TIDMWIN
RNS Number : 1095X
Wincanton PLC
08 August 2018
8 August 2018
WINCANTON PLC
('Wincanton' or the 'Group')
Pension scheme agreement
Wincanton, a leading provider of supply chain solutions in the
UK & Ireland, today announces that it has reached an agreement
with the Trustee of the Wincanton Pension Scheme (the 'Scheme') on
the 2017 triennial valuation (the '2017 valuation') and recovery
plan.
The key elements of the 2017 valuation and recovery plan are set
out below.
Deficit recovery contributions
The deficit recovery plan will run to 31 March 2027. The annual
deficit contributions are as follows:
-- GBP17.3m pa (GBP18m pa gross less pension administration
expenses incurred by the Company) from April 2018 through to March
2021, increasing annually from April 2019 in line with the Retail
Prices Index
-- GBP24.3m pa (GBP25m pa gross less pension administration
expenses incurred by the Company) from April 2021 to March 2027,
increasing annually from April 2022 in line with the Retail Prices
Index
In addition, the company will make a one-off lump-sum
contribution of GBP15m which will be paid in August 2018, funded by
the sale proceeds of an underutilised freehold property in Corby
that completed in June 2018.
The payments above are deductible for Corporation tax
purposes.
The agreement does not change expectations for the Group's
underlying operating profit for the current year nor its net debt
at 31 March 2019.
Actuarial valuation of the deficit
The current proforma actuarial deficit, after allowing for
contributions made to date and including the one-off lump sum
amount, is estimated at GBP190m. The actuarial deficit at 31 March
2017 was GBP221m. The position calculated in accordance with the
IAS19 Accounting Standards showed a significantly smaller deficit
of GBP76m as at 31 March 2017 and GBP47m as at 31 March 2018,
reflecting the very different methodology prescribed by IAS19.
Other provisions
Wincanton has agreed the following other provisions with the
Scheme:
-- Wincanton will provide additional payments to the Scheme on a
partial (50%) matching basis if distributions to shareholders
(dividends and share-buy-backs) grow year-on-year in excess of 10%
and on a full matching basis if distributions grow year-on-year in
excess of 15%. The matching will only be in relation to the
distribution amounts above the thresholds.
-- Wincanton will adjust contribution payments to the Scheme in
the event of severe adverse Scheme investment performance where the
actual deficit in the Scheme exceeds an agreed threshold above the
expected deficit at the end of two consecutive six-month reporting
periods. Initially, the threshold is set so that higher
contributions would be paid to the Scheme if the actuarial deficit
increases by more than GBP85m above the expected position. This
approach is intended to increase the likelihood that the Scheme
will be fully funded on the technical provisions basis by 2027 in
the event that significant downside performance is experienced by
the Scheme.
-- Wincanton will make a one-off payment to the Scheme of GBP6m
in any year if both the underlying profit after tax is lower than
the level of profit after tax reported in the 2017/18 financial
year and the dividend payout ratio increases to over 40% of profit
after tax.
-- In the event of disposals of businesses within the Wincanton
Group, Wincanton will pay an amount to the Scheme equal to 50% of
the combined net proceeds for the first GBP30m of the proceeds in
any financial year.
The next triennial valuation is due as at 31 March 2020.
Adrian Colman, Wincanton CEO, said:
"I am pleased that we have reached an agreement with the Trustee
over the pension fund valuation and recovery plan that is both fair
and affordable. It allows us to move forward with confidence and
certainty. Importantly, we retain our ability to invest in the
business and to continue our progressive dividend policy."
For further information please contact:
Wincanton Plc Tel: 01249 710 000
Adrian Colman, Chief Executive Officer
Tim Lawlor, Chief Financial Officer
Buchanan Tel: 020 7466 5000
Richard Oldworth / Chris Lane / Maddie Seacombe
Further information in relation to the Valuation and the
recovery plan
Actuarial deficit and IAS 19 deficit
At the valuation date of 31 March 2017, the two measures of the
deficit comprised:
At 31 March 2017 Actuarial deficit IAS 19 deficit
GBPm
Gross liabilities 1,302 1,157
Gross assets (1,081) (1,081)
------------------ ---------------
221 76
------------------ ---------------
The key differences between the assumptions used for the
actuarial deficit and those used for the IAS19 calculations are the
more prudent discount rate and mortality assumptions used in
calculating the liabilities for the actuarial deficit.
Investment strategy
An important element of the agreement between Wincanton and the
Trustee of the Scheme is a reduction in the level of investment
risk in the Scheme over time. This is expected to continue to
increase the stability of the actuarial deficit and contribution
requirements. Over time the investment strategy has moved to a
lower risk profile with a greater level of protection against
movements in expected interest rates and inflation. Currently the
scheme has hedged the interest and inflation risk of approximately
80% of the gross liabilities. The level of interest rate and
inflation protection will continue to increase as the funding level
improves.
The exposure to return-seeking assets will continue to reduce
over the next ten years and over the recovery plan period to 31
March 2027 the target return from return seeking assets is as
follows;
Time period Target return on assets
To 31 March 2021 Gilts plus 1.6%
-----------------------------
From 1 April 2021 to 31 March Gilts plus 1.2%
2024
-----------------------------
From 1 April 2024 to 31 March Gilts plus 0.8%
2027
-----------------------------
From 1 April 2027 Gilts plus 0.4%
-----------------------------
Administration expenses of the Scheme
Certain administration expenses of the Scheme are borne by the
Company and will continue to be netted off against the annual
contribution commitments so cash payments to the Scheme will be
approximately GBP0.7m per annum lower than the gross amounts in the
contribution schedule.
Engagement with the Pensions Regulator
The Pensions Regulator has been actively engaged with the
Company and the Trustee during the triennial negotiation process
and has indicated that he does not anticipate carrying out any
further investigations or having any further queries in relation to
the agreement.
Corby freehold property disposal
The sale of an underutilised freehold property in Corby was
completed in June for gross proceeds of GBP14.5m. An exceptional
profit on the sale of approximately GBP6m will be recognised in the
2018/19 financial statements. There will be no impact on underlying
operating profit arising from the disposal.
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END
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