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Wincanton reaches pension scheme agreement 08 August 2018

Fair and affordable deficit recovery plan will run to March 2027

Wincanton has reached an agreement with the Trustee of the Wincanton Pension Scheme on the 2017 triennial valuation (the '2017 valuation') and recovery plan. The deficit recovery plan will run to 31 March 2027 and has been described as ‘both fair and affordable’. It allows Wincanton to move forward with confidence and certainty. Importantly, it means that the Company retains its ability to invest in the business and to continue a progressive dividend policy.

The annual deficit contributions are as follows:

> £17.3 million pa (£18.0 million 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

> £24.3 million pa (£25.0 million 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 £15.0 million 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. Wincanton noted that 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.

The current proforma actuarial deficit, after allowing for contributions made to date and including the one-off lump sum amount, is estimated at £190.0 million. The actuarial deficit at 31 March 2017 was £221.0 million. The position calculated in accordance with the IAS19 Accounting Standards showed a significantly smaller deficit of £76.0 million as at 31 March 2017 and £47.0 million as at 31 March 2018, reflecting the very different methodology prescribed by IAS19.

Wincanton has agreed other provisions with the Scheme:

> It will provide additional payments to the Scheme on a partial (50.0%) matching basis if distributions to shareholders (dividends and share-buy-backs) grow year-on-year in excess of 10.0% and on a full matching basis if distributions grow year-on-year in excess of 15.0%. 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 £85.0 million 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 £6.0 million 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 40.0% 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 50.0% of the combined net proceeds for the first £30.0 million of the proceeds in any financial year.

The next triennial valuation is due as at 31 March 2020.