Coats promises to retain £342m of asset sale proceeds to resolve pension standoff
Coats Group [NZX: COA], the UK-based threadmaker that grew out of diversified investor Guinness Peat Group, has committed to retaining the £342 million generated from asset sales in an attempt to resolve its impasse with the UK Pensions Regulator over its three pension schemes.
The company had intended to distribute the funds to shareholders after an asset sales programme that shrank the company to just the Coats business, prompting the name change. The regulator has issued warning notices over the amount of support for its Coats, Brunel and Staveley pension schemes, thwarting the company's ability to return the capital.
Coats' commitment to retain the cash balance is conditional on the regulator withdrawing the warning notices, and for the company to be able to resume dividend payments and invest for growth, it said. If settlement can't be reached, the regulator has indicated its Determinations Panel should hear the cases for all three schemes at the same time, likely to be in the second half of 2016 at the earliest, it said.
The company's obligations to its retirement schemes stood at £286 million as at December 31, down from £326 million a year earlier, according to the 2015 financial statements.
Coats' 2015 revenue was $US1.49 billion, from $US1.56 billion a year earlier, including the unprofitable EMEA Crafts business, which was sold at a loss of $US75.5 million. Group operating profit rose to $US139.4 million from $US123.4 million.
The company plans to delist from the NZX and ASX on June 24, leaving its shares tradable only on the London Stock Exchange. UK shareholders own more than 70 percent of the stock of Coats, which previously owned a portfolio of investments in Australia and New Zealand.
The company also gave an update of potential liabilities over the pollution of New Jersey's Lower Passaic River. Exceptional costs before tax and discontinued items of $US23 million included $US6.4 million for US environmental costs in the first half, including a provision for remedial work on the river.
Its Coats and Clark Inc unit is among companies that the US Environmental Protection Agency has advised have potential responsibility for "certain historical environmental costs for the Lower Passaic River," which amount to $US1.7 billion based on the EPA's preferred remedy, Coats said.
Coats, which is one of about 70 companies in a cooperating parties group, said it doesn't believe Coats and Clark's predecessors generated the contaminants that polluted the river. It also says it has valid legal defences, is a de minimis, or minor party, and that other parties will emerge who should bear a significant share of the costs. Still there was a risk the EPA enforced its current remedial plan, which could force Coats to take more and larger provisions, it said.
Coats shares rose 5.3% to 50c on the NZX and have fallen 28% in the past two years.