Coats Group, the renowned UK threads and zips giant, has recently received positive news regarding its cash flow and costs. In an announcement made on Thursday, the company revealed that it has reached an agreement with the trustee of its UK Pension Scheme. This agreement allows Coats Group to cease making deficit repair payments for its pension scheme starting from January 1st.
As a result of this favorable development, Coats Group experienced a substantial boost in its share value, with a nearly 10% increase during morning trading on the London Stock Exchange. This decision is expected to bring a monthly free cash flow benefit of £2 million to the business as long as the deficit repair payments remain switched off. However, it is worth noting that the payments will resume if the scheme’s assets fall below 99% of its technical provisions. To further solidify their financial position, Coats Group has also agreed to make a one-off lump sum payment of £10 million to the scheme, ensuring that it reaches an expected surplus position.
Chief Financial Officer Jackie Callaway expressed satisfaction with this milestone, stating that Coats Group has made significant progress in managing its pension obligations in recent years. The company remains committed to maximizing its free cash flow generation and is working closely with the scheme’s trustee to achieve this goal. Coats Group has set a medium-term objective of fully insuring the pension scheme, thereby removing UK pension risk from its balance sheet. Additionally, the company aims to optimize its capital allocation framework to unlock additional growth opportunities.
This announcement comes as a much-needed boost for Coats Group, considering the challenging market conditions it operates in. The company’s financial results for the four-month period ending in October revealed a strengthening of margins and cash, indicating its resilience in the face of adversity. With the pension deficit payments now behind them, Coats Group is well-positioned to capitalize on growth opportunities while effectively managing risks.
The future looks promising for Coats Group as it takes advantage of this opportunity to enhance its financial position and strategic outlook. By focusing on free cash flow generation and diligently managing its pension scheme, the company is demonstrating its commitment to improving financial performance and creating long-term value for its shareholders.
[Here are two useful links related to the topic:1. Coats Group Official Website
2. London Stock Exchange – Main Market]
