Disposal

27 February 2012

2ergo Group plc

Sale of international operations for $3.8m

Introduction

2ergo Group plc (AIM: RGO, "2ergo" or "the Group"), the mobile solutions company, has sold its three international businesses for $3.8m as part of a strategic restructuring programme initiated last year.

Details of the Disposals

To fulfil a major part of the Group's strategy, on Friday 24 February 2012 2ergo sold 2ergo Americas Inc, which represented its non-core North and Latin American operations, to Nasdaq-listed SoundBite Communications Inc ("SoundBite", NASDAQ: SDBT). SoundBite now becomes a key partner of the Group in the US.

Consideration for the disposal was $3.8m in cash, of which $3m was paid on completion. The balance will be held in escrow to settle any warranty claims arising and is expected to be released over a two year period. In the year to 31 August 2011, the loss before tax of 2ergo Americas Inc was $0.7m.

Importantly, the Group has retained 2ergo Inc. in the US which operates 2ergo's strategic partnership with Microsoft's Innovation Outreach Programme. This business is performing well and delivering important contract wins from, for example, Wendy's Restaurants and 3M. The Group views such regional partnerships as central to its geographical sales strategy going forward.

The Group has also sold its Australian operations to Gomeeki Pty Limited, one of its key partners in the country, and its Indian operations to the Indian management, whilst retaining important technology and IP. The latter transaction also completed on Friday 24 February and the former completed today. Consideration for these two disposals was nominal.

Outlook

Due to the strategic restructuring programme, which included the termination of sub-scale UK operations and legacy business lines, and the continuing challenging trading environment, the Group's profitability for H1 to 29 February 2012 is now expected to be below the Board's original expectations. However, the restructuring leaves the Group more focused than ever before and the disposals are expected to reduce the Group's operating costs by approximately £250,000 per month. The Group's excellent sales pipeline remains in place, although deals continue to take longer than usual to close due to the current economic climate.

The proceeds of the sales will be invested in accelerating the roll-out of podifi, 2ergo's new patented contactless mobile coupon and payment redemption technology launched today during the Mobile World Congress (see separate announcement).

podifi is the culmination of 12 years' experience in delivering customer acquisition technology for clients including Orange Wednesdays, reputed to be the world's most successful mobile loyalty programme. podifi will become one of the Group's core market propositions.

Neale Graham, CEO of 2ergo, said:

"As part of the review accompanying our restructuring programme, we concluded that our overseas operations were sub-scale and not in line with the Group's core strategy. As a result, we have taken advantage of attractive opportunities to dispose of these operations whilst maintaining market presence through high quality partners such as our new partner SoundBite.

"Although the strategic restructuring has been a distraction for the management, we are now a focused operation and in an excellent position to capitalise on the numerous opportunities we are seeing in our core business and especially the potential of podifi, our ground breaking contactless mobile coupon and payment technology. We look forward to announcing the progress of podifi in due course."

This announcement is being timed to coincide with an equivalent announcement being released by SoundBite in the United States.

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