GLOBAL
LEADERSHIP
Threads
and footwear
components
Coats Group plc
Annual Report 2022
Coats Group plc Annual Report and Accounts 2022
OUR PURPOSE IS TO CONNECT TALENT,
TEXTILES AND TECHNOLOGY TO MAKE
A BETTER AND MORE SUSTAINABLE WORLD.
Big, bold, game-changing ideas are crucial to delivering this.
We are accelerating profitable sales growth through our ground-breaking
sustainable products and solutions, transforming Coats for the future
and creating value for our customers, their industries, our shareholders,
our people and the communities in which we operate.
Read about our business model on page 14
Read about our values on page 11
Read about our strategy on page 12
Read about our culture on page 16
TABLE OF CONTENTS
Strategic report
03
2022 full year results
and highlights
04 Coats at a glance
06 Chair’s statement
08 CEO’s statement
11
12
14
16
18
24
26
Our values
Strategy
Business model
People and culture
Case studies
Sustainability
Innovation
28 Market trends
30
32
Key performance indicators
Stakeholder engagement
35
39
42
50
TCFD
Section 172 statement
Principal risks and uncertainties
Long term viability statement
51 Operating review
54
Financial review
Corporate governance
57 Chair’s introduction to governance
61 Board of Directors
64 Corporate governance report
71
Audit and Risk Committee report
77 Nomination Committee report
80 Directors’ report
85 Remuneration Committee report
89 Directors’ remuneration report
Financial statements
105
Independent Auditor’s report
114 Primary financial statements
118 Notes to the financial statements
170 Company financial statements
171
Notes to Company financial
statements
Other information
173 Group structure
180 Five-year summary
180 Shareholder information
DISCOVER OUR STRATEGY IN ACTION
Accelerating profitable sales growth:
Winning with the winners
Transforming the business:
Building for the future
Value creation:
Creating a global footwear champion
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20
22
See our online ‘Year in Review’ at
coats.com/results
A full copy of this Annual Report can also be
downloaded from coats.com/investors
02
Coats Group plc Annual Report and Accounts 2022
2022 full year results and highlights
We have had a very successful year with adjusted
EBIT margins now ahead of pre-Covid levels,
despite a year of record inflation.”
Rajiv Sharma
Group CEO
10%
ORGANIC REVENUE
GROWTH
37%
RECYCLED SALES
GROWTH
17
NEW PRODUCTS
LAUNCHED
8.2c
ADJUSTED EPS UP 14%
2.43c
TOTAL DIVIDEND UP 15%
1.4x
PRO FORMA BALANCE
SHEET LEVERAGE
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$235m
ADJUSTED EBIT
22%
ADJUSTED ORGANIC EBIT GROWTH
Coats Group plc Annual Report and Accounts 2022
At a glance and highlights
We are the global market leader
in apparel threads, structural
components and threads for
footwear, and innovative pioneers
in performance materials.
We are manufacturers of sustainability-led innovative
products, and trusted partner to leading brands
across all three segments and multiple industries.
A FTSE250 company and a FTSE4Good Index
constituent, Coats takes part in the UN Global
Compact and is committed to Science Based
sustainability targets for 2030 and beyond.
50+
Countries
17,000
Employees
34,000
Customers globally
>250
Years of textiles experience
Revenue by division
Revenue by region
Apparel & Footwear 73%
Performance materials 27%
Asia 58%
Americas 21%
EMEA 21%
Highlights
Financial performance
Accelerating profitable sales growth
Continuing operations
– Group organic growth of 10%; Apparel & Footwear
FY 2022
FY 20213
FY2022 vs FY 2021
Reported
CER
Organic
Revenue*
Adjusted
Operating profit*
EBITDA*
Basic earnings per share*
Free cash flow*
Net debt (excl. IFRS 16)
Pro forma leverage*2
Reported1
Operating profit
Basic earnings per share
Net cash generated by
operating activities
Final dividend per share
Total dividend per share
9%
19%
16%
27%
10%
22%
2%
9%
9%
$1,584m
$1,447m
$235m
$284m
8.2c
$114m
$394m
1.4x
$181m
4.8c
$96m
1.73c
2.43c
$198m
$243m
7.2c
$124m
$147m
0.7x
$178m
5.8c
$129m
1.50c
2.11c
Alternative Performance Measures – see note 37.
*
Indicates our KPI measures. See pages 30-31 for more details and historical performance.
1. Reported metrics refer to values contained in the IFRS column of the primary financial statements in either the current or comparative period.
2. Leverage calculated on a pro forma and frozen GAAP basis and therefore excludes the impact of IFRS 16 on both adjusted EBITDA and net debt and includes
a full 12 months of EBITDA for Texon and Rhenoflex.
3. Restated to reflect the results of the Brazil and Argentina business, divested in 2022, as a discontinued operation.
Some of our customers
9%, Performance Materials 13%
– Thread market share gains up over
100bps to 24%
– Recycled product revenues up 37% to $127m
– 17 new innovative products brought to market
– Adjusted operating margin up 120bps to 14.8%
– Price/mix and self-help offset inflationary
pressures of $118m
– Strong free cash flow of $114m, pro forma leverage
after acquisitions of 1.4x
– Adjusted earnings per share increased 14%
to 8.2c and dividend per share by 15%,
full year dividend 2.43c
Transforming the business
– Acquisition of Rhenoflex and Texon creates global
market leader in footwear components
– Significant momentum in strategic projects to
optimise the portfolio and footprint, and improve
the overall cost base efficiency. As a result, we
now expect to achieve an added $20m in
Operating Profit in 2024, up to $70m
– Divested our Brazil and Argentina business, exited
from Russia and direct operations in South Africa.
Rationalised plants in Hungary and the USA and
sold our units in Mauritius and Madagascar
– Sustainability ambitions upgraded in line with
our net zero commitments. Substantially delivered
on 2022 goals. New 2030 targets announced
– Positive progress in relation to de-risking of UK
pension scheme; £350m buy-in completed. On/off
contribution trigger agreed with Pension Trustees
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Coats Group plc Annual Report and Accounts 2022
ATTRACTIVE MARKETS ACROSS
THREE DISTINCT DIVISIONS
APPAREL
Coats is the global market leader in supplying
premium sewing thread to the apparel industry, and
is estimated to be over twice the size of the nearest
thread competitor. The global thread market is
estimated to be c.$3.4bn and whilst thread alone is
1-2% of the cost of a typical garment, it is a critical
component in the manufacturing process and for the
quality and performance of the finished product. We
are one of the few global players of a key supply
chain component in the $1.4tn global apparel
industry which is projected to grow at low single
digits in the medium term. We also manufacture
selected zip and trim products, and our fashion tech
business supplies software solutions for speed,
productivity and transparency in customers’
operations. Whilst economic volatility, inflation and
supply chain disruption impacted our industry in
2022, we expect industry growth rates to continue
to demonstrate resilience in the medium term. In
Apparel we are growing faster than the market
because of our excellent reputation for quality, our
value proposition, our global footprint and our
strong sustainability agenda.
Our new organisational and reporting structure, effective 1 January 2023, is
comprised of three divisions; Apparel, Footwear and Performance Materials.
PERFORMANCE MATERIALS
We are global experts in the design and supply of
highly engineered performance threads, yarns and
lightweight composites used in a range of industries
including thermal and cut-protective wear, telecom
and oil & gas infrastructure, automotive and feminine
hygiene products. We estimate the total
addressable market that we could realistically
supply in the near term to be c.$3.0bn, giving us an
estimated market share of around 15%. We aim to
deliver mid- to high-single digit organic growth in
the medium-term in Performance Materials as a
whole. Specifically, Composites and Personal
Protection affords better growth opportunities
where we expect to grow revenues at a higher rate
compared to Performance Thread where growth is
likely to be in the mid-single digit range.
These markets are driven by sustainable innovation,
reliability and reputation, and we are well positioned
to take advantage of future growth in this industry.
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FOOTWEAR
Coats is the global market leader in supplying highly
engineered structural components and performance
thread to the footwear industry. We estimate the
structural components addressable markets to be
$0.6bn in which, through our recent acquisitions of
Texon and Rhenoflex, we enjoy a market leading
share of over 20% in a fragmented market. The
global footwear threads market is c.$0.6bn, where
we also have a long-established leading position.
Our acquisitions have opened new markets,
particularly in footwear insoles, and in lifestyle and
luxury structural components. In aggregate, the
global footwear markets we serve are expected to
grow 7-8% over the medium term.
Coats Group plc Annual Report and Accounts 2022
Chair’s statement
DAVID GOSNELL
CHAIR
I am proud of what we have achieved – our innovation,
our investment in our talented people, our bold
strategic ambitions… everything that will help us
to deliver value for all our stakeholders.”
Our purpose is to connect talent,
textiles and technology to make a better
and more sustainable world.
To support this, we have developed a new set
of values that embody Coats’ unique culture
of collaboration, agility, ‘can do’ approach, passion
and diversity. These are values that the company
has long demonstrated, so I am delighted that we
have formally framed these.
This provides the basis for our strategy whereby we
will accelerate profitable sales growth and transform
the business to improve margins and create
sustainable value for our shareholders, customers,
employees and the communities in which we operate.
2022 saw the world emerge from the challenges
of Covid only to be confronted with the conflict
between Russia and Ukraine, followed by an
exceptional inflationary period. The resilience of
our business model, execution of strategy, pricing
power, with the support of all the dedicated people
at Coats, have underlined our leading position.
In response to the situation between Russia and
Ukraine, we took the decision to exit the Russian
market. I am proud of the support provided to our
colleagues in Ukraine. The safety of our employees
and their families remains our top priority.
Our flexibility to change has been evident during
these challenging years but as we enter 2023,
we do so in a stronger position than ever.
Footwear acquisitions
Coats achieved a significant milestone in our M&A
strategy, with the acquisitions of Rhenoflex and
Texon. We created a new global market leader in
footwear components, complementing our global
leadership in threads. The addition of structural
components and accessories into this exciting
market underlined the Board’s drive to grow the
business and accelerate profitable sales growth.
I wish to thank our shareholders for the support and
confidence they showed in us during the equity
raise that funded the acquisition of Rhenoflex.
Footwear will now make up around a quarter of the
revenues of the Group and, as such, from 1 January
2023 we will be reporting Apparel, Footwear and
Performance Materials as three separate divisions.
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Coats Group plc Annual Report and Accounts 2022
Chair’s statement cont.
plant collected PET caps that were then sold for
recycling with Coats matching the proceeds.
The courage shown by the young people affected
by cancer and the hard work and dedication of
AOPAC should serve as an example to us all.
Sustainability and innovation
In 2021, we established a Board-level Sustainability
Committee, chaired by me, to enhance the Board
visibility and governance over these very important
milestones. In December of 2022, the Board, in
conjunction with the Committee, approved new
2026 Science Based Targets, linked to senior
management Long Term Incentive Plans (LTIP).
Pensions
I am delighted with the significant progress we have
made on pensions during the year. We collaborated
with the pension trustees, who completed a £350m
buy-in of annuity policies to bring us closer to our
medium term aim to remove the scheme from the
Group’s balance sheet. As a result of the improved
funding position, we have agreed a mechanism to
switch off / switch on the regular cash contributions
to the Scheme based on monthly estimates of the
latest funding position. This mechanism gives rise to
the potential for significant Group free cash flow
benefits from lower or eliminated cash contributions.
Board changes
I had great pleasure in welcoming two new additions
to the Board, adding further depth to the team.
Steve Murray joined on 1st September as an
Independent Non-Executive Director. Steve brings
with him more than 30 years of experience in the
apparel and footwear industry having most recently
been Global Brand President of The North Face
and previously CEO of Dr. Martens.
Heather Lawrence joined on 7th November as an
Independent Non-Executive Director. Heather has
more than 25 years of experience in banking and
capital markets as well as holding a number of non-
executive directorships. She will Chair the audit and
risk committee following the AGM to be held in May.
Capital allocation policy and dividend
Our capital allocation policy remains unchanged and
focusses on 4 key pillars (i) reinvesting in organic
growth (ii) acquisitions in line with disciplined strategy
(iii) supporting pensions and (iv) paying a progressive
dividend. We implement these pillars whilst
maintaining a strong balance sheet with a target
leverage ratio of 1-2x.
The Board is mindful of the importance of returns to
shareholders. To underline the strong progress we
have made in 2022, we are pleased to propose a
final dividend of the year of 1.73 cents per share,
bringing the total dividend for the year to 2.43 cents
per a share, a 15% increase on the 2021
total dividend.
Subject to approval at the AGM, the total
dividend will be paid on 25 May 2023 to ordinary
shareholders on the register at 28 April 2023,
with an ex-dividend date of 27 April 2023.
Looking ahead
Coats has scale, product and quality differentiation
and a growing pipeline of innovative and sustainable
products. This will enable revenue growth ahead of
market. Looking further ahead, as a result of the
transformational work done to date, we remain well-
positioned to grow earnings and cash.
I would like to conclude by thanking, on behalf of the
Board, our exceptional employees across the world.
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07
A personal highlight was seeing
first-hand the work of Asociación
Orizaba Propone AC (AOPAC) who
support children and adolescents
in their cancer treatment from the
nearby region of Orizaba.”
David Gosnell
Chair
8.2c
Adjusted EPS up 14% from 2021
2.43c
Total dividend up 15% from 2021
Strategic projects
We announced a series of strategic projects in
March 2022. The objective was to optimise our
portfolio and footprint and to improve the overall
cost base efficiency of the Group. Significant
momentum was gained over the year and we
now expect to deliver $70m of annual cost
savings by 2024.
The opening of a new state-of-the-art manufacturing
plant in Huamantla, Mexico, will address the labour
availability issues we face in the USA and deliver
higher margins in Performance Materials. I am
excited to see the second new facility coming online
in 2023 and the further momentum this will bring.
The plant opening was attended by the Board and
executive Team members in October. A personal
highlight, and one which I know touched all of the
Coats leadership team, was seeing first-hand the
work of Asociación Orizaba Propone AC (AOPAC) to
support children and adolescents receiving cancer
treatment in the nearby region of Orizaba. The
pandemic of the last years meant campaigning had
to be suspended so employees at Coats’ Orizaba
Coats Group plc Annual Report and Accounts 2022
CEO’s statement
RAJIV SHARMA
GROUP CEO
Coats has delivered a very strong financial and
operational performance in 2022 and continues
to transform the business with significant
momentum on strategic projects and creation
of a global footwear champion.”
2022 HIGHLIGHTS
10%
Organic revenue growth
$20m
Strategic projects savings in 2022
On track to deliver $70m in 2024
14.8%
Adjusted EBIT margin
37%
Recycled sales growth
$235m
Adjusted EBIT
$114m
Adjusted Free cash flow
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Coats Group plc Annual Report and Accounts 2022
CEO’s statement cont.
We continue to accelerate
innovation to deliver tailored
solutions to meet our customers’
design requirements and
to transform Coats for the
future. I would personally like
to thank everyone at Coats,
for executing with speed and
precision while maintaining
our high ethical standards.”
Rajiv Sharma
Group CEO
$150m
Pricing and self-help initiatives
to more than offset inflation
2022 has been a year of significant macro
economic and geo political challenges for
the world. High inflation, high volatility
and continuing supply chain disruption
characterised the macro environment
in which Coats had to operate.
Despite this, and because of the talented team at
Coats, 2022 has been a hugely successful year.
We continued to accelerate innovation to deliver
tailored solutions to meet our customers’ design
requirements and to transform Coats for the
future. I would personally like to thank everyone
at Coats, for executing with speed and precision
while maintaining our high ethical standards.
We entered 2022 prepared and ready to accelerate
profitable sales growth and transform the business
to improve margins. Our business model, strategy,
tactics, employees and eco system remained vibrant
and resilient. Coats was able to create and seize
opportunities. By thinking big, being bold and acting
fast we stayed ahead of the challenges.
Coats is now the global market leader in footwear
components as well as in apparel threads. To drive
focus and clarity, we have announced the creation
of a new Footwear division that will sit alongside
Apparel and Performance Materials. This means
that from 2023, Coats will have 3 distinct strategic
divisions, each addressing attractive markets.
Accelerate profitable sales growth
For the full year 2022, Coats delivered 10% organic
sales growth over 2021 and improved adjusted
margins by over 100 bps. Adjusted Free Cash Flow
was $114m (2021: $124m) and pro forma leverage
ended at 1.4x (2021: 0.7x), well within our stated
1 to 2x range.
The quality of our products and services in
conjunction with our operational delivery, allowed
us to win incremental customer business. Our
disciplined approach to pricing, productivity and
strategic projects allowed Coats to more than offset
high inflation and demand/supply challenges to
grow overall margins.
Coats has a successfully tested playbook to
“Win with the winners” and offset inflation through
price and productivity. We leverage our extensive
global footprint, technology capabilities and teams
to deliver world class service to customers. Apparel
& Footwear and Performance Materials divisional
performance in 2022 is stated below:
Apparel & Footwear: Revenue $1,163m
and adjusted margin 17.3%
Performance Materials: Revenue $420m
and adjusted margin 8.1%
Transforming the business to improve margins
Footwear acquisitions
With the acquisition of Texon and Rhenoflex,
we have created a global leader in footwear
components that complements our existing leading
position in footwear threads. This expands the
addressable market by 3 times to $1.8 billion.
Both Texon and Rhenoflex offer complementary
products that allow Coats to further expand in the
fast-growing athleisure and sports footwear market.
It also gives us a stronger presence with European
luxury footwear and accessories brands.
Sustainability and innovation are at the heart of
Texon and Rhenoflex, aligning with Coats’ strategy.
Over the medium term, we forecast 8% sales
CAGR and over 20% operating margins for the
Footwear division.
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WELCOME TEXON AND
RHENOFLEX
These back-to-back acquisitions have helped
Coats become a global leader in premium
structural components and materials for the
footwear and lifestyle industries.
In FY22 (full year effect), this has meant an
additional $87m revenue, $9.2m EBIT and
post-acquisition pro forma leverage of 1.4x.
Read more about these acquisitions on page 22
09
Coats Group plc Annual Report and Accounts 2022
CEO’s statement cont.
Strategic projects
In March 2022 we announced that we expected
incremental Operating Profit of $50m by 2024 from
strategic projects. These projects include improving
margins and service in the US Performance
Materials business and optimising G&A cost base
across the Group by moving activities closer to the
customers in market. These projects were well
executed and delivered $20m savings in 2022,
ahead of our initial projections of $5–10m. We are
now on course to deliver $70m of savings by 2024.
During the year, Coats divested its Brazil and
Argentina business, exited Russia and direct
operations in South Africa. We have announced the
closure of operations in Ujpest, Hungary and
Hendersonville, USA and sold our units in Mauritius
and Madagascar. A new factory with state-of-the-art
proprietary equipment in Huamantla, Mexico was
inaugurated in October. Our existing factory in
Orizaba, Mexico has been upgraded with new
manufacturing technology. These investments and
expanded capability in Mexico will address the issue
of labour shortages in the US that previously
restricted operations and growth. We have also
increased capacity in our performance material
factory in Spain and apparel factory in Romania.
Overall, these projects will play a big part in
transforming Coats in the Americas and Europe.
Sustainability
Sustainability is at the heart of our company purpose
and strategy. For Coats, this means continually
looking for ways to reduce consumption of materials,
energy and water, to holistically take care of our
employees and the communities in which we
operate; and to reduce waste and emissions
across the Group.
We set ourselves ambitious sustainability goals from
2019 to 2022, and I am thrilled to inform you that we
have substantially delivered on these goals. You can
read more about them in our sustainability report.
We committed to reduce emissions by 46% in this
decade. To deliver on this ambition we have
launched a company-wide transition from oil-based
materials to recycled and renewable materials.
We are pushing forward with transitioning energy
purchased from fossil fuel based power
generation to renewable energy.
Sustainability is not only the right thing to do, but
also a source of clear competitive advantage. After
the successful delivery of sustainability projects and
programs from 2019-2022, I am delighted to inform
you that we have set out new Sustainability Targets
for the period 2023-2026 that include energy,
materials, water, waste and people.
For more details, please see the sustainability
section and cases studies in this report, and our
Sustainability Report which is now in its 5th year.
Innovation
Innovation sits alongside sustainability in the centre of
our strategy. We have three large Innovation Hubs in
three continents that drive our new product pipeline.
The Innovation Hubs allow Coats to collaborate with
customers, suppliers, start-ups and academic teams to
develop next generation products.
Our Innovation Hub in Shenzhen, China has been
repurposed to focus on its new mission to accelerate
the transition from oil-based to recycled and
renewable materials. We announced a $10m fund to
advance green technologies and materials, including
bio-materials relevant to our industry supply chain.
In 2022, we launched 17 new products across all
our divisions (FY 2021 21 new products) generating
$34m incremental revenues (FY 2021: $37m).
This report highlights just some of these exciting
new products. I would draw your attention to the
case studies on ProWeave, Rhenoprint 2.0, our
Eco-range and developments in composites.
A year of strong financial performance
Accelerating profitable sales growth and transforming
the business delivers value to our shareholders.
Adjusted earnings per share has increased by
14% and, by carefully managing financial pro forma
leverage (2022 1.4x; 2021 0.7x) and generating healthy
adjusted free cash flow (2022: $114m; 2021: $124m),
we end the year in a strong position to propose the
1.73 cents per share final dividend.
This increase of 15% on 2022 total dividend,
alongside the proposed interim dividend of 0.70
cents per share brings the full year 2022 to 2.43
cents per share (2021: 2.11 cents per share). This is
a confirmation of our belief in the strategy that we
are executing, the robust health of the company,
and the outlook for the Group.
Looking to 2023
Following a year of excellent progress in
transforming the business, market share gains and
increased profitability, we expect to deliver another
year of strong strategic and operational progress.
This is in a macroeconomic environment where
there is a softening in demand and some destocking
by customers, primarily in Apparel markets and to a
lesser extent in Footwear markets. We continue to
proactively respond to macroeconomic uncertainty
and inflationary pressures using our well-defined
and tested playbook that focuses on cash, costs,
self-help and tactical pricing actions.
As a result, we continue to anticipate that full year
2023 performance will be in line with the Board’s
expectations, with a weighting to the second half.
This performance will be underpinned by the
contribution from acquisitions, in addition to
associated synergies and efficiencies from
strategic projects.
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Coats Group plc Annual Report and Accounts 2022
Our values
WE HAVE CAPTURED THE VALUES THAT REFLECT OUR UNIQUE CULTURE
WE ARE COLLABORATIVE
WE ARE AGILE
Coats connects talent, textiles and
technology to deliver great service
and quality to our customers.
We collaborate across all
geographies with partners and
customers to create the materials
and products of tomorrow.
We believe the success of our
colleagues is the success of Coats.
With a proud heritage dating
back more than 250 years and
a spirit of evolution that drives
us to constantly stay ahead
of the game, we have always
adapted to change, thriving and
becoming stronger as a result.
WE HAVE A ‘CAN DO’
ATTITUDE
We operate in a fast paced, ever
changing world. We are confident,
motivated and energetic dealing
with new tasks and challenges,
committed to serving our
customers, trusted to deliver.
WE ARE PASSIONATE
WE ARE DIVERSE
We are enthusiastic about our work,
our colleagues, our company and
especially our customers. Passion
is seen in everything we do.
We operate across 50 countries,
with a workforce of over 17,000.
We speak over 65 languages and
come from hundreds of nationalities,
cultures and ethnicities. We come
together as one.
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Coats Group plc Annual Report and Accounts 2022
Strategy
Accelerate profitable sales growth by leveraging innovation,
sustainability, digital technologies and our global scale to create world
class products and services, delivering value to our stakeholders.
ACCELERATE PROFITABLE
SALES GROWTH
Apparel
Increase our market share by delivering sustainable,
innovative and value-added product and service
solutions to our global customer base. Continue
to strengthen our global footprint to support
supply chain regionalisation.
Footwear
Focus on sustainability-led innovations to improve
product offerings to key brands and manufacturers,
and leverage our newly created scale to drive
efficiencies, share gains, and commercial synergies.
Performance Materials
Lead with innovative and sustainable developments
in highly engineered products, creating solutions
for attractive and growing markets.
Footwear progress in 2022
– Significantly increased our Total Addressable
Market as a result of our acquisitions
– Upside potential from innovations,
such as ProWeave
– Launched our recycled nylon thread range
specifically for use in footwear
Performance Materials progress in 2022
– Opened a new state-of-the-art factory in
Mexico with proprietary bonding equipment,
refurbished machinery and efficient factory
layout helping to maximise productivity
– Relocation of our Spanish facility to a larger,
purpose-built site has expanded capacity for
our composites range in telecom and
oil & gas sectors
– Launching innovative personal protection
yarn ranges addressing specific customer
needs e.g. protection from molten metal
splash for workers in foundries and smelters
Apparel progress in 2022
– Continued to grow Recycled sales, to $127m
in 2022 ($93m in 2021)
– Consecutive year of >100bp market
share growth
– Offset inflationary pressures through
productivity and pricing
TRANSFORM THE BUSINESS
Strategic projects
In March, Coats Group announced a number
of strategic projects to improve margins by
optimising the portfolio and footprint, improving
the overall cost base efficiency and mitigating
structural labour availability issues in the
US. The resulting benefits are anticipated to
deliver cost savings of $70m by 2024.
CREATE VALUE
Disciplined use of capital to fund inorganic
opportunities to build scale and acquire new
capabilities, technology and talent.
Progress in 2022
– Substantial savings of $20m versus original
Progress in 2022
expectations of $5m to $10m
– New factory commissioned in Huamantla,
Mexico to enable further growth in
the Americas
– Divested our Brazil and Argentina business,
exited from Russia and direct operations in
South Africa. Rationalised plants in Hungary
and the USA and sold our units in Mauritius
and Madagascar
– Streamlined our Corporate functions and
moved them closer to the customer to
reduce cost and improve delivery
– Two strategic acquisitions: Texon, funded
out of a new dedicated acquisition debt
facility; and Rhenoflex funded via an
over-subscribed equity raise
– In January 2023, successful $250m
refinancing of Texon Acquisition Facility
through a USPP issuance at competitive rates,
de-risking debt maturities
– Positive progress in relation to de-risking
of UK pension scheme; £350m buy-in
completed. On/off trigger agreed with
Pension Trustees
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Coats Group plc Annual Report and Accounts 2022
Strategy cont.
OUR STRATEGIC ENABLERS
Our purpose provides the basis for our strategy whereby we will
accelerate profitable sales growth and transform the business to
improve margins and create sustainable value for our shareholders,
customers, employees and the communities in which we operate.
Our strategic goals are underpinned by the following enablers:
INNOVATION
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 design requirements.
SUSTAINABILITY
Sustainability is a core tenet of our wider business
strategy and an imperative to our mid- and
long-term business success. Playing our part in
mitigating climate change is core to our strategy,
with commitments made to reduce carbon emissions
in line with Science Based Targets and underpinned
by energy transition to renewables and substitution
of materials to non virgin-oil based resources.
CASE STUDY
100% RECYCLED ECOVERDE
Coats EcoVerde is an innovative 100% recycled
alternative to virgin polyester that provides a
responsible solution to help reduce the global
plastic pollution problem. Since 2018, we have
recycled 799m PET bottles to make EcoVerde.
Our target is to transition all of our premium
polyester products to recycled polyester
by 2024.
DIGITAL
Our investment in technology infrastructure
and digital tools has allowed us to flex our
supply chain, react to situations with speed
and ensure we are focused on customer,
shareholder and employee value creation.
In 2022, we enhanced our offering with the
acquisition of Rhenoflex and the cutting edge
digital technology of Rhenoprint 2.0.
CASE STUDY
PROWEAVE: FABRICS REIMAGINED
ProWeave transforms the way performance
fabrics are made and how they look, feel and
function. Creating different elasticity, tenacity
and abrasion zones within the same weave,
ProWeave can help the world’s biggest brands
bring new creative concepts to life.
ProWeave has already been used by global
sports brand Umbro to create its new Velocita
Alchemist football boots. The use of Texon’s
patented ProWeave technology by Umbro is a
first in the sports sector and gives Velocita
Alchemist boots new levels of elasticity and
stability with recycled polyester yarns. In sports
footwear, ProWeave delivers the ultimate
adaptive fit acting like a second skin for
sure-footed stability.
We are very excited about the coming
opportunities with ProWeave. It provides a
solution that takes us to the partnership level
with our brand customers and allows us to play
a greater role in the structure, performance and
aesthetics of the shoe. As part of the Coats
Footwear Innovation products, we know we will
accelerate and transform not only our business,
but our brands and the industry.”
Bryan Whitfield
Sales Director
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Coats Group plc Annual Report and Accounts 2022
Business model
HOW WE CREATE VALUE FOR OUR CUSTOMERS
Our purpose of connecting talent, textiles
and technology to make a better and
more sustainable world drives how we
operate and create long-term value.
SPEED
Speed to market is critical.
Owing to our agile supply chain
and customer-centric operational
footprint, we provide customers
and brands with the flexibility
they need to stay relevant in
a fast moving world.
PRODUCTIVITY
We employ the latest in
Lean Six Sigma and other
methodologies to ensure a
continuous cycle of improvement
and delivery of operational
excellence. This enables us
to reduce costs which help to
offset inflation and maintain
excellent customer service.
OUR LEADING POSITION
AND EXCELLENCE IN ‘SPIQRS’
CREATES VALUE FOR OUR
CUSTOMERS AND
A COMPETITIVE ADVANTAGE
FOR COATS
RELIABILITY
Our track record for reliability and excellent technical
customer service allows us to partner with leading
global retailers, brands and manufacturers.
INNOVATION
We have a longstanding culture of innovation. Our Innovation Hubs
are spaces to collaborate with customers, in which we develop new
solutions to solve their problems and improve their finished products.
Our innovation capabilities have been further enhanced with the
acquisitions of the talent in Texon and Rhenoflex.
SUSTAINABILITY
QUALITY
We manufacture to high ethical,
labour and environmental
standards whilst delivering
consistent colour and exceptional
product quality. Our products are
tested and measured against
globally consistent, stringent
safety standards.
A key element of our purpose is to create a more sustainable world.
It is not just what we produce, but how we produce it. Coats has been
a leader in setting sustainability strategy within the industry since we
officially launched ‘Pioneering a Sustainable Future’ in 2019. We have
advanced our ambitions, acknowledging the impact that industry has on
the environment, and our part in taking responsibility for this. We have
set very ambitious sustainability targets across energy, materials, water,
waste and people to complement our market differentiating EcoVerde
range. See our TCFD Report for details. We gain competitive advantage
by helping customers to improve their own supply chain sustainability
credentials and our two acquisitions this year, Texon and Rhenoflex,
further enhance our sustainability capabilities and ambitions.
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Coats Group plc Annual Report and Accounts 2022
Business model cont.
HOW WE CREATE VALUE FOR OUR STAKEHOLDERS
EMPLOYEES
We are a proud employer of
a 17,000 strong highly engaged,
committed and diverse
workforce. Whilst driving a
high-performance, solution-
focused culture, we are
committed to the health, safety,
rights and well-being of our
employees. We champion
diversity and inclusion across the
Group. This is reflected in our
GPTW© certification.
17,000 EMPLOYEES
ACROSS THE GLOBE
SUPPLIERS
We look for the right balance of global, national and
local capabilities to maintain supply chain agility.
$1BN DOLLARS PAID TO SUPPLIERS
CUSTOMERS
We put our customers at the
centre of everything we do
and, as their expectations
evolve, we continually drive
towards responsibly sourced,
sustainable products.
INVESTORS
We are committed to delivering superior returns
and long term, sustainable value for our investors.
34,000 GLOBAL CUSTOMERS
2.43c TOTAL DIVIDEND FOR 2022
COMMUNITIES
We actively engage with our
local communities, providing
educational support to children,
food donations, and DE&I events,
along with thread donations
and tree planting initiatives.
This was highlighted in our
Save the Children donation
presented by the Board in
Mexico during October.
WE ARE IMMENSELY PROUD OF
THE 11 COATS EMPLOYEE
VOLUNTEERS WHO WENT TO
THE EARTHQUAKE EPICENTRE
IN SOUTH-EASTERN TURKEY
AS PART OF OUR EMERGENCY
RESPONSE RESCUE TEAM
ENVIRONMENT
Sustainability is critical in everything
we do, and for our customers. We have
substantially delivered against our ambitious
sustainability targets in 2022 and have
set new 2026 targets as we progress
towards our 2050 net zero ambitions.
7 BOLD NEW
SUSTAINABILITY
TARGETS
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Coats Group plc Annual Report and Accounts 2022
People and culture
We believe in putting people first
– equipping them with the skills to
adapt, grow and ultimately thrive
in the workplace of the future.”
Farnaz Ranjbar
Chief Human Resources Officer
50+
COUNTRIES
17,000
EMPLOYEES
GLOBALLY
POWERED BY OUR PEOPLE:
People are at the heart of our business. In 2022, 14,000
(86%) of our employees told us about the company
culture at Coats through a Great Place to Work (GPTW©)
certification. We were pleased to see that our coverage
exceeded the target of 80% by an outstanding +6%.
GPTW© is the most reputable global authority on
workplace culture who enable us to benchmark our
employee engagement. The GPTW© assessment
framework helps our employees give feedback on the
levels of respect, fairness, and pride they associate with
working for Coats. And the results were clear. Our
employees told us that they feel empowered and safe
and value the honest, inclusive, innovative and
collaborative environments we create across the globe.
In 2022 we developed a new set of values that
embody Coats’ unique culture of collaboration, agility,
‘can do’ approach, passion and diversity. You can read
more about these values on page 11.
We have been recognising good work for some time
but the GPTW© feedback showed us we can do even
better. We adopted a modern new global approach to
recognition called “Applause” to ensure that whenever
any of our colleagues does a good job, we can
appreciate and celebrate them. All the countries we
operate in, have the same standards, the same ways of
giving and receiving Applause, and the same awards.
Everyone has an equal chance to be celebrated for
their work. Our focus is on employee experience and
the moments that matter. We are passionate about
creating a dynamic, inspiring and purposeful place to
work. With over 17,000 employees across the world,
we offer rewarding careers within a global business,
boasting a history of more than 250 years.
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Coats Group plc Annual Report and Accounts 2022
People and culture cont.
I am delighted that we have
launched these new initiatives
to further engage and motivate
our workforce, enabling
a great place to work.”
Farnaz Ranjbar
Chief Human Resources Officer
THE FUTURE OF WORK – LOOKING
AFTER OUR PEOPLE
There is no question that Covid has led to different
ways of working, with employees more remote from
organisations than ever before. Hybrid work
environments continued to replace the more traditional
workplaces, requiring a reshape of the workplace
landscape and acceleration of technology into all types
at all stages of the recruitment process, while
increasing the visibility and profile of Women across
the business through spotlight stories on our Coats
Link employee communication platform. Our Women
in Leadership Fast-Track Programme focuses on
developing female employees to ensure equal
opportunity on shortlists for new job vacancies
across our business. Biannual Diversity, Equity and
Inclusion calls will continue in 2023. Our
Return-to-Work Programme is specifically targeted
at supporting the return-to-work process for both
maternity and paternity leavers, with return-to-work
guidelines established and shared with expectant
mothers, HR teams and managers.
of roles and industries. We saw the potential to do
things differently, reshaping how we work to build a
better business and a better world for our people.
Coats’ “Future of Work” policies provide two Global
Frameworks for the Future of Work: Remote Working
& Hybrid working. A Future Of Work Leadership
Pack provides tips, tricks and best practice
examples to help Coats leaders at any level to
continue being effective, keeping engagement
high and driving high performance across teams in
this new era of work.
At Coats we embrace Diversity, Equity and Inclusion.
Our “Coats for All” program puts our people
principles policy released in 2021 into action
(see more online) and ensures equality of treatment
during recruitment, while at work and for
development for all employees around the world
regardless of gender, age, disability, race, religion or
belief. Our “Coats for Her” program is a visible drive
for equal gender opportunities. The “Coats for Her”
program consists of a Recruitment Campaign and
updated recruitment policy and hiring guides which
seek to ensure full female candidate representation
What deserves some Applause? In short,
doing things the right way at work. What’s the
right way? A way that shows one or more of
the five Coats Principles – Passion, Agility,
Inclusion, Can-do and Collaboration.
Applause consists of 8 categories ensuring that we
can engage and recognise all levels of employees.
The categories are as follows;
Long Service Awards: Celebrating employees
working with us for 5, 10, 25, 30, 35 and 40 years.
Employee of the Year, Quarter and Functional:
Recognizes great contributions through the year.
Chairman Awards: Celebrating our leaders
in three categories: Profitable sales growth;
Increased productivity; Value delivery.
CEO Awards: To celebrate the work done by the
whole workforce in seven categories.
Innovation Awards: Global awards for great ideas
for new product development.
Safety Heroes: Awarded during Journey to Zero
week, to recognize employees who make
proactive efforts in health and safety.
In the next phase of our journey, we will continue to
utilise Great Place to Work as the main barometer to
measure levels of employee engagement and trust.
We are committed to further increasing our current
percentage of employees covered with certification
to 88% in 2026 and aspire to achieve 90% by 2030.
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Annual Report and Accounts 2022
Case Study
Accelerating profitable sales growth
WINNING WITH
THE WINNERS
We are immensely proud of what we have
achieved with this brand. It has been a truly
collaborative relationship and one which will
continue to grow from strength to strength.”
Adrian Elliott
President, Apparel and Footwear
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Coats Group plc Annual Report and Accounts 2022
Case Study
Accelerating profitable sales growth
SUCCESS THROUGH
COLLABORATION
A trusted partnership driven by
Technical Excellence.
We have been working closely with a global leader
in the premium activewear apparel and footwear for
the last decade, when we helped to engineer seams
using the right performance threads and sizes to
accommodate their base technical fabrics.
As the athleisure trend started to gain momentum,
new technical challenges arose as consumers began
to wear their garments for more than just athletic
activities. Now, they were wearing them for working,
going out on the town and relaxing at home.
Not only was strength, elongation and softness
important, it was crucial that these garments were
designed to withstand non-traditional uses such as
sitting in an office chair, leaning against a concrete
wall and rubbing from bags and backpacks.
Working in partnership with innovation, design,
development and quality teams, we helped
engineer the right sewing thread combinations.
For each fabric we trialled and developed
individual thread combinations.
As our partner brand continued to innovate,
new challenges arose as they introduced new
lighter weight and high stretch fabrics. Our
goal was always to offer thread combinations
that provided the optimal strength, stretch,
softness and abrasion resistance.
Garment wear trials were undertaken, with support
from Coats Technical Services teams at factories in
Asia and Americas. After several weeks of
successful testing the optimum thread combinations
were finalised and written into our partner brand’s
quality manuals.
Through this journey of best practice sharing
and collaboration, Coats has supported through
technical excellence. Today, we are proud to be
their Trusted Advisor for all threads. We continue
to strengthen our partnership through further
seaming innovation and we are now building
out a sustainability roadmap to help the
transition to more sustainable threads.
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Coats Group plc
Annual Report and Accounts 2022
Case Study
Transforming the business
With our new state-of-the-art
facilities in Huamantla and
Orizaba, we now have a more
productive, profitable and
sustainable home in Mexico. BUILDING
FOR THE
FUTURE
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Coats Group plc Annual Report and Accounts 2022
Case Study
Transforming the business
MEXICO’S ALL-NEW FACILITIES
The new facility provided us with the opportunity to
successfully migrate from legacy technologies in
some of our processes to more streamlined,
simplified manufacturing routes that deliver equal or
improved quality to our customers.
The collective cross-functional talent in Coats
made it possible to deliver new and improved
technologies that in turn enable us to provide our
customers with superior service with ever increasing
levels of flexibility and agility. The development of
the new employee-friendly and digitally controlled
bonding process, underpinned by the proprietary
infra-red bonding equipment, is a standout. By
innovatively up-cycling some of the equipment from
the US plants, we reduced the capital intensity of
the project while minimising scrap waste.
In 2022, Coats launched a
transformational, strategic project.
We added to our manufacturing
operations in Mexico, migrating
production from the US.
Our aim is to deliver profitable growth and better
customer experience through streamlined,
state-of-the-art, sustainable facilities in
Huamantla and Orizaba.
The Huamantla site has the latest compressed air
system that will, over time, result in measurable
energy savings. By up-cycling equipment relocated
from US plants, we have reduced waste for a more
sustainable approach.
New proprietary technology delivers a reduction
in the number of manufacturing process steps
and increases the level of flexibility to meet the
changing needs of the customer. To date the project
has seen success in the delivery of increased output
for previously constrained supply chains in
key growth segments.
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Coats Group plc
Annual Report and Accounts 2022
Case Study
Creating value
CREATING A GLOBAL
FOOTWEAR CHAMPION
Acquiring Texon and Rhenoflex has given
Coats an additional 23% market share in
premium athleisure footwear structural
components and thread components,
growing revenue by $230m.
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Coats Group plc Annual Report and Accounts 2022
Case Study
Creating value
WELCOME TEXON & RHENOFLEX
Their combined efforts in innovation and
sustainability (including ‘Rhenoprint’, a
digital zero-waste process for structural
components) are market leading.
Top talent, exciting profitability
Both acquisitions came with talented
management teams, who now make up the
majority of the combined Footwear leadership
team. Texon and Rhenoflex achieved their
combined business case EBIT for FY22.
The result of these acquisitions (in FY22, full
year effect) is an additional $87m revenue,
$9m EBIT, and post-acquisition pro forma
leverage of 1.4x (Texon being fully debt-funded,
Rhenoflex funded through equity).
This year, Coats announced
back-to-back acquisitions of Texon
and Rhenoflex, creating a global
leader in premium structural
components and materials for the
footwear and lifestyle industries.
The acquisition of Texon, a leader in structural
components and a critical supplier to key
athleisure footwear brands represented
an on-strategy move, helping Coats to
Accelerating profitable sales growth.
Rhenoflex is a leading player in innovative,
sustainable footwear components. Its key strengths
are its deep customer relationships, enhanced
sustainability solutions and growing share in the
luxury and lifestyle reinforcements segment.
In welcoming both businesses into the Coats family,
we have a market-leading offering in: structural
footwear components; footwear uppers and insoles;
reinforcement products serving the lifestyle
accessories and luxury handbags markets;
and sustainable recycled leather alternatives.
I truly believe that Coats shares our values
and vision to bring the best in sustainable,
innovative solutions to our customers.”
Frank Böttcher
MD Structural Components
23%
8%
Combined global share of
premium athleisure footwear
structural components
Medium term
sales growth ambition
23
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Coats Group plc Annual Report and Accounts 2022
Sustainability
DELIVERING TODAY TO PIONEER
A SUSTAINABLE FUTURE
We are delivering forward-thinking solutions.
Our commitments are to:
– achieve net zero emissions by 2050
– make sustained progress on social impact
– continue developing and adopting market-leading
eco materials
– and we aspire to lead the industry transition
to a circular economy
These targets complement our sustainability-led
innovation strategy.
Our Sustainability strategy evolves to remain
relevant and challenging. In 2022, having largely
delivered on our first set of milestone KPIs as
detailed in page 31 of this annual report, we
upgraded our KPIs and refreshed targets to extend
out to 2026. In committing to Science-Based Targets
by end 2030, we recognise the primary levers
underpinning delivery are a transition to renewable
energy and non-virgin oil-based materials and these
sit respectively under our materials and energy
pillars. Our water pillar recognises that as a scarce
natural resource, we need to limit the impact of our
fresh water extraction and our waste pillar considers
both the material and effluent waste associated with
our supply chain processes. Delivery of our
sustainability strategy is driven by the talent that we
engage across the business. To reflect this, we have
added further depth to our sustainability pillars to
emphasise the importance of people; Coats people,
their families, and the communities that they work in.
Five pillars
Our Sustainability strategy is supported by the pillars
of energy, materials, water, waste and people. These
are linked to eight UN Sustainable Development
Goals and include approved Science-based targets
to reduce scope 1 and 2 emissions by over 46%
and scope 3 emissions by 33% by 2030.
ENERGY
– 22% reduction in
Scope 1 & 2 Emissions
MATERIALS
– 60% transition to recycled
or bio materials
WATER
– 33% water recycling
WASTE
– 0% waste materials to landfill
– 100% ZDHC Compliance (Zero
Discharge of Hazardous Chemicals)
PEOPLE
– 88% GPTW© coverage
(Great Place to Work)
– 30% women in leadership roles
2026
OUR NEXT CHAPTER SHORT-TERM TARGET
22%
reduction in
scope 1&2
emissions
100%
ZDHC
compliance
60%
transition to
recycled or
bio materials
88%
GPTW© coverage
33%
increase in water
recycling rate
by 2026 from
2022 baseline
30%
Women in
leadership roles
0%
waste to
landfill
2030
OUR GOALS FOR 2030 ARE CLEAR AND AMBITIOUS
APPROVED SCIENCE BASED TARGETS WITH 2019 BASELINE THAT COMMIT US TO
46.2%
reduction in Scopes 1 & 2
emissions
100%
renewable electricity
33%
reduction in
Scope 3 emissions
FURTHER TRANSFORMATIONAL TARGETS
Zero products
from virgin oil-based
materials
70% of total energy
from renewable
sources
Circular product and
packaging solutions
Increased positive
social impact
2050
LONG-TERM TARGET
Net-Zero
emissions in our value chain by 2050
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Coats Group plc Annual Report and Accounts 2022
Sustainability spotlight
SPOTLIGHT ON SUSTAINABILITY
Climate change continues to be seen with
increasing frequency round the world, with science
confirming this is directly attributable to year-on-year
increases in global greenhouse gas emissions.
Increased frequency extreme weather events are
wreaking havoc round the world. In 2022, to name a
few, we witnessed catastrophic flooding in Pakistan,
further wildfires across California and drought being
declared across many parts of Europe. The only
hope for preventing further future devastation is
through action being taken to significantly reduce
emissions, and transition to a net-zero future.
Coats has committed to achieving interim Science
Based Targets, with delivery of absolute scope 1
and 2 greenhouse gas (GHG) emissions reduction
of 46.2% by 2030 against a 2019 baseline, and
we further commit to absolute scope 3 emissions
reduction of 33% within the same timeframe.
Our next stage, 2023-2026, priority energy target
will be directly related to scope 1 and 2 emissions
reduction across all of our operations.
For scope 3, delivery of our target reductions by
2030 is heavily dependent on transitioning our
products from virgin oil-based raw materials to
recycled or bio-based materials. Our Innovation
Spotlight section in this report outlines further how
we are responding in this area in Apparel with a
number of advances made in moves to a more
sustainable product offering.
At Coats, we fully recognise our responsibility to
use water as efficiently as possible to ensure that
our water extraction activities create no negative
impact on the local communities and biodiversity in
the areas in which we operate. We are committed to
minimising fresh water abstraction, and are reducing
water consumption especially in areas of high water
stress. Through our Cleaner and Lighter programme,
significant action has been taken to reduce water
intensity in our dyeing processes and delivered
through process optimisation, reduction in dyeing
liquor ratios and optimised machine cleaning
scheduling. We take great pride in having reduced
our global 2022 water intensity by 38% from a 2018
baseline, and from 2023 have set a target to
increase our rate of water recycling by 33% by
2026, based on our 2022 baseline.
Sustainable Development Goals
Details on the relationship between our 5
Sustainability Pillars and the Sustainable
Development Goals (SDGs) are shown below;
Related SDGs
Sustainability pillar
ENERGY
MATERIALS
WATER
WASTE
PEOPLE
For full details of our work on delivery of SDGs,
see our Sustainability Report.
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By 2050, we aspire to become a net-zero emitter
of carbon and have submitted our application
to the Science Based Targets Initiative and are
awaiting their approval of this commitment.
We have a clear roadmap for delivery of these
targets, with achievement of scope 1 and 2
emissions being delivered through further energy
intensity improvements in our operations, coupled
with a transition of our energy consumption from a
carbon intense fossil fuel base to a carbon free
renewable base. Our priority objective is to use our
electricity demand to promote the creation of new
renewable energy assets. We have already made
good progress through collaboration with
renewables suppliers in many geographic locations
resulting in installation of new roof-top solar arrays
as well as contracting to off-site wind-farm energy
supply through Power Purchase Agreements.
Coats Group plc Annual Report and Accounts 2022
Innovation
WE ARE BOLD INNOVATORS, CREATING HIGH QUALITY, DISRUPTIVE
PRODUCTS FOR A BETTER AND MORE SUSTAINABLE WORLD
PROGRESS IN 2022
ECO-RANGE
We are committed to developing new
products from bio-based and man-made
cellulosic materials, whilst ensuring the
right level of tenacity required to deliver
high quality, sustainable products suitable
for a range of applications. In line with
our most recent commitments, by 2030
all products will be made independently
of new oil-extraction material.
Key trends
These include recycled and natural materials,
circularity, 5G proliferation, lightweighting,
multi-hazard protection and more. We are
addressing these key trends to create products
that deliver exceptional performance and
add value to our customers across Apparel,
Footwear and Performance Materials.
Innovation Hubs
Our unique position in the supply chain means we
can work in collaborative partnerships to address
some of the biggest challenges the world faces.
We have three key Innovation Hubs in the USA,
China and Turkey, supported by Innovation Spokes
in Spain, Germany, and India.
We are proud to provide the breeding ground for
current and future generations of innovative ideas
that will create sustainable and highly engineered
solutions to help protect the planet, people,
energy and data.
Value delivery
We are working in partnerships with customers and
suppliers to create products that are designed to
address the key challenges and trends of today,
giving Coats a distinct competitive advantage.
RHENOPRINT 2.0
Our Rhenoprint™ products are changing the
way product designers look at reinforcement
materials for footwear.
The unique Rhenoprint™ process enables us to
respond to customer-specific requirements and
manufacture tailor-made products. Regardless
of shape, thickness or degree of hardness,
virtually any parameter can be varied
individually. Unlike the conventional process,
customers are not provided with sheet stock
which then has to be punched out and
trimmed. With the Rhenoprint™ process, the
reinforcing materials are custom-made in our
production facility and delivered ready for use.
In practice, this works quite simply: The
customer provides their individual cap shape
and specification values, and Rhenoflex
produces, able to realise almost any shape.
FIBRE OPTIC CABLES
COMPOSITES
To meet the ever-increasing demand for
data bandwidth that requires fibre optic
cables with high fibre density, we launched
Gotex StremX, a patent protected composite
strength member that enables the production
of lighter-thinner cables that are more cost-
effective. Substitution of fibreglass strength
members with StremX UHM resulted in a
25% diameter reduction while substituting
aramid strength members with StremX
HY resulted in a 35% cost reduction for
the fibre optic cable manufacturers.
SPORTS GOODS COMPOSITES
Footwear brands and athletes desire
lightweight materials that provide better
support, stability and performance to increase
their competitive edge. Our Lattice Lite Eco
range of products uses the combinations of
reinforcement fibres and matrix fibres in an
optimised laying process to create sustainable
composite plates with intelligent component
performance whilst reducing material and
process waste. Our Lattice Lite range of
products have been adopted by Salomon for
their road running and trail shoes.
PIPELINE COMPOSITES
Our new Gotex Xtru composite tape using
carbon fibre reinforcement provides a 50%
weight reduction versus legacy steel tapes
allowing Oil & Gas operators to accelerate
the conversion of legacy steel pipes to
composite pipes, mitigating corrosion related
issues. Pipe designs using our carbon Xtru
composite tapes are in advanced stages
of validation testing at a major pipeline
manufacturer and will help drive the transition
to non-metallics in Oil & Gas pipelines.
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Coats Group plc Annual Report and Accounts 2022
Innovation spotlight
APPAREL
Coats thread innovation has been focused on
sustainability and circularity. The key drivers include
Material Innovation – selection of substrates based
on carbon footprint reduction like 100%
post-consumer recycled polyester thread, to
accelerate biodegradation, micro fibre pollution
reduction and design for circularity.
Key trends
Thread is integral to apparel, footwear and technical
textiles. As the world opts for a more sustainable
future, it is imperative that Coats’ thread leads the
way, ensuring that all components of what we wear,
use and interact with deliver on this goal.
How we are responding and our ambition
We have made a number of advances in our product
offering to address the increasing demand for
sustainable garments.
Eco-Cycle thread is made out of a proprietary blend
of water based polymer and natural substrate to
enable the disassembly of garments post end of life
even after repeated washings. The thread remains
intact during the consumer usage phase but enables
easy disassembly for recycling by dissolving at 95°c.
Eco-cycle has obtained a Platinum rating for Material
Health from the Cradle to Cradle (C2C) Institute.
Eco B is made from recycled polyester with a special
additive which accelerates biodegradation and helps
in microfibre pollution reduction. Product offering
includes premium polyester core spun, textured and
embroidery threads.
Eloflex EcoVerde is the world’s first high extension,
100% recycled, stretch thread for performance
sportwear and next-to-skin garments.
FOOTWEAR
We are committed to efficient production and the
most effective use of resources, raw materials and
energy. We are always looking to improve – and
with technological competence and numerous
innovations, we develop the footwear solutions
of tomorrow.
Key trends
Lightweighting, comfort, stability and durability
combined with advanced technology,
sustainability and innovation.
How we are responding and our ambition
We have short, medium and long-term programs for
product and process developments.
Eco-strobe is not only made from 100% R-PET
(Recycled Polyethylene Terephthalate), but is also
100% recyclable without any loss in quality.
Rhenoprint multi-zone – Added multi-zone to our
existing Rhenoprint process which manufactures
structural components with zero waste. Multi-zone
allows us to adjust the amount of material used in the
component in different areas to produce a more
refined product for comfort and stability.
PERFORMANCE MATERIALS
Coats Performance Materials division provides
personal protection yarns and fabrics for Thermal,
Heat & Flame and Cut Protection applications.
The product trends across these end uses demand
ever increasing comfort, dexterity and an ability to
protect against multi hazards such as cut and
chemical or flame and electric arc.
Key trends
There is demand for ever lighter garments and
gloves with increased protection and comfort.
There is an increasing urgency to incorporate
sustainable materials in new solutions.
How we are responding and our ambition
We continue to develop highly-engineered yarns and
threads for us where performance is critical across a
range of industries and applications.
FLX range brings comfort and stretch to our
FlamePro for heat/flame protection applications and
to our Armoren for cut protection end uses.
Armoren Gold incorporates high performance fibres
in a patent-protected yarn process creating one of
the finest, most dexterous gloves in the market with
the cut protection levels normally associated with
products twice as heavy. The latest iteration uses
bio-based raw materials rendering the product
genuinely sustainable.
FlamePro Splash fabric (patent-protected) provides
best-in-class comfort with primary protection against
molten splash and secondary electric arc resistance.
The garments produced from FlamePro Splash are
proving to be extremely popular with aluminium and
other metal workers in sites large and small across
the globe.
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Coats Group plc Annual Report and Accounts 2022
Market trends
TREND 1
VOLATILE ECONOMIC CLIMATE
TREND 2
SUPPLY CHAIN DISRUPTION
TREND 3
SUSTAINABILITY
The industries we serve, like most consumer
focused industries, react to macro economic factors
such as rising cost of living and higher than normal
inflation in raw materials, freight, energy and labour.
2022 saw headline consumer inflation exceed c.10%
globally, which impacted demand across our
Apparel business, and to a lesser extent our
Footwear business, during the latter half of the year,
in addition to the increase in input costs. Although
we saw a softening of some inflationary pressures
towards the end of 2022, we are still cognitive of a
high inflationary and volatile economic environment
as we move through 2023.
Across the industries we serve, speed to market is
increasingly a critical differentiator. Our customers
are looking at their own supply chain resilience,
including reviews of their supply base and sourcing
geographies. During 2022, we saw industry supply
chain disruption with reduced availability of raw
materials, labour constraints and disruption of sea
freight operations, all contributing to higher than
normal levels of inflation globally. We expect these
challenges to largely continue into 2023, increasing
the importance of speed, agility and supply
resilience across the industries we serve.
Sustainability continues to increase in importance
across the industries we serve, driven by
consumer pressures, customer strategies and
legislative changes. COP27 delivered further
global progress across the environmental
agenda. This continued shift in sentiment
and behaviours is manifested in areas such
as materials innovation, energy renewables,
water management, waste reduction and social
justice and compliance. Many of our customers
are developing partner programmes that put
sustainability at the heart of ongoing collaboration.
Our expectation is that this trend is irreversible
and will only increase in importance over time.
Coats continues to challenge itself,
changing course to keep meeting
the needs of our customers by
supplying high-quality, agile
solutions in a transient market.”
Rajiv Sharma
Group CEO
Our response this year
Our response this year
Our response this year
Coats moved early to address the inflationary risk,
managing to fully offset inflation during the year. We
have offset inflation in the areas of raw materials,
freight, energy and labour with pricing and self-help
programmes.
By continuing to deliver on Speed, Productivity,
Innovation, Quality, Reliability and Sustainability
(SPIQRS) and focussing on the premium end of the
market, Coats is strategically positioned to
successfully navigate economic headwinds.
We have a resilient and global operational footprint,
which offers peace of mind and superior reliability to
our customers. We pivot quickly, responding to and
supporting our customers’ needs in a highly volatile
environment. Our unrivalled global, agile footprint,
and our scale proved invaluable as we delivered high
levels of supply and customer service, despite
multiple external challenges.
We have continued to advance our sustainability
journey in 2022 with positive progress made on
our ambitious targets to deliver reductions in
energy and water intensity. Collaborating with
our supply chain partners we have delivered
higher levels of circularity as a means of
driving waste prevention and reduction.
Our recent Texon and Rhenoflex acquisitions both
have sustainability strategies aligned to those of
Coats, with footwear component solutions such as
Rhenoprint delivering waste free production.
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Coats Group plc Annual Report and Accounts 2022
Market trends cont.
TREND 4
GROWTH OF ASIAN DOMESTIC MARKETS
AND ASIA BRANDS
Domestic consumer demand in Asia is significant and expected to grow
faster than JUSE (Japan, USA, Europe) markets. Globally, as a derived
demand component, sewing thread markets are expected to grow by
low single digits percentage over the medium term, but with higher
growth in Asia as demographics and consumer wealth expands. This is
reflected in the growth of domestic fashion retail, most notably, but not
only, in China and India. Demand for Composites is increasing due to the
pace of urbanisation (e.g. the rollout of fibre optic cable networks) and
economic growth, which means consumers buy more products needing
high performance materials (e.g. outdoor goods and passenger vehicles).
In personal protection, demand is being driven by increasing levels of
worker protection, industry regulation and the need for comfort with
multi-hazard protection.
Our response this year
We continued to develop and execute our domestic market growth
strategies in China and India, building on our competitive advantages of
product range, quality, technical application and brand strengths. In
Apparel and in Footwear, we delivered market share gains and significant
growth in China and made strong progress coming out of continued Covid
disruption. In Performance Materials, we delivered significant share gains
in China in Performance Threads with multiple new programme wins for
automotive safety critical and trim applications. We also had a very
successful start producing and selling FlamePro branded flame-retardant
fabrics in India mainly for use in garments destined for the middle eastern
oil and gas market. Our two acquisitions in the footwear space are well
positioned in China and Vietnam, and poised to take advantage of further
Asia-driven growth.
TREND 5
DIGITAL
Industry adoption of digital technology has continued to accelerate
during 2022 as companies look to drive faster speeds, increased
productivity, lower waste and end-to-end supply and materials
transparency. We continue to embed our investments in technology
of recent years to improve our supply chain and support functions,
and remain as vigilant as ever of cyber security threats.
Digital technology across the industry is not limited to pure software
solutions, as the industry becomes more and more responsive to
sustainability-led innovations, we are seeing increased demand for
solutions that use technology to simultaneously reduce waste and
increase productivity.
Our response this year
Coats Digital, our Fashion Tech business, enables fashion brands,
sourcing companies, and manufacturers to optimise, connect and
accelerate business critical processes seamlessly, including: design and
development; method-time-cost optimisation; production planning and
control; fabric optimisation and shop floor execution. In 2022 bookings
saw high double-digit growth ahead of reported sales growth, indicating
confidence for continued future growth.
In our Footwear division we acquired, as part of the Rhenoflex acquisition,
the proprietary ‘Rhenoprint’ 3D printing IP, which offers leading brands
a zero waste, print-to-order solution with enhanced performance
within the shoe.
In Apparel, we have begun selling Twine, our waterless digital colour
printing technology solution that is integrated into Coats’ own colour
catalogue. This allows colour development in garments to be done
in minutes, not weeks.
Rhenoprint and Twine in particular exemplifies how Coats is
connecting talent, textiles and technology to make a better and
more sustainable world.
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As the leader of Apparel, I am excited at what
opportunities the domestic Asia market holds
for us, particularly within China and India.”
Adrian Elliott
President, Apparel and Footwear
Coats Group plc Annual Report and Accounts 2022
Key performance indicators
Performance measures of the Group’s progress
FINANCIAL KPIs
Link to strategy
Profitable
sales growth
Transform the
business
Value
creation
During 2022 we continued to monitor our performance and progress using a range of key performance indicators (KPIs), each of which is a non-GAAP measure. In the year,
adjusted EBITDA growth and leverage were added to the range as the Board consider them, along with the existing KPIs, to be important measures to track business performance.
For further details of how these financial Alternative Performance Measures are reconciled to the nearest corresponding statutory measure, see note 37 on page 166.
2020 and 2021 KPI comparators are as reported in prior years and do not include any restatement for discontinued operations.
Revenue growth
Adjusted operating
profit growth
Adjusted EBITDA growth
Adjusted earnings
per share growth
Adjusted free cash flow
Leverage
Adjusted return on capital
employed (ROCE)
Definition
Annual organic growth in sales
at like-for-like exchange rates.
Definition
Annual organic growth in
operating profit, adjusted for
exceptional and acquisition
related items, at like-for-like
exchange rates.
Definition
Net income from continuing
operations before interest, tax,
depreciation, amortisation and
impairments, excluding
exceptional and acquisition
related items.
Definition
Annual growth in reported EPS
from continuing activities,
excluding exceptional and
acquisition related items.
2022 Commentary
Group organic growth ahead of
expected medium term targets,
driven by exceptional H1
performance in A&F, and
growth across all three sub-
segments in PM. Some industry
destocking in A&F in Q4.
2022 Commentary
Adjusted operating profit
increased to $235m reflecting
strong pricing and mix fully
offsetting inflation, as well as
strategic projects being
delivered ahead of schedule.
2022 Commentary
Adjusted EBITDA increased
to $283m reflecting strong
pricing and mix fully offsetting
inflation, as well as strategic
projects being delivered
ahead of schedule.
2022 Commentary
Adjusted EPS increased 14% to
8.2c, reflecting strong trading
performance and delivery of
strategic project savings.
A further reduction in effective
tax rate, with some offset from
higher interest charges.
Definition
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.
Definition
Multiple of Net Debt (excluding
leases) to EBITDA calculated on
a pro forma basis (includes the
full year impact of acquisitions).
2022 Commentary
Strong cash flow underlines
operating profit growth,
alongside disciplined
approach to working capital
and capital expenditure.
2022 Commentary
Pro forma leverage remains
comfortably within the 1-2x
target range following the
Texon acquisition, underpinned
by strong free cash flow.
Definition
Pre-exceptional operating profit
from continuing operations for
the year divided by capital
employed (property, plant and
equipment, acquired
intangibles, right of use assets
and lease liabilities plus net
working capital) at year end.
2022 Commentary
Strong operating profit
performance alongside a
continued well controlled asset
base. Capital employed has
increased in the year largely as
a result of the newly acquired
acquisition intangible assets.
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Performance
Performance
Performance
Performance
Performance
Performance
10%
22%
2022
2021
2020
10%
29%
(19%)
2022
2021
2020
(43%)
22%
75%
16%
2022
2021
2020
(34%)
16%
49%
14%
2022
2021
2020
14%
(65%)
181%
$114m
2022
2021
2020
$28m
1.4x
2022
2021
2020
$114m
$113m
30%
0.7x
1.4x
1.2x
2022
2021
2020
30%
40%
22%
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Coats Group plc Annual Report and Accounts 2022
Key performance indicators cont.
2022 SUSTAINABILITY KPIs
2022 saw the maturation of our highly ambitious 2019-2022 sustainability targets which span across the five pillars of our sustainability strategy.
We take great pride in the results delivered in 2022, and have now set our focus on the next chapter of our journey which will span 2023-2026.
* disposed businesses (Brazil/Argentina)
have been excluded to create a like for
like comparison between 2018 baseline
and 2022 performance
2024
SUSTAINABILITY KPI
BUSINESS CRITICAL
NON-FINANCIAL KPI
Water Intensity*
Energy Intensity*
Effluent quality
GPTW© certification
Waste %*
Sales of recycled material
Recordable accident rate
(RAR)
Target of 40% reduction by
2022 against our 2018 baseline
Target of 7% reduction by 2022
against our 2018 baseline
Definition
Litres of water used per kilo
of finished production.
Definition
kWh of energy used per kilo
of finished production.
2022 commentary
We reduced our water intensity
to 52.8 Ltrs/Kg versus our 2018
baselines of 85.2 Ltrs/Kg.
This significant progress was
delivered through multi-site
optimisation of dye process
parameters and comprehensive
leak remediation programmes.
2022 commentary
Our energy intensity reduced to
8.2kWHr/Kg from our 2018
baseline of 9.09kWHr/Kg.
Smart Energy metering rollout
was advanced which delivered
new actionable insights yielding
energy intensity reductions.
Focus was given to our Energy
Basics programme, sharing
best practice energy
management across sites.
Target of 100% ZDHC (Zero
Discharge of Hazardous
Chemicals) compliance by 2022
Definition
Percentage of effluent
that is compliant to ZDHC
Foundational standards
for effluent and sludge.
2022 commentary
Further improvements in
effluent quality, achieving 92%
ZDHC compliance versus an
82% compliance in 2021.
Target of 80% by 2022
Target to reduce waste by 25%
by 2022 from a 2018 baseline
Target is for 100% by 2024
Definition
Percentage of employees
in Coats units that have a
Great Place To Work (GPTW©)
or equivalent certification.
2022 commentary
Post pandemic we have seen a
mass acceleration of Great
Place to Work certification
covering 86% of employees in
2022, up from 83% in 2021, and
from 6% in 2020.
Definition
Waste generated across our
end to end supply chain as a %
of finished goods produced.
Definition
Percentage of premium
product sales that are
made with recycled material.
Definition
No. of recordable work related
injuries and illnesses per 100
full-time employees per year.
2022 commentary
2022 saw significant
acceleration of our waste
management programmes
globally with us achieving a
massive improvement in delivery
and full achievement of our
target. Circularity of packaging
waste and reduction in effluent
sludge generation played a
significant part in this delivery.
2022 commentary
We continue to make strong
progress in this area, steadily
increasing supply by
broadening our supplier base.
2022 Commentary
Persistent focus on preventative
measures such as training and
hazard identification and
remediation helped deliver
11% reduction in recordable
incidents in the year.
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Performance
Performance
Performance
Performance
Performance
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2021
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24%
14%
38%
10%
2022
2021
2020
3%
10%
7%
92%
2022
2021
2020
86%
2022
2021
2020
6%
92%
82%
74%
25%
2022
2021
2020
1%
3%
86%
83%
23%
0.40
25%
2022
2021
2020
23%
19%
13%
2022
2021
2020
0.40
0.45
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31
Coats Group plc Annual Report and Accounts 2022
Stakeholder engagement
Developing strong and constructive relationships with our stakeholders is part of our
culture and is vital to achieve our purpose and our strategic ambitions.
Below we summarise who our key stakeholders are, how we engaged with them during 2022, what we
learned and what we will do going forward. You can read our section 172 statement on pages 39 to 41, which
sets out how the Board and management considered certain insights gained from our stakeholders
in our decision making. Read more about why we consider these stakeholder groups to be important
to the delivery of our strategy in our Business model section on page 14.
OUR STAKEHOLDERS
EMPLOYEES
See page 32
CUSTOMERS
See page 33
SHAREHOLDERS
See page 33
ENVIRONMENT
See page 33
COMMUNITIES
See page 34
SUPPLIERS
See page 34
EMPLOYEES
Our 17,000+ 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 2022
The Board met with members of the workforce
at all levels during its site visit to the Rhenoflex
facilities in Germany in September. This
included meeting employees from both of our
recent acquisitions as well as members of the
Performance Materials and Apparel and Footwear
divisions. During the away week in October, the
Board met various groups of employees at the
Huamantla and Orizaba plants, as well as having
sessions with members of the workforce during
lunches and dinners throughout the week.
Fran Philip, Designated Non-Executive Director for
Workforce Engagement, continued to engage
through a combination of in-person and virtual
sessions held with employees based in Europe, Asia
and Mexico. Fran had discussions with the Chief
Operating Officers, and she also continued to attend
our DE&I Network calls to listen and speak to a wide
range of people from across the Company.
The Board received regular people updates as part
of discussions on the acquisitions, divestment and
Strategic Projects agenda at Board meetings, as
well as from the Group’s Chief HR Officer. These
sections also covered a review of the insights from
employee surveys that were undertaken, including
Great Place to Work and the Future of Work.
Steve Murray and Heather Lawrence met with
employees from various parts of the business as
part of their induction programmes and shared
their impressions with the Board.
What we learned
Employees continue to value the Company’s culture,
the opportunities to learn and develop, and the
Group’s approach to health and safety. Common
feedback for areas for continued focus included
opportunities for women and more opportunities
across teams globally.
What we are going to do in 2023
The Board will continue to seek opportunities to
conduct site visits during its annual away week and
to directly engage such as at the global leadership
conference, as well as monitoring key metrics such
as health and safety and engagement to continue
to gain workforce insights. Fran’s very important
role will continue, with a focus on ensuring that
the embedding of the new divisional structure
and the ongoing implementation of our Strategic
Projects are resulting in the desired cultural
outcomes, noting the importance of the culture
to employees. The ‘Coats for All’ programme will
continue with appropriate updates on DE&I and
opportunities from the Chief HR Officer, to allow
monitoring of the items identified as important
by employees. The insights from employee
surveys will also be appropriately considered, as
will other relevant metrics including in relation to
employee engagement and health and safety.
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Coats Group plc Annual Report and Accounts 2022
Stakeholder engagement cont.
CUSTOMERS
Our global footprint provides
unrivalled access to markets and
customers. We want to proactively work
together with our customers to deliver
additional value together.
How the Board engaged in 2022
The Board closely monitored customer insights
provided by the Executive Directors and senior
management as part of the discussions regarding
the acquisitions of Texon and Rhenoflex. As part of
the agenda at the Company’s Strategy Day,
emerging trends and behaviours were discussed in
depth by the Board and management, relying on
inputs sought directly from key customer meetings.
During the Board visit to Mexico, a key customer in
the region was invited to discuss trends in the
region at the Board meeting.
Our global customer surveys programme continued
using our dedicated commercial, sales and
marketing teams to connect and partner with
customers and brands, by listening and innovating
to achieve jointly desired outcomes. The Audit and
Risk Committee considered relevant feedback
received through the customer audit review process.
What we learned
As global uncertainty continues, speed, agility
and reliability continue to be critical to our
customers. The acquisitions of Texon and
Rhenoflex were well received with customers
noting that they were excited to see the
developments in the Footwear business.
An increasing number of consumers continue to
focus on sustainability when making their purchase
decisions and Coats’ continued innovation and
development in this area is a key differentiator.
What we are going to do in 2023
In 2023, the Board will continue to use existing
two-way feedback structures to regularly review
trends and insights identified by management
across all parts of our business. Opportunities for
direct engagement with the Board, either as a part
of Board visits or in the boardroom, will be
scheduled when appropriate. We will continue to
focus on sustainability and innovation, in line with
our business model, to appropriately respond to the
appetite for further solutions expressed by
customers during engagement sessions.
SHAREHOLDERS
Coats maintains and values
regular dialogue with shareholders
throughout the year, so that they can
more accurately assess our value and
the opportunities and risks of
investing in our business.
How the Board engaged during 2022
The Capital Markets Day held in October allowed a
wide range of existing and prospective investors the
opportunity to engage directly with the Group CEO,
Chief Financial Officer, Chair and Senior Independent
Director together with other key executives and
managers, and share their views on integration and
opportunities. The event showcased our expanded
and enhanced Footwear business and included
detailed presentations on Rhenoflex and Texon.
The Board was delighted to return to a physical AGM
in 2022 whilst retaining the option for shareholders
to listen to the business of the meeting remotely.
The Group CEO and Chief Financial Officer, together
with the Investor Relations function, are regularly in
contact with investors through calls and roadshows
throughout the year. In 2022, there was a focus on
investors from the US. The Chair and Chair of the
Remuneration Committee also joined investor calls
where appropriate. The Board receives an update
at every Board meeting from the Investor Relations
function on feedback from investors and key trends,
and these included feedback from the visits to
certain US sites by some of our major shareholders.
Additionally, the Board carefully considered the
progressive dividend policy when deliberating in
relation to the interim and final dividend levels,
noting the importance of returns to shareholders.
What we learned
Regular conversations with both existing and
prospective investors allow the Company to share
timely information on key strategic and operational
matters. The return to face-to-face engagement was
positively received and investors were excited to see
the opportunities arising from the new acquisitions.
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Investors continue to seek long-term financial
performance and shareholder returns as well as
good ESG credentials.
What we are going to do in 2023
As well as continuing our programme of
engagement on progress in our three divisions, the
Chair of the Remuneration Committee has engaged
on the new Remuneration Policy in 2023 (see the
Remuneration Committee report for further details).
We will continue to consider total returns to
shareholders in our Board discussions. The Chair,
Group CEO and Chief Financial Officer will continue
to attend relevant investor meetings as will the
Chairs of the Committees if required.
ENVIRONMENT
Coats is working proactively with
customers and suppliers to help
them improve the sustainability of their
products, and to minimise the environmental
impact of our industry.
How the Board engaged in 2022
After consultation with a wide variety of
stakeholders, the Board approved a new suite of
33
Coats Group plc Annual Report and Accounts 2022
Stakeholder engagement cont.
sustainability policies, including a Climate Change
policy, during 2022 and also agreed a range of new
2026 sustainability targets as recommended by the
Board’s Sustainability Committee. The Sustainability
Committee met twice and considered the views of
customers, suppliers and investors in determining
how to continue to deliver ongoing sustainability
progress in our business operations.
Environmental metrics are presented at every Board
meeting and progress is tracked across key
performance measures, including our sustainability
targets programme. There are discussions as to what
improvements are required to ensure we continue to
deliver against our ambitions. The Board also
considered several key supply contracts with
providers of renewable energy. Our recent
acquisitions offer new and exciting ways to progress
the Group’s zero waste to landfill ambitions.
What we learned
Our stakeholders have ever increasing expectations
for how a responsible business should operate and
reduce its impact to mitigate the climate emergency.
Shareholders shared their views on living wage
policies, as well as other ESG-related matters.
We need to continue to challenge ourselves to
provide opportunities for growth while also
protecting the environment and delivering for
all of our stakeholders.
What we are going to do in 2023
In line with the insights received, the Board will review
the detailed plans for and progress in achieving the
2030 Science Based Targets, including the transition
to renewables. In 2023, the Board and its Committees
will continue to monitor key environmental metrics
and climate-related metrics, as well as the progress of
our Audit and Assurance policy and activities.
COMMUNITIES
We operate in fifty countries across
six continents. By empowering people
and championing inclusion and diversity,
we can help build thriving communities
and strengthen our business.
How the Board engaged in 2022
The Board visit to Mexico included attendance
at the Asociación Orizaba Propone AC
(AOPAC) Foundation event with Coats, where
the Foundation received donations from the
Company. The Directors were able to directly
interact with people living in the areas in which
we operate, as well as with local officials, to gain
further insights. As part of the decisions taken in
relation to acquisitions and divestments during
the year, the Board considered the impact on
the local communities, especially in relation to
the changes made in our production footprint.
Communities were also considered as important
stakeholders regarding our new suite of ESG
policies, particularly in relation to the Living Wage
and Climate Change policies.
What we learned
The impact of operations on local markets is
especially important in the context of the current
economic volatility and increased inflation. The skills
and development opportunities, especially those
with a DE&I focus, provided by the Group continues
to be important and valued by the communities in
which we operate. Building strong relationships with
those close to our business helps us grow.
What we are going to do in 2023
The Board is strongly committed to proactive
engagement with our communities and will continue
to be mindful of the insights shared by stakeholders
during engagement when considering ESG-related
matters in 2023. We will continue to focus on our
Coats for All initiative, including the focus on the
Coats for Her element, to support our DE&I
aspirations and respond to the insights received.
The Board will monitor key metrics including those
relating to DE&I. More details of our activities can
be found in our Sustainability Report online
(www.coats.com/sustainability).
SUPPLIERS
Our suppliers do not just supply goods
and services to us, but are true
partners throughout our processes and
aligned to our requirements on compliance,
quality, sustainability and innovation ethos.
How the Board engaged in 2022
In 2022, members of the Group Executive Team
provided Group-wide oversight of suppliers in the
aftermath of the Covid pandemic, allowing increased
visibility and ability to mitigate the impact of
challenges. Management shared appropriate
insights in Board updates. The Audit and Risk
Committee continued to consider relevant findings
from Supplier audits. The Board has reviewed our
supply footprint as part of the considerations
regarding acquisitions, divestments and the
Strategic Projects and considered factors impacting
our supply chain that were identified by suppliers
during engagement with management. In line with
our Delegated Authorities Policy, the Board
reviewed appropriate contracts with several
suppliers and focused on the provision of
renewables where possible.
What we learnt
Our well-established Code of Conduct and Supplier
audits bring clear expectations of what we expect
from our suppliers and what they can expect from
us. This is appreciated throughout the supply chain.
Our continued focus on sustainability creates
opportunities for new relationships as do our
new acquisitions.
What we are going to do in 2023
The Board will continue to use existing feedback
structures to regularly review supply-related trends
and insights identified by management across all
parts of our business. Direct engagement as a part
of Board visits or in the boardroom will be kept
under review and scheduled when appropriate.
The Supplier Code will be refreshed and this will be
used as an engagement tool. Insights will be
considered at the Audit and Risk Committee.
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Coats Group plc Annual Report and Accounts 2022
Taskforce on climate-related financial disclosures
In complying with the requirements of Listing Rule
9.8.6R(8) on climate-related disclosures, we consider
our disclosure to be consistent with all of the Task
Force on Climate-related Financial Disclosures
(TCFD) Recommendations and Recommended
Disclosures as detailed in “Recommendations of the
Task Force on Climate-related Financial Disclosures”,
2017, with use of additional guidance from
“Implementing the recommendations of the Task
Force on Climate-related Financial Disclosures”,
2021. Our disclosures cover all divisions over which
Coats has operational control but does not include
acquisitions made during the course of FY2022.
We recognise that climate change presents our
business with significant risks and opportunities and
have integrated assessment of climate change risks
into our regular risk management process as well as
identifying climate as a principal risk. This process is
described in detail on pages 42 to 49 with a section
on climate risk. During 2022 we expanded our
analysis of risks and opportunities related to climate
and extended our TCFD disclosures in line with
latest all sector guidance and requirements. As a
result, we have created a stand-alone TCFD report
which can be found here. We have created
a separate TCFD report because of the significant
expansion of content in the report this year. This
report covers the calendar year 2022 aligning
to our Annual Report period.
Recommendation
Governance
Disclose the organisation’s
governance around climate-
related risks and opportunities
Strategy
Disclose the actual and potential
impacts of climate-related risks
and opportunities on the
organisation’s businesses,
strategy and financial planning
where such information is
material
Risk management
Disclose how the organisation
identifies, assesses, and
manages climate-related risks
Metrics and targets
Disclose the metrics and targets
used to assess and manage
relevant climate-related risks and
opportunities where such
information is material
Recommended disclosures
Disclosure level
Disclosure references
a) Describe the Board’s oversight of climate-
related risks and opportunities
b) Describe management’s role in assessing and
managing climate-related risks and opportunities
Complete
ARA 42, 57-59
TCFD 03
Complete
ARA 42-43, 46
TCFD 03
ARA 46
TCFD 05-08
a) Describe the climate-related risks and
opportunities the organisation has identified over
the short, medium and long term
Complete
b) Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy, and financial planning
c) Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario
a) Describe the organisation’s processes for
identifying and assessing climate-related risks
b) Describe the organisation’s processes for
managing climate-related risks
c) Describe how processes for identifying,
assessing, and managing climate-related risks
are integrated into the organisation’s overall risk
management
a) Disclose the metrics used by the organisation
to assess climate-related risks and opportunities
in line with its strategy and risk management
process
b) Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and
the related risks
c) Describe the targets used by the organisation
to manage climate-related risks and
opportunities and performance against targets
Complete
TCFD 09-14
Complete
TCFD 09-14
Complete
Complete
ARA 42
TCFD 04
ARA 42
TCFD 04
Complete
ARA 42-43, 46
TCFD 04
Complete
TCFD 15
Complete
ARA 82
Complete
TCFD 15
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Coats Group plc Annual Report and Accounts 2022
Taskforce on climate-related financial disclosures cont.
Non-financial information statement
The following key risks and opportunities are discussed in our TCFD report
TCFD category
Key Risk or Opportunity
Transition: Current and
Emerging Regulation
Transition: Market and
Technology
Risk 1: Introduction of carbon taxes leading to increased energy prices.
Opportunity 1: Growth in light-weighting products in transport markets, enabling
significant increase in market share gives us competitive advantage both from a
product perspective and an operational sustainability perspective.
Transition: Market, Technology
and Reputation
Risk 2: Declining sales due to shifting customer sentiment in terms of transitioning to
a low carbon model.
Transition: Market
Opportunity 2: Increased market share with apparel and footwear brands.
Transition: Regulation and
Technology
Risk 3: Inability to source sufficient renewable energy to meet emissions reduction
targets.
Transition: Policy and
Technology
Risk 4: Inability to source sufficient recycled raw material to fully transition to a low
carbon product range and hence achieve the SBTi targets.
Physical: Acute
Physical: Chronic
Physical: Chronic
Risk 5: Increase in flood damage risk, in a few Asian units.
Risk 6: Disruption of water supply in some units.
Risk 7: Extreme heat leading to possible need for plant relocation to ones with better
temperature regulation.
Our balanced evaluation is that in the short term our risks and opportunities are equivalent in magnitude. In
the longer term the physical risks increase, and we will be better able to disclose the overall impact once we
have completed the assessment of additional opportunities during 2023 as described in our TCFD report.
The non-financial reporting regulations in section
414CA and 414CB of the Companies Act 2006
require the disclosure of specific information relating
to environmental matters, the Company’s
employees, social matters, respect for human rights
and anti-corruption and anti-bribery matters, a
summary of which is set out below. Full details of all
our policies on these matters can be found in our
downloads section. We are Participants of the
United Nations Global Compact (UNGC) and are
committed to the 10 principles of the Compact,
covering Human Rights, Labour, the Environment
and Anti-corruption. Our Sustainability Report is our
formal annual UNGC Communication on Progress
(COP) and contains fuller information across all of
these areas.
The Environment
Operating sustainably with care for the environment
is embedded into our purpose and is a major area of
focus for our sustainability strategy. We have
committed to near-term emissions reduction targets
for 2030 and have submitted Net-Zero targets for
2050 which are currently being validated by Science
Based Targets initiative. Delivery of these targets
requires us to reduce and decarbonise our energy
requirements and to transition our raw materials
away from virgin oil-based products. Having nearly
delivered on our water intensity reduction goal we
are now focussing on increasing water recycling so
that we reduce the environmental water stress from
our operations. We operate to global industry
standards in terms of effluent quality and have
multiple programmes in place to reduce our waste
and redirect it to circular economy solutions.
We now have a zero waste to landfill target.
Our key policies in this area are our Environmental
and Climate Policies and these can be found on our
website and our environmental performance is
described in detail in our Sustainability Report.
Our energy use and emissions performance can be
found in the Directors’ Report page 82 and in more
detail in our Sustainability Report. The importance
of environmental policies and performance is
described on page 41.
Environmental non-compliance and climate change
are both considered to be principal risks and details
of the risk evaluations and mitigating actions are
shown on pages 46 to 47. Our approach to
responding to the risks and opportunities arising
from climate change are summarised in our TCFD
statement pages 35 to 36 and in more detail in our
TCFD Report. We measure our emissions impact for
Scopes 1 and 2 monthly and for Scope 3 annually.
Our results can be seen in our emissions disclosures
on page 82. Our key risk in environmental terms
relates to effluent quality and we have on-line
monitoring of key effluent measures in our large
units and have extensive tests done by external
laboratories of effluent quality every six months.
Our performance is shown in our KPIs on page 31.
Employees
We are committed to providing a safe and respectful
working environment for our employees and other
stakeholders. We aim to have an organisational
culture which promotes inclusion, diversity, equal
opportunities, personal development and mutual
respect. We aspire that our colleagues will enjoy
being at work and will all contribute to creating an
environment that is free from any discrimination,
bullying or harassment. We seek to promote
physical and mental wellbeing in our workplaces.
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Coats Group plc Annual Report and Accounts 2022
Non-financial information statement cont.
Our key people-related polices are our Key
People Principles, our Health and Safety Policy,
our Worldwide Employment Standards, our
Living Wage Policy (see page 41), our Ethics
Code (see page 48), our Equal Opportunities
Statement and our Speak Up (Whistleblowing)
Policy (see page 81). All of these can be found
on our website. Targets and performance on our
people policies is described on pages 16 to 17
of this report and in our Sustainability Report.
Principal risks related to this area are the failure to
attract, retain and develop diverse and inclusive
talent and capability given business changes,
growth in new areas and labour availability, and
the risk of serious Health & Safety incidents. These
risk evaluations and mitigations are described on
pages 44 to 49.
Human Rights
Coats is committed to protecting the Human Rights
of our employees and those working in our supply
chain. We fully support the United Nations (UN)
Guiding Principles on Business and Human Rights in
our operations and we uphold the UN Declaration of
Human Rights and the Convention on the Rights of
the Child, the core International Labour Organisation
(ILO) Conventions and the Organisation for
Economic Co-operation and Development (OECD)
Guidelines for Multinational Enterprises and the
related Due Diligence Guidelines for the Garment
and Footwear Sector. Every two years we do a
Human Rights Risk Assessment. This was last done
in 2021 and will be repeated in 2023. Our Global
Internal Audit (GIA) team include aspects of Human
Rights assessment in their regular audit
programmes. Details on the outcomes of our GIA
audits in this area are included in our Sustainability
Report on page 58.
The GIA team completed 8 audits during 2022. No
human rights violations were found and 10 human
resource management process concerns were
raised and these have all been resolved or are being
addressed.
We collaborate with our suppliers to extend our
principles up our supply chain and perform regular
Supplier Code audits on suppliers that are identified
as being at higher risk. The outcomes of our
Supplier Code audits are detailed in our
Sustainability report on page 58. 322 audits have
been completed between 2021 and 2022. Nineteen
of these required improvement and need to show
that they are making progress. 7 audits raised
serious issues, 4 have been resolved after
re-auditing and 3 (all from 2022 audits) are pending
reaudit. If the suppliers do not resolve the issues
then they will be delisted.
Our key policies on Human Rights are our
Worldwide Employment Standards and our Supplier
Code and these can be found on our website.
Further details on performance in this area can be
found in our Sustainability Report and in our
Modern Slavery Statement.
Social
We link to wider society through our suppliers and
their employees, through our relationships with our
local communities and neighbours and with our
customers and consumers through our products.
Our Supplier Code, described above, describes our
expectations of employment standards for our
suppliers. There is a risk of non-compliance here
and reputational damage and the Supplier Code
audit programme helps us to manage this risk.
The results have been described above.
We have a flexible community engagement
approach that allows our business units to engage
with their communities on issues that are important
at a local level. The principal risk here is the
environmental incident one described on page 47
and our management of this has been described
above. See page 34 and for more details our
Sustainability Report.
Ensuring that our products don’t present any risk to
our customers and consumers is actively managed
by our Restricted Substances List (RSL) programme,
which is updated annually. Application of this is part
of our Supplier Code management as all inputs into
our processes have to be certified as compliant to
our RSL list apart from a small number of industrial
products with performance-driven exceptions that
are approved at senior management level.
Anti-bribery and anti-corruption
Coats is committed to the highest levels of ethical
behaviour in all of our operations and has a zero-
tolerance approach to any bribery or corruption or
unethical behaviour in our operations and supply
chains. We have a rolling programme of raising
awareness across the business under the “Do the
Right Thing” banner and this is underpinned by
biennial training for all key staff (around 2700 in
total) in anti-bribery and anti-corruption, competition
law and ethical behaviour. We have a whistleblowing
system, “Speak up”, that has internal and external
reporting options and where every issue raised is
fully investigated. The outcomes from our
Whistleblowing process are detailed on page 81.
Our key policies in this area are our Anti-bribery and
Anti-Corruption Policy, our Competition Law Policy,
our Ethics code, our Gifts and Entertainment Policy,
our Speak Up (Whistleblowing) Policy and our
Undue Influence Policy. All of these policies can be
found on our website. The main risk we are exposed
to in this area is of non-compliance from our
upstream supply chain and the reputational impact
that could have on us. This is managed proactively
through our Supplier Code auditing process
described above.
Other matters
In addition, information required in relation to the
company’s business model is described on page 14.
Principal risks including those that relate to matters
above are included on pages 44 to 49. Key
non-financial KPIs are shown on page 31 where we
describe performance against targets up to 2022 and
on page 24 where we lay out the new targets that
have been set for 2026.
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Coats Group plc Annual Report and Accounts 2022
Non-financial information statement cont.
Non-financial information statement
POLICY
People
Key People Principles
Health and Safety Policy
Ethics Code
Speak Up – Whistleblowing Policy
Global Employment Standards
Equal Opportunities Statement
Modern Slavery statement
(including a statement on
transparency in supply chains)
Governance
Anti-bribery and Anti-corruption
Policy
Gifts and Entertainment Policy
Competition Law Policy
DESCRIPTION
This statement identifies the range of policies and procedures we have in place
to manage our key people-related issues.
This policy outlines our commitment and actions for the prevention of injury and
ill health, and ensuring health and safety excellence across our business.
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.
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.
As a global employer, Coats strives to follow ethical employment standards and
believes the human rights of its employees 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.
The Company supports equal opportunities in employment and considers it to
be an integral part of our employee relations policy.
This statement has been prepared for the year ending 31 December 2022 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.
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.
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.
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.
POLICY
Suppliers
Supplier Code
Restricted Substances List
Conflict Minerals Policy
Environment
Environmental Policy
Climate Change Policy
DESCRIPTION
The Supplier Code outlines our expectations required of suppliers and covers
labour practices, environmental management, responsible sourcing of materials
and products, and business conduct.
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.
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.
We are committed to doing what we can to limit the impact of climate change
and will always follow the scientific consensus on future impacts in assessing
how to address this challenge.
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Coats Group plc Annual Report and Accounts 2022
Section 172 statement
Section 172 of the Companies Act 2006
requires the Directors to promote the
success of the Company for the benefit of
the members as a whole, having regard to
the interests of stakeholders in their decision
making (S172 Factors). The Board believes
that considering our stakeholders in key
business decisions is not only the right thing
to do but is core to our ability to drive value
creation over the longer term.
On pages 32 to 34 we outline the ways that the
Board has engaged with our six groups of
stakeholders including what was learned and what
we will do in 2023 as a result of this engagement.
The Board has had regard to S172 Factors in all of its
key decisions and discussions, and examples of
these are set out below.
Strategic discussions and long-term consequences
Agile but responsible decision making is key to long-
term success in the current period of global volatility.
As the shape of the Group transforms as a result of
the implementation of the Strategic Projects and the
change in our operating structure (see page 40), we
rely on the Group’s well established systems and
ways of working to ensure that there is proper
consideration of the potential short and long term
consequences of decisions. The Board considered
the insights received from stakeholders as set out on
pages 32 to 34, including how to appropriately
manage the impact on employees and communities
when changing the location of some of our
operations, noting the challenge of maintaining
employee engagement through the period of
change. The feedback gathered from the direct
engagement with our investors at the Capital
Markets Day, and from conversations with customers
following the announcement of the acquisition of
Texon and Rhenoflex regarding the opportunities for
the Group, proved informative when the Board
discussed the creation of the Footwear division in
the context of the new operating model.
High standards of business conduct
Balancing the needs of our different stakeholders,
and noting that their needs might not always align,
required the Board to consider the likely
consequences of Board decisions and their impact
on the success of the Company. Considering our
long-term impact through all relevant lenses,
including our potential environmental and social
impact, is critical to ensure we maintain our
reputation for ‘doing the right thing’. Accordingly,
the Board valued the insights received from
shareholders and other environmental-related
stakeholders that were reflected in the ESG-related
policies and the 2026 sustainability targets (see
page 41). We continue to challenge ourselves, and
those in our supply chain, to demonstrate the
highest standards of conduct in our dealings and
the Board together with the Audit and Risk
Committee monitor these areas, including the
insights from supplier audits, and discuss
interventions with management where required.
Board information – the correct inputs
Equipping our leadership to make decisions in the
right way on the basis of the correct information
relies on good Group-wide governance and
reporting structures. Board papers continue to make
it easy to identify the key stakeholders for the
matters under consideration and provide relevant
information relating to them. The Board reviews and
probes the information presented and receives
assurance where appropriate.
Specific examples of Board decision making, including how stakeholders were considered and further
examples of how their input contributed to the outcomes, are shown on pages 40 to 41. Other information
considered by the Board during 2022 relating to the S172 Factors is set out below:
S172 Factor
(a) The likely
consequences of
any decision in the
long-term.
(b) The interests of the
Company’s
employees.
(c) The need to foster the
Company’s business
relationships with
suppliers, customers
and others.
(d) The impact of the
Company’s operations
on the community and
the environment.
(e) The desirability of the
Company maintaining
a reputation for high
standards of business
conduct.
(f) The need to act fairly
as between members
of the Company.
Relevant disclosures
– Chair’s statement (pages 6 to 7)
– Strategy (page 12)
– Business Model (pages 14 to 15)
– Sustainability (pages 24 to 25)
– Principal risks and uncertainties (pages 42 to 49)
– Long term viability statement (page 49)
– Business model (page 15)
– Culture, DE&I, and employee health and wellbeing (People and Culture, pages 16 to 17)
– Key performance indicators (GPTW© certification, page 31)
– Stakeholder engagement (page 32)
– Culture and ensuring alignment (The role of the Board, pages 65 to 66)
– Business Model (pages 14 to 15)
– Stakeholder engagement (pages 33 to 34)
– Principal risks and uncertainties (pages 44 to 49)
– Operating review (pages 51 to 52)
– Stakeholder engagement (pages 33 to 34)
– Sustainability (pages 24 to 25)
– TCFD disclosures (pages 35 to 37)
– Principal risks and uncertainties (pages 46 to 47)
– Directors’ report (SECR disclosures, page 82)
– Culture and values (People and Culture, pages 16 to 17) (Values, page 11)
– TCFD disclosures – Non-financial information statement (pages 36 to 38)
– Principal risks and uncertainties (pages 42 to 49)
– Audit and Risk Committee Report (pages 74 to 75)
– Whistleblowing (page 81)
– Stakeholder engagement (page 33)
– Leadership and engagement (page 64)
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Coats Group plc Annual Report and Accounts 2022
Section 172 statement cont.
BOARD DECISION MAKING DURING THE YEAR
Examples of Board decision making during the year and S172 Factors considered
Acquisition of Texon and Rhenoflex
The Board announced the acquisition of Texon in July 2022 quickly followed by the
announcement of the acquisition of Rhenoflex in August 2022. In discussing these
acquisitions the Board considered all aspects of future operations including fostering
relationships with, and the expectations of, new and existing employees, suppliers and
customers. The attractiveness of Texon’s and Rhenoflex’s products to customers was
considered, noting that innovation and sustainability had been identified as priorities for
customers in the insights received during engagement. Fundamental to the decision was
the selection of the appropriate funding structure for both acquisitions, particularly to
ensure the need to act fairly as between the members of the Company, and
consideration of the long-term impact of this on the financial position of the Group.
Strategic Projects
The Board announced a programme of Strategic Projects in early 2022 to appropriately
refresh our footprint by positioning key roles and operations closer to our customers.
This included considering the interests of employees, which markets the Group should
continue to operate in, and how the various impacts should be managed. After carefully
considering the trends in customer demands, including the need for speed and the
impact of global volatility on our supply chain, the Board concluded that it was
appropriate to undertake the Strategic Projects to ensure the Group remained agile and
was continuing to appropriately manage costs to ensure long-term success for all its
stakeholders. The importance of maintaining the Company’s high standards of business
conduct was considered at all stages of the decision making process.
Change to divisional operating structure
At the end of 2022, following the key decisions outlined above and the continued
monitoring of the progress in the Strategic Projects, the Board considered how the Group
should be structured to ensure long-term sustainable success in light of the internal and
external changes. Feedback gathered from investors and customers following the
acquisitions in relation to the potential for Footwear was noted. Careful consideration of
the current matrix structure versus the implementation of a new divisional structure rightly
included discussion regarding the interests of employees and other stakeholders.
Stakeholder considerations and outcomes
CUSTOMERS
SUPPLIERS
COMMUNITIES
EMPLOYEES
ENVIRONMENT
SHAREHOLDERS
The importance of fostering and maintaining business relationships was carefully considered. The Board discussed the
synergistic opportunities to customers and the potential to offer enhanced partnership when considering the acquisitions.
The impact on the supply chain, including the advantages of working at scale to further mitigate risk, was noted. Texon and
Rhenoflex both had facilities in new geographies and the responsibilities of the Group’s impact on new communities were
understood.
The need to retain key talent balanced with the need to ensure the appropriate business structure going forward was
carefully considered by the Board in relation to the acquisitions.
The innovative products offered by Texon and Rhenoflex (including ProWeave and Rhenoprint 2.0) offered new
opportunities for the Group in relation to sustainability and potential reduced environmental impact.
Consideration of long-term returns to shareholders was a key factor of both business cases as well as consideration of the
correct funding mechanism for both acquisitions. The equity placement for Rhenoflex included an offer to retail shareholders
to ensure fair treatment as between shareholders.
Outcome – both acquisitions were approved by the Board. The equity placement for the funding of Rhenoflex was oversubscribed and there
was a positive reception from the market and customers to the announcement of the acquisitions.
CUSTOMERS
COMMUNITIES
SUPPLIERS
EMPLOYEES
SHAREHOLDERS
Proposals to optimise the locations and efficiencies of business operations were reviewed considering the feedback of
current customers and communities. Noting the changes proposed to the geographic footprint, the Board considered the
opportunities presented by new facilities in Mexico and the potential changes to suppliers and customers following the
divestment of the Brazilian and Argentinian businesses.
Changing the operational footprint led to impacts on our workforce, which were considered by the Board through regular
People updates. The advantages of closer geographic links to and the opportunity to foster closer business relationships
with customers were balanced with re-aligning roles within the Group and the need to mitigate labour availability risk.
The long-term financial benefits of the Strategic Projects were balanced against the short-term costs.
Outcome – the Board approved the optimisation of the portfolio and footprint including moving certain roles in the corporate functions closer
to customers.
CUSTOMERS
SUPPLIERS
EMPLOYEES
SHAREHOLDERS
Following the business transformation outlined above, the Board considered how the revised shape of the Group could best
serve customers’ needs and industry trends. In light of the desire to drive clarity and focus in the delivery of superior
business outcomes, the impact on the global supply chain of three divisions rather than a geographic based business model
was considered.
Retention of key business talent and the identification of the correct leadership teams for each division was considered by
the Board.
The Board considered the long-term impact on the operating model and concluded that the structure would lead to a more
profitable business.
Outcome – The divisional structure was approved, and the Board will continue to monitor the impacts of implementation on stakeholders.
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Coats Group plc Annual Report and Accounts 2022
Section 172 statement cont.
Examples of Board decision making during the year and S172 Factors considered
Ukraine and Russia
Following the Russian invasion of Ukraine, there were various Board discussions as to
how to appropriately support our impacted employees in Ukraine as well as considering
the appropriate course of action for our operations in Russia to ensure fair treatment of
our people. Updates were provided by management on the safety of our employees in
the region as well as the interactions with local customers and suppliers.
Stakeholder considerations and outcomes
The Board considered our employees in the region first and foremost, and all appropriate efforts to support the safety of
those in the region were agreed immediately.
The Board considered relationships with the local community in Russia, and the customers and suppliers, noting the size
and nature of operations in the region and balanced this with the importance of maintaining the Company’s reputation for
‘doing the right thing’ and ensuring absolute adherence to the sanctions.
EMPLOYEES
CUSTOMERS
COMMUNITIES
SUPPLIERS
New sustainability targets, policies and DE&I initiatives including ‘Coats for All’
As set out elsewhere in this Annual Report, the Board considered and approved
several ESG-related policies at the start of 2022, including living wage and climate
change. Insights from direct engagement with investors relating to living wage and
other ESG-related matters had been considered when forming the proposals made
to the Board. In line with the Company’s purpose, the interests of employees and
the Company’s long-term sustainability impact were considered. The Sustainability
Committee and then the Board appropriately debated the new 2026 sustainability
targets and their linkage to senior management Long Term Incentive Plans (LTIP), noting
that the LTIP has had a sustainability linked element since 2020. Mindful of ensuring
the Company maintained its reputation for high standards of business conduct and
noting the expectations of investors, the Board considered the long-term financial and
environmental impacts of the new targets. Additionally, when considering the ‘Coats for
All’ programme, the Board was cognisant of the critical role that our diverse and engaged
workforce plays in our long-term success and achievement of our strategic ambitions.
Pensions
The Chair and Chief Financial Officer represented the Company on the joint working
group (JWG) formed with the UK Pension Trustee (Trustee), which aims to de-risk the
UK pension scheme (Scheme) by securing members’ benefits in full through one or
more insurance policies in the medium term. The Board received a number of updates,
including the decision of the Trustee to purchase a c.£350m bulk annuity policy in
December 2022. The Board has subsequently agreed on a mechanism to switch off/on
the regular cash contributions to the Scheme, based on monthly estimates of the latest
funding position and this gives rise to potential significant free cash flow benefits from
lower or eliminated cash contributions if the Scheme remains fully funded on its technical
provision basis.
Outcome – In response to the Russian invasion of Ukraine and in line with sanctions, the Board ensured that all appropriate steps were taken to
support the safety of our employees in Ukraine and also determined that it was appropriate for the Group to exit Russia.
CUSTOMERS
SUPPLIERS
COMMUNITIES
EMPLOYEES
ENVIRONMENT
SHAREHOLDERS
The Board recognises that sustainability and ESG continue to increase in importance for our current and future customers
and suppliers. Considering the feedback received, the new 2026 sustainability targets and ESG-related policies seek to
address their expectations to further foster relationships and to ensure the promotion of the success for all in the supply
chain.
The benefits of DE&I initiatives to the communities in which we operate are noted by the Board when considering new
policies and updates on initiatives in the Business. Living wage policies also create new long-term opportunities. When
debating the 2026 sustainability targets, the Board was mindful of the potential impact on communities.
Utilising the insights from previous employee surveys, from the Designated Non-Executive for workforce engagement and
from the Great Place to Work Surveys, the Board recognises the importance that DE&I initiatives have for our employees and
their opportunities in the Group as well as maintaining the desired culture. The Board is mindful that employees are proud to
work for a Company that maintains high standard of business conduct and the various progressive ESG changes in 2022
support their interests.
The importance of continuing our positive progress in delivering against our sustainability ambitions and continuing to set
challenging targets is well understood by the Board when considering our impact on the environment.
The Board is mindful of investor trends in relation to DE&I and sustainability. The importance of clearly communicating our
targets, and our progress against these, in clear disclosures is understood and considered across all ESG-related decisions
taken by the Board.
Outcome – Noting all the feedback received from stakeholders and having appropriately considered the long-term potential impacts on the
success of the Company, the Board approved the 2026 sustainability targets and the ESG-related policies.
EMPLOYEES
SHAREHOLDERS
The Board and the JWG understand the importance of progressively de-risking the Scheme to current and future
pensioners.
The benefits of lowering the risk profile of the Scheme together with the potential significant free cash flow benefits align
with shareholders’ desire for long-term sustainable growth.
Outcome – The purchase of the bulk annuity policy partly de-risks our UK defined benefit scheme by fully funding all financial and demographic
risks for approximately 20% of scheme liabilities. On a medium term basis and when market conditions permit, we aim to remove the Scheme
from the Group’s balance sheet in a cost effective manner.
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Coats Group plc Annual Report and Accounts 2022
Principal risks and uncertainties
Better business outcomes are the result of effective risk management.
Our approach and governance
Having an effective, pragmatic and robust approach to risk management is more important than ever during
a period of unprecedented external volatility, coupled with a period of transformational change internally.
We focus on effectively identifying, assessing, monitoring and, where appropriate, eliminating or managing
as well as leveraging risks and related opportunities that might impact our current or future performance and/
or our reputation. In 2022, our established risk management framework continued to facilitate the evolution
of policies, controls and informed business and strategic decisions to change with the evolving internal and
external landscape and needs of the business. The Group’s ongoing insurance programme is also kept
under review to ensure this continues to be refined each year.
The Board has overall responsibility for determining the nature and scope of the Company’s principal and
emerging risks, 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 controls. It has delegated responsibility for the latter to the
Audit and Risk Committee (ARC). The Group Executive Team (GET) is responsible for day-to-day monitoring and
management of risks that impact the business. A summary of risk management responsibilities is set out below.
Top-down Define
risk tolerance,
monitor exposure,
oversight of risk
management
The Board*
– Identifies which risks are most important for the Group, effectiveness of risk management and reviews the Group’s risk profile
– Sets risk tolerance in the aggregate and, in particular, for each of the principal risks
– Monitors risk experience
Group Executive Team (GET)
Audit and Risk Committee (ARC)
– Responsible for operational delivery of the Group’s
– Supports Board in monitoring the effectiveness of the
strategy, including day-to-day management of
operations and responsibility for monitoring detailed
performance of all aspects of the Group’s business.
Necessarily, this includes many elements of practical
risk management
systems of risk management and internal control
– Reviews reports from Group Executive Team (GET),
Group Risk Management Committee (GRMC), Group
Internal Audit (GIA) and the external auditor relating to
effectiveness
Business Units/Enabling Functions/Senior Management/
Risk Champions
– Responsible for identifying, managing and mitigating
appropriate sets of risks
– Regularly review a broad range of individual current
strategic and operational risks
– Monitors key risk indicators
– Reports and provide feedback to GRMC, GET, Audit and
Risk Committee and the Board
Group Risk Management Committee (GRMC)
– Responsible for formulating risk management strategies
and policies and monitoring risk management
throughout the Group
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 about this on
pages 39 to 41 in the S172 Statement.
Identify, monitor,
report
Bottom-up
During 2022, the membership of the GRMC was
updated and now comprises all members of the
GET. This allows risk assessments and discussions
to be undertaken at regular GET meetings as
required. This provides a more agile and responsive
approach. Changes to the risk profile, such as the
required swift evaluation of the consequences to the
business of Russia’s invasion of Ukraine, are
considered in real time with appropriate actions
undertaken within the agreed timescale.
We aim to integrate risk management and controls
holistically across the whole business, including in
our new Footwear division, to appropriately focus
our activities. The effectiveness of our risk
management relies on embedding the correct
behaviours as well as systems in the organisation.
Our Coats Ethical Culture programme – ‘Doing the
Right Thing’ – has continued in 2022, with sessions
held in new as well as existing parts of the business.
This is supported by our ongoing training and
compliance initiatives, as well as an extensive range
of communications.
Management and assurance of risks
The Board has recently comprehensively reviewed
and refreshed the Group Risk Register. This sets out
our risks (including our principal and emerging risks),
our risk tolerance, the current risk trends and a
summary of our approach to risk management.
Our well established and embedded risk tolerance
structure is determined using four categories which
are listed on the right. In setting risk tolerances, the
Board has considered the expectations of its
shareholders and other stakeholders.
Very risk averse
Risk averse
Somewhat risk
tolerant
High degree of
risk tolerance
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
Where we are cautious and seek to
reduce the financial and reputational
risk. Mitigation actions are
proportional and based on
cost effectiveness
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
Where we are willing to take
significant financial risk to achieve
our objectives. Mitigation involves
an active management of
risk-return trade-offs
We focus on understanding the risks, and their
potential impacts, to appropriately mitigate and/or
leverage risks and related opportunities and ensure
any residual risks are acceptably within our risk
parameters and do not impact business operations
adversely. 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. The Board oversees the management
and mitigation of the principal and emerging risks,
while senior executive management oversee the
management and mitigation of the key risks. Climate
related risks are evaluated and managed through
the same overall process as other principal risks.
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Principal risks and uncertainties cont.
During 2022, the Board, ARC, GET and GRMC
considered presentations from senior management
that included a holistic view of risks, including
principal risks, and gave input on the steps planned
to mitigate these risks. For example, there were
country specific deep-dives as well as deep-dives
into Apparel, Footwear and Performance Materials.
There were also regular updates on the progress in
the Strategic Projects and acquisitions/divestments
presented at Board meetings, which all included an
analysis of associated risks and opportunities,
including principal risk considerations. Assessing
risk dynamically as part of discussions on
operational or strategic matters allowed likely
impacts and possible mitigations to be appropriately
deliberated. The risks were 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 could be taken. The ARC, and then
Board, also reviewed the effectiveness of the
Company’s risk management and internal controls.
You can read more about this in the ARC report on
page 74. Additionally, the Board receives regular
reporting from the Group CEO/GET on health and
safety, sustainability, people, performance, M&A and
legal and environmental matters. There are also
standalone risk presentations when appropriate and
one such example is the deep dive into cyber
security presented to the ARC during the course
of the year.
Based on the principal and key risks of the
organisation, our GIA team updates and embeds the
relevant Group risks in its audit process, for
instance, compliance with anti-bribery and
corruption requirements, the risk of internal fraud,
sustainability-related risks and IT/cyber security
controls. GIA reviews the Group Risk Register and
local risk registers from the relevant management
committees on a quarterly basis. This review
includes an assessment of the risk management
practices such as the frequency and adequacy of
the regional risk management committee meetings,
the risks identified and discussed, and the
completion of the actions contained in the local risk
register. GIA also undertakes a periodic horizon
scanning of risks and this is discussed regularly at
the GRMC/GET. The ARC considers the results of
these assessments along with GIA’s bi-annual risk
questionnaire, which sets out business units’ reports
on exceptions or risks arising from operations.
Topics covered in the risk questionnaire are
appropriately aligned to principal and key risks,
including feedback on health and safety, people
matters, the environment and anti-bribery and
corruption. These activities provide an assurance
that risk management activities are carried out
appropriately and consistently throughout the
Group, and that the risks are reviewed and kept up
to date by the respective stakeholders.
Following regular review of the insights from these
GIA and business unit/cluster risk management
activities, and focussing on the risks that may impact
the strategic objectives of Coats, the Board has
defined 11 principal risks, as well as a number of
additional key and emerging risks within that Group
Risk Register. These risks, and the steps we have
taken to mitigate these risks, are covered further 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, with input from a range of key internal
stakeholders, undertook a comprehensive
assessment of the emerging and principal risks
facing the Group, along with the risk trends and
levels of risk tolerance for each of those risks. We
also considered the new acquisitions and the new
divisional structure when refreshing the Group
Risk Register.
Change of risk description
Due to the ever-changing global risk environment,
the following risks have been updated since the
last report:
Change in risk trend
From
increasing
to stable
From
increasing
to stable
1. Talent and capability risk has been amended to
refer more explicitly to diversity, equity and
inclusion given the importance of this area.
From
increasing
to stable
2. Risk of increasing customer expectations has
been amended to be more explicit in relation to
product sustainability, given the importance of
this area.
3. Economic and geopolitical risk has been
amended to call out even more explicitly
macroeconomic and global political
uncertainty risk.
4. M&A programme ambition risk has been
amended to make more explicit reference to the
integration of the two recent acquisitions.
The risk trend for talent and capability
risk has decreased from increasing to
stable, due to the risk not being higher
than 12 months ago and the various
internal actions undertaken in 2022 as
part of the Strategic Projects.
The risk trend for climate change has
decreased from increasing to stable, due
to the risk not being higher than 12
months ago and in light of the robust
process and activities being pursued
under the regular oversight of the GET
and the Board.
The risk trend for risk of supplier non-
performance and/or unavailability and/
or price increases of raw materials,
labour and freight has decreased from
increasing to stable, due to the risk not
being higher than 12 months ago and
anticipated supply chain trends which
are already starting to materialise.
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Principal risks and uncertainties cont.
Our principal risks, along with a summary of the measures we have put in place to manage and
mitigate them or leverage these risks and any related opportunities, are set out in the table below.
As stated above, the Board will continue to keep the management and mitigation of these principal risks,
as well as the appropriateness of this list and the constantly changing broader risk environment,
under ongoing review.
Principal risk
1. STRATEGIC
M&A programme ambition
risk in light of Group’s
increasing ambition in
scale of its acquisition
programme and its ability
to source, satisfactorily
acquire and integrate
suitable targets, including
two footwear acquisitions
completed in H2 2022
Risk trend
Link to strategy
• Create value
Action/mitigation
Originating and executing M&A opportunities is a key focus for the Group. A key
component of our strategy is value creation and very carefully considered and disciplined
use of capital to fund inorganic opportunities to build scale and acquire new capabilities,
technology and talent. The Board has approved a set of criteria to source and evaluate
acquisition opportunities, aligned to Group divisional strategy. These criteria include both
financial parameters, such as revenue growth and EBITDA margins, and non-financial
parameters, such as innovation and sustainability credentials. All M&A projects are
overseen and closely monitored by the Board and by senior executive management.
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.
Specific M&A risks and mitigations include the risk of failing to achieve required financial
returns by either overpaying for a target or under-delivering on the business case. This
risk is managed by deep sector knowledge brought by executive management, an
experienced M&A team which leverages specialist external advice on valuations, and
focused diligence to satisfy the Board that the commercial fundamentals are robust.
The risk of failing to fully integrate the target company into the Group is managed by a
dedicated integration management office (IMO), involved from the diligence phase
onwards and leveraging internal and external diligence resources, to facilitate successful
integration of the target company. A key focus of the IMO is enabling delivery of the
business case, whilst managing people and culture change to ensure sustained success.
The risk of failing to capture synergies is managed by ensuring that synergy cases are
robust and achievable and are reviewed by internal and external experts. The IMO plays
a key role in ensuring the integration allows for effective synergy delivery in line with the
business case. In addition to a well-resourced acquisitions team, we leverage wider
internal resources and external advisers in specialist areas such as valuation, financing,
due diligence and integration. Post-completion/integration reviews are also conducted to
ensure that learnings are identified and built into subsequent projects as part of a
continuous improvement process. Significant work has been completed in 2022 and,
having acquired two strategic businesses (Texon and Rhenoflex), our primary focus
remains the successful integration of these acquisitions into Coats, whilst continuing to
build a robust pipeline of opportunities for future acquisitions.
Principal risk
Risk of ever-increasing
customer product and
sustainability expectations
and Group’s continuing
ability to meet and exceed
those expectations as part
of its strategic growth and
sustainability ambitions
Risk trend
Link to strategy
• Accelerate profitable
sales growth
• Create value
Action/mitigation
For customers across all industries, 2022 was an unprecedented year of market volatility,
uncertainty, and complexity. Expectations of speed to market, productivity, innovation,
quality, reliability, and sustainability developed and changed rapidly through the year.
Coats continued to leverage its market leadership, customer relationships and global
footprint to meet and exceed those expectations.
We continue to leverage our well-established lines of communication with customers to
gain deep and valuable insights, and to anticipate trends that have the potential to
change our industry in the long term. We utilise various methods to engage with
manufacturers, brands and OEMs as well as customer and industry stakeholders,
influencers and decision-makers, including surveys, calls and workshops. Considering
and responding to the outcomes of these daily interactions result in our delivery of
superior customer value. In 2022 we have met customers’ innovation and sustainability
needs by launching 17 new products across Apparel, Footwear, and Performance
Materials divisions, as well as continuing our focus on recycled solutions. Our acquisitions
of Texon and Rhenoflex provided the opportunity for us to offer enhanced and synergistic
solutions, including new levels of innovation and sustainability. For example, Texon’s
ProWeave allows us to enhance our partnerships with brand customers. The demand for
increased personalisation and customisation continues and is a focus in our innovation.
The addition of Rhenoflex’s Rhenoprint 2.0 technology to our portfolio enhances our offer
to customers in this area, including reducing waste and increasing productivity. Coats
Digital’s FastReactPlan was selected by a large Chinese apparel manufacturer to
transform its production processes, enabling them to respond with agility to complex
order requests and improve on-time deliveries. In Personal Protection, increased worker
protection remains a key theme with more industry regulation and the need for comfort
with multi-hazard protection. Our customers and their customers continue to demand
increased performance from the materials they use, and our new personal protection yarn
ranges address these customer needs.
Our new sustainability targets for the period 2023-2026 include energy, materials, water,
waste and people goals, in line with customer expectations. Our Sustainability team
continue to collaborate and engage with customers across the globe to deepen their
understanding of demand trends and successfully meet and exceed expectations as
evidenced by the significant increase in sustainable product sales and the development
of new products to progress the industry circularity agenda. Sales of EcoVerde continued
to grow during the year and we supported a major European retailer in the launch of a
new sportswear brand by supplying high quality recycled threads.
We were able to flex our broad geographic manufacturing footprint to allow us to meet
customer requirements for speed of production and delivery in the event of local
disruption, a key differentiator of the business. During the year we utilised our total Asian
manufacturing footprint to maximise service across markets in China that were
experiencing ongoing impacts from Covid to meet increased demand during the peak
season. We also expanded our manufacturing capacity of a specialised thread product for
a world-leading retailer to allow them to fast-track productions of a new innerwear range.
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Principal risks and uncertainties cont.
Principal risk
Action/mitigation
1. STRATEGIC cont.
Risk of failure to attract,
retain and develop diverse
and inclusive set of talent
and capability given
business changes, growth
in new areas and labour
availability challenges.
Risk trend
Link to strategy
• Accelerate profitable
sales growth
• Transform the business
• Create value
As a result of significant macroeconomic volatility, 2022 has seen critical labour shortages
and specific skill gaps in some labour markets where Coats operates – particularly the
US, India and China – which have become increasingly competitive. To ensure that Coats
retains, attracts and develops the right talent with the right skill sets, the Board’s and
senior management team’s close focus on engaging and developing talent continued
in 2022.
Following our successful switch to 100% online learning in 2020, we delivered more than
95,000 hours of training to our employees in 2022 through a variety of training platforms.
We added new elements to our suite of learning programmes including Manager
Excellence, which focuses on critical manager skills through short, relevant sessions of an
hour every month for 12 months.
In order to further engage our employees we launched a Global Recognition Program
called ‘Applause’ with 8 programs to recognise employees at all levels of the organisation
both globally and locally. Recognising that a sense of belonging contributes to a great
place to work, we launched our ‘Coats for All’ initiative, bringing all our diversity initiatives
across the world under one umbrella and brand. The gender diversity initiative under the
name of ‘Coats for Her’, with five programs to develop and nurture our female talent,
further engaged our colleagues. A Global Job Vacancy Bulletin ensured transparency of
vacancies to allow development of talent and capability. Whilst ensuring engagement and
career development of Coats employees, we actively monitored the Coats markets to
ensure payment of living wage for all our employees to receive a wage that is sufficient to
afford a decent standard of living in their country or location. We also closely monitored
the inflation situation and made interventions where required.
As part of our employee listening strategy, which provides an integrated approach to
understanding the overall employee experience, we continued surveys during 2022 as
well as considering the insights from the Designated Non-Executive for Workforce
Engagement. Through our Future of Work survey we listened to what our employees
want from a workplace post-pandemic. As a result of the outcomes, we implemented
flexible work policies to continue engaging our employees. A Future of Work leadership
guide provided our managers with tips and tricks on how to engage employees in this
new hybrid world of work. Through the Great Place to Work survey we heard the voice of
over 14,000 of our employees and were proud that 86% of our employees worked in a
certified ‘Great Place To Work’. The Great Place To Work Trust Index score increased from
79% to 85%, showing the increased engagement of the workforce. The survey also
allowed us to understand how we can further improve the work environment for our
employees. Whilst we continued to deliver key employee health and wellbeing programs
at a local level across Coats, we will be focusing on a global wellbeing program called
“Energy4Performance” addressing all four health zones: mental, physical, emotional and
social to further retain our employees.
Principal risk
2. EXTERNAL
Economic and geopolitical
risk arising from significant
macroeconomic and
demand uncertainty –
across both key Asian and
developed markets –
including risk to free trade
conventions – as well as
global inflationary pressures
and ongoing geopolitical
developments
Risk trend
Link to strategy
• Accelerate profitable
sales growth
• Transform the business
• Create value
Action/mitigation
2022 was a year of significant macroeconomic uncertainty with continued higher than
normal inflation evident across all areas of the business. We have taken swift actions to
counter the continued high inflation through early and decisive strategic pricing actions
and a combination of activities (including the execution of the Strategic Projects,
acquisitions and divestments that supplemented self-help initiatives including productivity
improvement and cost control measures). We have also focused on volume and share
gain in addition to taking strategic pricing actions where appropriate. Supply chain
disruptions have been managed through leveraging our global footprint, long term
relationships with global suppliers and adjusting our inventory holding as needed (see
further actions referred to in Supply risk on page 47).
The Group continued to conduct appropriate financial forecasting and modelling to track
liquidity and assess foreign exchange exposure. We utilised our prior experiences of
managing in a downturn, including creating appropriate contingency plans for a number
of scenarios across our geographies. The ongoing impacts from the Covid pandemic that
continue to manifest and impact both the supply chain and labour, particularly in China,
are monitored with the previous learnings being utilised.
We monitor geopolitical risks and take action where appropriate. The Russian invasion of
Ukraine resulted in swift decision making by the Board and GET to ensure our people
were safe and that our operations were closed where necessary. The wider implications
of the war, including on oil/energy price and supply availability are considered and
managed via our Supply chain relationships and our global operational footprint.
Overall, our strategic focus has been on innovation, sustainability and automation to
manage the Group through a volatile, uncertain, complex and ambiguous environment
and achieve our strategic goals in 2022.
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Principal risks and uncertainties cont.
Principal risk
Action/mitigation
2. EXTERNAL cont.
Cyber risk
Risk of cyber incidents
leading to corruption of
applications, critical IT
infrastructure, compromised
networks, operational
technology and/or loss
of data.
Risk trend
Link to strategy
• Transform the business
2022 was a year of transition with changes in our internal talent adding to our in-house
capabilities and the consolidation of certain systems to allow us to introduce more
protective systems. We changed to a new provider for phishing simulations and user
awareness and training materials. These improved training materials and better insights of
user habits from phishing tests enable us to target users’ specific education needs and in
turn give Coats greater protection from online threats.
Our Managed Detection and Response (MDR) service was replaced with a more robust
device protection system and service, which includes a tier-1 Security Operations Centre
(SOC) and network discovery capability. Outbound internet traffic filtering through the
2021 SASE solution enables us to monitor traffic from our devices to identify and block
malicious activity. We proactively strengthened and matured existing controls, including
bringing support for some systems in-house rather than by third parties. This enables our
team to provide a better level of support with greater agility.
For our key systems we make daily backups to an alternative cloud provider to ensure we
do not have a single point of failure, and for these key systems we utilise the layers of
protection provided by Microsoft. For 2023 we have key strategic projects planned
including firewall enhancement across all global locations and secure reconfiguration of
our networks to reduce risk and mitigate potential attack.
As Coats continues to grow as a digital organisation, and supporting our strategy to
Accelerate and Transform, there will be huge benefits to be gained along with significant
digital security and strategy risks. Moving forward we will focus on continuing to ensure
the right level of governance, cyber personnel, technology, processes and training across
our business to minimise these risks, working on a principle of security by design at
all times.
Principal risk
Climate change risk arising
from either (i) 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 and
the financial risk of
emissions taxes or other
legislative changes, or (ii)
the physical impact of
climate change on the
Company’s operations and
business model, and that of
its customers in the textile
supply chain.
Risk trend
Link to strategy
• Accelerate profitable
sales growth
• Transform the business
• Create value
Action/mitigation
The GET, through the Group Sustainability function, is responsible for overseeing the reporting
of environmental data by the business, and driving the sustainability strategy and climate
change risk management processes. The Board and Sustainability Committee provide
strategic oversight and monitor the execution of the Company’s sustainability strategy and
initiatives. The ARC reviews the processes for the reporting of environmental data externally.
We manage a detailed register of climate related risks and opportunities which are assessed
based on their level of materiality and impact over short, medium and long term time horizons
and for those of greatest impact we define and implement mitigating actions.
Through 2022 we have further progressed work on climate change risk analysis, including a
review of our core scenario database which remains unchanged, and building on our review of
physical risks with detailed bottom up analysis for those sites identified at highest risk of
coastal or riverine flooding. As a result of this further analysis, we have determined that the
physical flooding risks are marginally lower than our previous assessment and more granular
details are included in our Taskforce on Climate-related Financial Disclosures (TCFD) report. As
a major identified risk we have also reviewed and updated our model for future carbon taxes.
As during 2021, risk and opportunity analysis, quantification and mitigation has been carried out
using the TCFD Recommendations as detailed in “Recommendations of the Task Force on
Climate-related Financial Disclosures”, 2017, with use of additional guidance from “Implementing
the Recommendations of the Task Force on Climate-related Financial Disclosures”, 2021.
Work progress was reported to the GET on a quarterly basis and went to the ARC for review
in both February and December 2022. A copy of our 2022 TCFD disclosures, which set out
the implications of climate risk over the short, medium and long term, can be found in the
TCFD Report (www.coats.com/sustainability). As a result of this, our current most significant
transitional risk remains linked to the potential introduction of carbon emission taxes and this
is detailed in our TCFD disclosures.
Following the submission and approval of our near term (2030) Science Based Targets
(SBTs) for emissions reduction under the 1.5°C pathway in February 2022, we have now
submitted our long term Science Based Targets for Net Zero emissions by 2050 and await
their approval. Delivery of the SBT carbon emission reductions will clearly have a very
significant mitigating effect on any carbon tax regimes that may potentially be introduced.
Progress has been made in transitioning to renewable supplies through 2022, however
country level energy market regulation could present a risk of fully achieving the planned
rate of progress in the coming few years. Priority focus will be given to our units with highest
energy consumption, with Renewable Energy Certificates purchased to compensate in areas
where full transition is not possible. You can read more about our new sustainability targets
in the Sustainability Report (www.coats.com/sustainability).
During the due diligence processes for the Texon and Rhenoflex acquisitions, initial
assessments of the impact of their operations on our climate commitments were undertaken.
In both of the key aspects relating to climate commitments we found that they were on a
similar trajectory to Coats (though not committed to SBTs) and had made good progress to
date on material transition and emissions reduction. During 2023 they will be fully
incorporated into our SBTs by re-baselining back to 2019.
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Principal risks and uncertainties cont.
Principal risk
Action/mitigation
2. EXTERNAL cont.
Risk of supplier non-
performance, unavailability
and/or price increases of
raw materials, labour and
freight and/or logistical
challenges causing major
disruption to Coats’ supply
chain.
Risk trend
Link to strategy
• Accelerate profitable
sales growth
• Transform the business
• Create value
The Group continues to conduct regular scenario analysis and continuity planning in
relation to each of our key raw materials and dyes, as well as labour and freight, to assess
what counter measures can be put in place if certain events were to occur.
During 2022, there was a continued impact of the Covid virus on global supply chains
particularly in China, limiting availability of certain feedstocks and raw materials. This,
coupled with the volatile global economic environment, has resulted in demand
fluctuations and the withdrawal from the market of some suppliers. There was also higher
than normal inflation across raw materials, freight, labour and energy. To mitigate these,
we continue to assess our global stocking policy for strategic raw materials, enter into
discussions with key suppliers ahead of any anticipated shortages to secure the required
volumes and destocking where downturns are expected. We also have expanded our
supplier base where necessary. We monitored regulatory developments and utilised our
global footprint to respond to changing sourcing requirements. Robust assessments of
financial performance of key suppliers and evaluation of suppliers’ own risk management
plans are undertaken, and our dependency on key suppliers and raw materials was
reviewed frequently. From August 2022 onwards, supply concerns on most raw materials
were viewed to have eased.
We continue to work closely with our key suppliers to ensure our requirements are met
and rely on systems and tools, such as the supplier portal, to manage costs. Coats’ scale
and global footprint offers security to both brands and contractors.
Principal risk
Environmental
non-performance risk given
changing standards,
increasing scrutiny,
customer and investor
demands and expectations
and scale of Group’s own
self-imposed standards
and ambitions, creating
commercial, financial and
reputational risks as well
as opportunities.
Risk trend
Link to strategy
• Transform the business
Action/mitigation
During 2022 we retained very tight focus on risk mitigation areas that align to our 2022
sustainability targets. This meant that we made continued progress on reducing energy
intensity through our energy monitoring system pilot, and accelerated our transition to
renewable electricity and performed strongly in relation to Zero Discharge of Hazardous
Chemicals (ZDHC) standards.
Progress on waste prevention and reduction was accelerated in 2022 with many
circularity initiatives introduced, particularly in paper, cardboard and plastic packaging.
Environmental targets continue to be core to our sustainability strategy and we have now
developed 2026 targets which will ensure that this remains central to the business.
Our 2026 targets include further reduction in energy intensity, with significant focus on
our energy transition, effluent standards, increased water recycling and zero waste to
landfill. Further details on our sustainability strategy can be found in our annual
Sustainability Report (www.coats.com/sustainability) which is published at the same time
as this Annual Report.
We continue to track and implement new and updated Environment, Health & Safety
(EHS) legislative requirements using a subscription based environmental system, thereby
enhancing our performance in relation to EHS legal requirements. We also utilise a permit
management system for management of all environmental permits and licences held in
each country we operate in.
Our environmental incident management system ensures that we have a consistent and
transparent way of managing any environmental incidents that occur, and we implement
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 ZDHC limits.
Following our acquisitions of Texon and Rhenoflex in 2022, we have commenced the
program of aligning those business units to the Coats environmental policies and
procedures, and use of common systems. During the due diligence their environmental
performance was assessed as fully as possible, and no concerning issues were identified.
Our global Business Continuity Plan includes environmental emergency preparedness
and response plans, and we track environmental risks through an environmental aspects
and impacts management system. Our environmental management plans are run through
a series of workstreams to ensure key stakeholders have an input into their delivery
through a define, measure, analyse, improve and control (DMAIC) process.
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Coats Group plc Annual Report and Accounts 2022
Principal risks and uncertainties cont.
Principal risk
Action/mitigation
3. OPERATIONAL
Health and safety – 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 pandemic,
impacting wellbeing,
engagement, productivity
and talent retention.
Risk trend
Link to strategy
• Transform the business
The Board continues to receive and discuss with management – as a priority at each
Board meeting – detailed reviews of health and safety (H&S) performance and monitoring
of progress against established annual H&S targets and objectives. Senior management
and employees throughout the Group likewise remain closely focused on creating an
injury-free work environment through the identification and remediation of hazards and
training and behavioural change programmes.
Covid has continued to be an area of focus in 2022, but at a much lower level than in the
two previous years. Our units performed commendably in maintaining appropriate levels
of workplace controls and were able to protect employees from workplace infection and
maintain operations. With the significant increase in Covid cases in China towards the end
of 2022 as societal controls were lifted, we immediately re-introduced tighter workplace
controls to protect employees.
We continued pursuing our Journey to Zero safety strategy that was launched in 2019.
We maintain a consistent focus on proactive and preventive actions as well as leading
indicators, as well as full investigation of any incident or near miss. We maintained broadly
the same level of employee training hours as in 2021 (30 hours vs 29 in 2021).
All of our proactive, preventive actions translated into the following results for 2022:
– 11% reduction in work-related recordable injury rate (0.40 vs 0.45 in 2021)
– 27% reduction in lost time case rate (0.24 vs 0.34 in 2021)
– 36% reduction in days lost per lost time injury (13 vs 21 in 2021)
– 24% reduction in first aid case rate (2.27 vs 2.97 in 2021)
At the end of 2022, to align our H&S management structure to the new business
structure, and recognising the significant progress made in the last few years, we
embedded much of the global team more directly into the business Divisions where
they will be better able to work closely with units to maintain the improvement
momentum. Our slimmer global team will work with divisional and geographic H&S
leaders on global development and delivery of global strategies. During 2023 we will
continue our Journey to Zero strategy and will be revising and updating our safety
management system. We will also be ensuring that our new acquisitions made in 2022
are aligned with our H&S policies and procedures. We have also detected a marginal
increase in commuting-related incidents in 2022 that we believe is related to a post-Covid
behavioural shift of employees from public to private transport and we will be enhancing
still further our focus on developing awareness and mitigation of commuting risks
amongst our employees.
Principal risk
Bribery and anti-
competitive behaviour –
risk of breach of anti-
corruption law or
competition law, resulting in
material fine and/or
reputational damage.
Risk trend
Link to strategy
• Accelerate profitable
sales growth
• Transform the business
Action/mitigation
The Group continues to maintain clear and well-publicised policies and processes,
including on anti-bribery and corruption and anti-competitive behaviour, which sit
alongside and interact with policies and procedures covering a number of other ethics
issues, such as the Code of Business Conduct, Gifts and Entertainment Policy, Ethics
Code and Supplier Code. These various policies and procedures apply not only to Coats
but also to Coats’ relations with partners, contractors and suppliers. These policies are
reviewed and updated annually, with the most recent review being completed in
December 2022. The policies are reinforced through contractual terms and through a
comprehensive Supplier Code. The Supplier Code and onboarding process contains
initial due diligence processes (through an automated vendor data management system),
onboarding, training, ongoing compliance monitoring and auditing.
The GET, comprising key business and functional leaders, regularly considers a range of
ethics risks (including closely monitoring key risk indicators for those risks), legislative and
regulatory developments, any issues or trends identified from the Group’s internal audit
function and mitigation plans. GIA conducts a dedicated risk questionnaire which covers
anti-bribery and corruption and anti-competitive practices. The risks and mitigation plans
are also considered at division level during regular local risk management meetings.
Coats implements an extensive annual and new-joiner training regime for its staff, with
enhanced training for managers and customer-facing and procurement staff. Specific
training regimes were also implemented for the staff who joined Coats as part of the
Rhenoflex and Texon acquisitions. This training regime includes compulsory annual
training in a range of areas, including anti-bribery and corruption and anti-competitive
behaviour. Refreshed online ethics training, alongside the ongoing self-certification
testing regime, was released in 2022. Coats also maintains an extensive database of
relevant training materials and guidance on its web portal and carries out face-to-face
training and regular communications through a range of channels, including through
leveraging the support of its global ethical culture champions network. The Group
actively maintains a whistleblower system through a dedicated “Speak Up” inbox and
24/7 whistleblower hotline which is maintained by an external provider. The
whistleblowing system enables 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, is publicised through an ongoing Ethical Culture Campaign which
operates at a Group and local level. An independent review of the Group’s whistleblowing
policy and associated processes is currently being conducted to ensure these continue to
align appropriately with best corporate governance practice.
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Coats Group plc Annual Report and Accounts 2022
Principal risks and uncertainties cont.
Principal risk
4. LEGACY
Action/mitigation
Lower Passaic River legacy
environmental matter
The Board continues to monitor developments very closely and oversees the strategy in
relation to the Lower Passaic River proceedings.
Detail of the Lower Passaic
River legacy environmental
matter can be found in note
28 on page 151.
Risk trend
Link to strategy
• Transform the business
Key risks
Emerging risks
In addition to these principal risks, the Group has
also identified a number of key risks. These are
monitored by the GET, 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 list of key risks also includes a number of
potential disruptive risks arising from, for example,
new competitors and new technology. The GET and
Board, as appropriate, continue to monitor these
potential disruptive risks and also the opportunities
that these may present.
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 activities as well as
conversations with external third parties and insights
from observing and reflecting on the broader
environment in which the Group operates.
Modern Slavery
During the year, the Board approved the Group’s
Modern Slavery Statement. We remain committed to
addressing the potential risks of modern slavery and
human rights abuses, to acting in an ethical manner
with integrity and transparency in all business
dealings, and to investing in the creation of effective
systems and controls across the Group to safeguard
against adverse human rights impacts.
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Coats Group plc Annual Report and Accounts 2022
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 2025.
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 February 2023,
have maturities which range from approximately
nineteen months to c7 years.
The Group’s strategic objectives and associated
principal risks are underpinned by an annual budget
and Medium Term Plan process, which comprises
financial projections for the next three years
(2023–2025). The Medium Term Plan represents
a common process with standard outputs and
requirements at the Group level. The Board reviews
and challenges 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 consider that the three year period
considered by the Medium Term Plan reflects an
appropriate period over which its business and
investment cycles, as well as its prospects, can be
considered. The Medium Term Plan and the severe
but plausible downside scenarios (as set out below)
both consider the implications of risks around
sustainability and climate change over the three
year assessment period. Longer term implications
and prospects, including both risks and
opportunities, of climate change have been
considered as part of the Task Force on
Climate-related Financial Disclosures report.
The Directors have taken into account the Group’s
current position and the potential impact of the
principal risks set out on pages 42 to 49 as well as
other risks that could crystallise during the medium
term. The Directors have considered a range of
severe but plausible scenarios that explore the
Group’s resilience to the potential impact of the
principal risks as set out on pages 42 to 49 as well
as other risks that could crystallise during the
medium term.
After assessing the potential impact of the principal
risks, the specific areas considered as part of the
severe but plausible scenarios include:
– 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.
As part of the going concern assessment, the
Directors also considered 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. As set out on
page 119, the Directors consider the likelihood of the
condition in the reverse stress test occurring to be
remote.
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.
– Sales growth is lower than expected throughout
the assessment period, with reduced margins and
cash generation. Lower sales growth could result
from a further prolonged Ukraine war, Covid
lockdowns, continued supply chain challenges,
inflation and current demand uncertainty, as well
as Coats being unable to meet customer
expectations (including sustainability targets);
– Benefits from strategic projects are lower than
expected;
– Benefits from synergies, following the Texon and
Rhenoflex acquisitions, are lower than expected;
and
– Supply chain challenges cause unavailability and/
or price increases of raw materials, labour, freight
and/or logistical challenges causing major
disruption to Coat’s supply chain.
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 between 2024 and 2030 and the
revolving facility matures in 2024, with the ability
for two one-year extensions. It has been assumed
that the US private placement borrowings and the
revolving facility that mature before 31 December
2025 are successfully refinanced during the
assessment period;
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Coats Group plc Annual Report and Accounts 2022
Operating review
Continuing operations
Revenue
By segment
A&F
PM
Total
By region
Asia
Americas
EMEA
Total
Adjusted operating profit ²
By segment
A&F
PM
Total adjusted operating profit
Exceptional and acquisition-related items
Operating profit
Adjusted operating margin²
By segment
A&F
PM
Total
2022
$m
2021³
$m
2022 vs 2021
2021
CER1
$m
Inc
%
CER1
inc
%
Organic⁴
inc
%
1,163
420
1,584
912
341
331
1,048
399
1,447
850
314
283
988
373
1,361
826
311
225
1,584
1,447
1,361
201
34
235
(54)
181
171
27
198
(20)
178
162
23
185
11%
5%
9%
7%
9%
17%
9%
18%
26%
19%
18%
13%
16%
10%
10%
48%
16%
24%
47%
27%
9%
13%
10%
6%
9%
25%
10%
18%
47%
22%
17.3%
8.1%
14.8%
16.3%
6.8%
13.7%
16.4%
6.2%
13.6%
100bps
130bps
120bps
90bps
190bps
120bps
140bps
190bps
150bps
1 Constant Exchange Rate (CER) are 2021 results restated at 2022 exchange rates.
2 On an adjusted basis which excludes exceptional and acquisition-related items.
3 Restated to reflect the results of the Brazil and Argentina business as a discontinued operation.
4 Organic on a CER basis excluding contributions from Texon and Rhenoflex acquisitions
2022 Operating Results overview
Apparel & Footwear (‘A&F’)
Group revenue of $1,584 million increased 9% on a
reported basis, 16% on a CER basis (which includes
the initial impact of the Texon and Rhenoflex
acquisitions), and 10% on an organic basis. This was
driven by pricing actions which fully offset ongoing
heightened inflationary pressures, market share
gains and a strong market recovery during H1.
As anticipated, year-on-year performance slowed
during the second half, in part due to the 2021
comparator strengthening, as well as a softening in
demand due to macroeconomic factors, with some
destocking. This was most noticeable in Apparel
markets in Q4 but also impacted Footwear towards
the end of the year.
Group adjusted operating profit of $235 million
increased 27% on a CER basis (2021: $198 million
reported), with operating margins up 120bps to
14.8% (2021: 13.7%). On a reported basis operating
profit was $181 million (2021: $178 million) after $54
million of strategic project costs and
acquisition-related items.
Adjusted earnings per share (‘EPS’) for the year
increased by 14% to 8.2 cents (2021: 7.2 cents)
as operating profits grew significantly due to the
strong trading performance and the delivery of
savings from the strategic projects, alongside
a reduction in the underlying effective tax rate.
There was some offset from higher interest
costs. Reported EPS of 4.8 cents (2021: 5.8
cents) was 18% lower, including the impact of
exceptional and acquisition related items.
Coats is the global market leader in supplying
premium sewing thread and footwear structural
components to the A&F industries. We are the
trusted value-adding partner, providing critical
supply chain components and services, and our
portfolio of world-class products and services exist
to serve the needs and requirements of our
customers and brand owners. Coats is also the
global market leader in footwear structural
components. Our highly engineered products have
strong brand component specification, primarily
targeted at the attractive athleisure, performance,
and sports markets. The combination of Coats,
Texon and Rhenoflex in this market has enabled us
to accelerate our innovation and sustainability.
Our A&F business benefited from market share
gains and strong pricing/mix fully offsetting
inflationary pressures, along with post-Covid
industry inventory restocking, buffer buying in the
face of supply chain disruption and continued
underlying market recovery during H1. As
anticipated, year-on-year performance slowed
during the second half, in part due to the 2021
comparator strengthening, as well as a softening in
demand due to macroeconomic factors, with some
destocking. This was most noticeable in Apparel
markets in Q4 but also impacted Footwear towards
the end of the year. Despite these industry dynamics
we have continued to leverage our key customer
relationships, strong sustainability credentials,
market-leading product ranges and technical
services, and our flexibility and agility in a turbulent
supply chain environment.
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Coats Group plc Annual Report and Accounts 2022
Operating review cont.
Revenue of $1,163 million (2021: $1,048 million)
reflected strong growth of 18% on a CER basis
(11% reported), which included the initial contribution
of the Texon and Rhenoflex acquisitions, which were
acquired in July and August 2022 respectively.
Excluding acquisitions, organic growth was 9% for
the full year with H2 adversely impacted, following
the exceptional H1 (organic growth 21%), as a result
of the changing market conditions described above,
and strengthening comparators. The performance in
the year reflects the flexibility of our global footprint
and our ability to support customers during the
Covid recovery and ongoing uncertainty in global
supply chains. Our global accounts programme,
in which we dedicate customer relationship
resources to our key brands and retailers, saw
significant new customer and programme wins,
which contributed to further overall share gains;
this has included a new programme win with a
major European retailer in relation to a sportwear
brand launch where we are the nominated
recycled thread supplier. We have also been able
to further leverage our technical advisory and
fast sampling service to deliver notable further
sales successes in a number of Asian markets.
All of our geographic regions (Asia, Americas and
EMEA) benefited from positive end market
sentiment during H1, led by our ongoing ability to
supply product. Market trends towards Sports and
Athleisure, as well as casualisation, continued to
accelerate. In addition, increasing online activity, a
shift towards premium products and supply chain
digitisation trends also continued during the year.
Supplier consolidation, nearshoring and the need for
agility were also prominent trends and,
unsurprisingly, customers continue to place
increasing emphasis on their sustainability agendas.
Despite the slowdown in the second half of the year,
largely driven by macroeconomic factors and
resulting destocking, these longer-term trends
remain and are opportunities to underpin further
accelerated medium-term growth and share gains.
All A&F’s sub-segments delivered organic revenue
growth in 2022; A&F thread was up 9%, Zips and
Trims was up 16%, and Coats Digital was up 3%.
Adjusted operating profit of $201m (2021: $171m)
increased 24% vs 2021. Adjusted operating margin
was up 90bps to 17.3% (2021: 16.4% at CER).
Excluding the marginally dilutive initial impact of
acquisitions (which are expected to be accretive,
post synergies), A&F margins were up organically
140bps year-on-year to 17.8%. This was as a result of
excellent commercial and operational delivery,
pricing and procurement actions fully offsetting
heightened inflationary pressures, alongside
strategic project benefits and general cost discipline.
Performance Materials (‘PM’)
We are experts in the design and supply of a diverse
range of technical products that serve a variety of
strategic end use markets. Building on over 250
years of leadership in thread, we incorporate
specific design features to be able to provide highly
engineered solutions for our customers. The
segment operates across Personal Protection,
Composites and Performance Threads. Personal
Protection offers multi-hazard industrial applications
for industrial, energy, firefighting and military wear.
Composites provides products and solutions for fibre
optic cables and oil & gas piping sectors and light
weighting solutions for automotive components,
while Performance Threads has applications in a
range of sewn products like safety-critical airbags
and seat belts, outdoor goods, household products
like bedding and furniture, hygiene-sensitive
consumer goods like feminine hygiene and tea bags.
From 2022, the Group has disclosed PM in three
sub-segments. Personal Protection (in 2022, 43% of
divisional revenue), Composites (18% of revenue)
and Performance Thread (39% of revenue). The
medium-term growth rates expected for each
sub-segment are high single digits for Personal
Protection, low double-digits for Composites, and
global GDP growth for Performance Thread. The
overall medium-term growth target for the division is
a mid-high single digit growth CAGR (6-9%), as in
the Revised Segmental Reporting section below.
There were new customer wins across all
sub-segments, such as the nomination for our
FlamePro Splash Protect fabric from a leading
US-based manufacturer of protective garments for
the molten metal industries and from an energy and
data management provider for our extruded coated
nylon, composite products used in cables for the
energy and automotive segments.
Overall, PM revenue grew 13% to $420 million
(2021: $399m) on an organic and CER basis
(5% on a reported basis), which was driven
primarily by price increases to offset inflation.
Revenue growth performance vs 2021 was
underpinned by strong demand in Composites
(up 21%) despite some H1 supply chain issues in
EMEA, and Personal Protection (up 19%), again
due to strong demand but also operational
improvements in the US yarns business.
Performance Thread increased 4% vs 2021 despite
weaker consumer demand in its Household and
Recreation markets, and ongoing labour availability
issues in the US. These operational constraints are
being addressed via our strategic projects. In H2,
overall demand has remained resilient across end
markets.
Adjusted operating profit increased 47% on an
organic and CER basis to $34 million (2021: $27
million). At an adjusted operating margin level, PM
margins were up on an organic and CER basis by
190 bps to 8.1% (2021: 6.2%). While still impacted in
the US by labour availability issues and labour
inflation, US margins have improved significantly
due to the positive impact of actions taken.
Excluding the US business, PM margins were c.12%,
slightly lower than 2021 (13%), as a result of specific
temporary supply chain disruption issues within
EMEA in H1, which have now been resolved.
Adjusted operating profit increased 47% on a CER
basis to $34 million (2021: $21m) and at an adjusted
operating margin level, PM margins were up 190 bps
to 8.1% (2021: 6.2% at CER). PM margins continued to
trend upward during the year, and while still
impacted in the US by labour availability issues and
labour inflation, US margins have improved
significantly due to the positive impact of the actions
that have started to take effect in the year. Excluding
the US business, PM margins were c.12%, slightly
lower than 2021 (13%) as a result of specific
temporary supply chain disruption issues within
EMEA in H1, which have now been resolved.
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Coats Group plc Annual Report and Accounts 2022
Operating review cont.
Revised segmental reporting –
from 1 January 2023
As mentioned above, in July and August 2022 we
completed the acquisitions of Texon and Rhenoflex
respectively. This has made us the global leader in
footwear components, alongside our existing global
leadership position in industrial thread.
As a result of these acquisitions, and as announced
at our Capital Markets Day in 2022, our new
organisational and reporting structure, effective
1 January 2023, is comprised of three divisions;
Apparel, Footwear and Performance Materials.
The new Footwear segment will consist of the
existing Coats footwear thread business (currently
part of A&F), and the acquired footwear components
businesses, Texon and Rhenoflex.
We will report our financial results on the new
segmental basis from our HY23 results.
As announced at our 2022 Capital Markets Day, the
medium-term sales growth CAGR for the new
operating segments are anticipated to be 3-4% for
Apparel, c.8% for Footwear, and 6-9% for
Performance Materials, resulting in Group growth of
c.6%. The goal for the Group 2024 adjusted
operating margin is c.17%, comprising 15-16% for
Apparel, >20% for Footwear, and 13-14% for
Performance Materials.
In EMEA, 21% (2021: 20%) of Group, revenue
increased 25% CER to $331 million (2021: $283
million). This was driven by positive momentum in
PM in telecommunication composites and
transportation, as fibre optic sales remained robust.
In A&F, Zips saw strong demand. Organic revenue
growth also benefited from the weakening Turkish
Lira, as we continued to price largely in USD, as well
as from the adoption of hyperinflation accounting in
that country.
In the Americas and EMEA, we also benefited from
increased nearshoring, with customers bringing
production closer to their end-markets, and this
trend gathered momentum through the year.
Geographical performance
We saw strong revenue growth in all regions driven
primarily by pricing actions, mix and positive end
market sentiment during H1.
Our Asia revenue, 58% (2021: 59%) of Group,
increased 6% CER to $912 million (2021: $850
million), despite some headwinds. While Vietnam
and India delivered strong growth, following Covid
disruption in 2021, the market in China was
impacted by Covid disruption during H1 2022.
Overall, Asian markets experienced significant
demand and supply volatility throughout the year,
with our performance underpinned by agility,
customer focus and self-help initiatives.
Our Americas revenue, 22% (2021: 22%) of
Group, increased 9% CER to $341 million
(2021: $314 million), with a particularly strong
performance in Colombia and Central America.
In addition, our US Personal Protection business
performed well, with strong demand and
operational delivery improving significantly.
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Coats Group plc Annual Report and Accounts 2022
Financial review
Revenues
Group revenue increased 9% on a reported basis
and 16% on a CER basis. On an organic basis
revenue increased 10%, which excludes the Texon
and Rhenoflex acquisitions. All commentary below is
on an organic basis unless otherwise stated.
Operating profit
At a Group level, adjusted operating profit increased
from $198 million in 2021 to $235 million (including
acquisitions) and adjusted operating margins
increased 120bps to 14.8%. The table sets out the
movement in adjusted operating profit during
the year.
2021 adjusted operating profit
Volumes impact (direct and
indirect)
Price/mix
Raw material inflation
Freight inflation
Other cost inflation (e.g. labour,
energy)
Productivity benefits
(manufacturing and sourcing)
Strategic projects savings
Other SD&A savings
Others (e.g. FX)
Contribution from Texon and
Rhenoflex acquisitions
2022 adjusted operating profit
Exceptional and acquisition
related items
2022 reported operating profit
Margin %
13.7%
14.8%
$m
198
(34)
128
(60)
(10)
(48)
22
20
16
(6)
9
235
(54)
181
In the first half of the year, there were volume
tailwinds as a result of the significant demand
recovery in the period. In the second half, as
anticipated, we saw a slow-down, particularly in
Apparel. The direct and indirect volume impact of
this, together with the increasingly strong 2021
comparators (due to the exceptional demand
conditions, which continued into H1 2022), resulted
in a direct and indirect volume headwind in the year.
In part as a result of increasing oil prices in the latter
part of 2020, and throughout 2021 and 2022, we
experienced year-on-year inflationary pressures for
a number of major cost categories, most notably raw
materials, freight and other costs such as labour and
energy. As in previous years, we were able to fully
offset these headwinds, by means of productivity
benefits and increased pricing. These inflationary
pressures continued throughout 2022, albeit with
some flattening out and price moderation in certain
areas in the latter part of the year. There was early
evidence of this, for example, in relation to some raw
materials and freight.
Selling, Distribution and Administration costs have
continued to be well controlled, despite ongoing
inflationary impacts. These are below last year as
we reduced our costs, particularly in the face of
more challenging conditions in H2. We have also
benefited from $20 million of savings in the year, in
relation to our strategic projects announced in early
2022, and these are ahead of our initial
expectations for the year. We have increased the
total efficiencies we expect to deliver by 2024 by
$20 million through expanding the scope of the
projects, in particular focusing on our Asian
operations, and we now expect to deliver a total of
$70 million incremental benefits.
Our 2022 acquisitions, Texon and Rhenoflex,
delivered a $9 million contribution to adjusted
operating profit post-acquisition. This was in line
with our acquisition business case, and we moved
quickly in the year to deliver the anticipated
synergies ($11 million total by 2024) with run-rate
savings at the year-end of $3 million.
As a result of these factors, the Group’s adjusted
operating margins increased by 120bps to 14.8% on
a CER basis (2021: 13.6%). Excluding the Texon and
Rhenoflex acquisitions, the Group margin increased
150bps to 15.1%.
On a reported basis, Group operating profit
(including exceptional and acquisition-related items)
increased to $181 million (2021: $178 million). This
includes exceptional items, and a breakdown is
provided below. Exceptional and acquisition-related
items are not allocated to segments, and as such
the segmental profitability referred to above is on an
adjusted basis.
Foreign exchange
The Group reports in US Dollars and translational
currency impacts can arise, as its global footprint
generates significant revenue and expenses in a
number of other currencies. In 2022, this was a
headwind of 7% on revenue and 8% on adjusted
operating profit. These adverse translation impacts
were primarily due to depreciation in the year in the
Euro and the Indian Rupee and to the adoption of
hyperinflation accounting in Turkey. At year-end
exchange rates we expect a c.1% translation
headwind for revenue and adjusted operating profit
in 2023 (excluding any future hyperinflation impact,
which cannot be forecast with accuracy).
Non-operating results
Adjusted earnings per share (‘EPS’) increased by
14% to 8.2 cents (2021: 7.2 cents) as operating profits
grew significantly, increasing from $198 million to
$235 million (due to the strong trading performance
and the delivery of savings from the strategic
projects). This was alongside a reduction in the
underlying effective tax rate of 29% (2021: 30%).
There was some offset from higher interest.
Reported EPS of 4.8 cents (2021: 5.8 cents) was 18%
lower, including the impact of exceptional and
acquisition related items.
The increase in adjusted profit before tax was due to
the increase in adjusted operating profit ($37 million
increase). This was partially offset by the net finance
charge which was $8 million higher year-on-year
(see further details below). There was a small (c.0.1
cents) dilutive impact from the two acquisitions
completed during the year, which is not expected to
recur in 2023, as the business case and synergies
are delivered.
Net finance costs increased to $30 million (pre-
exceptional) (2021: $21 million). The key drivers were
a $9 million increase in interest on bank borrowings
due to increasing interest rates on the floating
elements of debt, and additional interest on the
$240 million acquisition facility taken out in July to
fund the Texon acquisition. In addition, there was a
$6 million adverse movement on foreign exchange,
largely as a result of Sterling weakness towards the
year end, when we hedge a number of costs and
cash flows, including scheduled UK pension
contributions. These were partially offset by a $4
million decrease in interest on pension scheme
liabilities, as a result of an IAS19 basis surplus at 31
December 2021. There was also a $2 million credit
due to the indexation of non-current assets in
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Coats Group plc Annual Report and Accounts 2022
Financial review cont.
Turkey as a result of the adoption of hyperinflation
accounting.
The adjusted taxation charge for the year was $60
million (2021: $53 million). Excluding the impact of
exceptional and acquisition-related items, the
effective tax rate on pre-tax profit was 29% (2021:
30%). The reported tax rate was 37% (2021: 34%),
after exceptional and acquisition related items.
Profit attributable to minority interests increased by
13% to $22 million (2021: $20 million) and was
predominantly related to Coats’ operations in Vietnam
and Bangladesh, in which it has controlling interests.
Exceptional and acquisition-related items
Net exceptional and acquisition-related items before
taxation were $55 million (2021: $20 million). These
include strategic project costs of $31 million (of
which $5 million are non-cash impairments) and
acquisition-related items of $24 million.
Strategic project costs of $31 million relate to the
commencement of a number of strategic initiatives
during 2022; and primarily consist of severance
costs of $22 million, non-cash right-of-use asset
impairment charges in relation to UK and US office
exits of $5 million, and legal/advisor/closure costs of
$5 million, offset by a profit of $1 million from the
sale of property. These significant actions have
supported the acceleration of project benefits, as
mentioned earlier, with $20 million of incremental
adjusted operating profit delivered in 2022.
Acquisition-related items of $24 million consisted
of the provisional amortisation charges from
the newly recognised intangible assets from
the Texon/Rhenoflex acquisitions ($8 million),
related transaction costs ($13 million) and the
amortisation of intangible assets acquired
in previous acquisitions ($3 million).
Discontinued items
In May 2022, Coats completed the disposal of its
business in Brazil and Argentina to Reelpar SA, an
entity backed by a Sao Paulo Private Equity Firm.
As a result of the strategic exit from Brazil and
Argentina, the operating results of these businesses
prior to sale have been reported within discontinued
operations during the current (2022 operating
losses of $3 million) and prior years. This has
resulted in an overall increase to the Group adjusted
operating margin of around 50bps.
As a result of the transaction, we have disposed of
$49 million of net assets (of which $45 million
relates to working capital) for a cash payment to the
purchaser and fees of $20 million. In addition, $15
million of historic foreign exchange losses have
been recycled to discontinued operations. The
Group’s statutory profit of $7 million in the year
(2021: $109 million) is stated after the loss on
disposal from this divestment.
The exit from the Brazil and Argentina business is in
line with Coats’ strategic initiatives, announced in
March 2022, to accelerate profitable sales growth
and transform the company.
Cash flow
The Group delivered $114 million (2021: $124 million)
of adjusted free cash flow in the year. Free cash flow
is measured before annual pension deficit recovery
payments, acquisitions, disposals and dividends,
and excludes exceptional items.
Adjusted free cash flow performance was strong,
albeit slightly below 2021, which benefited from
some significant, favourable non-recurring items,
including non-payment of 2020 staff bonuses. We
managed net working capital closely, although there
was a $22 million outflow (2021: $14 million outflow).
This result was achieved after a significant
investment in inventory to underpin service levels
during an exceptional period of demand, supply
chain disruption and inflationary pressure, which
particularly impacted the first half. We continued our
disciplined approach to payables and receivables
management through the year.
Capital expenditure was $34 million (2021:
$31 million), as we continued to maintain a
selective approach to investing in growth
opportunities, as well as in strategic projects.
We anticipate 2023 capital expenditure to be
in the $30-40 million range, as we continue
to invest in support of our growth strategy
and in our environmental performance.
Minority dividends of $18 million (2021: $17 million)
were paid, as cash was repatriated from joint
ventures to the Group. Tax paid was $55 million
(2021: $48 million).
The Group delivered an overall free cash outflow of
$247 million (2021: $33 million inflow). This primarily
reflects the adjusted free cash inflow of $114 million,
offset by:
– UK pension payments of $43 million (being $32
million of ongoing deficit recovery payments and
administrative expenses, and $11 million catch-up
of deferred 2020 payments which are now fully
completed);
– Dividend payments of $33 million;
– Exceptional and acquisition related payments,
mainly relating to strategic projects of $23 million;
– Acquisition transaction payments of $12 million;
– Disposals and discontinued operations of $26
million relating to the Brazil and Argentina
business: payments to the purchaser and fees of
$20 million and $9 million cash outflow from
discontinued operations, net of the $3 million
overdraft disposed of;
– Net cash paid to acquire the Texon business,
which consisted of $235 million cash payment,
offset by $17 million cash within the business at
the time of acquisition.
The Rhenoflex acquisition, which consisted of a
$120 million cash payment, was largely funded by an
over-subscribed £92 million equity raise.
Net debt (excluding lease liabilities) at 31 December
2022 was $394 million (31 December 2021: $147
million). Including lease liabilities, net debt was $500
million (31 December 2021: $246 million).
Pensions and other post-employment benefits
The net surplus for the Group’s retirement and other
post-employment defined benefit liabilities (UK and
other Group schemes), on an IAS19 financial
reporting basis, was $105 million as at 31 December
2022, which was $84 million higher than 31
December 2021 ($21 million surplus). This increase
was primarily due to movements on the UK scheme.
The Coats UK Pension Scheme, which is a key
constituent of the Group defined benefit liabilities,
had a surplus on an IAS 19 basis at 31 December
2022 of $181 million (31 December 2021: $108
million). The increase in the surplus during the year
of $73 million predominantly relates to net actuarial
gains of $45 million. This is from an increased
discount rate due to significantly higher corporate
bond yields reducing liabilities, but this was partially
offset by asset losses due to the high degree of
hedging in place in the portfolio. There were also
employer contributions (excluding administrative
expenses) of $38 million, including $11 million of
catch-up payments.
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Coats Group plc Annual Report and Accounts 2022
Financial review cont.
UK funding update
We continue to maintain strong and collaborative
relations with the Scheme Trustees around strategic
planning and have established a joint working group
between the Company and Trustees to review
further opportunities for de-risking the scheme,
beyond the significant positive progress that has
already taken place.
As part of this constructive planning the Trustee of
the Coats UK Pension Scheme completed a partial
buy-in transaction in December 2022 by purchasing
a c.£350 million bulk annuity policy from Aviva
which insures benefits payable under the scheme in
respect of c.3,700 pensioner and dependant
members. These members represent roughly 20% of
the scheme’s liabilities.
The purchase of this policy sees all the Scheme’s
financial and demographic risks fully hedged for the
covered liabilities. The Scheme will receive a regular
stream of income that matches the pension
payments for the covered members, making it a
precise liability hedging asset. This further de-risks
the Scheme and reduces future balance sheet
volatility. It builds on the significant positive steps
taken to de-risk the Scheme in recent years,
resulting in 90% of the Scheme’s inflation/interest
rate exposure having previously been hedged.
The Aviva buy-in is consistent with Coats’ aspiration
of fully insuring the Scheme and removing it from
the Group balance sheet, in a cost effective manner.
When the Technical Provisions (funding) deficit for
the Scheme was last formally assessed at 31 March
2021, as part of the triennial valuation cycle, it
showed a £193 million deficit. As a result of this
valuation, future contributions were maintained at
the previously agreed levels of £22 million
($27 million) per annum (indexing) up until 2028,
which was expected to result in the pay-down of the
deficit slightly earlier than originally planned. The
Group agreed to continue to pay the Scheme
administrative expenses and levies of around
$5 million per annum.
Updates since then indicate that the funding deficit
has fallen significantly and is now approaching fully
funded on a technical provisions basis. This
significant improvement has been due to employer
contributions, favourable movements in the market
(increasing discount rates) and the de-risking actions
that we and the Trustees have taken, for example
the buy-in transaction referred to above.
As a result of this significantly improved funding
position, and reflective of the collaborative working
relationship with the Trustees, we have agreed a
mechanism to switch off/switch on the regular cash
contributions to the scheme based on monthly
estimates of the latest funding position. As such, if
the scheme remains in surplus for a consecutive
number of months cash contributions will cease
entirely until any trigger on the downside (i.e. a
return to deficit) has been hit. At this point,
contributions on a pre-agreed basis would resume.
Given the latest funding position, this has the
potential to significantly reduce or eliminate the
existing levels of contributions made into the
Scheme, and thereby increase free cash flows
generated by the Group, within the short to
medium term.
Balance sheet and liquidity
Going concern
On the basis of current financial projections and the
facilities available, the Directors are satisfied that the
Group has adequate resources to continue for at
least the next 12 months and, accordingly, consider
it appropriate to adopt the going concern basis in
preparing the financial statements. Further details of
our going concern assessment, financial scenarios
and conclusions are set out in note 1.
Group net debt (excluding lease liabilities) at 31
December 2022 was $394 million ($500 million
including lease liabilities), an increase on 31
December 2021 ($147 million). This reflects
disciplined cash management as noted above, offset
by the acquisition-related items, payments in
relation to the sale of the Brazil/Argentina business,
ongoing pension deficit repair payments,
shareholder dividends and exceptional cash costs in
relation to strategic projects.
As previously reported, the Texon acquisition, which
was completed in July 2022, was funded by a $240
million temporary acquisition facility. In January
2023, we successfully refinanced this acquisition
facility via the US Private Placement (USPP) market
with $250 million of notes split between 5 and 7
years tenor at highly competitive interest rates
(between 5.3% and 5.5%). This maintains our total
committed debt facilities at $835 million with well
diversified source and tenor; being $360 million
revolving credit facility, $225 million of original USPP
notes (2024 and 2027 tenors), and the new $250
million of USPP notes (2028 and 2030 tenors). The
committed headroom on our banking facilities was
approximately $250 million at 31 December 2022.
At 31 December 2022, our pro forma leverage ratio
(net debt to EBITDA; both excluding lease liabilities)
was 1.4x and remains well within our 3x covenant
limit, and in the middle of our target leverage of 1-2x.
Our interest cover covenant also continued to have
significant headroom at 31 December 2022 at 19.0x
vs a covenant limit of 4x. These covenants are
tested twice annually in June and December and
monitored throughout the year.
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Coats Group plc Annual Report and Accounts 2022
Chair’s introduction to governance
David Gosnell
Chair
The Board's role has been to guide the business through a challenging
external environment and through a period of internal transformation,
while maintaining our high standards of Corporate Governance and
ensuring we deliver long term value to our stakeholders”
DEAR SHAREHOLDER,
On behalf of the Board, it is my pleasure to present
the corporate governance report for the year ended
31 December 2022, which provides insights into the
Board’s and its Committees’ activities this year.
Board oversight of transforming the business
2022 has been a year of transformation for Coats.
Our long history demonstrates our track record
of proactively identifying when we need to adapt
and innovate to ensure we are well positioned
to continue to deliver sustainable long-term
growth and success for our stakeholders. I am
proud of the way in which we have responded
to the challenges of the external environment
by thoughtfully considering and taking bold
decisions to change the shape of our business.
The acquisition of Texon and Rhenoflex led to the
decision being taken to create three Divisions;
Apparel, Footwear and Performance Materials.
This will enable effective integration, drive synergies
and allow for end-to end accountability. Accordingly,
during 2022 the Board devoted substantial time
to considering these acquisitions, including their
funding, and their various impacts on the business
and operations, as well as on our stakeholders.
Our stakeholders and returning
to face-to-face engagement
The need for the Board to consider and understand
the insights from and the concerns of our
stakeholders continues to be a critical part of the
Group’s ongoing success. We were delighted to
continue our programme of Board visits in 2022,
with the Directors holding their annual away week in
Mexico and engaging informally with our employees
and communities, including local officials, as well as
more formally with customers in the Boardroom.
The Board visited some of our newly acquired sites
and met a selection of our new colleagues, both
through the acquisition processes and during the
Board visit to the Rhenoflex facilities in Germany in
September. Our Designated Non-Executive Director
for Workforce Engagement, Fran Philip, has
continued her programme of in-person and remote
engagement during the year. This provides the
Board with direct insights, which are of critical
importance during this period of significant change
to allow a full understanding of the effect of the
transformation of the Group and the impact on
culture and the workforce.
Subject matter
Board leadership and Company purpose
Promoting the long-term sustainable success
of the Company
Generating value for shareholders
Contributing to wider society
Page(s)
12 to 13
14 to 15
32
Purpose, values and strategy, and how
these and our culture are aligned
2, 11 to 13, 65 to 66
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 Chair
Board roles
Non-Executive Directors
Information and support
Composition, succession and evaluation
Succession planning
Board diversity
Board evaluation
30 to 31
74
32 to 34
38
64
64
64
64 and 67
77 to 79
78 to 79
22
Audit, risk and internal control
Independence and effectiveness of internal
and external audit functions
74 to 76
Fair, balanced and understandable reporting
72
Principal risks
Remuneration
42 to 49
Remuneration policies and practices that
support strategy and promote long-term
sustainable success
85 to 104
A formal and transparent procedure for
developing policy on executive remuneration 85 to 104
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Coats Group plc Annual Report and Accounts 2022
Chair’s introduction to governance cont.
Ensuring our investors understand our strategy and
vision is critical to our success and it was gratifying
to see the turnout of existing and prospective
shareholders at our Capital Markets Day in October.
Members of the executive team presented our
enhanced Footwear business to bring this to life for
investors and demonstrated the synergies available
to the Group. Investors also had the opportunity to
experience how the integration of the Coats,
Rhenoflex and Texon workforces position us
strongly going forward.
Sustainability
The need to be socially responsible, including
changing how businesses operate to reduce their
environmental impact, is rightly a focus for our
stakeholders, as well as society as a whole. Our
proactive approach and commitment to deliver real
change is well documented in our previous reports
but more is needed. At the start of this year the
Board approved a suite of progressive ESG policies
including a new Climate Change policy and Living
Wage policy, as well as the consolidated
Environmental Policy (which combines elements of
our previous environmental and energy policies with
appropriate updates).
Sustainability at Coats, including climate-related
governance, is led by the Board, supported by
the Board Sustainability Committee. Strategy
development and monitoring of action plans at
an executive level is championed by the Group
CEO and the whole Group Executive Team (GET).
The responsibilities for each element of our ESG
activities are set out in the Committees' section
(see page 67). Our independent Non-Executive
Directors play a large role in the Board’s ESG
oversight, including through Committee membership
and designated responsibilities at Board level.
Further details of the Group’s stance and focus
on ensuring effective stewardship in respect of
key ESG matters are set out in the Sustainability
section of this Annual Report, and also in our
Sustainability Report (available on www.coats.com/
sustainability). You can also read more about our
new 2026 sustainability targets and our policies,
as well as reviewing our report on our compliance
with the Task Force on Climate-Related Financial
Disclosures (TCFD) recommendations in the
Sustainability Report. I am pleased that we have
maintained our strong position in the FTSE4Good
and we are now in the top 5% of the index. We
have also achieved a “AA” rating from MSCI.
Governance and ethics
The Board sets the tone from the top to
demonstrate the Group’s commitment to ensuring
the correct governance mechanisms are in place
and followed, and ensuring that we continue to ‘do
the right thing’. The Audit and Risk Committee (ARC)
continues to oversee the governance element of our
ESG responsibilities. You can read about the ARC’s
activities, including their review of sanctions controls
and compliance, the oversight of the external auditor
tender and the development of the Group’s Audit
and Assurance Policy, on pages 71 to 76.
Given the context of the level of change in 2022, the
Company’s well-established Group-wide systems,
including the whistleblowing policy and associated
processes, which support good governance and
decision making, were of critical importance to
ensuring that high quality and consistent outcomes
continued. The Board regularly reviews and
considers individual allegations, consequent
investigations and any themes which emerge from
our various whistleblowing channels including our
externally hosted web service whistleblowing
hotline. You can read more about the statistics
relating to whistleblowing allegations in the
Directors’ Report on page 81.
17,000 WORKERS SPREAD
ACROSS 50 COUNTRIES
Coats has continued to apply the principles of the
UK Corporate Governance Code 2018 (‘Code’) and
our statement of compliance is set out on page 59.
Core to all our decisions and debates, are the key
themes of sustainability, diversity, engagement with
our stakeholders, fair remuneration structures and a
strong corporate culture. You can read more about
our proposed Remuneration Policy, which will be
presented to shareholders at the 2023 AGM, in the
Remuneration Committee report on pages 85 to 104.
Diversity, equity and inclusion
Our people are fundamental to our sustainable
success. These 17,000 employees spread across
some 50 countries are united by the Group’s
purpose to ‘connect talent, textiles and technology
to make a better and more sustainable world’.
The Board’s role in setting and monitoring the
Company’s culture remains critical, particularly in
ensuring that the Group’s culture is appropriately
aligned internally across the new business areas,
and also with strategy. In December 2022, Farnaz
Ranjbar, our Chief HR Officer, updated the Board on
the initiatives launched as a part of ‘Coats for All’,
an umbrella programme to ensure alignment across
all areas of our Group ways of working. The initiative
includes specific diversity projects and targets. 86%
of our employees now work in a Great Place to Work
certified country and this, combined with the 6%
increase seen in our trust index score, are testimony
to our high levels of employee engagement. You can
read more, including how we manage talent in the
People and Culture section of this Annual Report as
well as reading about our refreshed Board diversity
policy in the Nomination Committee report on
pages 77 to 79.
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Coats Group plc Annual Report and Accounts 2022
Chair’s introduction to governance cont.
The Nomination Committee, together with the
Remuneration Committee, continues to oversee the
social elements of our ESG responsibilities.
Board effectiveness
In line with the requirements of the Code, this year an
evaluation of the effectiveness of the Board and its
Committees, including consideration of the factors to
be considered by Directors to fulfil their duties under
s172 of the Companies Act 2006, was undertaken by
Independent Audit Limited, an external service
provider. Full details of the process, outcomes and
how this will inform the Board's development plan for
2023 can be found on pages 70. You can read about
the elements of the Board evaluation concerning the
effectiveness of the Committees in their individual
reports.
Board composition
Ensuring the correct composition of the leadership
of the Company, including the Board, GET and
senior management is key to achieving our goals.
Following Anne Fahy stepping down from the Board
in May 2022, Nicholas Bull became Chair of the
Audit and Risk Committee. I’m delighted that our
Non-Executive Director search processes resulted in
the appointment of Steve Murray, as a Non-
Executive Director and member of the ARC,
Nomination and Remuneration Committees, in
September 2022 and the appointment of Heather
Lawrence, as a Non-Executive Director and Chair
Designate of the ARC and a member of the
Nomination Committee, in November 2022.
Steve and Heather bring their significant skills and
experience to further strengthen our Board and
enhance our succession processes. You can find
more details in the Board biographies set out on
pages 61 to 63.
You can read more about the processes undertaken
in 2022 in the Nomination Committee report on
pages 77 to 79 and find further details about the
members of the GET and their remits on page 68.
David Gosnell
Chair
1 March 2023
THE UK CORPORATE GOVERNANCE CODE
Compliance statement
Coats has applied all of the principles and
complied with all the relevant provisions of the
2018 UK Corporate Governance Code (Code)
during the course of the year ended 31 December
2022, with the exception of a short period of non-
compliance with provision 24 (Membership of the
Audit Committee) and provision 38 (alignment of
executive director pension contribution rates with
those available to the workforce).
During the year there was a temporary period of
non-compliance with provision 24 following Anne
Fahy stepping down from the Board on 18 May
2022 as there were only two members of the
Audit and Risk Committee (Nicholas Bull, who has
recent and relevant financial experience, and
Jakob Sigurdsson). This position was resolved
when Steve Murray was appointed as a
Non-Executive Director and became a member
of the Audit and Risk Committee on 1 September
2022. Further details are provided in the
Nomination Committee report on page 78.
During the year there was non-compliance with
provision 38. Jackie Callaway was appointed in
December 2020 with a pension benefit which was
aligned to the workforce. A policy setting out
phased arrangements was in place for Rajiv
Sharma which limited his pension benefit with
effect from 1 January 2020 to a fixed amount and
his pension benefit reduced to 12% to ensure
compliance by 31 December 2022, as detailed in
the Remuneration Report on page 96. The Board
considers it appropriate that there was a phased
transition of the pension benefits for existing
Executive Directors who originally had a
contractual entitlement to a higher level of
pension benefit.
A summary of how we have applied the principles
set out in the Code is presented in the table on
page 57.
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Coats Group plc Annual Report and Accounts 2022
Chair’s introduction to governance cont.
How governance supports strategy
Strategic goal
ACCELERATE PROFITABLE
SALES GROWTH
TRANSFORM THE BUSINESS
CREATE VALUE
Read more on page 12
Read more on page 12
Read more on page 12
Key stakeholders
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.
Examples of areas of focus in 2022:
– Acquisitions of Texon and Rhenoflex and
implementation of the Strategic Projects
– In-depth review of Footwear strategy
– In-depth review of Performance Materials strategy
– Monitoring of key metrics, including sustainability and
KPIs, at each Board meeting
The Board reviews the strategy for sustainable growth
and leverages its collective experience to advise on
related matters.
The Board reviews key proposals relating
to business capability.
– Update on Culture, talent plan processes for 2023 and
the update on the launch of 'Coats for All' and updates
from our designated Non-Executive Director for
Workforce Engagement’s meetings with employees
– Oversight of Strategic Projects including ensuring
appropriate people and resource allocation
– Review of organisational structure
– Divestment of Brazil and Argentinian businesses
– Approval of 2026 sustainability targets and ESG policies
(including Living Wage and Climate Change policies)
– Review of UK pension scheme £350 million buy-in
and subsequent agreement of mechanism to switch
off/on regular cash contributions to UK pension
scheme, based on monthly estimates of latest
funding position
– Review and selection of funding process for
acquisition of Rhenoflex and impact on leverage
– Review of Group’s dividend policy
Stakeholders key
CUSTOMERS
COMMUNITIES
EMPLOYEES
ENVIRONMENT
SHAREHOLDERS
SUPPLIERS
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Coats Group plc Annual Report and Accounts 2022
Board of Directors
Board profiles (excluding Executive Directors)
Length of service
Relevant Functional
Experience
0–3 years 45%
3–6 years 22%
6–9 years 33%
Geographic Experience
People 20%
Legal 13%
Risk 18%
Finance 20%
Technology/Digital 13%
Customer 16%
Global Business Experience 26%
US Market Experience 24%
European Market Experience 26%
Asia Market Experience 24%
Key to Committee memberships
Committee chair
R Remuneration
A Audit and Risk
S Sustainability
N Nomination
N S
S
David Gosnell OBE
Rajiv Sharma
Jackie Callaway
Chair of the Board
British
Appointed as a Non-Executive Director on 2 March 2015,
Chair of the Board since 19 May 2021
Group CEO
Singaporean
Appointed as an Executive Director in March 2015,
Group CEO since 1 January 2017
Chief Financial Officer
New Zealander
Appointed as an Executive Director on 1 December 2020,
Chief Financial Officer since 1 April 2021
Key skills and experience
– Strong and deep supply and procurement background in global
multinational companies
– International and strategic mindset
External appointments
Was previously Chair 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 the 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 77 and an overview of
the activities of the Sustainability Committee on page 67.
Key skills and experience
– 30 years’ global multi-industry leadership experience
– Growth, digital, sustainability and acquisitions track record
Previous experience and 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 CEO’s statement on page 8.
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,
Jackie was Group Financial Controller of Brambles Ltd, 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 of the Institute of Chartered Accountants in England and
Wales. She has a Bachelor of Business Management Studies from the
University of Waikato, New Zealand.
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Coats Group plc Annual Report and Accounts 2022
Board of Directors cont.
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Nicholas Bull
Heather Lawrence
Senior Independent Non-Executive Director
British
Appointed as a Non-Executive Director and Senior
Independent Director on 10 April 2015
Independent Non-Executive Director
British
Appointed as a Non-Executive Director on 7 November 2022
Hongyan Echo (Echo) Lu
Independent Non-Executive Director
British/Chinese
Appointed 1 December 2017
Key skills and experience
– Global financial services and banking experience
– International business experience and insights, especially in China
– Advocate for ESG and SRI matters at the Board
Key skills and experience
– More than 25 years' experience in finance
– Strong background in corporate finance and investment banking, and
Key skills and experience
– Global business experience gained in different sectors in Europe,
Asia and the US
track record of delivering positive change globally and regionally
– Strong background in general management and track record of
External appointments
Deputy Chair of Conran Holdings Ltd, Trustee of the Design Museum,
Camborne School of Mines Trust, The Creative Education Trust and the
Conran Foundation and a member of the Advisory Panel of INTO
University. Previously served as Chair of Fidelity China Special Situations
plc, Chair of De Vere, Chair of the Advisory Board of Westhouse
Securities and of Smith’s Corporate Advisory Limited and a member of
Council of the University of Exeter. Nicholas had a global career in
banking with Morgan Grenfell (subsequently Deutsche Bank), Société
Générale and ABN AMRO.
External appointments
Non-Executive Director and Chair of the Audit Committee at Melrose
Industries plc. Heather originally qualified as a Chartered Accountant
and subsequently spent well over a decade working in senior roles in
corporate finance and investment banking, where she honed her
experience across industrial and transportation businesses. In her most
recent role, Heather was a Managing Director at Citigroup, where she
ran the Aviation and Travel franchise in EMEA. She has served on
several boards and retired from her role as a Non-Executive Director of
Flybe plc in 2019.
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.
He received an Honorary Doctorate of Law from the University of Exeter
in 2022.
Nicholas was appointed as Chair of the Audit and Risk Committee on 19
May 2022 and he is expected to step down as Chair following the 2023
AGM. Nicholas brings extensive financial experience through his
previous roles with Fidelity China Special Situations plc, De Vere Group
Limited, Morgan Grenfell, Société Générale and ABN Amro.
See the Audit and Risk Committee report on page 71.
Qualifications
Heather holds a bachelor’s degree in Economics from the
University of Exeter.
Heather was appointed as Chair Designate of the Audit and Risk
Committee on 7 November 2022, and she is expected to succeed
Nicholas Bull as Chair following the 2023 AGM.
delivering positive change
External appointments
Managing Director, UK and ROI, of Sonova Group, the global leader
for innovative hearing solutions. Previously Chief Executive Officer
of Haulfryn Group Ltd, a UK leisure business, Managing Director,
International of Holland & Barrett International and 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 and was a member
of the Advisory Board for Diversity in Hospitality, Travel and Leisure.
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.
Echo was appointed as Chair of the Remuneration Committee on
1 May 2021, having served on the Remuneration Committee since her
appointment to the Board in December 2017. Her background and
qualifications in Industrial Relations and Human Resources provide
the Company with an ideally experienced Chair of the
Remuneration Committee.
See the Remuneration Committee report on page 85.
Key to Committee memberships
Committee chair
R Remuneration
A Audit and Risk
S Sustainability
N Nomination
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Coats Group plc Annual Report and Accounts 2022
Board of Directors cont.
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Steve Murray
Independent Non-Executive Director
British
Appointed 1 September 2022
Fran Philip
Independent Non-Executive Director, Designated
Non-Executive Director for Workforce Engagement
American
Appointed 1 October 2016
Jakob Sigurdsson
Independent Non-Executive Director
Icelandic
Appointed 1 October 2020
Key skills and experience
– More than 30 years' experience in the apparel and footwear industry
– Strong background in general management and track record of
delivering positive change globally and regionally
Key skills and experience
– Extensive speciality retailing business experience
– Deep background in product innovation, design and development
– Workforce dynamics experience
Key skills and experience
– International business experience across a diverse range of sectors
with particular emphasis on growth in new or developing markets
– Strong background in general management and track record of
External appointments
Previously Global Brand President of The North Face and a member of
the group executive leadership team at VF Corporation, one of the
world's largest apparel, footwear and accessories companies and the
parent company of The North Face, Timberland and Vans. Steve
previously served as CEO of Airwair International (Dr. Martens, the iconic
British footwear brand), and prior to that he served as Global Brand
President of Vans, Global Brand President of Urban Outfitters and EMEA
President of Deckers Brands.
External appointments
Non-Executive Director of Vera Bradley Inc., Sea Bags, Totes Isotoner
and Vista Outdoor Inc. Previously Fran worked for The Gap, Williams-
Sonoma, 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.
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
Steve holds a bachelor’s degree in Business Studies from Middlesex
University, England.
Qualifications
Fran has a degree in English and Sociology from Bowdoin College,
Maine, and an MBA from the Harvard Business School.
Qualifications
Jakob has a BSc in Chemistry from the University of Iceland and an MBA
from the Northwestern University.
Key to Committee memberships
Committee chair
R Remuneration
A Audit and Risk
S Sustainability
N Nomination
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Coats Group plc Annual Report and Accounts 2022
Corporate governance
LEADERSHIP AND ENGAGEMENT
Our governance framework enables effective decision making and
ensures collaboration between the Board, its Committees and the GET.
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,
including consideration of strategic acquisitions;
– overseeing implementation of the strategy
and monitoring performance by ensuring that
the Group is suitably resourced to achieve
its aspirations;
– overseeing returns to shareholders and
monitoring the share price;
– encouraging entrepreneurial leadership by
providing a framework of prudent and effective
controls which enables risk, including risk
tolerance, to be assessed and managed,
supported by robust systems of governance,
ethics and compliance;
– engaging appropriately with stakeholders to
understand their views; and
– setting and monitoring the Group’s culture,
supported by its values, and ensuring alignment
with the Company’s purpose and strategy.
The 'Role of the Board' section on page 65
sets out how the Board has discharged these
key roles in 2022.
CHAIR
– Primarily responsible for the overall effectiveness
of the 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
CEO succession.
– Provides advice and acts as a sounding board to
the Board and management. Has open and
regular contact and interaction with the CEO.
– Ensures effective communication with
our shareholders.
SENIOR INDEPENDENT DIRECTOR
– Provides a sounding board to the Chair.
– Leads the appraisal of the Chair’s performance
with the other Directors annually.
– Acts as an intermediary for other Directors,
if needed.
– Available to respond to shareholder concerns
if contact through the normal channels
is inappropriate.
NON-EXECUTIVE DIRECTORS
– Contribute to developing our strategy.
– Scrutinise and constructively challenge
the performance of management in the execution
of our strategy.
– Responsible for the governance of the Company.
– Bring their diverse expertise to the Board and
Board Committees.
– Devote such time as is necessary to the
proper performance of their duties.
COMPANY SECRETARY
– Provides support to the Board and ensures
information is made available to the Board
in a timely manner.
– Supports the Chair 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.
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Coats Group plc Annual Report and Accounts 2022
Corporate governance cont.
THE ROLE OF THE BOARD
Setting the strategy
The Board's forward-looking agenda focused on
strategic matters including ESG and regulatory
issues, as well as any other matters that may
influence or affect the Company’s achievement of its
goals, including generating sustainable growth.
During 2022, the Board considered a wide range of
topics including the structure of the organisation,
the progress of Strategic Projects as well as
divestment of the Brazil and Argentinian business
and the acquisitions of Texon and Rhenoflex. The
Board held its annual Strategy Meeting in
September at Rhenoflex and focussed on the
strategy of the Footwear business and considered
the Performance Materials strategy for growth.
Performance and monitoring including shareholder
returns
The Board and its Committees evaluate and oversee
current performance, including against ESG targets,
and are responsible for approving annual plans and
budgets, results, dividends and announcements,
including the going concern and viability statements.
The Board also oversees returns to shareholders
and ensures pensioners’ interests are safeguarded.
Post-acquisition reviews are undertaken to ensure
performance is in line with expectations.
Performance monitoring includes non-financial
performance such as employee wellbeing,
environmental and social measures, and ethical
business practice.
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. In accordance with the UK
Modern Slavery Act 2015, we publish on our website
a statement, which is approved annually by the
Board, on our actions to prevent modern slavery in
our operations and in our supply chain. We expect
our employees and our suppliers to behave ethically
in all their dealings relating to our business. All our
employees receive training on ethics, compliance
and modern slavery including focussed training and
online training modules for our senior employees
and those with customer or supplier facing roles.
These training programmes are regularly refreshed,
available in 12 languages, form part of the induction
for new starters and are rolled out biannually for all
relevant employees including Directors.
Stakeholder engagement
The Board ensures that there is continued
compliance with the Code (see page 59) 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
pages 32 to 34.
Culture
The Board and its Committees assess and monitor
culture through a number of indicators and
mechanisms including in 2022:
– A presentation on Culture, diversity, equity and
inclusion initiatives, including the setting of
targets, and talent management plans for 2023 at
the December 2022 Board meeting
– Health and safety updates at every Board meeting
and an annual review into wellbeing
– Designated Non-Executive Director for Workforce
Engagement updates and Great Place to Work
certifications and updates
– A review of whistleblowing cases and remedial
actions (read more on page 81)
– Insights from supplier audits
– A sustainability strategy review and consideration
of sustainability metrics that are presented at all
Board meetings
– Appropriately monitoring policies, practices and
behaviour and how they support strategy via
reports given at Board meetings
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Setting the framework of 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 (see page 74). You can read more about
our principal and emerging risks on pages 42 to 49.
Robust systems of governance, ethics and
compliance
The Board regularly reviews information relating to,
among other areas, anti-bribery and corruption and
whistleblowing as set out in the Audit and Risk
Committee Report and in the principal risks and
uncertainties section. As set out in the Sustainability
Report, 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
Coats Group plc Annual Report and Accounts 2022
Corporate governance cont.
Directors’ indemnities
The Company maintains Directors’ and Officers’
liability insurance, which provides appropriate cover
for any 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.
It provides a structured framework to ensure the
correct level of scrutiny of various decisions covering
matters including contracts, capital expenditure,
tax, treasury and human resourcing decisions.
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 were approved
for adoption at the 2021 AGM and these reflect
best practice and current legal and
governance standards.
Service contracts
Details of the Executive Directors’ service contracts
and the Chair’s and the Non-Executive Directors’
letters of appointment are set out in the Directors’
Remuneration Report on page 92. These documents
are available for inspection at the registered office
of the Company during normal business hours and
at the AGM venue. These documents are reviewed
regularly.
Committee terms of reference
The Board is assisted by four 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.
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Ensuring alignment
The Board, with support from its Committees, plays
a crucial role in ensuring the alignment of the
Group's culture with the purpose and strategy. As
set out elsewhere in this Annual Report, the Board
has considered the changes to the organisational
structure resulting from the Strategic Projects,
acquisitions and divestments as part of the updates
presented at Board meetings and a key part of
these discussions, and ultimate decisions, relate to
our people and culture. The Board and its
Committees continue to consider any trends in, and
the insights from, the cultural indicators and metrics
as well as other information presented at and in
between Board meetings, through the lens of
ensuring the desired alignment between culture,
values, strategy and purpose, and provide feedback
and direction if required. You can read more about
our values on page 11.
Good governance is key to
delivering a strategy. The Board
has the global view which enables
them to ensure that individual
plans align and therefore that the
group’s strategy and broader
purpose is met."
Heather Lawrence
Non-Executive Director
Coats Group plc Annual Report and Accounts 2022
Corporate governance cont.
BOARD COMMITTEES
Audit and Risk Committee
– Oversees and monitors the integrity of 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.
Nomination Committee
– Reviews the structure, size, composition and
mix of skills and experience 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 and inclusion.
– Reviews matters relating to fraud.
– Oversight of the diversity and inclusion-related
– Oversight of the governance-related
element of ESG.
See page 71 for more information.
Remuneration Committee
– Reviews and recommends the framework and
policy for the remuneration of the Chair, 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 the setting of the
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.
– Oversight of the remuneration-related
social element of ESG.
See page 85 for more information.
social element of ESG.
See page 77 for more information.
Sustainability Committee
– Provides strategic oversight and monitors the
execution of the Company’s Sustainability
strategy and initiatives.
– Oversees, reviews and provides input as
required to refine, enhance and accelerate the
progress of the Company’s sustainability
strategy, projects and targets.
– Oversees the environmental and employee
engagement-related social elements of ESG.
The Sustainability Committee is chaired by the
Chair of the Board, and its other members are the
Group CEO and two Non-Executive Directors.
It was established in December 2021 and its terms
of reference are available on coats.com.
The Committee met twice during 2022.
See the Working Responsibly section of this Annual
Report and the Sustainability Report, available from
www.coats.com/sustainability, for more information.
OTHER COMMITTEES
Disclosure Committee
The Disclosure Committee oversees the
Company’s compliance with its disclosure
obligations. The Group CEO chairs the Committee,
and its other members are the Chief Financial
Officer and the Group Company Secretary.
Acquisition Committee
The Acquisition Committee is authorised to
oversee specified projects by the Board when
appropriate. The Group CEO chairs the Committee,
and it includes the Chief Financial Officer and the
Group Company Secretary.
Group Risk Management Committee (GRMC)
The GRMC is responsible for formulating risk
management strategies and polices, and
monitoring risk management throughout the Group.
Its Chair is the Group CEO and its membership
is aligned to the Group Executive Team.
See page 68 for information on our
Group Executive Team.
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Coats Group plc Annual Report and Accounts 2022
Corporate governance cont.
GROUP EXECUTIVE TEAM (GET) MEMBERS’
ROLES AND RESPONSIBILITIES
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.
During 2022 the following roles were
part of the GET:
RAJIV SHARMA
Group CEO
See biography on page 61
– Responsible for executive management of the
Group as a whole.
– Delivers strategic and commercial objectives
within the Board’s stated risk appetite (see page
42 for more detail on key risks).
– Builds positive relationships with all the Group’s
stakeholders (see page 32).
JACKIE CALLAWAY
Chief Financial Officer
See biography on page 61
– Responsible for financial management
and implementing and monitoring effective
financial controls.
– Supports the Group CEO in developing and
implementing the Company’s strategy.
– Oversees relationships with the investment and
banking community.
ADRIAN ELLIOTT
President, Apparel & Footwear
– 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.
STUART MORGAN
FREDERIC VERAGUE
Chief Legal & Risk Officer and
Group Company Secretary
– Responsible for legal and compliance,
governance, risk management and company
secretarial matters. He has executive oversight
of the Group Internal Audit function.
– You can read more about the Group Internal Audit
function’s work during the year on page 74.
FARNAZ RANJBAR
Chief Human Resources Officer
– Responsible for delivering the global Human
Resources strategy, including performance
management, progression planning, reward
and talent acquisition.
– You can read more about People and Culture
on page 16.
SOUNDAR RAJAN
Chief Supply Chain Officer
– Responsible for supply chain management,
sustainability, and health and safety.
MICHAEL SCHOFER
Chief Operations Officer, Americas
– Responsible for all operations in the Americas
region, including quality, compliance, customer
service and sustainability programmes.
Chief Operations Officer, EMEA
– Responsible for all operations in the EMEA region,
including quality, compliance, customer service
and sustainability programmes.
BILL WATSON
Chief Operations Officer, Asia
– Responsible for all operations in the Asia region,
including quality, compliance, customer service
and sustainability programmes.
– The President, Performance Materials, left the
business on 31 December 2022 . This role was
responsible for delivering the overall strategy
for Performance Materials, including commercial
activities and developing talent, and
Group innovation.
GET ROLES IN 2023
From 1 January 2023, a new GET structure is in
effect following the Board’s decision to change to a
divisional operating structure. The changes to GET
membership and responsibilities are set out below:
– Adrian Elliott is now CEO of Apparel;
– Soundar Rajan is now CEO of Performance
Materials; and
– Frederic Verague is now CEO of Footwear.
Rajiv Sharma, Jackie Callaway, Stuart Morgan and
Farnaz Ranjbar continue in their existing roles.
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Coats Group plc Annual Report and Accounts 2022
Corporate governance cont.
Board and Committee attendance
The Directors’ attendance record at the last AGM,
scheduled Board meetings and Board Committee
meetings regularly attended by Non-Executive
Directors, for the year ended 31 December 2022
is set out in the table below. For Board and Board
Committee meetings, attendance is expressed as
the number of meetings attended out of the number
that each Director was eligible to attend.
During the year, the Board held seven scheduled
meetings and an additional four Board calls were
held to discuss business matters that the Chair
and Group CEO decided should be considered
by the Board. All Directors received papers for
meetings in advance. The Board resumed meeting
in person for the majority of meetings held during
the year but utilised technology to hold hybrid
or fully virtual meetings when it was appropriate
to do so, recognising the environmental benefits
and other efficiencies in balancing a mix of virtual
and physical meetings. This approach will be kept
under review to ensure effectiveness is optimised.
The Board visited the Rhenoflex facilities in
September and held the Annual Strategy Meeting
onsite to allow engagement with the local workforce
and other stakeholders to enhance strategic
discussions and understanding of the Footwear
business. The Board travelled to Mexico for its
annual away week and toured various sites, met
with stakeholders and participated in community
events. You can read more about the Board’s
engagement with stakeholders on pages 32 to 34.
In addition to the scheduled meetings, the Senior
Independent Director and the Non-Executive
Directors meet once a year without the Chair
present in order to appraise his performance.
The Chair and the Non-Executive Directors also
periodically attend sessions without management
present to discuss, amongst other things, the
performance of key members of management.
David Gosnell
Rajiv Sharma
Jackie Callaway
Nicholas Bull
Anne Fahy1
Heather Lawrence3
Echo Lu
Steve Murray2
Fran Philip
Jakob Sigurdsson
Board
Audit and Risk
Nomination5
Remuneration
Sustainability
11/11
11/11
11/11
11/11
4/4
2/2
10/114
4/4
11/11
11/11
5/5
3/3
1/1
1/1
5/5
1/1
1/1
1/1
1/1
1/1
1/1
2/2
2/2
2/2
2/2
4/4
4/4
2/2
4/4
AGM
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1. Anne Fahy stepped down from the Board on 18 May 2022.
2. Steve Murray was appointed to the Board on 1 September 2022.
3. Heather Lawrence was appointed to the Board on 7 November 2022.
4. Echo Lu was unable to attend the ad hoc Board call convened at short notice on 25 July 2022 due to a long-standing commitment that could not be changed.
The business of the meeting was time sensitive. Echo had been involved in all previous discussions regarding the business of the meeting and discussed the
outcomes of the call with the Chair shortly after the meeting.
5. Certain Nomination Committee discussions were conducted as part of scheduled Board meetings.
Board effectiveness improvements in 2022
The Board progressed the agreed action plan in relation to the feedback received as part of the 2021
internal effectiveness review and a summary is set out below:
– Appointment of new Chief Human Resources Officer, launch of 'Coats for All'
Actions taken in 2022 as a result of previous evaluation feedback
Continue focus on ESG
matters, particularly related to
‘social’ including culture, at
Board meetings and through
Committees, including the
newly formed Sustainability
Committee
including new DE&I targets and initiatives
– Continuation of ‘Great Place to Work’ certification
– New sustainability targets recommended by Sustainability Committee to Board
– Development of Audit and Assurance Policy by Audit and Risk Committee
– Development of new Remuneration Policy by Remuneration Committee
Continue to ensure that the
Board engages appropriately
with all stakeholder groups
Lead by example on
simplification by reducing the
demand on management time
through the preparation of
shorter, more-focussed Board
packs, that maintain the
quality of information required
for effective decision making
– Further information available in Stakeholder engagement section of this Annual
Report on pages 32 to 34
– Focus on maximising time at Board visits to engage with all stakeholders, including
employees at all levels of the business
– Agreed new ways of working to identify desired paper length relative to discussion
time allocated at meetings, with traffic light tracking system to easily see
compliance
– Revised Board paper templates shared with presenters
– Significant reduction in length of Board packs demonstrated in 2022
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Coats Group plc Annual Report and Accounts 2022
Corporate governance cont.
2022 review of effectiveness
In line with the Code, this year an external
evaluation of the effectiveness of the Board and its
Committees was conducted by Independent Audit
Limited (‘IAL’). IAL were also used by the Company
to conduct the 2019 external evaluation and it was
considered beneficial to track changes in the
previous findings and adopt a consistent approach
to allow true comparisons, noting the period of
substantial change both internally and externally
over the intervening time frame. IAL has no other
connection to the Company nor any Directors.
The process included the circulation of an electronic
questionnaire, that was developed and administered
by IAL, pertaining to the Board and its Committees
which was completed by all Board members and
also by regular Board and Committee meeting
attendees. The questionnaire covered a wide range
of topics, including Board operations and dynamics,
Board and Committee composition including
diversity and how the Board and senior
management interacted. The questionnaire also
probed the content and scope of topics covered at
Board meetings, including stakeholder engagement
and overseeing culture, as well as considering the
discharge of other S172 duties. This process was
supplemented with interviews conducted between
Areas for development and actions planned for 2023
Key areas for focus
Actions identified for 2023
IAL and the Chair of the Board and each of the
Chairs of the Committees, the Group CEO, the
Chief Finance Officer and the Company Secretary.
IAL also observed a Board and Remuneration
Committee meeting and examined a sample of
materials prepared for Board and Committee
meetings to enable them to make a full and
transparent evaluation of the ways of working. IAL
presented a summary of their findings to the Chair
and the Group Company Secretary to discuss key
outcomes. The full report was then circulated to the
Board and was considered at the December 2022
meetings of the Board and its Committees, where
a full and frank discussion and analysis were
undertaken. The report identified key strengths,
including the Board's interaction with the GET, its
contribution to strategy and its oversight of risks and
Group culture, and areas for development. Action
plans and focus areas for 2023, including timelines
for delivery, were agreed as set out below and in the
relevant Committee reports. Noting that there had
only been two meetings of the newly formed
Sustainability Committee, it was deemed
appropriate not to have a full formal evaluation
but instead to include open ended questions on
relevant areas to identify any relevant feedback
and areas of concern.
Effectively telling the strategic story
externally
Board’s oversight and assurance of
technology
Continuing to work on executive
succession planning
– Ongoing Investor Relations programme with regular updates presented at
Board meetings
– Refreshing the Annual Report
– Regular Board updates from the Head of Cyber Security
– Cyber Security deep dive at the Board
– Continuing to invite appropriate Group Executive Team members to attend
Board meetings as an observer
– Talent and succession reviews with Chief HR Officer
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Coats Group plc Annual Report and Accounts 2022
Audit and Risk Committee report
Nicholas Bull
(Chair since 19 May 2022)
Member since 2015
Heather Lawrence
Jakob Sigurdsson
(Chair Designate)
Member since 2020
Member since
7 November 2022
Steve Murray
Member since
1 September 2022
Dear Shareholder,
I am pleased to present this report, which is my first
as Chair of the Audit and Risk Committee, for the
year ended 31 December 2022. This report sets out
how the Committee has discharged the duties
delegated to it by the Board, and the key topics and
findings during the year.
This year we completed a competitive external audit
tender process which resulted in the appointment of
Ernst & Young LLP, subject to approval by the
shareholders at the 2023 AGM, for the financial year
commencing 1 January 2023. You can read more
about the process undertaken on page 75.
The Committee reviewed and considered the
governance of the Strategic Projects that were
undertaken during the year. Ensuring the correct
accounting policies and assurance processes
including, where relevant, post investment reviews
(in particular in relation to acquisitions) enable the
Company’s strategy to be appropriately and
effectively executed.
The Committee has continued to look ahead
towards potential future regulatory changes and
emerging best practice. In anticipation of the
reforms proposed by the UK government in its
publication from May 2022, the Committee has
overseen the development and approval of an Audit
and Assurance Policy which is available on our
website www.coats.com. During the year, the
Committee also continued to consider ESG-related
reporting requirements and expectations. The
Company will continue to consider the appropriate
timing and process to progress the external
assurance of its sustainability data.
The global business environment continues to be
uncertain and the importance of the Committee’s
annual work cycle of monitoring and reviewing the
integrity of the Company’s financial reporting and
supporting systems and process, reviewing Group
Internal Audit activities including the processes for
whistleblowing and fraud, reviewing and challenging
risk management and internal controls processes
remains critical to our stakeholders. During 2022,
there have been deep-dives into expense
management processes and further reviews of
compliance with HR controls, noting the change in
Chief HR Officer during the year. Recognising the
increase in the prevalence of cyber-attacks on
corporates, in July 2022 the Committee reviewed
the cyber security-related controls, mitigations and
the methods used for threat identification.
Anne Fahy resigned from the Board and as Chair of
the Committee at the 2022 AGM. I would like to
thank Anne for her valuable contributions during her
tenure. I was appointed Chair of the Committee for
one year while an external search for a new
Non-Executive Director was conducted. Heather
Lawrence became a Non-Executive Director and
was appointed Chair Designate of the Committee
in November 2022, and she is expected to succeed
me as Chair of the Committee following the
2023 AGM. Steve Murray was appointed as a
Non-Executive Director and a member of the
Committee in September 2022. I’m delighted to
welcome both Heather and Steve to the Committee.
Nicholas Bull
Chair, Audit and Risk Committee
1 March 2023
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 Group Internal Audit.
– 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 consider reports under
the whistleblowing policy in conjunction with
the Board.
– Develop and monitor the Audit and Assurance Policy.
– Reviewing the Group’s compliance with the 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.
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Coats Group plc Annual Report and Accounts 2022
Audit and Risk Committee report cont.
Highlights of 2022
– Completion of audit tender resulting in
appointment of Ernst & Young LLP.
– Development of assurance policy.
– Developing regulatory environment for audit.
– Deep dives into cyber-security and expense
controls processes.
Areas of focus for 2023
– Design and rollout of automated controls
testing.
– External auditor transition.
– Supplier payment terms review.
– Progressive implementation of assurance
policy including the assurance of
sustainability data.
Membership and meetings
The members of the Committee are independent
Non-Executive Directors. During the year, the
Committee met four times and held one additional
call, and all Committee Members attended the
maximum number of meetings possible. Further
details of individual Directors’ attendance can be
found on page 69. The Committee met privately
with the external auditor and with the Group Internal
Audit function. 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 Senior
Financial Reporting Manager, the Head of Group
Internal Audit, the Chief HR Officer and the external
auditor attended parts of these meetings by
invitation. The Group Chair and Group CEO may also
attend meetings. The Deputy Company Secretary
acts as Secretary to the Committee. The Chair 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.
‘Financial expert’, recent and relevant financial
experience
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
purposes of the Code, in respect of the financial
year ended 31 December 2022, Nicholas Bull, Anne
Fahy and Heather Lawrence were the members of
the Committee determined by the Board as having
recent and relevant financial experience. You can
read more about the skills and experience of the
members of the Committee on pages 61 to 63.
Financial reporting, going concern and
viability statement
During the year, the Committee reviewed the interim
results announcement, including the interim financial
statements, the Annual Report and associated
preliminary results announcement, focussing on key
areas of financial judgement and estimates made by
management to ensure it was satisfied with the
outcome, critical accounting policies, disclosures
(including those relating to contingent liabilities,
climate change and principal risks), provisioning and
any changes required in these areas or policies.
Particular focus areas during the year were the
accounting treatment of our recent acquisitions and
our Strategic Projects. The Committee reviewed the
updated wording of the Group’s longer-term viability
statement, set out on page 50. The Committee
reviewed the process undertaken to ensure that the
model used was consistent with the approved
Business Plan and that the relevant scenario and
sensitivity testing aligned clearly with the principal
risks of the Group. The Committee 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 81 and confirmed its satisfaction with the
methodology including the appropriateness of
sensitivity testing.
The Committee continues to focus on both the basis
of preparation of the going concern and viability
analysis as well as the external disclosures, to
ensure they are prepared in line with current
Financial Reporting Council (FRC) guidance.
Fair, balanced and understandable
As part of its review of the company’s Annual Report
and associated disclosures, the Committee has
considered whether the report is ‘fair, balanced and
understandable’ and provides the information
necessary for shareholders to assess the Company’s
position, performance, business model and strategy,
as required by the Code. The Committee used the
established processes to ensure its input was
appropriately timed, including providing feedback
on the planning process, and considering the
reviews taken by external advisers. The Committee
received a full draft of the Annual Report and
provided feedback on it, highlighting the areas that
would benefit from further clarity or balance, and
this feedback was appropriate incorporated. In this
respect the Committee focussed on ensuring
consistency and completeness in non-financial
reporting, including ESG and TCFD reporting,
principal risks and uncertainties and reviewing the
use of alternative performance measures and their
appropriateness in aiding users of our financial
statements to understand better our performance
year-on-year. On this basis, the Committee
recommended to the Board that it could make the
required statement that the Annual Report is ‘fair,
balanced and understandable’.
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Coats Group plc Annual Report and Accounts 2022
Audit and Risk Committee report cont.
Following their review of the Annual Report for the
year ended 31 December 2021, the FRC wrote to the
Company in May 2022 requesting additional
information to understand the basis for recognising
the insurance reimbursement receivable relating to
the Lower Passaic River legacy environmental
matter, as well as details of other provisions. We
provided this information as part of our response,
which the FRC accepted as being satisfactory and
closed the matter. In addition, the FRC listed some
observations from their review in the appendix to
their letter and we have reflected the appropriate
changes in this Annual Report.
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
Exceptional and
acquisition-related items
In 2022, exceptional and acquisition-related items of $55.0m have been recorded in operating profit; the disclosures in note 4 provide
further details. The Committee assessed management judgements, took into account the views of the external auditor and concluded
that the accounting treatment was appropriate given the one-off nature of the events.
Acquisition accounting –
purchase price allocation
Following the acquisitions of Texon and Rhenoflex, the Group carried out an exercise to allocate the purchase price to the identifiable
assets acquired and liabilities assumed at fair value. This exercise resulted in the identification of provisional goodwill and intangible
assets of $338.7 million; the disclosure in note 31 provides further details. The Committee assessed the approach and judgements
taken by management, whilst also taking into account the views of the external auditor and concluded the provisional fair values
included in the financial statements are appropriate.
Pension matters – valuation
of obligations and
recognition of surpluses
At 31 December 2022, the Group’s IAS19 Pension surplus was $105.4 million. The Committee reviewed the methodology for
determining key assumptions underpinning the valuation of liabilities of the Group’s most significant pension schemes, including the
impact of the buy-in transaction completed during the year in the UK scheme. The Committee also reviewed in detail the various
aspects of the continuing obligations to the Group’s ongoing schemes. The Committee also considered the recognition of surpluses in
respect of both the UK and US funded plans. The Committee is satisfied that recognition of such surpluses and the disclosures
provided in note 10 to the financial statements are in line with accounting practice.
US legacy environment
provision
The Group has recognised a provision, net of insurance reimbursements, of $9.2 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 2022 and that the
disclosures provided in note 28 to the financial statements are appropriate.
Taxation
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
adjusted effective tax rate, which decreased from 30% to 29%, the Committee also considered the Group’s uncertain tax provisions
and deferred tax assets, which amount in total to $26.3 million and $24.4 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 Committee also received regular updates on provisions made for litigation and tax matters and the Committee considered the appropriateness of the
methodology applied.
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The Committee received updates on internal control
matters from the management, Group Internal Audit
and the external auditor at every meeting, as part of
its key duty to review the Company’s internal control
processes to facilitate timely identification of issues
and formal tracking of remedial actions. Instances
where the effectiveness of internal controls were
considered insufficient, or where there was
opportunity for enhanced controls, were discussed
during the year with updates being provided when
required. In particular, the Committee conducted a
deep dive into cyber security risks and controls, and
this will continue to be a focus in 2023. Remediation
plans are monitored closely on an ongoing basis,
including a further review of the application of HR
controls to ensure these remained on track after the
focus in 2021. The Committee continued to receive
detailed bi-annual reports on internal controls over
financial reporting, which included analytical reviews
of balance sheets conducted in the business, deep
dives into key financial risks and judgements and a
review of the timeliness of previous Group Internal
Audit follow-up actions. There were also regular
updates on the governance and reporting of the
Strategic Projects, divestments and acquisitions with
agreement on how to communicate any relevant
lessons learned.
Again, the Committee conducted its annual review
of the effectiveness of the Company’s risk
management and internal control systems covering
all material controls, including operational and
compliance controls. Following a robust process, the
Committee was satisfied that these systems operate
effectively in all material respects with no significant
weaknesses identified and others remediated
appropriately. The Committee also undertook its
annual review of ESG reporting and disclosures,
including consideration of the TCFD disclosures.
The Committee reviews the minutes of all Group
Risk Management Committee meetings and
discusses any relevant matters that have arisen
with management.
Coats Group plc Annual Report and Accounts 2022
Audit and Risk Committee report cont.
Internal control and risk management
The Board is responsible for the Group’s risk
management framework and risk appetite. The
Committee supports the Board in the management
of risk and is responsible for reviewing the
effectiveness of risk management and internal
control processes during the year. The principal risks
and uncertainties facing the Company are
addressed in the Strategic Report and in the table
on pages 42 to 49 in this Annual Report.
Fundamental components of the Company’s internal
control and risk management framework include:
– management structure supported by clear
approval limits and delegated authorities
– appropriately drafted and communicated policies,
procedures, and guidance to support business
operations
– a thorough and co-ordinated annual planning
process and strategy review, combined with
comprehensive financial forecasting, reporting,
and budgeting
– embedded tools and technology such as SAP
and Concur
– a well-established sign off system in relation to
financial reporting and other business matters
– appropriate post-acquisition integration activities
to ensure adherence to Group standards
– Group Internal Audit activities and investigations
– an externally operated whistleblowing helpline
and robust process to allow anonymous reporting
and suitable investigations
Internal audit
The Group Internal Audit plan for the year is agreed
in advance and reviewed at each Committee
meeting. Updates are provided on audit coverage
and any recommended changes to the schedule of
work. The Committee reviews key findings from
Group Internal Audit reports, receives detailed
reports from management where appropriate, and
monitors the rate at which actions agreed with
management are implemented. Group Internal Audit
present their annual audit opinion at the February
meeting of the Committee. 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.
During the year, key themes in the Group Internal
Audit reports included compliance with
environmental and regulatory requirements across
locations including reviews of compliance with zero
discharge of hazardous chemicals rules. Group
Internal Audit provided several updates on the
consistency of the application of the expenses
policy for those using our standard SAP Concur
system noting any remediation activities in the event
of exceptions, and this will be a regular activity
going forward. Data analytics were also being used
to review controls where certain exceptions to
certain IT controls had been observed, with
appropriate reporting being provided to the
Committee. Investigations were conducted both
remotely and physically on site during 2022, and the
Committee continued to monitor the way internal
audits were undertaken and the findings to ensure
there was consistency of approach on audit delivery.
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Coats Group plc Annual Report and Accounts 2022
Audit and Risk Committee report cont.
For any control findings identified as part of any
investigation or audit, remediation plans were put in
place and the Committee reviewed these and the
adequacy of the implementation measures. Group
Internal Audit also provide regular resourcing
updates, and this was a priority in 2022 with a focus
on the appropriate provision of external and internal
resource to fill any temporary staffing gaps. Group
Internal Audit continued to progress the actions
identified as part of the effectiveness evaluation
carried out by the Chartered Institute of Internal
Auditors in 2021 and provided regular updates to
the Committee. An internal assurance map was
developed during 2022 and this will continue to be
monitored. Group Internal Audit grade the severity
of any findings in their reporting to the Committee,
with significant control findings being defined as a
material deficiency in the design or implementation
of a control. This might include a risk of material
misstatement of financial information where controls
in operations are largely deficient or where there is
a pervasive violation of policies and procedures.
No significant control findings were identified during
the period.
In response to the BEIS consultation on “Restoring
Trust in Audit and Corporate Governance”, and our
desire to take a proactive stance in this area, we
have produced an Audit and Assurance Policy which
outlines our approach to audit and assurance within
the Group in all key areas, including future
developments. This policy statement reflects our
current position and this will continue to evolve,
reflecting the final outcomes of the BEIS
consultation and associated regulatory reform. In-
line with the ongoing consultation it is hoped that
this policy statement will act as engagement
facilitation tool. The Committee welcomes
consultation with our stakeholders in this matter.
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.
This will be Deloitte's last year auditing the
Company. 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. The Committee
annually reviews the policy on non-audit fees to
ensure it complies with latest FRC Ethical Standards.
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 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.
During 2022, the external auditor provided services
in relation to the Group’s interim results and also
provided 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.
The non-audit fees in relation to the services
supplied by the external auditor can be found in
note 5 of the financial statements. Non-audit fees
presented as a percentage of total audit fees
is 7%. 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.
The lead partner is rotated every five years.
Ed Hanson was appointed as the lead audit
engagement partner in 2018.
The Group is in compliance with the requirements
of the Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee
Responsibilities) Order 2014.
Audit tender
As set out in last year’s Annual Report, the Company
conducted a competitive tender process for the
Group’s external auditor during 2022. Five firms
were approached, including two 'middle tier' firms. A
formal RFP document was then issued to three firms
and two firms completed the full process. The
Committee agreed a clear set of evaluation criteria
and critical success factors having considered the
suggested criteria in the FRC guidance. Both firms
submitted comprehensive tender documents,
including lead partners CVs, for consideration. The
firms attended meetings with members of senior
management and presented to a selection panel
consisting of Committee members, the Chair, the
Chief Financial Officer and members of the Finance
function. There were no contractual obligations that
restrict the Company’s choice of external audit firm
but the auditor tendering and rotation requirements
set by the Code, the Competition & Markets
Authority and the European Commission preclude
Deloitte from the tender process. Deloitte LLP was
appointed the Company’s external auditor in 2003
and their work in respect of the year ended 31
December 2022 will be their final audit of the
Company. After due consideration and as
announced on 11 November 2022, the Company
intends to appoint Ernst & Young LLP as its auditor
for the year ending 31 December 2023, subject to
shareholder approval at the 2023 Annual General
Meeting of the Company. Since their appointment,
work has been completed to ensure Ernst & Young
LLP are independent, and relevant transitionary
activities have commenced, ahead of their expected
formal appointment at the AGM in May 2023. No
members of the Committee have any connection
with the current or potential auditors.
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Coats Group plc Annual Report and Accounts 2022
Audit and Risk Committee report cont.
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.
In respect of the financial year ended 31 December
2022, and noting that this would be the final audit
conducted by Deloitte LLP, the Committee
conducted an assessment of 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
questionnaire covered topics such as the robustness
of the audit, and the quality of delivery, reporting
and service as well as including free-from questions
to allow consideration of any other points that
respondents wished to raise. 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. Key themes of the
feedback, including the opportunities identified for
process enhancement will be shared with the
Company's incoming auditor.
Assessment of the effectiveness of the Committee
The Committee effectiveness in respect of the year
ended 31 December 2022 was evaluated as part of
the external evaluation conducted by Independent
Audit Limited (you can read more about this on page
70). The Committee considered the findings of the
process in relation to both the Committee and the
Group Internal Audit function at its December
meeting, as well as considering whether the
feedback identified in the previous year’s
assessment had been adequately addressed. The
2022 evaluation indicated that the Committee was
working effectively and identified opportunities for
the 2023 Committee work plan, which have been
appropriately included and are set out below.
Looking forward
As well as the regular cycle of matters that the
Committee schedules for consideration each year,
we are planning over the next 12 months to:
– Monitor the design and rollout of automated
controls testing
– Oversee the external auditor transition
– Conduct a deep dive into supplier payment terms
– Progressive implementation of assurance policy
including the assurance of sustainability data.
Signed on behalf of the Audit and Risk Committee
by:
Nicholas Bull
Chair, Audit and Risk Committee
1 March 2023
Areas of focus in 2022
Corporate reporting
– Half and full year external reporting
Key stakeholders
SHAREHOLDERS
– Interim and preliminary results announcements
– Annual Report and consolidated financial statements
– Review of tax and statutory filing status
Internal controls
– Group Internal Audit updates
– Bi-annual review of internal financial controls
– Monitoring agreed actions status
– Group Internal Audit resourcing reviews
– Update on HR related controls compliance
Risk management
– Litigation, cyber, expenses and tax risk reviews
– Bi-annual risk review including environmental compliance
– Review of governance of reporting of acquisitions
– Horizon scanning for changes to regulatory environment for audit
– Sanctions update including review of Company’s ways of working to
ensure compliance
External audit
– External audit tender
– Report on external audit at half and full year
– Insights and observations on reporting review
– Auditor independence and non-audit work reviews
– Review of management representation letters
– Review of fees of external auditor
– Auditor effectiveness review
EMPLOYEES
SHAREHOLDERS
CUSTOMERS
EMPLOYEES
ENVIRONMENT
SHAREHOLDERS
SUPPLIERS
CUSTOMERS
EMPLOYEES
SHAREHOLDERS
SUPPLIERS
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76
Coats Group plc Annual Report and Accounts 2022
Nomination Committee report
David Gosnell
(Chair)
Member since 2015
Nicholas Bull
Steve Murray
Member since 2015
Member since
1 September 2022
Heather Lawrence
Member since
7 November 2022
Fran Philip
Member since 2016
Echo Lu
Jakob Sigurdsson
Member since 2017
Member since 2020
Dear Shareholder,
On behalf of the Nomination Committee, I am
pleased to present this report for the year ended
31 December 2022. As set out elsewhere in this
Annual Report, 2022 was a year of transformation for
the Group. The Board has also seen changes with
Anne Fahy stepping down at the 2022 AGM and
Nicholas Bull succeeding her as Chair of the Audit &
Risk Committee (ARC). Following rigorous recruitment
processes as set out in this report, Steve Murray was
appointed to the Board as a Non-Executive Director
on 1 September and Heather Lawrence joined as a
Non-Executive Director and Chair Designate of the
ARC on 7 November.
The Committee, at times in discussions conducted
as part of scheduled Board meetings, has also
considered the pipeline for senior management and
Group Executive Committee (GET) succession
planning following the changes resulting from the
implementation of the Strategic Projects, and the
acquisitions of Texon and Rhenoflex. This will be a
continued focus in 2023 as the Group transitions to
its new divisional operating model and revised
succession planning is required.
At the core of all discussions, the Committee and
Board as a whole have focussed on maintaining the
desired culture of the Group while achieving the
footprint and business model required for the
Company’s long-term success in the current
challenging climate.
The Committee continued to fulfil its other core
responsibilities by keeping Board composition under
review, including reviewing director independence,
the balance of skills and experience of the existing
Non-Executive Directors and tenure to allow the
necessary recommendations to be made for
election and re-election of Directors to
shareholders. The Committee also considered the
structure of the Board Committees and continued to
consider its own effectiveness.
During the year, the Committee met once in a
separately scheduled meeting, with further
discussions taking place as part of scheduled Board
meetings, and all Committee members attended all
the meetings possible they were eligible to attend.
Further details of individual Directors’ attendance
can be found on page 69. You can read more about
the skills, tenure and experience of the members of
the Committee on pages 61 to 63.
Non-Executive Director recruitment
The recruitment process for Non-Executive
Directors, undertaken for the processes resulting in
the appointment of Steve Murray and Heather
Lawrence in 2022, included agreeing the criteria for
the candidate profiles noting the desire for a
successor for the role of the Chair of the ARC and
the benefits of having more direct industry
experience on the Board, and identifying the most
appropriate interview panel to lead the process.
In 2022, Russell Reynolds, a professional search
agency with no connection to the Company nor any
Director, was engaged to create a comprehensive
and diverse long list of candidates for both
individual roles. Russell Reynolds was appointed in
accordance with the Company’s procurement policy
based on its expertise relative to each role. The
shortlisted candidates were then interviewed, and
appropriate due diligence was undertaken to ensure
the appropriate fit with the requirements including
consideration of candidates' skillset and experience,
their ability to contribute across the requisite range
of Board topics, whether their appointment was in
line with the Board’s diversity aims and whether
they could meet the expected time commitment.
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.
– Oversight of the diversity and inclusion-related
elements of ESG.
Key responsibilities
– Ensuring the appropriate composition of the Board
and its Committees and overseeing a rigorous and
transparent procedure for appointments to the Board.
– Maintaining ongoing succession plans for the Board
and GET and reviewing the leadership needs of the
organisation.
– Ensuring diversity in the pipeline for senior
management roles.
Highlights of 2022
– Recruitment of Chair Designate of the Audit & Risk
Committee and another Non-Executive Director.
– Executive succession planning.
Areas of focus for 2023
– Board succession planning for key Board roles.
– Reviewing executive and senior management role
succession plans and talent pipelines following
organisational change in 2022.
– Continued monitoring of culture and DE&I
programmes.
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Coats Group plc Annual Report and Accounts 2022
Nomination Committee report cont.
Recommendations were then made to the Board. In
the case of Executive Director or GET appointments,
an executive leadership assessment would be
carried out by an external professional agency.
Any new Directors are appointed by the Board
and, in accordance with the company’s articles of
association, they must be elected at the next AGM
to continue in office. All existing Directors stand for
re-election every year.
Board direction induction programme example
Effectiveness
– Training on ethics and
other governance topics
– Briefed on outcomes
of most recent
effectiveness review
–
Accountability
Information on the Group
budget and strategy
– Last Annual Report
Leadership
– Meeting senior executives
– Site visits
Relations with
stakeholders
– Meeting with employees
during site visits
– Meeting with key customers
Succession planning
The Committee, on behalf of the Board, regularly
assesses the composition of the Board and its
Committees 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. Neither the
Chair nor any of the Non-Executive Directors has
exceeded the maximum nine-year recommended
term of service set out in the Code. Ensuring the
right balance and diversity of skills and experience
on the Board creates the conditions for the success
of the Group. Reviewing the strengths of existing
Board members as well as identifying any potential
opportunities to enhance the overall portfolio of
talent on the Board and in senior management is a
key responsibility of the Nomination Committee. The
Committee continued to develop the skills matrix to
provide a detailed and transparent assessment of
the current skill set on the Board and identify any
training needs. During 2022, the Board undertook
all required regular training for Coats' employees, as
well as receiving tailored training updates at Board
and Committee meetings for specific topics as
appropriate. A summary of the skills matrix is set
out below:
Criteria
PLC leadership experience
Relevant functional experience
Specific value-added expertise
Relevant sectoral experience
Geographic experience
Following Anne Fahy stepping down from the Board,
there was a temporary period of non-compliance
with provision 24 of Code as there were only two
members of the ARC. This position was resolved
following the recruitment of Steve Murray. After
careful consideration, it was agreed that it was
preferable to proceed with the two existing
members of the ARC forming quorums for meetings
until the recruitment process for a new Non-
Executive Director, which was already in train and
culminated in the appointment of Steve Murray, was
concluded. In fact, given the timing of Steve’s
appointment, only one meeting was convened with
the quorum of two. The recruitment of Heather
Lawrence further strengthens the succession plan
for the ARC.
The Committee and Board have continued to monitor
the GET and senior management talent pool to
ensure that succession planning for business-critical
roles is proactively reviewed. The Committee has
continued its regular review of the progress on Group
CEO succession plans and in 2022 a number of
members of the GET were given the opportunity to
observe and participate in a full Board meeting to
enhance their understanding of the Board ways of
working and to allow the Board greater face-to-face
contact. Chair succession planning has been
undertaken with discussions underway considering
the appropriate timing and approach. There were
also regular considerations of talent changes in the
business at the Board as part of the conversations
regarding the Strategic Projects, the divestment of
the Brazil and Argentina business and the
acquisitions of Texon and Rhenoflex. These allowed
timely feedback to be made to management.
Diversity
The Board acknowledges the important role
growing talent internally plays in our diversity
ambitions, aligning with the Board’s own diversity
policy, which encourages our leadership to
contribute to the development of a diverse
range of future leaders. During 2022, the Board
considered proposals regarding the Company’s
new ‘Coats for All’ initiative, together with the
Group’s ‘Future of Work’ framework policies and
leadership packs (see the People and Culture
section on pages 16 to 17 for further information).
These new tools support the achievement of the
Company’s aspirations for DE&I and wellbeing, which
contribute to us realising our overall strategy and
objectives to facilitate our long-term sustainable
success. Diversity creates innovation, which is core to
Coats' culture and business model. The ‘Coats for
Her’ programme utilises the passion and experience
of some of our senior leaders across five initiatives
designed to support women in our workplace from
recruitment, through mentoring and leadership
training and during any return-to-work processes.
The Board has approved new 2026 sustainability
targets linked to the senior management Long Term
Incentive Plan (LTIP).
The Board supports the recommendations of the
FTSE Women Leaders Review (formerly the
Hampton-Alexander Review) on gender diversity
and the Parker Review on ethnic diversity and
continues to monitor developments in these areas.
We are aware of the forthcoming Listing Rule
requirements relating to diversity and we have
started to gather information from our employees on
a voluntary basis. This will continue to be a focus
in 2023. Ahead of the forthcoming Listing Rule
changes, I am pleased to confirm that we have 44%
female representation on the Board, including our
Chief Financial Officer, Jackie Callaway, and there
are two Directors from an ethnic minority
background. Accordingly, as at 31 December 2022,
we are in line with the recommendations of the
FTSE Women Leaders Review and the Parker review
and we are currently in line with the targets set out
in our refreshed diversity policy (see page 79).
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Coats Group plc Annual Report and Accounts 2022
Nomination Committee report cont.
Please see below for some insights based on the
data collected in 2022.
Number
of senior
positions
on the
Board
(CEO,
CFO, SID
and Chair)
Number in
executive
management
(GET and
direct
reports)
Percentage
of executive
management
(GET and
direct
reports)
Number of
Board
members
Percentage
of the
Board
Number of
employees in
the Group
Percentage
of employees
in the Group
Men
Women
White
British
or other
White
Asian/
Asian
British
5
4
56%
44%
3
1
38
16
70% 13,266
30% 7,081
65%
35%
7
78% n/a
2
22% n/a
–
–
–
–
–
–
–
–
We define our senior management team as
employees that are band three or above in the
organisation (Senior Management). As at 31
December 2022, there were 37 women (21%)
and 139 men (79%) in Senior Management.
You can find further details in relation to the
diversity of our Group in our Sustainability Report
(www.coats.com/sustainability). Our refreshed
Board Diversity Policy can be viewed on our
corporate website (www.coats.com/about/
corporate-governance/board-composition) and it
sets out an indicative range of diversity criteria, that
will be considered alongside merit and other
objective factors, when recruiting to ensure the
continued calibre of the Board while being an
effective driver of the spirit of true diversity. Our
refreshed Board diversity policy aligns with the new
Listing Rule benchmarks and has been expanded to
include reference to knowledge and understanding
of relevant diverse geographies, peoples and their
backgrounds and includes, and is not limited to,
race, socio-economical, educational and
professional background, disability, gender, sexual
orientation, religion, belief and age, as well as
culture, personality, work-style and cognitive and
personal strengths. Our workforce diversity policy is
included in our Coats Key People Principles, which
set out the range of policies to ensure fair and
equitable treatment of our diverse workforce. The
diversity section includes the same definitions and
REFLECTIONS ON INDUCTION BY
HEATHER LAWRENCE
What were the highlights of your induction?
The highlight of my induction was the Global
Leadership Conference and plant tour in Bursa.
The plant in Bursa produces for all three
divisions and also has an Innovation Hub where
you can really understand how Coats listens to
the needs of its customers and develops the
next generation of products.
Who did you meet?
As well as the GET, I was able to meet a
diverse group of Coats employees from
around the world and hear their perspectives.
Coats’ greatest strength is the calibre of
its people and the collaborative way they
work together to achieve its purpose.
What did you learn?
I heard from the GET what they are working
to achieve, the challenges they may face and
how they are preparing for those challenges.
I learned about Coats’ manufacturing
systems and processes and got into the
detail of its sustainability agenda and how
it is working to meet its ambitious 2030
goals. I was also able to familiarise myself
with the financial aspects of the business.
references as our Board policy and aims to promote
an inclusive working environment. You can access
our Coats Key People Principles on our website
(https://www.coats.com/en/Download-Centre).
Independence and overboarding
The Chair was considered to be independent on
appointment and is committed to ensuring that the
Board comprises a majority of independent
Non-Executive Directors who maintain constructive
and challenging debate in the boardroom. The
Company maintains the terms of appointment of the
Chair and Non-Executive Directors to ensure that
they continue to meet the requirements of the Code.
As such, the Board considers that all its Non-
Executive Directors continue to demonstrate
independence.
During the course of the year, Board members
continued to inform the Chair of any proposed new
external appointments and these were considered
and approved by the Board. The Company
Secretary maintains a register of Interests and
Conflicts to track the commitments of the Directors
and ensure these are in line with overboarding
guidance. The Committee is satisfied that the
external commitments of its Chair 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 effectiveness in respect of the
year ended 31 December 2022 was evaluated by
Independent Audit Limited, an external service
provider, in line with the Code requirements. You
can read more about this on page 70. The
Committee also considered the key points that were
identified in the previous year’s assessment. The
REFLECTIONS ON INDUCTION BY STEVE MURRAY
What were the highlights of your induction?
All my sessions were highly informative. Through
meeting with a thoughtful cross section of
executives by business area and function,
I feel I came away with a good understanding
of Coats' business.
Who did you meet?
In addition to the GET, I met members of the
Finance and Sustainability functions as well as
GIA. I also met with several of the Company's
advisors. Additionally, I completed various
interactive compliance trainings covering
a range of topics from cyber security awareness
to modern slavery.
What did you learn?
The background information provided via my
induction programme helped to put the reasons
and objectives behind the re-structure of the
organisation into three divisions – Apparel,
Footwear and Performance Materials – into
proper context.
Committee, as part of a discussion on the full
Independent Audit Limited report conducted at a
Board meeting, discussed the key themes of the
areas identified for further focus, which included
executive succession and DE&I monitoring, and
these are appropriately reflected in the 2023
workplan for the Committee.
Signed on behalf of the Nomination Committee by:
David Gosnell
Chair, Nomination Committee
1 March 2023
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79
Coats Group plc Annual Report and Accounts 2022
Directors’ report
Coats Group plc (Company) is the
holding company of the Coats group
of companies (Group).
Annual General Meeting
The Annual General Meeting (AGM) of the Company
will be held on 17 May 2023 at 2.30pm at FTI
Consulting, 200 Aldersgate, London EC1A 4HD.
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 61 to 63 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 85 to 97.
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 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. The Company
adopted new Articles at the AGM held in May 2021.
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 64 to 68. Information
on compensation for loss of office is contained in
the Directors’ Remuneration Report on page 92.
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 the Board on 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 145,257,039 (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 May 2022) of
its own Ordinary Shares was granted at the 2022
AGM. No shares were purchased pursuant to this
authority during the year.
Shareholder authority for the Company to allot
Ordinary Shares up to an aggregate nominal amount
of £48,370,000 was granted at the 2022 AGM.
14,524,000 shares were allotted pursuant to this
authority during the year. The issued share capital of
the Company at 31 December 2022 was
approximately £79,890,520 divided into
1,597,810,385 Ordinary Shares.
Since 31 December 2022, 0 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 1 March 2023 is
1,597,810,385 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 2022 is set out in the Directors’
Remuneration Report on page 93.
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
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Coats Group plc Annual Report and Accounts 2022
Directors’ report cont.
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.
Political donations
No contributions were made to political parties
during the year (2021: £nil).
As at
31 December
2022*
As at
1 March 2023*
Nature of
holding
Liontrust Investment
Partners LLP
Kempen Capital
Management N.V.
FIL Limited
M&G Plc
Invesco Ltd
10.52
10.52
Direct
7.49
6.12
5.30
5.05
7.49
6.12
5.30
5.01
Indirect
Indirect
Indirect
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, as 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.
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 via email through the
Group ethics channel or via an externally hosted
web service whistleblowing hotline. ‘Doing the right
thing’ and ways to raise concerns are regularly
communicated and discussed.
During the year ended 31 December 2022, there
were 97 whistleblowing concerns raised (2021: 98).
Of these concerns raised, following investigation
22% (2021: 30%) of the closed cases were upheld
and 7 cases are still under review. In the case of
substantiated concerns, disciplinary action, up to
and including termination, was taken whenever
there was any evidence of misdemeanour and
training and enhanced controls were implemented
wherever appropriate. An independent review of the
Group’s whistleblowing policy and associated
processes is currently being conducted to ensure
these continue to align appropriately with best
corporate governance practice.
Concern is raised via
whistleblowing procedure
Acknowledgement is sent to the whistleblower
within seven days of receipt of the concern.
The investigation team, independent of the
relevant operational business or function, is
nominated by the CFO, Chief Legal & Risk
Officer and Group Company Secretary, Chief
Human Resources Officer and the relevant
Group Executive Team member.
Allegation is investigated by
the nominated team
Findings are presented to the CFO, Chief Legal
& Risk Officer and Group Company Secretary,
Chief Human Resources Officer and the
relevant Group Executive Team member who
decide appropriate remedial actions and any
controls/process enhancements.
The outcome of the investigation is
appropriately communicated to the
whistleblower once any remedial actions and/
or any controls/process enhancements (even in
circumstances where the allegation has not
been upheld) have been determined.
Reports and outcomes are reviewed by the
Board and the Audit and Risk Committee.
Going concern
The Company’s business activities, together with
the factors likely to affect its future development,
performance and position are set out in the Chair’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.
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(g).
The Directors are satisfied that the Company and
Group have 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.
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Coats Group plc Annual Report and Accounts 2022
Directors’ report cont.
Results and dividends
The results of the Group are shown on page 114 and
movements in reserves are set out in note 27 to the
financial statements.
The Board is mindful of the importance of returns to
shareholders and is pleased to propose a final
dividend of 1.73 cents per share (2021 final
dividend:1.50 cents). Subject to approval at the
forthcoming AGM, the final dividend will be paid on
25 May 2023 to ordinary shareholders on the
register at 28 April 2023, with an ex-dividend date
of 27 April 2023. Alongside the interim dividend of
0.70 cents per share, this makes a total of 2.43 cents
per share for the full year 2022.
Greenhouse gas (GHG) emissions
Absolute emissions for last 3 years plus 2019
baseline
Thousands of tonnes
of CO2e
20221
2021
2020
2019
Scope 1
Direct2
Scope 2
Indirect3
Scope 3
Value Chain4
54.1 62.7 51.3 64.6
Location Based 200.1 216.1 186.2 235.3
Market Based 158.1 190.7 165.9 209.2
777.6 891.3
671 849.2
1 2022 data includes Brazil and Argentina prior to their divestment (data
included to May). Texon for Scopes 1 & 2, data from August and Rhenoflex
data from September. Texon and Rhenoflex Scope 3 data is not yet
included as the full inventory for these units has not been completed. All
data is calculated following GHG Protocol guidelines.
2 Direct emissions relate to the use of fuels to generate energy on group
facilities, mainly the use of oil and gas to generate heat in the form of steam
for use in processing. On-site generation of electricity using diesel or gas
fired generators and the use of diesel, petrol and LPG for on-site transport
is also included. The calculation methodology here is to convert fuel
purchased in each country to kWh and then to CO2e equivalent using
DEFRA conversion factors; the data is consolidated globally.
3
Indirect emissions relate mainly to the purchase of electricity from third
party suppliers. This is mostly taken from local electricity grids, but does
include some on-site generation of electricity or steam from third party
suppliers. The methodology converts the electricity or other purchased
energy from kWh to CO2e using the country level conversion factors
published by the International Energy Authority (IEA) for electricity and
DEFRA conversion factors for other energy types. This provides the
location based calculation. Market based calculation deducts any certified
renewable energy that is purchased by country and continues to calculate
the residue of the energy consumed at the IEA country or DEFRA
conversion factors as appropriate. The data is then consolidated globally.
4 Scope 3 value chain emissions cover all other emissions that occur
throughout our product and business value chain. This includes the
cumulative emissions to produce our raw materials and capital equipment
and installations, product and people transport at all stages, downstream
processing and consumer use of our sold products and treatment for our
waste and our products at the end of their life. The methodology for this
varies for each Scope 3 category and follows the GHG Protocol hierarchy
of data quality to determine the best available inventory calculation
approach. Calculation models are maintained for each individual category
and are updated annually as required and consolidated globally.
Scopes 1 and 2 combined emissions on a market
based approach decreased by 16% compared to
2021. On a pure like for like basis, excluding Brazil
and Argentina divestments and Texon and
Rhenoflex acquisitions for both years, the reduction
in 2022 was 18% compared to 2021, attributable to
three principal factors: production volumes on a like
for like basis which declined by 10% in 2022 due to
the textile industry slowdown in the second half of
the year; our continued efforts to reduce energy
consumption (described in more detail below); and
our progressive transition to Scope 2 energy
through the purchase of renewable electricity.
Scope 1 and 2 emissions from our four UK offices
plus the newly acquired Texon site in Skelton (from
August) in 2022 were 431 tonnes CO2e and
represented 0.2% of our global emissions, compared
to 0.02% in 2021. The tenfold increase shows the
impact of the addition of the Skelton manufacturing
site, whereas all the other sites are offices.
Emissions Intensity1
Greenhouse gas emissions intensity
per unit of production
kg CO2e per kg of finished product
20223
20213
20203
Scopes 1&22
Scope 3
2.23
9.39
2.67
9.40
2.87
8.86
Greenhouse gas emissions intensity
per sales value
tonnes CO2e per million $ sales
Scopes 1&22
Scope 3
20223
132
511
20213
169
593
20203
187
577
1 We have used these two ratios for several years. The first uses volume of
finished goods production in tonnes (Kilo tonnes used for Scopes 1&2 are
2022 95, 2021 95, 2020 76) and hence relates directly to the industrial
activity that drives emissions, while the second uses group turnover and
hence relates to overall commercial activity. Since Scope 3 emissions data
does not include new acquisitions the production volume used for 2022
intensity is 83 kilo tonnes; there is no change to 2021 and 2020 production.
For Scope 3 value intensity, 2022 sales excluding new acquisitions were
$m 1,522.9. 2019 is not used as a baseline for these intensity metrics as
that year is only our baseline for our absolute Science Based Targets.
2 Figures are calculated on a market basis for Scope 2 emissions.
3 Overall these figures do not provide a like-for-like comparison as they
include Brazil and Argentina up to May 2022 and Texon and Rhenoflex
from August and September 2022 respectively.
The Scopes 1&2 volume emissions intensity shows a
17% drop between 2021 and 2022. 8% is due to
reduced energy use and transition to renewables in
Coats operations, 9% is due to significantly lower
emissions intensity of the Texon and Rhenoflex
businesses. These businesses have lower energy
consumption per unit of output and have also made
progress towards transitioning to renewable indirect
energy. Scope 3 volume intensity decreases
marginally compared to 2022, mainly reflecting
material stock movements between the years.
The overall value intensity for Scopes 1&2 emissions
reduced 22% compared to 2021, a 17% reduction on
a like for like basis, excluding acquisitions in 2022.
As for volume the Texon and Rhenoflex emissions
value intensity is lower than for the rest of the Coats
business. The difference between the volume and
value intensity reductions for the Coats business is
due mainly to movements in price and mix.
Full details on emissions of all reportable
greenhouse gas emissions and on the reporting
methodology used for the above figures can be
found in our online Sustainability Report.
Energy Consumption
Million kWh
Direct (Fuels)
Indirect (bought electricity
and steam)
Total
20221
2021
2020
284.9 319.7 260.3
446.1 481.1 409.2
731 800.8 669.5
1 2022 data includes Brazil and Argentina prior to their divestment (May),
Texon data from August and Rhenoflex data from September.
Our principal global activities to reduce energy
consumption were based on the insights provided
by our detailed energy monitoring pilot project that
ran in 7 sites during the year. The results allowed us
to identify new areas of energy wastage and to see
where increased efficiency in energy use was
possible. Multiple initiatives were developed through
this programme and replicated from pilot sites to
other areas which may also benefit. Two examples
are: first, we found that ovens in bonding machines
consumed a lot of energy when the machines were
idle, so we programmed more effective energy
cut-off protocols to significantly reduce consumption
in this phase.
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Coats Group plc Annual Report and Accounts 2022
Directors’ report cont.
Second, we identified that by extending the
centrifuge cycle and reducing the microwave drying
process, we reduced the overall energy consumed
in drying thread post-dyeing. Our continued efforts
to reduce water consumption led to energy savings,
both in terms of the energy needed to pump water
through multiple stages of use, but also using less
heat energy to bring the water to the temperature
needed in the dyeing processes where it is mainly
used. As a result of these two principal projects our
overall energy intensity reduced by 4% compared to
2021 (from 8.6 kWh/kg to 8.3). In 2021 we had just
started to use granular energy monitoring to
pinpoint reduction targets, so the benefits that year
were less, and most of the improvements we
achieved were due to water saving measures (as
also in 2022) and a focussed drive in energy
reduction activities in our Indian spinning mills.
Energy consumption in our four UK office locations
and the newly acquired Texon plant in Skelton in
2022 was 2,270 MWh and represented 0.3% of our
global energy consumption. This compares to 0.04%
in 2021 due to the acquisition of a new factory
during 2022.
The following methodology is used for calculating
emissions and energy consumption:
Boundary
Scope 1
Scope 2
Scope 3
All emissions from operating companies that
are consolidated in the Group financial
statements are included. Operational joint
ventures are included based on equity share.
Fuel consumption data is collated monthly
from all units, based on metered or invoiced
consumption converted into kWh. We use
DEFRA published gross calorific value
conversion factors to standardise emissions.
Electricity or steam purchase volumes are
collected from all units monthly. All electricity
kWh are converted using IEA country level
conversion factors for the location based
data. For the market based data certified
renewable electricity purchased is not
included and the remainder is converted
using the same IEA country factors.
Scope 3 emissions are calculated annually
using multiple sources for data (including
suppliers, lifecycle assessment data
providers and industry data sources). Each
category is calculated with the best available
set of data sources, and is consistent over
the 3 reported years. Products & Services,
Upstream Energy and Transport are the main
components of Scope 3 emissions.
More detail on methodology is available in
our Sustainability Report online.
Auditor
A resolution to appoint Ernst & Young LLP as auditor
will be proposed at the 2023 AGM. More information
about the competitive audit tender process that was
undertaken in 2022 can be found on page 75 in the
Audit and Risk Committee Report.
A statement in respect of the current auditor,
Deloitte LLP, 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, as 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 173.
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
Page(s)
Important events since the financial year-end
166
Likely future developments in
the business
10, 28 to 29
Exposure to price risk, credit risk, liquidity risk
and cash flow risk
159
Research and development
Information on financial instruments
Environmental policy
Employment of disabled persons
Employee involvement
Stakeholder engagement
Diversity policy
28 to 29
159
24 to 25
17
32, 39 to 41
32 to 34
78 to 79
This Directors’ Report was approved by order of
the Board.
On behalf of the Board
Stuart Morgan
Company Secretary
1 March 2023
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Coats Group plc Annual Report and Accounts 2022
Directors’ report cont.
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
financial statements for each financial year. Under
that law the directors are required to prepare the
group financial statements in accordance with
United Kingdom adopted international accounting
standards. The Directors have chosen 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 IFRS 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 1 March 2023 and is
signed on its behalf by:
Rajiv Sharma
Group CEO
1 March 2023
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Coats Group plc Annual Report and Accounts 2022
Remuneration Committee report
Echo Lu
(Chair)
Chair from May 2021
Member since 2017
Nicholas Bull
Member since 2015
Fran Philip
Member since 2016
Steve Murray
Member since
1 September 2022
Principal 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
– Implementing the Directors’ Remuneration Policy
(the ‘Policy’).
– Ensuring the competitiveness of reward.
– Designing the incentive plans.
– Setting incentive targets and determining
award levels.
– Reviewing workforce remuneration and related
policies and the alignment of incentives and
rewards with business strategy and culture.
Dear Shareholder,
As Chair of the Committee, I am pleased to present
the Directors’ Remuneration Report for 2022.
This report consists of three parts: this letter
summarising the work of the Committee and the
decisions made, the Annual Report on Remuneration
for 2022 (the ‘Report’), and the updated Directors’
Remuneration Policy (the ‘Policy’). This letter
and the Report will be subject to an advisory
vote from shareholders at the 2023 AGM, whilst
the Policy will be subject to a binding vote.
Highlights of 2022
– Reviewing the effectiveness of the current Policy
ahead of the 2023 AGM.
– Considering the implementation of the current
Policy for 2023, including amendments to
performance measures and weightings.
– Consultation with investors on the proposed
Policy and the proposed implementation for 2023.
– Reviewing remuneration arrangements within the
wider workforce including the annual review of
our global Living Wage policy.
– Appointment of a new independent advisor to
the Committee.
Areas of focus for 2023
– Overseeing the implementation of the new Policy,
subject to approval at the 2023 AGM.
– Reflecting on the feedback received from
investors and the voting results following the
2023 AGM.
– Setting incentive targets in a volatile macro
environment to ensure alignment with strategy
and shareholder interests, as well as to ensure
fairness and transparency.
– Continuing to review workforce remuneration
policies to support our environmental, social and
governance strategy as well as our diversity,
equity and inclusion objectives.
Workforce context
During the year the Committee continued to
oversee remuneration arrangements that operate
across the Group. This included an in-depth review
of the pay and benefits policies of our major markets
and overseeing the extent to which support was
provided in our markets with critically high levels of
inflation. The Committee reviewed the operation of
the Living Wage policy globally and increased the
minimum levels to ensure that they reflected levels
of inflation. A review was undertaken to ensure that
no employees were paid below the Living Wage.
Salary increases for the Executive Directors and the
senior executive team were approved considering
the increases that were being applied to the local
workforce in each location that they were based.
Fran Philip, our Designated Non-Executive for
Workforce Engagement continued her programme
of meetings with our employees in all our local
markets and employees were encouraged
to discuss our approach to remuneration.
Incentive structures are aligned within the Coats
business so that the key metrics that apply to senior
management compensation are applied consistently
at all levels of the organisation.
2022 remuneration outcomes
The 2022 annual bonus outcome reflects strong
business and financial performance detailed in this
Annual Report. The annual bonus measure for
Sales and Free Cash Flow reflected a performance
at maximum and reflected the actions taken in 2022
to implement pricing and self-help initiatives.
The bonus award for EBIT reflected a target level
of performance.
The LTIP20 award vested at 18.2%. Targets for the
2020 LTIP were, unlike many other companies who
delayed target setting, set prior to the onset of the
pandemic and were therefore challenging as they
did not consider the material impact the pandemic
would have over the three-year performance period.
Consequently the Earnings Per Share target and
cumulative Free Cash Flow measures did not meet
their minimum threshold targets.
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Coats Group plc Annual Report and Accounts 2022
Remuneration Committee report cont.
Total Shareholder Return performance was
encouraging and reflected the growth in the
company's share price and our strong dividend
growth. Sustainability is at the heart of our company
purpose and strategy and I am pleased to confirm
that, overall the Sustainability targets were achieved
and 10% of the award vested in full.
In determining vesting, the Committee considered
the potential for windfall gains and concluded that
the value on vesting of the 2020 awards did not
benefit from windfall gains. In reaching this
conclusion the Committee noted that following the
first half of 2020 our share price recovery had been
consistent through the balance of the three year
performance period (i.e. performance has been a
result of robust underlying financial performance as
opposed to any short-term change in market
sentiment. Furthermore, the targets were, unlike
many other companies, set prior to the onset of
Covid, with no delay to the target setting process
nor to the date of grant of the award. This ensures
that the above vesting is considered a fair and
balanced result by the Committee. Accordingly, the
Committee did not use any discretion in connection
with the 2020 award.
The Committee considered the formulaic outcome
under both the annual bonus and LTIP to
appropriately reflect the financial and non-financial
performance of the business over the performance
periods, and therefore the Committee did not apply
its discretion to adjust the formulaic outcomes.
The Committee can confirm that the current Policy
approved at the 2020 AGM was implemented in
2022 as the Committee originally intended and
was working effectively.
In reaching this conclusion, the Committee
considered the absolute levels of remuneration
earned at executive level across the group and also
the performance and relative amounts paid.
Based on feedback received to date, investors were
supportive of the existing Policy being rolled
forwards and understood the rationale for the
proposed implementation of the Policy in 2023.
Directors’ Remuneration Policy review
The existing Policy which was approved at the 2020
AGM will reach the end of its three-year cycle at the
2023 AGM. During 2022 the Committee undertook
a review of the effectiveness of the existing Policy in
supporting business strategy and considered
whether it continued to align to both market and
corporate governance best practice.
The review confirmed that the existing Policy
structure remains appropriate given our growth
focused strategy and performance culture. As a
result, the Committee is not proposing to make any
substantive changes to the existing Policy although
a number of minor changes are proposed to ensure
our Policy aligns with current market best practice.
There were a range of factors noted by the
Committee in reaching the decision to roll over the
existing Policy. Firstly, steps had already been taken
to align Executive Director pension provision with
that of the wider workforce. Secondly, our policy
takes account of current institutional investor ‘best
practice’ expectations. Finally, the policy continues
to appropriately support our long-term business
strategy.
Stakeholder engagement
Although no material changes are proposed to the
Policy, ahead of the 2023 AGM we have undertaken
an engagement process with our largest investors
as well as major proxy voting agencies, to
understand their views on our policy and its
proposed implementation in 2023.
Implementation of Policy for 2023
The key decisions taken in respect of 2023
implementation were as follows:
Chief Financial Officer remuneration – to better
align Jackie Callaway to market levels, and to reflect
her skills and experience which have developed
since her appointment in December 2020, the
Committee considers it appropriate to reposition her
remuneration package to a level that now reflects
this proven experience, calibre and demonstrated
performance. As a result, the Committee is to
increase her bonus opportunity to 125% of salary
(from 115% of salary). This change moves both her
total incentive opportunity (set as a percentage of
salary) and total target remuneration to within the
typical market range for a company of comparable
size in the FTSE 250 The revised annual bonus
opportunity is within the approved limits of our
existing Policy which has a maximum of 150% of
salary and she will continue to receive 60% of her
bonus paid in cash and 40% deferred into Company
shares for a period of three years.
Adjustments to annual bonus and LTIP performance
measures – we are to make modest revisions to the
performance metrics for 2023 to ensure they reflect
the Board’s current short to medium term priorities.
The performance metrics for the 2023 annual bonus
plan are to be rebalanced to reflect our focus on
maximising profitability and cash generation while
continuing to deliver organic sales growth. To
support the increased internal focus on strong
profitability and cash generation, we are adjusting
the weighting of our current performance measures
so that EBIT and Free Cash Flow will each have an
equal weighting of 35% of the total bonus
opportunity (2022: 30% and 20% respectively), with
Group Sales weighted at a reduced 10% (2022: 30%)
and individual strategic objectives remaining at 20%.
The choice and balance of measures remain fully
aligned with our growth strategy but take account of
current market conditions.
For the long-term incentive, we will increase the
weighting on relative TSR performance so that TSR
and EPS have an equal weighting of 30% (2022:20%
and 40% respectively) and replace the current
measure of Free Cash Flow with three-year average
cash conversion with an unchanged weighting of
20%. This change will ensure that cash remains a
key long-term focus but with a greater emphasis on
operational efficiency as opposed to the level of
absolute cash generated which is captured through
the annual bonus measure.
Base salary – as of 1 January 2023:
CEO (Rajiv Sharma) – £662,000
CFO (Jackie Callaway) – £411,000
The above salaries have been in operation since
1 July 2022 when they were increased by 5% in line
with the UK workforce budgeted increase. The
Committee is aware of institutional investor
guidance in relation to 2023 salary increases
considering current relatively high inflation rates in
the UK and will consider this guidance at the same
time as the need to recognise the performance,
experience and calibre of the Executive Directors.
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Committee membership
I was delighted to welcome Stephen Murray to the
Committee from September 2022 following his
appointment to the Board.
Conclusion
The Committee is satisfied that the decisions made
during 2022 reflect the financial and non-financial
performance of the Group during the year and
balances the interests of all key stakeholders.
I would like to thank those shareholders who
provided feedback during the consultation process,
as it was my first consultation as Chair of the
Remuneration Committee I found the process very
valuable. I look forward to receiving your support for
both our new Policy and the Annual Report on
Remuneration at our 2023 AGM.
Echo Lu
Chair, Remuneration Committee
1 March 2023
Coats’ Remuneration Policy
creates the right balance
between financial and non-
financial performance and
between short term objectives
and long term strategy”
Echo Lu
Chair, Remuneration Committee
Coats Group plc Annual Report and Accounts 2022
Remuneration Committee report cont.
Pension – the pension provision for the CEO
reduced from c20% of salary to the typical rate of
pension provision for the UK workforce of 12% from
1 January 2023. No change is to be made to the
CFO’s pension provision which is already 12%.
Annual bonus – the maximum annual bonus
opportunity will remain at 150% of salary for the CEO
and be set at 125% of salary for the CFO with 50%
deferred into shares for the CEO and 40% for the
CFO. The deferral period is three years. The
performance metrics are as detailed above.
The targets for the annual bonus will be disclosed
retrospectively in next year’s Remuneration Report.
The Committee is comfortable that the targets set
for 2023 reflect our business objectives and are
appropriately stretching relative to prior years and
current market conditions.
LTIP – the long-term incentive awards are expected
to be granted at 175% and 150% of salary for the
CEO and CFO respectively with awards vesting
subject to three-year performance targets relating to
EPS (30%), TSR (30%), Cash Conversion (20%) and
Sustainability (20%).
Sustainability is at the heart of our Company
purpose and strategy. Following the approval of new
Science Based Targets in December 2022 the LTIP
Sustainability measures and targets for the period
2023 to 2025 have been aligned to the longer term
measures and goals. Coats' Remuneration Policy
creates the right balance between financial and non-
financial performance and between short term
objectives and long term strategy.
Remuneration at a glance
The Remuneration Policy is intended to take
into account the need to recruit and retain
Directors who have the suitable skills and
experience to perform in the interests of the
Company, its stakeholders and its
shareholders.
The Remuneration Committee is responsible
for ensuring that any variable remuneration for
Executive Directors is suitably motivational and
encourages Executive Directors to meet
stretching financial and non-financial
performance targets with an acceptable
degree of risk.
The Committee’s policy is that remuneration
and benefits are sufficiently competitive
relative to appropriate peers, to attract,
incentivise, reward and retain Directors and
senior executives.
Our remuneration principles
– Competitive with the local market and
industry where we recruit from
– Rewards the achievement of personal goals
for each role
– Linked to company performance over short
and long term
– Fair & transparent rewards linked to clear
measures and aligned to business strategy
and goals
– Aligned to the principles and operation of the
remuneration policy for the wider workforce
– Ensures that Remuneration appropriately
reflects and incentivises the Company's
Sustainability goals
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Coats Group plc Annual Report and Accounts 2022
Remuneration Committee report cont.
Remuneration Policy summary (Executive Directors)
Element
Key features of policy
Fixed base and benefits
– Base salary is benchmarked against the FTSE250 and a selected comparator
Annual bonus
group of similar size and complexity
– Benefits benchmarked to local market practice and reflect the nature of the
Executive’s role
– Pension benefits aligned to the workforce where the role is based
– Maximum award opportunity: 150% of base salary
– A proportion of annual bonus is subject to a mandatory deferral. Deferred
bonuses are converted into share awards and are released after a three-year
retention period so that the value of annual incentives is significantly aligned to
the longer term performance of the Company
LTIP
– Maximum LTIP award opportunity: 175% of base salary (200% exceptional
circumstances)
– Awards are discretionary and may be made annually
– Vesting is 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
– 200% of salary within five years of appointment
– Applies for 2 years post termination of employment based on the lower of the
shareholding requirement or the actual shares held on termination
Shareholding Requirement
Remuneration release profile
2022
2023
2024
2025
2026
Base salary/Benefits/Pension
Cash & benefits
Short-term incentive
Long-term incentive
Cash
Deferred shares
Performance Period
Holding Period
Summary implementation in 2022
Fixed remuneration
Implementation in 2022
Base salary
1 July 2022 review
Pension benefit
Aligned to the UK workforce
Annual bonus
Performance measures:
Sales: 30%
EBIT: 30%
Free Cash Flow: 20%
Personal objectives: 20%
Long term incentive
Performance measures:
EPS growth: 40%
Cumulative Free Cash Flow: 20%
Total Shareholder Return: 20%
Sustainability: 20%
– Increase of 5% for Rajiv Sharma and Jackie Callaway
– Aligns to the average for the UK workforce of 5%
– For Rajiv Sharma fixed at £122,400 per annum until 31 December 2022 reducing
to 12% from 1 January 2023
– For Jackie Callaway 12% of salary
– For Rajiv Sharma a maximum bonus of 150% of salary with a deferral of 50% of
the outcome in shares
– For Jackie Callaway a maximum bonus of 115% with a deferral of 40% of the
outcome in shares
– Outcomes for 2022 shown on page 89
– Grant of 175% of salary to Rajiv Sharma
– Grant of 150% to Jackie Callaway
– 3 year performance period with subsequent 2 year holding period
– Targets for 2022-2024 on page 91
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report
for the year ended 31 December 2022
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 information has been audited
by Deloitte LLP.
The Annual Report on Remuneration will be subject to an advisory vote and the Directors’ Remuneration
Policy will be subject to a binding vote at the AGM on 17 May 2023.
Executive Directors
Two Executive Directors were employed during 2022. Rajiv Sharma was appointed to the Board on 2 March
2015 and was appointed as Group Chief Executive with effect from 1 January 2017. Jackie Callaway was
appointed to the Board on 1 December 2020 and appointed as Chief Financial Officer on 31 March 2021.
Single total figure for Executive Directors’ remuneration for 2022 (audited information)
£000
Base salary
Benefits
Other
Pension
Total Fixed
Annual bonus
LTIP
Total Variable
Total
Rajiv Sharma
Jackie Callaway
Total
2022
646.2
41.4
–
122.4
810.0
834.1
191.1
2021
621.3
47.4
50.0
122.4
841.1
917.4
–
1,025.2
1,835.2
917.4
1,758.5
2022
401.3
21.3
–
48.2
470.8
397.2
–
397.2
868.0
2021
385.8
15.7
100.0
46.3
547.8
420.1
–
420.1
967.9
2022
2021
1,047.5
1,007.1
62.7
–
170.6
1,280.8
1,231.3
191.1
1,422.4
2,703.2
63.1
150.0
168.7
1,388.9
1,337.5
–
1,337.5
2,726.4
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 Jackie Callaway
– Other: as disclosed in last year’s report Jackie Callaway received £100,000 as compensation on
recruitment for the loss of an incentive payment from her former employer; this was paid on the condition
that at least the net amount received would be used by her to purchase shares in Coats; this condition has
been met. From 1 January 2022 Rajiv Sharma is based in Singapore; the company paid a relocation
allowance of £50,000 in connection with this change in work location; no other benefits are payable in
connection with this relocation
– Annual bonus: is the total value in cash and shares of the annual bonus that is attributable to each year.
Fifty percent of any 2022 bonus outcome for the Chief Executive Officer and forty percent for the current
Chief Financial Officer will be awarded in shares under the terms of the Deferred Annual Bonus Plan
– 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.
Jackie Callaway’s pension benefit is based on 12% of salary. Rajiv Sharma’s pension benefit was fixed at
£122,400 per annum and reduced to 12% of salary with effect from 1 January 2023. By 1 July 2023 the
typical UK Company pension contribution rate is 12% of salary
– The value of LTIP awards shown for Rajiv Sharma reflect the vesting of LTIP awards with a performance
period ending in 2022. Of the amount shown, £14,324 of this value represents the value attributable to
share price growth over the 3 year period
Annual bonus outcome 2022 (audited information)
The annual bonus for 2022 was determined in accordance with the details provided in the 2021 Directors’
Remuneration Report. Details of the bonus measures and opportunities are provided in the table below.
The measures were selected to incentivise a balance of outcomes that reflected the strategic priorities for
the Group at the beginning of 2022. In particular these were to deliver a strong performance in sales with
strong margin through efficiency 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 2022
Performance Measure
Group Sales $m
Earnings Before Interest and Taxation (EBIT) $m
Free Cash Flow (adjusted) (FCF)
Individual objectives
Total
Weighting
Achievement
Performance
achieved in 2022
Threshold
(0% of max)
Target
(50% of max)
Maximum
(100% of max)
Outcome as % of
Max
30.0%
30.0%
20.0%
20.0%
100.0%
1,402.2
1,476.0
1,512.9
1,555.0
188.0
72.0
–
202.0
87.0
–
212.1
97.0
202.0
115.1
– See below
30%
15%
20%
19%
84%
Targets are set in relation to budget for the upcoming financial year and the figures in the table above reflect
the 2022 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 $58 m for Sales, $9m for EBIT, and $7m
for FCF respectively.
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
EBIT performance also excludes the impact of acquisitions during the year and strategic and associated
projects. The effect was to toughen the targets versus full year reported EBIT.
For the 2022 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 2022 are reflected in the section below.
Personal objectives linked to 2022 bonus
At the beginning of the year the Committee determined that the following personal objectives would be
linked to 20% of the maximum annual bonus outcome. All objectives were equally weighted.
Rajiv Sharma:
Objective: to successfully implement the planned 2022 strategic projects.
Outcome: the projects completed in 2022 delivered substantial value to shareholders in terms of cost
savings and are on track to deliver $70m by the end of 2024 which significantly exceeds planned
expectations, the portfolio optimisation activities were successfully implemented with exits completed in
Brazil, Argentina and South Africa and the opening of a new improved facility in Mexico.
Objective: to deliver the 2022 sustainability targets and accelerate recycled and biomaterial use.
Summary 2022 Bonus Outcome
Rajiv Sharma: 126% of salary = £834,120. This is 84% of a maximum bonus of 150%
Jackie Callaway: 96.65% of salary = £397,232. This is 84% of a maximum of 115%.
Long Term Incentive award vesting (audited information)
On 6 March 2020 Rajiv Sharma was granted Long Term Incentive Plan awards in the form of 1,558,573 nil
cost options over shares in respect of the performance period 1 January 2020 to 31 December 2022
(referred to as LTIP 2020). Of this amount 18.2% (283,660 options) will vest on 4 March 2023
The performance measures were based upon Total Shareholder Return Performance (TSR), compound
annual growth (CAGR) in Earnings Per Share and cumulative Free Cash Flow relating to Coats Group plc. The
achievement of the Long Term Incentive Plan performance measures and the consequent vesting of the
award is shown in the table below.
LTIP 2020: Performance period 1 January 2020 to 31 December 2022
Measure
EPS CAGR
Free Cash Flow
Weighting
40.0%
30.0%
20.0%
10.0%
Threshold
(25% vesting)
Mid
(62.5% vesting)
Maximum
(100% vesting)
Actual
4%
5.0%
$296m
Median
10.0%
$326m
15.0%
$356m $253.4m
62.5th
Percentile
Upper
Quartile
55th
Percentile
See summary of performance below
Outcome as % of
max LTIP
0%
0%
8.2%
10%
18.2%
Outcome: the Sustainability goals for 2022 were substantially achieved and momentum and focus in this
area was increased and culminated in the adoption and approval by the Board of Science Based Targets for
2026. The performance to deliver against our 2022 goals for water recycling, energy usage, effluent quality,
Great Place to Work accreditation and waste management was considered by the Committee to be a
significant achievement which greatly enhanced Coats’ reputation with all our key stakeholders.
Total Shareholder Return versus the FTSE 250
excluding investment trusts
Sustainability
Total
The Committee determined the outcome of 19% out of a possible 20% of maximum bonus.
Jackie Callaway:
To complete two material acquisitions and to complete other actions relating to the company’s long term
portfolio. Other elements of this personal objective remain commercially sensitive.
The two acquisitions of Texon and Rhenoflex were completed efficiently and on time and, in the case of the
latter, following a successful and oversubscribed capital raise.
To co-lead the Company’s project to realise savings of $50m; to deliver various strategic projects and embed
new ways of working.
The savings that have been achieved significantly exceeded our planned expectations and the new
operating model has been successfully embedded and the resulting efficiencies significantly delivering
longer term benefits.
The Committee determined the outcome of 19% out of a possible 20% of maximum bonus.
Summary of performance against sustainability targets
The extent of achievement in performing against the targets set for the 2020 long-term incentive award is
set out below. The Committee tested the extent of achievement against the target on an indexed basis.
Based on average performance against the targets set (on an unweighted basis), 100% achievement results
in the threshold target being met (25% of this part of the award vesting), rising to 100% vesting for 107.5%
average achievement against the targets. With 107.5% achievement against the targets, the maximum target
of 107.5% was achieved and so this part of the award vested in full.
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
Area
Water usage
Energy
Effluent & emissions
Social
Sustainability
Average achievement
Target
Performance
Achieve by 2022 a 40% reduction, vs
a 2018 baseline, of water usage per
kilogram of thread production
Achieved a 38% reduction in 2022
(95% of target).
Achieve a 7% reduction of kWH per
kilogram of product made
Achieved 10% reduction in 2022 (143%
of target).
To achieve compliance with Zero
Discharge of Hazardous Chemicals
effluent standards
Achieved 92% compliance in 2022.
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.
Achieved 86% in 2022. Community
activities during various phases of
lockdown pivoted to supporting
communities and our employees’
families.
Reduce waste by 25% and achieve
progress towards achieving a goal
that all premium polyester thread will
be from recycled material by 2024
A 25% reduction in waste achieved in
2022 with substantial growth in use of
recycled material
143%
92%
108%
100%
107.5%
The Committee considered the Group’s overall performance for 2022 and felt that the outcome of 18.2%
appropriately reflected the performance of the business during the performance period.
In determining vesting, the Committee considered the potential for windfall gains and concluded that the
value on vesting of the 2020 awards did not benefit from windfall gains. In reaching this conclusion the
Committee noted that following the first half of 2020 the share price recovery had been consistent through
the balance of the three year performance period (i.e. performance has been a result of robust underlying
financial performance as opposed to any short-term change in market sentiment). Furthermore, the targets
were set prior to the onset of Covid, with no delay to the target setting process or grant of award which was
common practice by other companies during 2002. This ensures that the above vesting is considered an
exceptional result by the Committee. Accordingly, the Committee did not use any discretion in connection
with the 2020 award.
Share awards granted in 2022 (audited information)
The following share awards were granted to Executive Directors during the financial year ended 31 December
2022. The targets for achieving minimum performance for each measure, where these apply, are shown in
the table below.
Coats Group plc Long Term Incentive Plan
Percentage
Achievement of
Target
95%
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
Vesting date
Jackie Callaway
4–Mar–22
904,157
£587,250
150%
1 Jan 2022
to 31 Dec
Rajiv Sharma
4–Mar–22 1,698,806 £1,103,375
175%
£0.6495
25%
2024 4–Mar–25
The share price shown above, which was used to calculate the number of options awarded under the terms
of the Coats Group plc Long Term Incentive Plan, is based on the mid-market closing price for the day
immediately preceding the grant date..
Awards were granted 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. Awards were also granted to approximately 100 senior
managers on similar terms. 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 upon exercise.
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 2022 (LTIP 2022) are shown below.
Measure
EPS CAGR
Total Shareholder Return versus the FTSE 250
excluding investment trusts
Cumulative Free Cash Flow
Sustainability (see details below)
Weighting
40.0%
20.0%
20.0%
Threshold
(25% vesting)
Mid
(62.5% vesting)
Maximum
(100% vesting)
5%
12.5%
Median
$321m
62.5
percentile
$359m
20%
Upper
quartile
$396m
20.0% See below
– See below
The Board will consider the achievement of 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.
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.
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
The Sustainability targets were based on targets for the end of 2024 in 3 areas, measured against
a 2022 baseline;
1) to achieve an increase in product made from recyclable material. The target is to achieve a growth in
sustainable (non-virgin oil based) materials to 40% by 2024;
2) to achieve a reduction in emissions. The target is a pro rata reduction in Scope 1&2 emissions of 11%;
3) to achieve a reduction in water usage. The proposed target is to increase the water recycling rate and
achieve a 5% increase.
The Committee will test the extent of achievement against each target shown above. Based on a partial
achievement of each measure up to 25% of the award will vest if a minimum threshold performance standard
is obtained in all three targets rising to 100% vesting for the achievement of all three.
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.
Non-Executive Directors
The base fee was increased by 5% from £60,000 to £63,000 per annum with effect from 1 July 2022 (this
was the first increase since 1 October 2013). The fee for the Chair payable to David Gosnell following his
appointment on 19 May 2021 remained fixed at the level that was paid to his predecessor.
Base fee
£000
Supplementary fee
£000
Benefits1
£000
Other fee2
£000
Total
£000
Comments
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
David
Gosnell
Nicholas
Bull
250.0
177.3
–
4.2
61.5
60.0
18.3
10.0
Anne Fahy
25.0
60.0
5.2
12.5
Heather
Lawrence
Echo Lu
Stephen
Murray
Fran Philip
Jakob
Sigurdsson
10.5
61.5
21.0
61.5
–
–
60.0
12.5
–
60.0
–
7.5
–
–
8.3
–
7.5
–
61.5
60.0
Total
552.5
477.3
43.5
42.5
–
–
–
–
–
–
–
–
–
0.6
4.2
–
–
0.8
–
0.2
–
5.8
–
–
250.0
182.1
1.5
1.5
81.3
75.7
1.5
30.2
74.0
Resigned
18–May–
22
–
1.5
–
–
10.5
74.0
21.0
75.0
Appointed
1–Nov–22
–
70.6
Appointed
1–Sep–22
–
67.7
1.5
6.0
63.0
61.5
605.0
531.6
–
–
–
–
6.0
1.5
9.0
1 The figure under benefits for Non-Executive Directors relates to business expense reimbursements 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 Chair) who travel long haul to attend Board meetings. The
travel fee is capped at a maximum of £7,500 per annum.
3. Nicholas Bull was appointed Chair of the Audit and Risk Committee in May 2022.
Single total figure for Non-Executive Directors’ remuneration for 2022 (audited information)
Non-Executive Directors, excluding the Chair, 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 round trip 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.
The base fee paid by Coats Group plc is currently £63,000 per annum for Non-Executive Directors and
£250,000 for the Chair.
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). Fran Philip receives £7,500 per
annum for undertaking additional responsibilities concerning employee engagement.
Payments for loss of office (audited information) & Payments to former Directors (audited information)
There have been no payments for loss of office during the year. No payments were paid to former Directors
in the year.
Directors service agreements and appointment letters
All Executive Directors have service agreements which are rolling with an indefinite term and provide for a
notice period from either side of twelve months and all of this notice is unexpired. No appointment letters for
Non-Executive Directors, including the Chair, 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.
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
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 2022, are
set out below.
Shareholding requirement in 2022
Shares 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?
01-Jan-221
31-Dec-222
01-Jan-221
31-Dec-222
01-Jan-221
31-Dec-222
01-Jan-221
31-Dec-222
Executive Director
Jackie
Callaway 1,200,000 200%
Rajiv
Sharma 2,000,000 200%
No
151,606
269,716
–
258,709
942,148 1,846,305
–
–
Yes 4,439,012 4,596,492 511,684 1,055,858 4,422,071 5,027,626 184,542 346,586
Chair and Non-Executive Directors
David Gosnell
N/A 1,409,990 1,567,470
Nicholas Bull
Anne Fahy
Heather Lawrence
Echo Lu
Stephen Murray
Fran Philip
Jakob Sigurdsson
1. Or date of appointment, if later.
2. Or date of resignation, if earlier.
N/A 500,000
550,000
N/A
N/A
N/A
N/A
N/A
N/A
40,000
40,000
–
–
15,000
22,874
–
50,000
30,000
–
75,984
77,244
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3. The target number of shares is based on the average share price for 2022 which was 66.6p.
The Executive Directors’ shareholding requirement must be met within five years of their appointment to the
Board (2 March 2020 for Rajiv Sharma, 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 unexercised Long-Term Incentive Plan awards granted to Executive Directors
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.
Details of scheme interests as at 31 December 2022 (audited information)
Rajiv Sharma
Award
Vesting date
Retention period
Expiry date
No.
Status
Performance
conditions?
Deferred bonus shares subject to vesting period
DABP20
6–Mar–23
N/A 6–Mar–30
349,640 Unvested
DABP22
Sub-total
4–Mar–25
N/A 4–Mar–32
706,218 Unvested
1,055,858
LTIP share options (subject to performance conditions)
LTIP20
6–Mar–23 6–Mar–25 6–Mar–30 1,558,573 Unvested
LTIP21
LTIP22
Sub-total
Share options (no performance conditions)
DABP18
DABP19
Sub-total
Jackie Callaway
5–Mar–24 5–Mar–26 5–Mar–31 1,770,247 Unvested
4–Mar–25 4–Mar–27 4–Mar–32 1,698,806 Unvested
5,027,626
4–Mar–21
4–Mar–22
N/A 4–Mar–28
184,542
N/A 4–Mar–29
162,044
Vested
Vested
346,586
No
No
Yes
Yes
Yes
No
No
Award
Vesting date
Retention period
Expiry date
No.
Status
Performance
conditions?
Deferred bonus shares subject to vesting period
DABP22
4–Mar–25
Sub-total
N/A 4–Mar–32
258,709 Unvested
No
258,709
LTIP share options (subject to performance conditions)
LTIP21
5–Mar–24 5–Mar–26 5–Mar–31
942,148 Unvested
LTIP22
Sub-total
4–Mar–25 4–Mar–27 4–Mar–32
904,157 Unvested
1,846,305
Yes
Yes
Share options (exercised during the year)
No share options were exercised by Directors during the year.
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 2022 was 67.5 pence and the range during the year was 51.2 pence to
81.2 pence.
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
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 2013 to 31 December 2022. 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 2022.
£350
£300
£250
£200
£150
£100
£50
£0
31-Dec
2012
31-Dec
2013
31-Dec
2014
31-Dec
2015
31-Dec
2016
31-Dec
2017
31-Dec
2018
31-Dec
2019
31-Dec
2020
31-Dec
2021
31-Dec
2022
£120
£100
£80
£60
£40
£20
£0
31-Dec
2019
31-Dec
2020
31-Dec
2021
31-Dec
2022
Coats
FTSE250 Index
FTSE All-Share Index
Coats
FTSE250 Index
FTSE All-Share Index
Chief Executive total remuneration for the last 10 years1
Director’s remuneration – annual percentage change from 2020 to 2022
The table below shows the percentage change in the annual remuneration of Directors and the average UK
colleague from 2019 onwards.
Salary or fees (% change)
Benefits3 (% change)
Bonus (% change)
2021 to 2022 2020 to 2021 2019 to 2020 2021 to 2022 2020 to 2021 2019 to 2020 2021 to 2022
2020 to 2021 2019 to 2020
6.9%
–3.6% –12.7%
25.8% –46.8%
–9% 1,898.8% –91.1%
35.7%
–0.6%
N/A
–5.5%
100%
Rajiv Sharma
Jackie Callaway
Nicholas Bull
Anne Fahy
David Gosnell
Heather Lawrence
Echo Lu
Stephen Murray
Fran Philip
Jakob Sigurdsson
Average of all employees1
4.0%
4.0%
13.7%
0%
1.4%
4.4%
7.4%
37.7% 163.4%
0%
6%
0%
11.1%
2.4%
5.5%
N/A
22.5%
N/A
2.9%
–6.8%
3.1%
N/A
–5%
–5%
–5%
N/A
–5%
N/A
–5%
–5%
0%
0%
0%
0%
N/A
0%
N/A
0%
0%
0%
0%
0%
0%
N/A
0%
N/A
0%
0%
0%
0%
0%
0%
N/A
0%
N/A
0%
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0% –12.4% 322.8% –51.4%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1. 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 employed by the UK parent company 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 and excludes
acquisitions made during the year.
2. 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.
Executive Director
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
3. To enable comparisons, leaver and joiners figures have been annualised. The figures for David Gosnell, Echo Lu and Nicholas Bull in 2022 and 2021 reflect their
Name
CEO single figure of
remuneration (£k)
Annual bonus as a % of
maximum opportunity
LTIP award as a % of
maximum opportunity
N/A
N/A
Paul
Forman
Paul
Forman
Rajiv
Sharma
Rajiv
Sharma
Rajiv
Sharma
Rajiv
Sharma
Rajiv
Sharma
Rajiv
Sharma
–
–
–
– 1,017.0 1,760.3 2,566.9 3,356.7 2,228.1
787.4 1,758.5 1,835.2
–
–
87.1%
77.0%
79.5%
66.7%
67.3%
5.0%
97%
84%
–
43.6%
60.0%
84.2%
95.8%
0%
0%
18.2%
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.
2. 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.
increased fees following their appointments as Group, Remuneration Committee and Audit Chairs respectively.
4. Jackie Callaway’s increase in benefits reflects the cost of non-taxable insurance benefits for the full year 2022 which were not incurred in 2021.
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
2022
325.7
32.9
17,713
1,583.8
234.9
Year to
31 December
2021
% change
344.3
27.6
16,998
1,361.4
185.4
–5%
19%
4%
16%
27%
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
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 2022 and 2021
have been stated on the basis of continuing operations only. Information for 2022 includes acquisitions
made during the year. The figures for revenues and operating profit are on a constant exchange rate (CER)
basis with amounts for 2021 restated at 2022 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.
Financial Year
Calculation
methodology
2019
2020
2021
2022
A
A
A
A1
Salary
Salary plus bonus
Total pay
P25
21
20
16
15
P50
12
12
12
10
P75
8
7
8
6
P25
37
20
37
34
P50
20
12
27
21
P75
11
7
13
10
P25
58
20
41
42
P50
36
14
27
23
P75
19
7
12
11
1 During the year, Coats acquired Texon which includes approximately 100 UK based employees. Giving the timing of this acquisition and associated
complications in relation to incorporating these employees into the calculation of the CEO Pay Ratio, these employees have been excluded for 2022. Coats
intends to incorporate these employees going forwards. Although employees from Texon have been excluded from the calculations, based on high-level
analysis, Coats is comfortable that the inclusion of these employees would not have a material impact on the overall CEO pay ratio, and that the ratio set out
above is reflective of the overall Group.
Year-on-year change in ratio of CEO pay to median employee pay
45
40
35
30
25
20
15
10
5
0
2019
2020
2021
2022
Total pay
Salary plus bonus
Salary
The ratio of salary, salary plus bonus and Total Pay have marginally decreased during 2022, largely due to
the reduction in the number of UK based head office employees. The lower quartile, median and upper
quartile employees in the table below were identified on the basis of full-time equivalent total remuneration
and benefits in the twelve month period ending 31 December 2021 (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 2021. The UK workforce is the most appropriate comparator group because the CEO is
employed by the UK parent company 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 2022 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
Lower quartile
Median
Upper quartile
£646,262
£42,000
£66,303
£110,250
£1,480,300
£1,835,200
£42,630
£43,875
£69,552
£153,082
£81,212
£167,562
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
Prior to the publication of the proposed Remuneration Policy the Company consulted with major
shareholders (all those with more than a 2% shareholding) and major governance advisors to explain the
rationale behind the limited number of proposed changes to the Remuneration Policy that will be subject to
an approval vote at the 2023 AGM. In addition, the Company explained the rationale for changes that were
proposed, within the framework of the existing policy, for implementation in 2023. The Company did respond
to questions raised by shareholders notably to assure shareholders that the incentive targets relating to the
increased bonus opportunity (within the limits of the existing policy) would remain challenging. In addition
shareholders enquired about the reason for the change in the Long Term Incentive cash measure and
whether there were alternative measures that had been considered; in this respect the company confirmed
that the wording of the Remuneration Policy was intended to allow sufficient flexibility to consider alternative
cash related measures (such as Return on Capital Employed) during the lifetime of the policy and with further
consultation with all shareholders.
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
The Company also implemented the requirement contained in Provision 38 to align the pension benefit
provision of the Executive Directors with those of the UK workforce within effect from 1 January 2023. The
pension benefit for Jackie Callaway was implemented at 12% of salary upon her appointment in 2020 and for
Rajiv Sharma his pension benefit reduced to 12% of salary from 31 December 2022. The 12% benefit level is
the typical Company pension contribution rate to UK employees for 2023.
The above Executive Director salaries have been in operation since 1 July 2022 when they were increased
by 5% in line with the UK workforce budgeted increase. The Committee is aware of institutional investor
guidance in relation to 2023 salary increases in light of the current high inflation rates in the UK and will
consider this at the same time as the need to recognise the performance, experience and calibre of the
Executive Directors when reviewing salaries at our standard UK review data of 1 July 2023.
The Directors believe that the principles outlined in Provision 40 of the Corporate Governance Code
continue to be met in the operation of the Remuneration Policy in 2022. Remuneration arrangements are
clearly communicated and straightforward. Incentives are linked to the key performance metrics of sales,
profit and cash generation. These measures are aligned throughout the groups incentive schemes and there
is a balance between overall group performance across all three metrics and each individual local business
unit. Personal performance is also an element, both in incentives and in salary reviews, but there is an overall
link to the achievement of company performance to ensure that the risk of excessive rewards in cases of
poor performance is managed. Teamwork is a key strength and cultural aspect for Coats and incentives are
managed to ensure that there is cooperation and flexibility in delivering performance and to ensure that
incentive structures to not negatively impact the culture of the organisation.
Although the Company does not formally consult with employees in determining the Remuneration Policy
there are several routes by which employee engagement is achieved. Fran Philip is the Designated
Non-Executive for Workforce Engagement and is also a member of the Remuneration Committee. During
2022 a programme of meetings was conducted by Fran with business unit leadership teams to discuss a
variety of issues of interest to employees. All employees were encouraged to raise any areas of concern,
including concerning alignment of executive remuneration with the wider workforce, directly or through line
managers. Further details of the Board’s engagement with the workforce is set out on page 32. In addition,
during 2022 the Board conducted a series of in depth review meetings and as part of this review considered
for all employees the competitiveness of the remuneration offering, the level of any minimum Living Wage
and whether any employees were below this level, the gender profile and pay differentials of the workforce
and the level of pension or other benefit programmes. During the review meetings business leadership
teams were encouraged to provide as much feedback from their teams as possible.
Statement of implementation of Remuneration Policy for 2023
Base salaries for Executive Directors and fees for the Non-Executive Directors will be reviewed on 1 July 2023.
Rajiv Sharma will, until the review date, continue to receive a base salary of £662,000, a car allowance of
£20,000 and a pension contribution (aligned to the UK workforce) of 12%.
Jackie Callaway will continue to receive a base salary of £411,000, a car allowance of £15,000 and a pension
benefit of 12%. Both Directors also receive private medical insurance, life and income replacement insurance.
In line with Remuneration Policy, it is expected that the LTIP award for the Chief Executive Officer will be
175% and the maximum annual bonus opportunity will remain 150%. The maximum bonus opportunity for the
Chief Financial Officer will be 125% and the LTIP award is expected to be at 150% of salary. The compulsory
three-year deferral into shares of the 2023 bonus outcome will be 50% for the Chief Executive Officer and
40% for the Chief Financial Officer. A post-termination minimum shareholding requirement applies to all
Executive Directors for two years following termination of employment based on the lower of 100% of the
MSR or the actual shareholding at termination.
The performance measures and weightings for annual and long-term incentives are shown below.
Annual bonus
Measure
Sales
Earnings Before Interest
and Taxation
Free Cash Flow
Individual objectives
Weighting
10%
35%
35%
20%
Long Term Incentive
Measure
Weighting
Earnings Per Share CAGR
30%
Three year Average
Cash Conversion
Total Shareholder Return
compared to the FTSE250
Sustainability
20%
30%
20%
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 2023 will be subject to targets that will vest at a level no
more than 25% (for each measure) for threshold performance and at 100% (for each measure) for
performance at maximum. There will be straight-line between threshold, maximum and any intervening
points.
Further details regarding the targets will be published when the awards for 2023 are granted.
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Coats Group plc Annual Report and Accounts 2022
Directors’ remuneration report cont.
Consideration by the Directors of matters relating to Directors’ remuneration
The members of the Committee were: Echo Lu (Chair), Fran Philip, Nicholas Bull and Stephen Murray (from
1 September 2022).
Statement of voting at the General Meeting
At the AGM of the Company on 18 May 2022 the results of the vote regarding Resolution 2 (to approve the
Annual Report on Remuneration) were:
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.
Votes for
Number
1,195,752,385
%
96.69
Votes against
Number
40,978,595
Votes total
Votes withheld
%
3.31
Number
1,236,730,980
Number
36,058
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),
Farnaz Ranjbar (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.
During the year, the Committee undertook a competitive tender process in respect of the adviser to the
Committee. Following this process Korn Ferry replaced Mercer-Kepler as the Committee’s advisor from 30
September 2022.
Mercer-Kepler received fees of £12,650 for time spent and materials used in providing advice to the
Company during the period to 30 September 2022. Korn Ferry received fees of £42,900 for time spent and
material used in providing advice to the Committee during the period to 31 December 2022.
Both Korn Ferry and Mercer-Kepler provided no other remuneration advice to the Company or any of the
Directors, and are signatories of the Remuneration Consultants Group code of conduct. The Committee is
satisfied that the advice provided the Committee was independent and was fair and objective.
At the AGM on 11 June 2020 the results of the vote regarding Resolution 3 (to approve the Directors
Remuneration Policy) were:
Votes for
Number
933,453,843
%
98.8
Votes against
Number
11,759,000
Votes total
Votes withheld
%
1.2
Number
945,212,843
Number
78,764
Committee performance and effectiveness
The Committee effectiveness in respect of the year ended 31 December 2022 was evaluated following an
externally facilitated review process as set out earlier in this Annual Report. The Committee considered the
key points that were identified in the previous year’s assessment. The 2022 evaluation indicated that the
Committee’s ways of working and dynamics were working effectively and noted the successful transition in
Chair. Opportunities identified for the 2023 Committee work plan included further focus on monitoring and
evaluating new and emerging trends.
Signed on behalf of the Remuneration Committee by:
Echo Lu
Chair, Remuneration Committee
1 March 2023
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Coats Group plc Annual Report and Accounts 2022
Remuneration policy report
The Remuneration Policy was last approved by shareholders at the 2020 AGM. This updated policy will be
subject to a binding shareholder vote at the 2023 AGM on 17 May 2023. If approved, the policy will apply for
a period of up to three years from the date of approval.
As set out in the Remuneration Committee Chair’s statement, following a review of the existing Policy, the
Committee determined that the Policy should be rolled-forwards with no material changes.
Directors’ Remuneration Policy
The Remuneration Committee has responsibility for determining remuneration for the Company’s Directors
including the Group Chair but excluding the Non-Executive Directors. The remuneration for Non-Executive
Directors, excluding the Group Chair, is determined by the Board albeit the Non-Executive Directors are not
present when their fees are discussed. The Committees take into account the need to recruit and retain
Directors who have the suitable skills and experience to perform in the interests of the Company and its
shareholders, while paying no more than is necessary.
The table below sets out how the proposed Policy specifically addresses the provisions of the UK Corporate
Governance Code.
Alignment of the Remuneration Policy to the provisions of the 2018 Corporate Governance Code
Clarity
Simplicity
Risk
There are no material changes to the previous Remuneration Policy being made. This is because the
Committee reviewed the current Policy’s effectiveness in aligning performance and reward as well as
considered how it compared with market and institutional investor best practice. The conclusion of this
process was that the policy has achieved a fair relationship between performance and reward and is aligned
with best practice. As a result, the Committee determined no material changes should be made. The
changes that are being made are to better align the Policy wording with the intended application of the
policy. The changes to the previous Policy wording provide for:
– Flexibility in relation to the timing of the annual salary review date. This is currently set as 1 July each year
for Executive Directors, with the refined Policy wording enabling the salary review date for Executive
Directors to be aligned with the appropriate workforce if there was a change of review date. The Company
does not currently intend to change the existing review date
– Aligning the pension Policy wording with pension practice from 1 January 2023. This is for Executive
Director pension to be set at 12% and so aligned with the typical rate of Company pension provision to UK
based employees
– Defining the portion of annual bonus that is normally deferred within policy (i.e. 50% of any bonus earned
where the maximum bonus opportunity is 150% of salary and 40% of any bonus earned where the
maximum bonus opportunity is below 150% of salary)
The approach to all elements of
remuneration for Executive
Directors is set out clearly within
the Policy.
The Policy structure is simple and aligns
with FTSE market practice.
Performance measures which are well
understood by our stakeholders have been
chosen with targets and achievement of
these targets clearly disclosed either
prospectively or retrospectively.
All elements of variable remuneration
have been designed to discourage
excessive risk taking and all contain
appropriate maximum limits.
Executive Directors are required to
develop and maintain, including
post-employment, material shareholdings
in line with the shareholding requirements.
This provides significant alignment to the
long-term experience of shareholders.
Predictability
Proportionality
Alignment to culture
Maximum opportunity levels for
each component of variable
remuneration are defined within
the Policy.
The scenario chart later in this
Policy sets out an illustration of
how the Policy may operate in
practice, including maximum and
minimum potential values.
Variable remuneration opportunity levels
have been set at an appropriate level,
proportionate to the size of the business,
and mindful of the levels of fixed
remuneration.
Performance measures are linked to the
Company’s strategy and aligned with
long-term creation of value for shareholders.
The Committee retains its discretion to
adjust formulaic variable remuneration
outcomes where these do not align to the
financial or non-financial performance of
the business.
Variable remuneration is based
on the achievement of financial and
non-financial measures which link to
the overall business strategy.
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Coats Group plc Annual Report and Accounts 2022
Remuneration policy report cont.
The Remuneration Policy set out below applies to all Directors who are appointed to the Board during the life
of this policy.
VARIABLE REMUNERATION
Executive Directors’ Remuneration Policy table
FIXED REMUNERATION
Purpose and link to strategy
Operation and opportunity
Salary
To attract and retain
the key talent that
the Company needs
to achieve its
objectives.
Pension
To provide a market
competitive level of
retirement provision.
Benefits
Salaries for new Executive Directors will be set by the Board taking into account such factors as it
determines to be necessary, as discussed above.
Following recruitment, salaries will normally be reviewed annually with effect from 1 July (or such
other date so as to align with the appropriate workforce review date). Salary reviews take account
of factors including the market competitive level of pay in other companies, average salary
increases applied elsewhere across the Group, the performance of the Company, the relative
skills, performance and talent of the individual and any increase in the scope and/or responsibility
of the individual’s role.
There is no set maximum salary but the Committee’s approach will consider the median level of
salary of similar positions in the FTSE 250 (excluding financial services), as well as companies in
similar sectors and of a similar international scope and size to Coats, for UK based roles to reflect
the global scope and dimensions of the Group’s operations and the sector in which it operates.
External benchmark data is considered only as a reference point and the median figure will not be
regarded as a target level of remuneration.
From 1 January 2023 Executive Directors will be entitled to participate in a defined contribution
scheme, on a non-contributory basis, with an employer contribution of up to the typical UK
workforce (or other relevant local workforce where appropriate) rate which is currently 12% of
salary, or will be provided with a cash alternative in lieu of any pension benefits of up to an
equivalent value.
To provide a market
competitive level of
benefits.
Benefit provision to Executive Directors will be determined by the Committee taking into account
such factors as it determines to be necessary, with the aim of creating a competitive overall
package. There are no set maximum levels.
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 arrangements.
Executive Directors may also participate in any all-employee incentive plan operated by the
Company from time to time, up to the same limit for participation as applies for other employees.
Purpose and link to strategy
Operation and opportunity
Performance
Annual bonus, Cash bonus and deferral into shares under the rules of the Deferred Bonus Plan
Annual bonus
incentivises key
individuals to
achieve the
objectives of the
annual business
plan.
The deferred
element ensures
that the final value of
the annual incentive
is linked to the
longer-term value of
the Group.
Annual bonuses will be determined by
reference to performance, measured over one
financial year.
The performance measures, weightings and
targets for the annual bonus will be set by the
Committee on an annual basis.
The maximum annual bonus that may be
awarded to any executive director will be 150%
of salary.
Performance measures will normally include
tests of both business and individual
performance.
Any bonuses awarded will be subject to a
mandatory deferral which is normally 50% of
any bonus earned where the maximum bonus
opportunity is 150% of salary and 40% of any
bonus earned where the maximum bonus
opportunity is below 150% of salary.
Deferred bonuses will be transferred into
shares, to be held for a three year retention
period, under the terms of the Deferred Bonus
Plan.
Deferral may operate so that shares will be held
beneficially by the Executive Director during
this period, in which case dividends will be
payable on shares during such period. The
deferral may alternatively be achieved by the
grant of a share award or nil cost option in lieu
of the deferred portion of the bonus, in which
case an additional payment in cash or shares
may be made to reflect dividends that may have
been earned during the period from grant to
vesting.
The annual bonus including cash paid or
deferred element of the bonus may be subject
to malus or clawback. Details of malus and
clawback terms are set out below.
The weighting for each objective will be
determined annually by the Committee to
reflect the strategic importance of each
objective for the year ahead.
The Target level of performance will result in a
payment of 50% of the maximum award. The
Committee will determine the Target level of
remuneration on a basis that it feels is
stretching and challenging. Below Target,
payment will increase between nil (below
Threshold performance) and Target pay-out, on
a straight- line basis. Above Target, payment
will increase on a straight-line basis up to 100%
for Maximum performance.
The Committee will have the discretion to
reduce vesting levels if it determines the result
of the performance targets does not accurately
reflect the financial health of the Company.
All annual bonus payments and awards are
made at the discretion of the Committee and
the terms of the awards may be amended by
the Committee at any time provided that they
remain within the terms of this policy.
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Coats Group plc Annual Report and Accounts 2022
Remuneration policy report cont.
VARIABLE REMUNERATION cont.
Purpose and link to strategy
Operation and opportunity
Performance
Long Term Incentive Plan
To incentivise key
individuals to
achieve key long
term objectives, in
line with the Group’s
long-term strategy.
To create alignment
between executives
and shareholders.
To retain key
individuals.
Awards will be made annually, conditional on
the achievement of three-year performance
conditions. Any vested shares will be subject to
an additional two-year holding period.
Award levels for any Director will be up to a
maximum of 175% of salary. Awards may be
made to other senior executives within the
Group. Larger awards may be made in
exceptional circumstances, but in no case to
exceed 200% of salary.
Awards will normally be made in the form of nil
cost options, exercisable between the third and
the tenth anniversary of grant (subject to the
additional two-year holding period), although
awards may be made in other forms. An
additional payment in cash or shares may be
made to reflect dividends that may have been
earned on the proportion of the award that
vests during the period from grant to the end of
the holding period.
Awards will be subject to malus and clawback
provisions. The malus provisions give the
Committee discretion to reduce the level of an
award prior to vesting in the event of personal
misconduct or if events have happened that
caused the Committee to determine the grant
level was not appropriate.
Details of malus and clawback terms are
set out below.
The performance measures used, the weighting
on each measure, the definition of the
measures and the performance targets, will be
determined by the Committee considering the
balance of strategic priorities for the Company
for the upcoming three-year performance
period.
In addition, the Committee may consider setting
an underpin condition which must be satisfied
prior to vesting of an award.
No awards will vest for performance below
Threshold, 25% of each element will vest for
achieving Threshold performance, increasing
on a straight-line basis to 100% for Maximum
performance.
The Committee will be able to reduce vesting
levels if it determines the result of the
performance targets does not accurately reflect
the financial health of the Company.
Following grant of an award, the Committee will
have power to amend performance measures
and targets if events happen that mean they
are no longer a fair test of performance, but not
so as to make the assessment of performance
materially less onerous.
Shareholding requirements
Executive Directors will be required to attain a shareholding, over a five-year period, equivalent to 200% of
salary. This requirement will apply for a two year period post termination of employment based on the lower
of the in-post requirement and the Executive Director’s actual shareholding on termination of employment.
Malus & clawback
The Committee may, at any time within three years of a cash bonus payment, LTIP or deferred bonus award
vesting, determine that malus and / or clawback shall apply if the Committee determines that:
– there was a material misstatement of the financial statements of the Company upon which the
performance targets were assessed, or an erroneous calculation was made in assessing the extent
to which performance targets were met;
– the award holder has contributed to serious reputational damage to the Company or one of its
business units;
– the award holder’s conduct has amounted to serious misconduct, gross negligence, fraud, dishonesty,
a breach of the Code of Business Conduct or material wrongdoing; or
– where corporate failure or failure in risk management has occurred.
Performance measure selection and target-setting
The measures used under the annual bonus and LTIP are selected annually to reflect the most important
measures for the upcoming year and include both business and individual performance objectives.
Performance targets are set taking into account the objectives for the business and the need to successfully
progress the execution of the Group’s long term growth strategy. Targets are also established on the basis
that they should be stretching within an acceptable degree of risk.
Illustrations of the application of remuneration policy (figures in £000)
£4,000
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
0
£3,514k
£2,934k
27%
£1,859k
31%
27%
39%
34%
£783k
100%
42%
27%
Below
Target
Target
Maximum
£482k
100%
Below
Target
£1,920k
£1,612k
£1,047k
25%
29%
46%
38%
32%
30%
Target
Maximum
CEO
CFO
LTIP
Annual bonus
Fixed pay
LTIP with 50% share price growth
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Coats Group plc Annual Report and Accounts 2022
Remuneration policy report cont.
The above charts give an illustrative value of the remuneration package for each of the executive Directors
in the upcoming year.
– Minimum is the base salary and pension contributions as of 1 January 2023 plus the value of benefits as
External appointment
In the cases of hiring or appointing a new Executive Director from outside the Company, the Committee may
make use of all the existing components of remuneration, as follows:
disclosed in the FY 2022 single figure table
Component
Approach
Maximum annual grant value
– On target is the aforementioned minimum plus an assumed 50% pay-out of the annual bonus opportunity
Base salary
and 50% vesting of LTIP awards to be made in FY 2023
– Maximum is the aforementioned minimum with an assumed 100% pay-out of the annual bonus opportunity
and full vesting of LTIP awards to be made in FY 2023
– Maximum + share price assumption shows maximum plus a 50% share price appreciation on the shares
Benefits
subject to vested LTIP awards to be made in FY 2023
Legacy matters in respect of future Executive Directors
In the event that an executive of the Group is promoted to the Board, the Company retains discretion to
honour any existing remuneration commitments. In particular, any long term awards, both cash and share
awards, will continue to be capable of vesting on their existing terms. This would include awards previously
granted under legacy Group incentive plans. This would also include any awards granted under the Long
Term Incentive Plan or Deferred Bonus Plan prior to the individual being appointed as a Director (although it
would be intended that any such awards would in any event comply with the Policy as set out above).
Pension
Annual bonus
Recruitment Policy
When appointing an Executive Director, including a promotion to the Board of an executive from within the
Group, the Committee will offer the recruit a remuneration package that it believes is appropriate, taking into
account the skills and experience of the individual and the need to attract, retain and motivate individuals of
the appropriate calibre. In determining the remuneration package that may be offered to a new Executive
Director, the Committee may also take into account external and internal comparisons and relevant market
factors, as well as any other factors which the Board determines to be relevant.
LTIP
Salaries for new appointees will be determined by
reference to the relative skills and experience of the
individual, the market competitive level of pay in other
companies and any other relevant external or internal
comparisons.
New appointees will be eligible to receive benefits which
may include (but are not limited to) the provision of private
medical insurance, ill-health protection and/or life
insurance and a cash- for-car-allowance, and, where
appropriate, relocation, international transfer or tax
equalisation arrangements.
New appointees will receive pension contributions or cash
alternative in lieu of any pension benefit.
The structure described in the policy table will apply to
new appointees with the relevant maximum being pro-
rated to reflect the proportion of employment over the
year. Targets for the personal element will be tailored to
each Executive Director. The Committee retains discretion
to set different targets for a new Executive Director in the
year of appointment to the other Executive Director(s)
targets depending on the timing of their appointment.
New appointees will be granted awards under the LTIP on
the same terms as other Executive Director’s, as described
in the policy table.
Currently 12% of salary if UK based
150% of salary
200% of salary in exceptional
circumstances
For external appointment, the Committee may determine that there may be exceptional circumstances
where it would be appropriate, in order to secure the right candidate, to compensate for lost awards incurred
by an individual as a result of leaving their former employer. In the case of any long term incentive awards,
save where such awards are close to vesting, any such award on appointment would normally be granted as
a share based award, subject to such vesting and/or performance conditions as the Committee determines
to be appropriate, either under a one-off arrangement or under the terms of the Long Term Incentive Plan.
In determining the terms of any such awards, the Committee would take account of the vesting schedule
and conditions attached to the forfeited awards, but also other factors that it determines to be relevant,
including the need to suitably incentivise and retain the individual during the initial years of their
applicable appointment.
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Coats Group plc Annual Report and Accounts 2022
Remuneration policy report cont.
Internal promotion
In cases of appointing a new Executive Director by way of internal promotion, the Committee and Board will
be consistent with the policy for external appointees detailed above.
Service contracts for Executive Directors
The Committee’s policy is for service contracts for Executive Directors to reflect the Committee’s
understanding of best corporate practice for listed companies. However, in the event that an executive of the
Group is promoted to the Board, the Committee may include terms in any new service contract which are
consistent with that individual’s existing service contract and legacy arrangements.
Subject to this, the key elements of a service contract offered to a UK based Executive Director
appointment are:
Notice period
Contracts are rolling with an indefinite term. The notice period is no more than 12 months (in the
case of notice being given by the Company or the Executive Director).
An Executive Director may be placed on garden leave during some or all of the notice period.
Payment in lieu of
notice (‘PILON’)
Save in circumstances justifying summary termination, employment may be terminated without
notice by paying a PILON comprising basic salary and contractual benefits. Subject to any legacy
terms, the Company will have discretion to pay on a phased basis, which will normally be subject to
mitigation.
Pension
Benefits
Incentive plans
The service contract may include entitlement to pension benefits, subject to the provisions and any
limits set out in this Policy and the pension scheme rules or an annual allowance. The entitlement to
pension benefits may continue during any notice period.
The service contract may include entitlement to other benefits, subject to the provisions and limits
set out in this Policy. The entitlement to benefits may continue during any notice period.
The Executive Director will be eligible to be considered (at the Committee’s discretion) to participate
in the annual bonus and long term incentive arrangements operated from time to time, subject to
the provisions and limits set out in this Policy. The terms of such arrangements would apply in the
event of a cessation of office or employment, as set out in the table below.
Service contracts offered to non-UK based, external appointments will generally be in line with the
provisions set out above, subject to any local law requirements. All Executive Director letters of appointment
are available for inspection at the Company’s registered office during normal hours of business, and will also
be available at the Company’s AGM.
Executive Directors will be able to accept non-executive appointments outside the Company (as long as this
does not lead to a conflict of interest) with the consent of the Board, as such appointments can enhance their
experience and add value to the Company. Any fees received (excluding positions where the Executive
Director is appointed as the Company’s representative) may be retained by the Executive Director.
Policy on payment for loss of office of Executive Directors
In the case of an executive of the Group who is promoted to the Board, the terms on cessation of office or
employment would be governed by the terms of the individual’s existing employment agreement. In addition,
the terms of any incentive awards made to the individual prior to being appointed as an Executive Director,
and the terms of any pre-existing participation in a pension scheme, would govern the treatment of such
arrangements.
The policy that applies to the appointment of any Executive Director is shown below. The remuneration
package may include the components of remuneration described below in the Executive Directors’
Remuneration Policy table subject to the relevant limits as set out in the following tables.
Notice periods, salary and contractual rights
The notice periods and contractual rights on termination that would be included in a service contract offered
to an external recruit are set out above. In addition, the Executive Director would be entitled to accrued but
untaken holiday.
In respect of any awards made to an Executive Director under any all-employee share plan, the same leaver
conditions will apply as apply in respect of employees generally.
Discretions
In considering the exercise of its discretions under the incentive arrangements, as referred to above, or
otherwise in connection with the cessation of office or employment of an Executive Director, the Committee
will take into account all relevant circumstances, having regard to their duties as Directors.
In doing so, factors that the Committee may take into account shall include, but not be limited to, considering
the best interests of the Company, whether the Executive Director has presided over an orderly handover,
the contribution of the Executive Director to the success of the Company during their tenure, the need to
ensure continuity, the need to compromise any claims that the Executive Director may have, whether the
Executive Director received a PILON and whether, had the Executive Director served out their notice,
a greater proportion of the outstanding award may have vested.
Other
The Company may enter into new contractual and financial arrangements with a departing Executive
Director in connection with the cessation of office or employment, including (but not limited to) in respect of
settlement of claims, confidentiality, restrictive covenants and/or consultancy arrangements, where the
Committee determines it necessary or appropriate to do so. Appropriate disclosure of any such arrangement
would be made.
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Coats Group plc Annual Report and Accounts 2022
Remuneration policy report cont.
Corporate actions
On a corporate action affecting the Company, the rules of the Long Term Incentive Plan and Deferred Bonus
Plan will apply. In summary, on a change of control awards will vest, subject to the performance conditions
and, unless the Committee determines otherwise, time pro-rating.
Deferred shares awarded under the terms of the Deferred Bonus Plan, which represent deferrals of
previously earned bonus, will vest in full. Under the Long Term Incentive Plan and Deferred Bonus Plan, the
Committee may determine that a demerger or similar event shall constitute a corporate action.
On a variation of share capital or similar event, the Committee may make such adjustment to awards under
the Long Term Incentive Plan and the Deferred Bonus Plan as the Committee considers appropriate.
Incentive plans
Good leavers
Other leavers
Where the reason for cessation of office or
employment is personal misconduct no bonus
will be payable.
In other cases, unless the Committee determines
that the departing Executive Director is eligible
to receive a bonus, no bonus will be payable.
Deferred Bonus
Plan
Annual bonus
The Company does not consider it appropriate
to set defined ‘good leaver’ and ‘bad leaver’
conditions in respect of the annual bonus
arrangements. Instead, where an Executive
Director has ceased to hold office or
employment with the Group, or is under notice,
other than due to personal misconduct, the
Committee will determine whether or not the
individual will be eligible to receive any annual
bonus.
If the Committee determines that a departing
Executive Director is eligible to receive a bonus,
the amount of the bonus will be assessed by
reference to the performance targets set for that
financial year.
The deferral requirement in respect of any bonus
awarded will continue to apply if the Committee
so determines.
The amount of any bonus will be pro-rated for
time, provided that the Committee has discretion
to waive time pro-rating.
Incentive plans
Good leavers
Other leavers
Long Term
Incentive Plan
A departing Executive Director will be a ‘good
leaver’ on ceasing employment due to
retirement, injury, disability, ill-health, death,
redundancy or the sale of a business or
subsidiary out of the Group.
Awards held by ‘good leavers’ will normally vest
on the normal vesting date (i.e. the third
anniversary of grant) to the extent that the
performance conditions are met, and be pro-
rated for time.
Any awards that the Committee determines to
have vested will ordinarily be subject to the
additional two- year holding period, unless the
Committee determines in its discretion to
accelerate vesting to the date of cessation. The
Committee also will have discretion to waive the
time pro-rating requirement.
Unvested deferred shares (which represent
deferrals of earned bonus) will vest in full on the
normal vesting date (i.e. the third anniversary of
grant), provided that the Committee will have
discretion to accelerate vesting to the date of
cessation.
Unvested awards will lapse in full where the
cessation of office or employment is on grounds
of personal misconduct.
In other cases, the Committee will have
discretion to determine that unvested awards will
vest (in which case the terms applicable to ‘good
leavers’ will apply). Unless this discretion is
exercised, no bonus will be payable.
Where the reason for cessation of office or
employment is personal misconduct unvested
awards lapse in full.
Non-Executive Directors
The Chair and Non-Executive Directors receive an annual fee (paid in monthly instalments). Non-Executive
Directors (excluding the Chair) may also receive an additional fee in respect of travel if over five hours of
one-way flight time is required to attend a Board meeting, up to an annual cap. The fee for the Chair is set by
the Remuneration Committee and the fees for the Non-Executive Directors are approved by the Board, on
the recommendation of the Chair. In determining the appropriate level of fees the Committee and the Chair
consider advice from external sources and data on the fee levels in other similar companies. No individual is
present when his or her own level of remuneration is discussed.
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Coats Group plc Annual Report and Accounts 2022
Remuneration policy report cont.
For Non-Executive Directors, the remuneration arrangements will be in line with those set out in the relevant
Section below.
Non-Executive Directors’ Remuneration Policy table
Element
Fees
Supplementary
fees
Travel fees
Purpose and link to strategy
Operation
To attract and retain a high-calibre Chair and
Non-Executive Directors by offering market
competitive fee levels.
The Board benefits from the diverse global
business experience of its Non-Executive
Directors, some of whom do not reside in the
UK. However, the increasingly global nature of
our business means that our Non-Executive
Directors are required to travel, with recent
meetings held in Brazil, China, Mexico, Sri
Lanka, the USA and Vietnam. The Board wishes
to recognise the additional time commitment
required for Non- Executive Directors
(excluding Chair) in travelling to Board
meetings.
The Chair is paid an all-inclusive fee for all Board
responsibilities. The other Non-Executive
Directors receive a basic Board fee, with
supplementary fees payable for additional Board
responsibilities and travel (if appropriate). The fee
levels are reviewed on a periodic basis and may
be increased taking into account factors such as
the time commitment of the role and market levels
in companies of comparable size and complexity.
Additional payments may be made above the
basic Board fee if duties significantly exceed
expectations.
Supplementary fees may be payable to the Senior
Independent Director, Chair of the Audit and Risk
Committee, and Chair of the Remuneration
Committee and the Director responsible for
employee engagement.
An additional fee may be payable to any
Non-Executive Director (excluding the Chair)
who is required to travel for more than a specified
length of time to attend a Board meeting.
The maximum total fees for travel will be subject
to an annual cap.
For 2023, a travel fee will be payable for any
journey longer than 5 hours of one-way flight time
and the maximum fee will be capped at the
equivalent of 5 trips. The length of journey and
maximum cap will be reviewed annually to ensure
their continued relevance and appropriateness.
No benefits or other remuneration will be provided to Non-Executive Directors. However in some cases reimbursement of business travel, entertaining and
accommodation expenses claimed in accordance with the UK expenses policy may be deemed taxable benefits under UK tax rules. The Company pays the
resulting tax liability. In addition, professional fees may be paid to assist a non-UK tax resident Director submit appropriate UK income tax returns; the cost of these
fees may be regarded as a taxable benefit
In determining the level of fees for a new Non-Executive Director, the Committee will take into account all
factors it determines to be relevant, including the skills and experience of the individual and the need to
attract Non-Executive Directors of the appropriate calibre. The Committee will also take into account the
level of fees offered by equivalent companies.
Under their respective Non-Executive Director appointment letters, all of the Non-Executive Directors are
entitled to receive an annual fee. None of the appointment letters contains a set term of office. None of the
appointment letters contains a notice period. There are no provisions in the Non-Executive Directors’ letters
of appointment that would give rise to any compensation payments for loss of office.
Removal of the Non-Executive Directors would be governed by the Articles of Association of the Company.
All Non-Executive Director letters of appointment are available for inspection at the Company’s registered
office during normal hours of business, and will also be available at the Company’s AGM.
Development of this policy
Statement of consideration of employment conditions elsewhere in the Company
Prior to setting the Remuneration Policy the Committee the Committee does consider the pay structures
elsewhere in the Group. The approach to benchmarking identifies similar comparator companies in each
local market that the Company wishes to recruit from; the same underlying principles of fairness,
transparency and market competitiveness are applied to executive appointments and to local remuneration
arrangements. Benefit provision follows the same principles of being security minded and in line with local
market practice with an objective of promoting mental and physical well-being. There is a greater level of “at
risk” remuneration for more senior roles reflecting the extent to which pay is conditional on company
performance. The Committee annually reviews the details, market competitiveness and quantum of the
remuneration policies in each of the Company’s major markets and compares that, where applicable, to
senior leadership roles based in that location. This consideration is also extended to the implementation of
the Company’s Living Wage policy, which is reviewed annually to ensure it is relevant to all our employees
and corrective actions are identified to increase compensation where this is required. Committee takes into
account the impact on and comparison with pay arrangements throughout the Company. The Committee
does not directly consult with employees when determining remuneration policy.
The structure of remuneration for Coats’ senior management team is consistent with that for the Executive
Directors. Senior executives participate in annual bonus and long-term incentive arrangements based on
performance measures that are aligned to the measures applicable to Executive Directors.
Statement of consideration of shareholder views
The Committee remains committed to shareholder dialogue and takes an active interest in voting outcomes.
The Committee sought the views of our major shareholders before submitting this Policy for shareholder
approval at the 2023 AGM.
The Committee may, without seeking shareholder approval, make minor changes to this Policy that do not
have a material advantage to Directors.
A copy of the Remuneration Policy will be made available at www.coats.com/governance
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Coats Group plc Annual Report and Accounts 2022
Independent auditor’s report to the members of Coats Group plc
Report on the audit of the financial statements
1 Opinion
In our opinion:
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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 2022 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with United Kingdom
adopted international accounting standards;
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
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. The non-audit services provided to the group are set
out in note 5 to the financial statements and further detail on the nature of services provided is set out in the
Audit and Risk Committee report on page 71. We confirm that we have not provided any non-audit services
prohibited by the FRC’s Ethical Standard 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.
–
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
3 Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
We have audited the financial statements which comprise:
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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 United Kingdom adopted international accounting standards. 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).
Materiality
Scoping
Significant changes in
our approach
– Uncertain tax provisions;
– Material assumptions underlying UK retirement benefits obligations; and
– Acquisition accounting: Valuation of acquired intangibles .
The materiality that we used for the group financial statements was $9.9m
which was determined on the basis of 0.6% of revenue. 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 broad geographical spread of the group, the audit is subject to scoping
decisions on overseas components. Our full-scope audit and specified audit
procedures performed covered 76% of the group’s net assets, 81% of the group’s
adjusted profit before tax within the group’s trading components, and 77% of the
group’s revenue.
Due to the developments referred to on page 151, we no longer consider there to
be a key audit matter relating to Lower Passaic River provisioning.
In light of the Group’s acquisition of Texon International Group (“Texon”) and
Rhenoflex GmbH (“Rhenoflex”), we have identified a key audit matter over the
valuation acquisition of intangibles relating to these businesses.
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Coats Group plc Annual Report and Accounts 2022
Independent auditor’s report to the members of Coats Group plc cont.
4 Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s 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 Covid, the requirements of the applicable financial reporting
framework and the system of internal control;
– Considering emerging issues such as current macroeconomic conditions;
– 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;
– Testing the mechanical and logical accuracy of management’s calculations in their forecast;
– 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’s 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.
5 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our 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 Uncertain Tax Positions
Key audit matter
description
How the scope of our
audit responded to the
key audit matter
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, particularly in respect of intercompany cross-border transactions. The
group’s uncertain tax provisions at 31 December 2022 amount to $26.3 million
(2021: $20.2 million).
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.
There is a risk that there are matters excluded from the gross exposure calculation
and there is judgement required by management and their external advisors to
determine the amount to be provided against known exposures. The valuation of
central provisions relating to ongoing Advanced Pricing Agreement (“APA”)
negotiations between the UK and Indonesian jurisdiction tax authorities is
considered to be the most significant uncertain tax exposure in the group, however
management do not consider this to be a key source of estimation uncertainty.
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 73.
In responding to the key audit matter identified, we performed the following audit
procedures:
Obtained an understanding of the relevant controls over the central tax provision
and evaluated whether these had been implemented as designed. Worked with
our tax specialists 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.
Worked with our transfer pricing specialist to challenge management and their
external advisors on the basis for the provision recognised in respect of the
ongoing Indonesian Advanced Pricing Agreement.
Assessed the completeness and accuracy of management’s disclosures within
the financial statements in accordance with IAS 12 Income Taxes and whether
any critical accounting judgements or key sources of estimation uncertainty exist
that require further disclosure under IAS 1.
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Key observations
Following our analysis and considerations of the Uncertain Tax Provisions, we are
satisfied that the provisions raised in respect of the potential taxation exposures
lie within an acceptable range, and are therefore appropriate. We concluded that
the related disclosures in the financial statements are appropriate.
How the scope of our
audit responded to the
key audit matter
5.2 Material assumptions underlying retirement benefit obligations
Key audit matter
description
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 2022 was $1,912 million (2021: $3,197 million), determined by
management’s expert.
The assumptions used in the valuation are relatively sensitive to small changes
and can result in a material difference in the net surplus recognised of $105.4
million (2021: $21.1 million net surplus). The Coats UK Pension Scheme is the most
significant scheme, the gross liabilities of which amount to $1,786.2 million
(2021: $3,034.9 million). During the period, the trustee purchased a £350 million
bulk annuity insurance policy with Aviva to be held as an investment of
the scheme.
The key assumptions involved in the determination of the present values of the
UK defined benefit obligation include discount rates, mortality, and inflation rates.
Management has taken the judgement that an unconditional right to recover the
UK scheme surplus exists and have therefore recognised a surplus in respect of
the UK scheme, in line with IFRIC 14.
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 69.
Key observations
In responding to the key audit matter identified, we performed the following audit
procedures:
Obtained an understanding of the relevant controls over the UK pension
assumptions and evaluated whether this had been implemented as designed.
Worked with our pension specialists to challenge the assumptions underlying
management’s calculation of the UK defined benefit scheme. We have compared
the key assumptions to industry benchmarks and prior year methodologies.
Evaluated the competence, capability and objectivity of the experts that
management engaged to determine the underlying assumptions of the defined
benefit pension obligations, by checking they are qualified and affiliated with
the appropriate industry body. We evaluated the underlying assumptions of
the pension scheme liabilities, both individually and in aggregate against our
independently determined range of key assumptions and the key assumptions
determined by management.
Assessed management’s judgement that an unconditional right to recover the
UK scheme surplus exists by comparison to the underlying scheme rules and
the view of management’s external specialist.
With the assistance of our pension specialists we assessed the Aviva buy-in
transaction, and the accounting treatment by assessing the key terms of the
agreement.
Independently calculated the value placed on the annuity policies based on
member data as at 31 December 2022.
Assessed the completeness and accuracy of management’s disclosures
within the financial statements in accordance with IAS 19 Employee Benefits
and whether any critical accounting judgements or key sources of estimation
uncertainty exist that require further disclosure under IAS 1.
The key assumptions upon which the underlying retirement benefit obligation
is based were within our reasonable ranges. We concur with management’s
judgement that it is appropriate to recognise a surplus in respect of the
UK scheme. We concluded that the related disclosures in the financial statements
are appropriate.
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5.3 Acquisition accounting: Valuation of acquired intangibles
Key audit matter
description
During the financial year, the Group acquired Texon and Rhenoflex for $211.0
million and $81.5 million respectively. Supported by external valuation specialists,
management has recognised acquisition intangibles of $240.2 million and
goodwill of $98.5 million as a result of these acquisitions. The valuation of these
assets involved management determining a number of significant assumptions,
being: the discount rate, attrition rate for customer relationships and royalty rates
for the trade name and technology.
How the scope of our
audit responded to the
key audit matter
The matter is discussed as a significant financial and reporting issue in the Audit
and Risk Committee report on page 73.
In responding to the key audit matter identified, we performed the following audit
procedures:
Obtained an understanding of the relevant controls over the valuation of
acquired intangible assets and whether these had been implemented as
designed.
Worked with our valuation specialists to challenge the valuation of acquired
intangibles by obtaining underlying data used in the calculation and
benchmarking it against market data and comparable organisations.
Evaluated associated underlying assumptions and forecasts by agreeing the
underlying data to acquisition due diligence reports.
Assessed the mechanical and logical accuracy of the models underpinning the
valuation.
Assessed the competence capability and objectivity of management’s external
valuation specialist.
Assessed the opening balance sheet of the acquired businesses, including any
fair value adjustments determined by management; and
Group revenue
$1,583m
Assessed the completeness and accuracy of management’s disclosures within
the financial statements in accordance with IFRS 3 Business Combinations and
whether any critical accounting judgements or key sources of estimation
uncertainty exist that require further disclosure under IAS 1.
Following our audit procedures performed, we have concluded that the key
assumptions sit within an acceptable range. We are therefore satisfied that the
valuation of acquired intangibles relating to Texon and Rhenoflex, and related
disclosures, are appropriate.
Key observations
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:
Group financial statements
$9.9 million (2021: $9.2 million)
Materiality
Basis for determining materiality Consistent with prior year, we have
determined materiality on the basis
of 0.6% of group revenue.
Rationale for the benchmark
applied
We consider group revenue to be
the most appropriate measure to
reflect the focus of users of the
financial statements and the
volume of transactions in the year.
Parent company
financial statements
$8.9 million (2021: $8.2 million)
Consistent with prior year, parent
company materiality is determined
on the basis of net assets and
capped at 90% of group materiality.
The parent company is primarily an
investment holding company and
net assets is considered the most
appropriate benchmark.
Group materiality
$9.9m
Component
materiality range
$3.9m to $8.9m
Audit and Risk Committee
reporting
threshold $0.5m
Group revenue
Group materiality
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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.
Performance materiality
Basis and rationale for
determining performance
materiality
Group financial statements
70% (2021: 70%) of group materiality 70% (2021: 70%) of parent company
Parent company
financial statements
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. For FY22 purposes, Deloitte has
continued to apply a performance materiality threshold of 70% (FY21:
70%) of group materiality. given the quality of the control environment,
the relatively low level of misstatements identified in the current and
prior years, as well as the fact that management is generally willing to
correct these misstatements.
6.3 Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in
excess of $0.5 million (2021: $0.5 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 was subject to scoping decisions on overseas components.
Following the Group’s acquisition of Texon and Rhenoflex, we have refreshed and updated our
understanding of the group and its environment, including assessing the risks of material misstatement at the
group level, in order to ensure that the components selected for audit provide an appropriate basis on which
to undertake audit work to address the identified risks of material misstatement.
We focused our Group audit scope on 14 (2021: 11) overseas components spread across four continents,
which were subject to full audits. The increase in component full scope audits is as a result of the Texon and
Rhenoflex acquisitions in the year. Additionally, 7 (2021: 7) components were subject to specified audit
procedures.
The 14 overseas components and UK components subject to full audit scope account for 65% (2021: 69%) of
the group’s net assets, 81% (2021: 80%) of the group’s adjusted profit before tax within the group’s trading
components, and 67% (2021: 71%) of the group’s revenue. Including specified audit procedures performed,
we have obtained coverage over 76% (2021: 85%) of the group’s net assets and 77% (2021: 78%) of the
group’s revenue.
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
Adjusted profit before tax
Net assets
Full audit scope
67%
Specified audit
procedures
10%
Review at group level 23%
Full audit scope
81%
Specified audit
procedures
10%
Review at group level 9%
Full audit scope
65%
Specified audit
procedures
11%
Review at group level 24%
7.2 Our consideration of the control environment
Coats Group 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 India component audit team relies upon controls across various operating cycles, general IT controls and
relevant entity level controls, 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 and scoping, we did not seek to place reliance
upon the operating effectiveness of the general IT and entity level controls within these components.
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7.3 Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of climate change on the Group’s business
and its financial statements.
The Group continues to develop its assessment of the potential impacts of climate change which is currently
premised upon three scenarios; a low carbon scenario, a medium carbon scenario and a high carbon
scenario, as explained in the Strategic Report on page 36. Management has identified specific transitional
and physical climate related risks.
As a part of our audit, we have obtained management’s climate-related risk assessment and held discussions
with the head of sustainability and finance management to understand the process of identifying climate-
related risks, the determination of mitigating actions and the impact on the Group’s financial statements. As
explained in note 1(v), the key areas in the consolidated financial statements considered were the impact on
estimated useful lives of tangible assets and forecasts used in the impairment reviews of CGUs. Management
concluded there was no material impact arising from climate change on the judgements and estimates made
in the financial statements as explained in note 1(v).
We performed our own qualitative risk assessment of the potential impact of climate change on the Group’s
account balances and classes of transaction and did not identify any reasonably possible risks of material
misstatement. With the involvement of climate change and sustainability specialists, we evaluated
management’s risk assessment process in respect of the potential impact of climate change in judgements
and estimates taken in the financial statements, and evaluated management’s Task Force on Climate-Related
Disclosures in line with the latest guidance. We also read the climate-related disclosures in the Strategic
Report to consider whether it is materially consistent with the financial statements and our knowledge
obtained in the audit.
7.4 Working with other auditors
As part of our year end audit work, the group engagement team visited the Mexico and US component audit
and management teams during the year-end audit process.
For all overseas components, including Coats Bangladesh and all subsidiaries within the Texon Group
audited by non-Deloitte firms, we held planning calls, assessed their independence, maintained regular
contact throughout the audit process, directed the audit procedures performed and reviewed the risk
assessment and work of overseas component auditors.
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.
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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:
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. These included the group’s environmental regulations that affect the group’s
operations.
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.
Our procedures to respond to risks identified included the following:
–
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;
– 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;
– results of our enquiries of management, group internal audit, and the Audit and Risk committee about
– enquiring of management, the Audit and Risk committee and external legal counsel concerning actual
their own identification and assessment of the risks of irregularities;
and potential litigation and claims;
– any matters we identified having obtained and reviewed the group’s documentation of their policies and
– performing analytical procedures to identify any unusual or unexpected relationships that may indicate
procedures relating to:
risks of material misstatement due to fraud;
–
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;
–
in addressing the risk of fraud in revenue recognition, we tested the accuracy and completeness of the
year end rebate accrual by comparison to contractual requirements of principal end customers and by
performing a retrospective assessment of the accuracy of the 2022 rebate accrual;
– reading minutes of meetings of those charged with governance, reviewing internal audit reports and
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
reviewing correspondence with tax and licensing authority; and
–
–
the matters discussed among the audit engagement team including significant component audit teams,
and relevant internal specialists, including tax, valuations, 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
global 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 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.
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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 77;
the directors’ explanation as to its assessment of the group’s prospects, the period this assessment
covers and why the period is appropriate set out on page 77;
the directors’ statement on fair, balanced and understandable set out on page 80;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on page 49;
the section of the annual report that describes the review of effectiveness of risk management and
internal control systems set out on page 42; and
–
the section describing the work of the audit committee set out on page 67.
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.
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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 20 years, covering the years ending 31 December 2003 to 31 December 2022.
The year ended 31 December 2022 will be the final year under audit by Deloitte.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in
accordance with ISAs (UK).
16. 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.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR)
4.1.14R, these financial statements form part of the European Single Electronic Format (ESEF) prepared
Annual Financial Report filed on the National Storage Mechanism of the UK FCA in accordance with the
ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over whether
the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.
Edward Hanson (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
1 March 2023
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Consolidated income statement
2022
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
2,3
1,583.8
–
1,583.8
1,446.7
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
(Loss)/profit from discontinued
operations
Profit for the year
Attributable to:
Equity shareholders of the company
Non-controlling interests
2,4,5
16
6
7
5
9
(1,087.1)
496.7
(126.1)
(135.7)
–
234.9
1.1
2.6
(32.3)
206.3
(60.1)
146.2
(3.7)
142.5
120.2
22.3
142.5
(9.9)
(9.9)
(3.8)
(41.4)
1.2
(53.9)
–
–
(1.1)
(55.0)
3.7
(51.3)
(83.9)
(135.2)
(134.9)
(0.3)
(135.2)
Earnings/(loss) per share (cents):
11
Continuing operations:
Basic
Diluted
Continuing and discontinued operations:
Basic
Diluted
(979.3)
467.4
(125.1)
(144.6)
–
197.7
1.2
0.4
(21.8)
177.5
(53.3)
124.2
(5.2)
119.0
99.3
19.7
119.0
(1,097.0)
486.8
(129.9)
(177.1)
1.2
181.0
1.1
2.6
(33.4)
151.3
(56.4)
94.9
(87.6)
7.3
(14.7)
22.0
7.3
4.80
4.77
(0.98)
(0.97)
Adjusted earnings per share
37(d)
8.17
7.17
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
Notes on pages 118 to 169 form part of these financial statements.
Consolidated statement of comprehensive income
2021*
Total
US$m
1,446.7
(979.3)
467.4
(125.1)
(164.1)
–
Year ended 31 December
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains on retirement benefit schemes (note 10)
Tax relating to items that will not be reclassified
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Items reclassified to profit or loss:
–
–
–
–
(19.5)
–
(19.5)
178.2
Exchange differences transferred to income statement on sale of business (note 32)
Other comprehensive income and expense for the year
Net comprehensive income and expense for the year
Attributable to:
Equity shareholders of the company
Non-controlling interests
Notes on pages 118 to 169 form part of these financial statements.
–
–
–
(19.5)
0.2
(19.3)
8.9
(10.4)
(10.4)
–
(10.4)
1.2
0.4
(21.8)
158.0
(53.1)
104.9
3.7
108.6
88.9
19.7
108.6
5.84
5.82
6.10
6.07
2022
US$m
7.3
59.8
(1.4)
58.4
2021
US$m
108.6
212.8
(1.0)
211.8
(31.9)
(17.0)
15.0
41.5
48.8
27.5
21.3
48.8
–
194.8
303.4
284.2
19.2
303.4
S
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A
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A
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114
Coats Group plc Annual Report and Accounts 2022
Consolidated statement of financial position
31 December
Non-current assets:
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments in joint ventures
Other equity investments
Deferred tax assets
Pension surpluses
Trade and other receivables
Current assets:
Inventories
Trade and other receivables
Pension surpluses
Cash and cash equivalents
Total assets
Current liabilities:
Trade and other payables
Current income tax liabilities
Bank overdrafts and other borrowings
Lease liabilities
Retirement benefit obligations:
– Funded schemes
– Unfunded schemes
Provisions
Net current assets
Notes
2022
US$m
2021
US$m
31 December
Notes
2022
US$m
2021
US$m
13
13
14
15
16
16
17
10
19
18
19
10
30(g)
21
23
15
10
10
25
124.7
488.7
256.3
96.5
13.1
5.9
24.4
222.7
20.2
1,252.5
211.4
286.3
2.0
172.4
672.1
26.2
256.7
244.5
91.6
12.0
6.0
20.7
159.7
28.7
846.1
250.1
302.7
5.2
107.2
665.2
Non-current liabilities:
Trade and other payables
Deferred tax liabilities
Borrowings
Lease liabilities
Retirement benefit obligations:
– Funded schemes
– Unfunded schemes
Provisions
Total liabilities
Net assets
Equity:
Share capital
Share premium account
Own shares
Translation reserve
1,924.6
1,511.3
Capital reduction reserve
(278.4)
(346.8)
Other reserves
Retained profit
(20.2)
(16.7)
(19.0)
(27.6)
(5.0)
(18.2)
(385.1)
287.0
(16.5)
(19.2)
(17.8)
(41.9)
(6.1)
(8.1)
(456.4)
208.8
Equity shareholders’ funds
Non-controlling interests
Total equity
Rajiv Sharma
Group Chief Executive
Jackie Callaway
Chief Financial Officer
Approved by the Board 1 March 2023
Company Registration No.103548
Notes on pages 118 to 169 form part of these financial statements.
21
24
23
15
10
10
25
26
27
26, 27
27
27
27
27
27
(26.3)
(65.3)
(550.1)
(86.4)
(3.3)
(83.4)
(25.4)
(840.2)
(1,225.3)
699.3
99.0
111.4
(0.1)
(121.9)
59.8
246.3
270.7
665.2
34.1
699.3
(24.2)
(6.8)
(235.1)
(81.2)
(5.6)
(90.2)
(27.7)
(470.8)
(927.2)
584.1
90.1
10.5
(0.5)
(105.7)
59.8
246.3
252.5
553.0
31.1
584.1
S
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A
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E
G
I
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P
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O
R
P
O
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G
O
V
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A
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115
Coats Group plc Annual Report and Accounts 2022
Consolidated statement of changes in equity
Share
capital
US$m
Share
premium
account
US$m
Own
shares
US$m
Translation
reserve
US$m
Capital
reduction
reserve
US$m
Other
reserves
US$m
Retained
profit/(loss)
US$m
Non-
controlling
interests
US$m
Total
US$m
Total
equity
US$m
90.1
10.5
(3.2)
(89.2)
59.8
246.3
(23.8)
290.5
88.9
88.9
28.4
19.7
318.9
108.6
Balance as at
1 January 2021
Profit for the year
Other comprehensive
income and expense
for the year
Dividends (see notes 12
and 27)
Movement in
own shares
Share based payments
Deferred tax on share
schemes
Balance as at
31 December 2021
(Loss)/profit for the year
Other comprehensive
income and expense
for the year
Application of IAS 29
(note 1)
Dividends (see notes 12
and 27)
Issue of ordinary
shares
Purchase of own
shares by Employee
Benefit Trust
Movement in
own shares
Share based payments
Deferred tax on share
schemes
Balance as at
31 December 2022
90.1
10.5
(0.5)
(105.7)
59.8
246.3
252.5
553.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.7
–
–
–
(16.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8.9
100.9
–
–
–
–
–
–
–
–
–
–
–
–
–
(2.1)
2.5
–
–
–
(16.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
211.8
195.3
(0.5)
194.8
(27.6)
(27.6)
(16.5)
(44.1)
(0.8)
3.9
0.1
1.9
3.9
0.1
(14.7)
(14.7)
–
–
–
1.9
3.9
0.1
31.1
22.0
584.1
7.3
58.4
42.2
(0.7)
41.5
5.0
5.0
–
5.0
(32.9)
(32.9)
(18.3)
(51.2)
–
–
(2.5)
4.6
0.3
109.8
(2.1)
–
4.6
0.3
–
–
–
–
–
109.8
(2.1)
–
4.6
0.3
99.0
111.4
(0.1)
(121.9)
59.8
246.3
270.7
665.2
34.1
699.3
Notes on pages 118 to 169 form part of these financial statements.
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116
Coats Group plc Annual Report and Accounts 2022
Consolidated 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
Acquisition of businesses
Disposals of business
Net cash absorbed in investing activities
Cash inflow/(outflow) from financing activities:
Issue of ordinary shares
Purchase of own shares by Employee Benefit Trust
Dividends paid to equity shareholders
Dividends paid to non-controlling interests
Payment of lease liabilities
Borrowings settled on completion of acquisitions
Drawdown of term loan acquisition facility
Net increase in other borrowings
Net cash generated from/(absorbed in) financing activities
Notes
30(a)
30(b)
30(c)
30(d)
30(e)
30(f)
30(f)
2022
US$m
2021
US$m
Year ended 31 December
176.5
(25.5)
(54.6)
96.4
0.5
(31.6)
(271.2)
(17.0)
(319.3)
Net increase in cash and cash equivalents
Net cash and cash equivalents at beginning of the year
Foreign exchange losses on cash and cash equivalents
Net cash and cash equivalents at end of the year
Reconciliation of net cash flow to movements in net debt
Net increase in cash and cash equivalents
Drawdown of term loan acquisition facility
Net increase in other borrowings
Change in net debt resulting from cash flows (free cash flow)
Net movement in lease liabilities during the period
189.0
(12.5)
(47.9)
128.6
0.3
(30.3)
–
–
(30.0)
Movement in fair value hedges
Other non-cash movements
Foreign exchange gains/(losses)
(Increase)/decrease in net debt
Net debt at the start of the year
Net debt at the end of the year
Notes on pages 118 to 169 form part of these financial statements.
26
109.8
(2.1)
(33.0)
(18.3)
(18.1)
(62.5)
240.0
79.2
295.0
31
30(g)
–
–
(27.4)
(16.5)
(22.1)
–
–
8.4
(57.6)
Notes
2022
US$m
72.1
90.8
(5.2)
30(g)
157.7
72.1
30(g)
(240.0)
37(e)
30(g)
(79.2)
(247.1)
(13.0)
5.2
(1.0)
2.2
(253.7)
(246.1)
(499.8)
2021
US$m
41.0
52.1
(2.3)
90.8
41.0
–
(8.4)
32.6
(33.0)
3.0
(1.3)
(0.8)
0.5
(246.6)
(246.1)
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117
Coats Group plc Annual Report and Accounts 2022
Notes to the financial statements
1 Principal accounting policies
Discontinued operations
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:
In the course of preparing the financial statements, the below critical judgements and key sources of
estimation uncertainty have had a significant effect on the amounts recognised in the financial statements for
the years ended 31 December 2022. The critical accounting judgements made by management in applying
the Group’s accounting policies and the key sources of estimation uncertainty were the same as those
applied to the consolidated financial statements for the year ended 31 December 2021, except for the critical
accounting judgement relating to the sale of the Brazil and Argentina business in 2022 set out below.
Critical judgements in applying the Group’s accounting policies
Exceptional and acquisition related items
As set out in the Group’s accounting policy below, judgement is used to determine those items which should
be separately disclosed as exceptional and acquisition related items to provide valuable additional
information for users of the financial statements in understanding the Group’s performance. This judgement
includes assessment of whether an item is of sufficient size or of a nature that is not consistent with normal
trading activities. Please see note 4 for further details.
UK pension surplus recognition
The Group has recognised a net defined benefit pension surplus for the Coats UK Pension Scheme under
IAS 19 of $180.7 million at 31 December 2022 (2021: $108.0 million). Judgement has been applied when
interpreting the scheme rules to determine whether the Group can recognise this surplus asset amount on
the statement of financial position or whether any economic benefits available as a refund are contingent
upon factors beyond the Group’s control and instead require an adjustment to be made to restrict the
amount of the surplus recognised and reflect a liability arising from future committed contributions to the
Coats UK Pension Scheme under IFRIC 14. The Group has determined that it has an unconditional right to a
refund of the surplus assuming the gradual settlement of liabilities over time and therefore has recognised
the full amount of the net defined benefit pension surplus. Please see note 10 for further details.
In management’s judgement the Brazil and Argentina business which was sold in May 2022 represents a
separate major geographical area and therefore its results for 2022 have been presented as a discontinued
operation with 2021 comparative amounts represented to reclassify the results of the Brazil and Argentina
business from continuing operations to discontinued operations
Key sources of estimation uncertainty
The key assumptions concerning the future, and other sources of estimation uncertainty at the balance sheet
date, that may have a significant risk of causing material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
UK retirement benefit obligations
The UK retirement benefit surplus recognised in the consolidated statement of financial position is the net of
the fair value of scheme assets less the present values of the defined benefit obligations at the year end. Key
assumptions involved in the determination of the present values of the defined benefit obligations include
discount rates, beneficiary mortality and inflation rates. Changes in any or all of these assumptions could
materially change the employee benefit surplus recognised in the consolidated statement of financial
position. 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.
a) Accounting convention and format
The Group’s financial statements for the year ended 31 December 2022 have been prepared in accordance
with international accounting standards in conformity with the requirements of the Companies Act 2006, and
complies with the disclosure requirements of the Listing Rules of the UK Financial Conduct Authority. The
financial statements are prepared under the historical cost convention except for investments and derivatives
which are stated at fair value 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, interpretations and
amendments (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 2021.
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118
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
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.
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.
Discontinued operations
On 10 May 2022 the Group announced the agreement to sell its business in Brazil and Argentina to Reelpar
SA, an entity backed by a Sao Paulo Private Equity Firm. The sale was completed on 26 May 2022, the date
which control passed to the acquirer. The results of the Brazil and Argentina business are presented as a
discontinued operation in the consolidated income statement for the year ended 31 December 2022.
Amounts for year ended 31 December 2021 in the consolidated income statement have been represented to
reclassify the results of the Brazil and Argentina business from continuing operations to discontinued
operations. Note 32 provides further details of the sale.
Joint ventures
Going concern
The Directors are satisfied that the Group has sufficient resources to continue in operation for the
foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they
continue to adopt the going concern basis in preparing the consolidated financial statements.
In assessing the Group’s going concern position, the Directors have considered a number of factors,
including the current balance sheet position and available liquidity, the principal and emerging risks which
could impact the performance of the Group and compliance with borrowing covenants.
In order to assess the going concern status of the Group management has prepared:
– A base case scenario, aligned to the latest Group budget for 2023 as well as the Group’s Medium Term
Plan for 2024;
– A severe but plausible downside scenario, which assumes that the global economic environment is
severely depressed over the assessment period; and
– A reverse stress test flexing sales to determine what circumstance would be required to either reduce
headroom to nil on committed borrowing facilities or breach borrowing covenants, whichever occurred
first.
The severe but plausible downside scenario includes further management actions that would be deployed if
required (for example further reduction in costs).
The reverse stress test also includes further controllable management actions that could be deployed if
required. The outcome of the reverse stress test was that the interest cover covenant would be breached,
however, at the breaking point in the test the Group still maintained a comfortable level of liquidity on
committed borrowing facilities. The Directors consider the likelihood of the condition in the reverse stress
test occurring to be remote.
Liquidity headroom
As at 31 December 2022 the Group’s net debt excluding leases liabilities was $394.4 million (2021: $147.1
million). Following the completion of the new US Private Placement and repayment of the acquisition facility
in February 2023, the Group’s committed debt facilities total $835 million across its Banking and US Private
Placement group, with a range of maturities from late 2024 through to 2030. As of 31 December 2022, based
on the facilities in place at that date, the Group had around $250 million of headroom against these
committed banking facilities.
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.
In both the base case and the severe but plausible downside scenario liquidity is comfortable throughout the
assessment period.
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119
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
Covenant testing
The Group’s committed borrowing facilities are subject to ongoing covenant testing. Covenants are
measured twice a year, at full year and half year and are measured under frozen accounting standards and
therefore exclude the effects of IFRS 16. The financial covenants under the borrowing agreements are for
leverage (net debt/EBITDA) less than 3.0 and interest cover (EBITDA/interest charge) to be in excess of 4.0.
All banking covenants tests were met comfortably at 31 December 2022, with leverage of 1.4x and interest
cover of 19.0x. The base case forecast indicates that banking covenants will be comfortably met throughout
the assessment period. Under the severe but plausible downside scenario covenant compliance is still
projected to be achieved throughout the assessment period, although with reduced but adequate headroom.
Conclusion
In conclusion, after reviewing the base case, the severe but plausible downside scenario and considering the
remote likelihood of the scenario in the reverse stress test occurring, the Directors have formed the
judgement that, at the time of approving the consolidated financial statements, there are no material
uncertainties that cast doubt on the Group’s going concern status and that it is appropriate to prepare the
consolidated financial statements on the going concern basis.
c) Functional currency
The functional currency of Coats Group plc continued to be United States dollars (USD) during the year
ended 31 December 2022.
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.
The principal exchange rates (to the US dollar) used in preparing these financial statements are as follows:
Average
Period end
Sterling
Euro
Chinese Renminbi
Indian Rupee
Turkish Lira*
Sterling
Euro
Chinese Renminbi
Indian Rupee
Turkish Lira
2022
0.81
0.95
6.73
78.59
16.57
0.83
0.93
6.90
82.72
18.69
2021
0.73
0.85
6.45
73.92
8.89
0.74
0.88
6.35
74.47
13.32
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
* Cumulative inflation rates over a three-year period exceeded 100% in Turkey in Q2 2022 and is considered
as hyperinflationary and as a result IAS 29 “Financial Reporting in Hyperinflationary Economies” has been
applied for the first time for the year ended 31 December 2022. In accordance with IAS 29, the financial
statements of the Company’s subsidiary in Turkey are translated into the Group’s US Dollar presentational
currency at the 31 December 2022 year end exchange rate. Monetary assets and liabilities are not restated.
All non-monetary items recorded at historical rates are restated for the change in purchasing power caused
by inflation from the date of initial recognition to the year end balance sheet date. The income statement of
the Company’s subsidiary in Turkey is adjusted for inflation during the reporting period. Comparative
amounts in the Group’s financial statements are not restated. The translation adjustment resulting from the
initial application of IAS 29 of $5.0 million was recognised in equity and a net monetary gain of $1.9 million
was recognised within finance income on non-monetary items held in Turkish Lira. The inflation rate used is
the consumer price index published by the Turkish Statistical Institute, TurkStat. The movement in the price
index for the year ended 31 December 2022 was 64%.
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 financing 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, non-actuarial gains or losses arising from significant one off changes to defined benefit pension
obligations, regulatory investigation costs and impairment of assets. Acquisition related items include
amortisation of acquired intangible assets, acquisition transaction costs, contingent consideration linked to
employment and adjustments to contingent consideration. 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.
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) Business combinations and Intangible assets
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
consideration for each acquisition is measured as the sum of the acquisition-date fair values of assets given,
liabilities incurred or assumed in exchange for control of the acquiree. Acquisition-related costs are
recognised in the consolidated income statement, as incurred, in operating costs.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the measurement period (see below), or
additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognised as of that date.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
The measurement period is the period from the date of acquisition to the date the Group obtains complete
information about facts and circumstances that existed as of the acquisition date and is subject to a
maximum of one year.
Goodwill
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest
in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed. 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.
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.
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;
The estimated useful lives (other than Coats Brands) are as follows:
– it is probable that the asset created will generate future economic benefits; and
Brands and trade names
Technology
Customer relationships
5 years to 20 years
4 years to 10 years
9 years to 15 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.
– 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.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
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.
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.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
(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.
(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.
(iii) Compound instruments
(vi) Cash flow hedges
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.
(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 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.
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.
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.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
(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.
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.
o) Taxation
The tax expense represents the sum of the current tax and deferred tax.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
q) Borrowing costs
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.
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.
When some or all of the economic benefits required to settle a provision are expected to be recovered from
an insurer, a receivable is recognised as an insurance reimbursement asset and included separately within
other receivables if it is virtually certain that reimbursement from the insurer will be received and the amount
of the receivable can be measured reliably.
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.
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.
S
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P
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A
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G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
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H
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R
I
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F
O
126
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
1 Principal accounting policies cont.
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.
v) 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 Taskforce on
Climate-related Financial Disclosures (TCFD) section of the Strategic Report on pages 35-38 we are exposed
to specific transitional and physical climate related risks. The key areas in the consolidated financial
statements that were identified for consideration of potential impacts from these climate related risks were
the assumptions used to support impairment reviews of cash generating units (CGUs) and accounting
policies on estimated useful lives of tangible fixed assets.
(i) Impairment of assets
The key climate related risks considered were the introduction of carbon taxes, disruption of water supply
and extreme weather events (floods and extreme heat). These risks as well as any potential mitigations were
considered when assessing the appropriateness of the assumptions used to project future cash flows to
support the value in use of a CGU. No specific significant financial impacts were identified in relation to the
CGUs that were subject to an impairment review during the year ended 31 December 2022 (see note 13).
In addition, no significant short to medium term (pre 2045) climate related impacts have been identified for
individual assets or other CGUs in the Group.
(ii) Fixed asset useful lives
Consideration was given as to whether the impact of physical risks relating to extreme weather events (e.g.
flood risk damage) may require a reassessment of the estimated useful lives of fixed assets. As noted in the
physical risks section in our TCFD disclosures, no significant impacts are currently expected in the short to
medium term (pre 2045), after which point the majority of the Group’s current fixed asset portfolio will be fully
depreciated. As such, the reassessment of fixed asset useful lives to reflect potential impacts of climate
change was not deemed necessary.
In light of the above, the Group’s current assessment is that the climate related risks detailed in the TCFD
disclosures section of the Strategic Report do 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:
– Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
– Annual Improvements to IFRS Standards 2018–2020;
– Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); and
– Reference to the Conceptual Framework (Amendments to IFRS 3).
The adoption of these standards has not had a material impact on 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 UKEB, are expected to be effective as follows:
From the year beginning 1 January 2023:
– Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
– IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts;
– Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
– Definition of Accounting Estimates (Amendments to IAS 8); and
– Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
From the year beginning 1 January 2024:
– Non-current Liabilities with Covenants (Amendments to IAS 1);
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.
2 Segmental analysis
Operating segments are components of the Group’s business activities about which separate financial
information is available that is evaluated regularly by the chief operating decision maker (the Group
Executive Team). The Group’s customers throughout the year ended 31 December 2022 were grouped into
two segments Apparel & Footwear and Performance Materials which have distinct different strategies and
differing customer/end-use market profiles. Effective 1 January 2023 the Group’s new organisational
structure and reporting structure will consist of three divisions: Apparel, Footwear and Performance
Materials. The Group will report its financial results on this new segmental basis from half year 2023 and,
from 1 January 2023, this will be the basis on which financial information is reported internally to the chief
operating decision maker (CODM) for the purpose of allocating resources between segments and assessing
their performance.
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G
O
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R
N
A
N
C
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F
I
N
A
N
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127
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
2 Segmental analysis cont.
b) Geographic information
As at December 2022, this internal reorganisation had not occurred with segment results grouped into two
segments Apparel & Footwear and Performance Materials to which the CODM was provided financial
information on which to assess performance and allocate resources.
Year ended 31 December
Europe, Middle East & Africa (EMEA)
a) Segment revenue and results
Year ended 31 December 2022
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 2021*
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
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
Segment results include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Cost of sales and other operating costs not directly attributable to a segment are allocated
to segments on an aggregated 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, total liabilities and depreciation charges 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.
Apparel &
Footwear
US$m
Performance
Materials
US$m
Total
US$m
1,163.4
200.8
420.4
1,583.8
34.1
UK
Rest of EMEA
Americas
USA
Rest of Americas
Asia & Rest of World
India
China and Hong Kong
Vietnam
Other
Apparel &
Footwear
US$m
Performance
Materials
US$m
1,048.1
170.7
398.6
27.0
234.9
(53.9)
181.0
1.1
2.6
(33.4)
151.3
Total
US$m
1,446.7
197.7
(19.5)
178.2
1.2
0.4
(21.8)
158.0
Revenue by origin
Revenue by destination
Non-current assets
2022
US$m
2021*
US$m
2022
US$m
2021*
US$m
2022
US$m
2021
US$m
23.1
308.3
219.4
121.2
184.4
234.9
213.5
279.0
14.4
268.8
205.4
108.4
166.7
217.5
192.0
273.5
13.0
281.6
240.7
118.1
184.3
198.4
215.0
332.7
14.8
250.9
218.4
116.2
161.8
194.1
178.7
311.8
1,583.8
1,446.7
1,583.8
1,446.7
256.8
195.0
51.0
52.8
39.7
301.8
38.7
63.7
999.5
258.9
70.3
63.3
46.6
46.1
77.1
34.9
67.2
664.4
Non-current assets excludes derivative financial instruments, investments, pension surpluses and deferred
tax assets.
3 Revenue
An analysis of the Group’s revenue is as follows:
Year ended 31 December
Goods transferred at a point in time
Software solutions services transferred over time
Other operating income
Finance income
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
The software solutions business is included in the Apparel & Footwear segment.
2022
US$m
2021*
US$m
1,573.6
1,435.6
10.2
11.1
1,583.8
1,446.7
1.2
2.6
–
0.4
1,587.6
1,447.1
S
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G
O
V
E
R
N
A
N
C
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F
I
N
A
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128
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
3 Revenue cont.
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
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
Revenue from Texon and Rhenoflex totalling $87.2 million for the period to 31 December 2022 from their
respective acquisition dates (see note 31) is included in the amount above for the Apparel & Footwear
segment of which $34.4 million is included in Asia, $1.2 million is included in Americas and $51.6 million is
included in EMEA.
The Group had no revenue from a single customer which accounts for more than 10% of the Group’s revenue.
4 Exceptional and acquisition related items
The Group’s consolidated income statement format is presented before and after exceptional and acquisition
related items. Adjusted results exclude exceptional and acquisition related items on a consistent basis with
the previous reporting period to provide valuable additional information for users of the financial statements
in understanding the Group’s performance and reflects how the performance of the business is managed
and measured on a day-to-day basis. Further details on alternative performance measures are set out
in note 37.
Exceptional items may include significant restructuring associated with a business or property disposal,
litigation costs and settlements, profit or loss on disposal of property, plant and equipment, non-actuarial
gains or losses arising from significant one off changes to defined benefit pension obligations, regulatory
investigation costs and impairment of assets. Acquisition related items include amortisation of acquired
intangible assets, acquisition transaction costs, contingent consideration linked to employment and
adjustments to contingent consideration.
2022
US$m
2021*
US$m
911.8
340.6
331.4
849.7
313.8
283.2
1,163.4
420.4
1,583.8
1,048.1
398.6
1,446.7
1,583.8
1,446.7
Exceptional items
Judgement is used by the Group in assessing the particular items, which by virtue of their scale and nature,
are presented in the income statement and disclosed in the related notes as exceptional items. In
determining whether an event or transaction is exceptional, materiality is a key consideration and qualitative
factors, such as frequency or predictability of occurrence, are also considered. This is consistent with the
way financial performance is measured by management and reported to the Board.
Total exceptional and acquisition related items charged to profit before taxation for the year ended 31
December 2022 were $55.0 million (2021: $19.5 million) comprising exceptional items for the year ended 31
December 2022 of $31.2 million (2021: $3.7 million) and acquisition related items for the year ended 31
December 2022 of $23.8 million (2021: $15.8 million). Taxation in respect of exceptional and acquisition
related items is set out in note 9.
Exceptional items charged/(credited) to operating profit during the year ended 31 December 2022 are set out
below:
Year ended 31 December
Exceptional items:
Strategic project costs:
- Cost of sales
- Distribution costs
- Administration costs
Profit from sale of property:
Other operating income
Total exceptional items charged to operating profit from continuing operations
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
2022
US$m
2021*
US$m
9.9
3.8
18.7
32.4
(1.2)
31.2
–
–
3.7
3.7
–
3.7
S
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P
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P
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G
O
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N
A
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F
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A
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I
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129
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
4 Exceptional and acquisition related items cont.
Strategic project costs – At the end of 2021 the Group commenced a strategic project to improve margins by
optimising the portfolio and footprint, improving the overall cost base efficiency, and mitigating structural
labour availability issues in the US. During the year a new facility was established in Mexico, manufacturing
processes were transferred from the US and a legacy facility in the US was exited. In EMEA thread
operations in Romania were consolidated in a purpose-built logistics facility and warehouses in Poland and
Hungary were exited. Corporate and overhead activities in the UK and US were moved closer to the Group’s
operations and customers. As a result of these activities, exceptional restructuring costs totalling $32.4
million were incurred during the year ended 31 December 2022 which included severance costs of $22.5
million, non-cash impairment charges of tangible fixed assets and right-of-use assets of $4.7 million and $5.2
million of legal, advisers, closure and related costs.
The Group accelerated the implementation of this strategic project during the year ended 31 December
2022, delivering in-year efficiencies in 2022 ahead of the Group’s expectations. In addition, the Group
expect to deliver total savings of $70 million by 2024, a significant increase on the $50 million the Group
previously expected to deliver. The additional $20 million savings will primarily arise from the transformation
of Asian operations, in particular in China and India.
During the previous year ended 31 December 2021, exceptional strategic project costs of $3.7 million were
incurred which included advisers’ costs of $0.9 million, impairment charges relating to plant and equipment
in North America of $2.0 million and closure and related costs of $1.7 million. This was offset by an
exceptional credit of $0.9 million relating to the closure of a small business in Australia in a prior year.
Profit from sale of property – During the year ended 31 December 2022 a profit of $1.2 million was made
from the sale of a property as part of the above strategic project.
Acquisition related items
Acquisition related items are set out below:
Year ended 31 December
Acquisition related items:
Administrative expenses:
Acquisition transaction costs
Amortisation of acquired intangible assets
Acquisition earnouts and contingent consideration
Finance costs:
Acquisition transaction costs
Total acquisition related items before taxation
2022
US$m
2021
US$m
11.9
10.8
–
22.7
1.1
23.8
12.4
3.3
0.1
15.8
–
15.8
Acquisition transaction costs charged to administrative expenses during the year ended 31 December 2022
of $11.9 million include transaction costs relating to the acquisitions of Texon and Rhenoflex (see note 31).
Acquisition transaction costs charged to finance costs during the year ended 31 December 2022 of $1.1
million relate to the $240.0 million term loan acquisition facility used to finance the acquisition of Texon (see
note 31).
During the year ended 31 December 2021, the Group pursed several acquisition opportunities and as a result
incurred transaction costs of $12.4 million
Acquisition transaction costs and amortisation of intangible assets acquired through business combinations
are not included within adjusted operating profit and adjusted earnings per share. These costs are
acquisition related and management consider them to be capital in nature and are not included in profitability
measures by which management assess the performance of the Group.
Excluding amortisation of intangible assets acquired through business combinations and recognised in
accordance with IFRS 3 “Business Combinations” from adjusted results also ensures that the performance of
the Group’s acquired businesses is presented consistently with its organically grown businesses. It should be
noted that the use of acquired intangible assets contributed to the Group’s results for the years presented
and will contribute to the Group’s results in future periods as well. Amortisation of acquired intangible assets
will recur in future periods. Amortisation of software is included within operating results as management
consider these cost to be part of the trading performance of the business.
The Group has made acquisitions in prior years with earn-outs to allow part of the consideration to be based
on the future performance of the businesses acquired and to lock in key management. Where consideration
paid or contingent consideration payable in the future is employment linked, it is treated as an expense and
part of statutory results. However, all consideration of this type is excluded from adjusted operating profit
and adjusted earnings per share, as in management’s view, these items are part of the capital transaction.
S
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A
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I
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P
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P
O
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A
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G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
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H
E
R
I
N
F
O
130
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
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)/loss 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
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
Net monetary gain arising from hyperinflation accounting (see note 1)
Other interest receivable and similar income
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
12.6
26.5
19.4
(1.1)
1.0
1.7
0.1
0.1
2.9
6.2
1.1
3.5
(0.2)
728.2
4.1
2022
US$m
0.1
1.9
0.6
2.6
6.0
28.2
19.4
0.1
0.7
1.5
0.2
0.2
2.6
6.1
(0.2)
0.5
(0.2)
631.4
5.3
2021*
US$m
0.1
–
0.3
0.4
7 Finance costs
2022
US$m
2021
US$m
Year ended 31 December
Interest on bank and other borrowings
Interest expense on lease liabilities
Net interest on pension scheme assets and liabilities
Other finance costs including unrealised gains and losses on foreign exchange contracts
2022
US$m
18.9
4.9
0.5
9.1
33.4
2021*
US$m
10.4
5.2
4.1
2.1
21.8
Other finance costs for the year ended 31 December 2022 include acquisition related transaction costs of
$1.1 million incurred in connection with the $240.0 million term loan acquisition facility used to finance the
acquisition of Texon (see note 4).
8 Staff costs
The average monthly number of employees was:
Year ended 31 December
Continuing operations1:
Manufacturing
Other staff
Discontinued operations2
Total number of employees
Comprising:
UK
Overseas
The total numbers employed at the end of the year were:
UK
Overseas
Discontinued operations
Total number of employees
2022
2021*
14,329
3,384
17,713
1,240
18,953
256
18,697
18,953
228
16,415
16,643
–
16,643
13,819
3,179
16,998
1,475
18,473
182
18,291
18,473
179
17,374
17,553
1,264
18,817
1. The 2022 average number of employees for continuing operations includes the acquired Texon and Rhenoflex businesses from their respective
acquisition dates of 20 July 2022 and 23 August 2022 through to 31 December 2022 (see note 31).
2. The 2022 average number of employees for the discontinued Brazil and Argentina business are for the period until disposal on 10 May 2022 (see
note 32).
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
S
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A
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G
I
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R
E
P
O
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C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
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E
M
E
N
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S
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131
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
8 Staff costs cont.
Year ended 31 December
Employee aggregate remuneration comprised (including directors)1:
Wages and salaries
Social security costs
Other pension costs (note 10)
Discontinued operations
2022
US$m
2021*
US$m
288.1
28.2
9.4
325.7
5.6
331.3
304.6
29.7
10.0
344.3
12.3
356.6
1. This does not include any contingent consideration on acquisitions that is treated as an expense, due to it being linked to continued employment
(see note 4).
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
9 Tax on profit from continuing operations
Year ended 31 December
UK Corporation tax at 19% (2021: 19%)
Overseas tax charge
Deferred tax (charge)/credit
Total tax charge
2022
US$m
–
(56.2)
(0.2)
(56.4)
(55.0)
1.9
(53.1)
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
The overseas tax charge includes withholding tax charges and other taxes not based on profits for the year
ended 31 December 2022 of $13.3 million (2021: $12.1 million).
For the year ended 31 December 2022 the tax credit in respect of exceptional and acquisition related items
was $3.7 million (2021: $0.2 million). This includes exceptional tax credits of $2.0 million relating to
exceptional strategic projects and $1.7 million relating to the unwinding of tax liabilities on the amortisation of
intangible assets acquired as a result of the acquisitions of Texon and Rhenoflex during the year ended 31
December 2022 (refer to note 32).
The tax charge for the year can be reconciled as follows:
2021*
US$m
Non-taxable income
–
Local tax incentives
Year ended 31 December
Profit before tax
Expected tax
charge/(credit) at
the UK statutory
rate of 19%
(2021: 19%)
Differences
between overseas
and UK taxation
rate
Non-deductible
expenses
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
Exceptional and
acquisition
related items
US$m
(55.0)
Adjusted
US$m
206.8
Other
adjustments1
US$m
2022
Total
US$m
(0.5)
151.3
Exceptional and
acquisition
related items
US$m
(19.5)
Adjusted
US$m
181.6
Other
adjustments1
US$m
2021*
Total
US$m
(4.1)
158.0
39.3
(10.5)
(0.1)
28.7
34.5
(3.7)
(0.8)
30.0
1.8
5.0
–
–
–
–
–
–
–
(2.1)
(1.7)
(0.7)
(0.3)
(1.3)
12.6
(0.5)
2.0
13.3
60.6
29%
–
–
–
–
–
(0.3)
3.3
(0.7)
(0.3)
(0.1)
0.8
(0.6)
(0.7)
(1.3)
(3.5)
(0.4)
12.2
–
–
–
(0.5)
2.0
13.3
56.4
37%
7.7
1.7
1.9
12.1
53.8
30%
1.5
2.0
–
–
–
–
–
–
–
(0.1)
–
–
–
–
0.4
–
–
–
(0.2)
1%
(0.5)
12%
1.3
2.8
(0.6)
(0.7)
(3.5)
8.1
1.7
1.9
12.1
53.1
34%
(3.7)
7%
(0.5)
100%
1. Other adjustments consist of net interest on pension scheme assets and liabilities of $0.5 million (2021: $4.1 million).
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
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132
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
9 Tax on profit from continuing operations cont.
Taxation paid
The Group’s adjusted 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 adjusted
effective rate on pre-tax profits was 29% (2021: 31%). The lower rate was driven by higher year on year
profits, improved profit mix and a reduction in withholding taxes.
Uncertain tax positions
The Group’s tax liability includes a number of tax provisions, which together total $26.3 million (2021: $20.2
million). The increase in the year is primarily due to $5.6 million of tax provisions relating to acquisitions (see
note 31). 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.
During the year the Group made Corporate Income Tax payments in respect of continuing operations
(including withholding and dividend distribution taxes) of $54.6 million (2021: $47.8 million). The amount of
tax paid in each jurisdiction is as follows:
Year ended 31 December
UK
Vietnam
India
Indonesia
Hong Kong
Bangladesh
Turkey
Tunisia
China
Colombia
USA
Hungary
Thailand
Pakistan
Singapore
Sri Lanka
Germany
Spain
Poland
Others (15 countries each less than $0.5 million)
Total Corporate Income Tax paid
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
2022
US$m
10.0
16.1
2021*
US$m
9.3
13.9
3.9
3.3
3.1
2.9
2.3
2.2
1.8
1.6
1.3
0.9
0.8
0.8
0.7
0.6
0.6
0.2
0.2
1.3
3.0
4.4
1.2
1.8
0.4
–
3.8
1.3
0.1
0.7
1.0
0.8
2.3
0.8
–
1.0
0.5
1.5
54.6
47.8
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
9 Tax on profit from continuing operations cont.
b) Defined contribution schemes
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 current year the Group paid withholding taxes in the following
jurisdictions:
The Group operates a number of defined contribution plans around the world to provide pension benefits.
c) Defined benefit schemes
Indonesia
India
China
Vietnam
Bangladesh
Thailand
Estonia
Others (each less than $0.5 million)
Total withholding taxes paid
10 Retirement and other post-employment benefit arrangements
a) Pension and other post-employment costs
2022
US$m
2021
US$m
2.4
1.7
1.5
1.5
1.1
0.6
0.4
2.2
2.9
2.0
1.9
1.7
1.8
0.5
0.6
0.4
11.4
11.8
The Group operates various defined benefit pension and other post-employment arrangements in most of
the countries in which it operates. The most significant defined benefit pension schemes are the Coats UK
Pension Scheme and the Coats North America Pension Plan (US Plan) – more details of which are included
below. These schemes represent around 95% of the Group’s total defined benefit obligations. Both these
schemes are pre-funded and report an accounting surplus, whereas the majority of the Group’s other
arrangements (most significantly in Germany) are unfunded and benefits are met on an ongoing basis by the
Group.
The overall balance sheet position for the Group in respect of the defined benefit pension and other post-
employment arrangements shows a significant surplus under IAS 19 at the end of the financial year of $105.4
million. This is due mainly to the pre-funded schemes’ assets exceeding the IAS 19 measure of their liabilities.
Importantly, the measurement of liabilities under IAS 19 differs from local requirements to determine the
Group’s cash funding of these schemes, which are currently more onerous in the UK in particular and
contrary to the IAS 19 position leaves the scheme in a Technical Provision deficit position on the funding
basis (albeit significantly improved in recent periods).
Pension and other post-employment costs charged to operating profit for the year were (continuing and
discontinued operations):
Defined contribution schemes
Defined benefit schemes –
Coats US funded
Other funded and unfunded
Past service cost/(credit)
Settlements
Administrative expenses for defined benefit schemes
US$m
–
3.9
Year ended
31 December
2022
US$m
5.5
3.9
1.3
0.1
4.7
15.5
US$m
2.0
4.0
Year ended
31 December
2021
US$m
4.0
6.0
(0.2)
(3.5)
5.0
11.3
Coats UK Pension Scheme
The Coats UK Pension Scheme (“the Scheme”) is administered by a trustee. Its assets are 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 (for example the Group).
The sponsor of the Scheme is Coats Limited and the Company provides a guarantee to the Scheme.
The trustee board is responsible for setting the Scheme’s investment policy following consultation with the
wider Group. Over the majority of the financial year, the trustee board operated 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. This policy was augmented in December by the purchase of a bulk
annuity as summarised below.
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134
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
10 Retirement and other post-employment benefit arrangements cont.
Latest funding valuation estimate
Cash funding commitments
The Scheme is subject to full actuarial valuations every three years using assumptions agreed between the
trustee board and the wider Group. The purpose of this valuation is to design a cash funding plan to ensure
that the pension scheme has sufficient assets available to meet the future payment of benefits to Scheme
members. It is this funding valuation basis, not accounting valuations under IAS 19, that determines the cash
funding the Group provides to the Scheme.
The valuation of liabilities for funding purposes differs from the IAS 19 valuation used for accounting
purposes, mainly due to the different actuarial assumptions used. To calculate the funding valuation liabilities
(the “Technical Provisions”) the assumptions agreed with the trustee board must be set more prudently
overall, with the discount rate in particular reflecting a relatively cautious expectation of future returns on the
Scheme’s assets. In contrast, under IAS 19, all the assumptions used to value the liabilities are the Company
directors’ central best estimates according to established accounting principles with the exception of the
discount rate, which is based on high-quality (AA rated) corporate bond yields regardless of scheme
investment strategy and therefore differs in practice to the funding basis of valuation.
In November 2021, the Group and the trustee board agreed the latest funding valuation of the Scheme with
an effective date of 31 March 2021. This showed a prudent Technical Provisions (funding) deficit of £193
million ($261 million at 31 December 2021 exchange rates) and resulted in agreed ongoing deficit recovery
payments of £22 million per annum ($27 million) until 31 December 2028. These payments are uprated each
year by the increase in the UK Retail Prices Index, but capped at 5% in any year. The difference between the
agreed schedule of payments which total around £170 million and the overall deficit of £193 million is
expected to be met by modest asset outperformance vs valuation assumptions over the c.7 year period. The
Group also meets the Scheme’s administrative expenses and levies estimated at £4 million ($5 million) per
annum.
In addition, over a number of months from May 2021 the Group had committed to pay circa $21 million of
agreed deficit recovery payments that fell due in 2020, but were deferred as part of Covid underpinning
actions. The final monthly “catch-up” payment was made in November 2022.
Recent updates indicate the funding deficit has fallen significantly and is now approaching fully funded on a
Technical Provisions basis. This significant improvement has been due to employer contributions, favourable
movements in the market (increasing discount rates) and the de-risking actions that the Group have taken,
for example the pensioner buy-in transaction referred to below. As a result of this significantly improved
funding position, and reflective of the collaborative working relationship with the Trustees, the Group has
agreed a mechanism to switch off / switch on the regular cash contributions to the Coats UK Pension
Scheme based on monthly estimates of the latest funding position. As such, if the Scheme remains in surplus
for a consecutive number of months cash contributions will cease entirely until any trigger on the downside
(i.e. a return to deficit) has been hit. At this point, contributions on a pre-agreed basis would resume.
Pensioner buy-in
In December 2022, the trustee board purchased a circa £350 million bulk annuity policy from Aviva, which
insures all the benefits payable in respect of around 3,700 pensioner members (a “pensioner buy-in”). This
policy will see all financial and demographic risks, including those related to longevity, covered for
approximately 20% of Scheme members. The bulk annuity policy is an asset of the Scheme. Under IAS 19 it
is deemed a qualifying insurance policy, due to it exactly matching the amount and timing of benefits
payable by the Scheme to the covered members. Under IAS 19, the value of the bulk annuity policy is
therefore set equal to the corresponding IAS 19 liabilities for covered members; not the premium paid. Given
the favourable pricing at the point of transaction, the pensioner buy-in has no material impact on the Group’s
balance sheet or future income statements on an IAS 19 basis.
Coats North America Pension Plan
The Coats North America Pension Plan (Coats US) is a defined benefit scheme, the assets of which are held
in funds that are legally separated from the Group. In 2019 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 following disclosures are required in accordance with the requirements of IAS 19 and do not include
information in respect of schemes operated by joint ventures. The information provided below for defined
benefit plans has been prepared by independent qualified actuaries based on the most recent formal
actuarial valuations of the schemes (effective at 31 March 2021 and 1 January 2022 for the UK and US
respectively), updated to take account of the valuations of assets and liabilities as at 31 December 2022.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
10 Retirement and other post-employment benefit arrangements cont.
Risk
Description
Commentary
The following disclosures do not include information in respect of schemes operated by joint ventures.
i) Principal risks
The Group is exposed to actuarial and investment risks, the principal risks are:
Risk
Description
Commentary
Interest rate
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.
Inflation
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.
Longevity risk
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 impact of the movement in discount
rates are shown on page 141. The Trustees
of the UK and US schemes hedge these
sensitivities through physical bonds and
derivatives. The Coats UK Pension Scheme
is currently over 90% (2021: over 85%)
hedged against interest rate movements by
reference to the Technical Provisions
liability.
The impact of the movement in inflation
rates are shown on page 141. 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 90%
(2021: over 85%) hedged against inflation
rate movements by reference to the
Technical Provisions liability.
The impact of an increase in life expectancy
is shown on page 141. Currently this is a risk
that is largely unhedged by the Group’s
pension schemes. However, the UK
scheme’s recent £350 million pensioner
buy-in with Aviva hedges roughly 20% of its
longevity risk.
Investment
risk
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.
Liquidity risk
The scheme needs available financial
resources to meet obligations when they fall
due. Not being able to sell assets in a timely
manner for the expected valuation could
lead to an increased disclosed deficit or
reduced surplus.
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 fixed
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.
The schemes’ investment policies recognise
the need to generate cash flows to meet
members’ benefits as they fall due.
In addition, the UK scheme’s hedging policy
is run using low leverage in order to
maintain strong liquidity, even after the
pensioner buy-in transaction. The scheme
suffered no meaningful impacts during the
well documented market issues over
September and October 2022, which faced
those UK schemes relying heavily on “LDI”
strategies.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
10 Retirement and other post-employment benefit arrangements cont.
iii) Amounts recognised in the consolidated income statement
ii) Principal assumptions
Amounts recognised in income in respect of these defined benefit schemes are as follows:
The principal assumptions for the UK and US schemes are as follows:
Principal assumptions at 31 December 2022
Rate of increase in salaries
Rate of increase for pensions in payment
Discount rate
Inflation assumption
Principal assumptions at 31 December 2021
Rate of increase in salaries
Rate of increase for pensions in payment
Discount rate
Inflation assumption
Coats UK
Pension Scheme
Coats US
%
–
Various
4.8
3.3
%
–
–
5.2
–
Coats UK
Pension Scheme
Coats US
%
–
Various
1.9
3.5
%
3.0
–
2.8
2.2
Other
%
5.7
4.1
5.7
4.5
Other
%
4.9
2.9
4.0
3.0
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% (2021: 3.4%). For
former Staveley scheme members, the majority of the increases for pensions in payment fall within the range
2.2%–3.0% (2021: 2.6%–3.4%). For former Brunel scheme members, the majority of the increases for
pensions in payment fall within the range 3.4%–4.0% (2021: 3.2%–4.0%).
The assumed life expectancy on retirement is:
Retiring today at age 60:
Males
Females
Retiring in 20 years at age 60:
Males
Females
Year ended 31 December 2022
Year ended 31 December 2021
Coats UK
Pension Scheme
Years
Coats US
Years
Coats UK
Pension Scheme
Years
Coats US
Years
25.6
28.5
27.1
29.9
24.9
27.1
26.6
28.6
25.8
28.6
27.3
30.0
24.8
27.0
26.5
28.6
Year ended 31 December 2022
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
Year ended 31 December 2021
Current service cost
Past service (cost)/credit
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$m
–
–
–
(4.1)
(4.1)
(50.0)
52.2
–
2.2
–
(1.2)
–
(0.5)
(1.7)
(1.3)
3.9
(2.3)
0.3
Coats UK
Pension Scheme
US$m
Coats US
US$m
–
–
–
(4.2)
(4.2)
(41.0)
39.6
–
(1.4)
(2.0)
(0.1)
3.6
(0.7)
0.8
(1.9)
4.0
(1.8)
0.3
Other
US$m
(3.9)
(0.1)
(0.1)
(0.1)
(4.2)
(3.5)
0.5
–
(3.0)
Other
US$m
(4.0)
0.3
(0.1)
(0.1)
(3.9)
(3.6)
0.8
(0.4)
(3.2)
Group
US$m
(3.9)
(1.3)
(0.1)
(4.7)
(10.0)
(54.8)
56.6
(2.3)
(0.5)
Group
US$m
(6.0)
0.2
3.5
(5.0)
(7.3)
(46.5)
44.4
(2.2)
(4.3)
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N
A
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F
I
N
A
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
10 Retirement and other post-employment benefit arrangements cont.
v) Amounts recognised in the consolidated statement of financial position
iv) Amounts recognised in the consolidated statement of comprehensive income
Actuarial gains and losses were as follows:
The amounts included in the consolidated statement of financial position arising from the Group’s defined
benefit arrangements are as follows:
Effect of changes in demographic assumptions
Effect of changes in financial assumptions
Effect of experience adjustments
Remeasurement on assets (excluding interest income)
Adjustment due to surplus cap
Included in the statement of comprehensive income
Year ended
31 December 2022
US$m
10.8
941.1
(67.7)
(855.5)
31.1
59.8
Year ended
31 December 2021
US$m
(30.7)
125.7
64.3
50.6
2.9
212.8
Year ended 31 December 2022
Cash and cash equivalents
Equity instruments:
US
UK
Eurozone
Other regions
Debt instruments:
Corporate bonds (Investment grade)
Corporate bonds (Non-investment grade)
Government/sovereign instruments
Global real estate
Derivatives:
Total return, interest and inflation swaps
Assets held by insurance company:
Insurance contracts
Diversified investment fund
Other
Total market value of assets
Actuarial value of scheme liabilities
Net asset/(liability) in the scheme
Adjustment due to surplus cap
Recoverable net asset/(liability) in the scheme
Coats UK
Pension Scheme
US$m
64.6
47.6
3.1
8.4
20.1
428.2
89.4
562.9
238.5
(20.7)
391.6
5.5
127.7
1,966.9
(1,786.2)
180.7
–
180.7
Coats US
US$m
1.6
Other
US$m
4.2
Total
US$m
70.4
60.5
4.2
12.9
28.3
473.4
91.1
587.6
238.5
(20.7)
392.9
5.5
127.7
0.6
–
–
1.2
1.6
–
–
–
–
0.8
–
–
8.4
2,072.3
(96.7)
(1,912.2)
(88.3)
–
(88.3)
160.1
(54.7)
105.4
12.3
1.1
4.5
7.0
43.6
1.7
24.7
–
–
0.5
–
–
97.0
(29.3)
67.7
(54.7)
13.0
S
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A
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E
G
I
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P
O
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C
O
R
P
O
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A
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E
G
O
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E
R
N
A
N
C
E
F
I
N
A
N
C
I
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
10 Retirement and other post-employment benefit arrangements cont.
The amounts are presented in the consolidated statement of financial position as follows:
Year ended 31 December 2021
Cash and cash equivalents
Equity instruments:
US
UK
Eurozone
Other regions
Debt instruments:
Corporate bonds (Investment grade)
Corporate bonds (Non-investment grade)
Government/sovereign instruments
Global real estate
Derivatives:
Total return, interest and inflation swaps
Assets held by insurance company:
Insurance contracts
Diversified investment fund
Other
Total market value of assets
Actuarial value of scheme liabilities
Net asset/(liability) in the scheme
Adjustment due to surplus cap
Recoverable net asset/(liability) in the scheme
Coats UK
Pension Scheme
US$m
73.3
124.0
7.9
17.2
43.9
767.5
244.3
1,440.9
300.0
0.6
2.7
–
120.6
3,142.9
(3,034.9)
108.0
–
108.0
17.8
–
–
17.1
68.7
2.6
31.2
–
–
0.5
–
0.1
142.0
(46.9)
95.1
(83.5)
11.6
16.6
3,301.5
(114.9)
(98.3)
(0.2)
(98.5)
(3,196.7)
104.8
(83.7)
21.1
Coats US
US$m
4.0
Other
US$m
2.7
Year ended 31 December
Non-current assets:
Funded
Current assets:
Funded
Current liabilities:
Funded
Unfunded
Non-current liabilities:
Funded
Unfunded
2022
US$m
2021
US$m
222.7
159.7
2.0
5.2
(27.6)
(5.0)
(3.3)
(83.4)
105.4
(41.9)
(6.1)
(5.6)
(90.2)
21.1
The schemes disclosed as part of the ‘other’ column in the tables above include surplus positions of $3.7
million (2021: $3.8 million).
Total
US$m
80.0
143.0
7.9
17.2
64.5
839.8
246.9
1,472.1
300.1
0.6
4.0
4.3
121.1
1.2
–
–
3.5
3.6
–
–
0.1
–
0.8
4.3
0.4
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
139
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
10 Retirement and other post-employment benefit arrangements cont.
vi) Assets without a quoted price in an active market
Movements in the present value of defined benefit obligations were as follows:
At 1 January
Current service cost
Decrease in liabilities on settlements
Past service (cost)/credit
Interest on defined benefit obligations – unwinding of discount
Actuarial gains on obligations
Contributions from members
Benefits paid
Net movement due to acquisitions and disposals of subsidiaries
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)
Decrease in assets on settlements
Assets transferred out of schemes
Contributions from members
Contribution from sponsoring companies
Benefits paid
Net movement due to acquisitions and disposals of subsidiaries
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)
Unrecognised surplus at 31 December
Year ended
31 December 2022
US$m
Year ended
31 December 2021
US$m
(3,196.7)
(3,588.5)
(3.9)
0.4
(1.3)
(54.8)
884.2
(0.1)
157.2
(3.6)
306.4
(6.0)
69.6
0.2
(46.5)
159.3
(0.1)
177.1
–
38.2
(1,912.2)
(3,196.7)
3,301.5
3,447.1
56.6
(855.5)
(0.5)
–
0.1
46.3
(157.2)
(4.7)
(0.6)
(313.7)
44.4
50.6
(66.1)
(7.0)
0.1
44.2
(177.1)
–
(1.0)
(33.7)
2,072.3
3,301.5
83.7
2.3
(31.3)
54.7
84.4
2.2
(2.9)
83.7
For the Coats UK Pension Scheme, all assets in the table in section v of this note, except for cash and cash
equivalents, do not have a quoted price in an active market. For the Coats US scheme, included in the in
section v of this note are $nil (2021: $0.4 million) US equity instruments, $43.6 million (2021: $68.7 million) of
corporate bonds (Investment grade), $1.7 million (2021: $2.6 million) of corporate bonds (Non-investment
grade) and $0.5 million (2021: $0.5 million) of insurance contracts without a quoted price in an active market.
All other assets have a quoted price in an active market.
vii) 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.
viii) 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 in 2019,
Coats retains the previously incurred pension obligations from the business. The pension scheme was in a
surplus position of $67.7 million at 31 December 2022 of which a recoverable surplus of $13.0 million is
recognised on the Balance Sheet.
The Coats UK Pension Scheme moved into an IAS 19 surplus position during the previous year. The Group
has 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.
S
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R
A
T
E
G
I
C
R
E
P
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C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
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E
R
I
N
F
O
140
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
10 Retirement and other post-employment benefit arrangements cont.
ix) Duration of plan liabilities
The weighted average duration of benefit obligations is 12 years (2021: 15 years) for the Coats UK scheme
and 9 years (2021: 11 years) for the Coats US scheme.
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.
x) 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
2022
-0.25%
US$m
53.9
0.7
(30.1)
–
+0.25%
US$m
(51.4)
(0.7)
28.0
–
Year ended
31 December
2021
-0.25%
US$m
115.0
1.3
(72.0)
–
+0.25%
US$m
(108.8)
(1.2)
74.6
–
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 $192.3 million and $2.6 million (2021: $401.4 million and $4.9 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 $232.2 million and $3.1 million (2021: $502.7 million and $6.0 million)
respectively. The above sensitivity analysis (on a IAS 19 basis) considers the impact on the scheme liabilities
only and excludes any impacts on scheme assets from changes in discount and inflation rates. As noted on
page 136, the Coats UK Pension Scheme is currently over 90% hedged against interest rate and inflation rate
movements. Therefore on a Technical Provision basis, to the extent there is a change in the scheme liabilities
due to movements in discount and inflation rates there would be offsetting impacts from the scheme assets
due to the hedging in place.
If members of the Coats UK Pension Scheme live one year longer the scheme liabilities will increase by
$59.8 million (2021: $105.8 million). If members of the Coats US scheme live one year longer scheme
liabilities will increase by $0.4 million (2021: $0.7 million), however, there would be no overall impact on the
recoverable surplus.
Sensitivity of medical schemes to medical cost trend rate assumptions:
Effect on total service cost and interest cost components of other
schemes
Effect on defined benefit obligation of other schemes
xi) Expected contributions for 2023
Year ended
31 December
2022
-1%
US$m
(0.1)
(0.7)
+1%
US$m
0.1
0.8
Year ended
31 December
2021
-1%
US$m
(0.1)
(1.4)
+1%
US$m
0.1
1.5
The total estimated amount to be paid in respect of all of the Group’s retirement and other post-employment
benefit arrangements during the 2023 financial year (excluding administrative expenses paid by the
Company) is $31.6 million. The amount of contributions for the 2023 financial year will be lower in the event
that regular cash contributions to the Coats UK pension scheme are switched off under the mechanism set
out above.
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.
For diluted earnings per ordinary share, the weighted average number of ordinary shares in issue is adjusted
to include all potential dilutive ordinary shares. The Group has two classes of dilutive potential Ordinary
Shares: those shares relating to awards under the Group Deferred Bonus Plan which have been awarded but
not yet reached the end of the three year retention period and those long-term incentive plan awards for
which the performance criteria would have been satisfied if the end of the reporting period were the end of
the contingency period.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
141
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
11 Earnings per ordinary share cont.
Year ended 31 December
Profit from continuing operations attributable to equity shareholders
(Loss)/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
2022
US$m
72.9
(14.7)
2022
Number of
shares
m
1,516.0
9.3
2021*
US$m
85.2
88.9
2021
Number of
shares
m
1,457.1
5.9
Weighted average number of ordinary shares in issue for diluted earnings per share
1,525.3
1,463.0
Year ended 31 December
Continuing operations:
Basic earnings per ordinary share
Diluted earnings per ordinary share
Continuing and discontinued operations:
Basic (loss)/earnings per ordinary share
Diluted (loss)/earnings per ordinary share
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
12 Dividends
Year ended 31 December
2022 interim dividend paid – 0.70 cents per share
2021 final dividend paid – 1.50 cents per share
2021 interim dividend paid – 0.61 cents per share
2020 final dividend paid – 1.30 cents per share
2022
cents
2021*
cents
4.80
4.77
(0.98)
(0.97)
2022
US$m
11.1
21.8
–
–
32.9
5.84
5.82
6.10
6.07
2021
US$m
–
–
8.8
18.8
27.6
The proposed final dividend of 1.73 cents per ordinary share for the year ended 31 December 2022 is not
recognised as a liability in the consolidated statement of financial position in line with the requirements of
IAS 10 Events after the Reporting Period and, subject to shareholder approval, will be paid on 25 May 2023
to ordinary shareholders on the register on 28 April 2023, with an ex-dividend date of 27 April 2023.
13 Intangible assets
Cost
At 1 January 2021
Currency translation differences
Additions
Disposals
At 31 December 2021
Currency translation differences
Acquisition of subsidiaries (see
note 31)
Additions
Disposals
Acquired intangibles
Goodwill
US$m
27.2
(1.0)
–
–
26.2
–
Brands &
trade names
US$m
243.3
–
–
–
243.3
0.3
Technology
US$m
18.1
(0.9)
–
–
17.2
(0.3)
Customer
relationships
US$m
7.1
(0.3)
–
–
6.8
1.0
Total
acquired
US$m
268.5
(1.2)
–
–
267.3
1.0
98.5
40.9
40.5
158.8
240.2
–
–
–
–
–
–
–
–
–
–
At 31 December 2022
124.7
284.5
57.4
166.6
508.5
Cumulative amounts charged
At 1 January 2021
Currency translation differences
Amortisation charge for the year
Disposals
At 31 December 2021
Currency translation differences
Amortisation charge for the year
Disposals
At 31 December 2022
Net book value at
31 December 2022
Net book value at
31 December 2021
–
–
–
–
–
–
–
–
–
1.3
–
0.4
–
1.7
–
2.1
–
3.8
8.7
(0.4)
2.4
–
10.7
(0.7)
3.6
–
13.6
2.5
(0.1)
0.5
–
2.9
(0.1)
5.1
–
7.9
12.5
(0.5)
3.3
–
15.3
(0.8)
10.8
–
25.3
124.7
280.7
43.8
158.7
483.2
26.2
241.6
6.5
3.9
252.0
Computer
software
US$m
86.8
(1.5)
2.2
(9.9)
77.6
(1.7)
0.6
2.1
(2.5)
76.1
81.4
(1.5)
2.7
(9.7)
72.9
(1.6)
1.8
(2.5)
70.6
5.5
4.7
Total
US$m
382.5
(3.7)
2.2
(9.9)
371.1
(0.7)
339.3
2.1
(2.5)
709.3
93.9
(2.0)
6.0
(9.7)
88.2
(2.4)
12.6
(2.5)
95.9
613.4
282.9
S
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A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
142
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
13 Intangible assets cont.
The carrying amount of goodwill has been allocated as follows:
The carrying value of Coats brands at 31 December 2022 and 31 December 2021 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 fair value measurement is categorised in its entirety in line with
level 3 of the fair value hierarchy. The valuation has been based on the latest budget and medium-term plan
approved by the Board, covering the period to 31 December 2025, applying a pre-tax discount rate of 11.6%
(2021: 10.5%) and long-term growth of 2.7% (2021: 2.7%). Management believes that no reasonable potential
change in any of the above key assumptions would cause the carrying value to exceed its recoverable
amount.
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 Group completed two acquisitions during
the year obtaining control of both Texon and Rhenoflex, leading manufacturers of structural footwear
components supplying the world’s leading footwear brands (see note 31). The provisional goodwill arising
from these acquisitions has initially been allocated to a new Structural Footwear Components CGU. This
initial allocation will be reviewed next year following further integration of Structural Footwear Components
with the pre-existing Coats footwear and thread business.
As set out in note 4, during the current year the Group commenced a strategic project to mitigate structural
labour availability issues in the US. As a result, a new facility was established in Mexico, and certain
manufacturing processes were transferred from the US to Mexico. The Group has also integrated a number
of key business processes of the US and Mexico businesses, and a significant proportion of US sales will
now be fulfilled by Mexico. As such, the Group views the US and Mexico businesses as manufacturing sites
serving customers in the US and Mexico rather than separate businesses. As the cash inflows of the US and
Mexico are inter-dependent, the Group considers goodwill arising from previous US acquisitions (Pharr HP
and Patrick Yarn) to be allocated to the single CGU of US and Mexico. This is consistent with the information
used by the Board to monitor the goodwill arising from these acquisitions for impairment.
Year ended 31 December
Structural Footwear Components
Gotex
US and Mexico
Coats Digital
Other
2022
US$m
100.1
12.3
2.6
8.0
1.7
124.7
2021
US$m
–
13.0
2.6
8.8
1.8
26.2
The carrying value of the provisional goodwill allocated to the Structural Footwear Components CGU,
relating to the Texon and Rhenoflex businesses, which were acquired during the second half of 2022 was
tested for impairment at the year end. The original business case cash flow forecasts which underpinned the
amount of provisional goodwill recognised were reviewed, factoring in management’s latest view of the
future outlook. No material adjustments were deemed necessary to the original business case cash flow
forecasts.
The carrying value of the goodwill allocated to the Gotex, US and Mexico and Coats Digital 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 2025;
– discount rates; and
– growth rates used to extrapolate risk adjusted cash flows beyond the medium-term period.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
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H
E
R
I
N
F
O
143
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
13 Intangible assets cont.
CGU specific operating assumptions are applicable to the cash flows for the years 2023 to 2025 and relate
to revenue forecasts and forecast operating margins. A short-term growth rate is applied to the December
2025 plan to derive the cash flows arising in 2026–2027 and a long-term rate is applied to 2027 to
determine a terminal value. Revenue growth and operating margin improvement assumptions in 2026–2027
are as follows:
Gotex
US and Mexico
Coats Digital
Revenue
growth
2026
%
7.5
5.0
33.3
Revenue
growth
Operating margin
improvement
Operating margin
improvement
2027
%
3.0
5.0
5.0
2026
%
0.7
0.1
1.0
2027
%
–
0.2
–
The pre-tax discount rates applied to the cash flow forecasts are derived from the Group’s post-tax weighted
average cost of capital. The Group’s weighted average cost of capital 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 11.6%
(2021: 10.5%) 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 14.0% for Gotex, 11.9% for
US and Mexico, and 14.2% 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 1,100 bps in Gotex, 470 bps in US and Mexico and 1,700 bps
in Coats Digital; or
– cumulative 2023–2027 revenue is 54% lower in Gotex, 23% lower in US and Mexico and 49% lower
in Coats Digital; or
– cumulative 2023–2027 operating profit is 47% lower in Gotex, 34% lower in US and Mexico and 68% 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.
14 Property, plant and equipment
Cost
At 1 January 2021
Currency translation differences
Additions
Disposals
At 31 December 2021
Currency translation differences
Application of IAS 29 (see note 1)
Acquisition of subsidiaries (see note 31)
Disposal of subsidiaries (see note 32)
Additions
Disposals
At 31 December 2022
Cumulative amounts charged
At 1 January 2021
Currency translation differences
Depreciation charge for the year
Impairment charge (see note 4)
Disposals
At 31 December 2021
Currency translation differences
Depreciation charge for the year
Impairment charge (see note 4)
Disposal of subsidiaries (note 32)
Disposals
At 31 December 2022
Net book value at 31 December 2022
Net book value at 31 December 2021
Land and
buildings
US$m
163.1
(4.6)
3.0
(0.6)
160.9
(4.9)
–
10.2
(8.9)
3.4
(3.3)
157.4
77.4
(2.3)
4.6
–
(0.6)
79.1
(2.9)
4.7
–
(3.7)
(1.8)
75.4
82.0
81.8
Plant and
equipment
Vehicles and
office equipment
US$m
562.8
(17.2)
22.1
(16.5)
551.2
(24.8)
7.3
12.9
(30.2)
24.4
(11.7)
529.1
404.3
(13.2)
20.5
2.0
(15.8)
397.8
(18.5)
19.3
1.7
(25.5)
(11.6)
363.2
165.9
153.4
US$m
76.5
(2.1)
2.6
(11.6)
65.4
(2.5)
–
0.6
(3.9)
2.4
(1.1)
60.9
66.3
(1.7)
3.1
–
(11.6)
56.1
(2.2)
2.5
0.1
(3.0)
(1.0)
52.5
8.4
9.3
Total
US$m
802.4
(23.9)
27.7
(28.7)
777.5
(32.2)
7.3
23.7
(43.0)
30.2
(16.1)
747.4
548.0
(17.2)
28.2
2.0
(28.0)
533.0
(23.6)
26.5
1.8
(32.2)
(14.4)
491.1
256.3
244.5
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
144
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
14 Property, plant and equipment cont.
Analysis of net book value of land and buildings 31 December
Freehold
Leasehold improvements:
Over 50 years unexpired
Under 50 years unexpired
15 Leases
2022
US$m
64.2
2.7
15.1
82.0
2021
US$m
67.8
1.8
12.2
81.8
The Group leases several assets including buildings, plants, vehicles and office equipment. The average
lease term is 5 years (2021: 4 years). The Group’s consolidated balance sheet includes the following amounts
relating to leases:
Right-of-use assets
Net carrying amount
At 1 January 2022
At 31 December 2022
Depreciation expense for the year ended
31 December 2021
31 December 2022
Land and
buildings
US$m
80.4
87.5
14.3
14.1
Plant and
equipment
Vehicles and
office equipment
US$m
4.5
3.7
2.1
2.5
US$m
6.7
5.3
3.0
2.8
Total
US$m
91.6
96.5
19.4
19.4
Lease liability maturity analysis
Payable within one year
Payable between one and two years
Payable between two and five years
Payable after more than five years
Undiscounted
2022
US$m
Undiscounted
2021
US$m
Discounted
2022
US$m
Discounted
2021
US$m
24.2
20.9
43.5
46.6
22.6
19.4
38.9
40.4
19.0
16.5
32.9
37.0
17.8
15.6
31.3
34.3
At 31 December 2022
The net increase in lease liabilities during the year ended 31 December 2022 was $6.4 million (2021: $33.0
million) which includes foreign exchange gains on lease liabilities of $6.6 million (2021: $0.2 million). The total
cash outflow for leases in the year ended 31 December 2022 was $23.0 million (2021: $22.1 million).
105.4
135.2
121.3
99.0
The Group’s consolidated income statement includes the following amounts relating to leases:
Year ended 31 December
Depreciation expense
Interest expense on lease liabilities
Expenses relating to short term leases
Expenses relating to leases of low value assets
Expense relating to variable lease payments not included in the measurement of the lease
liability
Impairment of right-of-use assets
Income from subleasing right-of-use assets
2022
US$m
19.4
4.9
0.6
0.1
0.5
2.9
(0.2)
2021
US$m
19.4
5.2
1.1
0.1
0.6
–
(0.2)
Additions to the right-of-use assets during the year ended 31 December 2022 were $23.9 million (2021: $51.1
million).
The Group subleases some of its right-of-use assets. At the balance sheet date, the Group had contracted
with tenants for receipt of the following minimum lease payments:
Lease liabilities
Year ended 31 December
Current
Non-current
2022
US$m
19.0
86.4
105.4
2021
US$m
17.8
81.2
99.0
Year ended 31 December
Receivable within one year
Receivable between one and two years
16 Non-current investments
Year ended 31 December
Interests in joint ventures (see below)
Investments in equity securities:
Unlisted investments
2022
US$m
0.1
0.1
0.2
2022
US$m
13.1
5.9
19.0
2021
US$m
–
–
–
2021
US$m
12.0
6.0
18.0
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
145
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
16 Non-current investments cont.
Interests in joint ventures
At 1 January 2022
Acquisitions (see note 31)
Dividends receivable
Share of profit after tax
At 31 December 2022
Year ended 31 December
Share of net assets on acquisition
Share of post-acquisition retained profits
Share of net assets
2022
US$m
11.3
1.8
13.1
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
2022
US$m
28.7
1.2
(0.3)
0.9
2022
US$m
5.5
15.4
20.9
(7.8)
13.1
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 of subsidiaries (note 31)
Reclassified from deferred tax liability
Transfer to current tax
Credited/(charged) to the income statement
Charged to other comprehensive income and expense
At 31 December
18 Inventories
Year ended 31 December
Raw materials and consumables
Work in progress
Finished goods and goods for resale
US$m
12.0
0.7
(0.5)
0.9
13.1
2021
US$m
10.6
1.4
12.0
2021
US$m
27.9
1.7
(0.5)
1.2
2021
US$m
5.6
15.0
20.6
(8.6)
12.0
2022
US$m
24.4
2021
US$m
20.7
2022
US$m
20.7
–
3.3
–
–
1.8
(1.4)
24.4
2022
US$m
98.0
32.3
81.1
211.4
2021
US$m
22.7
(0.6)
–
(0.1)
–
(0.3)
(1.0)
20.7
2021
US$m
127.7
38.0
84.4
250.1
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
146
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
19 Trade and other receivables
Year ended 31 December
Non-current assets:
Trade receivables
Other receivables
Prepaid pension contributions
Derivative financial instruments
Current assets:
Trade receivables
Current income tax assets
Prepayments and accrued income
Derivative financial instruments
Prepaid pension contributions
Amounts due from joint ventures
Other receivables
The loss allowance has been determined as follows:
2022
US$m
2021
US$m
0.9
15.3
4.0
–
20.2
1.1
20.5
5.8
1.3
28.7
Expected loss rate
Gross carrying amount (US$m)
Loss allowance provision (US$m)
Expected loss rate
Gross carrying amount (US$m)
235.5
240.4
Loss allowance provision (US$m)
Current
0.3%
204.8
0.6
Current
0.3%
214.9
0.7
1–3 months past
due
3–6 months past
due
6+ months past
due
Total
2022
2%
29.2
0.5
26%
2.7
0.7
79%
7.3
5.8
244.0
7.6
1–3 months past
due
3–6 months past
due
6+ months past
due
Total
2021
2%
24.9
0.6
35%
2.0
0.7
7.0
7.4
1.6
1.6
–
6.4
7.0
4.2
1.2
0.1
The movements in the expected loss allowance are analysed as follows:
At 1 January
Currency translation differences
33.2
286.3
43.4
302.7
Acquisition of subsidiaries
Disposal of subsidiaries
Charged/(credited) to the income statement
Amounts written off during the year
At 31 December
80%
8.6
6.9
2022
US$m
8.9
(0.5)
0.7
(2.1)
1.1
(0.5)
7.6
250.4
8.9
2021
US$m
10.2
(0.6)
–
–
(0.2)
(0.5)
8.9
As at 1 January 2021, trade receivables amounted to $224.1 million (net of loss allowance of $10.2 million).
20 Derivative financial instruments – assets
Derivative financial instruments within non-current and current assets comprise:
Year ended 31 December
Fair value through the income statement:
Forward foreign currency contracts
Interest rate swap contracts
Amounts shown within non-current assets
Amounts shown within current assets
2022
US$m
2021
US$m
1.6
–
1.6
–
1.6
3.6
1.9
5.5
1.3
4.2
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.
S
T
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A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
147
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 $6.6 million (2021: $7.7 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 $7.6 million (2021: $8.9 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. Impairment has been considered for other receivables,
and is considered not to be significant.
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
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
Amounts falling due after more than one year:
Other payables
Contract liabilities
Employee entitlements
Derivative financial instruments
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 $6.6 million (2021: $6.7 million) which were outstanding at 31 December
2021 were released to revenue during the year ended 31 December 2022, with the remainder expected to
be released in 2023 and 2024.
22 Derivative financial instruments – liabilities
2022
US$m
2021
US$m
Derivative financial instruments within non-current and current liabilities comprise:
151.3
208.5
Fair value through the income statement:
Year ended 31 December
2022
US$m
2021
US$m
15.0
8.9
30.8
43.9
7.9
6.0
14.6
278.4
20.7
1.5
1.1
3.0
26.3
16.3
7.7
36.7
50.8
6.8
0.8
19.2
346.8
21.3
1.7
1.1
0.1
24.2
Forward foreign currency contracts
Interest rate swap contracts
Amounts shown within non-current liabilities
Amounts shown within current liabilities
5.9
3.1
9.0
3.0
6.0
The fair values of these financial instruments are calculated by discounting the future cash flows to net
present values using appropriate market interest and foreign currency rates prevailing at the year end.
23 Borrowings
Year ended 31 December
Bank overdrafts
Borrowings repayable within one year
Due within one year
Borrowings repayable between one and two years
Borrowings repayable between two and five years
Due after more than five years
Due after more than one year
Bank overdrafts
Series A and Series B Senior Notes
Bank and other borrowings
2022
US$m
14.7
2.0
16.7
360.4
189.7
–
550.1
14.7
222.3
329.8
566.8
0.9
–
0.9
0.1
0.8
2021
US$m
16.4
2.8
19.2
–
135.1
100.0
235.1
16.4
227.5
10.4
254.3
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.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
148
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
23 Borrowings cont.
In April 2021 the Group entered into a $360.0 million three year bank facility, with the ability for two one-year
extensions. The facility bears interest at the risk free rate plus a credit adjustment spread and a margin. The
facility also includes an ESG component which impacts the margin based on performance against three of
the Group’s published sustainability targets.
On 20 July 2022, the Group fully drew down on a new $240 million term loan acquisition facility to fund the
purchase of Texon (see note 31). This facility was to mature in July 2024, and the Group had an option to
extend this term by a further nine months to May 2025. In February 2023, the Group completed the
refinancing of this acquisition facility via the US Private Placement market with $250 million of Notes. $150
million 5.26% Series A Senior Notes are due on 16 February 2028 and $100 million 5.37% Series B Senior
Notes are due on 16 February 2030.
Series A and Series B Senior Notes at 31 December 2022 of $222.3 million includes a fair value adjustment
to the nominal amount outstanding of $2.7 million, for which the Group has interest rate swaps which are
accounted for as fair value hedges.
The currency and interest rate profile of the Group’s borrowings is included in note 34 on page 163.
The Group’s net deferred tax liabilities/(assets) are analysed
as follows:
Accelerated tax depreciation on tangible fixed assets
Other temporary differences
Revenue losses carried forward
Capital losses carried forward
Investment in subsidiaries
Acquired intangibles
Brands
Retirement benefit obligations offset against brands
Retirement benefit obligations
2022
2021
Provided/
(recognised)
Unprovided/
(unrecognised)
US$m
US$m
Provided/
(recognised)
Unprovided/
(unrecognised)
US$m
US$m
14.8
(13.8)
(10.6)
–
4.5
51.8
50.1
(50.1)
(5.8)
40.9
(17.8)
(7.6)
(242.1)
(355.7)
6.8
–
–
–
(1.5)
(617.9)
13.9
(15.4)
(11.4)
–
5.8
59.9
(59.9)
(6.8)
(13.9)
(17.5)
(10.8)
(298.4)
(355.7)
5.3
–
–
(2.8)
(679.9)
24 Deferred tax liabilities
At 1 January
Currency translation differences
Acquisition of subsidiaries (note 31)
Reclassified from deferred tax assets
Charged/(credited) to the income statement
Credited to equity
At 31 December
2022
US$m
6.8
2.0
54.8
–
2.0
(0.3)
65.3
2021
US$m
9.0
0.2
–
(0.1)
(2.2)
(0.1)
6.8
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax
balances (after offset) for financial reporting purposes:
Deferred tax assets (note 17)
Deferred tax liabilities
2022
2021
Provided/
(recognised)
US$m
(24.4)
65.3
40.9
Provided/
(recognised)
US$m
(20.7)
6.8
(13.9)
At the year end, the Group had approximately $1.5 billion (2021: $1.6 billion) of unused gross income tax
losses and approximately $1.3 billion (2021: $1.4 billion) of unused gross capital losses available for offset
against future profits. A deferred tax asset of $10.6 million (2021: $11.4 million) has been recognised in respect
of $40.7 million (2021: $36.9 million) of such income tax losses. No deferred tax asset has been recognised in
respect of the remaining losses due to lack of certainty regarding the availability of future taxable income.
Such losses are only recognised in the financial statements to the extent that it is considered more likely than
not that sufficient future taxable profits will be available for offset.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
149
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
24 Deferred tax liabilities cont.
The Group’s income tax losses can be analysed as follows:
Expiring within 5 years
Expiring in more than 5 years
Available indefinitely
2022
US$m
17.0
10.5
2021
US$m
33.2
15.5
1,457.8
1,485.3
1,510.5
1,559.2
At 31 December 2022, the aggregate amount of temporary differences associated with undistributed
earnings of subsidiaries for which deferred tax liabilities have not been recognised is $6.8 million
(2021: $5.3 million). Deferred tax on distribution of these profits has not been provided on the grounds that
the Group is able to control the timing of the reversal of the remaining temporary differences and it is
probable that they will not reverse in the foreseeable future.
At 1 January 2022
Currency translation differences
Acquisition of subsidiaries (see note 31)
Disposal of subsidiaries (see note 32)
Utilised in year
(Credited)/charged to the income statement
At 31 December 2022
Property related
provisions
US$m
2.1
(0.2)
–
–
–
(1.0)
0.9
Other
provisions
US$m
33.7
(0.6)
7.4
(0.9)
(49.6)
52.7
42.7
Total
US$m
35.8
(0.8)
7.4
(0.9)
(49.6)
51.7
43.6
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.
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
26 Share capital
2022
US$m
2021
US$m
Year ended 31 December
Ordinary Shares of 5p each
Number
1,597,810,385
2022
US$m
99.0
Number
1,452,570,385
2021
US$m
90.1
18.2
25.4
43.6
2022
US$m
0.9
42.7
43.6
8.1
27.7
35.8
2021
US$m
2.1
33.7
35.8
During the year ended 31 December 2022 the Company issued 145,240,000 Ordinary shares of 5p each in
connection with an equity placing as set out below. The par value of the shares issued was $8.9 million. The
proceeds raised net of costs were $109.8 million and were used to fund the acquisition of Rhenoflex GmbH
(see note 31). During the year ended 31 December 2021 the Company issued 493,113 Ordinary shares of 5p
each following the exercise of awards under the Group’s share based incentive plans.
At 1 January 2022
Issue of ordinary shares
At 31 December 2022
Number of shares
1,452,570,385
145,240,000
1,597,810,385
US$m
90.1
8.9
99.0
As at 1 January 2021 the company had 1,452,077,272 Ordinary shares in issue. The company has one class of
Ordinary shares which carry no right to fixed income.
The own shares reserve of $0.1 million at 31 December 2022 (2021: $0.5 million) represents the cost of
shares in Coats Group plc purchased in the market and held by an Employee Benefit Trust to satisfy awards
under the Group’s share based incentive plans.
The number of shares held by the Employee Benefit Trust at 31 December 2022 was 805,501 (2021:
2,020,306).
Details of share awards outstanding under the Group’s LTIP and Deferred Bonus Plans are set out in note 33.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
150
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
27 Reserves and non-controlling interests
28 Contingent liabilities and environmental matters
At 1 January 2022
Dividends
Currency translation differences
Actuarial gains on employee
benefits
Tax on actuarial gains
Application of IAS 29 (note 1)
Issue of ordinary shares
Purchase of own shares
Movement in own shares
Share based payments
Deferred tax on share schemes
Loss for the year
Share
premium
account
US$m
10.5
–
–
–
–
–
100.9
–
–
–
–
–
Own
shares
US$m
(0.5)
–
–
–
–
–
–
(2.1)
2.5
–
–
–
Translation
reserve
US$m
(105.7)
–
(16.2)
–
–
–
–
–
–
–
–
–
Capital
reduction
reserve
US$m
Other
reserves
US$m
59.8
246.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2022
111.4
0.1
(121.9)
59.8
246.3
Retained
profit
US$m
252.5
(32.9)
–
59.8
(1.4)
5.0
–
–
(2.5)
4.6
0.3
(14.7)
270.7
Non-
controlling
interests
US$m
31.1
(18.3)
(0.7)
–
–
–
–
–
–
–
–
22.0
34.1
Other reserves of $246.3 million in the above table relate to legacy non-distributable reserves, which arose
during the period when the Group was part of the Guinness Peat Group.
The table below shows financial information of non-wholly owned subsidiaries of the Group that have
non-controlling interests:
EMEA
Asia & Rest of World
Profit allocated to
non-controlling interests
Accumulated
non-controlling interests
Year ended
31 December
2022
US$m
0.7
21.3
22.0
Year ended
31 December
2021
US$m
0.1
19.6
19.7
31 December
2022
US$m
1.4
32.7
34.1
31 December
2021
US$m
0.9
30.2
31.1
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 173 to 179.
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 in a settlement or court ruling has not yet been determined.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
28 Contingent liabilities and environmental matters cont.
In March 2017, EPA notified 20 parties not associated with the disposal or release of any contaminants of
concern as being eligible for early cash out settlements. As expected, EPA did not identify CC as one of the
20 parties. EPA invited approximately 80 other parties, including CC, to participate in an allocation process to
determine their respective allocation shares and potential eligibility for future cash out settlements. In the
allocation, CC presented factual and scientific evidence that it is not responsible for the discharge of dioxins,
furans or PCBs – the contaminants that are driving the remediation of the LPR – and that it is a de minimis or
even smaller de micromis party. The allocation process concluded in December 2020. The EPA-appointed
allocator determined that CC is in the lowest tier (Tier 5) of allocation parties, and is responsible for only a de
micromis share of remedial costs.
On 30 June 2018, OCC filed a lawsuit against approximately 120 defendants, including CC, seeking recovery
of past environmental costs and contribution toward future environmental costs. OCC released claims for
certain past costs from 41 of the defendants, including CC, and is not seeking recovery of those past costs
from CC. OCC’s lawsuit seeks resolution of many of the same issues addressed in the EPA sponsored
allocation process, and does not alter CC’s defences or CC’s continued belief that it is a de micromis party.
In 2015, a provision totalling $15.8 million was recorded for remediation costs for the entire 17 miles of the
LPR and the estimated associated legal and professional costs in defence of CC’s position. The provision for
remediation costs was based on CC’s estimated share of de minimis costs for (a) EPA’s selected remedy for
the lower 8 miles of the LPR and (b) the remedy for the upper 9 miles proposed by the CPG, which was later
substantively adopted by the EPA. This charge to the income statement was net of insurance
reimbursements and was stated on a net present value basis. During the year ended 31 December 2018, an
additional provision of $8.0 million was recorded as an exceptional item to cover legal and professional fees.
The Group will continue to mitigate additional costs as far as possible through insurance and other avenues.
At 31 December 2022, the remaining provision, taking into account insurance reimbursement, was $9.2
million (2021: $11.2 million). The process concerning the LPR continues to evolve and these estimates are
subject to change based upon legal defence costs associated with the EPA process and OCC’s lawsuit, the
share of remedial costs to be paid by the major polluters on the river, and the share of remaining remedial
costs apportioned among CC and other companies.
In 2022, CC and other parties entered into a settlement with EPA in which the settling parties agreed to pay
$150 million toward remediation of the full 17-mile LPR in exchange for a release for those matters addressed
in the settlement. CC’s share of the cash-out settlement is consistent with a de micromis share of total
remedial costs for the full 17-mile LPR. EPA has indicated it will seek the balance of LPR remedial costs from
OCC and a small number of other parties that EPA has determined were not eligible to participate in a
cash-out settlement. These work parties (and not the cash-out parties) would be responsible for remedial
costs over-runs. The settlement does not address claims for natural resource damages by federal natural
resource trustees. The Group believes that CC’s share, if any, of such costs would be de micromis.
In late 2022, the cash-out settlement for the full 17-mile LPR was lodged with the court by the Department of
Justice (DOJ) on behalf of EPA. Court approval is necessary for the settlement to go into effect, and OCC has
indicated that it will oppose such approval. The Group expects that DOJ and EPA will assert that the
settlement is just and reasonable and that it should be approved by the court, and courts have generally
deferred to EPA’s judgment on such matters. However, it is nonetheless possible that the court may not
approve the settlement. It is also possible that the court may approve the settlement but permit OCC’s
litigation against the settling parties to continue in whole or in part. Because of these continued
uncertainties, the Group is maintaining its current provision for the LPR for the present time.
Coats believes that CC’s predecessor did not generate any of the contaminants which are driving the current
and anticipated remedial actions in the LPR, that it has valid legal defences which are based on its own
analysis of the relevant facts, that the EPA-appointed allocator correctly concluded that it has a de micromis
share of the total remediation costs, and that OCC and other parties will be responsible for a significant share
of the ultimate costs of remediation. As this matter evolves, the provision may be reduced if the settlement is
approved by the court and if the court bars further litigation against CC and other settling parties. It is
nonetheless still possible that additional provisions could be recorded and that such provisions could
increase materially based on further decisions by the court, negotiations among the parties and other future
events.
Following the sale of the North America Crafts business, including CC, announced on 22 January 2019,
Coats North America Consolidated Inc. (the seller) retains the control and responsibility for the eventual
outcome of the ongoing LPR environmental matters, including the rights to the related insurance
reimbursements.
29 Capital commitments
As at 31 December 2022, the Group had commitments of $5.6 million in respect of contracts placed for
future capital expenditure (2021: $5.1 million).
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
30 Notes to the consolidated cash flow statement
e) Capital expenditure and financial investment
a) Reconciliation of operating profit to cash generated from operations
Year ended 31 December
Operating profit
Depreciation of owned property, plant and equipment
Deprecation of right-of-use assets
Amortisation of intangible assets
Decrease/(increase) in inventories
Decrease/(increase) in debtors
(Decrease)/increase in creditors
Provisions and pension movements
Foreign exchange and other non-cash movements
Discontinued operations
Cash generated from operations
b) Interest paid
Year ended 31 December
Interest paid
Discontinued operations
c) Taxation paid
Year ended 31 December
Overseas tax paid
Discontinued operations
d) Investment income
Year ended 31 December
Dividends received from joint ventures
2022
US$m
181.0
26.5
19.4
12.6
43.6
10.4
(76.2)
(41.6)
8.8
(8.0)
176.5
2022
US$m
(24.8)
(0.7)
(25.5)
2022
US$m
(54.6)
–
(54.6)
2022
US$m
0.5
2021*
US$m
178.2
27.3
19.4
6.0
(66.8)
(38.2)
91.5
(34.5)
13.0
(6.9)
189.0
2021*
US$m
(11.0)
(1.5)
(12.5)
2021*
US$m
(47.8)
(0.1)
(47.9)
2021
US$m
0.3
Year ended 31 December
Purchase of property, plant and equipment and intangible assets
(Purchase)/sale of other equity investments
Disposal of property, plant and equipment
Discontinued operations
f) Acquisitions and disposals of businesses
Year ended 31 December
Acquisition of businesses (note 31)
Disposal of business (note 32)
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
g) Summary of net debt
Year ended 31 December
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Borrowings (see note 23)
Net debt excluding lease liabilities
Lease liabilities (see note 15)
Total net debt
2022
US$m
(33.8)
(0.1)
2.8
(0.5)
(31.6)
2022
US$m
(271.2)
(17.0)
(288.2)
2022
US$m
172.4
(14.7)
157.7
(552.1)
(394.4)
(105.4)
(499.8)
2021*
US$m
(30.5)
0.1
0.8
(0.7)
(30.3)
2021
US$m
–
–
–
2021
US$m
107.2
(16.4)
90.8
(237.9)
(147.1)
(99.0)
(246.1)
On 20 July 2022, the Group fully drew down on a new $240 million term loan acquisition facility to fund the
purchase of Texon (see note 31). This facility was to mature in July 2024, and the Group had an option to
extend this term by a further nine months to May 2025. In February 2023, the Group completed the
refinancing of this acquisition facility via the US Private Placement (USPP) market with $250 million of notes.
$150 million 5.26% Series A Senior Notes are due on 16 February 2028 and $100 million 5.37% Series B
Senior Notes are due on 16 February 2030.
For financial covenant purposes, the Group’s leverage is calculated on the basis of net debt without IFRS 16
lease liabilities and at the Coats Group Finance Company Limited level. Net debt excluding IFRS 16 lease
liabilities at the Coats Group Finance Company Limited level at 31 December 2022 for covenant purposes
was $399.9 million (31 December 2021: $148.0 million).
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
30 Notes to the consolidated cash flow statement cont.
Total net debt is presented in the consolidated statement of financial position as follows:
Year ended 31 December
Current assets:
Cash and cash equivalents
Current liabilities:
Bank overdrafts and other borrowings
Lease liabilities
Non-current liabilities:
Borrowings
Lease liabilities
Total net debt
2022
US$m
2021
US$m
172.4
107.2
(16.7)
(19.0)
(550.1)
(86.4)
(499.8)
(19.2)
(17.8)
(235.1)
(81.2)
(246.1)
The components of net debt and movements during the periods are set out below:
At 1 January 2021
Financing cash flows
Other cash flows
Non-cash movements
Foreign exchange
At 31 December 2021
Financing cash flows
Other cash flows
Acquisition of subsidiaries
(note 31)
Non-cash movements
Foreign exchange
Series A
and Series B
Senior Notes
US$m
(230.4)
–
–
2.9
–
(227.5)
–
–
–
5.2
–
Bank
loans
US$m
(2.3)
(8.4)
–
(1.4)
1.7
(10.4)
(256.7)
–
(62.5)
(1.0)
0.8
Lease
liabilities
US$m
(66.0)
22.1
–
(55.3)
0.2
(99.0)
18.1
4.9
–
(36.0)
6.6
Total
financing
activity
liabilities
US$m
(298.7)
13.7
–
(53.8)
1.9
(336.9)
(238.6)
4.9
(62.5)
(31.8)
7.4
Bank
overdrafts
US$m
(19.8)
–
3.1
–
0.3
(16.4)
–
1.7
–
–
–
Cash
at bank
and in hand
US$m
71.9
–
37.9
–
(2.6)
107.2
–
70.4
–
–
(5.2)
Net debt
US$m
(246.6)
13.7
41.0
(53.8)
(0.4)
(246.1)
(238.6)
77.0
(62.5)
(31.8)
2.2
At 31 December 2022
(222.3)
(329.8)
(105.4)
(657.5)
(14.7)
172.4
(499.8)
The non-cash movement during the year ended 31 December 2022 of $5.2 million (2021: $2.9 million) within
Series A and Series B Senior Notes represents the movement in the fair value adjustment to the nominal
amount outstanding of $225.0 million and relates to interest rate swaps which are accounted for as fair value
hedges.
The non-cash movement during the year ended 31 December 2022 of $36.0 million (2021: $55.3 million)
within lease liabilities relates to the following: the unwind of lease liabilities of $4.9 million (2021: $5.2 million)
and the impact of entering into new leases, disposals and modification of existing leases of $31.1 million
(2021: $50.1 million).
Total interest paid during the year ended 31 December 2022 was $25.5 million (2021: $17.6 million), which
primarily relates to the above Senior Notes, bank loans and overdrafts and lease liabilities. Total interest
charged to the profit and loss account for the year ended 31 December 2022 for the above Senior Notes,
bank loans and overdrafts and lease liabilities was $23.8 million (2021: $15.6 million).
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
31 Acquisitions
The Group completed two acquisitions during the year obtaining control of both Texon and Rhenoflex,
leading manufacturers of structural footwear components supplying the world’s leading footwear brands.
Both have operations in Asia and Europe and are complementary additions to Coats’ existing footwear
business with opportunities to leverage existing footprints and combine expertise in the attractive athleisure
footwear market.
– On 20 July 2022, the Group acquired the entire share capital of Torque Group International Fortune
Limited (‘Texon’) for $211.0 million. On completion, the Group immediately settled all of Texon’s external
bank debt of $24.4 million such that total cash outflow was $235.4 million.
– On 23 August 2022, the Group also purchased the entire share capital of Rhenoflex GmbH (‘Rhenoflex’)
for $81.5 million. On completion, the Group immediately settled all of Rhenoflex’s external bank debt of
$38.1 million such that the total cash outflow was $119.6 million.
The Texon transaction was funded through a new $240.0 million term loan acquisition facility and the
Rhenoflex transaction was predominately financed through an equity raise of $109.8 million net of costs.
These acquisitions have been accounted for as business combinations using the acquisition method in
accordance with IFRS 3 ‘Business Combinations.’ For each acquisition, a provisional assessment of the fair
values of identified assets acquired and liabilities assumed has been undertaken with assistance provided by
external valuation specialists.
In the provisional accounting, adjustments are made to the book values of the net assets of the companies
acquired to reflect their provisional fair values to the Group. Previously unrecognised assets and liabilities at
acquisition are included. As part of this exercise, accounting policies are aligned with those of the Group and
as the acquisitions were made in the second half of the year and given their global footprint, the fair values
presented below are provisional as these assessments will be completed within 12 months from each
relevant acquisition date.
The provisional fair values of the identifiable assets and liabilities of Texon and Rhenoflex as at their
respective acquisition dates were as follows:
Assets
Acquired intangible assets
– Customer relationships
– Brands and trade names
– Technology
Computer software
Property, plant and equipment
Right-of-use-assets
Investments in joint ventures
Deferred tax assets
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities
Trade and other payables
Deferred tax liabilities
Borrowings
Lease liabilities
Retirement benefit obligations
Provisions
Total identifiable net assets acquired at fair value
Goodwill recognised on acquisition (provisional)
Purchase consideration paid
Provisional fair
value recognised
on acquisition of
Texon
US$m
Provisional fair
value recognised
on acquisition of
Rhenoflex
US$m
Provisional
Total
US$m
107.1
26.7
26.3
160.1
0.1
14.4
4.9
0.7
2.6
20.6
26.0
16.8
51.7
14.2
14.2
80.1
0.5
9.3
4.3
–
0.7
20.3
13.8
4.5
158.8
40.9
40.5
240.2
0.6
23.7
9.2
0.7
3.3
40.9
39.8
21.3
246.2
133.5
379.7
(28.8)
(28.5)
(24.4)
(4.9)
(7.6)
(5.3)
(99.5)
146.7
64.3
211.0
(12.7)
(26.3)
(38.1)
(4.3)
(2.7)
(2.1)
(86.2)
47.3
34.2
81.5
(41.5)
(54.8)
(62.5)
(9.2)
(10.3)
(7.4)
(185.7)
194.0
98.5
292.5
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
31 Acquisitions cont.
The fair value assessed for intangible customer relationship assets was $107.1 million for Texon and $51.7
million for Rhenoflex. In both cases this will be amortised over a fifteen-year useful economic life. As fair
value level one observable market prices are not available for these assets, management engaged external
professional valuation advisors to assist in identifying and valuing these assets The excess earnings method
was used to value these customer relationships which considers the use of other assets in the generation of
projected cash flows to isolate the economic benefit generated by the relationships.
The fair value assessed for brands and trade names was $26.7 million for Texon and $14.2 million for
Rhenoflex and for technology was $26.3 million for Texon and $14.2 million for Rhenoflex. The relief from
royalty method was used to value both the technology and the trade names which will be amortised over a
useful economic life of ten years. The relief from royalty method looks at the savings from owning the trade
name and technology compared to paying royalties for their use based on comparable market royalty rates.
The net deferred tax position reflected adjustments related to the deferred tax impact of the fair value uplifts
on acquired intangible assets and other fair value adjustments at the tax rates that are expected to be
applied to the temporary differences when they reverse, based on the laws that were enacted or
substantively enacted. Deferred tax liabilities recognised as a result of the acquisition of Texon and
Rhenoflex total $54.8 million. The Group’s total deferred tax liabilities at 31 December 2022 were $65.3
million (2021: $6.8 million).
Fair value adjustments were also made to uplift property, plant and equipment by a total of $3.5 million for
Texon. Other adjustments were made to decrease pension obligations on an IAS 19 basis by $2.1 million and
$0.7 million at the acquisition dates for Texon and Rhenoflex respectively. Due to their contractual dates, the
fair value of receivables acquired approximated to the gross contractual amounts receivable. There was no
material expected credit losses for either acquisition and these receivables have materiality been settled
between the respective acquisition dates and the 31 December 2022 year-end date. There are no material
contingent liabilities recognised in accordance with paragraph 23 of IFRS 3.
Provisional goodwill of $64.3 million for Texon and $34.2 million for Rhenoflex represents the premium
attributable to purchasing separately established businesses with assembled workforces, opportunities for
synergies and exploitation of the general technological capabilities and knowledge base of each company.
Goodwill is not expected to be deductible for tax purposes.
Goodwill is not amortised but tested annually for impairment. For the purposes of annual impairment testing
the combined provisional goodwill has initially been allocated to a new Structural Footwear Components
cash generating unit. This initial allocation will be reviewed during 2023 following further integration of
Structural Footwear Components with the pre-existing Coats footwear and thread business.
Provisional goodwill and intangible assets acquired for Texon and Rhenoflex totalled $338.7 million. From
their respective acquisition dates to 31 December 2022, amortisation charges for acquired intangible assets
amounted to $5.6 million for Texon and $2.1 million for Rhenoflex.
From their acquisition dates, the contribution to revenues in the year to 31 December 2022 was $57.2 million
for Texon and $30.0 million for Rhenoflex. The contribution to operating profit excluding exceptional items
and amortisation of acquired intangible assets in the year to 31 December 2022 was $5.8 million for Texon
and $3.4 million for Rhenoflex in the year to 31 December 2022. The loss after tax in the year to 31 December
2022 (after exceptional items and amortisation of acquired intangible assets) was $1.9 million for Texon and
a profit of $0.5 million for Rhenoflex.
If the acquisitions had taken effect at the beginning of the reporting period (1 January 2022), the Group’s
revenues for the year ended 31 December 2022 would have been $85.9 million higher for Texon and
$60.0 million higher for Rhenoflex and the Group’s profit after tax would have been $2.9 million higher for
Texon and $3.1 million higher for Rhenoflex based on management accounts.
Transaction costs totalling $12.6 million relating to the acquisitions of Texon ($8.6 million) and Rhenoflex
($4.0 million) have been expensed and are included in the consolidated income statement (see note 4).
Transaction costs of $11.5 million have been charged to administrative expenses and $1.1 million has been
charged to finance costs relating to the $240.0 million Texon term loan acquisition facility. Transaction costs
paid in the year ended 31 December 2022 relating to these acquisitions was $12.3 million and are included
in cash flows absorbed in operating activities in the consolidated cash flow statement. In addition costs of
$2.8 million were incurred in connection with the equity raise to finance the acquisition of Rhenoflex which
have been charged to the share premium reserve.
The purchase consideration was paid in cash with the amounts included in the statement of consolidated
cash flows as follows:
Purchase consideration paid to previous owners
Cash and cash equivalents acquired
Acquisition of businesses – investing cash flows
External bank borrowings settled on completion – financing cash flows
Total cash out flow on respective acquisition dates
Texon
US$m
211.0
(16.8)
194.2
24.4
218.6
Rhenoflex
US$m
81.5
(4.5)
77.0
38.1
115.1
Total
US$m
292.5
(21.3)
271.2
62.5
333.7
The repayment of external bank borrowings of Texon and Rhenoflex on the respective completion dates of
the acquisitions is presented as financing cash flows.
The total cash outflow for the acquisitions of Texon and Rhenoflex in the year ended 31 December 2022 was
$346.0 million (see note 37(e)) comprising the total cash outflow on the respective acquisition dates of
$333.7 million plus transaction costs paid of $12.3 million.
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156
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
32 Discontinued operations
Sale of Brazil and Argentina
On 10 May 2022 the Group announced the agreement to sell its business in Brazil and Argentina to Reelpar
SA, an entity backed by a Sao Paulo Private Equity Firm. The sale was completed on 26 May 2022, the date
which control passed to the acquirer. Under the terms of the disposal, the Group paid $15.0 million to Reelpar
S.A. to support restructuring of the business. During the five years following the completion date earn-out
payments are payable to the Group in the event that certain operational cash flow targets are met by the
Brazil and Argentina business. No earn-out payments have been recognised by the Group as at 31
December 2022.
a) Discontinued operations
The results of the discontinued operations are presented below:
Year Ended 31 December
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating (loss)/profit
Investment income
Finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit from discontinued operations for the year
Loss on disposal (note 32 (b))
Exchange loss transferred to income statement on disposal
Total (loss)/profit from discontinued operations
2022
US$m
26.3
(22.6)
3.7
(3.8)
(3.3)
(3.4)
–
(0.3)
(3.7)
–
(3.7)
(68.9)
(15.0)
(87.6)
2021*
US$m
66.8
(49.8)
17.0
(10.2)
(5.6)
1.2
4.2
(0.4)
5.0
(1.3)
3.7
–
–
3.7
Exceptional items – discontinued operations
Exceptional items credited/(charged) to (loss)/profit from discontinued operations are set out below:
Year Ended 31 December
Brazil indirect taxes:
– Cost of sales
– Finance income
– Taxation
Loss on disposal (note 32(b))
Exchange loss transferred to income statement on disposal
Total exceptional items – discontinued operations
Brazil indirect taxes
2022
US$m
2021*
US$m
–
–
–
(68.9)
(15.0)
(83.9)
5.8
4.2
(1.1)
–
–
8.9
In 2021 the Brazilian Supreme Federal Court concluded its judgement that Brazilian ICMS (indirect tax on
goods and services) should not be included in the calculation basis of PIS (Program of Social Integration) and
COFINS (Contribution for the Financing of Social Security) indirect taxes.
As a result, estimated refunds were recognised as exceptional items in the results for the year ended 31
December 2021 of $5.8 million which was included in cost of sales and in addition exceptional interest
income was recognised year ended 31 December 2021 of $4.2 million. The exceptional tax charge for the
year ended 31 December 2021 was $1.1 million. These refunds dated back to 2003 and the estimated tax
credit amounts were expected to be utilised over a period of approximately six years, once the business has
received a favourable Court ruling.
(Loss)/earnings per ordinary share from discontinued operations
The (loss)/earnings per ordinary share from discontinued operations is as follows:
Year Ended 31 December
(Loss)/earnings per ordinary share from discontinued operations:
Basic (loss)/earnings per ordinary share
2022
Cents
2021*
Cents
(5.78)
(5.74)
0.26
0.25
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
Diluted (loss)/earnings per ordinary share
Revenue reported above includes inter-company sales for the year ended 31 December 2022 of $1.6 million
(2021: $3.6 million). External revenue of the Brazil and Argentina business for the year ended 31 December
2022 was $24.7 million (2021: $63.2 million).
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
157
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
32 Discontinued operations cont.
Cash flows from discontinued operations
The table below sets out the cash flows from discontinued operations:
Year Ended 31 December
Net cash outflow from operating activities
Net cash outflow from investing activities
Net cash flows from discontinued operations
2022
US$m
(8.7)
(0.5)
(9.2)
2021*
US$m
(8.5)
(0.7)
(9.2)
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
b) Loss on disposal
The major classes of assets and liabilities disposed relating to the Brazil and Argentina business was
as follows:
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Trade and other payables
Current income tax liabilities
Bank overdrafts
Retirement benefit obligations
Provisions
Total liabilities
Net assets disposed
Consideration paid
Disposal costs
Exceptional loss on disposal – discontinued operations
US$m
10.8
26.9
35.7
0.7
74.1
(18.1)
(1.2)
(2.5)
(2.0)
(0.9)
(24.7)
49.4
15.0
4.5
68.9
The consideration paid on the date of disposal was $15.0 million and net of cash and cash equivalents and
bank overdrafts disposed was $13.2 million. Disposal costs of $3.8 million were paid in the year ended
31 December 2022 and as a result the cash outflow in the year ended 31 December 2022 on the sale of the
Brazil and Argentina business was $17.0 million.
33 Related party transactions
Remuneration of key management personnel
The Group Executive Team and Non-Executive Directors are deemed to be the key management personnel
of the Group. The remuneration of the Group Executive Team and Non-Executive Directors, is set out below
in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information
regarding the remuneration of individual directors is provided on pages 85 to 97 in the audited part of the
Directors’ Remuneration Report.
Year ended 31 December
Short-term employee benefits
Share based payments
Trading transactions
2022
US$m
10.3
2.1
12.4
2021
US$m
10.4
1.6
12.0
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions between the Group and its joint ventures are
disclosed below.
During the year, Group companies entered into the following transactions with related parties who are not
members of the Group:
Joint ventures
Sale of goods
Purchase of goods
2022
US$m
1.4
2021
US$m
2.7
2022
US$m
63.2
2021
US$m
61.1
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.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
158
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
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:
Cash and cash equivalents
Trade receivables (note 19)
Amounts due from joint ventures (note 19)
Other receivables (note 19), net of non-financial assets $29.8 million (2021: $29.9 million)
Financial assets carried at fair value through the income statement:
Derivative financial instruments (note 20)
Other financial assets carried at fair value through the statement of comprehensive income:
Other investments (note 16)
Financial liabilities
The Group’s financial liabilities are summarised below:
Year ended 31 December
Financial liabilities carried at amortised cost:
Trade payables (note 21)
Amounts owed to joint ventures (note 21)
Other financial liabilities
Provisions (note 25)
Lease liabilities (note 15)
Borrowings (note 23)
Financial liabilities carried at fair value through the income statement:
Derivative financial instruments (note 22)
2022
US$m
2021
US$m
Total financial liabilities
2022
US$m
2021
US$m
151.3
15.0
74.7
0.9
105.4
566.8
914.1
208.5
16.3
116.3
2.1
99.0
254.3
696.5
9.0
0.9
923.1
697.4
Other financial liabilities include other payables, other than taxation, contract liabilities, employee
entitlements and other statutory liabilities.
172.4
236.4
–
18.7
427.5
1.6
1.6
5.9
5.9
107.2
241.5
0.1
34.0
382.8
5.5
5.5
6.0
6.0
Total financial assets
435.0
394.3
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
159
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
34 Derivatives and other financial instruments cont.
Fair value of financial assets and liabilities
The fair value of the Group’s financial assets and liabilities is summarised below:
Year ended 31 December
Primary financial instruments:
Cash and cash equivalents
Trade receivables
Amounts due from joint ventures
Other receivables
Other investments
Trade payables
Amounts owed to joint ventures
Other financial liabilities and provisions
Borrowings
Derivative financial instruments:
Forward foreign currency contracts
Interest rate swaps
Net financial liabilities
Book value
US$m
2022
Fair value
US$m
Book value
US$m
172.4
236.4
–
18.7
5.9
172.4
236.4
–
18.7
5.9
(151.3)
(151.3)
(15.0)
(75.6)
(15.0)
(75.6)
(566.8)
(566.8)
107.2
241.5
0.1
34.0
6.0
(208.5)
(16.3)
(118.4)
(254.3)
(4.3)
(3.1)
(4.3)
(3.1)
2.7
1.9
2021
Fair value
US$m
107.2
241.5
0.1
34.0
6.0
(208.5)
(16.3)
(118.4)
(254.3)
2.7
1.9
Fair value measurements recognised in the statement of financial position
The following tables provide an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
– Level 2 fair value measurements are those derived from inputs other than quoted prices that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
– Level 3 fair value measurements are those derived from valuation techniques which include inputs for the
asset or liability that are not observable market data (unobservable inputs).
Financial assets measured at fair value
Year ended 31 December
2022
Financial assets measured at fair value through the income
statement:
Total
US$m
Level 1
US$m
Level 2
US$m
Level 3
US$m
Trading derivatives
1.6
–
1.6
–
Derivatives designated as effective hedging instruments
Financial assets measured at fair value through the statement of
comprehensive income:
(382.7)
(382.7)
(204.1)
(204.1)
Other investments
Unlisted investments are stated at fair value. For floating rate financial assets and liabilities, and for fixed rate
financial assets and liabilities with a maturity of less than 12 months, it has been assumed that fair values are
approximately the same as book values. Fair values for forward foreign currency contracts have been
estimated using applicable forward exchange rates at the year end. All other fair values have been calculated
by discounting expected cash flows at prevailing interest rates.
2021
Financial assets measured at fair value through the income
statement:
Trading derivatives
Derivatives designated as effective hedging instruments
Financial assets measured at fair value through the statement of
comprehensive income:
Other investments
5.9
7.5
3.6
1.9
6.0
11.5
0.9
0.9
–
–
1.0
1.0
–
1.6
3.6
1.9
–
5.5
5.0
5.0
–
–
5.0
5.0
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
160
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
34 Derivatives and other financial instruments cont.
Financial liabilities measured at fair value
Year ended 31 December
2022
Financial liabilities measured at fair value through the income
statement:
Trading derivatives
Derivatives designated as effective hedging instruments
2021
Financial liabilities measured at fair value through the income
statement:
Trading derivatives
Total
US$m
Level 1
US$m
Level 2
US$m
Level 3
US$m
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.
(5.9)
(3.1)
(9.0)
(0.9)
(0.9)
–
–
–
–
–
(5.9)
(3.1)
(9.0)
(0.9)
(0.9)
–
–
–
–
–
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.
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.
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 an early stage of its lifecycle 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 161 to 165 and, except as noted, have
remained unchanged since the beginning of the year to which these financial statements relate.
Interest rate risk
In 2022, 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 $360.0 million, of which $90.0 million had been
drawn down at year end, a $240.0 million term loan acquisition facility 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 2022 the Group has fixed to floating 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 2022 was $3.1 million (see note 22) 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.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
161
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
34 Derivatives and other financial instruments cont.
A reasonably possible change of one per cent in market interest rates would reduce profit before tax by
approximately $5.0 million (2021: $2.5 million), and would reduce shareholders’ funds by approximately $5.0
million (2021: $2.5 million). If interest rates fluctuate by a different rate, the aforementioned approximate
impact can be linearly interpolated.
Trade and other receivables and trade and other payables are excluded from the following disclosure (other
than the currency disclosures) as there is limited interest rate risk.
Capital risk management
The Group manages its capital so as to ensure that the Company and the Group will be able to continue as a
going concern.
The Group’s capital structure comprises cash and cash equivalents and borrowings (see Summary of net
debt on page 153), and share capital and reserves attributable to the equity shareholders of the Company.
Currency exposure
The table below shows the extent to which Group companies have financial assets and liabilities, excluding
forward foreign currency contracts, in currencies other than their functional currency. Foreign exchange
differences arising on retranslation of these assets and liabilities are taken to the Group income statement.
The table excludes loans between Group companies that form part of the net investment in overseas
subsidiaries on which the exchange differences are dealt with through reserves, but includes other Group
balances that eliminate on consolidation.
Functional currency 2021
Sterling
United States dollars
Euros
Indian Rupees
Brazilian Reals
Other currencies
Net foreign currency financial assets/(liabilities)
Sterling
US$m
US dollars
US$m
–
(7.5)
–
–
–
(0.3)
(7.8)
(2.2)
–
1.4
(1.0)
(1.6)
(17.9)
(21.3)
Euro
US$m
(1.5)
(9.1)
–
(0.3)
0.2
5.8
(4.9)
Indian Rupees
Brazilian Reals
US$m
US$m
Other
US$m
–
–
–
–
–
0.3
0.3
–
–
–
–
–
–
–
0.5
1.7
(0.1)
–
0.1
–
2.2
Total
US$m
(3.2)
(14.9)
1.3
(1.3)
(1.3)
(12.1)
(31.5)
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:
2022
Increase in US dollar exchange rate
(Decrease)/increase in profit before tax
Increase/(decrease) in shareholders’ funds
2021
Increase in US dollar exchange rate
(Decrease)/increase in profit before tax
Sterling
US$m
10%
(1.1)
21.6
Sterling
US$m
10%
(2.4)
21.6
Euro
Indian Rupees
Brazilian Reals
US$m
10%
(1.1)
(0.8)
Euro
US$m
10%
(1.0)
(1.4)
US$m
10%
0.6
5.0
US$m
10%
–
–
Indian Rupees
Brazilian Reals
US$m
10%
0.1
4.9
US$m
10%
0.2
0.1
Net foreign currency financial assets/(liabilities)
Increase/(decrease) in shareholders’ funds
Functional currency 2022
Sterling
United States dollars
Euros
Indian Rupees
Brazilian Reals
Other currencies
Sterling
US$m
US dollars
US$m
–
(8.4)
–
–
–
(0.2)
(8.6)
(0.3)
–
5.1
(6.0)
–
14.3
13.1
Euro
Indian Rupees
Brazilian Reals
US$m
1.9
(6.6)
–
(0.1)
–
7.7
2.9
US$m
–
0.5
–
–
–
–
0.5
US$m
–
–
–
–
–
–
–
Other
US$m
0.2
7.5
–
–
–
1.3
9.0
Total
US$m
1.8
(7.0)
5.1
(6.1)
–
23.1
16.9
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
162
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
34 Derivatives and other financial instruments cont.
Currency profile of financial assets
The currency profile of the Group’s financial assets was as follows:
Details of fixed and non interest-bearing liabilities (excluding derivatives and trade and other payables) are
provided below:
31 December
Currency:
Sterling
United States dollars
Euros
Indian Rupees
Brazilian Reals
Other currencies
Cash and
cash
equivalents
Trade and
other
receivables
Derivative
financial
instruments
Investments
Total
Investments
US$m
US$m
US$m
US$m
US$m
US$m
Cash and
cash
equivalents
US$m
Trade and
other
receivables
Derivative
financial
instruments
US$m
US$m
2022
–
5.0
0.1
0.8
–
–
1.7
97.1
8.6
18.9
–
6.2
10.7
18.6
114.3
(26.7)
189.7
42.1
26.3
–
(3.9)
(0.5)
–
46.9
45.5
–
46.1
66.2
22.0
134.3
–
5.0
0.1
0.9
–
–
0.4
55.1
2.5
9.2
2.2
37.8
4.7
127.2
22.7
22.3
22.9
75.8
275.6
66.0
(99.7)
(14.9)
12.5
–
41.6
5.5
2021
Total
US$m
71.1
87.6
10.4
44.9
25.1
155.2
394.3
Year ended 31 December
Currency:
Sterling
United States dollars
Other currencies
Weighted average
Fixed rate
financial
liabilities
Weighted
average
interest
rate
%
–
4.00
25.56
4.27
Weighted
average
period for
which rate
is fixed
(months)
–
46
6
45
Total financial assets
The investments included above comprise unlisted investments in shares and bonds.
435.0
172.4
255.1
5.9
1.6
107.2
6.0
Currency and interest rate profile of financial liabilities
The currency and interest rate profile of the Group’s financial liabilities was as follows:
Currency profile of foreign exchange derivatives
Floating
rate
US$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
Interest free
US$m
US$m
Lease
liabilities
US$m
Derivative
financial
instruments
US$m
2022
2021
Total
US$m
Year ended 31 December
Currency:
Sterling
United States dollars
0.3
–
4.1
3.8
(44.3)
(36.1)
0.5
–
13.8
4.5
(42.9)
(24.1)
400.5 160.0
99.5
26.9
37.4
–
28.5
12.2
6.6
–
41.3 729.8
79.6
160.0
143.6
22.7
(2.4)
–
65.8
41.6
–
9.4
–
–
–
–
–
17.5
52.0
10.4
17.1
9.5
10.3
–
42.8
10.3
–
1.2
443.1
46.7
62.3
11.6
–
–
–
2.0
74.0
54.3
(8.3) 122.0
2.0
2.8
105.9
57.6
(10.5)
157.8
4.0
–
–
–
404.8 162.0
241.9 105.4
9.0
923.1
91.5
162.8
343.2
99.0
0.9
697.4
Euros
Indian Rupee
Brazilian Real
Other currencies
Market price risk
31 December
Currency:
Sterling
United States
dollars
Euros
Indian Rupees
Brazilian Reals
Other currencies
Total financial
liabilities
2022
Financial
liabilities
on which
no interest
is paid
Weighted
average
period until
maturity
(months)
18
–
–
18
2022
US$m
55.0
39.2
–
3.7
–
43.3
141.2
Fixed rate
financial
liabilities
Weighted
average
interest
rate
%
–
4.00
23.95
4.34
Assets
2021
US$m
109.6
35.2
–
12.5
–
64.2
221.5
Weighted
average
period for
which rate
is fixed
(months)
–
58
9
57
2022
US$m
–
(104.1)
(26.6)
(1.8)
–
(13.0)
(145.5)
2021
Financial
liabilities
on which
no interest
is paid
Weighted
average
period until
maturity
(months)
18
–
–
18
Liabilities
2021
US$m
(0.7)
(179.6)
(25.2)
–
(1.2)
(12.1)
(218.8)
The benchmark for determining floating rate liabilities in the UK is the risk-free rate for both sterling and
US$ amounts.
The sensitivity analyses below have been determined based on the exposure to reasonably possible price
changes for the investments held at the year end.
The Group has equity and bond investments at 31 December 2022 of $5.9 million (2021: $6.0 million) held for
strategic rather than trading purposes. The Group does not actively trade these investments and is not
materially exposed to price risk.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
163
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
34 Derivatives and other financial instruments cont.
Maturity of undiscounted financial liabilities (excluding derivatives)
Year ended 31 December
Impact of a 10% increase in prices:
Increase in pre-tax profit for the year
Increase in equity shareholders’ funds
Liquidity risk
2022
US$m
2021
US$m
–
0.6
–
0.6
The Group typically holds cash balances in deposits with a short maturity. Additional resources can be drawn
through committed borrowing facilities at operating subsidiary level. During the year the Group has complied
with all externally imposed capital requirements.
The Group had the following undrawn committed borrowing facilities in respect of which all conditions
precedent had been met at the year-end:
The expected maturity of the Group’s financial liabilities, using undiscounted cash flows, was as follows:
Year ended 31 December
In one year or less, or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
2022
US$m
2021
US$m
282.3
383.2
233.5
48.1
947.1
380.1
22.3
176.3
142.6
721.3
The above table comprises the gross amounts payable in respect of borrowings (including interest thereon),
trade and other non-statutory payables and certain provisions, over the period to the maturity of those
liabilities.
Year ended 31 December
Expiring between one and two years
Expiring between two and five years
2022
US$m
–
2021
US$m
–
270.0
350.0
Maturity of undiscounted financial derivatives
The maturity of the Group’s financial derivatives (on a gross basis), which include interest rate and foreign
exchange swaps, using undiscounted cash flows, was as follows:
Maturity of undiscounted financial assets (excluding derivatives)
The expected maturity of the Group’s financial assets, using undiscounted cash flows, was as follows:
Year ended 31 December
In one year or less, or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
2022
US$m
419.6
5.0
2.9
5.9
2021
US$m
366.2
12.6
4.0
6.0
433.4
388.8
Year ended 31 December
In one year or less, or on demand
In more than one year but not more than two years
In more than two years but not more than five years
2022
US$m
126.6
14.5
–
141.1
Assets
2021
US$m
182.2
24.8
16.6
223.6
2022
US$m
(131.3)
(17.7)
–
(149.0)
Liabilities
2021
US$m
(178.5)
(24.3)
(16.0)
(218.8)
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
164
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
34 Derivatives and other financial instruments cont.
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)
Amounts due from joint ventures
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
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, or more frequent
if appropriate, review of their credit limits and credit periods.
2022
US$m
2021
US$m
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 (see note 19).
When determining expected losses for trade receivables, 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.
Hedges
During 2022, 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 2022, the fair value of such instruments was a net liability of $7.4 million (2021: net asset of
$4.6 million).
Interest rate swap fair value hedges outstanding at 31 December are expected to (decrease)/increase the
income statement in the following periods:
Year ended 31 December
Within one year
Within one to two years
Within two to five years
2022
US$m
(1.6)
(1.5)
–
(3.1)
2021
US$m
0.9
0.5
0.5
1.9
The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is three
months’ LIBOR.
172.4
1.6
236.4
–
18.7
429.1
5.9
435.0
21.0
5.5
2.2
2.0
1.5
32.2
204.2
236.4
0.6
0.2
0.3
0.7
5.8
7.6
107.2
5.5
241.5
0.1
34.0
388.3
6.0
394.3
17.5
5.1
1.7
1.3
1.7
27.3
214.2
241.5
0.8
0.2
0.3
0.7
6.9
8.9
Trade receivables consist of a large number of customers, spread across diverse geographical areas and
industries.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
165
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
35 Share-based payments
The total cost recognised in the consolidated Income Statement in respect of equity settled share-based
payment plans was as follows:
The fair value of the market-based component of these awards was calculated using the Monte Carlo
simulation method to reflect the likelihood of the market-based Total Shareholder Return (TSR) performance
condition, which attach to 20% (2021: 20%) of the award, being met, using the following assumptions:
Year ended 31 December
Long Term Incentive Plan (LTIP)
Deferred bonuses
2022
US$m
3.7
0.9
4.6
2021
US$m
3.9
0.5
4.4
The average share price for the year ended 31 December 2022 was 66.0p (2021: 65.8p).
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:
Vesting period
Share price at valuation date
Exercise price
Risk free rate
Expected dividend yield
Expected volatility
Fair value per share
Deferred bonuses
2022
2021
3 years
66.0p
Nil
1.04%
0%
39.93%
48.4p
3 years
59.2p
Nil
0.13%
0%
38.26%
16.8p
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.
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
2022
Options
42,003,141
12,221,204
(6,467,817)
(4,422,917)
(2,438,040)
40,895,571
3,692,768
40,532,920
15,492,212
(7,136,430)
(2,689,364)
(4,196,197)
42,003,141
4,917,104
The options outstanding at 31 December 2022 had a weighted average remaining contractual life of
7.5 years (2021: 7.7 years).
2021
Options
The options outstanding at 31 December 2022 had a weighted average remaining contractual life of 7.9
years (2021: 7.6 years).
36 Post balance sheet events
On 20 February 2023 the Group announced completion of a $250 million issue of US Private Placement
notes (see note 30 (g) for further details).
37 Alternative performance measures
This Annual Report contains both statutory measures and alternative performance measures which, in
management’s view, provide valuable additional information for users of the financial statements in
understanding the Group’s performance.
The Group’s alternative performance measures and key performance indicators are aligned to the Group’s
strategy and together are used to measure the performance of the business. A number of these measures
form the basis of performance measures for remuneration incentive schemes.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
166
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
37 Alternative performance measures cont.
Alternative performance measures are non-GAAP (Generally Accepted Accounting Practice) measures and
provide supplementary information to assist with the understanding of the Group’s financial results and with
the evaluation of operating performance for all the periods presented. Alternative performance measures,
however, are not a measure of financial performance under International Financial Reporting Standards
(‘IFRS’) and should not be considered as a substitute for measures determined in accordance with IFRS.
As the Group’s alternative performance measures are not defined terms under IFRS they may therefore not
be comparable with similarly titled measures reported by other companies.
A reconciliation of alternative performance measures to the most directly comparable measures reported in
accordance with IFRS is provided on pages 167 to 169.
a) Organic growth on a constant exchange rate (CER) basis
Organic growth measures the change in revenue and operating profit before exceptional and acquisition
related items after adjusting for acquisitions. The effect of acquisitions is equalised by:
– removing from the year of acquisition, their revenue and operating profit; and
– in the following year, removing the revenue and operating profit for the number of months equivalent to
the pre-acquisition period in the prior year.
The effects of currency changes are removed through restating prior year revenue and operating profit at
current year exchange rates. The principal exchange rates used are set out in note 1.
Organic revenue growth on a CER basis measures the ability of the Group to grow sales by operating in
selected geographies and segments and offering differentiated cost competitive products and services.
Adjusted organic operating profit growth on a CER basis measures the profitability progression of the Group.
Adjusted operating profit is calculated by adding back exceptional and acquisition related items (see note 4
for further details).
Year ended 31 December
Operating profit from continuing operations2
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 acquisitions1
Organic adjusted operating profit on a CER basis
2022
US$m
181.0
53.9
234.9
–
234.9
(9.2)
225.7
2021*
US$m
178.2
19.5
197.7
(12.3)
185.4
–
185.4
%
Growth
2%
19%
27%
22%
1. Revenue and operating profit from acquisitions relates to the acquisitions of Texon and Rhenoflex (see note 31).
2. Refer to the consolidated income statement for a reconciliation of profit before taxation to operating profit from continuing operations.
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
b) Adjusted EBITDA
Adjusted EBITDA is presented as an alternative performance measure to show the operating performance of
the Group excluding the effects of depreciation, amortisation and impairments and excluding exceptional
and acquisition related items.
Operating profit from continuing operations before exceptional and acquisition related items and before
depreciation of owned fixed assets and right-of-use assets and amortisation (Adjusted EBITDA) is as set out
below:
Year ended 31 December
Profit before taxation from continuing operations
Share of profit of joint ventures
Finance income (note 6)
Finance costs (note 7)
Operating profit from continuing operations1
2022
US$m
151.3
(1.1)
(2.6)
33.4
181.0
53.9
234.9
26.5
1.8
263.2
19.4
282.6
2021*
US$m
158.0
(1.2)
(0.4)
21.8
178.2
19.5
197.7
27.3
2.7
227.7
19.4
247.1
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
167
Year ended 31 December
Revenue from continuing operations
Constant currency adjustment
Revenue on a CER basis
Revenue from acquisitions1
Organic revenue on a CER basis
2022
US$m
2021*
US$m
1,583.8
1,446.7
–
(85.3)
%
Growth
9%
Exceptional and acquisition related items (note 4)
Adjusted operating profit from continuing operations
Depreciation of owned property, plant and equipment
1,583.8
1,361.4
16%
Amortisation of intangible assets
(87.2)
–
Adjusted EBITDA including IFRS 16 depreciation of right-of-use assets (Pre-IFRS 16 basis)
1,496.6
1,361.4
10%
Depreciation of right-of-use assets
Adjusted EBITDA
1. Refer to the consolidated income statement for a reconciliation of profit before taxation to operating profit from continuing operations.
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
37 Alternative performance measures cont.
d) Adjusted earnings per share
Net debt including lease liabilities under IFRS 16 at 31 December 2022 was $499.8 million
(2021: $246.1 million).
This gives a leverage ratio of net debt including lease liabilities to adjusted EBITDA at 31 December 2022
of 1.8 (2021: 1.0).
Net debt excluding lease liabilities under IFRS 16 at 31 December 2022 was $394.4 million
(2021: $147.1 million).
This gives a leverage ratio on a pre-IFRS 16 basis at 31 December 2022 of 1.5 (2021: 0.6).
The Group’s pro forma leverage on a pre-IFRS 16 basis at 31 December 2022 is 1.4 after adjusting EBITDA to
include Texon and Rhenoflex as if the acquisitions had taken effect at the beginning of the reporting period
(1 January 2022)
For the definition and calculation of net debt excluding lease liabilities see note 30 (g).
c) Adjusted effective tax rate
The adjusted effective tax rate removes the tax impact of exceptional and acquisition related items and net
interest on pension scheme assets and liabilities to arrive at a tax rate based on the adjusted profit before
taxation.
A significant proportion of the Group’s net interest on pension scheme assets and liabilities relates to UK
pension plans for which there is no related current or deferred tax credit or charge recorded in the income
statement. The Group’s net interest on pension scheme assets and liabilities is adjusted in arriving at the
adjusted effective tax shown below and, in management’s view, were this not adjusted it would distort the
alternative performance measure. This is consistent with how the Group monitors and manages the effective
tax rate.
Year ended 31 December
Profit before taxation from continuing operations
Exceptional and acquisition related items (note 4)
Net interest on pension scheme assets and liabilities
Adjusted profit before taxation from continuing operations
Taxation charge from continuing operations
Tax credit in respect of exceptional and acquisition related items
Tax credit in respect of net interest on pension scheme assets and liabilities
Adjusted tax charge from continuing operations
Adjusted effective tax rate
2022
US$m
2021*
US$m
151.3
55.0
0.5
206.8
56.4
3.7
0.5
60.6
29%
158.0
19.5
4.1
181.6
53.1
0.2
0.5
53.8
30%
The calculation of adjusted earnings per share is based on the profit from continuing operations attributable
to equity shareholders before exceptional and acquisition related items as set out below. Adjusted earnings
per share growth measures the progression of the benefits generated for shareholders.
Year ended 31 December
Profit from continuing operations
Non-controlling interests
Profit from continuing operations attributable to equity shareholders
Exceptional and acquisition related items net of non-controlling interests (note 4)
Tax credit in respect of exceptional and acquisition related items
Adjusted profit from continuing operations
Weighted average number of Ordinary Shares
Adjusted earnings per share (cents)
Adjusted earnings per share (growth %)
2022
US$m
94.9
(22.0)
72.9
54.7
(3.7)
123.9
2021*
US$m
104.9
(19.7)
85.2
19.5
(0.2)
104.5
1,515,999,205
1,457,076,765
8.17
14%
7.17
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
The weighted average number of Ordinary Shares used for the calculation of adjusted earnings per share for
the year ended 31 December 2022 is 1,515,999,205 (2021: 1,457,076,765), the same as that used for basic
earnings per ordinary share from continuing operations (see note 11).
e) Adjusted free cash flow
Net cash generated by operating activities, a GAAP measure, reconciles to changes in net debt resulting
from cash flows (free cash flow) as set out in the consolidated cash flow statement. A reconciliation of free
cash flow to adjusted free cash flow is set out below.
Consistent with previous periods, adjusted free cash flow is defined as cash generated from continuing
activities less capital expenditure, interest, tax, dividends to minority interests and other items, and excluding
exceptional and discontinued items, acquisitions, purchase of own shares by the Employee Benefit Trust and
payments to the UK pension scheme.
Adjusted free cash flow measures the Group’s cash generation that is available to service shareholder
dividends, pension obligations and acquisitions.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
O
T
H
E
R
I
N
F
O
168
Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
37 Alternative performance measures cont.
f) Adjusted return on capital employed
Year ended 31 December
Change in net debt resulting from cash flows (free cash flow)
Acquisition of businesses (note 31)
Disposal of business (note 32)
Net cash outflow from discontinued operations
Payments to UK pension scheme
Net cash flows in respect of other exceptional and acquisition related items
Issue of ordinary shares (note 26)
Purchase of own shares by Employee Benefit Trust
Dividends paid to equity shareholders
Tax inflow in respect of adjusted cash flow items
Adjusted free cash flow
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1).
2022
US$m
(247.1)
346.0
17.0
9.2
42.7
22.5
(109.8)
2.1
33.0
(1.4)
114.2
2021*
US$m
32.6
–
–
9.2
42.4
12.2
–
–
27.4
–
123.8
Adjusted return on capital employed (ROCE) is defined as operating profit before exceptional and acquisition
related items adjusted for the full year impact of acquisitions divided by period end capital employed as set
out below. Adjusted ROCE measures the ability of the Group’s assets to deliver returns.
Year ended 31 December
Operating profit from continuing operations before exceptional and acquisition related items
adjusted for full year impact of acquisitions1
Non-current assets:
Acquired intangible assets
Property, plant and equipment
Right-of-use assets
Trade and other receivables
Current assets:
Inventories
Trade and other receivables
Current liabilities:
Trade and other payables
Lease liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Capital employed
Adjusted ROCE
2022
US$m
2021*
US$m
250.9
197.7
366.6
256.3
96.5
20.2
211.4
286.3
36.8
235.1
91.6
20.4
229.6
279.8
(278.4)
(19.0)
(328.9)
(17.8)
(26.3)
(86.4)
827.2
30%
(24.2)
(81.2)
441.2
45%
The amounts shown above for non-current assets, current assets, current liabilities and non-current liabilities
at 31 December 2021 exclude the discontinued Brazil and Argentina business.
1. Operating profit from continuing operations before exceptional and acquisition related items for the year ended 31 December 2022 has been
adjusted to include Texon and Rhenoflex as if the acquisitions had taken effect at the beginning of the reporting period (1 January 2022). Including
full year pro forma results, rather than the actual consolidated results of these acquired businesses, better reflects the return from the capital
position at the period end. Therefore this provides reliable and more relevant information on the financial performance of the Group to a user of the
financial statements. Refer to note 4 for details of exceptional and acquisition related items.
* Represented to reflect the results of the Brazil and Argentina business as a discontinued operation (see note 1). Amounts for non-current assets,
current assets, current liabilities and non-current liabilities at 31 December 2021 exclude the discontinued Brazil and Argentina business.
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Notes to the financial statements cont.
Coats Group plc Annual Report and Accounts 2022
Company balance sheet
31 December
Fixed assets:
Investments
Current assets:
Trade and other receivables
Cash at bank and in hand
Creditors: amounts falling due within one year:
Loans from subsidiary undertakings
Trade and other payables
Net current liabilities
Net assets
Capital and reserves:
Share capital
Share premium account
Capital redemption reserve
Share options reserve
Capital reduction reserve
Own shares
Profit and loss account
Shareholders’ funds
Company statement of changes in equity
Notes
2022
US$m
2021
US$m
4
1,354.0
1,244.2
1 January 2021
Share
capital
US$m
90.1
Share
premium
account
US$m
10.5
Capital
redemption
reserve
US$m
14.1
Share
options
reserve
US$m
18.5
Capital
reduction
reserve
US$m
59.8
Own
shares
US$m
(3.2)
Profit and loss
account
US$m
Total
equity
US$m
984.0
1,173.8
0.2
0.6
0.8
(1.7)
(0.5)
(1.4)
–
0.8
0.8
(68.7)
(0.6)
(68.5)
1,352.6
1,175.7
5
5
99.0
111.4
14.1
18.5
59.8
(0.1)
90.1
10.5
14.1
18.5
59.8
(0.5)
1,049.9
1,352.6
983.2
1,175.7
Profit and total
comprehensive
expense for
the year
Dividends to equity
shareholders
Movement in
own shares
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31 December 2021
90.1
10.5
14.1
18.5
59.8
Profit and total
comprehensive
expense for
the year
Issue of ordinary
shares
Dividends to equity
shareholders
Purchase of own
shares
Movement in
own shares
–
–
8.9
100.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31 December 2022
99.0
111.4
14.1
18.5
59.8
–
–
28.2
28.2
(27.6)
(27.6)
2.7
(0.5)
(1.4)
1.3
983.2
1,175.7
–
–
–
(2.1)
2.5
(0.1)
100.0
100.0
–
109.8
(32.9)
(32.9)
–
(0.4)
(2.1)
2.1
1,049.9
1,352.6
The Company reported a profit for the financial year ended 31 December 2022 of $100.0 million (2021: $28.2
million).
Rajiv Sharma
Group Chief Executive
Jackie Callaway
Chief Financial Officer
Approved by the Board 1 March 2023
Company Registration No.103548
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Coats Group plc Annual Report and Accounts 2022
Company cash flow statement
Year ended 31 December
Net cash flows from operating activities:
Operating profit
Decrease in creditors
Increase in debtors
Net cash flows from operating activities
Net cash flows from investing activities:
Investments in subsidiary undertakings
Net cash flows from investing activities:
Net cash flows from financing activities:
Issue of ordinary shares
Purchase of own shares
Repayment of loans from subsidiary undertakings
Proceeds from sale of own shares
Dividends paid to equity shareholders
Net cash flows from financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash at bank and in hand at the beginning of the year
Cash at bank and in hand at the end of the year
2022
US$m
2021
US$m
93.5
–
(0.2)
93.3
(109.8)
(109.8)
109.8
(2.1)
(60.5)
2.1
(33.0)
16.3
(0.2)
0.8
0.6
27.7
(1.4)
–
26.3
–
–
–
–
–
1.3
(27.4)
(26.1)
0.2
0.6
0.8
Notes 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 2022.
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.
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Coats Group plc Annual Report and Accounts 2022
Notes to the company financial statements cont.
1 Accounting policies cont.
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
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 profit for the year attributable to shareholders was $100.0 million (2021: $28.2
million profit). Fees paid for the audit of the Company’s annual accounts are disclosed on page 131.
Details of directors’ remuneration are set out on pages 85 to 97 within the Remuneration Report and form
part of these financial statements.
3 Dividends
Dividends amounting to $32.9 million in respect of the year ended 31 December 2022 were payable to Coats
Group plc shareholders during the year (2021: $27.6 million). Details of the proposed final dividend for the
year ended 31 December 2022 are set out in note 12 of the consolidated financial statements.
4 Investments
At 1 January 2022
Additions (see note 26)
At 31 December 2022
Investments in
subsidiary
undertakings
US$m
1,244.2
109.8
1,354.0
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.
The carrying value of investments at 1 January 2021 was $1,244.2 million.
5 Share capital and reserves
There are 1,597,810,385 Ordinary Shares of 5p issued and fully paid at 31 December 2022
(2021: 1,452,570,385).
g) Dividends
Dividends proposed are recognised in the period in which they are formally approved for payment.
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 2022.
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 2022 of $0.1 million (2021: $0.5 million) represents the cost of
shares in Coats Group plc purchased in the market and held by an Employee Benefit Trust to satisfy awards
under the Group’s share based incentive plans. The number of shares held by the Employee Benefit Trust at
31 December 2022 was 805,501 (2021: 2,020,306).
As at 31 December 2022 the Company had distributable profits of $287.3 million (2021: $220.1 million).
6 Related party transactions
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.
Amounts due from and to other Group companies are disclosed on the face of the Balance Sheet on
page 170.
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Coats Group plc Annual Report and Accounts 2022
Group 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:
Indirect holdings of the Company
Country of Incorporation
Company name
Registered office address
Share class
Subsidiaries:
Direct holdings of the Company
Country of Incorporation
Company name
Registered office address
United Kingdom
Arrow HJC
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
B. M. Estates
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
Coats Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Contractors’
Aggregates Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
GPG (UK) Holdings
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
GPG March 2004
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
S G Warburg Group
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Australia
Australia
Bangladesh
Bangladesh
Bulgaria
Cambodia
Share class
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
Canada
Coats Australian
Pty Ltd
Guinness Peat
Group (Australia)
Pty Limited
Unit 2, 56 Keys Road, Moorabbin VIC 3189, Australia
AUD0.54 Ordinary
Level 44, 600 Bourke Street, Melbourne, Victoria,
3000, Australia
Coats Bangladesh
Limited
Tower 117, 117/A Tejgaon Industrial Area, Dhaka 1208,
Bangladesh
Coats Crafts
Bangladesh Limited
Novo Tower, 270 Tejgaon Industrial Area, Dhaka 1208,
Bangladesh
Coats Bulgaria
Eood
Coats Threads
(Cambodia)
Company Limited
Coats Canada Inc
Tharigradsko shouse bld 7th Km, Sofia 1748, Bulgaria
Phnom Penh Tower, No. 445, Room No. 1, 7th Floor,
Monivong Blvd corner street 232, 1, Boeng Proluet,
Prampir Meakkakra, Cambodia
10 Roybridge Gate Blvd, Vaughan ON L4H 3M8,
Canada
AUD1.00 Ordinary,
AUD14,977.77
Redeemable
Preference
BDT100.00 Ordinary
(80%)
BDT100.00 Ordinary
(80%)
BGL50.00 Ordinary
KHR4,000 Ordinary
Common (no par
value)
CAD Common, CAD
Class A Pref 1, CAD
Class A Pref 2
US$1.00 Ordinary
Canada
Staveley Services
Canada Inc
44 Chipman Hill, Suite 1000, Saint John NB E2L 2A0,
Canada
Chile
Chile
China
China
China
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
Coats Opti
Shenzhen Limited
Coats Shenzhen
Limited
Donguan Rhenoflex
New Materials Co.
Ltd
Phase two of high-tech park), B6/B15 of Coats Industrial
Park, Fengtang Avenue, Tangwei Community, Fuyong
Street, Bao’An District, Shenzhen, China
US$1.00 Ordinary
(90%)
Coats Industrial Park, Fengtang Avenue, Zhancheng
Community, Fuhai Street, Baoan District, Shenzhen,
China 518103
Building 5, No. 77 Shilong Road, Guancheng Street,
Dongguan, Guangdong Province, China
US$1.00 Ordinary
(90%)
US$500,000.00
Ordinary
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Coats Group plc Annual Report and Accounts 2022
Group structure cont.
Country of Incorporation
Company name
Registered office address
Share class
Country of Incorporation
Company name
Registered office address
Donguan Rhenoflex
Shoe Materials Co.
Ltd
Room 1510, Business Building, Gosun Science and
Technology Park, Nancheng Street, Dongguan, China
US$100,000.00
Ordinary
France
UT France
Zone Industrielle de la Bergerie, 10 rue Gustave Eiffel,
49280 La Seguiniere, Maine-et-Loire, Pays de la Loire,
France
China
China
China
China
China
China
Colombia
Ecuador
Egypt
Egypt
Egypt
El Salvador
Estonia
France
France
Guangzhou Coats
Limited
Unit B12, 2nd Floor, 2nd Building, No 11 Hao Ke Zhou
East Street, Haizhu District, Guangzhou, China
Jiangyin Rhenoflex
Waterproof Material
Co.Ltd
No. 58 Dong Sheng Road, Hi-Tech Park, Jiangyin
Economic Development Zone, China
Qingdao Coats
Limited
No. 6, Sanhuan Road, Jimo Environmental Protection
Industrial Park, Jimo District, Shandong, China
Shanghai Coats
Limited
No.8 Building, Export Processing Garden, Songjiang
Industrial Zone 201613, Shanghai, China
HKD1.00 Ordinary
(90%)
US$1,500,000.00
Ordinary
US$1.00 Ordinary
(90%)
US$1.00 Ordinary
(90%)
US$1,420,000.00
Ordinary
Texon Dongguan
Non Woven Ltd
Coats Cadena
Andina SA –
Colombia
Coats Cadena SA
Ecuador
No. 17 Weiheng Road, Niushan Foreign Economics
Industrial Park, Dongcheng Street, Dongguan City,
China
Avenida Santander, N.5E-87, Pereira, Colombia
COP20.63 Ordinary
De las Avellanas E, 2-74 y El Juncal, Quito, Ecuador
US$1.00 Ordinary
Coats Craft Egypt
New Cairo, 5th settlement, Villa 28, Egypt
Coats Egypt for
manufacturing and
dyeing sewing
thread SAE
Industrial Area Zone B3, Plot 78, 10th of
Ramadan City, Cairo, Egypt
Coats Industrial
Trading Egypt
Industrial Area Zone B3, Plot 62, 10th of Ramadan City,
Cairo, Egypt
Coats El Salvador,
S.A. de C.V.
Zona Franca Export Salva, Edificio No 18C, San
Salvador, El Salvador
EGP1.00 Ordinary
US$14.0625
Ordinary
EGP4000.00
Ordinary
US$12.00 Ordinary
Coats Eesti AS –
Estonia
Ampri tee 9/4, Lubja küla 74010 Viimsi Vald, Harjumaa,
Estonia
€63.90 Ordinary
Coats France S.A.S. 8 avenue Hoche, 75008, Paris, France
€0.60 Ordinary
Honduras
Rhenoflex France
SAS
3 rue du Moulin, 49450 St. Macaire en Mauges, France €188,401.00
Ordinary
€1.22104 Ordinary
France
Texon France SAS
Zone Industrielle de la Bergerie, 10 rue Gustave Eiffel,
49280 La Seguiniere, Maine-et-Loire, Pays de la Loire,
France
Share class
€1.51178 Ordinary
€12,000,000.00
Ordinary
€1,000,000.00
Ordinary
€11,704,000.00
Ordinary
€25,000.00
Ordinary
DEM1.00 Ordinary
€126,000.00
Ordinary
€27,041,999.59
Ordinary
GTQ100.00
Ordinary
GTQ1.00 Ordinary
GTQ100.00
Ordinary
GTQ1.00 Ordinary
Germany
Coats GmbH
1 Suedwieke 180, 26817 Rhauderfehn, Germany
Germany
Germany
Coats Opti
Germany GmbH
1 Suedwieke 180, 26817 Rhauderfehn, Germany
Coats Thread
Germany GmbH
Adolf-Kolping-Straße 2 – 6, Donaueschingen, 78166,
Germany
Germany
Rhenoflex GmbH
Giulinistraße 2, 67065 Ludwigshafen, Germany
Germany
Germany
Germany
Guatemala
Guatemala
Guatemala
Guatemala
Guatemala
Hong Kong
Hong Kong
Schwanenwolle
Tittel & Krueger AG
i. L
Texon Components
GmbH
Texon Mockmuhl
GmbH
RHS, Stadtstrasse 29, 79104 Freiburg, Germany
Roigheimer Str., 69-72, Mockmuhl, 74219, Germany
Roigheimer Str., 69-72, Mockmuhl, 74219, Germany
Centraltex de
Guatemala, S.A.
26 Avenida No. 7-27, Zona 4, Mixco oficina 11,
Guatemala
Coats de
Guatemala, S.A.
13-78 Zona 10, Edif. Intercontinental Plaza Torre
Citigroup Nivel 17, Oficina 1702, Ciudad, Guatemala
Crafts Central
America, S.A.
26 Avenida No. 7-27, Zona 4, Mixco oficina 11,
Guatemala
Distribuidora Coats
de Guatemala,
Sociedad Anomina
Guatemala Thread
Company Sociedad
Anonima
39 Avenida, 3-47 Zona 7, Colonia El Rodeo, Guatemala,
Guatemala
39 Avenida, 3-47 Zona 7, Colonia El Rodeo, Guatemala,
Guatemala
GTQ10.00 Ordinary
Coats Honduras,
S.A.
Edificio #13 Zona Libre Inhdelva, 800 mts. Carretera a
la Jutosa, Choloma, Cortes, Honduras
HNL100.00 Ordinary
China Thread
Development
Company Limited
Unit 1-4, 10/F, The Broadway, 54-62 Lockhart Road,
Wanchai, Hong Kong
HKD10.00 Ordinary
Coats (China)
Limited
Unit 1-4, 10/F, The Broadway, 54-62 Lockhart Road,
Wanchai, Hong Kong
HKD10.00 Ordinary
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Coats Group plc Annual Report and Accounts 2022
Group structure cont.
Country of Incorporation
Company name
Registered office address
Share class
Country of Incorporation
Company name
Registered office address
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hungary
India
India
India
Fastreact Systems
(Far East) Co
Limited
Rhenoflex Hong
Kong Ltd
Coats
Magyarorszag
Cernagyarto es
Ertekesito Korlatolt
Felelossegu
Tarsasag
Intellosol Softwares
India Private
Limited
Madura Coats
Private Limited
Texon (India)
Private Limited
HKD10.00 Ordinary
Italy
Coats Italy S.r.l.
Sesto San Giovanni (MI), Via Milanese, 20 CAP, 20099,
Milan, Italy
Coats China
Holdings Limited
Unit 1-4, 10/F, The Broadway, 54-62 Lockhart Road,
Wanchai, Hong Kong
Coats Hong Kong
Limited
Unit 1-4, 10/F, The Broadway, 54-62 Lockhart Road,
Wanchai, Hong Kong
Coats Opti Hong
Kong Limited
Unit 1-4, 10/F, The Broadway, 54-62 Lockhart Road,
Wanchai, Hong Kong
HKD10.00 Ordinary
(90%)
HKD1.00 Ordinary
Italy
Italy
Coats Thread HK
Limited
Unit 1-4, 10/F, The Broadway, 54-62 Lockhart Road,
Wanchai, Hong Kong
HKD10.00 Ordinary
Fast React Asia
(HK) Limited
Room 2203 22/F, Tower 1, Lippo Centre, 89
Queensway, Hong Kong
HKD1.00 Ordinary
Room 2203 22/F, Tower 1, Lippo Centre, 89
Queensway, Hong Kong
HKD1.00 Ordinary
Malaysia
17/F 700 Nathan Road, Monkok, Hong Kong
HKD1.00 Ordinary
Texon International
(Asia) Limited
Room 1–4, 10th Floor, The Broadway, 54-62 Lockhart
Road, Wanchai, Hong Kong
HKD1.00 Ordinary
1044 Budapest, Vaci ut 91, Hungary
HUF100,000.00
Ordinary
Rhenoflex Italy S.r.l Via Borgogna 2, 20122 Milan, Italy
Texon Italia S.r.l.
Via Felice, Casati 20, Milan, 20124, Italy
Coats (Madagascar)
International1
First Immo, Galaxy Industrial Estate, Rue du Dr. Raseta,
Andraharo, Antananarivo, Madagascar
Coats (Madagascar)
S.AR.L (EPZ)2
First Immo, Galaxy Industrial Estate, Rue du Dr. Raseta,
Andraharo, Antananarivo, Madagascar
49-B Jalan Melaka Raya 8, Taman Melaka Raya, 75000
Melaka, Malaysia
Allee des Mangues, Pailles, Mauritius
Coats Thread
(Malaysia) Sdn.
Bhd.
J & P Coats
(Mauritius) Ltd3
Coats Indian Ocean
Holding Co Limited
Coats Mexico S.A.
de C.V.
Madagascar
Madagascar
Mauritius
Mauritius
Mexico
Share class
€5,000,000.00
Quota
€10.000.00
Ordinary
€1.00 Ordinary
MGF100,000.00
Ordinary
MGF100,000.00
Ordinary
RM10.00 A,
RM10.00 B,
RM10.00 C (99%)
Rs100.00 Ordinary
Morocco
Coats Maroc
1/22, Second Floor, Asaf Ali Road, New Delhi, Central
Delhi, Delhi, 110002, India
INR10.00 Ordinary
Morocco
Netherlands
7th Floor, Jupiter 2A, Prestige Tech Park, Sarjapur
Marathalli Ring Road, Bangalore, 560103, India
INR10.00 Ordinary
S. No. 376, Thirumudivakkam Main Road, Behind
Amarprakash Heritage Apartments, Thirumudivakkam,
Chennai, Tamil Nadu, 600044, India
INR100.00 Ordinary
Netherlands
Mercerie
Industrielle de
Casablanca
Coats Industrial
Europe Holdings
B.V.
Coats Industrial
Thread Holdings
B.V
2nd Floor, IBL House, Caudan, Port-Louis, Mauritius
US$100.00 Ordinary
Periferico Sur #3325 Piso 8, Col. San Jerónimo Lídice,
Magdalena Contreras, Mexico City, CP10200, Mexico
220 Bld Chefchaouni, Ain Sebaa, Casablanca, Morocco MAD100.00
MXP1.00 Ordinary-A,
MXP1.00 Ordinary-B
Ordinary
220 Bld Chefchaouni, Ain Sebaa, Casablanca, Morocco MAD100.00
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Ordinary
€1.00 Ordinary
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
€1.00 Ordinary
Indonesia
PT. Coats Rejo
Indonesia
Ventura Building, Lantai 5, Suite 501-B, Jl. RA Kartini
No. 26, Cilandak, Jakarta Indonesia
Indonesia
PT Coats Trading
Indonesia
Ventura Building, Lantai 5, Suite 501-B, Jl. RA Kartini
No. 26, Cilandak, Jakarta Indonesia
IDR415.00
Ordinary-A,
IDR627.00
Ordinary-B, US$1.00
Preference
USD1.00 Ordinary
Netherlands
Netherlands
Coats Northern
Holdings B.V.
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Coats South
America Holdings
B.V.
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
€1.00 Ordinary
€1.00 Ordinary
1 Sold on 31st January 2023
2 Sold on 31st January 2023
3 Sold on 31st January 2023
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Coats Group plc Annual Report and Accounts 2022
Group structure cont.
Country of Incorporation
Company name
Registered office address
Share class
Country of Incorporation
Company name
Registered office address
Netherlands
Netherlands
New Zealand
Nicaragua
Pakistan
Peru
Poland
Portugal
Portugal
Coats South Asia
Holdings B.V.
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
€1.00 Ordinary
South Africa
Coats Southern
Holdings B.V.
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
€1.00 Ordinary
Coats Patons (New
Zealand) Ltd
3 Mana Place, Wira, Auckland, New Zealand
NZD1.00 Ordinary
Coats de Nicaragua
SA
Altamira d’este, Rotonda Madrid #235, Managua,
Nicaragua
NIO100.00 Ordinary
J & P Coats
Pakistan (Pvt)
Limited
Suites 112-113, Prime Office Lobby, Park Towers,
Shahrah-e-Firdousi, Clifton, Karachi, 75600, Pakistan
PKR100.00 Ordinary
Coats South Africa
(Proprietary)
Limited
107 Escom Road, New Germany, 3620, KZN, Natal,
South Africa
Coats Cadena SA
– Peru
Av. Republica de Panama 3461, Piso 9, San Isidro, Lima,
Peru
Nowe Sady 2, 94-104 Lodz, Poland
PEN 0.01 Ordinary
(99%)
PLN1,000.00
Ordinary
Spain
Gotex S.A.
Avinguda de Montcau, No 5, Parcela A del VGP Llica
d’Amunt, (Nave E2 y E3), Llica de Munt, Barcelona,
08186, Spain
Share class
ZAR0.01 Ordinary,
ZAR0.01 Cumulative
Redeemable
Preference, ZAR0.01
Non-redeemable
Preference Shares,
ZAR0.01
Non-redeemable
Non-cumulative
Variable Rate
Convertible
Preference
€6.02 Ordinary
Praca Duque de Saldhana, 1, Edif. Atrium Saldanha, Piso
7, Lisbon, 1050-094, Portugal
€1.00 Ordinary
Bearer Shares
Sri Lanka
Sri Lanka
Praca Duque de Saldhana, 1, Edif. Atrium Saldanha, Piso
7, Lisbon, 1050-094, Portugal
€1.00 Bare Shares
Sweden
Coats Thread
Exports (Private)
Limited
Coats Thread
Lanka (Private)
Limited
Coats Industrial
Scandinavia AB
No. 479, Level–08, HNB Towers, T.B. Jayah Mawatha,
Colombo, 10, Sri Lanka
LKR100.00 Ordinary
(99%)
No. 479, Level–08, HNB Towers, T.B. Jayah Mawatha,
Colombo, 10, Sri Lanka
LKR10.00 Ordinary
(99%)
Stationsvagen 2, SE-516 31 Dalsjofors, Sweden
SEK1,000.00 Bearer
Coats Polska
Spolka z
oganiczona
odpowiedzialnoscia
Coats – Comercio
de Linhas, Fechos
e Acessorios, Para
a Industria SA
Companhia de
Linha Coats & Clark
S.A.
Romania
Coats Romania SRL Municipiul Odorheiu Secuiesc, Str. Nicolae Balcescu, Nr.
Russian Federation Coats LLC
71, Judetul Harghita, Romania
53 Lenin Street, Oktyabrsky, Lubertsy, 140060,
Moscow Region, Russia
RON169.38
Ordinary
RUB173.55 Ordinary
Singapore
Coats International
Pte. Limited
12 Marina View, #11-01, Asia Square Tower 2, 018961,
Singapore
SGD1.00 Ordinary
Switzerland
Coats Stroppel AG c/o Haussmann Treuhand AG, Seefeldstrasse 45, 8008
CHF2,500.00
Zurich, Switzerland
Thailand
Tunisia
Tunisia
Turkey
Ukraine
United Kingdom
Coats Threads
(Thailand) Ltd
Coats Industrial
Tunisie
Coats Trading
Tunisie
Coats (Turkiye) Iplik
Sanayii AS
Allied Mutual
Insurance Services
Ltd
39/60 Moo 2 Tambol Bangkrachaw, Amphur Muang,
Samutsakorn Province 74000, Thailand
52, rue du Tissage, Douar Hicher, Manouba, 2086,
Tunisia
THB1,000.00 Ordinary
TND10.00 Ordinary
TND10.00 Ordinary
52, rue du Tissage, Douar Hicher, Manouba, 2086,
Tunisia
BALAT OSB MAH Mavi Cad. No 2, 16220 Bursa, Turkey TRY1.00 New
Ordinary (92%)
UAH1.00 Ordinary
£1.00 Ordinary
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Coats Ukraine Ltd Moskovskiy ave. 28A, litera B, Kiev, 04655, Ukraine
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Coats Group plc Annual Report and Accounts 2022
Group structure cont.
Country of Incorporation
Company name
Registered office address
Share class
Country of Incorporation
Company name
Registered office address
£1.00 Ordinary
United Kingdom
United Kingdom
Anfield 1 Limited
United Kingdom
Anfield 2 Limited
Mazars Llp, 45 Church Street, Birmingham, B3 2RT
United Kingdom
Mazars Llp, 45 Church Street, Birmingham, B3 2RT
United Kingdom
Barbour Threads
Limited
Cornerstone, 107 West Regent Street, Glasgow, G2
2BA, United Kingdom
United Kingdom
United Kingdom
United Kingdom
Brown Shipley
Holdings Limited
Brunel Pension
Trustees Limited
United Kingdom
Cardpad Limited
United Kingdom
Coats (UK) Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Coats Digital
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Coats Finance Co.
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£1.00 Ordinary,
£1.00 Deferred
£10.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
United Kingdom
United Kingdom
United Kingdom
Coats Property
Management
Limited
Coats Shelfco
(BDA) Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Coats Shelfco (CV
Nominees) Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Coats Shelfco (VV)
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
Coats Trading (UK)
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
Coats UK Pension
Scheme Trustees
Limited
United Kingdom
Corah Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£1.00 Ordinary
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Coats Group
Finance Company
Limited
Coats Holding
Company
(No. 1) Limited
Coats Holding
Company
(No. 2) Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£0.33 Ordinary
United Kingdom
D. Byford & Co
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£0.125 Ordinary
United Kingdom
Embergrange
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£0.25 Ordinary
United Kingdom
Fast React Systems
(Bangladesh)
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
Coats Holdings Ltd The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
£1.00 Ordinary
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£1.00 Ordinary
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Coats Industrial
Thread Brands
Limited
Coats Industrial
Thread Limited
Coats Patons
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Cornerstone, 107 West Regent Street, Glasgow, G2
2BA, United Kingdom
£1.00 Ordinary
£0.25 Ordinary
£1.00 Ordinary
Coats Pensions
Trustee Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
United Kingdom
Fast React Systems
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
GPG Securities
Trading Ltd
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
Griffin SA Ltd
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom
United Kingdom
GSD (Corporate)
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
GSD Holdings
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Share class
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£0.01 Ordinary,
£0.075 Deferred
£1.00 Ordinary
£0.25 Ordinary,
£1.00 4.2%
Cumulative
Preference
£0.20 Ordinary,
£1.00 Preference
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary-A,
£1.00 Ordinary-B
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
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Coats Group plc Annual Report and Accounts 2022
Group structure cont.
Country of Incorporation
Company name
Registered office address
Share class
Country of Incorporation
Company name
Registered office address
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£0.50 Ordinary
United Kingdom Texon
Management Ltd
United Kingdom Hicking
Pentecost
Limited
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
United Kingdom Patons Limited
United Kingdom Simpson, Wright
& Lowe, Limited
United Kingdom Sir Richard
Arkwright & Co.
Limited
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 Texon (Newco 2)
Ltd
United Kingdom Texon
International
Group Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
1 George Square, Glasgow G2 1AL, United
Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Skelton Industrial Estate, Skelton,
Saltburn-By-The-Sea, Cleveland, TS12 2LH,
England, United Kingdom
Skelton Industrial Estate, Skelton,
Saltburn-By-The-Sea, Cleveland, TS12 2LH,
England, United Kingdom
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
United Kingdom Texon Non
Woven Ltd
United Kingdom Texon Overseas
£1.00 Ordinary
United Kingdom The Central
Agency Limited
£1.00 Ordinary
United Kingdom The Coats
Trustee Company
Limited
Skelton Industrial Estate, Skelton,
Saltburn-By-The-Sea, Cleveland, TS12 2LH,
England, United Kingdom
Skelton Industrial Estate, Skelton,
Saltburn-By-The-Sea, Cleveland, TS12 2LH,
England, United Kingdom
Skelton Industrial Estate, Skelton,
Saltburn-By-The-Sea, Cleveland, TS12 2LH,
England, United Kingdom
Cornerstone, 107 West Regent Street, Glasgow,
G2 2BA, United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
£1.00 Ordinary,
£1.00 7% Preference
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
United Kingdom Thomas Burnley
& Sons, Limited
United Kingdom Tootal Group
Limited
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
United Kingdom Tootal Limited
United Kingdom Torque Group
International
Fortune Limited
United Kingdom Torque Group
United States
International
Wealth Limited
Coats American
Inc
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Skelton Industrial Estate, Skelton,
Saltburn-By-The-Sea, Cleveland, TS12 2LH,
England, United Kingdom
Skelton Industrial Estate, Skelton,
Saltburn-By-The-Sea, Cleveland, TS12 2LH,
England, United Kingdom
CT Corporation System, 820 Bear Tavern Road,
West Trenton, NJ 08628, USA
£0.0001 A Ordinary,
£0.0001 B Ordinary,
£0.00001 Deferred
Ordinary
United States
Coats Garments
(USA) Inc
CT Corporation System, Corporation Trust
Centre, 1209 Orange Street, Wilmington, DE
19801, USA
Share class
£1.00 Ordinary
£1.00 Ordinary
£1.00 Ordinary
£10.00 Ordinary
£1.00 Ordinary
£10.00 Ordinary
£0.25 Ordinary,
£1.00 3.5 %
Cumulative
Preference
£1.00 Ordinary
£0.01 A Ordinary,
£0.01 B Ordinary,
£0.01 C Ordinary
£1.00 Ordinary
US$10.00
COMMON, US$5.00
5% Cumulative
Preference
US$1.00 Ordinary
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Coats Group plc Annual Report and Accounts 2022
Group structure cont.
Country of Incorporation
Company name
Registered office address
Share class
Country of Incorporation
Company name
Registered office address
United States
Coats Holdings
Inc
United States
United States
United States
United States
United States
United States
United States
Coats HP
Holding Inc
Coats HP Inc
Coats North
America
Consolidated Inc
Coats North
America de
Republica
Dominica Inc
Coats Sales
Corporation
Jaeger
Sportswear Ltd
Patrick Yarn Mill,
Inc.,
United States
United States
Rhenoflex
Americas Corp.
Staveley Inc
United States
United States
Vietnam
Vietnam
Texon Materials,
Inc.
Westminster
Fibers, Inc.
Coats Phong Phu
Limited Liability
Company
Rheno Shoe-
Components
(VN) Co Ltd
US$1.00 Ordinary
Vietnam
CT Corporation System, Corporation Trust
Centre, 1209 Orange Street, Wilmington, DE
19801, USA
CT Corporation System, 160 Mine Lake Ct., Suite
200, Wake NC 27615-6417, USA
CT Corporation System, 160 Mine Lake Ct., Suite
200, Wake NC 27615-6417, USA
CT Corporation System, Corporation Trust
Centre, 1209 Orange Street, Wilmington, DE
19801, USA
CT Corporation System, 160 Mine Lake Ct., Suite
200, Raleigh, North Carolina, 27615-6417, USA
US$1.00 Ordinary
US$1.00 Ordinary
US$0.10 Ordinary,
US$1.00 Class B
Voting Shares
US$1.00 Ordinary
CT Corporation System, 820 Bear Tavern Road,
West Trenton, NJ 08628, USA
CT Corporation System, 28 Liberty Street, New
York, NY 10005, USA
CT Corporation System, 160 Mine Lake Ct., Suite
200, Raleigh, North Carolina, 27615-6417, USA
Corporation Trust Center, 1209 Orange Street,
Wilmington, DE, United States
The Corporation Trust Co., 1209 Orange Street,
Wilmington, DE 19801, USA.
Corporation Trust Center, 1209 Orange Street,
Wilmington, DE, United States
c/o The Corporation Trust, 1209 Orange Street,
Wilmington, Delaware, USA
No. 48 Tang Nhon Phu Street, Tang Nhon Phu B
Ward, District 9, Ho Chi Minh City, Vietnam
US$100.00 Ordinary
US$ Common
US$1.00 Class A
voting, Class B non-
voting
US$0.01 Ordinary
US$0.01 Ordinary
US$0.01 Ordinary
US$1.00 Common
shares
US$1.00 Ordinary
(64%)
Plant 57, 1-7 street, Long Thanh Industrial Park,
Tam An Commune, Long Thanh District, Dong
Nai Province, Viet Nam
VND17,581,335,900
Ordinary
Texon
Manufacturing
Vietnam
Company Limited
Plant No. 02 and Factory No. 03, An Phuoc
Industrial Zoe, An Phuoc Ward, Long Thanh
District, Dong Nai Province, Viet Nam
Share class
VND33,446,917,552
Charter Capital
Joint Ventures
Country of Incorporation
Company Name
Registered Office address
China
China
China
India
Italy
Italy
Mexico
Spain
Guangying
Spinning
Company Limited
Huizhou Uniqa
Shoes
Component
Manufacturing
Co., Ltd
Tianjin Jinying
Spinning Co Ltd
S&P Threads
Private Limited
AKCA
Technologies S.r.l
Levante S.r.l.
Rhenoflex Shoe-
Mat S.R.L. de CV
Texogan, S.L.
United Kingdom
Uruguay
Coats VTT
Limited
Texogan S.A.
4 % owned by Levante S.r.L
5 % owned by Texogan S.L.
2 Yuan Cun Xi Jie Guangzhou, 510655, China
Shop 30, 1st Floor, Building 5, Cunhu Modern
Huafu, West of Jiaoxiao Section, Shiwan Avenue
(formerly Yongshi Avenue), Shiwan Town,
Huizhou City, Boluo County, China
10m E of intersec. of Jinlai Rd and Mingqing Rd,
Liqi Zhuang, Xiqing Qu, Tianjin, 300381, China
Delite Theatre Building, III Floor, Asaf Ali Road,
New Delhi, 110 002, India
Via Felice, Casati 20, Milan, 20124, Italy
Via Traversa, Di Parezzana 14, 55012, Capannori
(LU), Carraia, Italy
Sigma 308, Fracc. Industrial Delta, CP 37545
León, Guanajuato, Mexico
C/ Fresser 21-23, 2P, Pol. Ind., Pla D' En Coll
Montacada i Reixac, Barcelona, 08110, Spain
The Pavilions, Bridgwater Road, Bristol, BS13 8FD,
United Kingdom
Camino Bajo la Petisa 5040, Local 1, 12800
Montevideo, Uruguay
Share class
US$1.00 Ordinary
(50%)
Ordinary (100%)4
US$1.00 Ordinary
(50%)
INR10.00 Ordinary
(50%)
€1.00 Ordinary
(60%)
€1.00 Ordinary
(40%)
MXP500,000.00
Ordinary (50%)
€1.00 Ordinary
(50%)
US$0.01 Ordinary
(50%)
US$1.00 Ordinary
(65%)5
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Coats Group plc Annual Report and Accounts 2022
Five-year summary
For the year ended 31 December
Continuing operations (before exceptional and
acquisition related items)1:
Revenue
Cost of sales
Gross profit
Operating costs
Operating profit
Share of profits from joint ventures
Finance income
Finance costs
Profit before taxation
Taxation
Profit from continuing operations
Adjusted earnings per share (cents)
Dividend per share (cents)
Adjusted free cash flow ($m)
Adjusted return on capital employed (%)
Notes:
2018
US$m
20193
US$m
2020
US$m
2021
US$m
2022
US$m
1,340.9
(848.0)
492.9
(295.3)
197.6
0.1
1.7
(26.1)
173.3
(53.8)
119.5
6.87
1.66
96.2
42.6%
1,326.2
(850.7)
475.5
(273.8)
201.7
1.1
1.7
(29.6)
174.9
(50.5)
124.4
6.97
0.554
106.8
42.3%
1,115.1
(769.4)
345.7
(232.1)
113.6
0.6
0.7
(25.5)
89.4
(35.2)
54.2
2.42
1.30
28.0
22.2%
1,446.7
(979.3)
467.4
(269.7)
197.7
1.2
0.4
(21.8)
177.5
(53.3)
124.2
7.17
2.11
123.8
44.8%
1,583.8
(1,087.1)
496.7
(261.8)
234.9
1.1
2.6
(32.3)
206.3
(60.1)
146.2
8.17
2.43
114.2
30.3%2
Shareholder information
United Kingdom
The Pavilions
Bridgwater Road
Bristol BS13 8FD
Tel: 020 8210 5000
coats.com
Incorporated and registered in England No. 103548
Registered office:
The Pavilions
Bridgwater Road
Bristol BS13 8FD
UK registered members
To manage your shareholding online, please visit: investorcentre.co.uk
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:
1. The Income Statement amounts for 2018-2021 has been restated following the disposal of the Brazil and Argentina business. Adjusted earnings per
Registrar
Telephone and postal enquiries
Inspection of Register
share, adjusted free cash flow and adjusted return on capital employed for 2018-2020 are as previously reported.
2. Operating profit from continuing operations before exceptional and acquisition related items for the year ended 31 December 2022 has been
adjusted in the adjusted return on capital employed calculation to include Texon and Rhenoflex as if the acquisitions had taken effect at the
beginning of the reporting period (1 January 2022).
3. The Group adopted IFRS 16 ‘Leases’ from 1 January 2019 using the modified retrospective approach and therefore results for 2018 are not restated.
4. 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.
UK Main Register:
Computershare Investor
Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8FD
Tel: 0370 707 1022
Facsimile: 0370 703 6143
The Pavilions
Bridgwater Road
Bristol BS13 8FD
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180
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Coats Group plc
The Pavilions
Bridgwater Road
Bristol BS13 8FD
coats.com
Incorporated and registered
in England No. 103548