Parity Regulatory News (PTY)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any New Ordinary Shares, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract or commitment whatsoever with respect to the proposed Firm Placing, Placing and Open Offer or otherwise. This announcement is not a prospectus and investors should not subscribe for or purchase any New Ordinary Shares referred to in this announcement except SOLELY on the basis of information in the prospectus expected to be published TODAY. Copies of the prospectus will, following publication, be available from PINSENT MASONS LLP, 30 CROWN PLACE, LONDON EC2A 4ES.

PARITY GROUP PLC

Proposed Firm Placing, Placing and Open Offer

and

Interim Management Statement

Parity Group plc ("Parity" or the "Company") (LSE: PTY:L) a specialist provider of IT services, is pleased to announce that it proposes to raise approximately £6.4 million (net of expenses) by way of a Firm Placing of 20,873,087 New Ordinary Shares and a Placing and Open Offer of 9,561,696 New Ordinary Shares at the Issue Price of 23 pence per New Ordinary Share.

Highlights:

·; Proposed Firm Placing, Placing and Open Offer to raise approximately £6.4 million (net of expenses);

·; Issue Price of 23p per New Ordinary Share represents a discount of 16.4 per cent to the closing middle market price on 10 May 2011 (being the last dealing day prior to this announcement);

·; Qualifying Shareholders can subscribe for Open Offer Shares on the basis of 1 Open Offer Share for every 4 Existing Ordinary Shares held; and

·; The net proceeds of £6.4 million will be used by management to provide additional working capital, invest in new initiatives and take advantage of opportunities to reduce the cost base.

Singer Capital Markets Limited is acting as sponsor and broker to the Company.

This announcement also serves as the Company's Interim Management Statement for the period from 1 January 2011 to 11 May 2011.

Philip Swinstead, Chairman of Parity, said:

"Following the fundamental restructuring of the Board last year, when I and my fellow founder of Parity re-joined the Company, a good deal of progress has been made in addressing the issues facing the business. The cost base has been reduced, new banking facilities negotiated, and the business reorganised to focus on newer and more profitable emerging demands and technologies.

"It is clear to us however that, in order to reduce the reliance on debt facilities, to implement further cost reductions, and to enable us to invest in new growth initiatives, it is now necessary to raise these additional funds.

"Overall and as expected, we have seen more stable revenues and performance in the first quarter of the current year, which is encouraging. As the markets for IT services improve, and with the additional cost-cutting measures and new initiatives enabled by the additional funds, the Board believes that further improvement to performance will be possible, albeit with significant results not showing through fully until next year."

The Prospectus, Application Form and Form of Proxy will be posted to shareholders (other than shareholders in Prohibited Territories) today. The Prospectus contains a notice of general meeting to approve, inter alia, the Firm Placing, Placing and Open Offer, which will be held at 11.00 a.m. on 27 May 2011 at Wimbledon Bridge House, 1 Hartfield Road, Wimbledon, London SW19 3RU.

When posted, copies of the Prospectus will be submitted to the UKLA's National Storage Mechanism and will be available for inspection at www.hemscott.com.

In addition, the Prospectus will be available to view on the Company's website (www.parity.net). Copies of the Prospectus will be also available from the offices of Pinsent Masons LLP, 30 Crown Place, London EC2A 4ES.

This announcement is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into Australia, Canada, Japan, New Zealand, the Republic of Ireland, the Republic of South Africa or the United States or any jurisdiction into which the publication or distribution would be unlawful.

This announcement is for information purposes only and does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire shares in the capital of the Company. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. The New Ordinary Shares have not been and will not be registered under the applicable securities laws of any of the Prohibited Territories and, unless an exemption under such laws are available, may not be offered for sale or subscription or sold, or pledged, or subscribed directly or indirectly within the Prohibited Territories or for the account or benefit of any national, resident or citizen of the Prohibited Territories. The New Ordinary Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state of the United States and may not be offered, sold, resold, pledged, transferred or delivered, directly or indirectly, into or within the United States or to or for the account or benefit of any US person within the meaning of Regulation S of the Securities Act, except pursuant to an applicable exemption from registration requirements. In particular, the New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any other US regulatory authority, nor has any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the accuracy or the adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.

Forward looking statements:

This announcement includes statements that are, or may be deemed to be, "forward-looking statements" that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts and are stated subject to the Company's obligations under the Disclosure and Transparency Rules, Listing Rules and Prospectus Rules.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Company's actual results to differ materially from those indicated in these statements. These factors include but are not limited to those described in the part of the Prospectus entitled "Risk Factors", which should be read in conjunction with the other cautionary statements that are included in the Prospectus and this announcement. Any forward-looking statements in this announcement reflect the Company's current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company's operations, results of operations and growth strategy.

Undue reliance should not be placed on forward-looking statements, which speak only as of the date of this announcement. The Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, subject always to the continuing obligations of the Company to make relevant disclosures under the Listing Rules, Prospectus Rules and Disclosure and Transparency Rules as in force from time to time. Among the factors which could cause actual results to differ materially from those described in the forward-looking statements are changes in global, political, economic, business or competitive conditions, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or disposals.

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any New Ordinary Shares, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract or commitment whatsoever with respect to the proposed Firm Placing, Placing and Open Offer or otherwise. This announcement is not a prospectus and investors should not subscribe for or purchase any New Ordinary Shares referred to in this announcement except SOLELY on the basis of information in the prospectus expected to be published TODAY. Copies of the prospectus will, following publication, be available from PINSENT MASONS LLP, 30 CROWN PLACE, LONDON EC2A 4ES.

PARITY GROUP PLC

Proposed Firm Placing, Placing and Open Offer

and

Interim Management Statement

1. Introduction

Parity Group plc ("Parity" or the "Company") (LSE: PTY:L) a specialist provider of IT services, announces a proposed share issue to raise gross proceeds of £7 million (approximately £6.4 million net of expenses) by the issue of 30,434,783 New Ordinary Shares through the Firm Placing, Placing and Open Offer at the Issue Price of 23 pence per New Ordinary Share. 20,873,087 New Ordinary Shares will be issued through the Firm Placing and 9,561,696 New Ordinary Shares will be issued through the Placing and Open Offer.

The Offer Price of 23 pence represents a 16.4 per cent. discount to the closing middle market price of 27.5 pence per Ordinary Share on 10 May 2011 (being the last Business Day prior to the date of the announcement of the Firm Placing, Placing and Open Offer).

The Issue is conditional, inter alia, upon Shareholders passing the Resolutions to be proposed at the General Meeting. A notice of the General Meeting to be held at 11.00 a.m. on 27 May 2011 is set out at the end of the Prospectus.

This announcement also serves as the Company's Interim Management Statement for the period from 1 January 2011 to 11 May 2011.

2. Board restructuring

In June 2010, Paul Davies and I, who are the original founders of the Group, rejoined the Board as CEO and Chairman respectively. The previous CEO, Alwyn Welch, left the company, as did John Hughes, a non-executive director. In December 2010, the Board announced that Finance Director Ian Ketchin was leaving the business at the end of March 2011. Alastair Woolley, FCA, was appointed to the Board on 1 April 2011 as Finance Director.

3. Background to and rationale for the Issue

In June 2010, Paul Davies and Philip Swinstead, who are the original founders of the Group, rejoined the Board as CEO and Chairman respectively. Following two years of revenue decline and reducing profitability, the Group's performance worsened considerably in 2010. Consequently, the new management team were forced to address urgently the increasing losses of the Group and its worsening cash position and restructure the business accordingly. Various initiatives implemented over two phases resulted in approximately £3.5 million being removed from the annual cost base of the business, thereby achieving a better balance between revenue and cost. New banking facilities were negotiated with PNC Bank to provide further debt finance. The Solutions division, where many of the problems lay, withdrew from bidding for very large Systems Integration projects in which it had not performed well financially. A further significant restructuring of management and the business followed, including the launch of separate graduate Talent Management and Systems divisions from the existing Solutions division.

In the preliminary results for 2010 announced on 3 March 2011, the Board reported that revenues were 22% lower compared to 2009 and that the Group suffered a loss of £3.1 million before tax and exceptional items. Exceptional items and discontinued business costs amounted to £3 million. Encouragingly, the Board reported that the Solutions division returned to operational breakeven in the last quarter of 2010.

After the setbacks of last year it is clear to the Board that it is necessary to raise additional funds in order to reduce reliance on debt facilities, and implement further cost reductions, to provide additional working capital and funds to invest in initiatives aimed at new growth markets.

4. Use of Proceeds

In order of priority, it is intended that the £6.4 million net proceeds of the Issue will be applied as follows:

1. Opportunities to reduce cost base, including IT and property; £1.0m

2. Providing additional working capital; £2.0m

3. Investment in the future:

- Additional top management; £0.5m

- New advanced applications initiative in Systems division with major partner; £0.5m

- First graduate talent management move in England; £1.0m

- Parity TechLab to be created with a major partner; and £1.0m

- Enhancing Resources growth in non-government areas. £0.4m

5. Current trading and prospects

In the Company's 2010 Annual Report, it was noted that the UK IT services market remains uncertain, but with some signs of recovery, including in the government sector. 2011 will therefore be a year of consolidation for the Company withthe focus on continuing to improve performance, finalising the Group's new growth strategy and moving the Group's offerings towards newer and more profitable emerging demands and technologies.

The first quarter has continued to be slow in the government sector but overall the Group has seen more stable revenues and performance as expected, which is encouraging. As the markets for IT services improve, and with the additional cost-cutting measures and new initiatives enabled by the Issue, the Board believes that further improvement to performance will be possible, albeit with significant results not showing through fully until next year.

6. Principal Terms of the Firm Placing, Placing and Open Offer

Parity proposes to issue 30,434,783 New Ordinary Shares through the Firm Placing, Placing and Open Offer at 23 pence per New Ordinary Share to raise gross proceeds of £7 million.

The Issue Price represents a 16.4 per cent. discount to the closing price of 27.5 pence per Ordinary Share on 10 May 2011 (being the last dealing day prior to the announcement of the Issue). The Issue Price was decided following a "book-building" exercise, which is a mechanism through which investor support for a fundraising is ascertained. In order to ensure sufficient support for the Issue, it was determined that an Issue Price representing a discount in excess of 10 per cent. was necessary.

Firm Placing

The Company has conditionally raised approximately £4.8million (before expenses) through the Firm Placing of 20,873,087 New Ordinary Shares at the Issue Price with qualified investors (as defined by section 86(7) of FSMA) and sophisticated investors. The Firm Placing is not subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer.

Placing and Open Offer

A further 9,561,696 New Ordinary Shares have been conditionally placed pursuant to the Placing at the Issue Price with placees and are subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer.

The Directors have, in aggregate, committed to invest £518,375 in the Issue.

Qualifying Shareholders are being offered the opportunity to subscribe at the Issue Price for any number of Open Offer Shares on the following basis:

1 Open Offer Share for every 4 Existing Ordinary Shares

held and registered in their name at the close of business on the Record Date.

Open Offer Entitlements will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will not be allocated but will be aggregated and sold for the benefit of the Company under the Excess Application Facility and/or will be made available under the Placing. The aggregate number of Open Offer Shares available for subscription pursuant to the Open Offer will not exceed 9,561,696 of the New Ordinary Shares. If you have sold or otherwise transferred all of your Existing Ordinary Shares before the ex-entitlement date for the Open Offer (being 8.00 a.m. on 11 May 2011), you are not entitled to participate in the Open Offer.

Qualifying Shareholders are also being offered the opportunity to subscribe for Excess Shares in excess of their Open Offer Entitlements. Subject to availability, the Excess Application Facility enables Qualifying Shareholders to apply for Excess Open Offer Shares through the Excess Application Facility, up to a maximum number of Excess Open Offer Shares equal to 4 times the number of Ordinary shares held as at the Record Date.

Excess applications may be allocated in such manner as the Directors determine, in their absolute discretion, and no assurance can be given that applications by Qualifying Shareholders under the Excess Application Facility will be met in full or in part or at all. In the event of over subscription under the Excess Application Facility, applications by Qualifying Shareholders will be scaled back pro-rata to their existing holdings of Ordinary Shares at the Record Date.

The latest time and date for receipt of Application Forms under the Open Offer will be 11.00 a.m. on 25 May 2011.

Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market on behalf of, or placed for the benefit of, the relevant Qualifying Shareholder, but will be subscribed for under the Placing for the benefit of the Company.

The Firm Placing, Placing and Open Offer has not been underwritten.

The New Ordinary Shares issued pursuant to the Issue will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared on or after the date on which they are issued.

Applications will be made for Admission of the New Ordinary Shares to be issued under the Issue to the Official List and to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in such shares will commence at 8.00 a.m. on 31 May 2011.

7. Effect of the Firm Placing, Placing and Open Offer

Upon Admission and assuming no further exercise of options under the Share Schemes, the Enlarged Share Capital is expected to be 68,681,567 Ordinary Shares. On this basis, the New Ordinary Shares will represent approximately 44.3 per cent. of the Company's Enlarged Share Capital. New Ordinary Shares issued through the Firm Placing will represent 30.4 per cent. of the Enlarged Share Capital and New Ordinary Shares issued through the Placing and Open Offer will represent 13.9 per cent. of the Enlarged Share Capital.

If a Qualifying Shareholder does not take up any of his Open Offer Entitlement, such Qualifying Shareholder's holding, as a percentage of the Enlarged Share Capital, will be diluted by up to approximately 44.3 per cent. as a result of the Issue. Furthermore, Qualifying Shareholders who take up their Open Offer Entitlements in full in respect of the Open Offer will suffer dilution of approximately 30.4 per cent. to their shareholdings in the Company as a result of the Issue (on the assumption that they are not also a placee and the maximum number of Open Offer Shares are issued).

8. Importance of the Vote

If the Resolutions are not passed and the Issue does not proceed, then the Group will not have sufficient financial resources to fund its expansion plans and future growth strategy as detailed in the Prospectus and, if some or all of the discretionary actions described in the Prospectus are not successful, the Group may not necessarily have adequate headroom to finance the business on a day to day basis. In the event that the Issue does not proceed, the Group is likely to have to pursue alternative courses of action in order to increase the headroom under its existing working capital facilities and the Group would therefore change its proposed expansion strategy and seek to manage the existing cost base accordingly. Accordingly, it is very important that Shareholders vote in favour of the Resolutions at the General Meeting in order that the Issue can proceed and the Group can secure additional working capital for the business on a day to day basis and pursue its expansion plans and future growth strategy as detailed in the Prospectus. Not to do so could be extremely harmful for the Group and the interests of Shareholders.

9. Admission, Dealings and Settlement

The New Ordinary Shares issued pursuant to the Issue will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared on or after the date on which they are issued.

Applications will be made for Admission of the New Ordinary Shares to be issued under the Issue to the Official List and to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in such shares will commence at 8.00 a.m. on 31 May 2011.

Arrangements have been made for dealings in the New Ordinary Shares to be settled in uncertificated form through CREST. New Ordinary Shares to be held in uncertificated form and issued pursuant to the Issue are expected to be delivered in CREST by no later than 8.00 a.m. on 31 May 2011.

10. General Meeting

A notice convening the General Meeting to be held at 11.00 a.m. on 27 May 2011 at Wimbledon Bridge House, 1 Hartfield Road, Wimbledon, London SW19 3RU at which the Resolutions will be proposed, is set out at the end of the Prospectus.

11. Expected timetable of principal events

Each of the times and dates below are indicative only and may be subject to change:

12. Recommendation

The Board considers the Issue and the passing of the Resolutions to be in the best interests of Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions.

The Directors intend to vote in favour of the Resolutions in respect of their own beneficial holdings amounting to 10,620,383 Existing Ordinary Shares in aggregate, representing 27.76 per cent. of the Company's issued share capital.

Definitions

Singer Capital Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Parity in relation to the Firm Placing, Placing and Open Offer and will not be responsible to anyone other than Parity for providing the protections afforded to clients of Singer Capital Markets Ltd nor for providing advice in relation to the Firm Placing, Placing and Open Offer or any other transaction or arrangement referred to in this announcement and, apart from the responsibilities and liabilities which may be imposed on Singer Capital Markets by the FSMA, Singer Capital Markets accepts no responsibility whatsoever and makes no representation or warranty, express or implied, for or in respect of the contents of this announcement, including its accuracy, completeness or verification, nor for any other statement made or purported to be made by it, or on its behalf, in connection with Parity or the Firm Placing, Placing and Open Offer. This announcement has been issued by, and is the sole responsibility of, the Company. Singer Capital Markets accordingly disclaims all and any liability, whether arising in tort, contract or otherwise, which it might otherwise be found to have in respect of this announcement or any such statement.

Neither the content of Parity Group plc's website nor any website accessible by hyperlinks on Parity Group plc's website is incorporated in, or forms part of, this announcement.

The distribution of this announcement and the offering of the New Ordinary Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by the Company or Singer Capital Markets that would permit an offering of such shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by the Company and Singer Capital Markets to inform themselves about, and to observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement is for information only and does not constitute or form part of any offer or invitation to issue, acquire or dispose of any securities or investment advice in any jurisdiction.

No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per share of Parity Group plc for the current or future financial years would necessarily match or exceed the historical published earnings per share of Parity Group plc.