Dfs Furniture Plc Regulatory News (DFS)

Dongfang Shipbuilding (Group) Company Limited

("Dongfang" or the "Company")

Trading update

Further to the announcement of 10 January 2012, the Board of Dongfang announces the following update. The Company's 49%-owned shipbuilding associate, Dongfang Shipbuilding (Group) Co., Limited ("DFS Shipbuilding"), continues to have discussions with its banks and the local provincial authorities in Yueqing to secure the relevant finance and guarantees for the execution of contracts to allow commencement of work on shipbuilding orders. To date, there has been no conclusive outcome to these discussions and, as a result, DFS Shipbuilding has not been able to increase its order book or reduce its bank debts.

In light of the continuing adverse trading conditions being experienced by DFS Shipbuilding, the Directors of the Company are reviewing various restructuring options to maximise shareholder value. As shipbuilding in China is classified as a restricted industry, the Company's share ownership in DFS Shipbuilding is restricted to 49%. It is, however, the beneficiary of contractual arrangements which are designed to entitle it to certain economic benefits arising from the shipbuilding business and 100% of any earnings which may be distributed to DFS Shipbuilding's shareholders (the 'Contractual Arrangements'). The Company is not required to underwrite any losses, and has not guaranteed any bank or other indebtedness, of DFS Shipbuilding. That said, the Directors are increasingly aware of the negative impact of DFS Shipbuilding and the mistaken perception that the Contractual Arrangements expose the Company to DFS Shipbuilding's liabilities. This is further enforced by virtue of the Contractual Arrangements resulting in the consolidation of DFS Shipbuilding in the Company's group accounts.

The Directors are considering the level of the fair value provision to be made against the Company's equity investment of US$14.4 million (approximately £9.1 million) in DFS Shipbuilding given the lack of any short term prospect of any improvement in the adverse trading conditions being experienced, and the fact that certain bank loan repayments due by DFS Shipbuilding have become overdue. In addition, the Company is undertaking with its auditors a review of the Contractual Arrangements to establish which, if any, it may be beneficial to vary or terminate to avoid the Company consolidating DFS Shipbuilding's accounts and to prevent any perceived negative association with DFS Shipbuilding's liabilities.

The restructuring review includes options to focus the Group's business on its shipping operations based in Singapore and Hong Kong.

Further announcements will be made in due course as appropriate.

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For more information, please see: www.dongfangship.com.cn