Return of Capital

James Halstead PLC
01 November 2004


James Halstead plc

1 November 2004

Return of Capital

The Company announced in its final results on 28 September 2004 its intention to
return 60 pence per Ordinary Share, amounting to approximately £15 million cash,
to shareholders by way of a Return of Capital.

A circular relating to the Return of Capital is being posted to Shareholders
today.

The Return of Capital is conditional upon the approval of Shareholders. The EGM,
at which Shareholders will be asked to approve the Return of Capital, will be
held at The Moat House Hotel, 1 Higher Bridge Street, Bolton at 12.15pm on 6
December 2004, or, if later, immediately following the conclusion or adjournment
of the AGM convened for 12.00pm on the same day and at the same place.

The Return of Capital is also conditional upon the approval of Preference
Shareholders at an extraordinary general meeting of the Preference Shareholders,
which is also to be held on 6 December 2004 at 12.30pm or, if later, immediately
following the conclusion or adjournment of the EGM.

The Board unanimously recommends that Shareholders vote in favour of the
resolution to be proposed at the EGM, as they intend to do in respect of their
own beneficial holdings.

Disposal of non-core assets

In line with James Halstead's strategy of concentrating on its core floor
covering business, the Company has made a number of disposals of non-core assets
over the last five years. These disposals included the disposal on 2 September
1999 of its wholly-owned subsidiary, Driza-Bone Pty Limited, for a cash
consideration of £2.12 million and the disposal on 15 June 2004 of its
subsidiary, Belstaff International Limited, together with several brands, for a
net cash consideration of £10.4 million.

These disposals have contributed to net cash of £37.1 million on the Group
balance sheet at 30 June 2004.

The Return of Capital

On 28 September 2004, the Company announced its intention to return 60 pence per
Ordinary Share to Shareholders, representing approximately £15 million.

In determining the amount of capital to be returned, the Directors have sought
to balance the desire to return cash to Shareholders, the specific future
investment opportunities available to the Company and the objective of
maintaining an appropriate capital structure.

Under the terms of the Return of Capital, Shareholders will receive:

for every 1 Ordinary Share held on the Record Date          either 1 B Share
                                                            or 1 C Share

Shareholders need to elect to receive either B Shares or C Shares. If
Shareholders elect to receive C Shares, they should indicate whether they wish
to redeem some or all of their C Shares (free of all dealing expenses and
commissions) for cash on the First Redemption Date (expected to be 14 January
2005) or on Future Redemption Dates. Shareholders should return forms of
election to James Halstead's registrars, Computershare Investor Services PLC, as
soon as possible and, in any event, so as to be received by no later than 5.00pm
on 12 January 2005.

Shareholders are able to split their elections between the B Share and C Share
Alternatives, subject to the limit on the number of C Shares that can be issued
under the Return of Capital.
Up to 25,000,000 B Shares with a nominal value of 1 penny each will be issued,
which will have a total nominal value of up to £250,000. The B Shares will be
issued fully paid using the Company's distributable reserves.

Up to 9,265,580 C Shares with a nominal value of 60 pence each will be issued,
which will have a total nominal value of up to £5,559,348. The C Shares will be
issued fully paid using the Company's share premium account.

The maximum number of C Shares that can be allotted under Alternatives 2 and 3
(as described below) is 9,265,580. If elections are received for more C Shares
under those alternatives than are available, then each applicant will be scaled
back pro rata to their election and will receive B Shares to the extent that C
Shares cannot be allotted under Alternatives 2 and 3.

Subject to the B Share Dividend, the Return of Capital does not affect the
rights attaching to the Preference Shares. In relation to the Ordinary Shares,
the B Share Dividend and the C Share Continuing Dividend will be paid in
priority to any payment of dividend or other distribution to holders of Ordinary
Shares and the Ordinary Shares will rank behind the C Shares on a return of
capital on a winding up of the Company.

Shareholders should note that the B Shares shall have no voting rights and the C
Shares will not generally have voting rights except in very limited
circumstances.

B Share and C Share Alternatives

Under the Return of Capital Shareholders have the following three alternatives
in relation to receiving either B Shares or C Shares. Broadly speaking, the
three alternatives are intended to provide Shareholders with a choice as to how
to receive the Return of Capital. Shareholders are able to split their elections
between the B Share and C Share Alternatives, subject to the limits on the
number of C Shares that can be issued under the Return of Capital. If elections
are received for more C Shares than are available, then each applicant will be
scaled back pro rata to the election and will receive B Shares to the extent
that C Shares cannot be allotted under Alternatives 2 and 3.

Alternative 1: B Share Dividend

If Shareholders choose this alternative, they will receive 1 B Share for every 1
Ordinary Share that they hold on the Record Date. Shareholders will then receive
a single dividend of 60 pence for each B Share that they hold, following which
all of their B Shares will automatically be converted into Deferred Shares. It
is expected that cheques for B Share Dividends will be sent to Shareholders by
20 January 2005.

Deferred Shares will not be listed, will have extremely limited rights and will
have negligible value.

Alternative 2: C Share Initial Redemption

If Shareholders choose this alternative, they will receive 1 C Share for every 1
Ordinary Share that they hold on the Record Date. These C Shares will be
redeemed by James Halstead on the First Redemption Date (expected to be 14
January 2005) at 60 pence per C Share, free of all dealing expenses and
commissions.

It is expected that cheques for the proceeds will be sent to Shareholders by 20
January 2005.

If Shareholders decide to redeem part only of their C Shares they will have the
right to have their remaining C Shares redeemed in the future on Future
Redemption Dates, as described in Alternative 3 below.

Alternative 3: C Share Future Redemption Right

If Shareholders choose this alternative, they will receive 1 C Share for every 1
Ordinary Share that they hold on the Record Date. Shareholders will retain these
C Shares, which will give them the right to have them redeemed in the future on
Future Redemption Dates at 60 pence per C Share, free of all dealing expenses
and commissions. Shareholders with unredeemed C Shares will receive the C Share
Continuing Dividend of 4 per cent. per annum payable, in arrears, on the nominal
value of 60 pence per unredeemed C Share, with the first dividend being paid on
14 January 2006.

Future Redemption

Shareholders who have chosen Alternative 3 in respect of some or all of their C
Shares will be entitled to receive the C Share Continuing Dividend and have the
right to redeem such C Shares on 14 January in each calendar year (until 14
January 2008) by submitting a Future Redemption Form by no later than 31
December in the calendar year preceding the redemption date.

James Halstead will exercise its right to redeem all C Shares then in issue on
14 January 2008 at their nominal value of 60 pence per C Share.

The first C Share Continuing Dividend, of 4 per cent. per annum payable, in
arrears, on the nominal value of 60 pence per unredeemed C Share, will be paid
on 14 January 2006 and annually thereafter. The C Shares will not provide any
further participation in the profits of James Halstead.

If 14 January is not a Business Day in any calendar year, then C Shares would be
redeemed and the C Share Continuing Dividend paid, as appropriate, on the next
following Business Day.

Recommendation

The Board are of the opinion that the Return of Capital and the resolution to be
proposed at the EGM are in the best interests of Shareholders as a whole and
accordingly unanimously recommend that Shareholders vote in favour of such
resolution, as they intend to do in respect of their own beneficial holdings
amounting in aggregate to 2,742,843 Ordinary Shares representing approximately
10.87 per cent. of the current issued ordinary share capital of James Halstead.

Enquiries:
James Halstead plc
Gordon Oliver, Finance Director
Tel: [phone]

Westhouse Securities LLP
Tim Feather, Director
David Simmons, Assistant Director
Tel: [phone]

                    EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Ex-dividend date for the payment of the final dividend on the          Wednesday
Ordinary Shares                                                  3 November 2004
Record date for payment of the final dividend                             Friday
                                                                 5 November 2004
Latest time and date for receipt of form of proxy for AGM             12.00pm on
                                                                        Saturday
                                                                 4 December 2004
Latest time and date for receipt of form of proxy for EGM             12.15pm on
                                                                        Saturday
                                                                 4 December 2004
AGM/EGM/Preference Shareholder EGM                                        Monday
                                                                 6 December 2004
Despatch of cheques in respect of the final dividend                      Monday
                                                                 6 December 2005
Ex-entitlement date for the Return of Capital                          Wednesday
                                                                 8 December 2004
Record date for the Return of Capital                                     Friday
                                                                10 December 2004
Latest time for receipt of Shareholders' election forms in             
relation to the B Share and C Share Alternatives                       5.00pm on
                                                                       Wednesday
                                                                 12 January 2005
First Redemption Date                                                     Friday
                                                                 14 January 2005
Despatch of C Share certificates (as appropriate)                       Thursday
                                                                 20 January 2005
Despatch of cheques in respect of C Shares redeemed on the First        Thursday
Redemption Date and the B Share Dividend as appropriate          20 January 2005
B Shares convert into Deferred Shares                                     Friday
                                                                 21 January 2005

Note:
If any of the above times or dates should change, the revised times and/or dates
will be notified to Shareholders by an announcement on the Regulatory News
Service of the London Stock Exchange.

                                 DEFINITIONS

The following definitions apply throughout this document, unless the context
requires otherwise:

'AGM'             the annual general meeting of James Halstead to be held at The
                  Moat House Hotel, 1 Higher Bridge Street, Bolton at 12.00pm on
                  6 December 2004

'Alternative 1'   the B Share Dividend

'Alternative 2'   the Initial Redemption

'Alternative 3'   the Future Redemption Right

'Articles'        the Company's articles of association from time to time

'B Share and C    Alternative 1, Alternative 2 and Alternative 3
Share
Alternatives'

'B Share          the dividend of 60 pence per B Share
Dividend'

'B Shares'        non-redeemable ordinary shares of 1 penny each in the capital
                  of the Company

'Board' or        the board of directors of James Halstead
'Directors'

'Business Day'    a day (other than a Saturday, Sunday or public holiday) on
                  which pounds sterling deposits may be dealt in on the London
                  inter-bank market and commercial banks are open for general
                  business in London

'C Share          the non-cumulative preferential dividend payable on a Dividend
Continuing        Payment Date in relation to each C Share at the rate (on the
Dividend'         nominal value thereof) of 4 per cent. per annum calculated in
                  accordance with the proposed amendments to the Articles

'C Shares'        redeemable non-cumulative preference shares of 60 pence each
                  in the capital of the Company

'Capital          the proposed increase of the Company's authorised share
Reorganisation'   capital from £5,200,000 to £11,009,348 by the creation of
                  25,000,000 B Shares and 9,265,580 C Shares to be approved by
                  Shareholders at the EGM

'Company' or      James Halstead plc
'James
Halstead'

'Deferred         the deferred shares of 1 penny in the capital of the Company,
Shares'           which have extremely limited rights

'Dividend Payment 14 January in each year within the Future Redemption Period
Date'             (or, if not a Business Day, the next Business Day (without any
                  interest or payment in respect of the delay)) and 'Dividend
                  Payment Dates' shall be construed accordingly

'EGM'             the extraordinary general meeting of James Halstead's to be
                  held at The Moat House Hotel, 1 Higher Bridge Street, Bolton
                  at 12.15pm on 6 December 2004, or, if later, immediately
                  following the conclusion or adjournment of the AGM convened
                  for 12.00pm on the same day and at the same place

'First Redemption 14 January 2005, being the date on which it is expected that C
Date'             Shares will be redeemed by James Halstead in respect of valid
                  election forms received by 5.00pm on 12 January 2005

'Future           14 January in any calendar year within the Future Redemption
Redemption        Period
Dates'

'Future           the period beginning on 14 January 2005 and ending on 14
Redemption        January 2008
Period'

'Future           the right to require the redemption of C Shares on any Future
Redemption        Redemption Date
Right'

'Future           the redemption of C Shares on any Future Redemption Date
Redemption'

'Initial          the redemption of C Shares on the First Redemption Date
Redemption'

'Ordinary         ordinary shares of 10 pence each in the capital of the
Shares'           Company

'Preference       the extraordinary general meeting of the Preference
Shareholder       Shareholders to be held at The Moat House Hotel, 1 Higher
EGM'              Bridge Street, Bolton at 12.30pm on 6 December 2004, or, if
                  later, immediately following the conclusion or adjournment of
                  the EGM convened for 12.15pm on the same day and at the same
                  place

'Preference       holder(s) of 5.5% Preference Shares of £1 each in the capital
Shareholders'     of the Company

'Preference       5.5% Preference Shares of £1 each in the capital of the
Shares'           Company

'Qualifying       holders of Ordinary Shares on the register of members on the
Holders'          Record Date

'Record Date'     the close of business on 10 December 2004 (or such other date
                  as the directors of James Halstead may determine)

'Return of        the transaction comprising the Capital Reorganisation and the
Capital'          return of 60 pence per Ordinary Share held by each Qualifying
                  Holder by way of the B Share Dividend, the Initial Redemption
                  or a Future Redemption

'Shareholders'    holders of Ordinary Shares and/or B Shares and/or C Shares, as
                  the context may require

Full details of the Return of Capital, together with the notice of the EGM, are
contained in the circular dispatched to the Shareholders on 1 November 2004.



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