Signet shake-up leaves ordinary shareholders with 17.5% stake

Signet, the former Ratner's jewellery business, announced its long-awaited capital restructuring yesterday in a shake-up that will leave existing ordinary shareholders with just 17.5 per cent of the company.

Signet said the capital reorganisation would reduce interest charges, improve liquidity and enable it to pay dividends on future profits. The H Samuel and Ernest Jones retailer has not paid a dividend since 1992 and does not expect to pay one in the current year. Signet's ordinary shares fell 6p to 30.5p.

The rebel shareholder Julian Treger, of UK Active Value, said he approved of the restructure in principle but would need to see the precise detail before giving it his full support. "We're glad they've announced a re- structure at last. We think it is now a very exciting company."

Signet's chairman, James McAdam, said the company's plans to convert all classes of shares into new ordinary shares were pitched at a level which the board thought would be acceptable to all investors.

Under the terms of the deal the nine existing classes of ordinary and preference shares will convert into 1.38 billion new shares. Dividend areas of pounds 164.5m owed to preference shareholders will be waived. Preference shareholders will then hold 82.5 per cent of Signet with ordinary shareholders holding the remainder. UK Active Value will have between 7 to 8 per cent.

If the capital reconstruction is approved, the group of rebel shareholders who sought a shake-up in a filing to the US Securities and Exchange Commission, would hold 35 per cent of the new group. They have said that would not act in concert and so under Takeover Panel rules would not be required to make an offer for the company.

However, the reconstruction needs to be approved by a 75 per cent majority of each class of share. James McAdam said he was "optimistic" that the terms would be approved. Emergency and class meetings will be held on 26 June.

The new share structure should boost earnings per share and lead to a re-rating. Mr Treger said that if the restructure was approved Signet could be valued at pounds 500m, making it a FTSE 250 company.

Signet also announced its full-year results yesterday, showing an 80 per cent leap in profits to pounds 45m. Operating profits were 20 per cent ahead at pounds 76.5m though there was a pounds 31.4m interest charge. Profits in the US rose by 17 per cent while the UK operations, H Samuel and Ernest Jones showed a 25 per cent profits improvement. Like-for-like sales were 12 per cent ahead at Ernest Jones but just 1.2 per cent up at H Samuel. In current trading Signet said same store sales were ahead of last year and in line with expectations.