Placing & Final Results

Parity Group PLC 30 March 2006 NOT FOR RELEASE OR DISTRIBUTION IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, OR JAPAN This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the prospectus to be published by Parity Group plc in due course in connection with the admission of the New Ordinary Shares in the capital of the Company to the Official List of the Financial Services Authority and to trading on London Stock Exchange plc's (the 'London Stock Exchange') main market for listed securities (the 'Prospectus'). Copies of the Prospectus will, following publication, be available from the Company's registered office. 30 March 2006 Parity Group plc Firm Placing of 16,000,000 New Ordinary Shares and Placing and Open Offer of 16,038,427 New Ordinary Shares at 50 pence per New Ordinary Share Capital Reorganisation and Preliminary results for the year ended 31 December 2005 Parity Group plc ('Parity' or the 'Group' or the 'Company'), the UK IT services group, announces its intention to strengthen its balance sheet through a fully underwritten Firm Placing and Placing and Open Offer to raise approximately £14.7 million, net of expenses. In addition, the Group announces its preliminary results for the year ended 31 December 2005. Highlights Proposed Issue • Proposed Firm Placing of 16,000,000 New Ordinary Shares and a Placing and Open Offer of 16,038,427 New Ordinary Shares at 50 pence per New Ordinary Share (equivalent to 1 pence per share in the absence of the Capital Reorganisation) to raise approximately £14.7 million, net of expenses • Proceeds of the Issue will be used solely to reduce the net debt position of the Group. This will result in a strengthening of the Group's balance sheet and a reduction in the Group's interest charge and will provide additional working capital to be invested in growing the business • Issue has been fully underwritten by Arbuthnot Securities Limited Group summary for the year • Main elements of planned Group restructuring completed • Significant cost reductions achieved in all UK businesses • Disposal of US and French/German businesses completed (France and Germany post year-end) • Negotiations concerning the disposal of the small Benelux businesses, representing the remainder of mainland European operations, are well advanced with completion targeted for the first half 2006 • New Chief Executive and Group Finance Director appointed, business unit leadership strengthened Preliminary results • Trading performance in line with restructuring update of December 2005 • Group turnover from continuing operations up 4.6 per cent. at £138.5 million (2004: £132.5 million excluding discontinued operations) • Operating loss from continuing operations before exceptional items and goodwill impairment £1.7 million (2004: £1.4 million) of which £0.5 million occurred in the second half of 2005 • Loss from continuing operations before tax £8.4 million including exceptionals of £2.3 million and goodwill impairment charge • Loss per ordinary share 3.23 pence (2004: 1.91 pence) • Net debt at year end £19.1 million (2004: £13.7 million) Commenting on today's announcement, John Hughes, Chairman of Parity Group plc, said: 'As highlighted in our restructuring update in December 2005, the Board concluded that the balance sheet of the Group must be strengthened to exploit the opportunities which the new, slimmed down Group has in front of it. We are therefore pleased to announce a fully underwritten firm placing and placing and open offer to raise approximately £14.7 million, net of expenses, which will be used to reduce our net debt. We are also pleased to have been able to strengthen the executive team in recent weeks with the appointments of Alwyn Welch as our new Chief Executive and Joe Kelly as Group Finance Director. These appointments, along with the steps we are taking within the business, support a more positive outlook for the Group. Following the completion of the firm placing and placing and open offer, the Directors view the prospects of the Group with cautious optimism, with trading in the year to date supporting this view.' Arbuthnot Securities Limited is acting as sponsor, financial adviser broker and underwriter to Parity. Enquiries: Parity Group plc Tel: 020 7832 3500 John Hughes, Chairman Alwyn Welch, Chief Executive Arbuthnot Securities Limited Tel: 020 7012 2000 Alastair Moreton/Andrew Fullerton Financial Dynamics Tel: 020 7831 3113 Giles Sanderson/Harriet Keen/Cass Helstrip Notes to editors: Parity is a UK focused provider of specialist IT services through its three business units, Resourcing Solutions, Business Solutions and Training, to clients across both the public and private sectors. Resourcing Solutions - Resourcing Solutions, the largest business unit in Parity, 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. Business Solutions - Business Solutions provides IT consulting, systems development and application management services to blue chip private and public sector clients, using Microsoft and Oracle technologies. Training - Parity, through its Training business unit, is a leading provider by revenue of IT training in the UK with a focused offering of learning, skills development and consultancy based services. This announcement does not constitute, or form part of, an offer to sell, or the solicitation of an offer to subscribe for or buy, any of the New Ordinary Shares to be issued in connection with the Issue. Any decision to invest in the New Ordinary Shares should only be made on the basis of information in the Prospectus which will contain further details relating to the Issue and Parity in general as well as a summary of the risk factors to which an investment in the New Ordinary Shares is subject. The Prospectus in connection with the Issue is being issued today. The New Ordinary Shares have not been and will not be registered under the United States Securities Act 1933, as amended, or under the applicable securities laws of any state of the United States, any province or territory of Canada, Japan or Australia. Accordingly, unless a relevant exemption from such requirements is available, the New Ordinary Shares may not, subject to certain exceptions, be offered, sold, taken up, renounced or delivered, directly or indirectly, within the United States, Canada, Japan or Australia or in any country, territory or possession where to do so may contravene local securities laws or regulations. Arbuthnot Securities Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Parity and for no one else in relation to the Issue and will not be responsible to anyone other than Parity for providing the protections afforded to customers of Arbuthnot Securities Limited or for providing advice in relation to the Issue or on any matter referred to herein. Past performance is not a guide to future performance. Potential investors should consult a professional advisor as to the suitability of the Open Offer for the individual concerned. Certain statements in this announcement are forward looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. Except as required by law, the Company is under no obligation to update or keep current the forward-looking statements contained in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements. Parity Group plc Firm Placing of 16,000,000 New Ordinary Shares and Placing and Open Offer of 16,038,427 New Ordinary Shares at 50 pence per New Ordinary Share Capital Reorganisation and Preliminary results for the year ended 31 December 2005 1. Introduction Parity is proposing to raise approximately £14.7 million, net of expenses, by the issue of 32,038,427 New Ordinary Shares at a price of 50 pence per New Ordinary Share. The issue is being made by way of a Firm Placing of 16,000,000 New Ordinary Shares and a Placing and Open Offer of 16,038,427 New Ordinary Shares to Qualifying Shareholders. The Issue Price of 50 pence per New Ordinary Share is equivalent to a price of 1 pence per Ordinary Share in the absence of the Capital Reorganisation. This represents a 78.9 per cent. discount to the middle market price as at the time of the announcement of the Issue of 4.75 pence per Ordinary Share. The Firm Placing and the Placing and Open Offer are each conditional upon, inter alia, shareholder approval of the Resolutions which will be sought at the Extraordinary General Meeting to be held on 24 April 2006. The Issue has been fully underwritten by Arbuthnot. The Issue will result in the issue of 32,038,427 New Ordinary Shares (representing approximately 84.7 per cent. of the issued ordinary share capital of the Company, following the Capital Reorganisation and the Issue). The New Ordinary Shares to be issued pursuant to the Issue, when issued and fully paid, will rank pari passu in all respects with the New Ordinary Shares arising pursuant to the Capital Reorganisation and will rank for all dividends or other distributions declared, made or paid after the date of issue of the New Ordinary Shares. Capital Reorganisation Currently, implementation of the Issue is impeded because the market value of the Company's existing issued Ordinary Shares is below their nominal value of 5 pence per share. The Company is legally prohibited from issuing shares at a discount to their nominal value. Accordingly, a reorganisation of the Company's share capital is being proposed in order to reduce the nominal value of the Company's ordinary share capital, thus enabling the Company to implement the Issue. The Sub-division will also help the Company to fund its expansion in the future, if desirable, through further share issues. Following the Sub-division, the Consolidation will be effected to strike a share price which your Directors believe will lead to a reduction in the bid-offer spread and an improvement in the liquidity of the Company's shares. 2. Reasons for the Issue • Group restructuring to return Parity to profitability Following several years of poor performance by the Group, the Group's new management team has been focused on restructuring the Group with the objective of returning it to profitability. This process began in November 2004 with a strategic review of the Group's operations, leading to an announcement in April 2005, which set out a new and clear business direction, having as its objectives a Group which addresses the UK IT services market with an attractive, competitive offering and an overhead structure appropriate to the Group's scale. • Implementation of UK-centric strategy Since the appointment of John Hughes as Chairman in May 2005, significant progress has been achieved in implementing the UK-centric strategy. Following the disposal of the Group's US operations in November 2005 and the disposal of substantially all of the Group's mainland European operations in January 2006, the Group is now almost entirely refocused on the UK IT services market. Discussions are well advanced with regard to the disposal of the remaining small European operations in the Benelux region, which the Directors believe will be concluded in the first half of 2006. • Restructuring of UK operations The UK operations have also been significantly restructured with rationalisation of the Group's cost structure at both a central and operational level. Substantial costs have been eliminated at the head office and in each of the business units, with divisional infrastructures integrated and simplified so that the Group now consists of one integrated entity with three business units. The Group has also vacated property surplus to requirements, has entered into a number of sub-lease agreements and continues to work to sub-let or negotiate termination of empty or underutilised properties previously provided for. The Group has also entered into a contract with a new outsourcing supplier for IT services which is of a different nature, more appropriate to the Group's size and structure and at a much lower ongoing cost than the previous arrangement. • Actions to reduce net debt The final element of this restructuring phase is the reduction in the level of the Group's current indebtedness. As at 31 December 2005, Parity's net debt amounted to £19.1 million, an increase from £15.5 million reported as at 30 June 2005. The increase in debt levels in the six months to 31 December 2005 was due to the on-going effect of the restructuring measures referred to above, including continuing payments for surplus property which are only now starting to be mitigated by the sub-leases signed, the delay in the sale of the French and German businesses and associated working capital demands and the fact that proceeds from the US disposal will be received over a 15 month period. Additionally, as expected, the on-going losses coupled with an improvement in the performance of Resourcing Solutions requiring an increase in working capital requirements during the period resulted in an operating cash outflow in the second half of 2005. Subsequent to 31 December 2005 the sale of the French and German businesses in January 2006 realised net proceeds totalling approximately £5.2 million and further proceeds of a minimum of £0.4 million from the sale of the US business are expected in 2006. However, while these proceeds will reduce Parity's net debt from its position at the end of 2005, this reduction will be offset by the continuing cash impact in 2006 of prior year restructuring charges (principally in relation to surplus property and amounting to £1.2 million), working capital investment and settlement of year end creditors (approximately £4.7 million) and the settlement (£1.3 million) of the Group's previous IT supply agreement referred to above. As at 3 March 2006, Parity's net debt amounted to £16.6 million. Having now completed the main elements of the planned Group restructuring, the Directors believe that in order to grow the business going forward it is important that the overall debt position of the Group is reduced to a more appropriate level. The net proceeds of the Issue will be used solely to reduce the net debt position of the Group. This will result in a strengthening of the Group's balance sheet and a reduction in the Group's interest charge and will in turn provide additional working capital to be invested in growing the business. • The Board A key element in developing the Group further has been the recent appointment of Alwyn Welch as Chief Executive. He has over 25 years' experience in the technology sector with leading sector companies such as Unisys (where he was Managing Director of the UK operations), Cap Gemini (where he was CEO of the UK and Asia Pacific region and latterly CEO of the Nordic region) and Logica and has full day to day responsibility for the running of the business of the Group. The Board has also recently appointed Joe Kelly (previously Finance Director and latterly Managing Director of Parity's Resourcing business unit) as the Group's Finance Director, completing the rebuilding of the executive management team. The strengthening of the senior management team marks the end of the period of major reorganisation and the Board now intends to continue its focus on the operational aspects of the Group's businesses with the objective of significantly improving its financial performance. Parity's three distinct business units, IT Resourcing, Solutions and Training, have strong capabilities and inherent strengths on which to build. The Board intends to focus its near term attention on the objective of each of the three business units achieving upper quartile financial performance. • The Business The Board believes that Parity can continue to use its strong brand and reputation in project and programme management to service its major public and private sector clients. They also believe that the initiatives put in place in 2005 will improve client engagements. In the private sector, Parity is increasingly becoming an outsourcer to a number of the major IT service companies. • Parity Resourcing Solutions (UK) Parity Resourcing Solutions (UK) delivered strong results in 2005, reporting a 12.5 per cent. increase in its revenue and a 21.9 per cent. increase in operating profit before exceptional items, central costs and impairment of goodwill compared with the previous year. The objective for this business unit will be to continue to achieve above market growth and improvement of its margins through the focus on specific industry sectors and skills areas where margins are higher, together with a move away from some of the division's lower margin activities. Examples include the investment to grow capabilities in the 'spot' market for specific skills and the recent announcement that Parity has been selected as an approved supplier to the public sector by Catalist, the new procurement function of the Office of Government Commerce. • Parity Business Solutions Parity Business Solutions operates in a diverse market. However, the business unit is concentrating on particular niches where it has demonstrable skills and expertise, such as Microsoft and Oracle technologies. Taken together with the strength of its client relationships and the Parity brand, its offering will be directed towards focused areas of client-side consultancy, systems development, integration and managed services as evidenced by the recent BAT contract announcement. • Parity Training The focus of Parity Training has been on transforming its cost base, historically characterised by primarily fixed costs, to one which is more variable and flexible. At the same time, a review of the course portfolio has resulted in a substantially reduced number of improved public courses, and a concentration on those courses where Parity Training has an established position and can expect to achieve high levels of utilisation. Additionally there has been significant work on improving the corporate training sales and marketing programmes which leverage many of Parity's core skills and competences and tie into the Group's managed services capabilities. 3. Use of net proceeds The net proceeds of the Issue will be used solely to reduce the net debt position of the Group. This will result in a strengthening of the Group's balance sheet and a reduction in the Group's interest charge and will in turn provide additional working capital to be invested in growing the business. While Parity has committed facilities of £18 million to 31 December 2007 and an overdraft facility of £2 million, it has agreed with its principal lending bank to discuss the terms of a new facility, more appropriate to its size of business, following completion of the Issue. 4. Principal terms of the Issue Under the Issue, the Company intends to raise approximately £16.0 million, before expenses, comprising £8.0 million by way of the Firm Placing and £8.0 million under the Placing and Open Offer. Subject to the fulfilment of the conditions set out in the Prospectus, Qualifying Shareholders are being given the opportunity to subscribe for the Open Offer Shares pro rata to their existing shareholdings at a price of 50 pence per Open Offer Share on the basis of: 1 Open Offer Share for every 18 existing Ordinary Shares held by Qualifying Shareholders at the Record Date and so on in proportion for any other number of Ordinary Shares then held. Fractions of Open Offer Shares will not be allotted, each Qualifying Shareholder's entitlement under the Open Offer being rounded down to the nearest whole number. The fractional entitlements will be aggregated and included in the Placing, with the proceeds being retained for the benefit of the Company. The Issue Price of 50 pence per New Ordinary Share is equivalent to a price of 1 pence per Ordinary Share in the absence of the Capital Reorganisation. This represents a 78.9 per cent. discount to the middle market price as at the time of the announcement of the Issue of 4.75 pence per Ordinary Share. The Issue is conditional, inter alia, upon: • the passing of the Resolutions; • Admission becoming effective by not later than 8.00 a.m. on 28 April 2006 (or such later time and/or date as Arbuthnot and the Company may agree, not being later than 9.00 a.m. on 12 May 2006); and • the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms prior to Admission. Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the Issue will not proceed. Further information on the Issue and the terms and conditions on which it is made will be set out in the Prospectus. 5. Related Party Transactions Aberforth Partners LLP, a substantial shareholder of Parity, is a related party of the Company for the purposes of the Listing Rules. It is proposed that Aberforth Partners LLP will participate in the Issue as a placee in respect of 4,800,000 New Ordinary Shares under the Firm Placing and up to a maximum of 4,800,000 New Ordinary Shares under the Placing, such participation under the Placing to be reduced to the extent of its participation under the Open Offer. Aberforth Partners LLP will also receive a placing commission on the same basis as the other placees, details of which are set out in the Prospectus. Philip Swinstead, a Director of Parity, and the self-invested pension plan of which he is a beneficiary are also related parties of the Company for the purposes of the Listing Rules. It is proposed that the Swinstead SIPP will participate in the Issue as a placee in respect of 855,744 New Ordinary Shares under the Firm Placing. Alwyn Welch, a Director of Parity, is also a related party of the Company for the purposes of the Listing Rules. It is proposed that Alwyn Welch will participate in the Issue as a placee in respect of 300,000 New Ordinary Shares under the Firm Placing. The participation of Aberforth Partners LLP, Philip Swinstead, the Swinstead SIPP and Alwyn Welch in the Issue will be related party transactions for the purposes of the Listing Rules and will therefore each require separate approval from Shareholders at the EGM. Each of Aberforth Partners LLP, Philip Swinstead, the Swinstead SIPP and Alwyn Welch will abstain, and will take all reasonable steps to ensure that their respective associates (as defined in the Listing Rules) will abstain, from voting at the EGM in relation to the Resolution relating to the approval of its related party transaction. 6. Extraordinary General Meeting Set out at the end of the Prospectus will be a notice convening the Extraordinary General Meeting to be held at 10.00 a.m. on 24 April 2006 at the offices of Ashurst, Broadwalk House, 5 Appold Street, London EC2A 2HA, for the purpose of considering and, if thought fit, passing the Resolutions. The Resolutions will be proposed to effect the Capital Reorganisation required in order to enable the Issue to take place at the Issue Price and approve the terms of the Issue and the Related Party Transactions. Pursuant to the Resolutions, Shareholders will be requested to approve: (i) the subdivision, conversion and consolidation of each Ordinary Share into one New Ordinary Share and 124 Deferred Shares; (ii) the rights and restrictions to attach to the Deferred Shares; (iii) the subdivision of every 2 authorised but unissued Ordinary Share into 5 New Ordinary Shares; (iv) the terms of the Issue (including the Issue Price, which is equivalent to a price of 1 pence per Ordinary Share in the absence of the Capital Reorganisation and represents a 78.9 per cent. discount to the middle market price as at the time of the announcement of the Issue of 4.75 pence per Ordinary Share; and (v) the Related Party Transactions. Shareholders should note that the Issue is conditional, inter alia, on the Resolutions being passed. The New Ordinary Shares to be issued pursuant to the Firm Placing and the Placing and Open Offer will be issued pursuant to the authorities given by Shareholders at the annual general meeting held on 30 June 2005. Shareholders should note that the Deferred Shares will have negligible economic value and no voting rights at general meetings. Shareholders should also note that the Resolutions grant the Company irrevocable authority to compulsorily acquire all the Deferred Shares for an amount not exceeding 1 pence. Save in respect of the issue of New Ordinary Shares pursuant to the Issue and any issues of Ordinary Shares which may be required to be made pursuant to the Share Option Schemes, the Directors currently have no plans to allot relevant securities. The Resolutions will be proposed as ordinary resolutions. 7. Intentions of Directors and other shareholders John Hughes, Joe Kelly and Alastair Macdonald intend to take up their full entitlements under the Placing and Open Offer, comprising 8,333, 11,055 and 7,256 New Ordinary Shares respectively. John Hughes and Joe Kelly have also undertaken to subscribe for 41,667 and 10,000 New Ordinary Shares respectively, pursuant to the Firm Placing. Philip Swinstead will not take up his entitlement to subscribe for New Ordinary Shares under Open Offer. Persons connected to Philip Swinstead intend to accept their full entitlements under the Placing and Open Offer representing 36,094 New Ordinary Shares. A Self Invested Personal Pension Plan of which Philip Swinstead is a beneficiary will subscribe for 855,744 New Ordinary Shares pursuant to the Firm Placing, maintaining his beneficial percentage interest in the issued share capital of the company. Alwyn Welch does not have any entitlements under the Placing and Open Offer. However, Alwyn Welch has undertaken to subscribe for 300,000 New Ordinary Shares pursuant to the Firm Placing. Dominion Holdings Limited has undertaken to take up its entitlement under the Placing and Open Offer in full comprising 3,055,555 New Ordinary Shares and to subscribe for 244,445 New Ordinary Shares pursuant to the Firm Placing. 8. Importance of the Issue The proceeds of the Issue are required, as explained above, to strengthen the balance sheet and to reduce the Group's current indebtedness as referred to in paragraph 2 above. The Company is of the opinion that, after taking into account the banking facilities available to the Group and the net proceeds of the Issue, the Group has sufficient working capital for its present requirements, that is for at least the 12 months immediately following the date of this document. If Shareholders do not vote in favour of the Resolutions the Issue will not proceed, and based on current forecasts the Company will immediately need to consider alternative methods to fund the Group's ongoing requirements. In this event, the Company is of the opinion that it will not be able to confirm that the Group has sufficient working capital for its present requirements, that is for at least the 12 months immediately following the date of this announcement. The Director's believe that the Group's cash requirements are likely to marginally exceed the amount available under its existing facilities of £20 million in late April 2006 and the Group would be immediately obliged to seek to negotiate revised banking facilities with its principal lending bank which could require a material debt reduction programme involving the sale of one or more of the Group's businesses. However, the Board cannot be confident that such negotiations would be successful and the Group's ability to conduct its business may therefore be affected since the future of the Group would then be dependent on the decisions taken by its principal provider of finance. Without an agreement on revised banking facilities following late April 2006, Parity may be unable to meet its obligations as they fall due and may become insolvent leading to administration or receivership or other insolvency proceedings. 9. Recommendation The Board (excluding Philip Swinstead and Alwyn Welch, who are related parties of the Company for the purposes of the Listing Rules and who have not taken part in the Board's consideration of the matter), who have been so advised by Arbuthnot, consider that the Related Party Transactions are fair and reasonable so far as Shareholders are concerned. In providing its advice to the Board (excluding Philip Swinstead and Alwyn Welch), Arbuthnot has taken into consideration the Board's (excluding Philip Swinstead and Alwyn Welch) commercial assessment of the Issue. The Board considers that the Issue and the Resolutions are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions 1, 2 and 3 as set out in the Notice of EGM. The Board (excluding Philip Swinstead and Alwyn Welch) unanimously recommends that Shareholders vote in favour of Resolution 4. The Directors intend to vote in favour of the Resolutions 1, 2 and 3 in respect of their own beneficial holdings amounting to an aggregate of 8,840,268 Ordinary Shares, representing approximately 3.1 per cent. of the Company's current issued share capital. The Directors (excluding Philip Swinstead and Alwyn Welch) intend to vote in favour of Resolution 4 in respect of their own beneficial holdings amounting to an aggregate of 479,625 Ordinary Shares, representing approximately 0.2 per cent. of the Company's current issued share capital. Expected timetable of principal events • Posting of Prospectus and Application Forms 30 March 2006 • Extraordinary General Meeting 10.00 a.m. on 24 April 2006 • Dealings in the New Ordinary Shares to commence at 8.00 a.m. London time on 28 April 2006 Notes The dates set out in the Expected Timetable of Principal Events above and mentioned throughout this document may be adjusted by Parity in which event details of the new dates will be notified to the Financial Services Authority and the London Stock Exchange and, where appropriate, to Shareholders. Statistics relating to the issue • Issue Price of New Ordinary Shares 50 pence • Number of Firm Placing Shares 16,000,000 • Number of Open Offer Shares 16,038,427 • Basis of Open Offer, 1 Open Offer Share for every 18 existing Ordinary Shares • Number of New Ordinary Shares to be issued pursuant to the Issue 32,038,427 • Number of New Ordinary Shares in issue immediately following Admission 37,812,260 • Gross proceeds of the Issue £16.0 million • Net proceeds of the Issue £14.7 million Parity Group plc Preliminary results for the year ended 31 December 2005 In addition to the Group announcing its intention to strengthen its balance sheet through a fully underwritten firm placing and placing and open offer to raise approximately £14.7 million, net of expenses, Parity also announces its preliminary results for the year ended 31 December 2005. Summary • Trading performance in line with restructuring update of December 2005 • Significant cost reductions achieved in all UK businesses • Disposal of US and French/German businesses completed (France and Germany post year-end) • Negotiations concerning the disposal of the small Benelux businesses, representing the remainder of mainland European operations, are well advanced with completion targeted for the first half 2006 • Significant progress on property disposals, exits and sub-leases resulting in material cash savings • New Chief Executive and Finance Director appointed, business unit leadership strengthened • Business structure streamlined and simplified • New sales organisations put in place in Training and Business Solutions • Investment in Resourcing Solutions to create a higher margin spot market and industry specific operations, in response to market demand Group Financials • Group turnover from continuing operations up 4.6 per cent. at £138.5 million (2004: £132.5 million excluding discontinued operations) • Operating loss from continuing operations before exceptional items £1.7 million (2004: £1.4 million) of which £0.5 million occurred in the second half of 2005 • Goodwill impairment charge of £2.5 million against goodwill dating from an acquisition in the late 1990's • Loss from continuing operations before tax £8.4 million including exceptionals of £2.3 million and goodwill impairment charge • Net debt at year end £19.1 million (2004: £13.7 million) • Loss per ordinary share 3.23 pence (2004: 1.91 pence) • The Board will not be recommending the payment of a final dividend for the year ended 31 December 2005 (2004: nil). No interim dividend was paid (2004: nil) Operating performance • Resourcing Solutions (UK) grew revenues by 12.5 per cent., which was above the market rate, and operating profit before exceptional items increased by 21.9 per cent. despite investments in new business area development • Training made a significant loss, although its performance improved in the second half of 2005 as a result of move to a more flexible cost structure • Business Solutions revenues and profits declined as a result of weak order inflow in late 2004 and early 2005 • Mainland Europe (now largely disposed) grew revenues and operating income • Americas business (now disposed) revenues declined and failed to sustain profitability Chairman's statement 'Clearly 2005 has been a very challenging year for the Group. However, despite the unacceptable financial performance, a number of major positive steps have been taken to place the Group on the road to recovery. The strategic review which identified the UK-centric strategy has been implemented with the disposal of substantially all of the mainland European businesses post the year end and all of the Americas activity during 2005. In the UK significant costs have been eliminated and a simpler, more optimal structure, appropriate to the scale and ambitions of Parity, has been put in place. Importantly, in the Training business unit, a major change is well advanced to transition the business from a fixed cost structure to one which is more variable in response to changes in volume; this work continues into 2006. Actions have been taken to reduce the burden of empty or underutilised property by exiting or sub-leasing significant parts of the Group's property portfolio, the benefit of which will show in the 2006 financials. Changes have been made in the sales and marketing efforts of the Group, which are already starting to show in terms of new wins and improved margins in Resourcing Solutions and should deliver improved results in both Business Solutions and Training in 2006. We shall continue to aggressively drive out costs wherever we can while at the same time improving our new orders rate and ensuring that we continue the quality of delivery for which the Parity brand is known. Additionally the cash improvement actions taken in 2005 are starting to bear fruit and we will remain tightly focused on managing our cash resources. As identified in our restructuring update in December 2005, the Board has concluded that the balance sheet of the Group must be strengthened to exploit the opportunities which the new, slimmed down Group has in front of it and today announced a fully underwritten firm placing and open offer to raise approximately £14.7 million, net of expenses. Resourcing Solutions has experienced strong trading in the early weeks of 2006, leading us to believe that the growth seen in 2005 should continue this year, as should improvement in profit margins due to the highly skilled resources we provide and our moves to increase the higher margin elements of our business. We have seen the modest improvement in the number of opportunities for Business Solutions continuing into 2006 and believe that we are well positioned in a market which continues to grow. While our position with public sector clients and Microsoft competences are a plus, ambitions must be mitigated by the fact that the benefits of the strengthening of our sales channel in the second half of 2005 will take time to translate into an improving revenue position. The changes made in both the cost structure and the sales channel of our Training business unit should improve our trading position relative to 2005. Industry analysts expect a recovery in this market, from which we are well placed to benefit. Overall, we view the prospects of the Group with cautious optimism, with trading in the year to date supporting this view. Finally, I am delighted that we have been able in recent weeks to strengthen the executive team with the appointments of Alwyn Welch as our new Chief Executive and Joe Kelly in his new role as Group Finance Director. These appointments along with the steps outlined above support a more positive outlook for the Group and we expect to see significant improvements in 2006 and beyond.' Parity Group plc Unaudited Consolidated Income Statement For the year ended 31 December 2005 Before Before exceptional Exceptional Total exceptional Exceptional Total items items year items items year year ended year ended ended year ended year ended ended 31.12.05 31.12.05 31.12.05 31.12.04 31.12.04 31.12.04 Notes £'000 £'000 £'000 £'000 £'000 £'000 Revenue 2 138,523 - 138,523 132,466 - 132,466 Employee benefit costs (23,642) (483) (24,125) (23,823) (1,562) (25,385) Depreciation (766) (194) (960) (1,033) - (1,033) Impairment of goodwill (2,500) - (2,500) - - - All other operating expenses (115,813) (1,613) (117,426) (108,970) (1,816) (110,786) Total operating expenses (142,721) (2,290) (145,011) (133,826) (3,378) (137,204) Operating loss (4,198) (2,290) (6,488) (1,360) (3,378) (4,738) Finance income 6 - 6 47 - 47 Finance costs (1,943) - (1,943) (1,470) - (1,470) Loss before tax (6,135) (2,290) (8,425) (2,783) (3,378) (6,161) Tax (378) 616 238 (110) 308 198 Loss for the period from continuing operations (6,513) (1,674) (8,187) (2,893) (3,070) (5,963) Discontinued operations (Loss) profit for the period from discontinued operations 3 (472) (563) (1,035) 717 (213) 504 Loss for the period attributable to equity shareholders' of the company (6,985) (2,237) (9,222) (2,176) (3,283) (5,459) Loss per share expressed in pence per share - Basic and diluted 5 (3.23) (1.91) Loss per share from continuing operations - Basic and diluted 5 (2.87) (2.09) Parity Group plc Unaudited Balance Sheet As at 31 December 2005 Consolidated As at As at 31.12.05 31.12.04 Notes £'000 £'000 Non-current assets Goodwill 7,116 9,616 Property, plant and equipment 988 1,920 Available for sale financial assets 30 30 Deferred tax assets 4,954 5,280 13,088 16,846 Current assets Work in progress 1,323 1,664 Trade and other receivables 35,539 40,402 Current tax assets 24 687 Cash and cash equivalents 749 2,175 37,635 44,928 Assets classified as held for sale and included in disposal groups 9 8,746 - Total assets 59,469 61,774 Current liabilities Financial liabilities (18,039) (3,627) Trade and other payables (29,550) (31,785) Current tax liabilities (216) - Provisions (1,718) (1,562) (49,523) (36,974) Non-current liabilities Financial liabilities (19) (12,241) Provisions (2,129) (2,816) Retirement benefit liability (4,657) (4,746) (6,805) (19,803) Liabilities classified as held for sale and included in disposal groups 9 (7,231) - Total liabilities (63,559) (56,777) Net (liabilities) assets (4,090) 4,997 Shareholders' (deficit) equity Called up share capital 10 14,434 14,434 Share premium account 10 6,062 6,062 Other reserves 10 44,160 44,160 Retained earnings 10 (68,746) (59,659) Total shareholders' (deficit) equity (4,090) 4,997 Parity Group plc Unaudited Statement of Recognised Income and Expense For the year ended 31 December 2005 Consolidated Year Year ended ended 31.12.05 31.12.04 £'000 £'000 Exchange differences on translation of foreign Operations 178 (289) Actuarial losses on defined benefit pension Schemes (263) (924) Deferred taxation on items taken directly to equity 79 277 Net loss recognised directly in equity (6) (936) Loss for the period (9,222) (5,459) Total recognised expense for the period (9,228) (6,395) Parity Group plc Unaudited Cash Flow Statement For the year ended 31 December 2005 Consolidated Year Year ended ended 31.12.05 31.12.04 £'000 £'000 Cash flows from operating activities Cash used in operations (4,460) (1,169) Interest received 23 49 Interest paid (1,417) (884) Tax received 585 1,006 Net cash used in operations (5,269) (998) Cash flows used in investing activities Purchase of property, plant and equipment (327) (518) Proceeds from disposal of property, plant and equipment 155 - Net cash used in investing activities (172) (518) Cash flows from financing activities Expenses from issue of ordinary shares - (56) Repayment of loan notes (6) (8) Net cash inflow from borrowings 4,947 2,475 Payment of capital element of finance leases (20) (17) Equity dividends paid - (87) Net cash from financing activities 4,921 2,307 Net (decrease) increase in cash and cash equivalents (520) 791 Cash and cash equivalents at beginning of the period 2,175 1,393 Net foreign exchange difference 83 (9) Cash and cash equivalents at end of the period 1,738 2,175 Cash and cash equivalents at 31 December 2005 of £1,738,000 includes £989,000 of cash and cash equivalents held in assets classified as held for sale and included in disposal groups. Parity Group plc Unaudited Notes to the Preliminary Results 1 Accounting Policies Basis of preparation This summary of results does not constitute full Financial Statements within the meaning of section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2005 and 2004 have been extracted from the unaudited financial statements of Parity Group plc which will be delivered to the Registrar of Companies in due course. The auditors have issued an unqualified opinion on the Group's statutory financial statements under UK accounting standards for the year ended 31 December 2004, which have been filed with the Registrar of Companies. These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRS. This is the first time the Group has prepared its financial statements in accordance with IFRSs, having previously prepared its financial statements in accordance with UK accounting standards. Details of how the transition from UK accounting standards to IFRSs has affected the group's reported financial position, financial performance and cash flows, including reconciliations from UK accounting standards to IFRS for prior year results and the revised summary of significant accounting policies under IFRS was published in conjunction with the Group's interim results in September 2005. Basis of consolidation The consolidated financial statements comprise the financial statements of the parent company (Parity Group plc) and its subsidiary undertakings (defined as where the Group has control). The financial statements of subsidiaries are prepared as of the same reporting date as the parent company, using consistent accounting policies. The results of subsidiaries are consolidated, using the purchase method of accounting, from the date on which control of the net assets and operations of the acquired company are effectively transferred to the Group. Similarly, the results of subsidiaries divested cease to be consolidated from the date on which control of the net assets and operations are transferred out of the Group. Going Concern The Group's Revolving Loan Facility ('RLF') with its principal banker, Lloyds TSB ('LTSB') has been successfully renegotiated to 31 December 2007. The RLF, currently at £18m will not be reduced following the disposal of substantially all of Resourcing Solutions mainland Europe in January 2006. In addition the Group has an overdraft facility of £2m with LTSB, repayable on demand. The Board has announced today that it intends to raise £14.7 million (net) by way of a firm placing and placing and open offer of new ordinary shares in order to reduce the overall net debt position of the Group. This will result in a strengthening of the Group's balance sheet, a reduction in the Group's interest charge and will provide additional working capital to be invested in growing the business. Based on the Issue being fully underwritten by Arbuthnot, the Board believes that it will be successful in raising these funds. In the absence of these additional funds the Board would, in the short term, need to consider alternative methods to fund the Group's ongoing requirements and is of the opinion that it will not be able to confirm that the Group has sufficient working capital for its present requirements, that is, for at least the 12 months immediately following the date of this preliminary statement. In this event, the Directors believe that the Group's cash requirements are likely to marginally exceed the amount available under its existing facilities of £20 million in late April 2006 and the Group would be immediately obliged to seek to negotiate revised banking facilities with its principal lending bank which could require a material debt reduction programme involving the sale of one or more of the Group's businesses. However, the Board cannot be confident that such negotiations would be successful and the Group's ability to conduct its business may therefore be affected since the future of the Group would then be dependent on the decisions taken by its principal provider of finance. Without an agreement on revised banking facilities, following late April 2006, the Group may be unable to meet its obligations as they fall due and may become insolvent leading to administration or receivership or other insolvency proceedings. In the belief that the firm placing and placing and open offer will be successful together with the banking facilities available to the Group, the Board believes that the adoption of the going concern basis is appropriate in the preparation of the 31 December 2005 preliminary results. If the adoption of the going concern basis were not to be appropriate, adjustments would be required to reclassify property, plant and equipment as current assets, to adjust assets to their recoverable values and to provide for any further liabilities that may arise. 2 Segmental Analysis The Group is organised into three primary business segments: Resourcing Solutions, Business Solutions and Training. Consolidated 2005 2004 £'000 £'000 Revenue - continuing operations Resourcing Solutions 95,892 85,628 Business Solutions 22,587 23,067 Training 20,044 23,771 138,523 132,466 Revenue - discontinued operations Resourcing Solutions 38,116 36,173 Business Solutions - 597 Training - 624 38,116 37,394 Geographical analysis United Kingdom 134,087 128,139 Mainland Europe 4,436 4,327 138,523 132,466 Operating result before Operating result after exceptional items exceptional items Exceptional items 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations Resourcing Solutions 1,844 1,239 5 87 1,849 1,326 Business Solutions 21 1,382 (607) (893) (586) 489 Training (1,161) (991) (1,007) (218) (2,168) (1,209) 704 1,630 (1,609) (1,024) (905) 606 Central costs (2,402) (2,990) (681) (2,354) (3,083) (5,344) Impairment of goodwill (2,500) - - - (2,500) - Segment results (4,198) (1,360) (2,290) (3,378) (6,488) (4,738) Interest expense (1,943) (1,470) - - (1,943) (1,470) Interest income 6 47 - - 6 47 Loss before tax (6,135) (2,783) (2,290) (3,378) (8,425) (6,161) Tax (378) (110) 616 308 238 198 Loss for the year from continuing operations (6,513) (2,893) (1,674) (3,070) (8,187) (5,963) Operating result before Operating result after exceptional items exceptional items Exceptional items 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 Discontinued operations Resourcing Solutions 1,054 763 (563) (305) 491 458 Business Solutions - (87) - (87) Training - 53 - 53 Segment results 1,054 729 (563) (305) 491 424 Interest expense (233) (120) - - (233) (120) Interest income 17 4 - - 17 4 Profit (loss) before tax 838 613 (563) (305) 275 308 Tax (1,310) 104 - 92 (1,310) 196 (Loss) profit for the year from discontinued operations (472) 717 (563) (213) (1,035) 504 3 Exceptional Items Consolidated 2005 2004 £'000 £'000 Continuing operations Redundancy payments 483 1,562 Property restructuring 573 1,646 Network and IT Support Services exit costs 1,234 - Other - 170 Total exceptional items from continuing operations 2,290 3,378 The exceptional charge of £2,290,000 (2004: £3,378,000) for continuing operations relates to the restructuring of the Group and the implementation of a new UK-centric strategy. Redundancy payments related mainly to the centralisation of the Group's finance function, plus changes in senior management. Property restructuring includes additional onerous lease provisions for those vacant properties where the prospect of subletting in the short-term appears unlikely. Network and IT support services exit costs are directly attributable to the change in provider of outsourced IT services to the Group. Consolidated 2005 2004 £'000 £'000 Discontinued operations Redundancy payments 60 81 Property restructuring 287 214 Other 216 10 Total exceptional items from discontinued operations 563 305 Exceptional items from discontinued operations are shown gross of tax. The tax credit relating to exceptional items from discontinued operations is £nil (2004: £92,000). 4 Discontinued Operations 2005 2004 £'000 £'000 Post tax profit from discontinued operations 87 88 Gain on disposal of subsidiary net tangible assets 188 220 Taxation (1,310) 196 Net (loss) profit on disposal (1,122) 416 Total (1,035) 504 Effective 1 November 2005, the Group sold the business and certain assets of its US operations, Parity Americas. The consideration will be received over an earn-out period which commenced on 1 November 2005 and will conclude on 31 January 2007. The tax charge of £1,310,000 (2004: £196,000 credit) relates to operations. Subsequent to year end the Group completed the sale of substantially all of its mainland European operations. As a consequence these operations have been disclosed as discontinued for the year ended 31 December 2005. 5 Earnings Per Ordinary Share Basic earnings per share is calculated by dividing the basic earnings for the period by the weighted average number of fully paid ordinary shares in issue during the period, less those shares held by the ESOP Trust, which are treated as cancelled. Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all dilutive potential ordinary shares. The Group has one class of potential dilutive ordinary shares being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. In April 2005, July 2005 and September 2005, the Company granted 359,000 awards under the Co-investments Scheme, 11,138,889 awards under the Long-Term Incentive Plan and 1,850,000 options under the Executive Share Option Scheme respectively. These awards/options have an exercise price which is below the average price of the Company's ordinary shares during the year. The incremental shares from the assumed exercise of these options/awards are not included in calculating the diluted per share amounts as they are antidilutive. This is due to the Group incurring a loss for the year (2004: loss). 2005 2004 weighted weighted average average number Per-share number Per-share Earnings of shares amount Earnings of shares amount £'000 thousands pence £'000 thousands pence Basic EPS Earnings attributable to ordinary Shareholders (9,222) 288,692 (5,459) 288,692 Shares held by the ESOP Trust (2,756) (2,756) Effect of dilutive securities Options - - Diluted EPS Adjusted earnings (9,222) 285,936 (3.23) (5,459) 285,936 (1.91) Earnings per share from continuing operations Basic EPS (9,222) 285,936 (3.23) (5,459) 285,936 (1.91) Profit on sale of subsidiary (188) (0.07) (220) (0.08) Pre-tax profits from discontinued operations (87) (0.03) (88) (0.03) Tax on discontinued Operations 1,310 0.46 (196) (0.07) Basic EPS from continuing Operations (8,187) 285,936 (2.87) (5,963) 285,936 (2.09) Diluted EPS (9,222) 285,936 (3.23) (5,459) 285,936 (1.91) Profit on sale of subsidiary (188) (0.07) (220) (0.08) Pre-tax profits from discontinued operations (87) (0.03) (88) (0.03) Tax on discontinued Operations 1,310 0.46 (196) (0.07) Diluted EPS from continuing operations (8,187) 285,936 (2.87) (5,963) 285,936 (2.09) Earnings per share from discontinued operations Basic EPS Profit on sale of subsidiary 188 285,936 0.07 220 285,936 0.08 Pre-tax profits from discontinued operations 87 0.03 88 0.03 Tax on discontinued Operations (1,310) (0.46) 196 0.07 Basic EPS from discontinued operations (1,035) 285,936 (0.36) 504 285,936 0.18 Diluted EPS Profit on sale of subsidiary 188 285,936 0.07 220 285,936 0.08 Pre-tax profits from discontinued operations 87 0.03 88 0.03 Tax on discontinued operations (1,310) (0.46) 196 0.07 Diluted EPS from discontinued operations (1,035) 285,936 (0.36) 504 285,936 0.18 6 Reconciliation of Operating Loss to Net Cash Flow Consolidated 2005 2004 Continuing operations £'000 £'000 Net loss for the period (8,187) (5,963) Adjustments for: Tax (238) (198) Depreciation 960 1,033 Equity settled share based payments 141 169 Impairment of goodwill 2,500 - Loss on disposal of tangible fixed assets 18 33 Interest income (6) (47) Interest expense 1,943 1,470 Changes in working capital Decrease (increase) in work in progress 341 (1,103) (Increase) in trade and other receivables (2,910) (162) Increase in trade and other payables 2,352 4,356 (Decrease) increase in provisions (751) 337 Change in retirement benefit liability (1,123) (865) Cash used in continuing operations (4,960) (940) Discontinued operations Net (loss) profit for the period (1,035) 504 Adjustments for: Tax 1,310 (196) Depreciation 79 101 Loss on disposal of tangible fixed assets 23 8 Interest income (17) (4) Interest expense 233 120 Changes in working capital Decrease(increase) in trade and other receivables 52 (1,729) (Decrease) increase in trade and other payables (378) 562 Increase in provisions 233 405 Cash used in discontinued operations 500 (229) Total net cash flow from operating activities (4,460) (1,169) Cash generated from operations includes cash outflows relating to exceptional items recorded in prior years of £2,663,000 (2004: £1,560,000). 7 Reconciliation of Net Cash Flow to Movement in Net Borrowings 31.12.05 31.12.04 £'000 £'000 (Decrease) increase in cash in the period (520) 791 Increase in bank loans (5,300) (1,200) Decrease (increase) in other bank borrowings 913 (1,275) Increase in invoice factoring facility (571) - Repayment of obligations under finance leases 20 17 Repayment of loan notes 6 8 Exchange movements 93 3 Movement in net debt in the period (5,359) (1,656) Net debt at 1 January (13,693) (12,037) Net debt at 31 December (19,052) (13,693) 8 Analysis of Net Borrowings Exchange 01.01.05 Cash flow Movements 31.12.05 £'000 £'000 £'000 £'000 Cash and cash equivalents Cash at bank and in hand 5,641 (3,986) 83 1,738 Overdrafts (3,466) 3,466 - - 2,175 (520) 83 1,738 Borrowings Bank loans (12,200) (5,300) - (17,500) Other bank borrowings (3,602) 913 13 (2,676) Invoice factoring facility - (571) (3) (574) Obligations under finance leases (60) 20 - (40) Variable rate loan notes (6) 6 - - Net Borrowings (13,693) (5,452) 93 (19,052) Cash and cash equivalents includes cash held in assets held for sale and included in disposal groups of £989,000. Borrowing includes other bank borrowings and invoice factoring facilities of £2,158,000 and £574,000 respectively, held in liabilities held for sale and included in disposal groups. 9 Assets and Liabilities Classified As Held for Sale and Included in Disposal Groups The Company announced during the year that it planned to dispose of its Parity mainland Europe operations. The disposal of substantially all of this business was completed on 31 January 2006. The following major classes of assets and liabilities relating to these operations have been classified as held for sale in the consolidated balance sheet. Parity mainland Europe £'000 Assets classified as held for sale Property, plant and equipment 27 Trade and other receivables 7,725 Cash and cash equivalents 989 Deferred tax assets 5 8,746 Liabilities classified as held for sale Borrowings 2,732 Trade and other payables 4,200 Current tax liabilities 299 7,231 Assets and liabilities classified as held for sale and included in disposal groups were previously included in the Resourcing Solutions segment information. 10 Statement of Changes in Shareholders' (Deficit) Equity Share Share premium Other Retained capital reserve reserves earnings Total Consolidated £'000 £'000 £'000 £'000 £'000 At 1 January 2005 14,434 6,062 44,160 (59,659) 4,997 Net loss for the period - - - (9,222) (9,222) Share options - value of employee services - - - 141 141 Net loss recognised directly in equity - - - (6) (6) At 31 December 2005 14,434 6,062 44,160 (68,746) (4,090) Share Share premium Other Retained capital reserve reserves earnings Total Consolidated £'000 £'000 £'000 £'000 £'000 At 1 January 2004 14,434 6,062 44,160 (53,346) 11,310 Net loss for the period - - - (5,459) (5,459) Share options - value of employee services - - - 169 169 Dividend paid - - - (87) (87) Net loss recognised directly in equity - - - (936) (936) At 31 December 2004 14,434 6,062 44,160 (59,659) 4,997 DEFINITIONS The following definitions apply throughout this announcement, unless the context requires otherwise: 'Act' or the 'Companies Act' the Companies Act 1985, as amended 'Admission' the admission of the New Ordinary Shares to be issued pursuant to the Capital Reorganisation and the Issue (i) to the Official List and (ii) to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with the Listing Rules and the Admission and Disclosure Standards 'Admission and Disclosure the requirements contained in the publication 'Admission and Disclosure Standards Standards' ' containing, amongst other things, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's main market for listed securities 'Application Form' the application form which will accompany the Prospectus for Qualifying non-CREST Shareholders for use in connection with the Open Offer 'Arbuthnot' Arbuthnot Securities Limited whose office is at Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR 'Board' or 'Directors' the board of directors from time to time of the Company (or the directors present at a duly convened meeting of such board) or a duly authorised committee of the board 'Capital Reorganisation' the reorganisation of the existing share capital of the Company pursuant to the Sub-division and the Consolidation, as described in this document 'certificated' or not in uncertificated form 'certificated form' 'Consolidation' the proposed consolidation into New Ordinary Shares of every 50 ordinary shares of 0.04 pence each arising pursuant to the Sub-division, as described in this document 'Deferred Shares' deferred shares of 0.04 pence each in the capital of the Company arising pursuant to the Capital Reorganisation 'Existing Shareholder' a holder of Ordinary Shares as at the Record Date 'Extraordinary General Meeting' the extraordinary general meeting of the Company convened for 24 April 2006 (or or 'EGM' any adjournment of it), notice of which is set out at the end of this document 'Firm Placing' the conditional placing by Arbuthnot on behalf of the Company of the Firm Placing Shares at the Issue Price pursuant to the Placing Agreement 'Firm Placing Shares' the 16,000,000 New Ordinary Shares being placed firm conditionally and which are not being offered pursuant to the Open Offer 'Issue' the Firm Placing and the Placing and Open Offer 'Issue Price' 50 pence per New Ordinary Share 'Japan' Japan, its territories and possessions and any areas subject to its jurisdiction 'Listing Rules' the rules and regulations made by the Financial Services Authority under Part VI of the Financial Services and Markets Act 2000 (as amended from time to time) 'London Stock Exchange' London Stock Exchange plc 'New Ordinary Shares' the new ordinary shares of 2 pence each in the capital of the Company following the Capital Reorganisation, including the 32,038,427 new ordinary shares to be issued pursuant to the Issue, being the Firm Placing Shares and the Open Offer Shares 'Official List' the Official List of the Financial Services Authority 'Open Offer' the invitation to Qualifying Shareholders to subscribe for Open Offer Shares at the Issue Price on the terms and subject to the conditions set out in the Prospectus and, where relevant, in the Application Form 'Open Offer Shares' the 16,038,427 New Ordinary Shares for which Qualifying Shareholders are being invited to apply under the terms of the Open Offer 'Ordinary Shares' ordinary shares of 5 pence each in the capital of the Company or, where the context requires, New Ordinary Shares following the Capital Reorganisation 'Overseas Shareholders' Shareholders who are resident in, or who are citizens of, or who have registered addresses in, territories other than the United Kingdom and Shareholders who are US persons 'Parity Share Plans' or 'Share The Parity 1994 Executive Share Option Plan, the Parity Unapproved 1994 Executive Option Schemes' Share Option Plan, the Parity Group 1999 Company Share Option Plan, the Parity Group 1999 Unapproved Company Share Option Plan, the Parity Group 1999 Savings Related Share Option Scheme, the Parity 2004 Share Co-Investment Scheme and the Parity Long Term Incentive Plan 'Placing' the conditional placing by Arbuthnot on behalf of the Company of the Open Offer Shares pursuant to the Placing Agreement 'Placing Agreement' the agreement dated 30 March 2006 between the Company and Arbuthnot relating to the Issue 'Prospectus' the prospectus to be sent to Shareholders of Parity as soon as reasonably practicable after this announcement 'Qualifying Shareholders' holders of Ordinary Shares on the Company's register of members at the Record Date (other than certain Overseas Shareholders) 'Record Date' close of business on 29 March 2006 'Regulations' the Uncertificated Securities Regulations 2001, as amended from time to time 'Related Party Transactions' means the related party transactions with Aberforth Partners LLP and the Swinstead SIPP 'Resolutions' the resolutions set out in the notice of Extraordinary Genera Meeting at the end of the Prospectus 'Shareholders' holders of Ordinary Shares 'Sub-division' the proposed sub-division of each issued Ordinary Share into one ordinary share of 0.04 pence and 124 Deferred Shares and of every 2 unissued Ordinary Shares into 5 New Ordinary Shares 'Subsidiary' means a company which is both under the control of the Company and is a subsidiary of the Company (within the meaning of section 736 of the Act) 'Swinstead SIPP' the self-invested personal pension plan of which Philip Swinstead is a beneficiary 'uncertificated' or recorded on the relevant register or other record of the share or other security 'uncertificated form' concerned as being held in uncertificated form in CREST, and title to which, by virtue of the Regulations, may be transferred by means of CREST 'United Kingdom' or 'UK' the United Kingdom of Great Britain and Northern Ireland 'United States' or 'US' the United States of America, its territories and possessions and any state of the United States of America and the District of Colombia 'US person' has the meaning provided in section 902(k) of Regulation S under the US Securities Act 'US Securities Act' the United States Securities Act of 1933, as amended This information is provided by RNS The company news service from the London Stock Exchange

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