24th Jan 2007 07:01
Brown (N.) Group PLC24 January 2007 N Brown Group plc RETURN OF VALUE TO SHAREHOLDERS OF APPROXIMATELY £80 MILLION N Brown Group plc ("N Brown" or the "Company") announces it proposes to make a one-off return of value to shareholders of 27p per existing ordinary share, equivalent to approximately £80 million or 9.5% of N Brown's current market capitalisation. The return is being made using a B share structure with an associated share consolidation of 19 new ordinary shares for every 21 existing ordinary shares. The approval of shareholders is required for the return of value and share consolidation. Accordingly, the Company will shortly be postinga circular to its shareholders and convening an Extraordinary General Meeting, expected to be held on or about 21 February 2007, to approve the transaction. N Brown Chief Executive Officer, Alan White said: "Today we announced a trading update that shows a continued strong performance across the business despite a tough retail environment. Over the last few years, we have worked hard on our strategy to re-focus the company on its core home shopping business, and I am pleased that this has resulted in strong growth for N Brown in both turnover and operating profit. This has placed us in the position where we can make a one-off return of value to our shareholders, while at the same time maintaining a financial structure to continue to grow the business both organically and through appropriate acquisitions. We will continue to look at opportunities to enhance shareholder value on an ongoing basis." Rationale for the Return of Value Over the last few years, the management of N Brown has followed a strategy tore-focus the Company on its core home shopping business. As a result, theCompany has undergone a period of rationalisation including the divestment ofnon-core operations as well as developing the home shopping business byimproving product ranges and catalogue presentation and significantly increasingthe proportion of online sales. This has resulted in a return to strong growthin both turnover and operating profit despite challenging retail markets. Over this period, N Brown has raised significant proceeds from the disposal ofFirst Financial Limited, the Group's financial services business; therationalisation of House of Stirling, the Group's door-to-door selling arm, andthe disposal of the Group's TV rental business and courier operations. In the 52weeks ended 25 February 2006, turnover in the core home shopping businessincreased by 10.4% to £459.6 million and operating profit was up by 11.0% at£62.4 million. At the half year to 26 August 2006, net debt (excludingretirement benefit obligations) stood at £105.3 million and interest was covereda comfortable 8.5 times. N Brown has today separately issued a trading update in which it confirmed that,as a result of the continued momentum in sales growth the directors areconfident of at least meeting their expectations for the full year to February2007. This excludes the exceptional costs of £0.9 million arising from thereturn of value to shareholders. Both the one-off return of value toshareholders and trading for the year to date demonstrate the continuedconfidence the directors have in N Brown's prospects and strategy for 2007. Accordingly the directors now believe that N Brown has capacity to returnapproximately £80 million to shareholders while retaining flexibility tocontinue to grow the business organically and to continue to make complementaryacquisitions. In determining the size of the return, the directors have soughtto achieve a more efficient and appropriate balance sheet for the Company goingforward. If the return of value is approved, the directors have also decided to increasethe contributions towards the funding deficit in the N Brown Group Pension Fundby paying a one-off contribution of £15 million at the same time the return ofvalue is made, followed by three further contributions of £4 million per annumfor three years, with the final payment being subject to review. This shouldeliminate the pension funding deficit, which has been calculated at £26.8 million on an IAS19 basis as at 30 June 2006, over the next four years. The Pensions Regulator has made a determination on 23 January 2007 to issue a clearance statement to the directors in relation to the return of value. The Company has entered into new debt facility agreements with HSBC and The Royal Bank of Scotland, which will be used to finance the return of value, the increased contributions to the pension fund and for general corporate purposes. Key Terms of the Return of Value The return of value consists of a capital reorganisation, including an associated share consolidation, and the B share alternatives. Under the terms of the return of value, shareholders will receive: for every 1 existing ordinary share held at the record date 1 B share; and for every 21 existing ordinary shares held at the record date 19 new ordinary shares Subject to shareholder approval, shareholders will be able to elect between the following alternatives in relation to their B shares. Alternative 1 - Purchase Offer ("Purchase Offer") Shareholders (other than US shareholders) may elect to have all or some of theirB shares purchased by Credit Suisse, acting as principal under the purchaseoffer intended to be made, on or about 1 March 2007 (or such other date as thedirectors may determine), at 27 pence per B share, free of all dealing expensesand commissions. Alternative 2 - Single B Share Dividend ("Single B Share Dividend") Shareholders may elect to receive the Single B Share Dividend of 27 pence per Bshare in respect of all or some of their B shares. Shareholders who do not elect for either of these alternatives willautomatically be deemed to be electing for Alternative 2 and will receive theSingle B Share Dividend in relation to all of their B shares. Additionally,Alternative 1 is not being offered into the United States of America and, as aresult, US shareholders will only receive the single dividend in respect of suchshares. The B shares will neither be admitted to the Official List nor to trading on the London Stock Exchange's main market for listed securities nor will they beadmitted to trading on any other recognised investment exchange. The B shares will have limited rights. After payment of the Single B Share Dividend, the B shares will convert into deferred shares which the Company may buy back for an aggregate sum of one penny. A number of changes to the articles of association of the Company are required in order to implement the return of value. The share consolidation will reduce the number of ordinary shares in issue in order to reflect the value to be returned to shareholders. Subject to normal market movements, this is intended to make the market price and other Company data such as earnings and dividends per share comparable after the return. The effect of the share capital consolidation should be broadly to preserve the value of options and awards prevailing immediately before the return, subject to any normal market fluctuations. New ordinary shares will be traded on the London Stock Exchange in the same way as the existing ordinary shares and will be equivalent to the existing ordinary shares in all material respects. A circular containing full terms of the return of value and the alternatives, including a detailed timetable and a description of the tax consequences of the B share alternatives, together with notice convening an extraordinary general meeting of the Company will be posted to shareholders shortly, togetherwith a form of proxy for the Extraordinary General Meeting and a form of election in respect of the B share alternatives. Alan White and Dean Moore will be hosting a conference call for analysts and investors at 9.00 GMT today. Participants are invited to call five minutes prior to this time. Direct Dial-in number +44 (0) 1296 480100Passcode 704413 A replay facility will be available for a week following the announcement: Direct Dial-in number + 44 (0) 207 136 9233Passcode 21186889 Credit Suisse Securities (Europe) Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser and corporate broker to N Brown and is acting for no-one else in connection with the return of value, the Purchase Offer or any other matter referred to in this announcement, and will not be responsible to anyone other than N Brown for providing the protections afforded to customers of Credit Suisse Securities (Europe) Limited nor for providing advice to any other person in relation to the return of value, the Purchase Offer or any other matter referred to in this document. Enquiries: N Brown Group plc: 0161 238 2202Alan White, CEODean Moore, CFO Credit Suisse: 020 7888 8888John Hannaford Hoare Govett: 020 7678 8000Sara Hale Gavin Anderson: 020 7554 1400Fergus Wylie This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Brown Group