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Petards aims to wipe out [pounds sterling]26.5m deficit through proposed capital reduction; The Gateshead firm wants to create reserves which will give it the flexibility to pay dividends to shareholder.

Byline: Coreena Ford

Security and surveillance specialists Petards has proposed a plan to wipe out its [pounds sterling]26m deficit and pave the way for potential dividends for shareholders.

The Gateshead -based AIM-quoted business is to put forward a capital reduction plan to shareholders, to create distributable reserves and give it the flexibility to pay dividends and make other capital returns to shareholders.

Legislation currently bans the firm from paying dividends something it is banned from doing at the moment as it has negative distributable reserves.

The firm, which employs around 80 people, works in the rail, security and defence markets, manufacturing electronic solutions including video and sensor data surveillance, radio communications and threat simulation systems on mobile platforms.

And the firm said it has made good progress over the last two years, making this an "appropriate" time to make the capital reduction.

A market note announcing the plans said: "It is these business strengths and confidence for the future which have led the Board to recommend that the building blocks to create distributable reserves be put in place."

The company's plans -- which are subject to shareholder approval, followed by a court process -- involve eliminating the [pounds sterling]26.54m deficit it had at December 31 2014 through a series of measures.

Firstly, the 630,342,900 issued Deferred Shares would be cancelled and secondly, [pounds sterling]25.19m standing to the credit of the company's share premium account would be cancelled.

Directors propose to then capitalise on the [pounds sterling]1.074m in the company's merger reserve through a bonus issue of newly created Capital Reduction Shares, and lastly, the newly created Capital Reduction Shares would be cancelled.

The cancellations, if approved by a court hearing, will create realised profits sufficient to wipe out the deficit on the company's profit and loss account.

The first hearing on the capital reduction is slated for December 3, with the final one on December 16.

If everything goes ahead as planned the capital reduction will becoming effective on the last hearing day, after the necessary registration of the court order at Companies House.

The plans will be put before Petards' general meeting on November 11.

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Title Annotation:Business
Publication:The Chronicle (Newscastle upon Tyne, England)
Date:Oct 26, 2015
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