RNS Number : 0618X
Land of Leather Holdings plc
19 June 2008
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR THE
REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN THAT JURISDICTION
19 June 2008
LAND OF LEATHER HOLDINGS PLC
("Land of Leather" or the "Company")
Proposed Placing and Open Offer to raise �15 million
1 for 10 Consolidation of existing Ordinary Shares
The Board today announces that it proposes, subject to approval by Shareholders, to raise approximately �13.5 million (net of expenses)
by way of the issue of 29,945,226 New Ordinary Shares. The issue is being made by way of a Placing and Open Offer to Qualifying
Shareholders. The Board is proposing this course of action as additional funds are required to strengthen the Company's balance sheet and
working capital position.
Highlights
* The Company has successfully secured, subject to Shareholder approval, a financing package to provide additional working capital
appropriate for the challenging market conditions which the Directors believe are likely to continue well into 2009.
* Despite extremely difficult market conditions, forecast profit before tax and exceptional items is not less than �2 million for
the year ended 3 August 2008.
* At 25 May 2008, the Company had no debt and cash balances of �5.2 million.
* The expected cash balances for July 2008, post receipt of the additional equity funds, are circa �14.8 million, which should
provide the necessary working capital to trade through the current difficult retail environment.
* Management are focused on reducing operating costs and conserving cash, in line with lower activity levels, in order to minimise
the cash burn of the business.
* The Company has received expressions of support from two existing key trade insurers.
* The Company intends to utilise concession space released by The Sleep Depot and not taken up by the Homestyle Group to display a
new range of fabric sofas. The Group will remain focussed on its leather offering, which will not be reduced by this new line.
* The trading results in the six weeks ending 6 June 2008 show a like for like sales decline of 35 per cent.. The Company
anticipates like for like sales for the remainder of the financial year to be particularly difficult in light of strong comparatives from
the previous year.
* The Issue is being made by way of a Placing and Open Offer of 29,945,226 New Ordinary Shares to Qualifying Shareholders at an Issue
Price of 50 pence per New Ordinary Share (equivalent to 5 pence per Ordinary Share pre-Consolidation) to raise approximately �15 million
gross of expenses. In the absence of the Issue completing the Company is unlikely to be able to continue to trade in its current form.
* A 1 for 10 share consolidation is being proposed so that for every 10 existing Ordinary Shares of 1 penny each, a Shareholder will
hold one Ordinary Share of 10 pence each. The Placing and Open Offer will take place on a post consolidation basis.
* Directors and their associated persons have committed to take up to 5,976,715 New Ordinary Shares under the Issue equivalent to
�3.0 million.
* Barclays Bank plc, the Group's credit and debit card clearing bank, has agreed to continue to provide its existing credit and
debit card clearing facilities to the Group following Admission for a minimum period of 12 months, in consideration for which the Group has
agreed to provide some cash collateral over the period of the agreement.
* The Issue and the Share Consolidation are subject to Shareholders' approval at an Extraordinary General Meeting ("EGM").
* Investec is acting as sponsor, joint broker, and joint underwriter to the Company. Kaupthing is acting as joint broker and joint
underwriter.
A circular will shortly be posted to Shareholders comprising a prospectus containing details of the Placing and Open Offer and notice of
an EGM of the Company (the "Circular").
Once published, copies of the Circular will be available for inspection at the UK Listing Authority's Document Viewing Facility, which
is situated at:
The Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Roger Matthews, Chairman of Land of Leather Holdings PLC, commented:
"This fundraising package will support our continued trading through the toughest environment for furniture retailing and other big
ticket retailers for many years. Whilst our value orientated business model and product focus gives Land of Leather a number of important
competitive advantages, we have taken a very cautious view of the outlook for our sales throughout 2009.
We have also reviewed all elements of our business and have been quick to make a series of significant cost and capital expenditure
reductions to conserve cash. We will continue to seek to reduce operating costs in line with activity levels.
Whilst the short term outlook for the market is very challenging, longer term prospects are positive as key market drivers improve. The
high operational gearing of the Group should enable it to significantly increase profitability when sales recover to historic levels.
As a result of the new financing package, the Board believes the Company should be able to trade through this very difficult period and
exploit its strong market position into the longer term."
- ends -
For further information please contact:
Land of Leather Holdings plc
Clive Hatchard 0147 432 2277
Investec
James Grace / Patrick Robb 0207 597 5180
Kaupthing
Nicholas How / Paul Wedge 0203 205 5000
Hudson Sandler
James White / Andrew Hayes 0207 796 4133
This summary should be read in conjunction with the full text of this announcement.
This announcement is not a prospectus but an advertisement and investors should not subscribe for any New Ordinary Shares referred to in
this announcement except on the basis of the information contained in the Circular. Copies of the Circular will, following publication, be
available from the Company's registered office at Unit K1 & K2, Lower Road, Northfleet, Kent DA11 9BL.
This announcement does not constitute an offer of, or the solicitation of any offer to buy, any New Ordinary Shares to any person in any
jurisdiction. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose
possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these
restrictions may constitute a violation of the securities laws of such jurisdiction.
None of the Ordinary Shares, the New Ordinary Shares nor the Open Offer Entitlements have been or will be registered under the United
States Securities Act of 1933, as amended, or under the applicable securities laws of any state of the United States, any province or
territory of Canada, Japan, the Republic of South Africa or Australia. Accordingly, unless a relevant exemption from such requirements is
available, neither the New Ordinary Shares nor the Open Offer Entitlements may, subject to certain exceptions, be offered, sold, taken up or
delivered, directly or indirectly, within the United States, Canada, Japan, the Republic of South Africa or Australia or in any country,
territory or possession where to do so may contravene local securities laws or regulations. Shareholders who believe that they, or persons
on whose behalf they hold Ordinary Shares, are eligible for an exemption from such requirements should refer to the Circular to determine
whether and how they may participate.
Investec Investment Banking, a division of Investec Bank (UK) Limited, which is regulated in the United Kingdom by the Financial
Services Authority, is acting exclusively for the Company as sponsor, joint broker and joint underwriter and for no one else in relation to
the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections
afforded to customers of Investec Investment Banking or for providing advice in relation to the subject matter or contents of this
announcement.
Kaupthing Singer & Friedlander Capital Markets Limited, which is regulated in the United Kingdom by the Financial Services Authority, is
acting exclusively for the Company as joint broker and joint underwriter and for no one else in relation to the matters described in this
announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Kaupthing
Singer & Friedlander Capital Markets Limited or for providing advice in relation to the subject matter or contents of this announcement.
LAND OF LEATHER HOLDINGS PLC
("Land of Leather" or the "Company")
Proposed Placing and Open Offer to raise �15 million
1 for 10 Consolidation of existing Ordinary Shares
PART I
1. INTRODUCTION
The Board today announces that it proposes, subject to approval by Shareholders, to raise approximately �13.5 million (net of expenses)
by way of the issue of 29,945,226 New Ordinary Shares (equivalent to 299,452,260 Ordinary Shares pre-consolidation) . The Issue is being
made by way of a Placing and Open Offer to Qualifying Shareholders. The Board is proposing this course of action as additional funds are
required to strengthen the Company's balance sheet and working capital position and without which the Company is unlikely to be able to
continue to trade.
The Issue Price of 50 pence per New Ordinary Share is equivalent to a price of 5 pence per Ordinary Share prior to the Consolidation.
This represents a 48 per cent. discount to the middle market price of 9.7 pence per Ordinary Share on 18 June 2008, the last Business Day
prior to this announcement.
The Issue has been fully underwritten by Investec and Kaupthing. The New Ordinary Shares will rank pari passu with the existing Ordinary
Shares when taking into account the effect of the Consolidation. Investec is acting as sponsor, joint underwriter and joint broker to the
Company. Kaupthing is acting as joint broker and joint underwriter to the Company.
In view of the requirement to seek authority from Shareholders to effect the Consolidation, increase the authorised share capital of the
Company, allot the New Ordinary Shares, disapply statutory pre-emption rights in relation to such allotment, approve the Issue Price and
approve certain related party transactions connected with the Issue, an Extraordinary General Meeting will be convened to be held on or
around 14 July 2008.
2. BACKGROUND TO AND REASONS FOR THE ISSUE
Land of Leather is a specialist retailer of leather furniture and the UK's only national retailer that specialises in retailing leather
sofas. The Directors believe that the Group is the second largest UK retailer of leather sofas by value with approximately 13 per cent. UK
market share in 2007. In the Directors' opinion, the Company is a low cost operator, and its product offering is value orientated and
targeted at the mass market where Land of Leather enjoys strong brand recognition. As the only national retail brand specialising in leather
sofas, it enjoys the benefits of being a destination store for people seeking to purchase leather sofas.
The Group's turnover has increased from �4.2 million in 1998 to �240.0 million in 2007, whilst EBITDA (before exceptional items) has
increased from �0.4 million to �19.5 million with operating profit before exceptional items increasing from �0.3 million to �17.6 million
for the same period. This growth has primarily been achieved through the addition of further stores through a store roll-out programme.
Land of Leather currently trades from 109 retail outlets in the UK and the Republic of Ireland most of which are located in out of town
retail parks and main road locations, supported by eight warehouses and a head office in Northfleet, Kent. Land of Leather does not
manufacture any of the products it retails; its products are largely sourced from the Far East where the Group has strong relationships with
several manufacturers.
At 29 July 2007 the Group had cash balances of �25.5 million. In the period to 27 January 2008 the Group:
* invested �3.8 million in capital expenditure;
* closed out foreign currency hedges at a cash cost of �5.9 million;
* bought back �1.2 million of its own shares and funded the acquisition of �1.8 million of its own shares by the employee benefit trust;
and
* paid �4.4 million in dividends.
Notwithstanding the above cash outflows, which total �17.1 million, the Group had cash balances of �16.3 million at 27 January 2008.
This was due in part to seasonal working capital changes and a profit before tax of �5.5 million in the 26 weeks ended 27 January 2008. The
Company has now reduced capital expenditure to a maintenance level, stopped purchasing its own shares and paying dividends and does not have
any further adverse currency hedge contracts. The Directors have also put on hold all new store openings, mezzanine floor installations and
store refurbishments until market conditions improve. It is expected that these actions should reduce the demands on the Group's cash
resources.
The Group had cash balances of �5.2 million as at 25 May 2008 and the decline in cash balances since 27 January 2008 is due primarily to
the following factors:
* increased working capital, as a result of seasonal factors, in particular reduced customer deposits and declining sales orders;
* investment of �1.6 million in capital expenditure; and
* funding operating losses in the 17 weeks ended 25 May 2008 of �2.3 million.
Given the general deterioration in the retail market in 2008, the fall in the Group's sales orders in the current financial year and the
forecast continuation of current difficult trading conditions in the short to medium term, the Directors have taken action to cut costs and
to try to maintain the Group's gross margin at reasonable levels. Steps taken include adjusting the pricing of products, improving the range
of products (including introducing a new line of fabric upholstery), reducing promotional activity (including decreasing advertising and
reducing the number of free gifts previously being offered), actively managing the levels of stock purchases, implementing new supplier
policy standards to lower repair costs and focusing on reducing freight costs.
The Directors estimate that the cost saving measures the Group commenced in April 2008 have reduced operating costs by �11 million, on
an annualised basis, through a �6.5 million reduction in advertising to �15 million (which, when compared to advertising spend in the sector
in the 2007 calendar year, means the Group still has the third highest spend on advertising in the upholstery sector), a �3 million saving
on staff costs through headcount reduction and associated reduction in staff costs and �1.5 million of other discretionary cost saving
items.
In order to better understand the needs of the Group on an on-going basis given the current and forecast short term difficult trading
conditions, the Directors have undertaken various financial sensitivity analyses taking into account the actions above and certain
assumptions being made by the Directors in relation to gross margin and costs savings. These analyses demonstrate the effect of marginal
reductions in sales orders and gross margin against operating profit and are not made against any base figure. Accordingly, they are not
profit forecasts for any future financial period and do not qualify the profit forecast set out below. The Directors analyses leads them to
believe that the Group's income would equal its costs should revenue decline to �195 million in the 52 weeks ending 2 August 2009, which
would be equivalent to a six per cent. like for like sales order decline from the sales expected for the 52 weeks ending 3 August 2008. Such
a six per cent. like for like decline would be over and above an assumed 28 per cent. like for like sales decline in the year ending 3 August 2008 and hence would be a two year decline of 34 per cent.
The Directors estimate that a one per cent. decrease in sales orders would equate to a reduction in operating profit of approximately
�775,000 and that a reduction of 0.1 per cent. in the gross margin would equate to a reduction in operating profit of approximately
�195,000. In the event of a continuing deterioration in the Group's trading position, the Directors believe it would be possible to decrease
advertising and staff costs by a further approximately �6 million (annualised), which would provide headroom for a further eight per cent.
decrease in sales orders on a like for like basis against the figures for the 52 weeks ended 29 July 2007. Nothing in this paragraph is
intended to constitute a profit forecast for the financial year ending 2 August 2009.
The Group does not have any borrowings at present and had net tangible assets of �7.3 million at 27 January 2008. However, the Group has
experienced extremely difficult trading conditions in the second half of the current financial year with a significant decline in sales
orders and the Directors are of the opinion that the Company requires additional working capital. The Group is dependent upon its bankers
providing credit and debit card clearing facilities and upon the availability to its suppliers of credit insurance in relation to goods
supplied to the Group and accordingly needs to be able to demonstrate its financial stability to its bankers, credit insurers, suppliers and
customers to retain their support. The Company's clearing bank and principal credit insurer have indicated that they will continue to
support the Group until the result of the EGM is known. Barclays Bank plc, the Group's credit and debit card clearing bank, has agreed to
continue to maintain its existing credit and debit card clearing facilities to the Group for a period of at least 12 months following Admission, on the basis the Group agrees to provides �4.5 million
of cash collateral. �1.8 million of this cash collateral has already been provided through the Company's existing cash resources, a further
�1.7 million will also be funded through the Company's existing cash resources and �1 million will be funded through the use of the net
proceeds of the Issue. It is anticipated, following discussions with credit insurers, that the Group's suppliers should be able to obtain
suitable levels of credit insurance following completion of the Issue.
The Company's clearing bank and credit insurers have indicated that in the event of the Issue not proceeding, they would not continue to
support the Company. The Directors believe that in such circumstances, in the absence of any alternate sources of funding becoming
available, the Company would have insufficient cash to pay its creditors at the end of June 2008 when the Group's next quarterly property
rental payments fall due.
In addition, the Directors consider it prudent to raise additional equity to cover future trading losses that may arise in the event
that the recovery in trading takes longer than currently anticipated by the Company. Accordingly the Company proposes to raise �13.5 million
(net of expenses) via the Issue in order to give the Group the financial strength to trade through the current economic downturn. The
Directors believe that the Company has a sound business model that will benefit when economic and financial conditions improve and with a
strong balance sheet the Group should be in a position to benefit from any financial weakness in its competitors.
As mentioned above, the Group intends to finance a shortfall of �1 million of cash collateral required by Barclays Bank plc from the net
proceeds of the Issue. The remaining net proceeds of the Issue will be placed on deposit and applied to satisfy working capital requirements
as they arise.
3. CURRENT TRADING AND PROFIT FORECAST
On 1 May 2008 the Company released the following Interim Management Statement:
"Trading period - 13 weeks to 27 April 2008
* Total sales order intake down 24.7%
* Like for like sales orders down 32.1% (Prior year comparative down 0.9%)
39 weeks ended 27 April 2008
* Total sales order intake down 9.8%
* Like for like sales orders down 20.7% (Prior year comparative down 0.8%)
Since the announcement of the interim results on the 27 March 2008, market conditions have remained challenging due to the increasing
demands on consumers' disposable income and the continuing credit crunch. The third quarter results show a 32 per cent. decline over a two
year period which we estimate is in line with the reduction in the market in that period.
Management's focus remains on delivering cost efficiencies commensurate with lower activity levels and on conserving cash. Actions have
already been taken to reduce operating costs by approximately GBP 11m on an annual basis, including cutting back on advertising and
significantly reducing discretionary spend. We continue to look at ways of further reducing costs and improving efficiencies.
One new store was opened in Yeovil in the quarter. No additional store openings are planned until the retail conditions show signs of
improvement.
Following the announcement on 1 April regarding The Sleep Depot, the group has moved quickly to reduce the loss of the concession rental
income. We are pleased to announce that the company has entered into an agreement with Homestyle Group for it to take concession space in 28
of its stores. The Homestyle Group, part of Steinhoff International Holdings, will use this space for its bed division which includes
Bensons, Sleepmasters and The Bed Shed. The agreement provides for a turnover related rent, to be paid on a monthly basis, estimated to
yield in the region of GBP 2m per annum in rent commencing on 1 June 2008 for a minimum of four years. The group continues to look at other
options to maximizing the space remaining and will update shareholders in due course.
The Board expects market conditions to be challenging for the remainder of 2008, and particularly in the final quarter of the financial
year where trading is against strong comparatives, but remains confident in the business' ability to increase profits quickly when consumer
confidence returns."
The Group, in common with some other retailers of leather sofas, has received a number of customer complaints relating to skin
irritations alleged to be caused due to the existence of mould-inhibitors in sofas provided by certain of the Group's suppliers. The
Directors have quarantined stock obtained from suppliers known to have used such mould-inhibitors, instructed staff to undertake
pre-delivery inspections of sofas produced by such suppliers and obtained assurances from all of its suppliers that they no longer use such
mould-inhibitors. As at 18 June 2008, being the latest practicable date prior to the date of this announcement, the Group had received
complaints from 456 customers, of whom 134 have commenced legal action. These claims are currently being handled by the Group's product
liability insurers. The insurers have reserved their rights to assert that certain claims are not covered by the terms of the Group's
insurance policy. Having received legal advice, the Directors believe that any liability the Group may have is covered by its insurance and will review its position and make any provision necessary to cater for such direct
liability once the position becomes clearer. In addition, the Directors have taken the decision to offer to inspect sofas which may have
been affected. The Directors have made a prudent provision of �800,000 should certain costs related to mould-inhibitors not be recoverable
under the product liability insurance or from the manufacturer, which will be reflected in the results for the year ending 3 August 2008.
Since 1 May 2008 the Group has continued to experience difficult trading conditions and declining sales orders. In the period from 27
April 2008 to 8 June 2008 like for like sales orders declined by 34.5 per cent. which results in like for like sales orders for the 45 weeks
to 8 June 2008 being down 23.2 per cent. The Directors have forecast that the Group will make a profit before tax for the 52 weeks ending 3
August 2008 of not less than �0.2 million, and a profit before tax and exceptional items of not less than �2 million, not taking into
account any costs relating to the Issue. The Company reported a profit before tax for the 26 weeks ended 27 January 2008 of �5.5 million,
and a profit before tax and exceptional items of �5.5 million.
4. PROSPECTS
Since 1998 the Group's business has achieved strong growth in turnover, which is in excess of the growth in the upholstery market as a
whole and above the growth achieved by the majority of the Company's competitors. Although the 26 weeks ended 27 January 2008 continued to
show turnover growth of 15 per cent., it is expected that the second half year will report a reduction in turnover which will result in
turnover in the year ending 3 August 2008 being below the previous financial year. The current retail climate provides very limited
visibility on sales orders and the Directors envisage that this will remain unchanged for at least a further 12 months.
However, the Directors expect growth to resume when the problems faced by the UK consumer from reductions in disposable income and the
effects of the "credit crunch" are overcome. There remain significant opportunities to grow the business organically from the existing 109
stores to at least 160 stores.
In addition to the measures already taken to reduce costs the Company intends to implement a number of changes to increase sales and
restore profitability:
* increasing the average selling price and gross margin by greater focus on fewer promotional products and the extension of the product
range into higher priced products;
* increasing the number of in-store concessions. The loss of the 71 concessions occupied by The Sleep Depot was partially replaced by 28
new concessions with Homestyle Group Properties plc which leaves additional space for new concessions when they arise;
* the introduction of fabric covered sofas in up to 50 stores in Autumn 2008 which will utilise some of the space retained following the
loss of The Sleep Depot concessions and additional space in existing stores where Land of Leather currently trades more than the optimal
space. Following the launch of this range the Company will consider expanding the fabric range into more stores;
* reducing operating costs including:
(i) the marketing cost as a percentage of sales;
(ii) employment costs by reducing staff numbers and associated costs; and
(iii) reducing other controllable operating costs.
Following receipt of the net proceeds of the Issue the Directors believe that the Company should have adequate financial strength to
trade through the current economic downturn and be well positioned to benefit when consumer confidence returns.
As announced in the Company's interim statement for the 26 weeks ended 27 January 2008, Paul Briant, the Company's founding Chief
Executive Officer and Buying Director, has decided to retire at the end of this financial year on 3 August 2008. Mr Briant founded the
Group's business in 1997 and after more than 10 years is retiring to spend more time with his family. He will provide consultancy services
to the Group for an initial period of one year (which may be extended by the Company for a further year) to provide a smooth handover of
responsibilities and provide specific advice and support on stock purchasing and setting up new stores. Mr Briant will be succeeded as Chief
Executive Officer by Stephen Jenkins, the current Managing Director. Mr Jenkins has been with the Group for eight years and has had a career
in the furniture industry for over 25 years. Mr Hatchard, Chief Financial Officer, will assume all responsibility for property related
matters.
5. PRINCIPAL TERMS AND CONDITIONS OF THE ISSUE
Shareholders should refer to the Circular for full details of the terms and conditions of the Issue.
Subject to the fulfilment of the conditions to the Issue, Qualifying Shareholders will be given the opportunity to subscribe for the
Open Offer Shares pro rata to their existing shareholdings at a price of 50 pence per Open Offer Share on the basis of:
6 Open Offer Shares for every 10 existing Ordinary Shares
held by Qualifying Shareholders on the Record Date and so on in proportion for any other number of Ordinary Shares then held..
Pursuant to and subject to the terms and conditions of the Placing Agreement, Investec and Kaupthing have each agreed conditionally to
place with certain existing Shareholders and other institutional investors, or, to the extent that it fails to do so, themselves to
subscribe for the New Ordinary Shares, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer.
Further information on the Issue and the terms and conditions on which it is made, including the procedure for application and payment,
will be set out in the Circular and Application Form to be posted to Shareholders.
The latest time for acceptance and payment in full under the Issue is expected to be 11.00 a.m. on 11 July 2008.
The Issue Price of 50 pence per New Ordinary Share is equivalent to a price of 5 pence per Ordinary Share prior to the Consolidation.
This represents a 48 per cent. discount to the middle market price of 9.7 pence per Ordinary Share on 18 June 2008, the last Business Day
before this announcement.
The Issue will be conditional, inter alia, upon:
(a) the passing of the resolutions to be proposed at the EGM;
(b) Admission becoming effective by not later than 8.00 a.m. on 15 July 2008 (or such later time and/or date as Investec and Kaupthing
and the Company may agree, not being later than 5.00 p.m. on 31 July 2008 ); and
(c) the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms prior to
Admission.
Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the Issue will not proceed and any Open Offer
Entitlements admitted to CREST will thereafter be disabled.
The Issue will result in the issue of 29,945,226 New Ordinary Shares (representing approximately 85.7 per cent. of the issued share
capital of the Company following the Consolidation and the Issue). The New Ordinary Shares, when issued, will rank pari passu in all
respects with the New Ordinary Shares arising pursuant to the Consolidation and will rank for all dividends or other distributions declared,
made or paid after the date of issue of the New Ordinary Shares. No temporary documents of title will be issued.
Application will be made for the New Ordinary Shares to be admitted to the Official List and to trading on the London Stock Exchange's
main market for listed securities. It is expected that Admission will become effective on 15 July 2008 and that dealings for normal
settlement in the New Ordinary Shares will commence at 8.00 a.m. on 15 July 2008. The New Ordinary Shares will be admitted following the
Consolidation with the ISIN GB00B39TSN74.
6. SHARE CAPITAL CONSOLIDATION
Shareholders will be asked to approve a share capital consolidation pursuant to which every 10 Ordinary Shares of 1 penny each will be
consolidated into one New Ordinary Share of 10 pence each. The New Ordinary Shares will retain all the rights attaching to the existing
Ordinary Shares.
The Consolidation is conditional upon the passing of the Resolutions at the Extraordinary General Meeting and the Issue becoming
unconditional.
In the absence of the Consolidation the terms of the Issue would have been 6 Ordinary Shares at an issue price of 5 pence per share for
each Ordinary Share held. This would have meant that under the terms of the Issue for every 10 Ordinary Shares held Shareholders would have
been asked to pay 300 pence. The financial effect would therefore have been exactly the same as the terms of the Issue which is being made
on the basis of 6 Open Offer Shares at 50 pence per Open Offer Share for every 10 existing Ordinary Shares. However, it is the belief of the
Directors that the advantage to the Company and the Shareholders of the Consolidation should be a reduction in the bid-offer spread and an
improvement in the liquidity of the Company's shares than if there was no Consolidation. Save in respect of their nominal value, there will
be no material differences between the existing Ordinary Shares and the New Ordinary Shares following Consolidation. The Consolidation will
not affect the voting rights of holders of existing Ordinary Shares.
The Consolidation will give rise to fractional entitlements to Ordinary Shares where Shareholders hold a number of existing Ordinary
Shares which is not exactly divisible by 10. Subject to the Resolutions being approved by the Shareholders at the EGM, Shareholders with a
holding of existing Ordinary Shares which is not exactly divisible by 10 will, pursuant to the Consolidation, have their holding rounded
down to the nearest whole number of New Ordinary Shares. As at 18 June 2008, the latest practicable date prior to the date of this
announcement, a shareholding of 10 existing Ordinary Shares was worth 97 pence and any fractional entitlements arising pursuant to the
Consolidation as if carried out on 18 June 2008 would therefore be less than this.
In the view of the Board, aggregating such fractional entitlements, selling them and sending cheques to Shareholders in respect of their
pro rata proportion of the proceeds is neither practical nor cost-efficient given the relatively small sums of money attributable to each
individual Shareholder concerned. In accordance with the Articles, any fractional entitlements to issued New Ordinary Shares arising on the
Consolidation will be sold for the benefit of the Company.
One effect of the Consolidation will be that any Shareholder holding fewer than 10 existing Ordinary Shares at the close of business on
the record date for the Consolidation will not hold any New Ordinary Shares in the Company following the Consolidation becoming effective.
7. RELATED PARTY TRANSACTIONS
Stancroft Trust Limited, a substantial shareholder of Land of Leather, is a related party of the Company for the purposes of the Listing
Rules. It is proposed that Stancroft Trust Limited will participate in the Issue as a placee in respect of a maximum of 7,000,000 New
Ordinary Shares under the Placing, such participation under the Placing to be reduced to the extent of Shareholders' participation under the
Open Offer.
New Star Asset Management Limited, a substantial shareholder of Land of Leather, is a related party of the Company for the purposes of
the Listing Rules. It is proposed that New Star Asset Management Limited will participate in the Issue as a placee in respect of a maximum
of 3,490,000 New Ordinary Shares under the Placing, such participation under the Placing to be reduced to the extent of Shareholders'
participation under the Open Offer.
Paul Briant, who is a Director, is a related party of the Company for the purposes of the Listing Rules. It is proposed that Mr Briant
will participate in the issue as a placee in respect of a maximum of 750,000 New Ordinary Shares under the Placing, such participation under
the Placing to be reduced to the extent of Shareholders' participation under the Open Offer.
Clive Hatchard, who is a Director, is a related party of the Company for the purposes of the Listing Rules. It is proposed that Mr
Hatchard will participate in the issue as a placee in respect of up to a maximum of 650,000 New Ordinary Shares under the Placing, such
participation under the Placing to be reduced to the extent of Shareholders' participation under the Open Offer.
Malcolm Heald, who is a Director, is a related party of the Company for the purposes of the Listing Rules. It is proposed that Mr Heald
will participate in the issue as a placee in respect of up to a maximum of 2,000,000 New Ordinary Shares under the Placing, such
participation under the Placing to be reduced to the extent of Shareholders' participation under the Open Offer.
Steve Jenkins, who is a Director, is a related party of the Company for the purposes of the Listing Rules. It is proposed that Mr
Jenkins will participate in the issue as a placee in respect of up to a maximum of 749,361 New Ordinary Shares under the Placing, such
participation under the Placing to be reduced to the extent of Shareholders' participation under the Open Offer.
Peter Ling, who is a Director, is a related party of the Company for the purposes of the Listing Rules. It is proposed that Mr Ling will
participate in the issue as a placee in respect of up to a maximum of 104,554 New Ordinary Shares under the Placing, such participation
under the Placing to be reduced to the extent of Shareholders' participation under the Open Offer.
Stancroft Trust Limited, New Star Asset Management Limited, Paul Briant, Clive Hatchard, Malcolm Heald, Steve Jenkins, and Peter Ling
will also receive a placing commission on the same basis as the other placees.
The participation of Stancroft Trust Limited, New Star Asset Management Limited, Paul Briant, Clive Hatchard, Malcolm Heald, Steve
Jenkins and Peter Ling in the Issue will be related party transactions for the purposes of the Listing Rules and will therefore each
require separate approval from Shareholders at the EGM. Each of Stancroft Trust Limited, New Star Asset Management Limited, Paul Briant,
Clive Hatchard, Malcolm Heald, Steve Jenkins and Peter Ling will abstain, and will take all reasonable steps to ensure that their
respective associates (as defined in the Listing Rules) will abstain, from voting at the EGM in relation to the Resolution relating to the
approval of its own related party transaction.
8. SHARE OPTION SCHEMES
The Remuneration Committee of the Board has the power to adjust outstanding options and awards in accordance with the rules of the Share
Option Schemes and intends to consider whether it is appropriate for adjustments to be made to take account of the Issue. Participants will
be notified of any proposed adjustments in due course.
The Directors believe that equity incentives are and will continue to be an important means of retaining, attracting and motivating
employees. Following completion of the Issue, the Remuneration Committee of the Board therefore intends to grant a significant number of
options and/or awards to employees below Board level to ensure that their interests are appropriately aligned with those of the Company.
Where appropriate, the Remuneration Committee will seek the surrender of existing options which will be priced at inappropriate levels
following the Issue.
9. DIRECTORS' INTENTIONS
The Directors currently beneficially own, in aggregate, 6,475,561 Ordinary Shares representing approximately 12.91 per cent. of the
ordinary share capital of the Company and currently intend, in aggregate, to take up (or procure the taking up of) their entitlement to New
Ordinary Shares under the Open Offer in full. The Directors have, in aggregate, also agreed to participate in the Placing in respect of
1,331,510 New Ordinary Shares, less the New Ordinary Shares taken up by them in the Open Offer.
Each of the Directors have entered into lock-up arrangements with Investec and Kaupthing pursuant to which they have agreed not to
dispose of any of their shares in the Company for a period of 12 months following Admission without the prior consent of Investec and
Kaupthing, subject to certain limited exceptions.
10. USE OF PROCEEDS
The Company intends to apply �1 million of the net proceeds of the Issue towards providing cash collateral to its credit and debit card
clearing bank and place the remaining net proceeds of the Issue on deposit to be used to satisfy working capital requirements as they
arise.
DEFINITIONS
The following definitions apply throughout this announcement, unless the context otherwise requires:
"Admission" the admission of the New Ordinary Shares (i) to the Official
List and (ii) to trading on the London Stock Exchange's main
market for listed securities becoming effective in accordance,
respectively, with the Listing Rules and the Admission and
Disclosure Standards;
"Admission and Disclosure the requirements contained in the publication "Admission and
Standards" Disclosure Standards" containing, inter alia, the admission
requirements to be observed by companies seeking admission to
trading on the London Stock Exchange's main market for listed
securities;
"Application Form" the application form to be despatched with the Circular to
Qualifying non-CREST Shareholders for use in connection with the
Open Offer;
"Articles" the articles of association of the Company;
"Australia" the Commonwealth of Australia, its territories and possessions;
"Board" the Board of Directors of the Company;
"Business Day" any day (excluding Saturdays and Sundays) on which banks are
open in London for normal banking business;
"Canada" Canada, its provinces and territories and all areas under its
jurisdiction and political subdivisions thereof;
"certified" or "certificated not in uncertificated form;
form"
"Circular" the circular to be posted to Shareholders comprising a
prospectus and containing details of the Placing and Open Offer
and notice of the EGM;
"Company" or "Land of Leather" Land of Leather Holdings plc;
"Consolidation" the proposed consolidation of Ordinary Shares from one penny
each to ten pence each;
"CREST" the relevant system (as defined in the CREST Regulations) for
paperless settlement of share transfers and the holding of
shares in uncertificated form in respect of which Euroclear UK &
Ireland is the operator (as defined in the CREST Regulations);
"CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No.
3755), as amended;
"Disclosure Rules and the rules made by the FSA under Part VI of FSMA relating to the
Transparency Rules" disclosure of information (as amended from time to time);
"Euroclear UK & Ireland" Euroclear UK & Ireland Limited, the operator of CREST;
"existing Ordinary Shares" the fully paid Ordinary Shares in issue at the Record Date;
"Extraordinary General the extraordinary general meeting of the Company to be convened
Meeting" or "EGM" in connection with the Issue;
"FSA" the Financial Services Authority in its capacity as the
competent authority for the purposes of Part VI of FSMA and in
the exercise of its functions in respect of admission to the
Official List otherwise than in accordance with Part VI of FSMA
"FSMA" the Financial Services and Markets Act 2000, as amended from
time to time;
"Group" the Company and its subsidiaries from time to time;
"Investec" Investec Investment Banking, a division of Investec Bank (UK)
Limited of 2 Gresham Street, London EC2V 7QP;
"Issue" the Placing and Open Offer;
"Issue Price" 50 pence per New Ordinary Share;
"Japan" Japan, its territories and possessions and any areas subject to
its jurisdiction;
"Kaupthing" Kaupthing Singer & Friedlander Capital Markets Limited of One
Hanover Street, London W1S 1AX;
"Listing Rules" the listing rules made by the FSA under Part VI of FSMA (as
amended from time to time);
"London Stock Exchange" London Stock Exchange plc;
"New Ordinary Shares" the new ordinary shares of 10 pence each in the capital of the
Company following the Consolidation, including the new ordinary
shares to be issued pursuant to the Issue, being the Open Offer
Shares;
"Official List" the Official List of the FSA;
"Open Offer" the invitation to Qualifying Shareholders to subscribe for Open
Offer Shares at the Issue Price on the terms and subject to the
conditions to be set out or referred to in the Circular and,
where relevant, in the Application Form;
"Open Offer Entitlement" an entitlement to apply to subscribe for one Open Offer Share,
allocated to a Qualifying Shareholder pursuant to the Open
Offer;
"Open Offer Shares" the 29,945,226 New Ordinary Shares for which Qualifying
Shareholders will be invited to apply under the terms of the
Open Offer;
"Ordinary Shares" ordinary shares of one penny each in the capital of the Company
pre Consolidation and ordinary shares of ten pence each in the
capital of the Company post Consolidation;
"Placing" the conditional placing by Investec and Kaupthing on behalf of
the Company of the Open Offer Shares pursuant to the Placing
Agreement;
"Placing Agreement" the placing agreement relating to the Issue between the Company,
Investec and Kaupthing dated 19 June 2008;
"Prospectus Rules" the rules made by the FSA under Part VI of FSMA in relation to
offers of transferable securities to the public and admission of
transferable securities to trading on a regulated market;
"Qualifying CREST Qualifying Shareholders whose Ordinary Shares on the register of
Shareholders" members of the Company at the close of business on the Record
Date are in uncertificated form;
"Qualifying non-CREST Qualifying Shareholders whose Ordinary Shares on the register of
Shareholders" members of the Company at the close of business on the Record
Date are in certificated form;
"Qualifying Shareholders" Shareholders on the register of members of the Company at the
close of business on the Record Date;
"Record Date" the record date for the Issue, expected to be close of business
on 18 June 2008;
"Regulations" the Uncertificated Securities Regulations 2001, as amended from
time to time;
"Republic of South Africa" the Republic of South Africa, its territories and possessions
and any areas subject to its jurisdiction;
"Shareholders" holders of Ordinary Shares;
"United Kingdom" or "UK" The United Kingdom of Great Britain and Northern Ireland;
"United States" or "US" the United States of America, its territories and possessions,
any state of the United States of America and the District of
Columbia;
"�", "pence" or "sterling" the lawful currency of the UK.
This announcement is not a prospectus but an advertisement and investors should not subscribe for any New Ordinary Shares referred to in
this announcement except on the basis of the information contained in the Circular. Copies of the Circular will, following publication, be
available from the Company's registered office at Unit K1 & K2, Lower Road, Northfleet, Kent DA11 9BL.
This announcement does not constitute an offer of, or the solicitation of any offer to buy, any New Ordinary Shares to any person in any
jurisdiction. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose
possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these
restrictions may constitute a violation of the securities laws of such jurisdiction.
None of the Ordinary Shares, the New Ordinary Shares nor the Open Offer Entitlements have been or will be registered under the United
States Securities Act of 1933, as amended, or under the applicable securities laws of any state of the United States any province or
territory of Canada, Japan, the Republic of South Africa or Australia. Accordingly, unless a relevant exemption from such requirements is
available, neither the New Ordinary Shares nor the Open Offer Entitlements may, subject to certain exceptions, be offered, sold, taken up or
delivered, directly or indirectly, within the United States, Canada, Japan, the Republic of South Africa or Australia or in any country,
territory or possession where to do so may contravene local securities laws or regulations. Shareholders who believe that they, or persons
on whose behalf they hold Ordinary Shares, are eligible for an exemption from such requirements should refer to the Circular to determine
whether and how they may participate.
Investec Investment Banking, a division of Investec Bank (UK) Limited, which is regulated in the United Kingdom by the Financial
Services Authority, is acting exclusively for the Company as sponsor, joint broker and underwriter and for no one else in relation to the
matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded
to customers of Investec Investment Banking or for providing advice in relation to the subject matter or contents of this announcement.
Kaupthing Singer & Friedlander Capital Markets Limited, which is regulated in the United Kingdom by the Financial Services Authority, is
acting exclusively for the Company as joint broker and joint underwriter and for no one else in relation to the matters described in this
announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Kaupthing
Singer & Friedlander Capital Markets Limited or for providing advice in relation to the subject matter or contents of this announcement.
For further information please contact:
Land of Leather Holdings plc
Clive Hatchard 0147 432 2277
Investec
James Grace / Patrick Robb 0207 597 5180
Kaupthing
Nicholas How / Paul Wedge 0203 205 5000
Hudson Sandler
James White / Andrew Hayes 0207 796 4133
This information is provided by RNS
The company news service from the London Stock Exchange
END
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