14 February 2012
Response to Circular re Victoria PLC
("Victoria" or the "Company")
New Fortress Finance Holdings Limited, which holds shares in the Company representing 18.37%, and Alexander Anton note the Circular to Shareholders issued by the board of the Company dated 7 February 2012 and confirm that they have posted a response (the "Response"), a copy of which is attached in full below.
The Response outlines the reasons for the resolutions seeking the removal of the two non-executive directors and the appointment of four new non-executive directors and clearly sets out the strategy of the proposed new directors to maximise value and returns for all shareholders. Shareholders are urged to join the approximately 46% of shareholders who have already given written support to vote in favour of these changes.
There is enormous potential in Victoria that is not being realised. The proposals seek to re-invigorate the board by introducing new non-executive directors with the right skills sets, expertise and industry contacts to maximise value and returns for all shareholders. In contrast, the circular published by the current Board of Victoria is deeply concerning. Putting the Company up for sale in this rushed and unplanned way is both damaging and irresponsible.
Seymour Pierce (Financial advisor)
Jonathan Wright 020 7107 8000
Kate Miller 020 7404 5959
Reasons why you should VOTE FOR all the resolutions
Approximately 46 per cent of existing shareholders already
·The current Board has failed to create meaningful value. Shareholder value and returns are unacceptably low. That is why approximately 46 per cent of shareholders - a practical majority - want the board changed to one that can give a new approach and fresh impetus.
·The Proposed New Directors have a proven track-record of building shareholding wealth.
·The strategy of the Proposed New Directors is positive, straightforward and achievable and is intended to maximise value and returns for all shareholders. It is clearly set out in the section entitled "What are the Proposed New Directors' plans?" later in this letter.
·Many of Victoria's customers are excited about our plans for the Company and enthusiastically support us.
·The current Board's sudden extraordinary decision to put the Company up for sale in a rushed and unplanned way is irresponsible. Almost certainly it will not realise the best value for shareholders. Once appointed, the Proposed New Directors will work quickly to restore calm and confidence to the business.
·Control of Victoria is not changing. You, the shareholders, will continue to control the Company as you do now. To suggest otherwise is untrue. Shareholders are simply exercising their ownership rights to decide who should serve as directors of the Company.
· In response to the scaremongering by the current Board, the Proposed New Directors are pleased to confirm that there are several things that they are NOT intending to do:
o They do NOT intend to close down the UK business;
o They do NOT intend to leverage the business to go on an acquisition spree;
o They do NOT plan to act in a way that might jeopardise the livelihoods of the many hundreds of hard working employees of the group;
o They will NOT merge with, or acquire, Flooring Brands Limited;
o They do NOT intend to take the Company private.
·The Proposed New Directors already have the support of approximately 46 per cent. of the share capital of Victoria. The current directors own just 1 per cent. of the shares. They have shown little appetite to back themselves by investing in the Company and aligning their own interests with other shareholders.
·All our supporting shareholders have, like YOU, a vested interest in maximising the returns from their investment in Victoria. They believe this will only happen through VOTING FOR the proposed changes to the Board to bring in fresh thinking and impetus and they seek your support as well
REQUISITIONISTS' STATEMENT TO THE SHAREHOLDERS OF VICTORIA PLC
("VICTORIA" or the "COMPANY")
This statement has been issued on behalf of Ian Alexander Anton, and New Fortress Finance Holdings Limited ("New Fortress"). New Fortress, an indirect shareholder, requisitioned the General Meeting through its nominee HSBC Global Custody Nominee (UK) Limited.
14 February 2012
Dear Fellow Shareholder,
You will have received a Notice of General Meeting to be held at 2 p.m. on 6 March 2012 at the offices of Wragge & Co LLP, 55 Colmore Row, Birmingham B3 2AS. The purpose of this meeting is to make changes to the board of directors (the "Board") and this letter explains why you should VOTE FOR these changes.
Like you, we are shareholders in Victoria and have a very substantial interest in the long term success of Victoria. After years of vastly reduced dividends and with the undisturbed share price1 still trading at a 49.5 per cent. discount to the net asset value, a fresh impetus and approach is needed to create real long term value for all the Company's shareholders.
To make this happen we are seeking to replace the Chairman Nikki Beckett and non-executive director Peter Jensen with Katherine Innes Ker as Chairman, and Alexander Anton, Geoff Wilding, and Sir Bryan Nicholson (the "Proposed New Directors") as non-executive directors. These Proposed New Directors have a track record of creating substantial value for shareholders, and the right business acumen, complementary skills and industry contacts to take the business forward. We therefore ask that you join us in VOTING FOR the resolutions.
Contrary to the Company's pejorative characterisation of our group as representing only a "minority" of shareholders, shareholders owning approximately 46 per cent of Victoria's total issued share capital have already given written support to VOTE FOR these Board changes.
As fellow shareholders with a vested interest in seeing value maximised for your shares, we ask for your support too.
We first approached the Board with our proposal on 13 December 2011. We were very keen to see the changes agreed without disruption to the Company and its stakeholders, and without indulging in personalities or mud-slinging. We have kept to that stance except to refute the present Board's misleading and sometimes personal attacks.
We were astonished, as no doubt you were, that the current directors' response to our request was to ignore the wishes of a practical majority and put the whole Company up for a rushed sale. This irresponsible move supports our view that the current Board no longer has a viable strategy for the business and left us with no choice other than to requisition a general meeting. We had done everything we could to avoid doing so due to the potential disruption this would cause the business, its employees and customers.
Any offer received at this time will almost certainly substantially undervalue the Company because of the uncertain economic climate, the virtually non-existent profits in the UK, and the rushed, unplanned nature of the sale. The current Board's actions are akin to putting your house on the market at the worst possible time, leaving the lawns untidy and rubbish scattered around the garden, and then deciding you want the house sold within a week. No responsible house-owner who wants to get the best possible price would do that. And yet the Board is trying to convince shareholders that this is an appropriate response to our proposal.
1The undisturbed share price represents the average closing price of a Victoria share for the 30 business days prior to the announcement on 13 January 2012 that the current Board was putting the Company up for sale.
What is the truth about the current Board's performance?
We do not want Victoria sold under the current circumstances as there is great potential in the Company. However this is not being realised to the benefit of shareholders. For example,
· The current Board members take more from Victoria in salaries and fees than the shareholders receive in dividends.
· The current Board makes much of the increase in earnings per share in the six months to 1 October 2011. However, return on equity (which measures how well a company is using shareholders' money) was just 3 per cent. for the year ended 2 April 2011. Other carpet manufacturers' returns on equity are as high as 18 per cent. - 6 times as much.
· They also attempt to bask in the pre-tax profit growth of 76.8 per cent. in the year to 2 April 2011 compared to the prior year, but fail to mention that the pre-tax profit in that prior year was the lowest in at least the last 10 years and was a full 45 per cent. lower than the pre-tax profit made in the year to 29 March 2008.
· Until the market heard of our proposal, the share price was less than half the Company's net asset value.
· Nikki Beckett, the current chairman, was previously the CEO of NSB Retail Systems Plc. During the eight years it was listed on the main market of the London Stock Exchange and managed by Ms Beckett, it made a profit in only three years and in total lost more than £300 million.
· During the period Ms Beckett was CEO, NSB Retail also spent £350 million on a series of acquisitions. 18 months later, NSB Retail as a whole was worth just £58 million. This is alarming given the current Board's newly stated fall-back strategy (in the event they cannot sell the Company) of leveraging Victoria in order to embark upon acquisitions.
So, far from showing stellar performance, the latest results illustrate just how badly Victoria needs fresh thinking to create real wealth for shareholders. That is why you should VOTE FOR all the resolutions.
So who are the Proposed New Directors?
Brief biographical details of each of the Proposed New Directors are set out below. They have a wealth of financial and business experience and will bring enthusiasm, energy, and value-creating skills to Victoria's board - that is why we are VOTING FOR the resolutions:
Katherine Innes Ker, a former Director of SBC Warburg and media analyst, has extensive non-executive experience at well-known FTSE companies. She is currently non-executive director of the Go-Ahead Group, St Modwen Properties and Tribal Group and has held non-executive positions at companies including Taylor Wimpey, Fibernet and Shed Media Limited and Ordinance Survey.
Sir Bryan Nicholson is a former President of the CBI and a former Chairman of BUPA, Cookson Group plc, the Post Office and Rank Xerox (UK) Limited. He also chaired the Manpower Services Commission, the Financial Reporting Council, and the Council of the Open University and has been a non-executive director of GKN plc and LucasVarity plc.
Geoffrey Wilding is a former investment banker. He set up his own investment company in New Zealand in 1989 and has established a track record of creating value for shareholders, having developed and grown a number of substantial companies over the last 20 years. He sold his most recent company in a A$220 million (£1 50 million) transaction to a private equity firm. Geoff is a shareholder in Flooring Brands Limited, one of Australasia's largest carpet retailers with sales of more than A$200 million (£1 36 million) and a major customer of Victoria.
Alexander Anton, a member of the founding family of Victoria, was appointed to the main board of the Company in 1995 and became Chairman in 2007, stepping down voluntarily in 2010 as a result of a disagreement among the then members of the board about strategy. In addition to his extensive knowledge of the business, he has a track record of growing successful businesses and is currently Chairman of Legacy Portfolio, which last year successfully managed £100 million of liabilities for its clients. He was formerly Chairman of The Queen's Club, leading the successful Members' bid to acquire the club from the Lawn Tennis Association in May 2007.
The current Board has cast aspersions on Mr Wilding's and Mr Anton's suitability to act as directors of Victoria. These personal attacks are totally unwarranted and betray the current Board's inability to rebut our proposal on the basis of the relative merits of the alternative proposals. But let us address each of their claims:
· The current Board makes the claim that Alexander Anton "has tried to take the Company private on
several occasions". Not mentioned by the current Board is an attempt by Alan Bullock and some of
the current directors to take the company private in 2001. All this is in any case ancient history and
not relevant to present circumstances.
· They also attempt to impugn Mr Anton's suitability to act as a director of Victoria by referring to a cut in the dividend between 2008 and 2009. They fail to say the present chairman, Nikki Beckett, and all the current executive directors were also on the board at the time and collectively made the decision to cut the dividend when faced with declining profits.
· The current Board refers to Flooring Brands Limited, of which Geoff Wilding is a shareholder (but is not on the board), as "a competitor of a number of Victoria's largest customers in both Australia and New Zealand". They omit to mention that Flooring Brands is one of Victoria's largest customers. The Proposed New Directors believe the benefits Mr Wilding will bring to Victoria due to his intimate knowledge of the floorings market are significant and that any actual, potential or perceived conflict of interest can be appropriately managed with full transparency by the board.
· Flooring Brands Limited is a profitable retail group and has been for every single year of its existence. In fact, its operating profits are significantly higher than those of Victoria. Furthermore, it has continued to grow and make major acquisitions, including the purchase of Australia's largest independent carpet retailer in 2011, despite the global financial crisis, due to the strong support of its bankers.
In summary, the Proposed New Directors have the right complementary skills, expertise and industry contacts and interests to unlock significantly improved value for all shareholders through:
· intimate knowledge of the UK, Australian and Canadian businesses;
· first hand exposure to the Australian carpet market;
· extensive business experience on public company boards as non-executive directors.
That is why we are strongly opposed to a sale of Victoria at this time and ask that you join us in VOTING FOR the resolutions.
What are the Proposed New Directors' plans?
The Company's claim that the Proposed New Directors do not wish to disclose their strategy is false. They firmly believe you have a right to know how they intend to create wealth for all the shareholders. As you would expect, the Proposed New Directors will undertake a full strategic review. Key points of that review are already clear and are set out below:
· Growth.Our strategy is based upon growing the Company - both in the UK and Australia. No strategic opportunity is being ruled in or out. The key aim is to develop and enhance the business to reduce the unacceptable gap between the market valuation and net asset value. Strong opportunities exist in Australia where Mr Wilding's knowledge and expertise will be particularly helpful.
· New Opportunities. Unlike the current Board, the Proposed New Directors have a unique insight into flooring customers due to Mr Wilding's involvement in Flooring Brands Limited - a carpet retailer with A$200 million sales per annum. As a result they know where the high growth opportunities are in the market and where Victoria is missing out on this growth. This is all too common with companies with long-standing management. They become complacent and adopt a 'business as usual' attitude. We will ensure Victoria is positioned to take advantage of these high growth areas.
· Sale of non-core assets.We note that the current Board have agreed to adopt one of our proposals. It is a sign of complacency that this has not been done previously and is an example of the advantage of fresh thinking that the Proposed New Directors will bring to the Company.
● Working capital. The current Board has allowed too much money to be tied up in working capital. We will not allow this to continue as it is a highly inefficient use of the shareholders' money.
● Minimise debt. Loading a business up with debt in these economic times is at best unwise, and at worst dangerous. We are deeply disturbed by the current Board's proposal to leverage the Company. We will not. There is ample opportunity to increase returns to shareholders without putting the Company at risk with excessive debt.
We and the other shareholders who have already committed to support the proposed changes to the Board are long term and substantial shareholders in Victoria. Our interests are therefore exactly the same as yours: we do not want the Company sold, partially sold or otherwise dismembered at this time in such a rushed and damaging manner. We want it to grow and succeed better than it is at present.
Victoria has enormous potential. That is beyond dispute. However the current Board has failed to unlock that value and, after years of supporting the Company as long-standing shareholders, we do not want to see it sold for a price such that all that value can be realised by a new buyer. Nor do we want continued low returns.
What the Proposed New Directors offer is more beneficial to all shareholders than a continuation of the status quo or a rushed, ill-timed sale at this low point in the economic cycle. We therefore urge you to join us and the other supporting shareholders to VOTE FOR positive change and growth by supporting all of the resolutions. That will ensure the best outcome for all Victoria's shareholders.
Ian Alexander Anton New Fortress Finance Holdings Limited
Kate Miller Jonathan Wright
Brunswick LLP Seymour Pierce Limited
16 Lincoln's Inn Fields, 20 Old Bailey
WC2A 3ED EC4M 7EN
Tel: +44 20 7404 5959 Tel: +44 207 107 8000
How to Vote
By now you should have received a notice of general meeting of Victoria plc ("GM") to be held at 2.00 p.m. on 6 March 2012 at the offices of Wragge & co LLP, 55 Colmore Row, Birmingham B3 2AS ("Notice of GM").
You will find enclosed with the Notice of GM, a form of proxy for use at the GM ("Form of Proxy"). Whether or not you intend to attend the GM, we would urge you to complete the Form of Proxy to VOTE FOR all of the resolutions and to appoint Katherine Innes Ker as your proxy for the GM.
The Form of Proxy must be completed and signed and sent or delivered, together with any power of attorney or other authority (if any) under which it is signed, so as to reach Victoria's registered office, at Worcester Road, Kidderminster, Worcestershire DY1 0 1 JR as soon as possible but in any event no later than 2.00 p.m. (UK) time on 2 March 2012. The return of the completed Form of Proxy will not prevent you from attending the GM and voting in person if you wish to do so.
If you are in any doubt about the action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent professional adviser duly authorised under the Financial Services and Markets Act 2000.
The contents of this statement should not be construed as legal, investment or tax advice, nor should they be construed as an invitation to purchase or sell any of your shares in Victoria plc. This statement is being circulated to shareholders of Victoria plc for the purpose of supporting the resolutions proposed by Ian Alexander Anton and HSBC Global Custody Nominee (UK) Limited (for and on behalf of New Fortress) as members of Victoria plc pursuant to section 303(2)(a) of the Companies Act 2006.
We believe that certain statements in this announcement may constitute "forward-looking statements". Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and risks, any of which are subject to change. As a consequence, current plans, anticipated actions and future financial conditions and results may differ from those expressed in any forward-looking statements made by or on our behalf. Additionally, forward-looking statements speak only as of the date they are made and we undertake no obligation to release publicly the results of any future revisions or updates we may make to forward-looking statements to reflect new information or circumstances after the date of this announcement or to reflect the occurrence of future events.