REG - Coats Group PLC - Switch off of Pension Deficit Repair Payments

CoatsAnnouncement

07/12/2023 07:00

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RNS Number : 9513V  Coats Group PLC  07 December 2023

 

 7 December 2023

Coats Group plc

 

Agreement with UK Pension Scheme Trustee to switch off Deficit Repair Payments

 

Coats Group plc ("Coats" or the "Group") is pleased to announce that it has
reached agreement with the trustee of the Coats UK Pension Scheme
("scheme") to switch off pension deficit repair payments(1) from 1 January
2024.

 

The Group has agreed to pay the scheme a one-off lump sum payment of £10
million ($12.6 million) to move it into an expected surplus position against
the technical provisions funding basis and enable the switch off threshold to
be comfortably met.

 

This agreement will result in a free cash flow benefit of £2 million ($2.5
million) per month while the payments remain switched off. The deficit repair
payments will remain switched off so long as the scheme's assets remain above
99% of its technical provisions(2).

 

Jackie Callaway, Chief Financial Officer, said:

 

"We have made significant progress on pensions in recent years, and the news
today is another major milestone that benefits all stakeholders. We remain
focused on making further progress in order to maximise Coats' free cash flow
generation. We are continuing to work with the trustee of the scheme on a
collaborative basis, with the medium term aspiration of fully insuring the
scheme, removing UK pension risk from the Group balance sheet and optimising
our capital allocation framework to enable additional growth opportunities."

 

This announcement contains inside information for the purposes of Article 7 of
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 ("UK MAR").

 

 Enquiries
 Investors   Victoria Huxster /  Coats Group plc  +44 (0)7880 471350 / +44 (0)7720 999764

             Julian Wais
 Media       Richard Mountain /  FTI Consulting   +44 (0)20 3727 1374

             Nick Hasell

 

 

1.      The scheme's last triennial actuarial valuation at 31 March 2021
showed a deficit between the scheme's assets and its pension liabilities (the
"technical provisions").  Following the valuation, Coats agreed to pay
monthly deficit repair payments at a rate of £21.6m ($27.2m) per annum
through to December 2028, increasing in line with capped price inflation each
financial year.  By FY24, these payments will have inflated to c.£24m ($30m)
per annum or £2m ($2.5m) per month.

 

2.      In the light of significant improvements in the scheme's funding
position over FY 2022, including as a result of the pensioner buy-in
transaction in December 2022, the scheme trustee and Coats agreed a funding
mechanism.  Under this mechanism, the monthly deficit repair payments would
"switch off" if the scheme's updated position ever moves clearly into surplus
(assets rise above 101% of updated technical provisions for two months).  If
the scheme then subsequently reverts into a clear deficit position (assets
fall back below above 99% of updated technical provisions for two months), the
repair payments would "switch on" again.  Following any switch-on, monthly
payments would restart at 150% of the normal rate for as long as necessary to
make good any past payments not made as a result of prior switch-offs.

 

 

3.      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 2022 were $1.6bn. Trusted by the
world's leading companies to deliver vital, innovative, and sustainable
solutions, Coats provides value-adding products, including apparel, accessory
and footwear threads, structural components for footwear and accessories,
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 a spirit of evolution to constantly stay ahead of changing market
needs, Coats has operations across some 50 countries with a workforce of over
18,000, serving its customers worldwide.  Coats connects talent, textiles,
and technology to make a better and more sustainable world. Worldwide, there
are four dedicated Coats Innovation and Sustainability 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
and inclusion, workplace health and safety, employee and community wellbeing,
and supplier social performance. To find out more about Coats, visit
www.coats.com
(https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.coats.com%2F&data=05%7C01%7C%7C4397db941c4c4630be5b08dbe9af40ac%7C048ff72770274cd0b672f075b0bdb973%7C0%7C0%7C638360711130771602%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=dd2mhZFb1q5cP%2FFAAPiLiLKUfaCvmWJdoXp7K9o9SuI%3D&reserved=0)
.

 

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