AGA Rangemaster cites pension commitments and takeover costs for £4m H1 loss
RANGE oven and boiler manufacturer AGA Rangemaster has reported a half year loss of £4m citing costs associated with its takeover by a US group and ongoing pension commitments as the main reasons.
The loss came despite an increase in revenues and operating profit for the six month period to June 30, 2015.
AGA Rangemaster revealed last month that it had agreed a £129m deal with Illinois-based Middleby Corp, whose main business is food services. It has recommended shareholders accept the offer and a general meeting will be held next month during which the shareholders will vote on the recommendation.
The interims show revenue up 1.5% at £125.4m (2014: £123.5m), with operating profit up 16.7% to £2.8m (2014: £2.4m).
However, AGA said the group’s performance was compromised by increased pension charges and the costs associated with the Middleby offer.
It said it had incurred £3.4m of non-recurring costs during the period, £3m relating to the professional costs incurred in respect of the proposed acquisition and £0.4m as a result of ongoing restructuring. Further non-recurring costs may be incurred in the second half, it added.
The group’s pension problems have been documented for some time and in its interim statement it said the offer by Middleby included a covenant to bolster retirement payments.
Even taking into account the covenant the pension scheme, which is assessed every three years, is expected to show a deficit of £84m by the end of December. However, this is a considerable improvement on the picture at the end of 2011 when the deficit was £228m.
In its interim statement, AGA said: “If the transaction does not take place the triennial valuation would need to be completed without the support offered by Middleby. The deficit recovery plan that will be put in place on completion of the 2014 triennial actuarial valuation, on the basis that support is provided by Middleby, will include the payment into the pension scheme of a special contribution funded by Middleby of £10m shortly after completion of the takeover, another £10m during January 2016 and further deficit recovery contributions of up to £2.5m per annum to be paid by the group over a six year period commencing in 2018.
“The covenant offered by Middleby should materially strengthen the pension scheme’s security for its members and beneficiaries. In addition to the special contributions funded by Middleby totalling £20m to be paid into the pension scheme by January 2016, Middleby will provide to the pension scheme an unconditional guarantee of the group’s obligations to the pension scheme of up to £60m, together with a further conditional guarantee of the group’s obligations to the pension scheme as set out on the scheme’s schedule of contributions in place from time to time prospectively of up to an initial £95m.”
William McGrath, Chief Executive said: ”Our product investment programmes have ensured we are ready to benefit from the improving trading backcloth. Working with Middleby should provide additional momentum to enable our operations to thrive.”
He added that with the products brought to market by the group over recent years now well established in their market places, the group could look to the remainder of 2015 with confidence.
