Fairplace Consulting PLC 01 July 2005 Fairplace Consulting plc Disposal of distance-based division Further to the announcement made on 6 May 2005, Fairplace Consulting plc ("Fairplace" or "the Company") announces the disposal of the business and assets of its distance-based division in Northampton ("the Transaction") to Working Transitions 2005 Limited ("WT 2005"), a new company formed and owned by Jim Horsted and Neil Lewis, former directors of the Company. Principal terms of the Transaction - the business and assets will be sold for £225,000 in cash, payable on completion; - a further cash payment ("the Deferred Consideration") will be payable calculated by reference to WT 2005's average annual post tax profit for the two years from completion. The Deferred Consideration is subject to a minimum cash payment of £50,000 and a maximum cash payment of £125,000; - the service contracts of Jim Horsted and Neil Lewis with Fairplace will be automatically transferred to WT 2005 upon completion without Fairplace incurring any additional liability; - WT 2005 will continue to provide the existing Fairplace Direct distance-based service on behalf of Fairplace and to Fairplace corporate outplacement clients under a licence with a minimum term of 24 months and a maximum term of 30 months, extendible by mutual agreement; - during the term of the licence WT 2005 will be permitted to offer outplacement services to private clients and to organizations which : are not clients of Fairplace on completion ; are not financial institutions ; have less than 500 employees. WT 2005 and its directors will also be subject to a number of other competitive restrictions; - for a period of 3 years from completion WT 2005 will pay Fairplace a fee of 2.5% of WT 2005's annual sales, such fee to be capped at £15,000 pa in Years 1 and 2 and £20,000 in Year 3; - Michael Moran, Fairplace Chief Executive, will be appointed to WT 2005's Board of Directors on completion; - Fairplace will seek to assign or sublet the lease on its offices in Northampton and intends to relocate its UK division from those offices in due course. Proceeds from the sale will be used to reduce the Company's overdraft borrowings which currently amount to £331,767. Business and assets being disposed of The distance-based business currently provides career transition services under the following brands: - to the insurance creditor market under the Working Transitions brand name; - to retail / private clients under the Working Careers brand name; - to Fairplace corporate outplacement clients under the Fairplace Direct brand name. WT 2005 will purchase the Working Transitions and Working Careers brand names, together with certain other brand names owned by Fairplace that are currently non trading. Fairplace will retain ownership of the Fairplace Direct brand name, which WT 2005 will be permitted to operate under licence as indicated above. The sales and profits for the distance-based business, after elimination of interdivisional sales and pre-allocation of central overheads, were as follows : £ 12 months to 30 June 2004 11 months to 31 May 2005 Sales 642,468 476,479 Profit before tax 128,920 40,010 Extracted from Fairplace management accounts The principal assets to be disposed of comprise approximately £17,000 of fixed assets and £29,000 of stock. After a non cash write-off of goodwill relating to Working Transitions, sale of the above assets and professional expenses of the Transaction, Fairplace will recognize an estimated loss on disposal in its group profit and loss account for the twelve months to 30 June 2005 of approximately £592,000. Fairplace will also provide in its 2005 accounts for anticipated costs relating to the Northampton lease cost. Fairplace will pay WT 2005 £30,000 in respect of continuing distance-based support to be provided after completion to current Fairplace clients. This amount will be payable in two equal tranches in July and August 2005. Rationale for the disposal and future strategy The distance-based business forms a limited part of the Fairplace Group's overall business. Working Transitions has already built a leading position in the provision of distance-based career transition services to creditor clients of insurance companies in the UK market. As this market is estimated** at a maximum of £1.5 million per annum, the Board believes that prospects for further growth in this market are limited. Fairplace has also decided to discontinue its distance-based private client services, which operate in what is a relatively small market compared with the corporate sponsor outplacement market. The Board anticipates that distance-based sales and profits for the twelve months to 30 June 2005 will be lower than for the comparable period in 2004. These prospects contrast with the significant talent management and outplacement markets now being targeted by Fairplace. The UK coaching market is estimated** at over £400 million per annum, while the UK outplacement market is estimated** at £80-£100 million per annum. Fairplace aims to increase its share of both these markets, with the objective of generating revenues derived equally from talent management and outplacement services. (** Fairplace estimates) Related Party Transaction Jim Horsted and Neil Lewis have been directors of the Company within the last 12 months. The Transaction is therefore classified as a related party transaction for the purposes of AIM Rule 13. Having consulted with the Company's nominated adviser, Williams de Broe Plc, the Directors of Fairplace consider that the terms of the Transaction are fair and reasonable insofar as the Company's shareholders are concerned. Mark Allsup, Fairplace Chairman, commented : "The decision to sell the distance-based business, which is primarily related to the insurance creditor market, reflects our change of strategy over the past twelve months and our clear focus on the very significant talent management and outplacement markets. We are making excellent progress with the new strategy and talent management services are accounting for an increasing proportion of our revenues. While the disposal will result in a substantial goodwill write-off in our 2005 accounts, this will be of a non cash nature, while cash proceeds from the sale will reduce current borrowings. We are now in a position to direct all our management resources on the development of our core businesses. At the same time, the arrangements we have put in place will ensure that we continue to offer a seamless distance-based service to our corporate outplacement clients under the Fairplace Direct brand name. Working in partnership with Jim Horsted and Neil Lewis Fairplace will continue to lead the UK market in the provision of high quality distance-based career transition services." For further information contact: Mark Allsup, Chairman 020 7816 0707 Fairplace Consulting plc Mark Baker / Brian Thorn 020 7845 7900 The Wriglesworth Consultancy Jonathan Gray / Michael Shaw 020 7588 7511 Williams de Broe Plc, Nominated Adviser/Broker This information is provided by RNS The company news service from the London Stock Exchange