Last checked at 23 Jul 2008 07:00
23 July 2008
Parity Group plc
("Parity" or the "Company")
Disposal of Parity Training Limited
The Board of Parity is pleased to announce that it has agreed the disposal of Parity Training Limited, its training division, to Xpertise Group PLC for a total cash consideration of £4.775 million.
Highlights:
Proposed disposal of Parity Training for a total cash consideration of £4.775 million.
Following the Disposal, the Continuing Group will be in a stronger financial position and will be focused on growing its two main divisions, Resources and Solutions.
The proceeds of the Disposal will be used to reduce the Group's borrowings, further strengthening its financial position going forward.
The Disposal is conditional on Parity Shareholder approval and the re-admission of Xpertise to AIM.
As announced separately today, current trading in line with management expectations. Interim results for the six months ended 30 June 2008 to be released on 28 August 2008.
Alwyn Welch, Chief Executive of Parity, said:
"The improvement we have been able to deliver in Parity Training's performance is reflected in the value of the deal being announced today.
This disposal will put us in a better strategic and financial position to focus on and grow our two core divisions, Resources and Solutions, both of which are performing well and continue to report new contract wins.
By becoming a part of Xpertise, the Training business will gain the benefit from both the scale and focus required to maximise its potential in the future."
Enquiries:
| Parity Group plc Alwyn Welch, Chief Executive Officer Ian Ketchin, Finance Director
| 0845 873 6942 |
| Arbuthnot Securities Limited Alastair Moreton/Richard Tulloch
| 020 7012 2000 |
| The Hogarth Partnership John Olsen/Sarah Richardson
| 020 7357 9477 |
This announcement is for information purposes only and does not constitute an offer or invitation to acquire or dispose of any securities or investment advice in any jurisdiction.
This announcement contains a number of forward looking statements relating to the Parity Group with respect to, amongst others, the following: financial conditions; results of operations; economic conditions in which the Parity Group operates; the business of the Parity Group; future benefits of the Disposal; and management plans and objectives. Parity considers any statements that are not historical facts as "forward looking statements". They relate to events and trends that are subject to risks, uncertainties and assumptions that could cause the actual results and financial position of the Parity Group to differ materially from the information presented in the relevant forward looking statement. When used in this announcement the words "estimate", "project", "intend", "aim", "anticipate", "believe", "expect", "should", and similar expressions, as they relate to the Parity Group or the management of it, are intended to identify such forward looking statements. Readers are cautioned not to place undue reliance on these forward looking statements which speak only as at the date of this announcement. Neither Parity nor any member of the Parity Group undertakes any obligation to update publicly or revise any of the forward looking statements, whether as a result of new information, future events or otherwise, save in respect of any requirement under applicable laws, the Listing Rules, the Disclosure and Transparency Rules and other regulations.
Arbuthnot Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for Parity Group plc and for no one else in connection with the contents of this announcement and will not be responsible to anyone other than Parity Group plc for providing the protections afforded to customers of Arbuthnot Securities Limited in relation to the contents of this announcement or any other matters referred to in this announcement.
Proposed Disposal of Parity Training Limited to Xpertise Group PLC for £4.775 million
1. Introduction
Your Board announced earlier today that the Company had entered into a conditional agreement for the sale of Parity Training, its training division, to Xpertise, a leading supplier of IT training in the UK, for a total cash consideration of £4.775 million, subject to the terms and conditions of the Disposal Agreement.
Owing to the size of the Disposal relative to the size of the Company, the Disposal constitutes a Class 1 transaction for the purpose of the Listing Rules. Completion of the Disposal is therefore conditional upon, among other things, the approval of Shareholders at the Extraordinary General Meeting.
2.Information on Parity Training
Parity Training, a leading provider by revenue of IT training in the UK, is focused on the provision of flexible IT learning solutions to both public and private organisations. It offers a broad range of IT training courses via instructor led training, e-learning or a blend with a focus on the core areas of project and programme management, service management, business systems design and other soft skills related to IT.
A number of strategic and operational changes have been implemented within Parity Training over the last few years, with the aim of increasing its competitiveness and focusing it on attractive higher margin business. This has involved transforming the cost base from one which comprised primarily fixed costs to one which is more variable and flexible. It also sought to reduce the number of public courses delivered with the focus now being on courses where Parity Training has an established position and can achieve higher levels of utilisation. This has resulted in an improvement in Parity Training's performance with operational results increasing from an operating loss (before exceptionals) of £1.2 million in 2005 to an operating profit of £0.6 million in 2007. As at 31 December 2007, Parity Training had gross assets of £9.6 million.
3. Background to and reasons for the Disposal and use of proceeds
Following the successful implementation of the changes in Parity Training, as described above, the Board believes that for Training to continue to develop and take advantage of market opportunities as they emerge, it would be better placed if it was part of a pure play IT training company. As a result, the Board believes that the price agreed with Xpertise for Parity Training reflects the quality of the business and its prospects and that the business will be able to continue to develop as part of Xpertise, a leading provider of IT training in the UK.
Following the Disposal, the Board believes that the Continuing Group will be in a stronger financial position and will be focused on growing its two main divisions, Resources and Solutions. In addition the Board intends to use the net proceeds of the Disposal to reduce the Group's borrowings, further strengthening its financial position going forward.
Further information on the Continuing Group is set out below.
4. Principal terms and conditions of the Disposal
The Company, Parity Holdings, Xpertise Training and Xpertise entered into the Disposal Agreement today pursuant to which the Company agreed to procure the sale of, by its subsidiary Parity Holdings, and Xpertise Training agreed to purchase, with full title guarantee, the entire share capital of Parity Training as a going concern subject to the satisfaction of certain conditions.
The consideration to be paid by Xpertise for Parity Training is £4.775 million in cash payable on Completion, subject to the adjustment as detailed in the Disposal Agreement. Completion is conditional on (i) the approval of Parity Shareholders at the forthcoming EGM and (ii) the re-admission to trading on AIM of Xpertise's 5.6 million ordinary shares currently in issue and, in connection with Xpertise's fundraising to part finance the acquisition of Parity Training, the admission of 3.25 million new ordinary shares in Xpertise becoming effective (the "Buyer Condition"). These conditions are required to be satisfied by 14 September 2008, failing which the Disposal Agreement will terminate. If and to the extent Xpertise and Xpertise Training do not procure the satisfaction of the Buyer Condition (and this is not caused as a direct result of any actions of Parity Holdings or the Company) Xpertise and Xpertise Training shall pay a break fee of £100,000 to Parity Holdings. However, if there is a material adverse change in the financial position of Parity Training prior to Completion, Xpertise and Xpertise Training shall have a right to terminate the Disposal Agreement without any liability and no break fee shall be payable by Xpertise and Xpertise Training.
Under the terms of the Disposal Agreement, Xpertise and Xpertise Training is required to place £0.775 million of the Consideration ("Escrow Amount") into an escrow account. This Escrow Amount shall be released to Parity Holdings in five equal instalments every second month following Completion such that it is all released on the tenth month following Completion. If however at any time prior to the tenth month following Completion, a contract which Parity Training is a party to with one of its customers is terminated by that customer (save for reasons of insolvency of Parity Training), the full amount then standing in the escrow account shall be released to Xpertise and Xpertise Training.
Further details of the Disposal Agreement are set out in the circular to be sent to Shareholders today.
5. Information on the Continuing Group
The Disposal will enable Parity to focus on its two main divisions, Resources and Solutions.
Resources, Parity's largest business unit, is a leading IT recruitment specialist in the UK by revenue, providing permanent and contract technology staff, temporary staff and managed recruitment services to a wide range of clients in the public and private sectors. In the year ended 31 December 2007, Resources had revenue of £110.3 million and an operating profit (before exceptionals) of £2.66 million.
Solutions provides IT consulting, systems development and applications and management services to blue chip private and public sector clients, specialising in Microsoft and Oracle technologies. Solutions, with its in-house technical expertise and project management experience, will work both as a primary and secondary contractor on projects and programmes. In the year ended 31 December 2007, Solutions had revenue of £31.0 million and an operating profit (before exceptionals) of £3.2 million.
6. Further information and details of the Disposal
A circular containing further details of the Disposal, including notice of the Extraordinary General Meeting to seek Shareholders approval for the Disposal and the recommendation of the Board to vote in favour of the Disposal, will be sent to Shareholders later today.
The Extraordinary General Meeting will be held at 11.00 a.m. on 13 August 2008 at the offices of Ashurst, Broadwalk House, 5 Appold Street, London EC2A 2HA.
Two copies of the circular will be submitted to the UK Listing Authority and will be available for inspection by the public at the UK Listing Authority's Document Viewing Facility which is situated at: Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS, telephone 020 7066 1000.
Enquiries:
| Parity Group plc Alwyn Welch, Chief Executive Officer Ian Ketchin, Finance Director
| 0845 873 6942 |
| Arbuthnot Securities Limited Alastair Moreton/Richard Tulloch
| 020 7012 2000 |
| The Hogarth Partnership John Olsen/Sarah Richardson
| 020 7357 9477 |
Definitions
The following definitions apply throughout this announcement unless the context requires otherwise:
| "Board" or "Directors" | the directors of the Company |
| "Completion" | Completion of the disposal of Parity Training |
| "Continuing Group" | the Group as constituted after Completion |
| "Disposal" | the proposed disposal by Parity Group, of Parity Training Limited pursuant to the terms and subject to the conditions of the Disposal Agreement |
| "Disposal Agreement" | means the conditional agreement dated 23 July 2008 between Parity Group and Parity Training (as sellers) and Xpertise relating to the disposal |
| "Extraordinary General Meeting" or "EGM" | the extraordinary general meeting of the Company to be held at 11.00 a.m. on 13 August 2008, or any adjournment thereof |
| "Financial Services Authority" or "FSA" | Financial Services Authority Limited |
| "Listing Rules" | the listing rules of the UK Listing Authority (as amended) |
| "Ordinary Shares" or "Parity Shares" | the ordinary shares of 2p each in the capital of the Company |
| "Parity" or the "Company" | Parity Group plc |
| "Parity Group" or "Group" | the Company and its subsidiaries as at the date of this announcement |
| "Parity Holdings" | Parity Holdings Limited, a wholly owned subsidiary of Parity |
| "Parity Training" | Parity Training Limited |
| "Parity Shareholders" or "Shareholders" | holders of Ordinary Shares |
| "Resources" | the IT recruitment specialist business of the Parity Group |
| "Solutions" | the IT consulting systems development and applications business of the Parity Group |
| "Training" | the IT training business of the Parity Group |
| "UK Listing Authority" | the Financial Services Authority acting in its capacity as the competent authority for the purposes of part VI of the Financial Services and Markets Act 2000 (as amended) |
| "Xpertise" | Xpertise Group PLC |
| "Xpertise Training" | Xpertise Training Limited, a wholly owned subsidiary of Xpertise |