THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO. 596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

6 December 2022

Coats Group plc

A major step forward with partial buy-in of UK defined benefit pension scheme

Coats Group plc ("Coats" or the "Group") is pleased to announce that the trustee of the Coats UK Pension Scheme ("the scheme") has purchased a c£350m bulk annuity policy from Aviva which insures benefits payable under the scheme in respect of c3,700 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, thus further de-risking the scheme and reducing future balance sheet volatility. This builds on the significant positive steps to de-risk the scheme in recent years through which 90% of the scheme's inflation / interest rate exposure had 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. Once the scheme is fully funded and cash contributions cease, the Group's free cash generation will improve significantly allowing increased investment in growth or the return of excess capital to shareholders.  

When the Technical Provisions deficit for the scheme was last formally assessed at 31 March 2021, as part of the triennial valuation cycle, it showed a £193m deficit. Updates since then indicate that the deficit had fallen closer to £55m by mid-November 2022, with a further reduction to £25m-£30m expected following the buy-in.

The Group will provide a further update at its 2022 full year results presentation in March 2023.

Conference call

The Group will host a call at 8am today covering this statement. Join the call by dialling +44 (0) 333 300 9035. A short presentation is also available on our website.

Jackie Callaway, Chief Financial Officer, said:

"The purchase of this bulk annuity policy represents an important step in further de-risking our UK defined benefit pension scheme.  It moves us closer to eliminating our Technical Provisions deficit and achieving our ultimate plan of fully insuring, in a cost effective manner, the scheme and moving it off our balance sheet. Once the scheme is fully funded and cash contributions cease this will lead to a significant improvement in the Group's free cash generation. The completion of the buy-in reflects the constructive and collaborative working relationship between the Group and the trustee and I would like to thank all involved for helping us get to this position, which will benefit all stakeholders."

Notes

1.   The Coats UK Pension Scheme is Coats Group plc's sole defined benefit pension scheme in the UK, having been formed from the merger of three legacy pension schemes in 2018.

2.   The policy, commonly termed a pensioner "buy-in", is underwritten by Aviva Life and Pensions UK Limited, a leading UK life insurance business specialising in bulk annuity contracts.

3.   Aviva was selected by the scheme trustee following a competitive selection process overseen by a joint working group established between Coats and the trustee.

About Coats Group plc

Coats is a world leader in thread manufacturing and structural components for apparel and footwear, as well as an innovative pioneer in performance materials. These critical solutions are used to create a wide range of products, including ones that provide safety and protection for people, data and the environment. Headquartered in the UK, Coats is a FTSE250 company and a FTSE4Good Index constituent. Revenues in 2021 were $1.8bn.

Trusted by the world's leading companies to deliver crucial, innovative, and sustainable solutions, Coats provides value-adding products including apparel, accessory and footwear threads, structural footwear components, fabrics, yarns and software applications. Customer partners include companies from the apparel, footwear, automotive, telecoms, personal protection, and outdoor goods industries.

With a proud heritage dating back more than 250 years and spirit of evolution to constantly stay ahead of changing market needs, Coats has operations across some 50 countries with a workforce of over 17,000, serving its customers worldwide. 

Coats connects talent, textiles, and technology, to make a better and more sustainable world. Worldwide, there are three dedicated Coats Innovation Hubs, where experts collaborate with partners to create the materials and products of tomorrow. It participates in the UN Global Compact and is committed to Science Based sustainability targets for 2030 and beyond, with a goal of achieving net-zero by 2050. Coats is also committed to achieving its goals in Diversity, Equity & Inclusion, workplace health & safety, employee & community wellbeing, and supplier social performance.

To find out more about Coats visit www.coats.com.