivative financial instruments within non-current and current liabilities comprise:

Year ended 31 December

Fair value through the income statement:

Forward foreign currency contracts

Amounts shown within non-current liabilities

Amounts shown within current liabilities

2020 
US$m

2019 
US$m

0.3

0.3

0.3

-

1.5

1.5

1.2

0.3

The fair values of these financial instruments are calculated by discounting the future cash flows to net present values using appropriate 
market interest and foreign currency rates prevailing at the year end.

23 Borrowings

Year ended 31 December

Bank overdrafts

Borrowings repayable within one year

Due within one year

Borrowings repayable between one and two years

Borrowings repayable between two and five years

Due after more than five years

Due after more than one year

Bank overdrafts

Series A and Series B Senior Notes

Bank and other borrowings 

2020 
US$m

19.8

3.0

22.8

0.4

129.3

100.0

229.7

19.8

230.4

2.3

252.5

2019 
US$m

41.5

2.3

43.8

0.3

183.2

100.0

283.5

41.5

225.0

60.8

327.3

On 6 December 2017 the Group issued $125.0 million of 3.88% Series A Senior Notes due 6 December 2024 and $100.0 million of  
4.07% Series B Senior Notes due 6 December 2027 in a US private placement. Interest is payable semi-annually in arrears on 6 June and 
6 December of each year beginning on 6 June 2018. The Senior Notes are unsecured and rank equally with all the Group’s other unsecured 
and unsubordinated indebtedness.

On 6 December 2017 the Group also entered into a $350.0 million five year bank facility. The facility bears interest at LIBOR plus a margin.

Series A and Series B Senior Notes at 31 December 2020 of $230.4 million includes a fair value adjustment to the nominal amount 
outstanding of $5.4 million, for which the Group has interest rate swaps which are accounted for as fair value hedges.

The currency and interest rate profile of the Group’s borrowings is included in note 34 on page 170.

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information24 Deferred tax liabilities

At 1 January

Currency translation differences

Acquisition/disposal of subsidiaries

Reclassified from deferred tax assets

Transfer to current tax

Credited to the income statement

Credited to other comprehensive income and expense

At 31 December

2020 
US$m

8.2

0.4

–

5.2

–

(4.8)

–

9.0

2019 
US$m

10.5

(0.2)

(0.3)

2.8

3.4

(1.2)

(6.8)

8.2

The Group’s net deferred tax liabilities/(assets) are analysed as follows:

Accelerated tax depreciation on tangible fixed assets

Other temporary differences

Revenue losses carried forward

Capital losses carried forward

Investment in subsidiaries

Brands

Retirement benefit obligations offset against brands

Retirement benefit obligations

 2020 

2019

Provided/ 
(recognised) 
US$m

Unprovided/ 
(unrecognised) 
US$m

Provided/ 
(recognised) 
US$m

Unprovided/ 
(unrecognised) 
US$m

16.0

(12.0)

(13.6)

–

3.3

45.5

(45.5)

(7.4)

(13.7)

(12.6)

(9.2)

(330.8)

(290.3)

4.3

–

–

15.3

(623.3)

14.4

(9.0)

(13.8)

–

7.5

40.7

(40.7)

(7.1)

(8.0)

(10.2)

3.7

(303.7)

(254.1)

5.7

–

–

(3.5)

(562.1)

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for 
financial reporting purposes:

Deferred tax assets (note 17)

Deferred tax liabilities

(22.7)

9.0

(13.7)

(16.2)

8.2

(8.0)

During the year ended 31 December 2020, the Group performed a detailed recoverability review of its recognised deferred tax assets,  
given the heightened economic uncertainty arising due to the impact of Covid. This review resulted in a $1.9 million write-off of deferred 
tax assets which are no longer expected to be realised based on future expected taxable profits due to Covid impacts. The remaining 
deferred tax assets of $22.7 million as at 31 December 2020 are deemed to be wholly recoverable.

At the year end, the Group had approximately $1.6 billion (2019: $1.5 billion) of unused gross income tax losses and approximately 
$1.5 billion (2019: $1.4 billion) of unused gross capital losses available for offset against future profits. A deferred tax asset of $13.6 million 
(2019: $13.8 million) has been recognised in respect of $56.7 million (2019: $50.5 million) of such income tax losses. No deferred tax asset 
has been recognised in respect of the remaining losses due to lack of certainty regarding the availability of future taxable income. Such 
losses are only recognised in the financial statements to the extent that it is considered more likely than not that sufficient future taxable 
profits will be available for offset.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

24 Deferred tax liabilities continued
The Group’s income tax losses can be analysed as follows:

Expiring within 5 years

Expiring in more than 5 years

Available indefinitely

2020 
US$m

41.8

13.9

2019 
US$m

33.0

15.5

1,530.9

1,586.6

1,481.4

1,529.9

At 31 December 2020, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which 
deferred tax liabilities have not been recognised is $4.3 million (2019: $5.7 million). Deferred tax on distribution of these profits has not 
been provided on the grounds that the Group is able to control the timing of the reversal of the remaining temporary differences and  
it is probable that they will not reverse in the foreseeable future.

25 Provisions

Year ended 31 December

Provisions are included as follows:

Current liabilities

Non-current liabilities

Provisions are analysed as follows:

Year ended 31 December

Property related provisions

Other provisions

At 1 January 2020

Currency translation differences

Utilised in year

(Credited)/charged to the income statement

At 31 December 2020

2020 
US$m

2019 
US$m

8.2

27.9

36.1

2020 
US$m

2.2

33.9

36.1

Property
related 
provisions 
US$m

Other 
provisions 
US$m

2.2

0.3

(0.1)

(0.2)

2.2

41.3

(0.6)

(9.4)

2.6

33.9

12.8

30.7

43.5

2019 
US$m

2.2

41.3

43.5

Total 
US$m

43.5

(0.3)

(9.5)

2.4

36.1

Other provisions include the amounts set aside to cover certain legal and other regulatory claims, including in respect of the Lower Passaic 
River (see note 28 for further details), which are expected to be substantially utilised within the next ten years.

26 Share capital

Year ended 31 December

Ordinary Shares of 5p each

2020

2019

Number

US$m

Number

1,452,077,272

90.1 1,444,816,041

US$m

89.6

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information26 Share capital continued
During the year ended 31 December 2020 the Company issued 7,261,231 ordinary shares of 5p each (2019: 17,324,009) following the 
exercise of share options as set out below:

At 1 January 2020

Issue of ordinary shares 

At 31 December 2020

Number 
of shares

1,444,816,041

7,261,231

1,452,077,272

US$m

89.6

0.5

90.1

The own shares reserve of $3.2 million at 31 December 2020 (2019: $5.7 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 2020 was 7,010,248 (2019: 14,591,071).

During the year ended 31 December 2020 nil (2019: 524,745) options under the Group’s 2002 share option scheme were exercised  
and nil (2019: 64,960) options lapsed.

Details of share awards outstanding under the Group’s LTIP and Deferred Bonus Plans are set out in note 35.

27 Reserves and non-controlling interests

At 1 January 2020

Dividends

Currency translation differences 

Net change in fair value of cash flow hedges

Actuarial losses on employee benefits

Tax on actuarial gains and losses 

Issue of ordinary shares

Movement in own shares

Share based payments

Profit for the year 

At 31 December 2020

Share 
premium 
account 
US$m

Own 
shares 
US$m

Translation 
reserve 
US$m

Capital 
reduction 
reserve 
US$m

Other 
reserves 
US$m

Retained  
loss 
US$m

10.5

(5.7)

(75.9)

59.8

248.7

(5.9)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

2.5

–

–

–

(13.3)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(2.4)

–

–

–

–

–

–

–

–

–

(39.7)

0.1

(0.5)

(5.8)

1.6

26.4

10.5

(3.2)

(89.2)

59.8

246.3

(23.8)

Non-
controlling 
interests 
US$m

30.4

(17.8)

–

–

–

–

–

–

–

15.8

28.4

The table below shows financial information of non-wholly owned subsidiaries of the Group that have non-controlling interests:

EMEA

Asia & Rest of World 

Profit allocated to  
non-controlling interests

Accumulated  
non-controlling interests

Year ended  
31 December  
2020 
US$m

Year ended  
31 December  
2019 
US$m

31 December 
2020 
US$m

31 December 
2019 
US$m

–

15.8

15.8

0.1

20.0

20.1

1.5

26.9

28.4

2.0

28.4

30.4

The proportion of ownership interests and voting rights of non-wholly owned subsidiaries of the Group held by non-controlling interests  
is set out on pages 185 to 194.

Coats Group plc Annual Report and Accounts 2020

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NOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

28 Contingent liabilities and environmental matters
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. Over 100 PRPs have been 
identified by EPA. Approximately 50 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, including those that are the most responsible for its contamination. 

In March 2016, EPA issued a Record of Decision selecting a remedy for the lower 8 miles of the LPR at an estimated cost of $1.38 billion on 
a net present value basis. The EPA’s Record of Decision did not include a remedial decision for the upper 9 miles of the LPR. The EPA may 
consider a remedial alternative proposed by the CPG 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 8 miles 
of the LPR. Maxus Energy Corporation (‘Maxus’), which provided an indemnity to OCC that covered the LPR, has been granted Chapter 11 
bankruptcy protection, but OCC remains responsible for its remedial obligations even in the absence of Maxus’ indemnity. The approved 
bankruptcy plan also created a liquidating trust to pursue potential claims against Maxus’ parent entity, YPF SA, and potentially others, 
which could result in additional funding for the LPR remedy. While the ultimate costs of the remedial design and the final remedy are 
expected to be shared among hundreds of parties, including many who are not currently in the CPG, the final allocation of remedial costs 
among those parties has not yet been determined. 

In March 2017, EPA notified 20 parties not associated with the disposal or release of any contaminants of concern as being eligible for  
early cash out settlements. As expected, EPA did not identify CC as one of the 20 parties. EPA invited approximately 80 other parties, 
including CC, to participate in an allocation process to determine their respective allocation shares and potential eligibility for future cash 
out settlements. In the allocation, CC presented factual and scientific evidence that it is not responsible for the discharge of dioxins, furans 
or PCBs – the contaminants that are driving the remediation of the LPR – and that it is a de minimis or even smaller de micromis party. The 
confidential allocation process concluded in December 2020. CC continues to believe that it is a de minimis or even smaller de micromis 
party.

On 30 June 2018, OCC filed a lawsuit against approximately 120 defendants, including CC, seeking recovery of past environmental costs 
and contribution toward future environmental costs. OCC released claims for certain past costs from 41 of the defendants, including CC, 
and is not seeking recovery of those past costs from CC. OCC’s lawsuit seeks resolution of many of the same issues being addressed in  
the EPA sponsored allocation process, and does not alter CC’s defences or CC’s continued belief that it is a de minimis or even smaller  
de micromis party in an settlement or court ruling allocating remedial costs. 

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 estimated share of de minimis 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. During the year ended 31 December 2018, an additional provision of $8.0 million was recorded as an exceptional item to cover  
legal and professional fees. The Group will continue to mitigate additional costs as far as possible through insurance and other avenues.

As at 31 December 2020, $12.0 million of this provision had been utilised. The remaining provision at 31 December 2020, taking into 
account insurance reimbursement, was $12.6 million (2019: $14.6 million). The process concerning the LPR continues to evolve and these 
estimates are subject to change based upon legal defence costs associated with the EPA sponsored allocation and OCC’s lawsuit, the scope 
of the remedy selected by EPA for the upper nine miles, 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. 

158

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information28 Contingent liabilities and environmental matters continued
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 or even 
smaller de micromis party, and that additional parties not currently in the CPG will be responsible for a significant share of the ultimate 
costs of remediation. However, as this matter evolves, additional provisions could be recorded and such provisions could increase materially 
based on further decisions by EPA, negotiations among the parties, and other future events.

Following the sale of the North America Crafts business, including CC, announced on 22 January 2019, Coats North America Consolidated 
Inc. (the seller) retains the control and responsibility for the eventual outcome of the ongoing LPR environmental matters, including the 
rights to the related insurance reimbursements.

29 Capital commitments
As at 31 December 2020, the Group had commitments of $3.7 million in respect of contracts placed for future capital expenditure (2019: 
$5.8 million). 

30 Notes to the consolidated cash flow statement
a) Reconciliation of operating profit to cash generated from operations

Year ended 31 December

Operating profit

Depreciation of owned property, plant and equipment

Depreciation of right-of-use assets

Amortisation of intangible assets

Decrease in inventories

Decrease/(increase) in debtors

Decrease in creditors

Provision and pension movements

Foreign exchange and other non-cash movements

Discontinued operations

Cash generated from operations

b) Taxation paid

Year ended 31 December

Overseas tax paid

c) Investment income

Year ended 31 December

Dividends received from joint ventures

2020 
US$m

103.1

30.5

18.3

7.2

4.9

1.1

(28.7)

(14.0)

5.7

(0.1)

2019 
US$m

191.0

29.9

15.2

8.0

10.4

(6.5)

(13.8)

(33.5)

4.4

0.3

128.0

205.4

2020 
US$m

(46.3)

(46.3)

2020 
US$m

0.9

0.9

2019 
US$m

(46.3)

(46.3)

2019 
US$m

0.3

0.3

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CONTINUED

30 Notes to the consolidated cash flow statement continued
d) Capital expenditure and financial investment

Year ended 31 December

Acquisition of property, plant and equipment and intangible assets

Acquisition of other equity investments

Disposal of property, plant and equipment

Discontinued operations

e) Acquisitions and disposals of businesses

Year ended 31 December

Acquisition of businesses

Disposal of businesses

f) Summary of net debt

Year ended 31 December

Total cash and cash equivalents

Bank overdrafts

Net cash and cash equivalents

Other borrowings (see note 23)

Net debt excluding lease liabilities

Lease liabilities (see note 15)

Total net debt

Total net debt is presented in the consolidated statement of financial position as follows:

Year ended 31 December

Current assets:

Cash and cash equivalents

Current liabilities:

Bank overdrafts and other borrowings

Lease liabilities

Non-current liabilities:

Borrowings

Lease liabilities

Total net debt

2020 
US$m

(15.4)

0.1

3.0

–

2019 
US$m

(44.3)

0.4

4.3

0.5

(12.3)

(39.1)

2020 
US$m

(36.9)

–

(36.9)

2020 
US$m

71.9

(19.8)

52.1

(232.7)

(180.6)

(66.0)

(246.6)

2019 
US$m

(4.9)

30.7

25.8

2019 
US$m

177.4

(41.5)

135.9

(285.8)

(149.9)

(65.0)

(214.9)

2020 
US$m

2019 
US$m

71.9

177.4

(22.8)

(16.4)

(43.8)

(14.1)

(229.7)

(49.6)

(246.6)

(283.5)

(50.9)

(214.9)

For financial covenant purposes, the Group’s leverage is calculated on the basis of net debt without IFRS 16 lease liabilities and at the  
Coats Group Finance Company Limited level. Net debt excluding IFRS 16 lease liabilities at the Coats Group Finance Company Limited level 
at 31 December 2020 for covenant purposes was $177.0 million (31 December 2019: $152.6 million).

160

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information30 Notes to the consolidated cash flow statement continued
Total net debt of $246.6 million (2019: $214.9 million) comprises of borrowings of $232.7 million (2019: $285.8 million), net cash and  
cash equivalents of $52.1 million (2019: $135.9 million) and lease liabilities of $66.0 million (2019: $65.0 million). Movements in total net 
debt during the year included the net cash repayments of borrowings of $58.7 million (2019: $52.3 million), decrease in net cash and cash 
equivalents of $81.9 million (2019: $20.0 million increase), increase in lease liabilities of $0.3 million (2019: $64.5 million), movement in fair 
value hedges of $5.4m (2019: $nil), foreign exchange losses of $2.1 million (2019: $0.7 million gain) and other non-cash movements of  
$0.7 million (2019: $0.7 million).

31 Acquisitions
On 26 November 2019 the Group announced a binding agreement to acquire the trade and assets of Pharr High Performance Yarns  
(“Pharr HP”), a market leading manufacturer of high performance engineered yarns, based in McAdenville, North Carolina, US. Pharr HP 
specialises in providing technical yarn solutions to the markets of Industrial Thermal Protection, Defence and Fire Service industries. Its 
manufacturing capabilities and customer base provide the Group with further expertise within Personal Protection, a key end-use market in 
the Performance Materials operating segment. Other parts of Pharr, such as the carpet yarns and speciality flooring products business were 
not included as part of the acquisition. The acquisition was completed on 10 February 2020.

The initial consideration transferred on the acquisition date to acquire the Pharr HP business was $37 million. An adjustment to the 
consideration of $0.1 million was received in June 2020 following finalisation of certain completion consideration adjustments based on  
the amount of net working capital at the acquisition date. 

Fair values of the identifiable assets and liabilities of Pharr HP as at the date of acquisition were as follows:

Assets:

Intangible assets 

Property, plant and equipment

Right-of-use assets

Inventories

Trade and other receivables

Liabilities:

Trade and other payables

Lease liabilities

Total identifiable net assets acquired at fair value

Goodwill recognised on acquisition 

Total consideration paid

Fair value 
recognised  

US$m

0.6

3.9

3.7

23.7

14.3

46.2

(5.9)

(3.7)

36.6

0.3

36.9

In accounting for the acquisition, adjustments are made to the book values of the net assets of the business acquired to reflect the 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. The assessment of the fair value of assets and liabilities acquired was completed during the year ended 
31 December 2020 within 12 months of the acquisition date. 

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 the amounts above in accordance with paragraph 23 of IFRS 3 (revised).

The excess of the fair value of the consideration paid over the fair value of the assets and liabilities acquired is represented by trade names 
of $0.6 million with residual goodwill arising of $0.3 million. Goodwill arising from the acquisition of Pharr HP has been allocated to the 
single cash generating unit of North America.

Coats Group plc Annual Report and Accounts 2020

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CONTINUED

31 Acquisitions continued
The goodwill 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 acquisition is expected to be deductible for tax purposes.

Pharr HP revenues of $66.8 million and loss before tax of $0.7 million from the date of acquisition to 31 December 2020 has been included 
in the results from the continuing operations of the Group. If the acquisition had taken place at the beginning of the year, revenue would 
have been $79.0 million and the loss before tax would have been $0.5 million based on unaudited management accounts for the six 
months ended 31 December 2020.

Transaction costs relating to the acquisition of $0.9 million were expensed and included in administrative expenses in the condensed 
consolidated income statement for the year ended 31 December 2019. 

The total cash outflow in the year ended 31 December 2020 relating to the acquisition of Pharr HP was $37.3 million representing the 
consideration paid of $36.9 million and transaction costs paid of $0.4 million. 

32 Discontinued operations and assets and liabilities held for sale
a) Discontinued operations
The results of the discontinued operations are presented below. Unless stated, all amounts relate to the North America Crafts business 
which was sold on 20 February 2019:

Year ended 31 December

Revenue

Cost of sales

Gross profit

Distribution costs

Administrative expenses

Other operating income

Operating loss and loss before taxation

Tax on loss

Profit from discontinued operations

Exceptional loss on disposal of North America Crafts

Exceptional profit on disposal of legacy UK Crafts property

Total loss from discontinued operations

2020 
US$m

–

–

–

–

–

–

–

–

–

–

–

–

2019 
US$m

14.8

(10.4)

4.4

(3.7)

(2.4)

1.6

(0.1)

0.2

0.1

(1.1)

0.5

(0.5)

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coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information32 Discontinued operations and assets and liabilities held for sale continued
The loss per ordinary share from discontinued operations is as follows:

Year ended 31 December

Loss per ordinary share from discontinued operations:

Basic loss per ordinary share

Diluted loss per ordinary share

The table below sets out the cash flows from discontinued operations:

Year ended 31 December

Net cash (outflow)/inflow from operating activities

Net cash inflow from investing activities

Net cash flows from discontinued operations

2020 
Cents

2019 
Cents

–

–

(0.03)

(0.03)

2020 
US$m

(0.1)

–

(0.1)

2019 
US$m

0.3

0.5

0.8

Following the sale of the North America Crafts business, Coats North America Consolidated Inc. (the seller) retains the control and 
responsibility for the eventual outcome of the ongoing LPR environmental matters (see note 28).

b) Assets and liabilities held for sale
There were no non-current assets held for sale at 31 December 2020 (2019: property, plant and equipment of $1.5 million).

33 Related party transactions
Remuneration of key management personnel
The Group Executive Team are deemed to be the key management personnel of the Group. The remuneration of the Group Executive 
Team, is set out below in aggregate for each of the categories specified in IAS 24 – Related Party Disclosures. Further information regarding 
the remuneration of individual directors is provided on pages 79 to 95 in the audited part of the Directors’ Remuneration Report.

Year ended 31 December

Short-term employee benefits

Share based payments

2020 
US$m

6.0

0.7

6.7

2019 
US$m

8.6

2.8

11.4

Trading transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not 
disclosed in this note. Transactions between the Group and its joint ventures are disclosed below.

During the year, Group companies entered into the following transactions with related parties who are not members of the Group:

Joint ventures

Sale of goods

Purchase of goods

2020 
US$m

5.9

2019 
US$m

3.8

2020 
US$m

45.7

2019 
US$m

55.1

Amounts owing by/(to) joint ventures at the year end are disclosed in notes 19 and 21. All transactions with joint ventures are 
at an arm’s length and payment terms are consistent with normal trading terms with third parties.

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34 Derivatives and other financial instruments
The Group’s main financial instruments comprise:

Financial assets:

•  cash and cash equivalents;

•  trade and other receivables that arise directly from the Group’s operations; and

•  derivatives, including forward foreign currency contracts and interest rate swaps.

Financial liabilities:

•  trade, other payables and certain provisions that arise directly from the Group’s operations;

•  bank borrowings and overdrafts; and

•  derivatives, including forward foreign currency contracts and interest rate swaps.

Financial assets
The Group’s financial assets are summarised below:

Year ended 31 December

Financial assets carried at amortised cost (loans and receivables):

Cash and cash equivalents

Trade receivables (note 19)

Other receivables (note 19), net of non-financial assets $23.0 million (2019: $22.1 million)

Financial assets carried at fair value through the income statement:

Derivative financial instruments (note 20)

Other financial assets carried at fair value through the statement of comprehensive income:

Other investments (note 16)

Derivative financial instruments (note 20)

2020 
US$m

2019 
US$m

71.9

224.1

24.5

320.5

9.0

9.0

6.1

-

6.1

177.4

209.4

31.7

418.5

2.9

2.9

6.2

1.3

7.5

Total financial assets

335.6

428.9

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Financial liabilities
The Group’s financial liabilities are summarised below:

Year ended 31 December

Financial liabilities carried at amortised cost:

Trade payables (note 21)

Amounts owed to joint ventures (note 21)

Other financial liabilities

Provisions (note 25)

Lease liabilities (note 15)

Borrowings (note 23)

Financial liabilities carried at fair value through the income statement:

Borrowings (note 23)

Derivative financial instruments (note 22)

Total financial liabilities

Other financial liabilities include other payables, other than taxation and other statutory liabilities.

Fair value of financial assets and liabilities
The fair value of the Group’s financial assets and liabilities is summarised below:

2020 
US$m

2019 
US$m

158.5

170.7

12.4

78.3

2.2

66.0

182.1

499.5

 70.4

0.3

 70.7

570.2

16.2

93.6

2.2

65.0

327.3

675.0

-

1.5

 1.5

676.5

Year ended 31 December

Primary financial instruments:

Cash and cash equivalents

Trade receivables

Other receivables

Other investments

Trade payables

Amounts owed to joint ventures

Other financial liabilities and provisions

Borrowings

Derivative financial instruments:

Forward foreign currency contracts

Interest rate swaps

Net financial liabilities

2020

Book 
value 
US$m

71.9

224.1

24.5

6.1

Fair  
value 
US$m

71.9

224.1

24.5

6.1

2019

Book  
value 
US$m

177.4

209.4

31.7

6.2

Fair  
value 
US$m

177.4

209.4

31.7

6.2

(158.5)

(158.5)

(170.7)

(170.7)

(12.4)

(80.5)

(12.4)

(80.5)

(16.2)

(95.8)

(16.2)

(95.8)

(252.5)

(252.5)

(327.3)

(327.3)

4.1

4.6

4.1

4.6

1.4

1.3

1.4

1.3

(168.6)

(168.6)

(182.6)

(182.6)

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34 Derivatives and other financial instruments continued
Market values have been used as proxies for the fair value of all listed investments. Unlisted investments are stated at fair value. For floating 
rate financial assets and liabilities, and for fixed rate financial assets and liabilities with a maturity of less than 12 months, it has been assumed 
that fair values are approximately the same as book values. Fair values for forward foreign currency contracts have been estimated using 
applicable forward exchange rates at the year end. All other fair values have been calculated by discounting expected cash flows at 
prevailing interest rates.

Fair value measurements recognised in the statement of financial position
The following tables provide an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped 
into Levels 1 to 3 based on the degree to which the fair value is observable:

•  Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

•  Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset or liability, 

either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

•  Level 3 fair value measurements are those derived from valuation techniques which include inputs for the asset or liability that are not 

observable market data (unobservable inputs).

Financial assets measured at fair value

Year ended 31 December

2020

Financial assets measured at fair value through the income statement:

Trading derivatives

Derivatives designated as effective hedging instruments

Financial assets measured at fair value through the statement 
of comprehensive income:

Other investments

2019

Total 
US$m

Level 1 
US$m

Level 2 
US$m

Level 3 
US$m

4.4

 4.6

6.1

15.1

-

 -

1.1

1.1

4.4

 4.6

-

9.0

-

 -

5.0

5.0

Financial assets measured at fair value through the income statement:

Trading derivatives

2.9

–

2.9

–

Financial assets measured at fair value through the statement 
of comprehensive income:

Other investments

Derivatives designated as effective hedging instruments

6.2

1.3

10.4

1.2

–

1.2

–

1.3

4.2

5.0

–

5.0

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34 Derivatives and other financial instruments continued
Financial liabilities measured at fair value

Year ended 31 December

2020

Financial liabilities measured at fair value through the income statement:

Trading derivatives

Borrowings

2019

Financial liabilities measured at fair value through the income statement:

Trading derivatives

Total 
US$m

Level 1 
US$m

Level 2 
US$m

Level 3 
US$m

(0.3)

 (70.4)

(70.7)

(1.5)

(1.5)

-

 -

-

–

–

(0.3)

 (70.4)

(70.7)

(1.5)

(1.5)

-

 -

-

–

–

Level 1 financial instruments are valued based on quoted bid prices in an active market. Level 2 financial instruments are measured by 
discounted cash flow. For interest rates swaps future cash flows are estimated based on forward interest rates (from observable yield curves 
at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk of the various counterparties. 
For foreign exchange contracts future cash flows are estimated based on forward exchange rates (from observable forward exchange rates 
at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of the various counterparties. 
Equity instruments that are classified as level 3 financial instruments relate to the Group’s investment in Twine Solutions Limited. Given the 
business is at start-up phase and there have been no indications of impairment, the carrying value is deemed to approximate to fair value.

The main risks arising from the Group’s financial instruments are as follows:

•  currency risk;

•  interest rate risk;

•  capital risk;

•  market price risk;

•  liquidity risk; and

•  credit risk.

The Group’s policies for managing those risks are described on pages 167 to 174 and, except as noted, have remained unchanged  
since the beginning of the year to which these financial statements relate.

Currency risk
The income and capital value of the Group’s financial instruments can be affected by exchange rate movements as a significant portion  
of both its financial assets and financial liabilities are denominated in currencies other than US Dollars, which is the Group’s presentational 
currency. The accounting impact of these exposures will vary according to whether or not the Group company holding such financial assets 
and liabilities reports in the currency in which they are denominated. 

The Board recognises that the Group’s US Dollar statement of financial position will be affected by short-term movements in exchange 
rates, particularly the value of Sterling, Euro, Indian Rupee and Brazilian Real. The Group’s investments reflect the requirements of its 
customers, which results in investments in potentially more volatile developing market currencies. However, as a diverse global business, 
there are many natural offsets within the Group that tend to mitigate the risk associated with any individual currency volatility. 

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34 Derivatives and other financial instruments continued
The Group uses forward foreign currency contracts to mitigate the currency exposure that arises on business transacted by group 
companies in currencies other than their functional currency. Such foreign currency contracts are only entered into when there is a 
commitment to the underlying transaction. The contracts used to hedge future transactions typically have a maturity of between three 
months and one year.

Interest rate risk
In 2020, the Group financed its operations through shareholders’ funds, bank borrowings, Senior Notes and overdrafts. The Group’s 
trading subsidiaries use a mixture of fixed and floating rate debt. The Group also has access to committed bank facilities amounting to some 
$350.0 million, of which $nil had been drawn down at year end and $225.0 million of Senior Notes (see note 23).

Interest rate risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings using interest rate swap 
contracts. Interest rate swaps are accounted for as fair value or cash flow hedges, depending on initial designation. Hedging activities are 
evaluated regularly to align with interest rate views and risk appetite. In order to achieve hedge effectiveness, when entering into interest 
rate swap contracts, the cash flows, interest rate references and maturity of the underlying exposure of the hedged item are considered  
so as to match the hedging instrument. The ratio of fixed to floating rate hedging is established according to Group policy which prescribes 
a banded range for the fixed to floating ratio. The ratio of fixed to floating will decrease over a rolling 5-year period. 

As at 31 December 2020 the Group has fixed to variable interest rate swap contracts designated as fair value hedges against $65.0 million 
of fixed interest Senior Notes. The fair value of these hedges as at 31 December 2020 was $4.6 million (see note 20) and borrowings 
includes a corresponding fair value adjustment to the nominal amount outstanding in the Consolidated Statement of Financial Position.

The Group’s interest income does not vary significantly from the returns it would generate through investing surplus cash at floating rates 
of interest since the interest rates are re-set on a regular basis.

A reasonably possible change of one per cent in market interest rates would reduce profit before tax by approximately $2.2 million (2019: 
$0.7 million), and would reduce shareholders’ funds by approximately $2.2 million (2019: $3.5 million).

Trade and other receivables and trade and other payables are excluded from the following disclosure (other than the currency disclosures)  
as there is limited interest rate risk.

Capital risk management
The Group manages its capital so as to ensure that the Company and the Group will be able to continue as a going concern.

The Group’s capital structure comprises cash and cash equivalents and borrowings (see Summary of net debt on page 160), and share 
capital and reserves attributable to the equity shareholders of the Company.

Currency exposure
The table below shows the extent to which Group companies have financial assets and liabilities, excluding forward foreign currency 
contracts, in currencies other than their functional currency. Foreign exchange differences arising on retranslation of these assets and 
liabilities are taken to the Group income statement. The table excludes loans between Group companies that form part of the net 
investment in overseas subsidiaries on which the exchange differences are dealt with through reserves, but includes other Group  
balances that eliminate on consolidation.

Functional currency 2020

Sterling

United States dollars

Euros

Indian Rupees

Brazilian Reals

Other currencies 

Net foreign currency financial assets/(liabilities)

Sterling 
US$m

US dollars 
US$m

Euro 
US$m

Indian 
Rupees 
US$m

Brazilian 
Reals 
US$m

-

(0.1)

0.6

-

-

(0.1)

0.4

4.1

-

0.9

(2.7)

0.6

(10.1)

(7.2)

(2.4)

(8.9)

-

(0.8)

-

9.7

(2.4)

-

-

-

-

-

0.3

0.3

-

-

-

-

-

-

-

Other 
US$m

0.6

(4.5)

(0.5)

-

-

-

Total 
US$m

2.3

(13.5)

1.0

(3.5)

0.6

(0.2)

(4.4)

(13.3)

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Functional currency 2019

Sterling

United States dollars

Euros

Indian Rupees

Brazilian Reals

Other currencies 

Net foreign currency financial assets/(liabilities)

Sterling 
US$m

US dollars 
US$m

–

(21.9)

0.9

–

–

–

(21.0)

0.4

–

1.6

1.8

(2.5)

(10.1)

(8.8)

Euro 
US$m

1.4

 (1.3)

–

(0.5)

–

5.8

5.4

Indian 
Rupees 
US$m

Brazilian 
Reals 
US$m

–

–

0.1

–

–

0.7

0.8

–

–

–

–

–

–

–

Other 
US$m

1.9

(7.9)

(0.5)

–

–

–

(6.5)

Total 
US$m

3.7

(31.1)

2.1

1.3

(2.5)

(3.6)

(30.1)

The following table shows the impact on pre-tax profit and shareholders’ funds of reasonably possible changes in exchange rates against 
each of the major foreign currencies in which the Group transacts:

2020

Increase in US dollar exchange rate

(Decrease)/increase in profit before tax

(Decrease)/increase in shareholders’ funds

2019

Increase in US dollar exchange rate

(Decrease)/increase in profit before tax

(Decrease)/increase in shareholders’ funds

Currency profile of financial assets
The currency profile of the Group’s financial assets was as follows:

2020

Sterling 
US$m

10%

(2.0)

(6.3)

Sterling 
US$m

10%

(3.7)

(7.6)

Euro 
US$m

10%

(1.0)

(2.1)

Euro 
US$m

10%

(0.3)

1.5

Indian 
Rupees 
US$m

10%

0.3

4.2

Indian 
Rupees 
US$m

10%

(0.2)

4.1

Brazilian 
Reals 
US$m

10%

(0.1)

1.5

Brazilian 
Reals 
US$m

10%

0.2

1.8

Cash and 
cash 
equivalents 
US$m

2019

Trade and 
other 
receivables 
US$m

Derivative 
financial 
instruments 
US$m

Total 
US$m

Cash and 
cash 
equivalents 
US$m

Trade and 
other 
receivables 
US$m

Derivative 
financial 
instruments 
US$m

Investments 
US$m

Total 
US$m

Investments 
US$m

31 December

Currency:

Sterling

United States 
dollars

Euros

Indian Rupees

Brazilian Reals

Other currencies 

Total financial 
assets

-

5.0

0.1

1.0

-

-

0.1

5.3

104.5

109.9

40.0

111.1

(106.8)

1.7

8.0

2.6

19.5

21.7

22.2

13.2

75.1

49.3

23.5

32.8

11.9

-

1.6

(3.9)

13.6

108.2

–

5.0

0.1

1.1

–

–

0.6

7.3

60.5

68.4

114.1

5.7

18.1

1.8

37.1

90.1

23.0

24.3

22.2

74.2

(110.3)

(2.9)

14.3

(1.2)

43.8

98.9

25.9

57.8

22.8

155.1

6.1

71.9

248.6

9.0

335.6

6.2

177.4

241.1

4.2

428.9

The investments included above comprise listed and unlisted investments in shares and bonds.

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34 Derivatives and other financial instruments continued
Currency and interest rate profile of financial liabilities

The currency and interest rate profile of the Group’s financial liabilities was as follows:

2020

2019

Floating 
rate 
US$m

Fixed 
rate 
US$m

Interest 
free 
US$m

Lease 
liabilities
US$m

Derivative 
financial 
instruments 
US$m

Total 
US$m

Floating 
rate 
US$m

Fixed 
rate 
US$m

Interest 
free 
US$m

Lease 
liabilities
US$m

Derivative 
financial 
instruments 
US$m

Total 
US$m

31 December

Currency:

Sterling

Euros

Indian Rupees

Brazilian Reals

Other currencies

Total financial 
liabilities

United States dollars

82.3

160.0

100.4

0.2

-

11.4

6.6

-

-

-

-

-

-

3.5

12.9

37.8

11.7

77.1

5.1

13.1

2.5

13.3

0.1

31.9

(9.6)

7.1

1.3

–

10.8

(9.8) 346.0

95.2

220.0

126.7

20.0

-

4.1

42.0

51.1

15.9

5.5

–

–

–

–

–

(4.4) 108.1

2.7

2.6

12.5

38.4

12.6

81.7

5.4

11.2

3.2

16.0

10.6

28.6

(35.3)

(17.8)

9.2

462.3

19.7

–

7.1

0.8

40.9

54.4

20.3

116.4

89.1

163.5

251.3

66.0

0.3

570.2

104.7

222.6

282.7

65.0

1.5

676.5

The benchmark for determining floating rate liabilities in the UK is LIBOR for both sterling and US$ amounts.

Details of fixed and non interest-bearing liabilities (excluding derivatives and trade and other payables) are provided below:

2020

2019

Financial 
liabilities 
on which 
no interest 
is paid

Weighted 
average 
period until 
maturity 
(months)

Weighted 
average 
period for 
which rate 
 is fixed 
(months)

-

70

10

69

18

-

-

18

Fixed rate 
financial 
liabilities

Weighted 
average 
interest 
rate 
%

-

4.00

16.74

4.27

Fixed rate 
financial 
liabilities

Weighted 
average 
interest 
rate 
%

–

3.61

11.58

3.70

Weighted 
average 
period for 
which rate 
is fixed 
(months)

–

61

12

60

Financial 
liabilities 
on which 
no interest 
is paid

Weighted 
average 
period until 
maturity 
(months)

18

–

–

18

Year ended 31 December

Currency:

Sterling

United States dollars

Other currencies

Weighted average

170

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Currency profile of foreign exchange derivatives

Year ended 31 December

Currency:

Sterling

United States dollars

Euros

Indian Rupee

Brazilian Real

Other currencies

Assets

Liabilities

2020 
US$m

2019 
US$m

2020 
US$m

2019 
US$m

114.1

32.1

-

1.6

-

25.5

173.3

97.8

42.7

–

14.3

–

57.0

211.8

-

(133.8)

(20.0)

-

(7.9)

(7.5)

(1.9)

(163.5)

(22.7)

–

(8.3)

(14.0)

(169.2)

(210.4)

Market price risk
The Group has equity and bond investments at 31 December 2020 of $6.1 million (2019: $6.2 million) held for strategic rather than trading 
purposes. The Group does not actively trade these investments and is not materially exposed to price risk.

The sensitivity analyses below have been determined based on the exposure to reasonably possible price changes for the investments held 
at the year end.

Year ended 31 December

Impact of a 10% increase in prices:

Increase in pre-tax profit for the year

Increase in equity shareholders’ funds

2020 
US$m

2019 
US$m

-

0.6

–

0.6

Liquidity risk
The Group typically holds cash balances in deposits with a short maturity. Additional resources can be drawn through committed borrowing 
facilities at operating subsidiary level. During the year the Group has complied with all externally imposed capital requirements.

The Group had the following undrawn committed borrowing facilities in respect of which all conditions precedent had been met at the 
year-end:

Year ended 31 December

Expiring between one and two years

Expiring between two and five years

Maturity of undiscounted financial assets (excluding derivatives)
The expected maturity of the Group’s financial assets, using undiscounted cash flows, was as follows: 

Year ended 31 December

In one year or less, or on demand

In more than one year but not more than two years

In more than two years but not more than five years

In more than five years

2020 
US$m

 350.0

2019 
US$m

 -

-

290.0

2020 
US$m

312.0

5.2

3.5

6.1

2019 
US$m

404.1

7.7

3.2

6.0

326.8

421.0

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34 Derivatives and other financial instruments continued
Maturity of undiscounted financial liabilities (excluding derivatives)
The expected maturity of the Group’s financial liabilities, using undiscounted cash flows, was as follows:

Year ended 31 December

In one year or less, or on demand

In more than one year but not more than two years

In more than two years but not more than five years

In more than five years

2020 
US$m

290.3

18.8

155.0

122.5

586.6

2019 
US$m

339.6

19.0

212.2

123.7

694.5

The above table comprises the gross amounts payable in respect of borrowings (including interest thereon), trade and other non-statutory 
payables and certain provisions, over the period to the maturity of those liabilities.

Maturity of undiscounted financial derivatives
The maturity of the Group’s financial derivatives (on a gross basis), which include interest rate and foreign exchange swaps, using 
undiscounted cash flows, was as follows:

Year ended 31 December

In one year or less, or on demand

In more than one year but not more than two years

In more than two years but not more than five years

Assets

Liabilities

2020 
US$m

124.2

37.3

16.9

178.4

2019 
US$m

174.0

24.3

15.3

213.6

2020 
US$m

2019 
US$m

(120.8)

(172.5)

(34.2)

(14.3)

(24.0)

(13.9)

(169.3)

(210.4)

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Credit risk

Year ended 31 December

The Group considers its maximum exposure to credit risk to be as follows:

Cash and cash equivalents

Derivative financial instruments

Trade receivables (net of impairment provision)

Other receivables

Financial assets considered not to have exposure to credit risk:

Other investments

Total financial assets

Analysis of trade receivables over permitted credit period:

Trade receivables up to 1 month over permitted credit period

Trade receivables between 1 and 2 months over permitted credit period

Trade receivables between 2 and 3 months over permitted credit period

Trade receivables between 3 and 6 months over permitted credit period

Trade receivables in excess of 6 months over permitted credit period

Total trade receivables (net of impairment provision) in excess of permitted credit period

Trade receivables within permitted credit period

Total net trade receivables

Analysis of trade receivables impairment provision:

Trade receivables up to 1 month over permitted credit period

Trade receivables between 1 and 2 months over permitted credit period

Trade receivables between 2 and 3 months over permitted credit period

Trade receivables between 3 and 6 months over permitted credit period

Trade receivables in excess of 6 months over permitted credit period

Total impairment provision

2020 
US$m

2019 
US$m

71.9

9.0

224.1

24.5

329.5

6.1

335.6

17.7

4.3

1.0

1.2

1.2

25.4

198.7

224.1

1.2

0.2

0.2

0.4

8.2

10.2

177.4

4.2

209.4

31.7

422.7

6.2

428.9

17.0

5.1

1.7

2.3

0.3

26.4

183.0

209.4

0.1

–

–

0.2

7.8

8.1

Trade receivables consist of a large number of customers, spread across diverse geographical areas and industries.

Customers requesting credit facilities are subject to a credit quality assessment, which may include a review of their financial strength, 
previous credit history with the Group, payment record with other suppliers, bank references and credit rating agency reports. All active 
customers are subject to an annual review, or more frequent if appropriate, review of their credit limits and credit periods.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which requires the use of the 
lifetime expected loss provision for all trade receivables.

The Group monitors receivables for any significant increases in credit risk, and fully provides for trade receivables which are more than 6 
months overdue, unless there are specific circumstances which would indicate otherwise. For all other trade receivables, when determining 
expected losses, the Group takes into account the historical default experience and the financial position of the counterparties, as well as 
the future prospects considering various sources of information.

The Group does not have a significant credit risk exposure to any single customer.

Coats Group plc Annual Report and Accounts 2020

173

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

34 Derivatives and other financial instruments continued
Hedges
During 2020, the Group has hedged the following exposures:

•  interest rate risk – using interest rate swaps which are designated as fair value or cash flow hedges; and

•  currency risk – using forward foreign currency contracts.

At 31 December 2020, the fair value of such instruments was a net asset of $8.7 million (2019: $2.7 million). 

Interest rate swap fair value hedges outstanding at 31 December are expected to increase the income statement in the following periods:

Year ended 31 December

Within one year

Within one to two years

Within two to five years

2020 
US$m

2019 
US$m

1.2

1.2

2.2

4.6

0.4

0.3

0.6

1.3

The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is three months’ LIBOR.

35 Share-based payments
The total cost recognised in the consolidated Income Statement in respect of equity settled share-based payment plans was as follows:

Year ended 31 December

Long Term Incentive Plan (‘LTIP’)

Deferred bonuses

The average share price for the year ended 31 December 2020 was 58.7p (2019: 78.0p).

2020 
US$m

1.4

–

1.4

2019 
US$m

5.9

0.8

6.7

174

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information35 Share-based payments continued
LTIP
Under the terms of the Coats Group LTIP, executive directors and key senior executives may be awarded each year conditional entitlements 
to ordinary shares in the Company (in the form of nil cost options). The vesting of awards is subject to the satisfaction of a three-year 
performance condition, which is determined by the Remuneration Committee at the time of grant. The performance condition includes 
both market and non-market based measures.

Details of options outstanding under equity settled awards:

Outstanding at 1 January

Granted during the year

Vested during the year

Lapsed during the year

Exercised during the year

Outstanding at 31 December

Exercisable at 31 December

2020 
Options

2019 
Options

44,404,325

58,634,695

17,113,147

9,780,094

(545,804)

(4,252,860)

(3,944,198)

(2,233,488)

(16,494,550)

(17,524,116)

40,532,920

44,404,325

7,776,530

11,891,514

The options outstanding at 31 December 2020 had a weighted average remaining contractual life of 7.7 years (2019: 7.3 years).

The fair value of the market-based component of these awards was calculated using the Monte Carlo simulation method to reflect the 
likelihood of the market-based Total Shareholder Return (‘TSR’) performance condition, which attach to 20% (2019: 20%) of the award, 
being met, using the following assumptions:

Vesting period

Share price at valuation date

Exercise price

Risk free rate

Expected dividend yield

Expected volatility

Fair value per share

2020

3 years

58.9p

Nil

0.09%

0%

27.84%

24.9p

2019

3 years

81.5p

Nil

0.82%

0%

32.65%

48.0p

Deferred bonuses
Under the terms of the Coats Group Deferred Bonus Plan, any bonuses awarded to executive directors and key senior management  
will be the subject of a mandatory 25% to 50% deferred into shares, to be held for a three year retention period. Annual bonuses will be 
determined by reference to performance, in the normal course measured over one financial year. Awards are normally exercisable after 
three years.

The options outstanding at 31 December 2020 had a weighted average remaining contractual life of 8.3 years (2019: 8.0 years).

Coats Group plc Annual Report and Accounts 2020

175

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

35 Share-based payments continued
Share option scheme
The Company granted a number of awards under a share option scheme prior to 2010. There are no outstanding or exercisable share 
options under this scheme as of 31 December 2020 as set out below:

Outstanding at 1 January

Lapsed during the year

Exercised during the year

Outstanding at 31 December

Exercisable at 31 December

2020

2019

Weighted 
average  

Weighted 
average  

Options

exercise price

Options

exercise price

–

–

–

–

–

–

–

–

–

–

589,705

(64,960)

(524,745)

–

–

25.95p

25.95p

25.95p

–

–

36 Post balance sheet events
There are no material post balance sheet events requiring adjustment or disclosure.

37 Alternative performance measures
This Annual Report contains both statutory measures and alternative performance measures which, in management’s view, reflect  
the underlying performance of the business and provide a more meaningful comparison of how the Group’s business is managed and 
measured on a day-to-day basis.

The Group’s alternative performance measures and key performance indicators are aligned to the Group’s strategy and together  
are used to measure the performance of the business. A number of these measures form the basis of performance measures for 
remuneration incentive schemes.

Alternative performance measures are non-GAAP (Generally Accepted Accounting Practice) measures and provide supplementary 
information to assist with the understanding of the Group’s financial results and with the evaluation of operating performance for all the 
periods presented. Alternative performance measures, however, are not a measure of financial performance under International Financial 
Reporting Standards (‘IFRS’) as adopted by the European Union and should not be considered as a substitute for measures determined in 
accordance with IFRS. As the Group’s alternative performance measures are not defined terms under IFRS they may therefore not be 
comparable with similarly titled measures reported by other companies.

A reconciliation of alternative performance measures to the most directly comparable measures reported in accordance with IFRS 
is provided on pages 176 to 179. 

a) Organic growth on a constant exchange rate (CER) basis 
Organic growth measures the change in revenue and operating profit before exceptional and acquisition related items after adjusting  
for acquisitions. The effect of acquisitions is equalised by:

•  removing from the year of acquisition, their revenue and operating profit; and

•  in the following year, removing the revenue and operating profit for the number of months equivalent to the pre-acquisition  

period in the prior year.

The effects of currency changes are removed through restating prior year revenue and operating profit at current year exchange rates.

Organic revenue growth on a CER basis measures the ability of the Group to grow sales by operating in selected geographies and segments 
and offering differentiated cost competitive products and services.

Adjusted organic operating profit growth on a CER basis measures the underlying profitability progression of the Group.

Adjusted operating profit is calculated by adding back exceptional and acquisition related items (see note 4 for further details).

176

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information37 Alternative performance measures continued

Year ended 31 December

Revenue from continuing operations

Constant currency adjustment

Revenue on a CER basis

Revenue from acquisitions

Organic revenue on a CER basis

Year ended 31 December

Operating profit from continuing operations1

Exceptional and acquisition related items (note 4)

Adjusted operating profit from continuing operations

Constant currency adjustment

Adjusted operating profit on a CER basis

Operating loss from acquisitions

Organic adjusted operating profit on a CER basis

2020 
US$m

2019 
US$m

1,163.3

1,388.7

–

(32.7)

%  

Decline

 (16)%

1,163.3

1,356.0

 (14)%

(66.8)

-

1,096.5

1,356.0

 (19)%

2020 
US$m

103.1

7.5

110.6

–

110.6

0.9

111.5

2019 
US$m

191.0

7.0

198.0

(2.7)

195.3

–

%  

Decline

 (46)%

 (44)%

 (43)%

195.3

 (43)%

1. Refer to the consolidated income statement for a reconciliation of profit before taxation to operating profit from continuing operations.

b) Adjusted EBITDA 
Adjusted EBITDA is presented as an alternative performance measure to show the underlying operating performance of the Group 
excluding the effects of depreciation, amortisation and impairments and excluding exceptional and acquisition related items.

Operating profit from continuing operations before exceptional and acquisition related items and before depreciation of owned fixed assets 
and right-of-use assets and amortisation (Adjusted EBITDA) is as set out below:

Year ended 31 December 

Operating profit from continuing operations1

Exceptional and acquisition related items (note 4)

Adjusted operating profit from continuing operations

Depreciation of owned property, plant and equipment

Amortisation of intangible assets 

Adjusted EBITDA including IFRS 16 depreciation of right-of-use assets (Pre-IFRS 16 basis)

Depreciation of right-of-use assets

Adjusted EBITDA

2020 
US$m

103.1

7.5

110.6

30.5

4.0

 145.1

 18.3

163.4

2019 
US$m

191.0

7.0

198.0

29.9

5.1

 233.0

 15.2

248.2

1. Refer to the consolidated income statement for a reconciliation of profit before taxation to operating profit from continuing operations.

Net debt including lease liabilities under IFRS 16 at 31 December 2020 was $246.6 million (2019: $214.9 million). 

This gives a leverage ratio of net debt including lease liabilities to Adjusted EBITDA at 31 December 2020 of 1.5 (2019: 0.9). 

Net debt excluding lease liabilities under IFRS 16 at 31 December 2020 was $180.6 million (2019: $149.9 million). This gives a leverage ratio 
on a pre-IFRS 16 basis at 31 December 2020 of 1.2 (2019: 0.6).

For the definition and calculation of net debt excluding lease liabilities see note 30 (f).

Coats Group plc Annual Report and Accounts 2020

177

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOTES TO THE FINANCIAL STATEMENTS 
CONTINUED

37 Alternative performance measures continued
c) Underlying effective tax rate
The underlying effective tax rate removes the tax impact of exceptional and acquisition related items and net interest on pension  
scheme assets and liabilities to arrive at a tax rate based on the underlying profit before taxation.

A significant proportion of the Group’s net interest on pension scheme assets and liabilities relates to UK pension plans for which there is 
no related current or deferred tax credit or charge recorded in the income statement. The Group’s net interest on pension scheme assets 
and liabilities is adjusted in arriving at the underlying effective tax shown below and, in management’s view, were this not adjusted would 
distort the alternative performance measure. This is consistent with how the Group monitors and manages the underlying effective tax rate.

Year ended 31 December 

Profit before taxation

Exceptional and acquisition related items (note 4) 

Net interest on pension scheme assets and liabilities 

Underlying profit before taxation from continuing operations

Taxation charge from continuing operations

Tax (charge)/credit in respect of exceptional and acquisition related items and  
net interest on pension scheme assets and liabilities

Underlying tax charge from continuing operations

Underlying effective tax rate

2020 
US$m

79.6

6.8

4.7

91.1

37.4

(1.7)

35.7

39%

2019 
US$m

166.8

4.4

5.5

176.7

50.5

0.4

50.9

29%

d) Adjusted earnings per share
The calculation of adjusted earnings per share is based on the profit from continuing operations attributable to equity shareholders before 
exceptional and acquisition related items as set out below. Adjusted earnings per share growth measures the underlying progression of the 
benefits generated for shareholders.

Year ended 31 December

Profit from continuing operations

Non-controlling interests

Profit from continuing operations attributable to equity shareholders

Exceptional and acquisition related items net of non-controlling interests (note 4)

Tax credit in respect of exceptional and acquisition related items

Adjusted profit from continuing operations

Weighted average number of Ordinary Shares

Adjusted earnings per share (cents)

Adjusted earnings per share (decline %)

2020 
US$m

42.2

(15.8)

26.4

6.8

2.2

35.4

2019 
US$m

116.3

(20.1)

96.2

4.4

–

100.6

1,455,587,353

1,443,824,641

2.42

(65)%

6.97

The weighted average number of Ordinary Shares used for the calculation of adjusted earnings per share for the year ended 31 December 
2020 is 1,455,587,353 (2019: 1,443,824,641), the same as that used for basic earnings per ordinary share from continuing operations (see 
note 11).

178

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information37 Alternative performance measures continued
e) Adjusted free cash flow
Net cash generated by/(absorbed in) operating activities, a GAAP measure, reconciles to changes in net debt resulting from cash flows (free 
cash flow) as set out in the consolidated cash flow statement. A reconciliation of free cash flow to adjusted free cash flow is set out below. 
Adjusted free cash flow measures the Group’s underlying cash generation that is available to service capital demands.

Year ended 31 December

Change in net debt resulting from cash flows (free cash flow)

Acquisition of businesses (note 31)

Disposal of businesses 

Net cash outflow/(inflow) from discontinued operations (note 32)

Net cash flows in respect of Connecting for Growth programme

Payments to UK pension scheme

Net cash flows in respect of other exceptional and acquisition related items

Purchase of own shares by Employee Benefit Trust

Receipts from exercise of share options

Dividends paid to equity shareholders

Tax outflow in respect of adjusted cash flow items

Adjusted free cash flow

2020 
US$m

(23.2)

37.3

–

0.1

(0.4)

10.9

(0.7)

 3.1

–

0.2

0.7

2019 
US$m

72.3

4.9

(30.7)

(0.8)

4.3

26.7

6.2

 –

(0.2)

24.1

–

28.0

106.8

f) 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. ROCE measures the ability of the Group’s assets to deliver returns. 

Year ended 31 December

Operating profit from continuing operations before exceptional and acquisition related items1

Non-current assets:

Acquired intangible assets

Property, plant and equipment

Right-of-use assets

Trade and other receivables

Current assets:

Inventories

Trade and other receivables

Current liabilities:

Trade and other payables

Lease liabilities

Non-current liabilities

Trade and other payables

Lease liabilities

Capital employed

ROCE

1. Refer to note 4 for details of exceptional and acquisition related items.

2020 
US$m

110.6

41.8

254.4

60.7

19.0

187.0

274.5

2019 
US$m

198.0

41.8

276.3

63.4

20.1

172.5

261.2

 (255.7)

 (284.4)

 (16.4)

 (14.1)

 (18.1)

 (49.6)

497.6

22%

 (18.2)

 (50.9)

467.7

42%

Coats Group plc Annual Report and Accounts 2020

179

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCOMPANY BALANCE SHEET

31 December

Fixed assets:

Investments

Current assets:

Cash at bank and in hand

Creditors: amounts falling due within one year:

Loans from subsidiary undertakings

Trade and other payables

Net current liabilities

Net assets

Capital and reserves:

Share capital

Share premium account

Capital redemption reserve

Share options reserve

Capital reduction reserve

Own shares

Profit and loss account

Shareholders’ funds

Notes

2020
 US$m

2019 
US$m

4

1,244.2

1,244.2

0.6

0.8

(70.7)

(0.3)

(70.4)

(69.0)

(0.6)

(68.8)

1,173.8

1,175.4

5

90.1

10.5

14.1

18.5

59.8

89.6

10.5

14.1

18.5

59.8

5

(3.2)

(5.7)

984.0

988.6

1,173.8

1,175.4

The Company reported a loss for the financial year ended 31 December 2020 of $2.2 million (2019: $21.9 million profit).

Rajiv Sharma 
Group Chief Executive 

Simon Boddie
Chief Financial Officer

Approved by the Board 3 March 2021

Company Registration No.103548 

180

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCOMPANY STATEMENT OF CHANGES IN EQUITY

1 January 2019

Profit and total comprehensive 
income for the year

Issue of ordinary shares

Movement in own shares

Dividends to equity shareholders

Share 
capital 
US$m

88.5

Share 
premium 
account 
US$m

Capital 
redemption 
reserve 
US$m

10.4

14.1

Share 
options 
reserve 
US$m

18.5

Capital 
reduction 
reserve 
US$m

Own 
shares 
US$m

Profit and 
loss account 
US$m

Total 
equity 
US$m

59.8

(6.8)

992.8

1,177.3

–

1.1

–

–

–

0.1

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

1.1

–

21.9

(1.1)

(0.6)

(24.4)

21.9

0.1

0.5

(24.4)

31 December 2019

89.6

10.5

14.1

18.5

59.8

(5.7)

988.6

1,175.4

Loss and total comprehensive 
expense for the year

Issue of ordinary shares 

Movement in own shares

31 December 2020

-

0.5

-

90.1

-

-

-

-

-

-

-

-

-

-

-

-

10.5

14.1

18.5

59.8

-

-

2.5

(3.2)

(2.2)

(0.5)

(1.9)

(2.2)

-

0.6

984.0

1,173.8

Coats Group plc Annual Report and Accounts 2020

181

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationCOMPANY CASH FLOW STATEMENT

Year ended 31 December

Net cash flows from operating activities:

Operating profit

Decrease in creditors

Net cash flows from operating activities

Net cash flows from financing activities:

Purchase of own shares

Proceeds from sale of own shares

Receipts from exercise of share options

Dividends paid to equity shareholders

Net cash flows from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash at bank and in hand at the beginning of the year

Cash at bank and in hand at the end of the year

2020
 US$m

2019
 US$m

0.1

(0.7)

(0.6)

 (3.1)

3.7

-

(0.2)

0.4

(0.2)

0.8

0.6

24.5

(0.7)

23.8

 -

0.5

0.2

(24.1)

(23.4)

0.4

0.4

0.8

182

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOTES TO THE COMPANY FINANCIAL STATEMENTS

1 Accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and to the  
preceding year.

a) General information and basis of accounting
The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value,  
and in accordance with Financial Reporting standard 102 (FRS 102) as issued by the Financial Reporting Council.

Functional currency
The functional currency of Coats Group plc continued to be United States dollars (‘USD’) during the year ended 31 December 2020.

b) Fixed assets – investments
Investments in subsidiary undertakings are reflected at cost less provisions for any impairment.

c) Financial assets and liabilities
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. 
All financial assets and financial liabilities are initially measured at transaction price. If an arrangement constitutes a financing transaction, 
the financial asset or financial liability is measured at the present value of future payments discounted at a market rate of interest for  
a similar debt instrument. 

d) Impairment of assets
Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date. If there is objective 
evidence of impairment, an impairment loss is recognised in the profit and loss and the assets is reduced to its recoverable amount. The 
recoverable amount is the higher of its fair value less costs to sell and its value in use.

e) Share-based payments
Cash-settled
Cash-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at each 
reporting date. The fair value is expensed on a straight-line basis over the vesting period, with a corresponding increase in liabilities.

Equity-settled
The Group operates an equity-settled Long Term Incentive Plan for executives and senior management, settlement is in the form of Coats 
Group plc shares. Awards under this plan are subject to both market-based and non-market-based vesting criteria. 

The fair value at the date of grant is established by using an appropriate simulation method to reflect the likelihood of market-based 
performance conditions being met. As the Long Term Incentive Plan relates to employees of a subsidiary, when there is no recharge of  
the cost, the fair value is charged to Investments on a straight-line basis over the vesting period, with appropriate adjustments being made 
during this period to reflect expected vesting for non market-based performance conditions and forfeitures. The corresponding credit is to 
shareholders’ funds.

To satisfy awards under this Plan, shares may be purchased in the market by an Employee Benefit Trust (‘EBT’) over the vesting period. Coats 
Group plc is the sponsoring employer of the EBT and its activities are considered an extension of the Company’s activities. Therefore the 
shares purchased by the EBT are included as a deduction from shareholders’ funds and other assets and liabilities of the EBT are recognised 
as assets and liabilities of Coats Group plc.

f) Taxation
Provision is made for taxation assessable on the profit or loss for the year as adjusted for disallowable and non-taxable items. Deferred 
taxation is provided in full in respect of timing differences which have arisen but not reversed at the balance sheet date, except that 
deferred tax assets (including those attributable to tax losses carried forward) are only recognised if it is considered more likely than not  
that they will be recovered. Deferred taxation is measured on a non-discounted basis.

g) Dividends
Dividends proposed are recognised in the period in which they are formally approved for payment.

Coats Group plc Annual Report and Accounts 2020

183

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationNOTES TO THE COMPANY FINANCIAL STATEMENTS 
CONTINUED

1 Accounting policies continued
h) Critical accounting judgements and key sources of estimation uncertainty
Carrying value of investments:
The carrying values of investments are assessed annually for indicators of impairment. If an impairment review is required judgement is 
involved in calculating the recoverable amount. No indicators of impairment were identified during the year ended 31 December 2020.

There are no sources of estimation uncertainty at the balance sheet date, that may have a significant risk of causing material adjustment  
to the carrying amounts of assets and liabilities within the next financial year. 

2 Result for the year
The Company has not presented its own profit and loss account as permitted by section 408 of the Companies Act 2006. The loss for the 
year attributable to shareholders was $2.2 million (2019: $21.9 million profit).

Details of directors’ remuneration are set out on pages 79 to 95 within the Remuneration Report and form part of these financial statements.

3 Dividends
Dividends amounting to $nil in respect of the year ended 31 December 2020 were payable to Coats Group plc shareholders during the year 
(2019: $24.4 million). Details of the proposed final dividend for the year ended 31 December 2020 are set out in note 12 of the consolidated 
financial statements.

4 Investments

At 31 December 2019

At 31 December 2020

Investments in 
subsidiary 
undertakings 
US$m

1,244.2

1,244.2

5 Share capital and reserves
There are 1,452,077,272 Ordinary Shares of 5p issued and fully paid at 31 December 2020 (2019: 1,444,816,041).

The movement in share capital during the year is set out in note 26 of the consolidated financial statements.

The own shares reserve at 31 December 2020 of $3.2 million (2019: $5.7 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 2020 was 7,010,248 (2019: 14,591,071).

As at 31 December 2020 the Company had distributable profits of $218.2 million (2019: $220.4 million).

6 Related party transactions
Amounts due from and to other Group companies are disclosed on the face of the Balance Sheet on page 180.

184

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationGROUP STRUCTURE

The Company, through various subsidiaries, has branches in several different jurisdictions in which the business operates outside the UK. 
Unless otherwise indicated, all shareholdings owned directly or indirectly by the Company represents 100% of issued share capital of  
the subsidiary.

Subsidiaries:
Direct holdings of the Company

Country of Incorporation Company name

Registered office address

United Kingdom

Arrow HJC

United Kingdom

B. M. Estates Limited

United Kingdom

Coats Limited

Share class

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Contractors’ Aggregates 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

GPG (UK) Holdings Limited

United Kingdom

GPG March 2004 Limited

United Kingdom

MFC (Predecessors) Limited

United Kingdom

S G Warburg Group Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

Mazars Llp, 45 Church Street, Birmingham, 
B3 2RT, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

Subsidiaries:
Indirect holdings of the Company

Country of Incorporation Company name

Registered office address

Share class

Argentina

Coats Cadena S.A. – Argentina

Tucuman 1, 4th Floor, (1049) Capital 
Federal, Argentina

ARS1.00 Ordinary Nominal

Australia

Australia

Australian Country Spinners Pty 
Limited1

c/o Jagen Pty. Ltd, Level 1, 26-29 Beatty 
Avenue, Armadale VIC 3143, Australia

AUD1.00 Ordinary

Australian Country Spinners 
Unit Trust1

c/o Jagen Pty. Ltd, Level 1, 26-29 Beatty 
Avenue, Armadale VIC 3143, Australia

AUD1.00 Units

Australia

Coats Australian Pty Ltd

Australia

GPG Services Pty Limited

Unit 2, 56 Keys Road, Moorabbin VIC 
3189, Australia

c/o BDO, Level 11, 1 Margaret Street, 
Sydney NSW 2000, Australia

AUD0.54 Ordinary

AUD1.00 Ordinary

Australia

Guinness Peat Group 
(Australia) Pty Limited

c/o BDO, Level 11, 1 Margaret Street, 
Sydney NSW 2000, Australia

AUD1.00 Ordinary, AUD14,977.77 
Redeemable Preference

Australia

Sabatica Pty Limited

Bangladesh

Coats Bangladesh Limited

c/o BDO, Level 11, 1 Margaret Street, 
Sydney NSW 2000, Australia

Tower 117, 117/A Tejgaon Industrial Area, 
Dhaka 1208, Bangladesh

AUD1.00 Ordinary

BDT100.00 Ordinary (80%)

Bangladesh

Coats Crafts Bangladesh 
Limited

Novo Tower, 270 Tejgaon Industrial Area, 
Dhaka 1208, Bangladesh

BDT100.00 Ordinary (80%)

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CONTINUED

Country of Incorporation Company name

Registered office address

Share class

Brazil

Brazil

Coats Corrente Ltda

Corrente Sociedade de 
Previdência Privada

Rua do Manifesto, N 705, Bloco A, 
Ipiranga, Sao Paulo, SP BR, Brazil

Rua do Manifesto, N 705, Bloco A, 
Ipiranga, Sao Paulo, SP BR, Brazil

BRL1.00 Ordinary

Civil association

Bulgaria

Coats Bulgaria Eood

Coats Canada Inc

Tharigradsko shouse bld 7th Km, Sofia 
1748, Bulgaria

BGL50.00 Ordinary

10 Roybridge Gate Blvd, Vaughan ON L4H 
3M8, Canada

Common (no par value)

Canada

Canada

Chile

Chile

China

China

China

China

Egypt

Egypt

Egypt

Staveley Services Canada Inc

44 Chipman Hill, Suite 1000, Saint John 
NB E2L 2A0, Canada

CAD Common, CAD Class A Pref 1, 
CAD Class A Pref 2

Coats Cadena Ltda

Enrique Gomez Correa 5750, 3er piso, 
Oficina No.4, Macul, Santiago, Chile

The Central Agency Limited – 
Chile

Enrique Gomez Correa 5750, 3er piso, 
Oficina No.4, Macul, Santiago, Chile

US$1.00 Ordinary

US$1.00 Ordinary

Coats Opti Shenzhen Limited

Coats Shenzhen Limited

Guangzhou Coats Limited

Qingdao Coats Limited

Shenzhen Coats Industrial Park, Fuyong 
Town, Baoan District, Shenzhen, China

Shenzhen Coats Industrial Park, Fuyong 
Town, Baoan District, Shenzhen, China

US$1.00 Ordinary (90%)

US$1.00 Ordinary (90%)

Art Street 11, 1106 Xin Gang Road, Haizhu 
District, Guanghou, 510310, China

HKD1.00 Ordinary (90%)

Qingdao Huanhai, 
Economic+Technological Development 
Zone, Chengyang, Qingdao 266108, 
China

No.8 Building, Export Processing Garden, 
Songjiang Industrial Zone 201613, 
Shanghai, China

US$1.00 Ordinary (90%)

US$1.00 Ordinary (90%)

China

Shanghai Coats Limited

Colombia

Coats Cadena Andina SA – 
Colombia

Avenida Santander, N.5E-87, Pereira, 
Colombia

COP20.63 Ordinary

Ecuador

Coats Cadena SA Ecuador

Coats Craft Egypt

De las Avellanas E, 2-74 y El Juncal, Quito, 
Ecuador

US$1.00 Ordinary

Industrial Area Zone B3, Plot 78, 10th of 
Ramadan City, Cairo, Egypt

EGP1.00 Ordinary

Coats Egypt for manufacturing 
and dyeing sewing thread SAE

Industrial Area Zone B3, Plot 78, 10th of 
Ramadan City, Cairo, Egypt

US$11.625 Ordinary

Coats Industrial Trading Egypt

Industrial Area Zone B3, Plot 78, 10th of 
Ramadan City, Cairo, Egypt

EGP4000.00 Ordinary

El Salvador

Coats El Salvador, S.A. de C.V.

Estonia

Coats Eesti AS – Estonia

Zona Franca Export Salva, Edificio No 18C, 
San Salvador, El Salvador

US$12.00 Ordinary

Ampri tee 9/4, Lubja küla 74010 Viimsi 
Vald, Harjumaa, Estonia

€63.90 Ordinary

France

Germany

Coats France S.A.S.

8 avenue Hoche, 75008, Paris, France

€0.60 Ordinary

Coats GmbH

Huefingerstrasse 28, D-78199, 
Braunlingen, Germany

€12,000,000.00 Ordinary

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Registered office address

Germany

Coats Opti Germany GmbH

Germany

Coats Thread Germany GmbH

1 Suedwieke 180, 26817 Rhauderfehn, 
Germany

Huefingerstrasse 28, D-78199, 
Braunlingen, Germany

Share class

€1.00 Ordinary

€1.00 Ordinary

Germany

Schwanenwolle Tittel & 
Krueger AG i. L

RHS, Stadtstrasse 29, 79104 Freiburg, 
Germany

DEM1.00 Ordinary

Guatemala

Centraltex de Guatemala, S.A.

Guatemala

Coats de Guatemala, S.A.

Guatemala

Crafts Central America, S.A.

26 Avenida No. 7-27, Zona 4, Mixco 
oficina 11, Guatemala

13-78 Zona 10, Edif. Intercontinental Plaza 
Torre Citigroup Nivel 17, Oficina 1702, 
Ciudad, Guatemala

26 Avenida No. 7-27, Zona 4, Mixco 
oficina 11, Guatemala

Guatemala

Guatemala

Distribuidora Coats de 
Guatemala, Sociedad Anomina

39 Avenida, 3-47 Zona 7, Colonia El 
Rodeo, Guatemala, Guatemala

Guatemala Thread Company 
Sociedad Anonima

39 Avenida, 3-47 Zona 7, Colonia El 
Rodeo, Guatemala, Guatemala

Honduras

Coats Honduras, S.A.

Hong Kong

China Thread Development 
Company Limited

Hong Kong

Coats (China) Limited

Hong Kong

Coats China Holdings Limited

Hong Kong

Coats Hong Kong Limited

Hong Kong

Coats Opti Hong Kong Limited

Hong Kong

Coats Thread HK Limited

Edificio #13 Zona Libre Inhdelva, 800 mts. 
Carretera a la Jutosa, Choloma, Cortes, 
Honduras

Suite 23-25, Langham Place Office Tower, 
8 Argyle Street, Mongkok, Kowloon, Hong 
Kong

Suite 23-25, Langham Place Office Tower, 
8 Argyle Street, Mongkok, Kowloon, Hong 
Kong

Suite 23-25, Langham Place Office Tower, 
8 Argyle Street, Mongkok, Kowloon, Hong 
Kong

Suite 23-25, Langham Place Office Tower, 
8 Argyle Street, Mongkok, Kowloon, Hong 
Kong

Suite 23-25, Langham Place Office Tower, 
8 Argyle Street, Mongkok, Kowloon, Hong 
Kong

Suite 23-25, Langham Place Office Tower, 
8 Argyle Street, Mongkok, Kowloon, Hong 
Kong

GTQ100.00 Ordinary

GTQ1.00 Ordinary

GTQ100.00 Ordinary

GTQ1.00 Ordinary

GTQ10.00 Ordinary

HNL100.00 Ordinary

HKD10.00 Ordinary

HKD10.00 Ordinary

HKD10.00 Ordinary

HKD10.00 Ordinary (90%)

HKD1.00 Ordinary

HKD10.00 Ordinary

Hong Kong

Fast React Asia (HK) Limited

Room 2203 22/F, Tower 1, Lippo Centre, 
89 Queensway, Hong Kong

HKD1.00 Ordinary

Hong Kong

Hungary

Fastreact Systems (Far East) Co 
Limited

Room 2203 22/F, Tower 1, Lippo Centre, 
89 Queensway, Hong Kong

HKD1.00 Ordinary

Coats Magyarorszag 
Cernagyarto es Ertekesito 
Korlatolt Felelossegu Tarsasag

1044 Budapest, Vaci ut 91, Hungary

HUF100,000.00 Ordinary

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CONTINUED

Country of Incorporation Company name

Registered office address

Share class

India

India

Intellosol Softwares India 
Private Limited

Madura Coats Private Limited

Ground Floor, S-606-B School Block, 
Shakarpur Delhi, East Delhi, DL – 110092 
India

7th Floor, Jupiter 2A, Prestige Tech Park, 
Sarjapur Marathalli Ring Road, Bangalore, 
560103, India

INR10.00 Ordinary

INR10.00 Ordinary

Indonesia

PT. Coats Rejo Indonesia

Ventura Building, 5th Floor, Jl RA Kartini 
No 26, Cilandak, Jakarta 12430, Indonesia

IDR415.00 Ordinary-A, IDR627.00 
Ordinary-B, US$1.00 Preference

Indonesia

PT Coats Trading Indonesia

Coats (Israel) Ltd2

Coats Italy S.r.l.

Coats (Madagascar) 
International

Coats (Madagascar) S.AR.L 
(EPZ)

Ventura Building, 5th Floor, Jl RA Kartini 
No 26, Cilandak, Jakarta 12430, Indonesia

USD1.00 Ordinary

2 Shidlovsky Road, Yavne, Israel

US$400.00 Ordinary

Sesto San Giovanni (MI), Via Milanese, 20 
CAP, 20099, Milan, Italy

First Immo, Galaxy Industrial Estate, Rue 
du Dr. Raseta, Andraharo, Antananarivo, 
Madagascar

First Immo, Galaxy Industrial Estate, Rue 
du Dr. Raseta, Andraharo, Antananarivo, 
Madagascar

€5,000,000.00 Quota

MGF100,000.00 Ordinary

MGF100,000.00 Ordinary

Coats Thread (Malaysia) Sdn. 
Bhd.

49-B Jalan Melaka Raya 8, Taman Melaka 
Raya, 75000 Melaka, Malaysia

RM10.00 A, RM10.00 B, RM10.00 C 
(99%)

J & P Coats (Mauritius) Ltd

Allee des Mangues, Pailles, Mauritius

Rs100.00 Ordinary

Coats Indian Ocean Holding Co 
Limited

2nd Floor, IBL House, Caudan, Port-Louis, 
Mauritius

US$100.00 Ordinary

Israel

Italy

Madagascar

Madagascar

Malaysia

Mauritius

Mauritius

Mexico

Coats Assets de Mexico SA de 
CV

Mexico

Coats Mexico S.A. de C.V.

Morocco

Coats Maroc

Morocco

Netherlands

Netherlands

Mercerie Industrielle de 
Casablanca

Coats Industrial Europe 
Holdings B.V.

Coats Industrial Thread 
Holdings B.V

Netherlands

Coats Northern Holdings B.V.

Periferico Sur #3325 Piso 8, Col. San 
Jerónimo Lídice, Magdalena Contreras, 
Mexico City, CP10200, Mexico

Periferico Sur #3325 Piso 8, Col. San 
Jerónimo Lídice, Magdalena Contreras, 
Mexico City, CP10200, Mexico

220 Bld Chefchaouni, Ain Sebaa, 
Casablanca, Morocco

220 Bld Chefchaouni, Ain Sebaa, 
Casablanca, Morocco

MXN1.00 Series A Fixed

MXP1.00 Ordinary-A, MXP1.00 
Ordinary-B

MAD100.00 Ordinary

MAD100.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

€1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

€1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

€1.00 Ordinary

Netherlands

Coats South America Holdings 
B.V.

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

€1.00 Ordinary

Netherlands

Coats South Asia Holdings B.V.

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

€1.00 Ordinary

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Registered office address

Netherlands

Coats Southern Holdings B.V.

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

Share class

€1.00 Ordinary

Netherlands

New Zealand

Guinness Peat Group 
International Holdings BV

Naritaweg 165, 1043 BW, Amsterdam, 
Netherlands

€43,146 Ordinary

Coats Patons (New Zealand) 
Ltd

3 Mana Place, Wira, Auckland, New 
Zealand

NZD1.00 Ordinary

Nicaragua

Coats de Nicaragua SA

J & P Coats Pakistan (Pvt) 
Limited

Coats Cadena SA – Peru

Coats Polska Spolka z 
oganiczona odpowiedzialnoscia

Coats – Comercio de Linhas, 
Fechos e Acessorios, Para a 
Industria SA

Altamira d’este, Rotonda Madrid #235, 
Managua, Nicaragua

Suites 112-113, Prime Office Lobby, Park 
Towers, Shahrah-e-Firdousi, Clifton, 
Karachi, 75600, Pakistan

NIO100.00 Ordinary

PKR100.00 Ordinary

Av. Republica de Panama 3461, Piso 9, San 
Isidro, Lima, Peru

PEN 0.01 Ordinary (99%)

91-214 Lodz, ul, Kaczencowa 16, Poland

PLN1,000.00 Ordinary

Praca do Almada, No 10, 4490, Povoa do 
Varzim, Portugal

€1.00 Ordinary Bearer Shares

Pakistan

Peru

Poland

Portugal

Portugal

Companhia de Linha Coats & 
Clark S.A.

Praca do Almada, No 10, 4490, Povoa do 
Varzim, Portugal

€1.00 Bare Shares

Romania

Coats Romania SRL

Russian Federation

Coats LLC

Singapore

Coats International Pte. Limited

Singapore

Coats Overseas Pte Ltd

Municipiul Odorheiu Secuiesc, Str. Nicolae 
Balcescu, Nr. 71, Judetul Harghita, 
Romania

53 Lenin Street, Oktyabrsky, Lubertsy, 
140060, Moscow Region, Russia

RON169.38 Ordinary

SUR173.55 Ordinary

10 Changi Business Park Central 2, #05-01 
HansaPoint, 486030, Singapore

SGD1.00 Ordinary

10 Changi Business Park Central 2, #05-01 
HansaPoint, 486030, Singapore

SGD1.00 Ordinary

South Africa

Coats South Africa (Proprietary) 
Limited

107 Escom Road, New Germany, 3620, 
KZN, Natal, South Africa

ZAR0.01 Ordinary, ZAR0.01 
Cumulative Redeemable Preference, 
ZAR0.01 Non-redeemable 
Preference Shares, ZAR0.01 
Non-redeemable
Non-cumulative Variable Rate 
Convertible Preference

South Africa

Cotnat Properties (Proprietary) 
Limited

107 Escom Road, New Germany, 3620, 
KZN, Natal, South Africa

ZAR1.00 Ordinary

Spain

Spain

Sri Lanka

Coats Spain, S.L.

Gotex S.A.

Poligono Industrial Can Roqueta, Avda.Ca 
N’Alzina nr.79, Calle N’Alzina, Sabadell, 
Barcelona, Spain

€1.00 Ordinary

Poligono Industrial Can Roqueta, Calle 
N’Alzina, 79 Sabadell, Barcelona, Spain

€6.02 Ordinary

Coats Thread Exports (Private) 
Limited

479, 8th Floor, HNB Towers, T.B. Jayah 
Mawatha, Colombo 410, Sri Lanka

LKR100.00 Ordinary (99%)

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CONTINUED

Country of Incorporation Company name

Registered office address

Share class

Sri Lanka

Coats Thread Lanka (Private) 
Limited

479, 8th Floor, HNB Towers, T.B. Jayah 
Mawatha, Colombo 410, Sri Lanka

LKR10.00 Ordinary (99%)

Sweden

Coats Industrial Scandinavia AB

Switzerland

Coats Stroppel AG

Thailand

Coats Threads (Thailand) Ltd

Tunisia

Tunisia

Turkey

Coats Industrial Tunisie

Coats Trading Tunisie

Stationsvagen 2, Box 109, SE-516 31 
Dalsjofors, Sweden

c/o Haussmann Treuhand AG, 
Seefeldstrasse 45, 8008 Zurich, 
Switzerland

39/60 Moo 2 Tambol Bangkrachaw, 
Amphur Muang, Samutsakorn Province 
74000, Thailand

52, rue du Tissage, Douar Hicher, 
Manouba, 2086, Tunisia

52, rue du Tissage, Douar Hicher, 
Manouba, 2086, Tunisia

SEK1,000.00 Bearer

CHF2,500.00 

THB1,000.00 Ordinary

TND10.00 Ordinary

TND10.00 Ordinary

Coats (Turkiye) Iplik Sanayii AS

Organize Sanayi Bolgesi Mavi Cad. No 2, 
16220 Bursa, Turkey

TRY1.00 New Ordinary (92%)

Ukraine

Coats Ukraine Ltd

Moskovskiy ave. 28A, litera B, Kiev, 04655, 
Ukraine

UAH1.00 Ordinary

United Kingdom

Allied Mutual Insurance 
Services Ltd

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Anfield 1 Limited

United Kingdom

Anfield 2 Limited

Mazars Llp, 45 Church Street, Birmingham, 
B3 2RT United Kingdom

£1.00 Ordinary

Mazars Llp, 45 Church Street, Birmingham, 
B3 2RT United Kingdom 

£1.00 Ordinary, £1.00 Deferred

United Kingdom

Barbour Threads Limited

United Kingdom

Brown Shipley Holdings Limited

United Kingdom

Brunel Pension Trustees Limited

United Kingdom

Cardpad Limited

United Kingdom

Coats (UK) Limited

United Kingdom

Coats Digital Limited

United Kingdom

Coats Finance Co. Limited

Cornerstone, 107 West Regent Street, 
Glasgow, G2 2BA, United Kingdom

£10.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary, £1.00 Ordinary-A

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

United Kingdom

United Kingdom

Coats Group Finance Company 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£0.33 Ordinary

Coats Holding Company  
(No. 1) Limited

Coats Holding Company  
(No. 2) Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£0.125 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£0.25 Ordinary

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Registered office address

United Kingdom

Coats Holdings Ltd

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

Share class

£1.00 Ordinary

United Kingdom

Coats Industrial Thread Brands 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Coats Industrial Thread Limited

United Kingdom

Coats Patons Limited

United Kingdom

Coats Pensions Trustee Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

Cornerstone, 107 West Regent Street, 
Glasgow, G2 2BA, United Kingdom

£0.25 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Coats Property Management 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Coats Shelfco (BDA) Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Coats Shelfco (CV Nominees) 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Coats Shelfco (VV) Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£0.01 Ordinary, £0.075 Deferred 

United Kingdom

Coats Thread (UK) Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Coats UK Pension Scheme 
Trustees Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Corah Limited

United Kingdom

D. Byford & Co Limited

United Kingdom

Embergrange

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£0.25 Ordinary, £1.00 4.2% 
Cumulative Preference 

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£0.20 Ordinary, £1.00 Preference

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Fast React Systems 
(Bangladesh) Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Fast React Systems Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary, £1.00 Special 
redeemable non-voting shares

United Kingdom

GPG Europe Limited

United Kingdom

GPG Securities Trading Ltd

United Kingdom

Griffin SA Ltd

United Kingdom

GSD (Corporate) Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

€1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

GSD Holdings Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary-A, £1.00 Ordinary-B

United Kingdom

Guinness Peat Overseas 
Holdings Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

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CONTINUED

Country of Incorporation Company name

Registered office address

United Kingdom

Hicking Pentecost Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

Share class

£0.50 Ordinary

United Kingdom

I.P. Clarke & Co. Limited

United Kingdom

J.& P. Coats, Limited

United Kingdom

Marshaide Limited

United Kingdom

Needle Industries Limited

United Kingdom

Patons & Baldwins Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

1 George Square, Glasgow G2 1AL, 
United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

Patons Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary, £1.00 7% 
Preference

United Kingdom

United Kingdom

Simpson, Wright & Lowe, 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

Sir Richard Arkwright & Co. 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

United Kingdom

SIRBS Pension Trustee Limited

United Kingdom

Staveley 2005 No 3 Limited

United Kingdom

Staveley Industries Limited

United Kingdom

Staveley Services Limited

United Kingdom

The Central Agency Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

Cornerstone, 107 West Regent Street, 
Glasgow, G2 2BA, United Kingdom

£10.00 Ordinary

United Kingdom

United Kingdom

The Coats Trustee Company 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

Thomas Burnley & Sons, 
Limited

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£10.00 Ordinary

United Kingdom

Tootal Group Limited

United Kingdom

Tootal Limited

United States

Coats American Inc

United States

Coats Garments (USA) Inc

United States

Coats Holdings Inc

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£0.25 Ordinary, £1.00 3.5 % 
Cumulative Preference 

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

£1.00 Ordinary

CT Corporation System, 820 Bear Tavern 
Road, West Trenton, NJ 08628, USA

US$10.00 COMMON, US$5.00 5% 
Cumulative Preference

CT Corporation System, Corporation Trust 
Centre, 1209 Orange Street, Wilmington, 
DE 19801, USA

CT Corporation System, Corporation Trust 
Centre, 1209 Orange Street, Wilmington, 
DE 19801, USA

US$1.00 Ordinary

US$1.00 Ordinary

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Registered office address

Share class

United States

Coats HP Holding Inc

United States

Coats HP Inc

United States

Coats North America 
Consolidated Inc

United States

Coats North America de 
Republica Dominica Inc

United States

Coats Puerto Rico Inc

United States

Coats Sales Corporation

United States

Jaeger Sportswear Ltd

United States

Patrick Yarn Mill, Inc.,

United States

Staveley Inc

CT Corporation System, 160 Mine Lake 
Ct., Suite 200, Wake NC 27615-6417, USA 

US$1.00 Ordinary

CT Corporation System, 160 Mine Lake 
Ct., Suite 200, Wake NC 27615-6417, USA 

US$1.00 Ordinary

CT Corporation System, Corporation Trust 
Centre, 1209 Orange Street, Wilmington, 
DE 19801, USA

c/o CT Corporation System, 225 
Hillsborough Street, Raleigh, Wake 
County, North Carolina 27603, USA

US$0.10 Ordinary, US$1.00 Class B 
Voting Shares

US$1.00 Ordinary

CT Corporation System, 150 Fayetteville 
Street, Box 1011, Raleigh NC 27601, USA

CT Corporation System, 820 Bear Tavern 
Road, West Trenton, NJ 08628, USA

US$1.00 Ordinary

US$100.00 Ordinary

CT Corporation System, 111 8th Avenue, 
New York, NY 10011, USA

US$ Common

700 S Railroad Avenue, Kings Mountain 
NC 28086-3360, USA

US$1.00 Class A voting, Class B 
non-voting

The Corporation Trust Co., 1209 Orange 
Street, Wilmington, DE 19801, USA.

US$0.01 Ordinary

United States

The Calico Printers Association 
(U.S.A.) Limited

CT Corporation System, 111 8th Avenue, 
New York, NY 10011, USA

US$1.00 Ordinary

United States

Westminster Fibers, Inc.

Uruguay

Coats Cadena S.A. – Uruguay

Vietnam

Coats Phong Phu Limited 
Liability Company

c/o The Corporation Trust, 1209 Orange 
Street, Wilmington, Delaware, USA

Rufino Dominguez 1864, Montevideo, 
Uruguay

No. 48 Tang Nhon Phu Street, Tang Nhon 
Phu B Ward, District 9, Ho Chi Minh City, 
Vietnam

US$1.00 Common shares

UYU0.05 Ordinary

US$1.00 Ordinary (64%)

1. 100% owned by the joint venture ACS Nominees Pty Limited.

2. Liquidated in February 2021.

Coats Group plc Annual Report and Accounts 2020

193

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther information 
GROUP STRUCTURE 
CONTINUED

Joint Ventures
Country of Incorporation Company Name

Australia

ACS Nominees Pty Limited

Registered Office address

Share class

c/o Jagen Pty. Ltd, Level 1, 26-29 Beatty 
Avenue, Armadale VIC 3143, Australia

AUD1.00 Ordinary (50%)

Guangying Spinning Company 
Limited

2 Yuan Cun Xi Jie Guangzhou, 510655, 
China

US$1.00 Ordinary (50%)

Tianjin Jinying Spinning Co Ltd

S&P Threads Private Limited

Jinlai Road Liqizhuang, Xi Qing District, 
Tianjin, 300381, China

Delite Theatre Building, III Floor, Asaf Ali 
Road, New Delhi, 110 002, India

US$1.00 Ordinary (50%)

INR10.00 Ordinary (50%)

4 Longwalk Road, Stockley Park, Uxbridge, 
UB11 1FE, United Kingdom

US$0.01 Ordinary (50%)

United Kingdom

Coats VTT Limited

China

China

India

194

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceFinancial statementsOther informationFIVE-YEAR SUMMARY

For the year ended 31 December

Continuing operations (before exceptional and acquisition  
related items)1:

Revenue2

Cost of sales

Gross profit

Operating costs2

Operating profit

Share of profits from joint ventures

Finance income

Finance costs

Profit before taxation

Taxation

Profit from continuing operations

Adjusted earnings per share (cents)

Dividend per share (cents)

Adjusted free cash flow ($m)

Return on capital employed (%)

Notes:

2016
US$m

2017 
US$m

2018 
US$m

20194 
US$m

2020 
US$m

1,276.0

1,356.1

1,414.7

1,388.7

1,163.3

(789.2)

486.8

(347.6)

139.2

0.8

4.3

(35.9)

108.4

(41.0)

67.4

4.02

1.253

58.9

(849.7)

506.4

(345.8)

160.6

1.3

2.1

(25.4)

138.6

(44.6)

94.0

5.70

1.44

76.4

(901.9)

512.8

(317.9)

194.9

0.1

1.7

(26.1)

170.6

(53.8)

116.8

6.87

1.66

96.2

35.2%

35.4%

42.6%

(898.1)

490.6

(292.6)

198.0

1.1

1.7

(29.6)

171.2

(50.5)

120.7

6.97

0.555

106.8

42.3%

(806.6)

356.7

(246.1)

110.6

0.6

0.7

(25.5)

86.4

(35.2)

51.2

2.42

 1.30

28.0

22.2%

1. The results for 2016-2017 have been restated following the disposal of the North America Crafts business.

2. Revenue and operating costs have been restated for 2016-2017 following the Group’s adoption of IFRS 15 ‘Revenue from contracts with customers’ on 1 January 2018.

3. On a pro-forma basis (final dividend in 2016: 0.84c per share).

4. The Group adopted IFRS 16 ‘Leases’ from 1 January 2019 using the modified retrospective approach and therefore results for 2016-2018 are not restated.

5. In March 2020 the Company announced it had taken the decision, given the uncertainties caused by the Covid pandemic, to cancel the proposed 2019 final dividend payment of 1.30 cents per ordinary 

share which was due to be paid in May 2020.

Coats Group plc Annual Report and Accounts 2020

195

coats.com/investorsStrategic reportCorporate governanceOther informationFinancial statementsUK registered members 
To manage your shareholding online, 
please visit: investorcentre.co.uk

SHAREHOLDER INFORMATION

United Kingdom
4 Longwalk Road, 
Stockley Park, 
Uxbridge,
UB11 1FE
Tel: 020 8210 5000
coats.com 

Incorporated and registered
in England No. 103548

Registered office: 
4 Longwalk Road,
Stockley Park, 
Uxbridge,
UB11 1FE

Location of share registers
The Company’s register of members is maintained in the United Kingdom

Register enquiries may be addressed direct to the Company’s share registrars named below:

Registrar

Telephone and postal enquiries

Inspection of Register

UK Main Register:

Computershare Investor  
Services PLC

The Pavilions, 
Bridgwater Road, 
Bristol BS99 6ZZ 
Tel: 0370 707 1022 
Facsimile: 0370 703 6143

The Pavilions, 
Bridgwater Road, 
Bristol BS99 6ZZ

196

Coats Group plc Annual Report and Accounts 2020

coats.com/investorsStrategic reportCorporate governanceOther informationFinancial statementsC

O

A

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G

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P

P

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P

O

R

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2

0

2

0

A full copy of our Annual Report can be downloaded,  
along with other relevant documents from

coats.com/ar2020

Coats Group plc 
4 Longwalk Road 
Stockley Park 
Uxbridge 
UB11 1FE
Tel: 020 8210 5000 
coats.com 

Incorporated and registered in England No. 103548  
Registered ofﬁce: 4 Longwalk Road, Stockley Park, Uxbridge, UB11 1FE

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