Firm Placing & Open Offer

Volex Group PLC 06 June 2005 Embargoed until 07.01, 6 June 2005 Volex Group plc ('the Company' or ' Volex') Proposed Firm Placing of 18,076,474 New Ordinary Shares and Placing and Open Offer of 7,773,866 New Ordinary Shares at 73.5p per New Ordinary Share by Evolution Securities Volex, a leading independent producer of electronic and fibre optic cable assemblies and electrical power cords services group, today announces that it proposes to raise £15.8 million, net of expenses, by way of a Firm Placing and Placing and Open Offer of, in aggregate, 25,850,340 New Ordinary Shares at 73.5 pence per share. The Company also announces that it has today entered into new longer term bank facilities (the 'New Bank Facilities') Summary of the fundraising: • Raising £15.8 million, net of expenses, through the issue of 25,850,340 New Ordinary Shares at 73.5 pence per share, through a proposed Firm Placing and Placing and Open Offer with new and existing investors. • The Issue is fully underwritten by Evolution Securities, the Company's broker and financial adviser. • The Company has entered into New Bank Facilities on more favorable terms until March 2008. • An EGM will be held on 29 June 2005 and, assuming all Resolutions are passed, the New Ordinary Shares are expected to commence trading on 30 June 2005 Commenting on the Issue, John Corcoran, Group Chief Executive, said: 'The proceeds of the Issue and the provision of the New Bank Facilities, will enable the Directors to implement a strategy focused on restructuring and investing in growth opportunities available to the Group. With a strong client base, a global network and strengthened balance sheet, I believe that the scope for delivering shareholder return is significant.' Volex will host an analysts meeting today at 12 noon at the offices of: Allen & Overy, One New Change, London, EC4M 9QQ Enquiries: Volex Group Plc 01925 830101 Dom Molloy, Chairman John Corcoran, Group Chief Executive Derek Walter, Group Finance Director Evolution Securities 020 7071 4300 Tim Worlledge, Matthew Wood Weber Shandwick Square Mile 020 7067 0700 Chris Lynch/Nick Dibden Evolution Securities Limited, which is authorised and regulated in the UK by the Financial Services Authority and is a member of the London Stock Exchange plc, is acting for Volex and no one else in connection with the Issue. Evolution Securities Limited will not regard any other person as its customer in relation to the Issue and will not be responsible to anyone other than Volex for providing the protections afforded to its customers nor for giving advice in relation to the matters described in this announcement. Neither the Existing Ordinary Shares nor the New Ordinary Shares have been, or will be, registered under the United States of America Securities Act of 1933 (as amended) (the 'Securities Act') or under the securities laws of any state of the United States of America or qualify for distribution under any of the relevant securities laws of Canada, Australia, Ireland or Japan. Accordingly, subject to certain exceptions, the New Ordinary Shares may not be, directly or indirectly, offered, sold, taken up, delivered or transferred in or into Australia, Canada, Ireland, Japan or the United States, except, to the extent such offer or sale is made into the United States, where such offer or sale is made as part of an offshore transaction meeting the requirements of Regulation S under the Securities Act or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Certain statements in this announcement relating to the Issue are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties and assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results to differ materially from those expressed in or implied by the forward looking statements. These include, among other factors: conditions in the markets and market position, financial position, tax rates, cash flows, return on capital and operating margins; anticipated investments and capital expenditures; changing business or other market conditions; and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Forward looking statements contained in this prospectus based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Subject to any requirement under the Listing Rules, neither the Company nor Evolution Securities Limited undertakes any obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward looking statements, which speak only as of the date of this announcement. Volex Group plc ('the Company', 'the Group' or ' Volex') Proposed Firm Placing of 18,076,474 New Ordinary Shares and Placing and Open Offer of 7,773,866 New Ordinary Shares at 73.5p per New Ordinary Share by Evolution Securities 1. Introduction The Board announces today that the Company proposes to raise £15.8 million, net of expenses, by way of a Firm Placing and Placing and Open Offer of, in aggregate, 25,850,340 New Ordinary Shares at 73.5 pence per Ordinary Share. The Issue comprises 18,076,474 Firm Placing Shares, which have been placed firm primarily with new and existing institutional investors and 7,773,866 Open Offer Shares have been placed with new and existing investors subject to a right of recall to satisfy valid applications from Qualifying Shareholders under the Open Offer. Qualifying Shareholders are being given the opportunity to participate in this fundraising by way of the Open Offer, which is being made by Evolution Securities on the Company's behalf. Under the Open Offer, 7,773,866 New Ordinary Shares are being offered to Qualifying Shareholders on the basis of: 5 Open Offer Shares for every 19 Existing Ordinary Shares held at the Record Date and so in proportion to any number of Existing Ordinary Shares then held. The Issue Price represents a discount of 9.3 per cent. to the prevailing mid-market price of 81 pence per Existing Ordinary Share immediately prior to the announcement of the Issue at the close of business on 3 June 2005, the latest practicable time prior to the announcement of the Issue. The Issue has been fully underwritten by Evolution Securities and is subject to Shareholder approval. A prospectus containing a notice of EGM is expected to be dispatched to Shareholders today. As stated in the Company's trading update in February 2005, the Company has been in discussions with the Banks to replace the Company's Existing Bank Facilities with a new facility or facilities. The Company today announces that it has today entered into new longer term bank facilities on more favourable terms to the Company (the 'New Bank Facilities'), conditional on completion of the Issue. Shareholders should be aware that if the Resolutions relating to the Issue are not approved at the EGM and Admission does not take place on 30 June 2005, the net proceeds of the Issue will not be received by the Company and the Company will not be able to draw on the New Bank Facilities. The Existing Bank Facilities expire on 30 June 2005 and the Company would no longer have banking facilities and would not have adequate working capital to continue trading from that date. The Directors consider that in the scenario outlined above, the withdrawal of the Existing Bank Facilities would not be in the best interests of either the Banks or the Company and believe that the Existing Bank Facilities would be extended for a short period beyond 30 June 2005 whilst they were renegotiated for a longer period to enable the Company to continue trading. The Directors believe, however, that such renegotiated facilities would be on substantially worse terms than both the Existing Bank Facilities and the New Bank Facilities, in particular in regard to interest rate, use of free cash and repayment scheduling. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to approve the Issue. 2. Information on Volex Group The Business Volex Group is a leading independent producer of electronic and fibre optic cable assemblies and electrical power cords. The Group currently operates from forty facilities located strategically in Asia, Europe and North and South America, providing global support to leading producers of computers, telecommunications systems and networking devices. In addition, the Group assembles wiring assemblies and harnesses for consumer electronics and appliances, medical and industrial applications and for the transportation, defence and aerospace industries. Products The Company manufactures a wide range of cable assembly solutions that can be categorised into three broad product groupings - power products, signal cable assemblies and multifunction cable harnesses. Power Products Volex produces and supplies a wide range of power cords and cable assemblies finished to OEM specification. Volex has safety approval certification for over 20 countries. Volex's power products are used in computer products, medical products, electrical and electronic consumer products and industrial tools and equipment. Power products accounted for 45 per cent. of the Group's turnover in the 52 week period ended 3 April 2005 (2004: 41 per cent.) Signal Cable Assemblies These products carry signals within and/or between equipment for applications such as communications, networking and computing products and medical/ industrial equipment. The majority of these cable assemblies are custom designed. Overall, signal cable assemblies represented approximately 43 per cent. of turnover in the 52 week period ended 3 April 2005 (2004: 46 per cent.). They are subdivided into the following: Industry Standard Volex offers an extensive range of 'industry standard' cable assemblies for the communications and computer market, by which is meant, products which operate in accordance with standardised industry parameters. The cable assembly is also customised in its design, for example by reference to length, angle of connector, moulding and colour. Volex cable assemblies are used in, inter alia, networking products, servers and storage systems, internal switching and industrial products. High Speed Volex offers a range of standard and custom high speed cable assemblies, including Fibre Channel and InfiniBand, to a number of OEM customers. Cable assemblies are engineered to meet the stringent electrical and mechanical requirements of industry standard specifications and are increasingly being used in system area networks, parallel processing applications and server storage systems. Radio Frequency Volex offers a range of radio frequency cable assemblies including flexible, conformable, semi- rigid, corrugated and phase matched assemblies. These products are used within switching devices, industrial automation, telecoms networks, testing and measurement and antenna products. Fibre Optic Volex offers custom designed fibre optic cable assemblies. These products are used within Sonet/SDH Devices, networking cables, switching devices and base stations. Multifunction Cable Harnesses These hybrid products have both power and signal transmission capabilities within the cable harness. Overall, multifunction cable assemblies represented approximately 12 per cent. of turnover in the 52 week period ended 3 April 2005 (2004: 13 per cent.). Multifunction cable harnesses include specialist wiring harnesses, which Volex designs, manufactures and supplies for use in commercial and off-road vehicles and aerospace and defence applications, and multifunction cable assemblies for a variety of other applications including medical and industrial markets. In the 52 weeks ended 3 April 2005, the Group's turnover was spread across five different business sectors: Data/Telecommunications 39 per cent. (43 per cent.: 2004); Consumer Appliances 20 per cent. (18 per cent.: 2004); Consumer Electronics 19 per cent. (17 per cent.: 2004) Vehicles and Aerospace 12 per cent. (13 per cent.: 2004); and Medical/Industrial 10 per cent. (9 per cent.: 2004). The Directors believe that the breadth of Volex's product portfolio provides a significant competitive advantage to the Group. This broad range of products enables Volex to service a wide range of customer product supply requirements and offer the customer an opportunity to utilise Volex as its consolidated supplier of products across the cable assembly spectrum. Geographical Locations The Group is headquartered in Warrington, United Kingdom. It operates regional centres in Castlebar, Ireland to service the European signal cable assembly market, in Quincy, USA to service the North American market, and in Singapore to service the Asian and South American power product and signal cable assembly markets. The Singapore regional centre also manages the European power product business. Each regional centre manages its multi-site regional operations. In addition, the Group's specialist wiring harness businesses are based in the United Kingdom and service predominantly a UK/European customer base. The Group currently operates from some 42 locations across the World. Of these, 25 are manufacturing centres and the majority of these centres also house sales offices; 8 are engineering/sales/logistics support units; and 9 are purely sales offices. Turnover by geographic location for the 52 weeks ended 3 April 2005 was 26 per cent. for Europe (excluding the UK) (24 per cent.: 2004), 16 per cent. for the UK (17 per cent.: 2004), 31 per cent. for the Americas (31 per cent.: 2004) and 27 per cent. for Asia (28 per cent.: 2004). The average number of employees employed by the Group in the 52 week period ended 3 April 2005 was 10,059 (2004: 9,297). Customers Volex has a worldwide base of multinational customers, including Ericsson, Nortel Networks, Alcatel, Lucent Technologies Qualcomm, Cisco Systems, HP, IBM, Dell, StorageTek, Solectron, Flextronics, Celestica, Jabil, Canon, Philips, Apple, Epson, Lexmark, Black & Decker, LG Electronics, Panasonic, Electrolux, Invensys, Johnson and Johnson, GE Medical Systems, Case New Holland, Komatsu, JCB, Rolls Royce Aero Engines and BAE systems. This customer base spans a wide range of sectors, each of which utilises the broad range of cable assembly solutions offered by the Group. This broad spread is reflected in the fact that the Group's top ten customers account for only 42 per cent. of the Group's turnover. 3. Background to and reasons for the Issue Following several years of achieving sustained revenue growth, the Group experienced a significant downturn in demand for its product ranges between 2001 and 2003. During this time the Group's revenue fell 45 per cent. to £230.1 million in 2003 with operating profit (before exceptional items and impairments) falling 98 per cent. to £0.6 million. In the 52 weeks ended 4 April 2004 revenue increased to £238.4 million and operating profits to £2.5 million. This downturn was principally caused by difficulties within the telecommunications and server market, to which the Group had significant exposure. As demand for wire line and wireless infrastructure was depressed, a number of operators and carriers experienced financial difficulties which led to limited investment in networks by both carriers and enterprises. Furthermore demand for information technology server and networking products remained low, as a result of depressed prices and low-cost entrants and developments in the server segment of high-speed copper technologies. The Group has also experienced a number of exceptional circumstances which affected the financial performance of the Company. These included the rise in commodity prices, in particular copper which rose approximately 65 per cent. between 1 November 2003 and 31 March 2005. This rise in price was at a rate which the Group has been unable to pass onto its customer base in full. In addition, a fire in the Group's Tijuana, Mexico factory in September 2004 severely impacted the North American division's operational efficiency. The downturn in the Group's trading has meant that the level of debt within the Group has restricted the financial flexibility of the Group. Although £4.0 million of debt has been repaid over the past 2 years, the Group has not been able to generate sufficient cash flow to invest in the future growth of the Group's business or to complete the restructuring of the Group and to meet all of its previously agreed debt repayments which had been rescheduled by agreement with the Banks. The Directors believe the Issue will provide the Group with the financial security to enable it to invest in the restructuring of the operational cost base and in the future growth of the business. Further, the Company has entered into the New Bank Facilities which, if they become unconditional, provide an element of stability and certainty on the funding structure of the Group for the next 3 years, to June 2008. These new facilities are conditional on the Issue becoming unconditional and will allow the Group greater financial flexibility during this period. 4. Strategy of the Group The Directors have in recent years pursued a strategy of realigning costs commensurate with actual and projected levels of turnover and restructuring the operations of the Group to meet the changing market challenges and opportunities. This strategy has, however, been limited by the financial resources available to the Group as set out above. Following receipt of the net proceeds of the Issue and the provision of the New Bank Facilities, the Directors intend to implement a three-year growth plan focused on restructuring and investing in the growth opportunities available to the Group. These key strategies within this growth plan are set out below: • Reduce the number of manufacturing locations. The Group currently operates 25 manufacturing locations worldwide, which the Directors believe can be reduced by shifting to larger factories in low cost areas in order to maximise economies of scale. Furthermore, where manufacturing does not provide any level of differentiation, the Group plans to outsource production utilising the Group's sourcing and supply chain strengths. By reducing the Group's manufacturing footprint and concentrating capacity in low cost regional locations, the Directors believe the Group can reduce its cost base without adversely affecting service levels for its customers as a whole. • Improving the operational performance of the Group by reorganising under-performing divisions and geographical areas within the Group, principally by realigning reporting lines and streamlining the organisation. The approach will be to leverage the specific strengths of key management teams across the wider Group whether on a product or market basis, with a particular focus on improvement on the Asian signal cable assembly and North American power product businesses. • Further develop sourcing competence at the component layer and establish sourcing competence at the assembly level. The Directors intend to develop the functional capabilities of the Group principally by investing in its engineering teams to reconfigure, standardize and/or substitute existing supplies to effect cost reduction. This will also allow the Group to increase its outsourcing capabilities. In addition, the Group will invest in its supply chain management resources to improve the performance of its supply base and to reduce inventory, for example through further development of its vendor managed inventory ('VMI') programme. • Develop new markets to increase revenue. The Directors intend to supplement the existing global customer account management team with additional resources to increase the Group's marketing and technological expertise. New markets to be targeted include the medical market, the low frequency radio base station market and the industrial market. The medical and industrial markets today account for 10 per cent. of Group turnover and the Directors believe they provide significant opportunities for the Group. Progress has already been made in the development of key medical accounts and the industrial customer base is growing strongly. In the case of the low frequency element of the telecommunication base station market, as an example one of our largest customers has an annual cable assembly spend of some £15 million, which the Directors believe again represents an area of opportunity for the Group. • The Group has demonstrated competence in product design, especially where the functionality and design of the assembly is not dependent on customer specified componentry, and has already secured a number of specific programmes in this way. The Group will increasingly focus on product development opportunities, particularly within the Powercord arena where a number of new product opportunities exist requiring investment. The Directors believe investment in new products will help the Group to increase its product margins and to develop a differentiating strength for the Group. • Build alliances to expand the product set and technology offering. This will allow the Group to access low cost manufacturing and technical competence to facilitate new product development and/or fill product portfolio gaps. The Group will thereby be able to access new customers, new markets and/or increase its service to global customers with reduced costs or risk. The Group is already in discussion with a major Asian cable manufacturer in this regard. 5. Current Trading and Prospects The Company has today released its unaudited preliminary results for the 52 week period ended 3 April 2005, extracts from this statement are set out below: 'After the downturn experienced through late 2001, Volex Group has taken significant actions to reduce debt and return to profitability. Having achieved a revenue peak of £418 million in FY2001, the Group experienced a dramatic decline to £230 million in FY2003 and has improved from that low point to close the last financial year (2005) at a revenue level of £245 million. Despite the limited access to funds, a number of key actions have been undertaken over this period: • Gross borrowings have been reduced from £72 million to £45 million; • Gross margins have recovered from a low of 11.6 per cent. to 2005 levels of 14.5 per cent. through reductions in material costs and labour cost reductions by moving to lower cost areas; • Facilities have been closed and manufacturing transferred to low cost locations and under- utilised assets have been disposed of; • A strong global purchasing function has been established; • The global account team was enhanced and has delivered momentum to the emerging medical and industrial business which has grown to 10 per cent. of Group revenue; and • New management and systems have been introduced to the harness businesses (Wiring Systems and Ionix). The financial year 2005 had been expected to improve further on these achievements. The Group delivered revenues in 2005 at a level of £245 million which, when the effects of currency translation are removed was a growth year on year of 8 per cent. The Group has benefited from the general improvement in the demand across most of the markets that we service but has also made significant strides in developing new business opportunities in targeted markets such as the medical sector. The broadening of the customer base in existing and new markets remains a key focus for the Group and reduces the impact of cyclical demand patterns in any one sector. However, while the market demand profile supported the revenue ambitions of the Group the translation of those revenues to operating profit was disappointing and was impacted by unanticipated events, some of which were one-off in nature. • The escalation of commodity prices, particularly copper and petroleum, impacted the Group by circa £6 million in profit. While the sales teams have been successful in passing some of these effects through to the customer base, there was a lag between the supply base increases and the successful conclusion of negotiations with those same customers. • The turnaround of North America division was adversely impacted by an unsuccessful change in management, resulting in a failure to achieve the product transfer and margin improvement targets for the business, and by a fire in one of two buildings in Tijuana, Mexico that created loss of sales in the period. On a positive note, the Group has already addressed many of these areas and, the better performing divisions achieved operating margins of 6 per cent. plus in the year. Operationally the Group recovered the Tijuana fire impact successfully and the speed and effectiveness of that recovery bears testament to the ability of the Group to manage significant events without impacting the supply line to the customer base. The Group has changed the leadership of North America (October 2004) and positioned one of the non-executive directors back into the regional leadership position. The Group has built a new team and strengthened sales, engineering and operations. The Group has developed a strong global purchasing function that has mitigated the full effect of rising commodity prices by materials savings secured elsewhere in the supply chain. Despite the limited access to funds the Group continued to focus on cost reduction, re-profiling the manufacturing footprint and the level of debt within which the Company had to operate. In the year three further facilities were announced for closure: Conover (US), Malaysia and Philippines. The Group strengthened its focus and resource allocation in global account management to penetrate new markets, new accounts and the existing accounts for incremental revenues, some of which were already realized in the reported year.' With a strong client base, a global network and strengthened balance sheet following the Issue, the Directors believe that the scope for delivering improved shareholder returns is significant and remain positive on the prospects and outlook for the Group during 2005. 6. Board Changes The Group also announces today that, conditional upon Admission, it will be immediately appointing two new directors, Craig Mullett and Heejae Chae ('the Proposed Directors'). Both Craig and Heejae have extensive knowledge of the cable and interconnector markets, having both been for five years, senior executives with the Amphenol Corporation, a NYSE listed company and the world's third largest producer of electronics connectors, cables and interconnect systems. Craig, aged 36, who was the director of business development at Amphenol, will be joining the Group as a non-executive Director. He will assume responsibility for a number of special projects and will work with the executive team in implementing and developing, as necessary, the strategy described in this announcement for returning the Group to profitability. Craig is currently President of Branison Group, a corporate finance firm located in Connecticut, USA. Heejae, aged 36, was worldwide general manager of the Radio Frequency Group of Amphenol. He will become Chief Operating Officer and will work with the Chief Executive in the implementation of the strategy, taking responsibility for the improvement of the manufacturing operations. With the changes that are now taking place within the Group and having been with the Group for over 15 years, Dom Molloy will be resigning as Chairman and retiring from the Board following the EGM. The Group has already commenced a search for a new non-executive Chairman, who needs to have experience of running a multinational business and, in particular, has been involved in corporate restructurings in the past. The Company hopes to have identified and be able to appoint a new non-executive Chairman before the AGM in September 2005. For the interim period until that appointment, David Beever, who has been a non-executive Director since 2002, will assume the role of Chairman. 7. Principal Terms of the Issue The Issue Under the Issue, the Company intends to raise £19.0 million, comprising approximately £13.3 million by way of the Firm Placing and approximately £5.7 million under the Placing and Open Offer (in each case before expenses). Qualifying Shareholders are being given the opportunity to participate in the fundraising by way of the Open Offer, which is being made by Evolution Securities as agent for and on behalf of the Company. Due to the size of the fundraising relative to the current market capitalisation of the Company, the Directors believe it is necessary to broaden the shareholder base of the Company through a non pre-emptive issue by way of the Firm Placing in order to raise the necessary funds. Under the Issue, 30 per cent. of the New Ordinary Shares are being offered to Qualifying Shareholders pursuant to the Placing and Open Offer and 70 per cent. are being placed firm (subject, inter alia, to the conditions set out below) with certain new and existing investors pursuant to the Firm Placing in order to provide such investors with certainty as to the minimum number of New Ordinary Shares they will receive. The Directors believe that this has been an important factor in attracting these investors to support the Issue. The Directors also consider that all Ordinary Shareholders should have the opportunity to participate in the Issue to mitigate and reduce the dilutive effect of the Firm Placing on Ordinary Shareholders and consequently, the Issue also comprises the Open Offer. The Issue Price represents a discount of 9.3 per cent. to the prevailing mid-market price of 81 pence of an Existing Ordinary Share on 3 June 2005 immediately prior to the announcement of the Issue. The Issue has been fully underwritten by Evolution Securities. The Issue is conditional upon the Placing Agreement having become unconditional in all respects and not having been terminated in accordance with its terms. The Placing Agreement is conditional, inter alia, upon the satisfaction of the following conditions: (i) the passing of the Resolutions at the Extraordinary General Meeting; and (ii) Admission becoming effective by not later than 8.00 a.m. on 30 June 2005 (or such later time and/or date as the Company and Evolution Securities may agree being not later than 3.00 p.m. on 30 September 2005). Application has been made to the UK Listing Authority for the New Ordinary Shares to be admitted to the Official List and application has been made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on its market for listed securities. It is expected that Admission will become effective and that dealings will commence in the New Ordinary Shares at 8.00 a.m. on 30 June 2005. The Existing Ordinary Shares are listed on the Official List and traded on the London Stock Exchange. None of the New Ordinary Shares have been marketed or been made available in whole or in part to the public in conjunction with the application for Admission other than pursuant to the Open Offer. The New Ordinary Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to vote and receive dividends and other distributions declared following Admission. The Firm Placing The Company proposes to raise approximately £13.3 million (before expenses) through the issue of the Firm Placing Shares at the Issue Price, which represents a discount of 9.3 per cent. to the closing mid-market price of 81 pence of an Existing Ordinary Share on 3 June 2005, being the last dealing day prior to the announcement of the Issue. The Firm Placing Shares represent 70 per cent. of the Issue and will represent 32.6 per cent. of the Company's issued share capital immediately following Admission. The Placing and Open Offer As stated above, the Board wishes to allow existing Ordinary Shareholders to participate in the Issue. Accordingly, Qualifying Shareholders are being given the opportunity to participate in the Issue by way of an Open Offer. The Company intends to raise approximately £5.7 million (before expenses) from the issue of the Open Offer Shares which represents approximately 30 per cent. of the funds the Company intends to raise pursuant to the Issue. Pursuant to the Placing, Evolution Securities has conditionally placed the Open Offer Shares (other than the Committed Shares) subject to a right of recall in order to satisfy valid applications for Open Offer Shares received from Qualifying Shareholders. Evolution Securities, on behalf of the Company, is inviting Qualifying Shareholders to apply for Open Offer Shares under the Open Offer at the Issue Price payable in full on application, on the basis of: 5 Open Offer Shares for every 19 Existing Ordinary Shares held by such Qualifying Shareholders and registered in their names on the Record Date and so in proportion for any other number of Existing Ordinary Shares then held. Fractional entitlements to Open Offer Shares will not be allotted to Qualifying Shareholders and no cash payment will be made in lieu of fractional entitlements, which will be aggregated and allotted to placees under the Placing for the benefit of the Company. Accordingly, the entitlement of Qualifying Shareholders will be rounded down to the nearest whole number of Open Offer Shares. To the extent that Evolution Securities is unable to procure placees for the Open Offer Shares at the Issue Price, Evolution Securities has agreed to subscribe itself, as principal, at the Issue Price for any Open Offer Shares for which valid applications are not received from Qualifying Shareholders under the Open Offer. To be valid, completed Application Forms and payment in full must be received by 3.00 p.m. on 27 June 2005. Application Forms are personal to Qualifying Shareholders and may not be transferred except to satisfy bona fide market claims. Qualifying Shareholders should be aware that the Open Offer is not a rights issue and, therefore, any Open Offer Shares not applied for under the Open Offer will not be sold in the market for their benefit Any person who is in any doubt as to his/her tax position or who is subject to tax in a jurisdiction other than the United Kingdom should consult an appropriate professional adviser immediately. 8. Related Party Transaction Owing to the size of its shareholding in the Company, Cycladic Capital Management who holds approximately 12.6 per cent. of the Existing Ordinary Shares, is deemed to be a related party of the Company for the purposes of the Listing Rules. The issue of 5,645,510 Placing Shares to Cycladic Capital Management under the Firm Placing will be a transaction with a related party for the purposes of the Listing Rules, and will require separate approval by the Shareholders at the EGM by way of the Ordinary Resolution. Cycladic Capital Management has undertaken that it will not, and will take all reasonable steps to ensure that its associates (as defined in the Listing Rules) will not, vote on the Ordinary Resolution. 9. Irrevocable undertakings and Directors' intentions Placing and Open Offer All of the Directors who currently hold Ordinary Shares have irrevocably undertaken to take up in full their Open Offer Entitlement under the Open Offer and, in addition, certain of the Directors also intend to participate in the Firm Placing. Accordingly, the Directors intend to subscribe for, in aggregate, 445,596 New Ordinary Shares, representing 1.7 per cent. of the Issue. Furthermore, the Proposed Directors, Heejae Chae and Craig Mullett, intend to participate in the Firm Placing in respect of, in aggregate, 1,158,000 New Ordinary Shares, which, together with the Directors participations, will represent a total of 6.2 per cent. of the Issue. Voting Those Directors who have an interest in Existing Ordinary Shares have each irrevocably undertaken to the Company and Evolution Securities that they, having a beneficial and non beneficial interest between them in aggregate of approximately 0.83 per cent. of the Existing Ordinary Shares, will vote in favour of the Resolutions. Cycladic Capital Management, which holds 3,710,000 Ordinary Shares, has irrevocably undertaken to the Company and Evolution Securities that it will abstain, and will take all reasonable steps to ensure that its associates (as defined in the Listing Rules) abstain from voting in respect of the Ordinary Resolution relating to the related party transaction. 10. Share Option Schemes Holders of options under the Share Option Schemes are not entitled to participate in the Open Offer. Under the rules of the Share Option Schemes, the Directors may make such adjustments to the number of Ordinary Shares under option and to the exercise prices to take account of certain variations in the capital of the Company as they see fit. Any such adjustments may, in accordance with the rules of the relevant Share Option Scheme, be subject to written confirmation from the auditors of the Company that such adjustments are, in their opinion, fair and reasonable and also, where applicable, subject to HM Revenue & Customs approval. If any such adjustments are made, holders of options under the Share Option Schemes would be notified of any such adjustment in due course. The Remuneration Committee has begun a review of the Company's management incentive arrangements. It intends to discontinue the practice of granting share options to senior executives (including Directors). In its place it will introduce a long term share incentive plan under which it will conditionally award shares in the Company which will only vest three years later if predetermined corporate performance targets have been achieved. In due course, detailed proposals will be put before Shareholders in General Meeting for approval. 11. Extraordinary General Meeting The Prospectus (containing Listing Particulars) to be sent to Shareholders today in connection with the Issue, accompanied by a Form of Proxy fur use at the EGM and an Application Form for use in connection with the Open Offer, contains a notice convening the EGM to be held at 11.00 a.m. on 29 June 2005 at the offices of Allen & Overy LLP, One New Change, London EC4M 9QQ, at which the Resolutions will be proposed for the purposes of approving the Issue. At the EGM, Resolutions will be proposed to: • increase the authorised share capital of the Company; • authorise the directors to allot and issue, inter alia, the New Ordinary Shares; • disapply the statutory pre-emption rights in respect of the allotment and issue of, inter alia, the New Ordinary Shares pursuant to the Firm Placing; and • approve the issue of 5,645,510 Firm Placing Shares to Cycladic Capital Management pursuant to the Firm Placing as a related party transaction for the purposes of the Listing Rules. 12. Necessity for Shareholder approval In making an assessment of their voting intentions, Shareholders should be aware that if the Resolutions relating to the Issue are not approved at the EGM and Admission does not take place on 30 June 2005, the net proceeds of the Issue will not be received by the Company and the Company will not be able to draw on the New Bank Facilities. The Existing Bank Facilities expire on 30 June 2005 and the Company would no longer have banking facilities and would not have adequate working capital to continue trading from that date. The Directors consider that in the scenario outlined above, the withdrawal of the Existing Bank Facilities would not be in the best interests of either the Banks or the Company and believe that the Existing Bank Facilities would be extended for a short period beyond 30 June 2005 whilst they were renegotiated for a longer period to enable the Company to continue trading. The Directors believe, however, that such renegotiated facilities would be on substantially worse terms than both the Existing Bank Facilities and the New Bank Facilities, in particular in regard to interest rate, use of free cash and repayment scheduling. In these circumstances, the Company would not be in a position to implement the strategy described in this announcement. Indeed, in order to secure ongoing facilities, the Company may have to sell some or all of its trading subsidiaries to realise funds to repay some or all of the outstanding loans within the Existing Bank Facilities, albeit, that such funds realised may be insufficient to repay all of the outstanding loans. This would greatly diminish the value of the Group and accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to approve the Issue. 13. Recommendation The Board, which has been so advised by Evolution Securities, considers the Resolutions, including the transaction with the related party, to be fair and reasonable so far as Shareholders are concerned and in the best interests of the Company and its Shareholders as a whole. In providing advice to the Board, Evolution Securities has taken into consideration the Directors' commercial assessment of the Issue. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions (save for Cycladic Capital Management and its associates (as defined in the Listing Rules) in respect of the Ordinary Resolution) to be proposed at the Extraordinary General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial and non-beneficial shareholdings, which amount to 245,740 Ordinary Shares (representing approximately 0.83 per cent. of the Company's current issued share capital). EXPECTED TIMETABLE OF PRINCIPAL EVENTS Record Date for entitlement under the Open Offer close of business on 3 June 2005 Posting date of the prospectus and the Application Form 6 June 2005 Latest time and date for splitting Application Forms (to satisfy bona fide market claims only) 3.00 p.m. on 25 June 2005 Latest time and date for receipt of completed Application Forms and payment in full in respect of the Open Offer 3.00 p.m. on 27 June 2005 Latest time and date for receipt of Forms of Proxy for the Extraordinary General Meeting 11.00 a.m. on 27 June 2005 Extraordinary General Meeting 11.00 a.m. on 29 June 2005 Dealings expected to commence in the New Ordinary Shares 30 June 2005 Delivery in CREST of New Ordinary Shares to be held in uncertificated form 30 June 2005 Despatch of definitive share certificates in respect of New Ordinary Shares to be held in certificated form By 7 July 2005 ISSUE STATISTICS Number of Existing Ordinary Shares 29,540,692 Number of New Ordinary Shares being issued pursuant to the Firm Placing 18,076,474 Number of New Ordinary Shares being issued pursuant to the Placing and Open Offer 7,773,866 Issue Price 73.5 pence Net proceeds of the Issue £15.8 million Number of Ordinary Shares in issue following Admission 55,391,032 New Ordinary Shares expressed as a percentage of the Existing Ordinary Shares 87.5% Market capitalisation of the Company at the Issue Price following Admission £40.7 million Words and expressions where defined in the Prospectus to be issued by the Company and dated 6 June 2005 shall, unless the context requires otherwise, have the same meaning in this document. This information is provided by RNS The company news service from the London Stock Exchange

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