Special Town Hall Meeting: Monday 5th December 2022

How is the new Europe marketing team going to be managed and organized? where is it going to be based? What will happen with the current marketing members in the local marketing teams?

At this stage it is too early to give details as we want to first secure the lead for the function and then work with this lead to develop the structure and organisation. We will keep you updated.

With less people will you now be reviewing processes and looking for ways to make them leaner as they are often unnecessarily bureaucratic and long-winded?

We are definitely looking at our processes as they have an important part to play but they must be efficient and fit for purpose in the changing landscape. This review will include enhancing the agility and speed of our processes once we have clarity on roles & responsibilities we will look to have a tool to support the follow up.

Why was it not made clear in the coms on Monday that the PMs are being asked to leave? Most people are unaware of this & think the PMs are moving into the Brand teams.

Our global communication highlighted and explained the principles that we would be meeting and communications with functional leaders gave more clarity of the proposed plan.

It seems that Brand managers are not aware that they are going to be expected to run projects and the PMs are all leaving. But also the Brand team(s) are being reduced in head count. The Brand Teams do not have the capacity to run projects or the right skill set to run projects. It will have a huge impact on the success of projects and the time they take. It will have a huge negative effect on the other teams i.e. SIOP, procurement etc.

The clarity of understanding was part of the functional communications with the explanation about the detail. Of course we will now have to work out the details but together with the Brand Directors, we are confident that the integration together with the reduced NPD plan will enable success.

NPD/EPD Project Management is really Operations side with Factories, Procurement, Supply, Item Creation etc...when Brand are more Marketing topics and skills. How do we see that working?

The NPD process was previously part of Brand accountability and of course we will now have to work out the details but we are confident that the integration of this responsibility into the Brand teams, together with the reduced NPD plan, will enable success. This will also enable the Brand teams to have greater visibility of the EPD projects as these can have a significant impact on the Brands and the CBUs if they are not managed in a co-ordinatred manner and planned in collaboration with the Brands and markets.

How are the Brand Team going to be expected to learn project management, the processes of the project team, how to construct timelines etc. Are the PMs going to be expected to teach them all of this before they leave?

We do expect there to be a review of the current process and adaptation to ensure it can be integrated. We will look to the collaboration and professionalism of the PM team to support this change.

The removal of dedicated Project Managers is going to have a big negative impact on the teams in Le Mans and CTAM, and increase their work load, as well as have a bad impact on the success of projects and the meeting of deadlines. How is this going to be addressed?

For Colart to act as a high performing team, it is important that everyone plays their part to ensure success no matter where they work. This may mean adapting the way you work or indeed taking new responsibilities. This does not mean overloading people and we will review priorities to suit resources accordingly. We believe the maturity in the operation has increased to a point where this can be managed differently, the workflow tool is crucial on this.

It seems that the decision to remove Project Managers and expect Brand Managers to manage all projects is a major step backwards for a company of Colart's size and will have a negative impact on the success of our Brands which will fall behind our competitors. If you stand still and do not innovate and develop new products, you lose market share. This decision is a short term solution which will create many long term problems.

This is an interesting view as in many consumer branded businesses the size of Colart (or indeed slightly larger) Brand teams are responsible for innovation, from ideation to execution and do not separate the project management of these from Brand. This doesn't necessarily mean that the Brand teams do every task, but they have accountability and ownership to bring the right people together to ensure that the innovation is delivered on time and to budget, with the ability to make decisions in an agile and collaborative manner. Colart is not a high margin business and it is important that we create breadth in people's roles. The value of this is that we build agility, opportunities for growth and a cost base to enable our future success in a highly competitive market.

Is it evaluated that all PM will leave?

This is part of the consultation process

Concerning 2022.11.28 announcement "Reviewing Our Business Needs. Resetting for the Future", when I read in paragraph "Move towards a single Mainland Europe structure", does it mean there'll be major changes in European and in particular French companies structures COLART LE MANS - COLART EUROPE - COLART FRANCE and COLART CREATIVE INTERNATIONAL ? With organization changes in Finance teams as it's written at the and of the same paragraph (...) "as well as optimising synergies in the support functions"? Thank you

Yes this does mean that we are looking to create a single mainland European commercial business unit, but this does not necessarily mean we will have a single Europe legal entity. At present, no change to the French legal entity structure is anticipated. The creation of a single Mainland Europe commercial business unit is a major project with many things to be explored and discussed, such as how we will structure the marketing and commercial teams, including the support functions (HR, finance and IT) that will be dedicated to supporting the commercial business unit.

Will brand managers be expected to project manage their own projects?

Yes that is what we are planning for to ensure end to end ownership of NPD.

Are brands expected to design packaging now?

The Brand teams have always been responsible for the design of the packaging (this comes under the first of the 4Ps i.e. Product).

NPD team is the heart of Business Operation. Roles as such require completely different sets of skills which now is going to be required from Brand teams. The whole workload of this department would be spread across them, is this by your opinion sustainable?

Colart is not a high margin business and it is important that we create breadth in people's roles. The value of this is that we build agility, opportunities for growth and a cost base to enable our future success in a highly competitive market.

Given the significant changes over the course of the year, would it be possible to create an organogram so that we can understand where Business units and functions sit globally?

The organisation structure is already available to everyone in Splash. This organagram which you can see by Business Unit lead is always up to date and accurate. Please contact your local HR business partner if you have any problems accessing this functionality alternatively watch the Colart Academy video here https://intranet-old.colart.com/en/lessons/how-to-use-organisational-chart-english./

Regarding the projects follow up, do we plan to have "project management software" to support collaborative works or exchanges (reporting or timeline tracker).

We do have a project tracker and this is via microsoft project. The idea of having a platform that is accessible to all is a good one and in the future we would like to consolidate around the group to a single platform.

How do the changes impact promotions and progression (especially within the UK) as it seems operations are moving more towards mainland Europe? Will roles vacated in the UK be filled by employees in other locations?

As we have seen roles may move around the group subject to the synergies at the time - this may be to mainland Europe, to the UK or to North America. We are guided by need and best fit.

When will the reductions take place?

Most of the reductions are likely to take place by the end of the year but it is likely that some roles e.g. the project management may take longer to implement.

What will be the new NPD process if the NPD project management team aren’t there?

Between now and the time that the proposed change, there will be a review of the NPD process and how the new arrangements will work. Communications and more clarity will follow once we have completed the consultations.

How will existing projects be handed over and to whom?

Between now and the time that the proposed change, there will be a review of the NPD process and how the new arrangements will work. Communications and more clarity will follow once we have completed the consultations.

We note there are live open roles.  Will those at risk be able to apply?

The roles that are live are the ones we intend to progress with. We have been very careful in deciding which roles to continue and anyone is eligible to apply. Indeed we will be bringing them to the attention of those affected as part of the consultation.

As the plan is not to have anymore Global NPD/EPD co-ordination, who will manage all the Business As Usual co-ordination for NPD/EPD projects as : NPD/EPD proces management for the business ? Training all the Brand teams to PM role ? Tracking all projects ? PM allocation ? Tools improvements ? etc...

Between now and the time that the proposed changes will take place, there will be a review of the NPD process and how the new arrangements will work. Communications and more clarity will follow once we have completed the consultations.

In reference to centralisation of the supply chain function, but a decentralisation of NPD/Packaging to Brand. How are these two approaches strategically aligned and how will the business ensure both are appropriately controlled and subject to a collective and unbiased scrutiny?

This is about development and execution. Innovation and development roadmap creation is already very much integrated into Brand backed up by a centralised procurement process and supplier network. Then during the execution of the development, the local manufacturing sites will develop the products based on this supply platform, ensuring this fits the technological constraints we face. We believe our level of maturity within each site, the local coordinator structure and the close collaboration with all relevant stakeholders will enable this connectivity and communication to continue happening.

Apart from topline of saving money by losing people was any consideration made on a practical solution plan (in terms of work load) as a result of this change that does not disrupt the business going forward?

Less is more is very much our mantra with fewer, bigger impactful projects or workstream so with this reduction in resources, it is critical that leadership at all levels review priorities and what is possible. We then expect to see open dialogue taking place between functions/levels as appropriate. This has to be an integrated approach.

What strategy have we got in place to increase sales?

We recognise the challenges that will still be faced for revenue next year and each CBU has developed a Budget based on robust and aligned plans with our customers to deliver the 2023 Net Sales Budget. We also have a number of plans for increasing the top line including seeking business development opportunities.

What are we trying to achieve by reorganizing the NPD team? Will Brand have sufficient knowledge and availability to manage NPD projects by the end of Q1 2023?

Starting from the MarEx on Thursday this week, we will work on this during Q1 in terms of what integrating full responsibility for managing NPD (and EPD) projects in the Brand team means for roles and responsibilities. Clearly there is a lot to achieve between now and the end of Q1 2023 but the main challenges around NPD are in the operation side of things, having a centralised supply chain & good workflow will help manage our complexity. We trust that the people responsible for the process manage and run the process in the most effective and optimum way.

Will there be a bonus next March? For those that are being made redundant, is there any point going through the appraisal process?

The fundamental reason for the development and performance review process is not about salary reviews or bonus agreement, it is about helping the person to develop and grow personally & professionally. This continues to be very relevant regardless of whether the person remains with Colart so we continue to be committed to the process. In terms of payment of the STIP next march, only those business units that pass their EBIT gate will be eligible to a payment and at this stage only one business unit is close to its target. The group as a whole will fail to pass the EBIT gate.

Market conditions have changed considerably over the last couple of years, with consumers and retailers alike looking for a more varied portfolio with a focus on value and NPD. We have been slow in our development of either. What initiatives are the business looking at to help drive profitable top line sales that is new news for the marketplace? We keep selling the same things, for a higher price, and expecting different results in a struggling market that is looking for change.

What are the plans for Reeves?

Reeves will feature in our thinking going forward and we are currently reviewing the role that the Brand can play in the Colart portfolio.

How does the reduction in the W&N brand team relate to the 4 principles for change?

The fourth principle relates to the cost of our operations and recognising the plans going forward with a greater focus on consumer engagement versus NPD, we believe that we can restructure the W&N team which will result in the reduction of one role.

Why are we making changes in Brand when that is where we want to invest?

The fourth principle relates to the cost of our operations and recognising the plans going forward with a greater focus on consumer engagement versus NPD, we believe that we can restructure the W&N team which will result in the reduction of one role. We will continue to invest in our Brands in terms of A&P in the markets and at the Global Brand level.

How will we maintain our consumer focus if we are losing TFAC across Europe?

We are a consumer centric business and will continue to invest in activities that enable us to drive emotional engagement between our Brands and our target audience. Some activities may involve direct face to face engagement through workshops and consumer events in the markets, however, post pandemic these have decreased significantly. The Brands will continue to build strong partnerships with relevant institutions and are reviewing the role of the Artist Engagement team and the Education programme as a whole to maximise the return that these deliver. We will maintain Artist Engagement resource in NA, the UK and France to support Liquitex, W&N and LB.

What exactly is going on?

Knowing that macro-economic challenges are set to continue well into and beyond 2023, we conducted a complete strategic business review which has now been agreed by the Board. Whilst our strategy remains unchanged, this review highlighted crucial decisions that need to be made to deliver both a sustainable business and our owner’s financial expectation.

Why is this happening?

With the difficult start we saw to 2022 continuing deeper into the year with sales well behind not only our budget but also our reforecast, it is clear that the challenging times we are facing are set to continue. Global economic instability has resulted in clear implications for Colart, including reduced consumer confidence, higher costs and exposure to currency changes.

What are the key principles behind these proposed changes?

• Centralisation of the Supply Chain functions
• Move towards a single Mainland Europe structure
• Decentralisation of end-to-end responsibility for NPD and packaging design
• Adjusting our cost base

Has the company really thought this through properly?

These proposed changes have not been put forward lightly and we believe that this is the right direction for the business to secure 4% EBIT margin for 2023 as a first step to achieving our 2030 ambition of 10% EBIT margin.

When was this first thought about?

We have already communicated the need to be clear on our priorities and this means making choices. With a strategic review and the subsequent budgetary analysis in October, it has become clear that we have to take critical decisions.

What roles are likely to impacted by the decision?

Certain roles in North America, UK (London, Lowestoft), Italy, The Netherlands, Sweden and China could be affected. In total we believe 28 roles are likely to be impacted with the majority being in China.

Does this mean our strategy is changing?

It is important to reinforce that, whilst a reduced investment plan would accompany these savings initiatives, our strategy stays the same. We have confidence that these actions and our ability to weather the macro-economic storm will enable us to come out stronger. We have the people, the culture, as well as the brands and operational excellence of which we can be proud.