On the go: Yorkshire-based engineering firm 600 Group has finalised the buyout of its UK pension scheme liabilities with Pension Insurance Corporation.
Following the completion of the £201m transaction and windup of the scheme, all surplus funds totalling £6.3m gross (£4.1m net of tax) have now been returned to 600 Group.
Listed on Aim, the group’s crippling £201m pension liability dwarfed its market cap of £16m. Work on the transaction has been ongoing since July 2018, when the trustee of 600 Group’s UK defined benefits scheme had agreed to a buyout.
The deal secured benefits for the plan’s 2,000 pensioners and 800 deferred members, as well as relieving the company of the disproportionate liability of such a large scheme.
Completion of the transaction also provides the group with greater liquidity and financial flexibility. The £4.1m post-tax cash surplus will be used to fund working capital, invest in product development, provide flexibility and to seek acquisitions.
Commenting on the transaction, Paul Dupee, executive chairman of 600 Group, said: “The completion of the pension buyout significantly derisks the group’s balance sheet, providing greatly improved financial flexibility as we continue our strategy for growth and build a global industrials business.”
Speaking to Pensions Expert last year when a buy-in was put in place in preparation for full buyout, 600 Group’s finance director Neil Carrick said: “It has been a long old haul. The road to buyout began in 2013 with the closure of the DB scheme to future accrual and new members.”
It was a question of the tail wagging the dog with the pension scheme 10 times larger than the market capitalisation (£20m) of the company.
Mr Carrick explained: “There were a lot of restrictions on us because of the size of the scheme relative to the company. It had debenture security, restrictions on us paying dividends, lots of onerous undertakings.
“That has now been lifted off the company and we have started paying a dividend again.”
