23rd Jan 2007 07:30
Marks & Spencer Group PLC23 January 2007 Issued: Tuesday, 23 January 2007 MARKS & SPENCER ANNOUNCES FUNDING PLAN FOR UK DEFINED BENEFIT PENSION SCHEME • Triennial actuarial valuation deficit: £704m • M&S to contribute value of £500m via interest in property partnership; • It is not proposed to close the scheme for existing members and consultation begins with employees on a range of choices regarding the build up of their pension in the future. The triennial actuarial valuation of the Marks & Spencer UK defined benefitpension scheme ("Pension Scheme") at 31 March 2006 results in a deficit of£704m. The IAS19 valuation as at 30 September 2006 was a deficit of £1,031.7m. M&S has agreed the terms of a plan to fund the £704m deficit with the PensionScheme Trustee. M&S will contribute £500m of value into the Pension Scheme viaan interest in a property-backed partnership, with the remainder of the deficitexpected to be met by investment returns on the Pension Scheme's assets. To meet the £500m contribution of value, M&S will establish a partnership withthe Pension Scheme which will hold M&S properties with a current market value ofapproximately £1.1bn. These properties will be leased back to M&S and a fixedannual distribution to the Pension Scheme of c£50m will be made out ofpartnership profits for a 15 year period (currently equating to an effectivefinancing rate for M&S of c5.4%.). The Pension Scheme will hold the £500mpartnership interest, representing the net present value of these futuredistributions, as part of its total investment portfolio and accordingly thedeficit will be reduced by this amount. M&S will retain control over theproperties held as part of this arrangement, including flexibility to substitutealternative properties. The partnership will be consolidated in the M&S Group accounts with no impact onthe Group's net assets as the retirement benefit liability will be reduced by£500m and replaced by an amortising liability in respect of the obligations ofthe partnership to the Pension Scheme. The impact of the funding plan on theGroup's Income Statement is not expected to be material. This funding plan enables M&S to make a substantial contribution to the PensionScheme which will immediately reduce the deficit, while ensuring that theCompany's cashflow obligations to the Scheme are spread over a manageableperiod. From its perspective, the Pension Scheme receives a significant incomeyielding asset, backed by a strong portfolio of M&S property. This plan enablesthe Company to make the future of the Pension Scheme more secure for its 123,000members, including 26,000 current employees. In conjunction with the finalisation of the funding plan, Marks & Spencer hasalso begun consulting with employee members on a range of choices about howtheir pension builds up in the future. Under the proposal, there are threeoptions and each member can choose the one that suits them best. With one of theoptions, members would make contributions to the scheme; with the other two,members would not. In addition, Marks & Spencer today announces its intention to redeem outstandingsecured bonds to the value of £317m issued by Amethyst Finance plc*. This willrelease properties with a current estimated market value of £550m (book value at30 September 2006: £343m) for use in the partnership. The redemption will giverise to a one-off make-whole premium, which, together with the costs of thistransaction will result in an exceptional item of £30m - £35m being recorded inthe Group's 2006/7 profit and loss account. Ian Dyson, Finance Director, Marks & Spencer, said: "We know staff in our final salary scheme value this benefit very highly whichis why we want to keep the scheme open. By using our valuable property portfoliowe have been able to put the scheme on a safer footing and we have also puttogether a range of options which we're now discussing with employees to givethem choices about how they want to grow their pension in the future." * Amethyst Finance Plc comprises: £60,000,000 Class A1 Secured Floating Rate Notes due 2015 £131,000,000 Class A2 Secured Floating Rate Notes due 2026 £140,000,000 Class B Secured 6.282 per cent. Bonds due 2026 Statements made in this announcement that look forward in time or that expressmanagement's beliefs, expectations or estimates regarding future occurrences andprospects are "forward-looking statements" within the meaning of the UnitedStates federal securities laws. These forward-looking statements reflect Marks &Spencer's current expectations concerning future events and actual results maydiffer materially from current expectations or historical results. Any suchforward-looking statements are subject to various risks and uncertainties,including failure by Marks & Spencer to predict accurately customer preferences;decline in the demand for products offered by Marks & Spencer; competitiveinfluences; changes in levels of store traffic or consumer spending habits;effectiveness of Marks & Spencer's brand awareness and marketing programmes;general economic conditions or a downturn in the retail or financial servicesindustries; acts of war or terrorism worldwide; work stoppages, slowdowns orstrikes; and changes in financial and equity markets. Contacts: Amanda Mellor, IR +44 (0)20 8718 3604 Majda Rainer , IR +44 (0)20 8718 1563 Corporate Press Office: +44 (0)20 8718 1919 Investor Conference Call: This will be hosted by Ian Dyson at 08.30 (GMT) on Tuesday 23 January 2007: Dial in number: +44 (0) 208 515 2326 A recording of this call will be available until Tuesday 30 January 2007: Dial in number: +44 (0) 20 7190 5901 Access Code: 134895 # This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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