Interim Results & Other News

Worthington Group PLC 30 November 1999 Worthington Group plc Proposed Disposals, Rights Issue, Reduction of Share Premium Account and Adoption of New Share Option Schemes Introduction Worthington has agreed to sell two businesses for an aggregate cash consideration of £2,150,000. A majority stake in Nottingham Braid and whole of the Industrial Threads and Braids divisions of AJ Worthington (Leek) will be sold to their respective existing management teams. Of the aggregate cash consideration payable, £1,950,000 is payable on completion of the relevant sale agreements and £200,000 is deferred for a period of up to 36 months. Worthington will retain a 44 per cent. interest in Nottingham Braid. The Disposals are in addition to the sale of the Group's former Head Office in Willesden, North-West London, for a consideration of £2,300,000 (announced on 25 October 1999 and which completed last week) and the sale of a small non-core division of Worthington Manufacturing for a consideration of £130,000 which completed on 5 October 1999. The Company's report and accounts for the year ended 31 March 1999 referred to the implementation of an action plan for the financial restructuring of the Group. The measures announced today are significant steps towards achieving this plan and a position from which we can take the Group forward through diversification. However, the Disposals are in themselves insufficient to bring down borrowings to a level that will enable the Group to pursue the Board's strategy (as expanded on below). The Company is therefore also announcing a 5 for 4 Rights Issue at 10p per New Ordinary Share which will raise approximately £6.2 million, net of expenses. The Directors and their connected parties, who own in aggregate 20.4 per cent. of the Company's issued share capital, have irrevocably undertaken to take up (or procure to be taken up) their full entitlements under the Rights Issue. In addition, certain institutional investors, who own in aggregate 14.3 per cent. of the Company's issued share capital, have also irrevocably undertaken to take up their full entitlements under the Rights Issue. The balance of the Rights Issue has been underwritten by Collins Stewart. Certain of the Directors have agreed to sub-underwrite an aggregate of 10,830,000 New Ordinary Shares in addition to taking up their entitlements. The Company also announces proposals to adopt New Share Option Schemes and to apply to court to reduce its share premium account. The disposal of a majority stake in Nottingham Braid is conditional on shareholder approval in view of its size and the fact that certain directors of subsidiaries of Worthington are interested in that disposal. Shareholder approval is also necessary before Worthington can implement the Rights Issue, begin the process of reducing the Share Premium Account and adopt the New Share Option Schemes. A circular is being sent to shareholders today setting out details of these proposals and providing notice of an EGM at which approval for these proposals will be sought. The Directors and certain institutional investors, who own in aggregate 34.7 per cent. of the Company's existing issued share capital, have irrevocably undertaken to vote in favour of the proposed resolutions. The Board also announces today Worthington's interim results for the six months ended 30 September 1999. Background to and reasons for the proposals The Disposals In the Chairman's statement which accompanied the 1999 Report and Accounts it was mentioned that there would have to be disposals in order to complete the Board's de-gearing plan. Businesses within the Group which are suitable for disposal at the current time have been identified. Management teams from each of those businesses have agreed to acquire them, subject where necessary, to shareholder approval. The proceeds of the Disposals will be used to reduce bank borrowings. The Rights Issue The Disposals will raise much needed cash for the Group, but on their own will not be sufficient to put the Group back on course. The Board therefore proposes a Rights Issue which will raise £6.2 million (net of expenses). The proceeds from the Rights Issue will be used to reduce bank borrowings. Reduction of Share Premium Account The Company wishes to reduce the Share Premium Account in order to eliminate the deficit on the profit and loss account of the Company and to assist the Company in resuming the payment of dividends. New Share Option Schemes The Company previously operated the Worthington Group plc Senior Executive Share Option Scheme, but the ability to grant options under this scheme expired in August 1999. The Company therefore proposes to adopt the New Share Option Schemes to enable the Company to spread the benefits of share ownership to executives and to incentivise them to contribute to the Company's development. Current trading and prospects In the two months since the interim period ended 30 September 1999 trading has continued satisfactorily, in particular within the Clothing Components and the Industrial & Home Furnishing divisions. The Board is confident that with the Disposals and the reduction in cost base, those divisions which remain in the Group are well positioned to improve their profitability. Marks & Spencer remains a substantial indirect customer of the Group and sales to their suppliers to date are in line with expectations. Marks & Spencer have indicated that they are undertaking a general review of their supplier arrangements. The Company has received no information which would lead it to believe that its overall level of business with Marks & Spencer suppliers will at this stage be adversely affected. Strategy The UK textile industry is still experiencing difficult times and the Board will continue its programme of reducing the cost base within the Group, eliminating unprofitable areas, reducing working capital commitments and generally re-engineering the Group to be leaner, more efficient and better positioned in the current marketplace. The Board is giving particular attention to improving the Group's profitability and is undertaking a serious review of the scale and future of some of the Group's operations. The Board will actively pursue opportunities to widen the Group's activities into new business areas, outside the textiles sector, with the object of enhancing shareholder value. The proposals announced today are aimed at giving the Group the necessary springboard to develop future growth and a good quality of sustainable earnings. Information on the Disposals Nottingham Braid Nottingham Braid designs and manufactures high quality passementerie and trimmings for the interior decorating, soft furnishings, blinds and lighting markets. It trades under the names of Nottingham Braid Company and AJ Worthington (Leek) and operates from facilities located in Derby and Leek. It is proposed that the business be sold to Trimmings by Design, a company in which the existing management team (consisting of David Chapman, Gary Fowler and Grant Redfern) will hold 56 per cent. of the shares and Worthington will hold the other 44 per cent. The cash consideration payable to Worthington in respect of 56 per cent. of Nottingham Braid is £1,750,000, of which £1,600,000 is payable on completion and the remainder will be paid in 24 monthly instalments of £6,250, commencing 12 months after completion. The net book value of the assets to be acquired by Trimmings by Design as at 30 September 1999 was £2,254,000 and the profits attributable to these assets amounted to £349,000 in the year ended 31 March 1999 and £139,000 in the year ended 31 March 1998. Industrial Threads and Braids The Industrial Threads and Braids Divisions of AJ Worthington (Leek) are being sold for a consideration of £400,000 to a newly-formed company owned by Andrew Bourne, the existing managing director of Industrial Threads and Braids. £350,000 will be payable in cash on completion and the balance in 12 equal monthly instalments commencing on 1 April 2000. The net book value of the assets being acquired as at 30 September 1999 was £684,000 and the profits (before interest and taxation) attributable to those assets amounted to £53,759 in the year ended 31 March 1999 and £18,360 in the year ended 31 March 1998. By virtue of its small size, this sale does not require shareholder approval. Completion is due to take place on 23 December 1999. Principal terms of the Rights Issue Subject to fulfilment of the conditions set out below, the Company proposes to offer, by way of rights to Qualifying Shareholders other than certain Overseas Shareholders, up to 65,484,621 New Ordinary Shares at 10p per share, payable in full on acceptance, on the following basis: 5 New Ordinary Shares for every 4 Ordinary Shares held at the close of business on 16 December 1999. Entitlements to New Ordinary Shares will be rounded down to the nearest whole number and fractions of New Ordinary Shares will not be allotted. The New Ordinary Shares will, when issued fully paid, rank pari passu in all respects with the existing issued Ordinary Shares. The Directors and their connected parties, who own in aggregate 10,686,967 Ordinary Shares (representing 20.4 per cent. of the Company's issued share capital) have irrevocably undertaken to take up in full their entitlements under the Rights Issue. FP Asset Management, Edinburgh Fund Managers and Jupiter Asset Management, who own in aggregate 7,469,137 Ordinary Shares (representing 14.3 per cent. of the Company's issued share capital) have also irrevocably undertaken to take up in full their entitlements under the Rights Issue. The balance of 42,789,491 New Ordinary Shares comprised in the Rights Issue has been underwritten by Collins Stewart. The Rights Issue is conditional on: (a) the passing of certain resolutions at the EGM; (b) the Underwriting Agreement having become unconditional, subject only to Listing, and not having been terminated prior to Listing; (c) the Sale Agreements becoming unconditional and being completed in accordance with their respective terms prior to Listing; (d) Listing becoming effective not later than 8.00am on 24 December 1999 (or such later time and/or date as the Company and Collins Stewart may agree, but in any event not later than 8.00 am on 14 January 2000). Change of Auditors The Board is also pleased to announce the appointment, with effect from 29 November 1999, of KPMG Audit Plc as the Group's auditors in place of BDO Stoy Hayward. Litigation in respect of accounting errors A Dispute Resolution Agreement between the Company and Penmarric Plc, a company owned and controlled by the Company's chairman, Joseph Dwek, has been entered into in the context of the accounting errors that were uncovered after Mr Dwek's appointment to the Board, as disclosed in the annual report and accounts for the year ended 31 March 1999. The effect of this agreement is to protect the Company from any liability which might arise were Penmarric's possible claim against the Company to succeed. In the circumstances, the Company has made no provision in respect of the potential claim by Penmaric EXPECTED TIMETABLE OF PRINCIPAL EVENTS The close of business on (unless stated) Record date for entitlement to New Ordinary Shares 16 December 1999 Latest time for receipt of Forms of Proxy 10.00am on 21 December 1999 Extraordinary General Meeting 10.00am on 23 December 1999 Despatch of Provisional Allotment Letters 23 December 1999 Completion of the Disposals 23 December 1999 Dealings in New Ordinary Shares commence, nil paid 24 December 1999 Latest time for splitting Provisional Allotment Letters, nil paid 3.00pm on 13 January 2000 Latest time for acceptance and payment in full and 3.00pm on 17 January 2000 registration of renunciation Dealings in New Ordinary Shares expected to commence, 18 January 2000 fully paid / CREST stock accounts credited Definitive certificates for New Ordinary Shares despatched by 24 January 2000 If shareholders have any questions on the procedure for acceptance and payment, they should contact New Issues Department, IRG plc, PO Box 166, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TH (telephone 0181 639 2000). DEFINITIONS The following definitions apply throughout this announcement unless the context otherwise requires: 'AJ Worthington (Leek)' AJ Worthington (Leek), a division of Worthington Manufacturing 'Collins Stewart' Collins Stewart Ltd 'Continuing Group' the Group following completion of the Disposals 'CREST' the relevant system (as defined in the Uncertificated Securities Regulations 1995) in respect of which CRESTCo Limited is the Operator (as defined in those Regulations) 'Directors' or 'Board' the directors of Worthington 'Disposals' the proposed disposals of Nottingham Braid and Industrial Threads and Braids 'EGM' the Extraordinary General Meeting of Worthington to be held at 10.00am on 23 December 1999 'Industrial Threads and the Industrial Threads and Industrial Braids Braids' divisions of AJ Worthington (Leek) 'Listing' the admission of New Ordinary Shares, nil paid, to the Official List, in accordance with the Listing Rules 'Listing Rules' the rules made by the London Stock Exchange under section 142 of the Financial Services Act 1986 'London Stock Exchange' London Stock Exchange Limited 'New Ordinary Shares' the new Ordinary Shares to be issued pursuant to the Rights Issue 'New Share Option Schemes' the Worthington Group plc 1999 Approved Senior Executive Share Option Scheme and the Worthington Group plc 1999 Non-Approved Senior Executive Share Option Scheme 'Nottingham Braid' the divisions of S.Jerome & Sons trading as Nottingham Braid Company and certain assets of AJ Worthington (Leek) 'Official List' the Official List of the London Stock Exchange 'Ordinary Shares' ordinary shares of 10p each in Worthington 'Overseas Shareholders' Shareholders who have registered addresses in, or who are citizens or residents of, countries other than the United Kingdom 'Provisional Allotment the renounceable provisional letter of allotment in Letter' respect of New Ordinary Shares proposed to be sent to Qualifying Shareholders 'Qualifying Shareholders' holders of Ordinary Shares other than certain Overseas Shareholders on the register of members of Worthington at the Record Date 'Rights Issue' the proposed issue by way of rights of up to 65,484,621 New Ordinary Shares 'Sale Agreements' The Nottingham Braid Sale Agreements and the Industrial Threads and Braids Sale Agreement. 'Shareholders' holders of Ordinary Shares 'Share Premium Account' the Company's share premium account 'S Jerome & Sons' S Jerome & Sons Limited, a subsidiary of the Company 'Trimmings by Design' Takeready Limited, the proposed purchaser of Nottingham Braid, intended to be renamed Trimmings by Design Limited 'Underwriting Agreement' the conditional agreement dated 30 November 1999 made between Worthington and Collins Stewart 'Worthington Group'or Worthington and its subsidiary undertakings 'the Group' 'Worthington' or Worthington Group plc 'the Company' INTERIM RESULTS OF WORTHINGTON FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999 The task of restructuing the Group has continued with much vigour in the first half of the year and the benefits will not start to be apparent. The market has been far from easy, with much turbulence in the retail sector. In the circumstances, sales of £29.2 million producing trading profits of £1,169,000 and margins of some 4 per cent. averaged over the Group are considered satisfactory. From these trading profits must be deducted non-recurring items of £273,000, which are to be expected given the ongoing rationalisation which is set to continue until we have completed the streamlining of our operations. Competitiveness is currently being maintained by cost reduction programmes with the result that this half year performance was better than the last six months of the previous year. The interest charge has the most significant impact on these unaudited interim results, borrowings are simply too high and must be quickly reduced in order that the Group can progress plans for its development. The proposed Rights Issue and disposals announced today will remedy the problem to a large extent. The full details are contained in the circular which accompanies this Statement.Further disposals are under consideration with a view to eliminating all bank borrowings. Turning now to the individual divisions, Clothing Components had a good period with sales and profits well above budget. Industrial and Home Furnishings traded in line with expectations. The results for Yarns and Fabrics were a disappointment with sales and profits well below budget. Yours Board is giving particular attention to improving the Group's profitability, and is undertaking a serious review of the scale and future of some of the Group's operations. The Board is generally pleased with the progress to-date and feels that the time is now right to actively consider a measured diversification into new areas. Notwithstanding this proposed change of emphasis, some of the underlying businesses which are retained have a niche in the marketplace and their profit contributions should sustain a stream of earnings sufficient for dividends to be resumed once the balance sheet has been repaired. JC Dwek, C.B.E. 30 November 1999 Consolidated profit and loss account 6 months 6 months Year ended ended ended 30 September 30 September 31 March 1999 1998 1999 unaudited unaudited audited (restated - note 1) £'000 £'000 £'000 Turnover 39,364 18,649 45,001 ------ ------ ------ Trading profit/(loss) 1,169 1,096 (382) Exceptional and non-recurring items (note 3) (273) - (5,405) Operating profit/(loss) 896 1,096 (5,687) Profit on disposal of fixed assets - 4 134 Net interest payable (866) (479) (1,355) ------ ----- ------ Profit/(loss) before tax 30 631 (6,908) Taxation - (181) (301) ------ ------ ------ Profit/(loss) attributable to shareholders 30 440 (7,209) Dividends payable - (556) (556) ------ ------ ------ Retained profit/(loss) 30 (116) (7,765) ------ ------ ------- Earnings/(loss) per share 0.1p 1.1p (15.8p) Consolidated balance sheet 30 September 31 March 1999 1999 unaudited audited £'000 £'000 Fixed assets 18,777 19,528 Negative goodwill (80) (80) Investments 27 27 ------ ------ 18,724 19,475 ------ ------ Current assets Stock 9,802 10,016 Debtors 13,129 12,474 Cash 4 28 ------ ------ 22,935 22,518 Creditors due in less than one year (29,220) (29,256) ------ ------ Net current liabilities (6,285) (6,738) ------ ------ Total assets less current liabilities 12,439 12,737 Creditors due in more than one year (5,712) (6,040) ------ ------ Net assets 6,727 6,697 ------ ------ Capital and reserves Share capital 5,238 5,238 Share premium 16,219 16,319 Other reserves 152 152 Profit and loss account (14,882) (14,912) ------ ------ 6,727 6,697 ------ ------ Consolidated cash flow statement 6 months Year ended ended 30 September 31 March 1999 1999 unaudited audited £'000 £'000 Net cash (outflow)/inflow from operating activities (90) 1,305 Returns on investments and servicing of finance: Interest paid (603) (1,185) Interest element of finance lease rental payments (118) (170) ------ ------ (721) (1,355) ------ ------ Taxation: UK Corporation tax including advance corporation tax (40) (842) Capital expenditure and financial investments Purchase of tangible fixed assets (300) (811) Sale of tangible fixed assets 260 393 ------ ------ (40) (418) ------ ------ Acquisitions and disposals Purchase of subsidiary undertakings - (554) Overdrafts acquired with subsidiary - (2,412) ------ ------- - (2,966) ------ ------- Equity dividends (paid) (556) (1,275) Special dividend paid on acquisitions - (207) ------ ------ Net cash (outflow) before financing (1,447) (5,758) Financing: Issue of ordinary share capital - 7 Capital element of finance lease rental payments (615) (662) Debt due within one year Increase in short term borrowings - 500 Repayments of short term borrowings (496) (1,200) Debt due after more than one year New loan repayable 2006 - 4,620 Repayment of long term borrowings (258) (3,803) ------ ----- (1,369) (538) ------ ------ Decrease in cash (2,816) (6,296) ------ ------ Notes: 1. The unaudited results for the six months ended 30 September 1998 have been re-stated to take into account the change in accounting treatment of development costs and the error in the basis of stock valuation as detailed in the 1998/99 Annual Report & Accounts dated 30 July 1999, as follows: Pro-forma Change in Error As only re- account- in basis restated stated ing trea- of stock tment of valua- developm- tion ent costs £'000 £'000 £'000 £'000 Turnover 18,649 - - 18,649 ------ ------ ------ ------ Operating profit/(losses) 2,409 (450) (863) 1,096 Profit on disposal of fixed assets 4 - - 4 Net interest payable (479) - - (479) ------ ------ ------ ------ Profit before tax 1,934 (450) (863) 621 Taxation (561) 130 250 (181) ------ ------ ------ ------ Profit attributable to shareholders 1,373 (320) (613) 440 ------ ------ ------ ------ (i) The 'as previously reported' results for the half year ended 30 September 1998 are the Interim Results published on 7 December 1998. (ii) In March 1999 the Group reviewed its treatment of development costs which were previously classified as prepayments and written off against future revenue streams. All development costs are now written off as incurred. (iii)A review of the basis of stock valuation attributable to manufactured and bought-in stock was carried out in 1999 and revealed that in prior periods inappropriate costs had been absorbed into the carrying value of stocks. Absorption of direct and indirect costs is now included in the value of stock only when appropriate (iv) A tax credit equivalent to 29% has been allocated to the tax charge in respect of points (ii) and (iii) above (v) The exceptional items written off as at 31 March 1999 have not been allocated into the six month period ended 30 September 1998 since they principally related to items included in the balance sheet as at 31 March 1998 (see note 3 below). 2. The Interim Results and the comparative figures are unaudited and do not constitute Group accounts as defined in Section 240 of the Companies Act 1985. The information relating to the year ended 31 March 1999 does not constitute Group accounts as defined in Section 240 of the Companies Act 1985 and has been extracted from the audited accounts, reported without qualification, which have been delivered to the Registrar of Companies. 3. The exceptional and non-recurring items consist of the following: 6 months 6 months Year ended ended ended 31 March 30 Sept 99 30 Sept 98 1999 £'000 £'000 £'000 Non-recurring items Closure costs of London Head Office (170) - - Trading loss and loss on disposal of 'Davenport Street' operations (53) - - Redundancy costs (50) - - Exceptional items As per note 6 to the 1998/9 Annual Report and Accounts - - (5,405) ------- ------ ------ (273) - (5,405) ------- ------ ------ 4. Earnings/(loss) per share have been calculated by reference to the average number of of ordinary shares in issue in the period, amounting to 52,387,697 shares(six months ended 30 September 1998: 41,148,376 shares) and on profit after taxation of £30,000 (six months ended 30 September 1998: related profits after taxation of £440,000). The diluted earnings per share for the six months ended 30 September 1999 was 0.1p (six months ended 30 September 1998: 1.1p). 5. Reconciliation of operating profit to net cash flow from operating activities: 6 months Year ended ended 30 Sept 99 31 March 99 Operating profit/(loss) 896 (282) Depreciation 791 1,512 Decrease/(increase) in stock 214 877 Decrease/(increase) in debtors (655) 267 (Decrease)/increase in creditors (1,336) (1,060) ------ ------ Net cash flow from operating activities (90) 1,305 ------ ------ 6. Further copies of this statement are available from: Worthington Group plc, Victoria Works, Shipley, West Yorkshire BD17 7EF.

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