WGT Wallgate

    RNS Number : 6799G
  Wallgate Group PLC
  24 October 2008
   

    Immediate Release: 24 October 2008

    Wallgate Group plc

    ("Wallgate" or the "Company")

    Trading Update, Funding Requirements and Resignation of a Director

    Wallgate is today providing an update on trading, its financial position and its short term funding requirements.

    Trading update

    The acquisition of Wallgate Services Limited, at the end of March 2008, introduced a number of new sources of supply of consumer
electronic products to the group. Although in the period immediately following the acquisition, store sales increased dramatically, driven
by the type of stock that was introduced, the poor summer weather and general economic climate led to retail sales figures during the third
quarter being substantially below forecast. This in turn put significant pressure on cash flow and, as a result, the Company's retail
subsidiary, Hitchens Limited ("Hitchens"), continued to lose money, as the required sale and profit levels to cover the costs of running the
retail division were not met. 

    As a result, the Company has today reluctantly decided to place Hitchens into administration. This will result in a significant
reduction in the overhead for the Company and, the Board believes, will better position the Company for growth and a return to
profitability. 

    The Company will retain two stores (in Runcorn and Beeston) and its e-commerce trading divisions (Hot Deals Limited and Best Price
Trading Limited). The Company believes that demand for discounted electrical products from its wholesale division remains strong and that it
has a robust business model for the source and supply of such products. Furthermore, the Company believes that the current economic
conditions are conducive to the creation of opportunities for the purchase of distressed stock at discounted prices. 

    Further Funding

    The Company requires further funding of at least �1,000,000, by 28 November 2008, in order to continue trading. The Board has considered
a number of potential funding options, but believes that the only viable option available that satisfies the Company's requirements both in
terms of quantum and timing, is a deeply discounted equity issue (the "Proposed Placing"). Whilst the Company has an urgent requirement to
raise �1,000,000, the Board is targeting an equity issue to raise between �1,000,000 and �1,500,000. The price of the Proposed Placing will
be agreed between the Company and potential investors over the coming weeks

    The proceeds of the Proposed Placing are to be used for general working capital purposes, which will allow the Company to pay creditors,
to fund stock purchases and to take advantage of distressed stock situations in the run up to the Christmas trading period. The Company is
pleased to report that a number of its major commercial creditors have agreed to freeze their outstanding balances until at least 24
November 2008.  The Company is also pleased to report that Simon Fine (CFO) and Howard Strowman (Chairman and CEO) have agreed to forego
payment of their salaries for October 2008.

    The Company is seeking to raise the required funding through the issue of the Proposed Placing Shares at a price to be determined
following discussions with potential investors. The Board believes that discussions are progressing satisfactorily, albeit that preliminary
indications are that the Proposed Placing price will be at a significant discount to the current share price. However, the Companies Act
prevents the Company from issuing new shares at a price below the nominal value of its Ordinary Shares (currently 0.75p). The Board
therefore believes that a Capital Reorganisation would therefore help improve the marketability of the Company's share capital and will
allow the Proposed Placing to proceed and raise the required minimum amount of �1,000,000.

    The Company has been in discussions with potential investors for a number of weeks and the board of Wallgate is confident that
sufficient funds can be raised. 

    However, in the event that a minimum of �1,000,000 has not been raised by 28 November through the Proposed Placing, the Company will
need to explore alternative sources of funding as a matter of urgency and may be required significantly to curtail its operations and
further review its business strategy. 

    Resignation of director

    Additionally, the Company today announces that John Taylor is resigning from the Board, with immediate effect, to pursue other business
interests. The Company plans to replace Mr Taylor in due course and will make a further announcement accordingly.

    Howard Strowman, CEO, commented, "John has been a valuable member of the Wallgate team since Wallgate was acquired by Hitchens earlier
this year. He has made a very positive contribution to the merging of our two businesses and we wish him every success in the future".

    Extraordinary General Meeting

    Wallgate announces that it has today issued a circular to shareholders to convene a General Meeting at which it will seek shareholder
approval, inter alia, to disapply pre-emption rights for a new issue of ordinary shares with a nominal value of not greater than 90 per
cent. of the Company's existing issued share capital and a subdivision of each ordinary share of 0.75p into 10 ordinary shares of 0.075p, to
allow the Company to undertake, subject to shareholder approval, the Proposed Placing.



    For further information on the Company please see www.wallgategroup.com or contact:


 Wallgate Group plc       Howard Strowman, Chief           +44(0) 20 7559 1313
                          Executive
                          Simon Fine, Finance Director     +44(0) 12 0470 6624

 Strand Partners Limited  Stuart Faulkner                  +44(0) 20 7409 3494
                          James Spinney

 St Helen's Capital Plc   Ruari McGirr                     +44(0) 20 7628 5582

 Hansard Group            John Bick                        +44(0) 20 7245 1100





    About Wallgate Group plc (AIM ticker: WGT.L) 
    Wallgate Group provides outsourcing services to major manufacturers, retailers and distributors with whom it works in partnership to
maximize their net asset recovery percentage on consumer returns. Through its 'RevShare' service Wallgate provides an end-to-end solution
for returns management including store collection, inventory management, refurbishment, repackaging and remarketing of consumer returns back
across all marketing channels including online, principally for higher value consumer electronics goods. Wallgate has a wide customer base
for remarketed products which includes major high street and online retailers.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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