Coats Group plc
Cessation of UK Pensions Regulator's regulatory action
for the Staveley pension scheme
Further to the announcements of 16 December 2016 and 17 February 2017, Coats Group plc (the "Company"), the world's leading industrial thread manufacturer, today announces that it has signed a binding Settlement agreement ("the Staveley Settlement") with the Trustee of the Staveley Industries Retirement Benefits Scheme ("Staveley"). The Company has received written assurances from the UK Pensions Regulator that its regulatory action will automatically cease in relation to Staveley under the Warning Notice that it issued to the Company in 2013 upon completion. Following a series of Company determined corporate steps completion will occur by early July 2017.
The principal commercial terms of the Staveley Settlement are financial support on the basis of a technical provisions deficit as at 5 April 2015 of £97 million ($123 million1) to be repaired by:
a) an upfront payment of £74 million ($94 million) from Coats' parent group cash paid directly to Staveley (inclusive of the agreed Recovery Plan contributions of £39.5m paid to Staveley since 1 January 2016); and
b) annual deficit contributions of £2.2 million ($2.8 million) plus payment of administration expenses and levies, an estimated annual total of £3.0 million ($3.8 million), to be paid until 2028.
In common with the Settlement with the Coats and Brunel pension schemes, Staveley will have access to sponsor support from Coats for future funding needs together with a Company guarantee.
Combining the Staveley Settlement and the settlements reached with the Coats and Brunel pension schemes earlier in the year the principal commercial terms are:
· Financial support on the basis of a combined technical provisions deficit as at April 2015 of £582 million ($739 million) to be repaired by:
a) upfront payments totalling £329.5 million ($418.5 million) from the Company's parent group cash paid directly into the schemes (inclusive of the agreed Recovery Plan contributions paid to the Brunel and Staveley schemes since 1 January 2016); and
b) annual deficit contributions totalling £17.5 million ($22.2 million), including estimated administration expenses and levies to be paid until 2028.
· The next triennial valuation date for the three schemes is to be 31 March 2018.
As a result of the settlements reached with the three schemes, the total cash Recovery Plan contributions in 2017, including estimated administration expenses and levies, are expected to be £290m ($368m). This comprises £270m ($343m) upfront payments and £20m ($25m) annual deficit contributions, including estimated administration expenses and levies. These cash payments continue to be excluded from the Group's adjusted Free Cash Flow.
Mike Clasper, Chairman, said 'Reaching this Settlement with Staveley is a good outcome for all parties involved and following our announcement earlier this year, it now completes settlement with all three of our UK pension schemes. This, together with our recent entry to the FTSE 250, means Coats can continue to focus on growing the business to the benefit of all our stakeholders.'
1. US dollar figures at 22 June 2017 GBP:USD rate of 1.27.
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Enquiry details
Investors Rob Mann Coats Group plc +44 (0)20 8210 5175
Media Richard Mountain / Nick Hasell FTI Consulting +44 (0)20 3727 1374
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This announcement contains inside information for the purposes of the Market Abuse Regulation.
About Coats Group plc
Coats is the world's leading industrial thread manufacturer and a major player in the Americas textile crafts market. At home in some 60 countries, Coats employs 19,000 people across six continents. Revenues in 2016 were US$1.5bn. Coats' pioneering history and innovative culture ensure the company continues leading the way around the world, providing complementary and value added products and services to the apparel and footwear industries; applying innovative techniques to develop high technology Performance Materials threads and yarns in areas such as automotive composites and fibre optics; and extending the crafts offer into new markets and online. Headquartered in the UK, Coats is a FTSE 250 listed company on the London Stock Exchange. To find out more about Coats visit www.coats.com.
Background to UK Pensions Regulator investigations
During 2013 TPR began investigations into Guinness Peat Group's (as Coats Group plc was then known) three UK pension schemes. In December of that year TPR issued Warning Notices in respect of the two legacy schemes - Brunel and Staveley - and in December 2014 issued a Warning Notice in respect of the UK Coats Pension Plan. From 2013 onwards, all parties proceeded down a legal process set out by regulations governing TPR's procedures. During 2015 the Company was renamed Coats Group plc and a number of Director changes were made. In February 2016 Coats initiated settlement discussions with the three sets of trustees and committed to retain the entire parent group cash balance within the Group to support the schemes. This cash balance is the net proceeds generated from Guinness Peat Group's asset realisation programme between 2011-2013 when it sold its share in approximately 50 businesses leaving Coats as the only remaining operating business.
