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Worthington Group (WRN)

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Monday 07 March, 2011

Worthington Group

Circular and Notice of General Meeting

RNS Number : 4857C
Worthington Group PLC
07 March 2011

For immediate release                                                                                                                        7 March 2011


Worthington Group PLC ("the Company")

Circular to Shareholders and Notice of General Meeting

The Company have today posted a circular and Notice of General Meeting to Shareholders which contains details of  a proposed transfer of listing category on the Official List from premium to standard, adoption of New Articles of Association, cancellation of Deferred Ordinary Shares and Serious Loss of Capital. 

Copies of the circular will be submitted to the National Storage Mechanism and will shortly be available for viewing online at the following web-site address:

The General Meeting will be held on 30 March 2011 at 1, The Green, Richmond Surrey TW9 1PL starting at 3.30pm.

Transfer of Listing Status

Shareholders will be asked to vote on the proposed transfer of the New Ordinary Shares out of the category of a "premium listing (commercial company)" on the Official List and into the category of a "standard listing" on the Official List.

The Company was originally admitted to the Official List as a textile manufacturer, with UK-based trading businesses.  Given the increasingly competitive market-place, a programme of disposals was entered into from the late 1990s, and now the Company no longer owns any trading businesses - although it retains a 44% holding in an operating company, Trimmings by Design Limited - with its main asset being a property site in.    Keighley, Yorkshire.

The Company's interim results for the 6 months to 30 September 2010 showed a loss of £162,000 with total assets of £3,433,000 and cash at bank of £747,000.  In July of last year, a new Board was appointed - Anthony Cooke, and Peter Townsend.

As reported in the Company's interim management statement, the new Board continue to work on the possible future development of the site at Keighley with Bradford City Council ahead of making an application for planning permission.  In the past, the Company has investigated various planning schemes for the site which, whilst zoned for industrial use, nevertheless sits within a large residential area, and we are currently considering a mixed use development. 

At this early stage, the Company have provided Bradford City Council with a pre-application submission.  This submission is a discussion document on which the Council have agreed to hold a series of meetings to establish the framework of an agreeable planning scheme.  Thereafter, the Company would put together a formal planning application and would then submit to the Council.

Obtaining planning permission will, by itself, enhance the value of the site, but the process will be costly and time consuming.

Were planning permission in this instance outlined above not to be granted, the Board could well consider amending any application refused by the Council and re-applying until accepted, costs of such amendment being immaterial in relation to the money already spent on the process.

Any decision to maximise the opportunity and develop the site will require funding, be that in the form of bank finance, joint venture or direct capital raising by the Company.  The board believes that given the right covenants from prospective tenants bank funding will be available but there are no specific plans or arrangements at this time.

Ultimately, the Directors are confident that a worthwhile scheme can be progressed but it is too early to determine what it will be and how it will be achieved.  To create best value for the Company, the Board might consider the options, for example, of sole development, some form of joint venture or sale with or without some form of profit participation.

In any event, the Board is confident that the potential development value of the 5 acre site will be recognised which would by itself increase shareholder value or as the value that another party might place upon in it.  In any event, the Board considers that it has sufficient cash resources to consider other opportunities which may present themselves in the future.  The Company is not currently involved with any detailed discussions on any plans other than the development of the Keighly site.

The Board believe that the success of any scheme for the Keighly property may reduce the pension deficit and hence also address the historic "serious loss of capital" as set out below.

After careful consideration, the Board has concluded that in order to ensure liquidity in the Ordinary Shares through a public listing whilst maintaining an appropriate degree of flexibility for a company of the size and type of Worthington, it is appropriate to transfer the listing of the Ordinary Shares from the category of "premium listing" to the category of "standard listing" under the Listing Rules. 

A "premium listing" imposes greater requirements on a company than for a standard listing.  These requirements are often referred to as "super-equivalent" standards because they include standards pursuant to the Listing Rules which are more stringent than the minimum standards imposed by the EU.  Such super-equivalent standards are designed to provide additional investor protections.  The transfer from "premium" to "standard" will have the effect that these additional investor protections will no longer apply in relation to Worthington.  In particular, a company with a standard listing is subject to significantly less stringent continuing obligations under the Listing Rules than a company with a premium listing of shares and shares in the Company could therefore be regarded as an investment carrying a greater risk which could have an impact on the market value of the Ordinary Shares.  Additionally, the perception of the Company in the market generally and the shares in the Company may become less marketable.

As a company with a "standard" listing the Company will remain subject to the Prospectus Rules and the Disclosure and Transparency Rules.  A company with a standard listing is still required to hold a minimum of 25 per cent. of its shares in public hands and will continue to be obliged to publish a prospectus when issuing new shares to the public unless such an issue falls within one of the permitted exemptions. Companies with standard listings are also still required to disclose inside information to the market and to comply with the provisions of the DTRs including to make notifications of dealings in shares. The Company must also prepare annual audited financial reports, interim financial reports and interim management statements in the same way that companies with a premium listing are required to.


However there are a a number of requirements which apply to companies with a "premium" listing under the Listing Rules which are not applicable to companies with a standard listing. Such requirements include: 

·      instances when a sponsor must be appointed or its guidance obtained under Listing Rule 8;

·      continuing obligations under Listing Rule 9 such as providing pre-emption rights to shareholders, complying with 
the Model Code, certain rules regarding employee share schemes and long term incentive plans, certain rules regarding the conduct of rights issues, open offers and placings and certain disclosures in annual financial reports;  

·      obligations under Listing Rule 10 which govern significant transactions whereby transactions are classified, with 
shareholders to be notified of certain transactions and to have the opportunity to vote on proposed significant transactions

·      obligations under Listing Rule 11 which govern related party transactions whereby to prevent such a party from 
taking advantage of its position or the perception thereof, the board give a fair and reasonable opinion on the transaction, and shareholders vote on this basis;

·      restrictions and procedures when a company proposes to deal in its own securities under Listing Rule 12;  

·      the requirement to ensure that circulars the company issues to shareholders comply with detailed requirements 
under Listing Rule 13; and

·      the Listing Principles under Listing Rule 7.

Compliance with the super-equivalent standards applicable to a premium listing can result in considerable costs.  The Board believes that there is an additional administrative burden associated with maintaining a premium listing and the combination of the costs, potential delays and administrative burden reduces the attraction of a premium listing in respect of the Ordinary Shares.  The Board therefore believes that a standard listing is more appropriate for the Company and that a transfer of the Ordinary Shares to a standard listing should reduce the costs and administrative burden for the Company and offer greater flexibility, particularly in relation to corporate transactions where Listing Rules 10 and 11 no longer apply:  accordingly there is no requirement to classify transactions, notify Shareholders or obtain their consent, nor is there is any requirement in related party transactions to obtain fairness opinions or Shareholder approval. 

As a company with a standard listing of its ordinary share capital and as referred to above, Worthington will continue to be subject to the Disclosure and Transparency Rules but will not be required to abide by the provisions of the Combined Code.  However, the Board intend to maintain appropriate standards of reporting and corporate governance for a company with a standard listing and to the extent they consider appropriate in the light of the Company's size, stage of development and resources will observe the requirements of the Combined Code.  However if the Company complies with the Combined Code, it would be on a voluntary basis only, and the FSA will not have the authority to monitor the Company's voluntary compliance or impose sanctions on any breaches.  At a suitable opportunity the Board may consider the appointment of a non-executive director.  Furthermore, the Board has not made, and does not anticipate or intend to make any changes to the Company's business in connection with the proposed transfer from a "premium" to a "standard".

Under the Listing Rules, the proposed transfer requires the Company to obtain the prior approval of a resolution for such transfer from not less than 75 per cent. of Shareholders who vote in person or by proxy at a general meeting.  Therefore, the resolution approving the transfer is a special resolution.  Further details of the proposed transfer arrangements and timetable are set out below. 

Pursuant to the Listing Rules, the date of transfer of listing category must not be less than 20 business days after the passing of the special resolution to approve the transfer of listing category.  The Board proposes to make application as soon as possible for the transfer to be effected, such transfer to take place not less than 20 business days after the passing of the special resolution.  Accordingly, subject to the passing of the Resolution One, it is anticipated that the date of the transfer will be 4 May 2011.  The New Ordinary Shares will on completion of the transfer continue to be traded on the Main Market, but under the designation "Listed: Standard". 

The Board considers that the special resolution relating to the transfer to be put to the meeting is in the best interests of the Company and the Shareholders as a whole.

When the Ordinary Shares have a standard listing, they will not be eligible for inclusion in the UK series of FTSE indices.

Adoption of new Articles of Association

The Company is also proposing to adopt the New Articles in line with modern articles of association appropriate for a public company, so that the Company will be authorised generally and unconditionally to use electronic communications with its shareholders and in particular to authorise the Company to supply documents and information to its members by making them available on a website in accordance with the Companies Act 2006.  The New Articles will also contain an updated directors' authority to allot New Ordinary Shares and to disapply the statutory pre-emption rights in relation to such allotments in respect of the authorised and unissued share capital of the Company.  The £50,000 aggregate limit on executive directors' remuneration has been disapplied but will continue to apply to non-executive directors and the limitation on the Company's ability to borrow has also been removed in the New Articles.

Authority to allot shares

Generally, Directors may only allot new shares in the Company if they have been authorised to do so by shareholders in general meeting or a power to do so is granted in the Company's articles.  The New Articles, authorise the Directors to allot New Ordinary Shares up to an aggregate amount equal to the nominal value of all of the authorised and unissued share capital of the Company.  This authority will expire on the earlier of 2 years after the date of the GM and the conclusion of the annual general meeting of the Company held in 2012.


The Directors have no present intention to exercise the authority sought under this resolution. However, the Directors consider that it is in the best interests of the Company to have the authority available without the need for a general meeting should they determine that it is appropriate to do so.  It is the Directors' intention to renew this authority at the next annual general meeting of the Company to be held in 2012.


Disapplication of pre-emption rights

If the Directors wish to allot new shares for cash, the Companies Act 2006 requires that the new shares must be offered first to existing shareholders in proportion to their existing shareholdings.  These statutory pre-emption rights may be disapplied by shareholders.  In some circumstances it may be in the Company's interests for the Directors to be able to allot some shares for cash without having to offer them first to existing shareholders.  To enable this to be done, shareholders' statutory pre-emption rights must be disapplied.  The New Articles provide the Directors with the power to disapply the statutory pre-emptions rights in respect of all of the authorised and unissued New Ordinary Shares in the capital of the Company.  This authority is subject to the same limitations as govern the Directors' authority to allot.

Serious Loss of Capital

It is a requirement of the Companies Act 2006 that  where the net assets of a public company are half or less of its called up share capital, the Directors must call a general meeting of the Company to consider whether any, and if so what, steps should be taken to deal with the situation.  It has recently been brought to the attention of the Board that the value of Worthington's net assets are now less than half of its called up share capital and accordingly the Board will take the occasion of the GM to briefly report on any progress on their proposals in relation to the serious loss of capital as set out below.  Shareholders are also referred to the "Transfer of Listing Status" section at page 5 above, where we refer to the possibility of developing the site at Keighley should planning permission be obtained, which would create  value for the Company.

The main liability is to the Group's pension fund with a deficit figure provided by the most recent actuarial report of £3,704,000.  Serious loss of capital is also due, to a lesser extent, to accumulated trading losses - since the late 1990s, the Group and its trading activities have been subject to a shrinking UK-based textile market and the intervening years have seen a programme of disposals, cost reduction and downsizing. 

The agreement between the Company and the pension trustees currently in place provides for the Group to pay £110,000 per annum and for expenses.  In addition it is agreed that 17% of the Group's profits go towards the deficit.  As is mandatory under the Pensions Act 2004 (as amended) for all companies with a pension fund deficit, the Directors are currently working with the pension trustees as part of the triennial review to secure arrangements for the next 3 years and it is anticipated that a satisfactory agreement (on a basis similar to the existing arrangements) will be concluded well in advance of the July 2011 deadline as required under the Pensions Act 2004 (as amended).  Accordingly, profit generated from the development of the Keighly site would contribute towards reducing the deficit.  Otherwise the Group has cash balances in excess of £600,000 and is well-placed to meet all liabilities as they fall due.  Longer term, the Directors anticipate that a proportion of any profits generated from operations can be in part utilised to reduce the remaining deficit.

It should be noted that the statutory provision under the 2006 Act relating to "serious loss of capital" imposes no immediate consequent risk given the current solvency of the Company's balance sheet and cash flow, and at a suitable future point, the Directors will seek a court-sanctioned reduction of capital to align the share capital more closely with the net assets. 

No specific proposals or agenda are being proposed at the General Meeting, but the matter will be open for discussion and questions from Shareholders in accordance with the 2006 Act.

There are no additional requirements under the 2006 Act other than raising the matter at a general meeting; but as referred to above, the Directors may in due course consider a court sanctioned scheme for a reduction of capital in order to eliminate, in part or in whole, the historic deficit on the profit and loss account.

As stated above, the Company is currently in no detailed discussions on any plans other than the development of the Keighly site.

Cancellation of Deferred Ordinary Shares

The existence of the Deferred Ordinary Shares represents a continuing cost and administrative burden for the Company.  The Directors transferred all of the Deferred Ordinary Shares, which are not publicly traded, to Neville Registrars in accordance with Article 5.3(e) of the Current Articles.  The Directors also wish to exercise the further power granted in the Current Articles to purchase all of the Deferred Ordinary Shares for one pence.  The purchase of the Deferred Ordinary Shares by the Company is contingent on the approval of the Shareholders in general meeting. 

On or about 18 February, 2011 the Company entered into a contract with Neville Registrars to acquire all of the Deferred Ordinary Shares of the Company in consideration of the payment to Neville Registrars of the sum of one pence in cash.  Neville Registrar is the legal and beneficial owner of all of the deferred ordinary share capital of the Company.  The purchase is being made in accordance with Article 5.3(e) of the current Articles and the 2006 Act.  In order for the Company to purchase the Deferred Ordinary Shares for one pence, it is necessary under the 2006 Act to make a "new issue" of one Ordinary Share and is conditional upon approval of the Contingent Purchase Contract by Shareholders in general meeting in terms of Part A of Resolution One.   The new Ordinary Share will rank pari passu with all existing Ordinary Shares, an accordingly application will be made for admission to trading on the Official List which is expected to take place on or around 31 March 2011

The authority granted to the Company to purchase the Deferred Ordinary Shares by virtue of the passing of the said resolution shall lapse if not exercised by 31 December 2011.  Completion of the purchase of the Deferred Ordinary Shares shall take place immediately after the passing of the said resolution.  Once purchased, the Deferred Ordinary Shares shall be cancelled and the nominal value of the cancelled Deferred Ordinary Shares shall be transferred to a capital redemption reserve.

The GM Notice contains a special resolution approving the purchase of the Deferred Ordinary Shares in accordance with the terms of the Contingent Purchase Contract.  A copy of the Contingent Purchase Contract is available for inspection at the registered address of the Company: 1 The Green, Richmond, Surrey TW9 1PL between the hours of 9.30am and 5.30pm, Monday to Friday (Saturdays and public holidays excepted) from the date hereof to the conclusion of the General Meeting.  The Directors are of the view that the cancellation of the Deferred Ordinary Shares is in the best interests of the Company and the Shareholders as a whole.


The Directors have received irrevocable undertakings to vote in favour of each of the Resolutions from Shareholders holding in aggregate 40.34 per cent. of the issued Ordinary Shares.  The Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole and accordingly unanimously recommend Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting.


Expected timetable of events:


-       Posting of circular and notice of General Meeting                         7 March 2011


-       Last date for receipt of proxies (48 hours before the meeting)     28 March 2011


-       General Meeting                                                                                 30 March 2011


-       Transfer of listing category on the Official List                              4 May 2011


The circular will also be shortly available on the Company's website:


Anne Aylesbury, PD Cosec Limited, Company Secretary, Worthington Group plc on 0208 940 0963

Roland Cornish, Beaumont Cornish Limited on 020 7628 3396



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