Capital Reorganisation

Leeds Group PLC
02 June 2003


Issued on behalf of Leeds Group plc
Date: Monday, 2 June 2003

                                                               Embargoed: 7.00am


                   Capital Reduction including Special Capital
                          Payment to Shareholders and

                    Notice of Extraordinary General Meeting


Leeds Group plc announces that a circular is being posted to Shareholders today
in relation to the proposal for a Capital Reduction including a Special Capital
Payment to Shareholders ('the Proposal').  Enclosed with the circular will be
the notice convening an Extraordinary General Meeting to be held on 27 June
2003, to approve the Proposal ('the Resolution').


On 12 March 2003, the Company completed the disposal of Nemesis SpA, its Italian
textile printing subsidiary, and announced that it had begun work on a capital
reconstruction to return capital to Shareholders and enable the Group to
implement a progressive dividend policy.


The Board proposes to return approximately £4.75 million of cash to Shareholders
and to restructure the Company's capital. The Proposal will require both
Shareholder approval and the confirmation of the Court.


In summary, the effect of the Proposal, if approved by Shareholders and the
Court, is that 13 pence of cash per ordinary share of the Company will be
returned to Shareholders as a Special Capital Payment. In addition to this, the
Proposal involves utilising the balance on the Company's share premium account
to eliminate the deficit and to create a positive balance on the Company's
profit and loss reserve. This would enable the Company to pay dividends from its
positive profit and loss reserve in the future.


Background to, and reasons for, the Proposal

During the last two years, the Directors' declared strategy has been:

• to focus on the Group's UK leasing business, which had
been recognised in 2000 to be the Group's principal growth opportunity;

• to improve the profitability of its textile import and
distribution subsidiary, Hemmers-Itex, by concentrating operations previously
conducted in Holland and Germany onto one site in Germany; and

• to divest the Group's textile manufacturing businesses.


These strategic aims have now been achieved. Leeds Leasing has successfully
grown its lease book from £6.3 million at 30 September 1999, to £18.2 million by
31 March 2003. The consolidation of Hemmers-Itex was completed in November 2002.
The business is trading profitably and is already benefiting from cost
reductions and lower levels of working capital employed. In March 2003, the sale
of Nemesis SpA completed the Group's withdrawal from textile manufacturing
operations and left Hemmers-Itex as the Group's only remaining textile business.


As a consequence of these strategic changes, the Group's net bank debt has
reduced materially in the past two years. The table below shows the reduction in
Group net debt from £24.5 million at 31 March 2001, to £8.4 million at 31 March
2003.

                                         31 March 2003       31 March 2001
                                             £ million           £ million
Textile businesses:
- Bank debt                                        3.5                14.2
- Cash                                            (8.4)               (0.3)
                                             ----------          ----------
Textile businesses net (cash)/debt                (4.9)               13.9
Leeds Leasing bank debt                           13.3                10.6
                                             ----------          ----------
Net Group bank debt                                8.4                24.5
                                             ==========          ==========



continued...


                                      -2-


The Board now proposes to apply £2.4 million of the £8.4 million cash balance at
31 March 2003, to reduce bank debt in Hemmers-Itex, to set aside £1.25 million
for operational needs and to return to Shareholders the balance of approximately
£4.75 million, equivalent to 13 pence per ordinary share of the Company.


Following the Special Capital Payment, the net assets of the Group at 31 March
2003, would have been reduced on a pro-forma basis from £18.2 million to £13.45
million and the Group would have had pro-forma net debt of £13.15 million,
comprising cash balances of £1.25 million, bank debt in Hemmers-Itex of £1.1
million and bank debt of £13.3 million in Leeds Leasing. The bank debt of £13.3
million in Leeds Leasing is secured against the lease book, which at 31 March
2003 was £18.2 million. Leeds Leasing has committed bank facilities, without
recourse to the Company, to finance its anticipated further growth for the
foreseeable future.


The Board has considered the various possible methods of returning cash to
Shareholders and has concluded that the Proposal represents the best way of
achieving this. The Proposal will require both Shareholder approval and the
confirmation of the Court and further details are set out below.


Capital Reduction and Court confirmation

The Capital Reduction relates only to the share capital and reserves of the
Company. The effect of the Capital Reduction will be to reduce the nominal value
of each ordinary share of the Company from 25p to 12p. At the date of this
announcement, the Company had an issued share capital of approximately £9.15
million divided into 36,598,603 ordinary shares of the Company. In addition to
this, the Company will cancel the whole of its share premium account, which
currently stands at £15.8 million. This amount will be used to eliminate the
accumulated deficit on the Company's profit and loss reserve (which stood at
£13.0 million as at 31 March 2003) with the balance being carried to a special
reserve which, subject to Court approval, will be treated as a distributable
reserve in the books of the Company out of which the Company would be able to
pay dividends to its Shareholders in the future. On a pro-forma basis the
distributable reserve of the Company would have been £2.8 million as at 31 March
2003.


Before the Capital Reduction can take place it needs the approval of
Shareholders and the confirmation of the Court, which is expected to be given at
a hearing scheduled for 23 July 2003. The Capital Reduction will be effective
from the date that the Court Order is registered with the Registrar of Companies
in England and Wales, which is expected to be by 28 July 2003. The Company will
give the Court such undertakings as it may require for the protection of
creditors.


The Special Capital Payment is expected to be made on 8 August 2003 and will be
made to Shareholders who appear on the register of members at 5pm on the
Effective Date, which is expected to be 28 July 2003.


Extraordinary General Meeting

An Extraordinary General Meeting of the Company will be held on 27 June 2003 at
10 am at the offices of Leeds Group plc, Schofield House, Gateway Drive, Yeadon,
Leeds LS19 7XY for the purposes of considering and, if thought fit, passing the
Resolution to approve the reduction of the Company's issued share capital and
return of capital to Shareholders, the reduction in nominal value of the
Company's ordinary shares and the reduction in the share premium account.


The definitions set out in the circular dated 2 June 2003 apply in this
announcement.

Enquiries:

Leeds Group plc                             Citigate Dewe Rogerson Ltd
Malcolm Wilson, Group Managing Director     Fiona Tooley
Today: 07801 224618                         Tel: [phone]
Thereafter: 0113 391 9000
Dawn Bowler, Group Finance Director         KPMG Corporate Finance
Today: 07747 777055                         Bob Bigley
Thereafter: 0113 391 9000                   Tel: [phone]


KPMG Corporate Finance, a division of KPMG LLP which is authorised by The
Financial Services Authority for investment business activities, is acting for
the Company as nominated adviser and is not acting for any other person.  KPMG
Corporate Finance will not be responsible to anyone other than the Company for
providing the protections afforded to its clients or for providing advice in
relation to the contents of this document or any transaction or arrangement
referred to herein.



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