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Water Hall Group plc

Trading Update

8 January 2009 

    

Further to the Interim Statement of 25 September 2008 (the 'Interim Statement'), the board of Water Hall Group plc ('the Company') has today announced that, following the difficult trading conditions experienced in the third quarter, sales, which are sensitive to construction industry activity, were in line with expectations for the last quarter. This outcome was only achieved through the adoption of an aggressive pricing policy to attain increased volumes.

The Interim Statement also disclosed, as a post balance sheet event, that during September 2008 the Company had purchased listed investments at a total cost of £1.269m. The board took the decision to invest in Lloyds TSB Group plc ('Lloyds') by acquiring 425,000 ordinary shares of 25p as an income providing investment with the intention that it should provide a higher level of income support than deposit interest. 

Since making the investment, the banking sector has performed badly and the board of Lloyds has informed the market of its proposed acquisition of HBOS plc and that it would be accepting government support, as a consequence of which it would not be paying dividends in cash until such time as the preference share element of the government support package has been repaid.

The combination of these events has resulted in a significant fall in Lloyds share price and, therefore, the value of the Company's investment. At 31December 2008, the loss on the investment arising from this adverse market movement was £733,000.

On a more positive note, the board was pleased to note that on 16 December 2008, Petards Group plc ('Petards'), in which the Company owns 7.3% of the ordinary issued equity, had its listing on AIM restored following the release of its preliminary results for the year ended 31 December 2007 and its interim results for the six month period to 30 June 2008. The Company's board was further pleased to note that while Petards is looking to strengthen it balance sheet, following losses of previous years, a pre tax profit was announced at the interim stage.

Following the restoration of Petards' AIM listing, the investment will show an increase in its value at 31 December 2008 of £35,000 over that at the time of the Company's interim statement. 

While the board is disappointed that stock market and economic conditions have impacted on the value of these investments, in particular that of Lloyds, the board believes that both investments continue to represent medium to long term value for the Company's shareholders and will, therefore, continue to retain them while monitoring their performance. 

As shareholders have previously been informed, the Company is dependent on a single asset and on regional demand for its operating performance.

The board continues to consider acquisition possibilities and is of the view that, for the first time in a number of years, better value and a wider range of opportunities are beginning to emerge. A number of potential acquisitions are presently under review.

The board's policy remains that of operating the business for cash generation and building on its cash balances to assist in the funding of a suitable acquisition.

The Company expects to make its preliminary results announcement in April 2009, at which time the board hopes to be in a position to provide more details on the corporate activity possibilities.

Contact:

Water Hall Group plc
Raschid Abdullah, Chairman	01483 452 333 / 07768 905 004
Blue Oar Securities PLC
Nick Lovering, Director, Corporate Finance	0207 448 4400

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