Disposal of Armstrong Craven

26 June 2013

Work Group plc

 (the "Company")

Disposal of Armstrong Craven

The Company announces that it has today disposed of the business and all trading assets of Armstrong Craven ("AC") to Isis Equity Partners for a total consideration of £2.8 million (the "Disposal"). The consideration comprises an initial cash payment of £1.8 million, a deferred cash payment of £300,000 and retention by the Company of certain trading assets. The Disposal will result in the Company incurring a tax charge of approximately £490,000.

Reasons for the Disposal

As announced on 3 December 2012, the Company has undertaken a strategic review of the business and has considered all viable opportunities to maximise value for shareholders in light of the disappointing trading results for the year ended 31 December 2012 and the changing recruitment services market in general. This review highlighted that the resources of the Company are not sufficient to meet the investment needs of both the AC and Work Communications and Resourcing businesses and consequently the Board decided to seek potential buyers which culminated in the current Disposal.

During the year ended 31 December 2012, AC generated an operating profit before exceptional items of £266,000 (2011: £934,000), and an operating loss after exceptional items (including an impairment of £2,921,000) of £2,683,000 (2011: profit £934,000) and had net assets of £2,657,000 (2011: £5,397,000).

Following the Disposal, which will result in the management team and other employees (in total 51 people) of AC passing across under TUPE regulations, the Company intends to concentrate on its remaining businesses of Work Communications and Work Resourcing. Over the past months there have been extensive changes in the Work Communications business, with greater focus placed on the recruitment management activities of the Resourcing businessand the development of combined services with the communications teams. In addition there has been a reduction in the income derived from communication activities and the Board believes that by targeting a more even mix of revenue streams the Company will have a more secure base from which to develop its business going forward.

The Company is targeting to bring its central overheads in line with its reduced activities following the Disposal and is already in the process of moving to smaller London offices. It intends to deploy some of the proceeds from the Disposal to increase the sales and business development capabilities of the Work Communications and Resourcing businesses. In addition, although the Company has been historically debt free, the working capital needs have become greater in recent months and consequently some of the proceeds will be used to eliminate the Company's current indebtedness.

Directorate Change

Following the successful conclusion of this transaction, Julian Maslen, Finance Director, has given notice of his intention to leave the Company. Following a handover period the financial functions will be passed to the Company's financial controller who has worked in the business for three years.

The Company expects to announce its interim results for the six months ended 30 June 2013 in mid August 2013 at which time a more comprehensive update as to trading will be provided.

The Board continues to be mindful of the strategic options for the Company and will review opportunities for further deployment of the Disposal proceeds in the coming months.

Simon Howard, Executive Chairman, said: "This is an important step forward and will allow us to bring focus to the Company's development. I would like to thank Julian for seeing through this significant phase as well as his Board service over the past three years"

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