Issue of Equity

Dinkie Heel PLC
26 March 2004

                                Dinkie Heel plc


       Placing, Issue of Warrants, Cancellation of Loan Notes and Capital
                                Re-organisation


                         Key points of the transaction


•  Dinkie Heel plc ('Dinkie Heel' or the 'Company'), the AIM quoted
   manufacturer of components for the footwear manufacture and repair 
   industries, is proposing to place 95,800,000 shares with institutions and 
   certain individuals.

•  David Horner and Peter Cook will join the Dinkie Heel Board as non-executive 
   directors.

•  Alongside the existing business activities of the Company, the Board, with 
   the benefit of the additional skills of the Proposed Directors, wish to
   broaden the Company's activities to enable it to invest in Management Buy-Out
   and Management Buy-In opportunities.

•  Dinkie Heel shareholders will receive 1 warrant to subscribe for a New
   Ordinary Share for every 2 Dinkie Heel shares held at 19 April 2004, 
   exercisable at 2p per share.


For further information, please contact:



Dinkie Heel plc
Geoff Martin, Finance Director                     Tel:            0117 303 3404
David Horner, proposed director                    Tel:            01225 483 030



City Financial Associates Limited
Tony Rawlinson/James Caithie                       Tel:            020 7090 7800



Introduction

The Board of Dinkie Heel announced earlier today details of proposals to raise
£958,000 (before expenses) through a placing of 95,800,000 Placing Shares at an
issue price of 1p each. It was also announced that of the £400,000 Loan Notes
issued on 19 December 2002 and due for repayment on 17 December 2003, £330,000
were to be cancelled in consideration for the issue of the Loan Note Shares
(also to be issued at 1p each). The proposed Placing and cancellation of Loan
Notes will result in the issue, in aggregate, of 128,800,000 New Ordinary
Shares, representing approximately 89.13 per cent. of the Company's Enlarged
Issued Ordinary Share Capital.

The Concert Party would be interested, following the implementation of the
Proposals, in more than 30 per cent. of the Enlarged Issued Ordinary Share
Capital which would require the Concert Party to make an offer for the balance
of the New Ordinary Shares unless the Waiver is approved.

In addition, your Board proposes, conditional upon Admission, to allot Warrants
to all Shareholders, in the ratio of one Warrant for every two New Ordinary
Shares. The purpose of this document is to provide Shareholders with details of
the Proposals, and to explain the reasons why your Board considers the Proposals
to be in the best interests of the Company and Shareholders as a whole.  A
circular has been sent to all Shareholders and the Company has convened an
extraordinary general meeting to be held on 19 April 2004 at which Resolutions
to approve the Proposals will be put.


Working Capital

The Company is in urgent need of funds from the Placing for its survival. Debt
levels are currently unsustainable and cash flows from the Company's existing
operations have been insufficient to enable debts to be serviced or capital
repayments maintained. In particular, the Company has an outstanding overdue
creditor in the form of HM Customs & Excise, in respect of a VAT liability of
£223,000 (plus overdue penalties) largely arising from the sale of its freehold
premises in October 2003 (as mentioned in the paragraph entitled 'Current
Trading and Prospects' below).  Additionally, the Loan Notes, which were due to
be repaid on 17 December 2003, remain overdue, as detailed in the paragraph
entitled 'Cancellation of Loan Notes' below. If the Proposals detailed below are
not approved by Shareholders, the Board believes it would have no alternative
but to seek appointment of an administrator or pursue other insolvency options.


The Placing

The Placing is intended to repay debts and provide working capital for the
existing businesses of the Company, and also to provide 'seed capital' for the
new business activities described below. Accordingly, the Company is proposing
to raise £958,000 (before expenses) through the Placing of 95,800,000 New
Ordinary Shares at a price of 1p each with institutional and other placees.
This represents 89.13 per cent. of the Enlarged Issued Ordinary Share Capital.
The Placing price represents a discount of 77.78 per cent. to the mid-market
closing price per Existing Ordinary Share of 4.50p on 24 March 2004. The Board
believes that, given the precarious financial position of the Company, these
terms are acceptable. The Placing is conditional, inter alia, on Admission.
Dealings in the Placing Shares are expected to commence on 20 April 2004.


Warrants

Ideally, the Board would have wished to offer holders of Existing Ordinary
Shares the opportunity to take up all or some of the Placing Shares. This has
not been possible given the additional time and costs involved and the placees'
requirement to take up minimum levels of stock as a precondition of their
commitment to the Placing. However, in order to provide holders of Existing
Ordinary Shares with some opportunity to participate, the Proposals also
comprise the issue of 1 Warrant for every two New Ordinary Shares held which
would, if exercised, represent 33.27 per cent. of the Enlarged Diluted Issued
Ordinary Share Capital. Each Shareholder will receive, for every 2 New Ordinary
Shares, 1 Warrant. Each Warrant will entitle the holder thereof to subscribe for
one New Ordinary Share at 2p per share at any time in the period following
Admission until the third anniversary of Admission. The Warrants will not be
admitted to trading on AIM.


Cancellation of Loan Notes

The Loan Notes fell due for repayment on 17 December 2003. The capital sum
outstanding is currently incurring interest charges of 12 per cent. per annum.
An important element of the Proposals involves the holders of £330,000 of
outstanding Loan Notes agreeing to cancel their Loan Notes in consideration for
the issue of the Loan Note Shares. The balance of the outstanding Loan Notes
(plus unpaid interest accrued on all the Loan Notes) will be repaid out of the
proceeds of the Placing.


The City Code

Under Rule 9 of the City Code, where any person acquires shares which (taken
together with shares held or acquired by persons acting in concert with him)
carry 30 per cent. or more of the voting rights of a company which is subject to
the City Code, then, except with the consent of the Panel, he and any person
acting in concert with him, must make a general offer to other shareholders to
acquire for cash the balance of the shares not held by him and his concert
parties in that company at not less than the highest price paid by him or any
persons acting in concert with him within the preceding twelve months. In
addition, Rule 9 provides that, inter alia, where any person who holds between
30 per cent. and 50 per cent. of the voting rights of a company and such person
(or any person acting in concert with him) acquires further voting rights, then
that person or group of persons is required to make a general offer to all
shareholders to purchase their shares for cash at not less than the highest
price paid by him or any persons acting in concert with him within the preceding
twelve months.

The Concert Party's interests following the implementation of the Proposals will
amount to 82,254,050 New Ordinary Shares, representing 56.92 per cent. of the
Enlarged Issued Ordinary Share Capital. On a fully diluted basis the Concert
Party's interests would amount to 123,531,075 New Ordinary Shares representing
56.89 per cent. of the Enlarged Diluted Issued Ordinary Share Capital.

The Panel has been consulted and has agreed, subject to the passing on a poll by
Shareholders (who for the avoidance of doubt do not include members of the
Concert Party) of the Whitewash Resolution, to waive the obligation on the
Concert Party to make a general offer to Shareholders under Rule 9 of the City
Code which would otherwise arise as a result of the implementation of the
Proposals. In the event that the waiver is confirmed, Shareholders should be
aware that, for so long as the Concert Party remains constituted as at present,
any member of the Concert Party may acquire any number of further New Ordinary
Shares without being obliged to make a general offer to all other Shareholders.
However, each individual member of the Concert Party will normally incur an
obligation to make a general offer should he or she (together with associates)
acquire shares which have the effect of increasing his or her individual holding
to 30 per cent. or more of the Company's issued voting share capital at that
time.

Following the transactions set out above the Concert Party will own or control
more than 50 per cent. of the voting rights of the Company and will therefore be
able to acquire further New Ordinary Shares without incurring any further
obligation under Rule 9 to make a general offer.

Following discussions with the Panel it has been agreed that certain
Shareholders and placees are to be treated as the Concert Party for the purposes
of the City Code. The members of the Concert Party are David Horner, Chelverton
Asset Management Limited, Colinette Holdings Limited, Belas Knapp Trust, Stanton
Trust, Chelverton Growth Trust PLC, Robin Boyle, Helen Veale, Stephen Barclay,
Ian Buckley, Richard Organ, Robert Mitchell, Geoff Martin, Chris Ball, David
Abell, Simon Stephenson, Tom Sinclair, David Hart, David Dunbar, Peter Cook,
Linda Deschampsneufs and David Munn. The key member of the Concert Party is one
of the Proposed Directors, David Horner, and his related interests.

On completion of the Proposals, the Concert Party will hold 123,531,075 New
Ordinary Shares in aggregate, representing approximately 66.49 per cent. of the
Enlarged Issued Ordinary Share Capital (assuming that no Options or Warrants are
exercised by Independent Shareholders but that all Warrants and Options
available to members of the Concert Party are exercised).


New business activities

Alongside the existing business activities of the Company, the Board, with the
benefit of the additional skills of the Proposed Directors wish to broaden the
Company's activities to enable it to invest in Management Buy-Out and Management
Buy-In opportunities with an overall value below £5 million. Target companies
will tend to be stable, steady growth, profitable and cash generative
businesses. The Directors and Proposed Directors have identified this area of
the venture capital market as underfinanced and containing many opportunities.

It is therefore proposed that the Company would, through an investment
management contract with Chelverton Asset Management Limited (an unlisted
investment management company controlled by David Horner, one of the Proposed
Directors, a member of the Concert Party and participant in the Placing),
identify suitable targets.

Chelverton Asset Management Limited would waive all fees under such a contract
until an investment was made by the Company. Although part of the proceeds of
the Placing will provide some seed capital for the new business activities it is
likely that further funds would need to be raised to develop the business until
the time that it becomes self funding through realisations and yields from
investments.

These investments which will be in a variety of forms including equity,
redeemable preference shares and loan stock will achieve their target returns by
way of dividend yields and also loan interest on the outstanding sums, coupled
with a steady return of capital over the first five years of the investment.
This return of capital will be achieved by redeeming preference shares and
repaying loans.

The ongoing businesses of the Company, which comprise the manufacture and supply
of a range of components for the footwear manufacture and repair industries,
together with the manufacture and distribution of products for personal
protection and for the equestrian and dairy industries, will continue for the
time being. The Concert Party is not intending to prejudice the existing
employment rights, including pension rights, of any of the employees of the
Company.


Board Changes

It is proposed that Andrew Stowey, Martyn Stowey and Robert Mitchell will stand
down from the Board following the EGM. David Horner and Peter Cook will join the
Board immediately following the EGM as non-executive directors.  In addition,
Christopher Ball will relinquish his position as Managing Director and become a
non-executive director.


Capital Re-organisation and Reduction of Capital

The latest audited balance sheet of the Company, as at 31 December 2002, shows a
deficit of £2,135,000 on its profit and loss account. While there is a deficit
on the Company's profit and loss account, the Company is not able to pay
dividends. The Board is therefore proposing to effect the Capital
Re-organisation and, in due course, the Reduction of Capital to eliminate the
deficit.

Accordingly, subject to Shareholder approval, it is proposed to split the
Existing Ordinary Shares into New Ordinary Shares of 0.1p each and Deferred
Shares of 4.9p each.

Thereafter, shareholder approval is sought to cancel the Deferred Shares.
Shareholder approval is also sought for the reduction of the share premium
account of the Company following Admission by £1,869,064.

The Court's sanction of the Reduction of Capital is also required. If approved,
the reserve arising on the Reduction of Capital will be available to eliminate
the deficit on the Company's profit and loss account as at 31 December 2002.

The Court will be concerned to ensure that the creditors of the Company will not
be prejudiced by the Reduction of Capital and may require their position to be
protected by way of an undertaking. The precise nature of such protection is for
the Court to determine and the Company will provide such protection as the Court
requires and the Company's solicitors advise is appropriate.

The Capital Re-organisation and subsequent Reduction of Capital will not further
affect the number of shares held by Shareholders or the rights attaching to
those shares. The Capital Re-organisation and Reduction of Capital is subject to
Shareholder approval of the Special Resolutions to be proposed at the EGM.

It is the Board's intention to effect the Capital Reduction by applying to Court
for sanction of the Capital Reduction in due course. The Board believes this is
feasible providing there is no significant change in the financial and trading
position of the Company between the date of the EGM and the date of Court
approval of the Capital Reduction.


Current Trading and Prospects

The Company published on 29 September 2003 its interim results for the six
months to 30 June 2003 and reference was made in the announcement to impending
sales of fixed assets. The audited results for the full year to 31 December 2003
are expected to be announced before the end of June 2004.

Since 30 June 2003, the Company has sold all of its Bristol premises. The
freehold premises realized £980,000 in cash, net of expenses, and resulted in an
unaudited profit over book value of £255,000. The long leasehold premises
realised a further £390,000 net of expenses and an unaudited profit over book
value of £148,000. The Company's remaining plant and machinery were also sold
realising their net book value of £59,000. The proceeds of all of these sales
were used to reduce the Company's bank borrowings.

Restructuring costs in the second half of the year are estimated at £228,000.

The Davies Odell division, which is involved in the manufacture and distribution
of a wide range of components for the footwear manufacture and repair industries
and of products for personal protection and for the equestrian and dairy
industries, continued to trade successfully in the second half of the year and
performance at the beginning of 2004 continues to be satisfactory. The Dinkie
division, which supplies safety steel toecaps worldwide, continued to be
loss-making in the second half of 2003 but its current performance is close to
the expectations of the Board for the re-organised business.



EXPECTED TIMETABLE (all dates are 2004)

Latest time for receipt of Forms of Proxy - 11.00 a.m. on 17 April

Extraordinary General Meeting - 11.00 a.m. on 19 April

Record Date for entitlement to the Warrants - 5.30 p.m. on 19 April

Admission of Placing Shares and Loan Note Shares to trading on AIM - 20 April



For further information, please contact:


Dinkie Heel plc
Geoff Martin, Finance Director                    Tel:            0117 303 3404
David Horner, proposed director                   Tel:            01225 483 030



City Financial Associates Limited
Tony Rawlinson/James Caithie                      Tel:            020 7090 7800


City Financial Associates Limited, which is authorised and regulated by The
Financial Services Authority, is the Company's Nominated Adviser for the
purposes of the AIM Rules. Its responsibilities as the Company's Nominated
Adviser under the AIM Rules are owed solely to the London Stock Exchange and are
not owed to the Company or any Director. City Financial Associates Limited will
not be responsible to anyone other than the Company for providing the
protections afforded to customers of City Financial Associates Limited or for
advising any other person on the Proposals and other arrangements described in
the circular to Shareholders dated 26 March 2004.

Hazlewoods, which is authorised and regulated by The Financial Services
Authority, is acting for Dinkie Heel plc and its board of directors in relation
to the Waiver and is not advising any other person. Accordingly, Hazlewoods will
not be responsible to anyone other than the Company and its board of directors
for providing the protections afforded to clients of Hazlewoods or for providing
advice on the Waiver or any other matter referred to in the circular to
Shareholders dated 26 March 2004.

To the best of the knowledge and belief of the Directors and the Proposed
Directors the information contained in this announcement is in accordance with
the facts and does not omit anything likely to affect the import of such
information.

To the best of the knowledge and belief of each of the members of the Concert
Party the information contained in this announcement relating to the Concert
Party is in accordance with the facts and does not omit anything likely to
affect the import of such information.

Definitions in this announcement apply as they are set out in the circular dated
26 March 2004 which is being sent to shareholders of Dinkie Heel today and is
available from the offices of City Financial Associates Limited, 6 Laurence
Pountney Hill, London EC4R 0BL.


                      This information is provided by RNS
            The company news service from the London Stock Exchange