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Venturia PLC (VRA)

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Friday 28 May, 2004

Venturia PLC

Capital Reorganisation

Venturia PLC
28 May 2004



                     Venturia Plc - Capital Reorganisation

INTRODUCTION


The directors of Venturia Plc ('Venturia' or the 'Company') announce that they
intend to effect a proposed capital reorganisation of Venturia in order to
enable it to buy back the majority of the ordinary shares of £0.001 each in the
capital of the Company ('Ordinary Shares') and to buy back all of the preference
shares of £1 each in the capital of the Company ('Preference Shares') (together,
the 'Proposals').  The Company is currently precluded from doing this because,
inter alia, it has a substantial deficit on its profit and loss account, which
will be eliminated pursuant to the proposed capital reorganisation.


The capital reorganisation requires the consent of shareholders in the first
instance, prior to that of the High Court.


BACKGROUND TO THE PROPOSALS


On 11 April 2003, Armstrong Brooks Plc ('Armstrong Brooks') made an offer to
acquire the whole of the issued share capital of Venturia on the basis of 2.9p
per share for each Ordinary Share, and £1 for each Preference Share.  Details of
the offer were set out in an offer document dated 11 April 2003 (the 'Offer
Document').  The offer became unconditional on 2 May 2003.


On 26 May 2004, Armstrong Brooks held 83,107,366 Ordinary Shares (which
represent 95.25 per cent. of the ordinary issued share capital), and 130,000
Preference Shares (which represent all of the issued Preference Shares).


As set out in the Offer Document, the Board has since then considered a number
of potential investment opportunities.  To date, however, the Board has not
identified a suitable acquisition.


At 31 December 2003, the Company had cash resources of £2.90 million, which
significantly exceeds the needs of the Company.  Accordingly, the board has
considered a number of ways of returning surplus cash to shareholders and has
been advised by PKF that a share buy back by the Company is likely to be the
most tax efficient route from the perspective of the Company's shareholders.  At
the same time, the board considers it to be desirable to maintain the Company's
listing on the Alternative Investment Market of the London Stock Exchange Plc ('
AIM') and to preserve sufficient funds to make the Company attractive to
potential acquisition targets.


As at 31 December 2003, the Company had a deficit of approximately £1.7 million
on its profit and loss account, which prevents it, under the Companies Act 1985
(as amended) from buying back its shares.  However, it has approximately £4.3
million standing to the credit of its share premium account, which it can use to
eliminate the deficit on its profit and loss account and which will be effected
pursuant to the capital reorganisation.


THE CAPITAL REORGANISATION


As a company whose shares are listed on AIM and to maintain its status as a
public limited company, the Company is required to maintain a minimum level of
nominal share capital of £50,000, which would be reduced as a consequence of the
buy back proposals referred to below.



To avoid this and for it to maintain sufficient share capital, the Company
proposes to effect a bonus issue of Ordinary Shares by capitalising part of the
share premium account.  The bonus shares will be issued to the holders of
Ordinary Shares whose names appear on the register of members of the Company at
12.30 pm on 28 June 2004 on the basis of one Ordinary Share (a 'Bonus Share')
for every two Ordinary Shares held.


The capital reorganisation requires that the Company, in the first instance,
seek the agreement of shareholders for an application to be made to the High
Court for the share premium account of the Company to be reduced from £4,369,314
to nil.  That amount will be applied first in paying up the nominal amount of
the Bonus Shares and then in eliminating the deficit on the Company's profit and
loss account, with the remainder creating a distributable reserve of £2,582,755.


Finally, in order to avoid the Company's Ordinary Shares having a market price
of less than 1p (following the proposed buy back referred to below), the Company
is proposing to consolidate 10 Ordinary Shares into 1 ordinary share of £0.01 (a
'New Ordinary Share').  Entitlements will be rounded up.


The necessary resolution will be put to the Annual General Meeting of the
Company to be held on 30 June 2004.


It is expected that the capital reorganisation, including receipt of consent
from the High Court, will take between four and six months to complete.


BUY BACK OF NEW ORDINARY SHARES


Once the necessary approvals have been received, the Company intends to arrange
that an offer be made to all shareholders to buy back up to 60 per cent. of the
New Ordinary Shares (being the shares then in issue, following the issue of the
Bonus Shares) on a pro rata basis (thus treating all holders of New Ordinary
Shares equally) at a price which it is anticipated will be an effective price of
between 2.9p and 3.1p per Ordinary Share or between 29p and 31p per New Ordinary
Share.


BUY BACK OF PREFERENCE SHARES


The Company currently has in issue 130,000 Preference Shares all of which are
owned by Armstrong Brooks (of which Robert Cory and Peter Sanderson are both
directors, and which Robert Cory and his wife, Charlotte Cory, own outright).
The holders of the Preference Shares would be entitled, on a return of capital
or winding up of the Company to be paid in priority to the holders of Ordinary
Shares.  In view of the proposed buy back of the New Ordinary Shares, which will
significantly reduce the Company's cash resources and thus the level of 'cover'
for the Preference Shares, and, given that they are a liability of the Company,
the Company is proposing to buy back the Preference Shares at the same time as
it effects the buy back of the New Ordinary Shares.


ILLUSTRATIVE EXAMPLE
 

There follows a general illustration of the proposal, so far as it would affect
a holder of 1,000 Ordinary Shares.


The holder of 1,000 would be issued with an additional 500 Ordinary Shares under
the terms of the bonus issue (one Ordinary Share for every two Ordinary Shares
held at the relevant time).  The Company would capitalise part of its profit and
loss account and apply it in paying up the nominal amount of those 500 Ordinary
Shares.  The holder of those Ordinary Shares would not have to make a payment to
the Company in respect of those Ordinary Shares.


The 1,500 Ordinary Shares then held would be consolidated into 150 New Ordinary
Shares.


The Company intends to make an offer to that holder of New Ordinary Shares to
acquire up to 60 per cent. of the 150 New Ordinary Shares now held by him at a
price of £0.31 per New Ordinary Share (the highest of the proposed offer
prices).  That offer would, therefore, be for up to 90 New Ordinary Shares.  If
that holder of New Ordinary Shares accepted the offer in full, the Company would
buy back 90 New Ordinary Shares and pay to that holder of New Ordinary Shares an
amount equal to £0.31 multiplied by the number of New Ordinary Shares in respect
of which the offer is accepted.


In summary, subject to the above, the holder of 1,000 Ordinary Shares would
receive £27.90 (being 90 x £0.31) and be left as the holder of 60 New Ordinary
Shares.


FUTURE STRATEGY


The Board intend to continue to look for appropriate acquisition candidates,
with the likely industry sectors for investment continuing to be businesses
which are peripheral to industrial and commercial property or technology
businesses, particularly those involved in computing and telecommunications, in
which members of the Board have experience.  Following the implementation of the
buy backs and assuming full acceptances, the Company will retain approximately
£300,000 of cash, which the Board believes will provide the Company with
sufficient working capital to enable it to carry out this strategy.


In view of their relationship with Armstrong Brooks, Robert Cory and Peter
Sanderson have taken no part in the board's deliberations concerning the
proposal to approve the buy back of the Preference Shares, all of which are
owned by Armstrong Brooks.  The proposed buy back of the Preference Shares is a
related party transaction under the AIM rules.  Martin Robinson and Alan Clarke,
being the independent directors for the purposes of resolution 9, having
consulted with Corporate Synergy Plc, the Company's nominated adviser, consider
the terms of the proposed buy back of the Preference Shares to be fair and
reasonable insofar as shareholders are concerned.  Accordingly, they recommend
that you vote in favour of resolution 9 to be proposed at the Annual General
Meeting.


A document, setting out details of the Proposals and convening the Annual
General Meeting, has been sent to Shareholders today.


Enquiries:


Bob Cory - Venturia
Tel: 0161 9291129






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