1st Jul 2005 07:00
Fairplace Consulting PLC01 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 assetsof its distance-based division in Northampton ("the Transaction") to WorkingTransitions 2005 Limited ("WT 2005"), a new company formed and owned by JimHorsted 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 oncompletion; - a further cash payment ("the Deferred Consideration") will be payablecalculated by reference to WT 2005's average annual post tax profit for the twoyears from completion. The Deferred Consideration is subject to a minimum cashpayment of £50,000 and a maximum cash payment of £125,000; - the service contracts of Jim Horsted and Neil Lewis with Fairplace will beautomatically transferred to WT 2005 upon completion without Fairplace incurringany additional liability; - WT 2005 will continue to provide the existing Fairplace Direct distance-basedservice on behalf of Fairplace and to Fairplace corporate outplacement clientsunder a licence with a minimum term of 24 months and a maximum term of 30months, extendible by mutual agreement; - during the term of the licence WT 2005 will be permitted to offer outplacementservices to private clients and to organizations which : are not clients ofFairplace on completion ; are not financial institutions ; have less than 500employees. WT 2005 and its directors will also be subject to a number of othercompetitive restrictions; - for a period of 3 years from completion WT 2005 will pay Fairplace a fee of2.5% of WT 2005's annual sales, such fee to be capped at £15,000 pa in Years 1and 2 and £20,000 in Year 3; - Michael Moran, Fairplace Chief Executive, will be appointed to WT 2005's Boardof Directors on completion; - Fairplace will seek to assign or sublet the lease on its offices inNorthampton and intends to relocate its UK division from those offices in duecourse. Proceeds from the sale will be used to reduce the Company's overdraft borrowingswhich currently amount to £331,767. Business and assets being disposed of The distance-based business currently provides career transition services underthe 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 brandname. WT 2005 will purchase the Working Transitions and Working Careers brand names,together with certain other brand names owned by Fairplace that are currentlynon 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 ofinterdivisional sales and pre-allocation of central overheads, were as follows : £ 12 months to 30 June 2004 11 months to 31 May 2005 Sales 642,468 476,479Profit before tax 128,920 40,010 Extracted from Fairplace management accounts The principal assets to be disposed of comprise approximately £17,000 of fixedassets and £29,000 of stock. After a non cash write-off of goodwill relating to Working Transitions, sale ofthe above assets and professional expenses of the Transaction, Fairplace willrecognize an estimated loss on disposal in its group profit and loss account forthe twelve months to 30 June 2005 of approximately £592,000. Fairplace will also provide in its 2005 accounts for anticipated costs relatingto the Northampton lease cost. Fairplace will pay WT 2005 £30,000 in respect of continuing distance-basedsupport to be provided after completion to current Fairplace clients. Thisamount 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'soverall business. Working Transitions has already built a leading position inthe provision of distance-based career transition services to creditor clientsof insurance companies in the UK market. As this market is estimated** at amaximum of £1.5 million per annum, the Board believes that prospects for furthergrowth in this market are limited. Fairplace has also decided to discontinue itsdistance-based private client services, which operate in what is a relativelysmall market compared with the corporate sponsor outplacement market. The Board anticipates that distance-based sales and profits for the twelvemonths to 30 June 2005 will be lower than for the comparable period in 2004. These prospects contrast with the significant talent management and outplacementmarkets 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 boththese markets, with the objective of generating revenues derived equally fromtalent management and outplacement services. (** Fairplace estimates) Related Party Transaction Jim Horsted and Neil Lewis have been directors of the Company within the last 12months. The Transaction is therefore classified as a related party transactionfor the purposes of AIM Rule 13. Having consulted with the Company's nominatedadviser, Williams de Broe Plc, the Directors of Fairplace consider that theterms of the Transaction are fair and reasonable insofar as the Company'sshareholders are concerned. Mark Allsup, Fairplace Chairman, commented : "The decision to sell the distance-based business, which is primarily related tothe insurance creditor market, reflects our change of strategy over the pasttwelve months and our clear focus on the very significant talent management andoutplacement markets. We are making excellent progress with the new strategy andtalent management services are accounting for an increasing proportion of ourrevenues. While the disposal will result in a substantial goodwill write-off in our 2005accounts, this will be of a non cash nature, while cash proceeds from the salewill reduce current borrowings. We are now in a position to direct all ourmanagement resources on the development of our core businesses. At the same time, the arrangements we have put in place will ensure that wecontinue to offer a seamless distance-based service to our corporateoutplacement clients under the Fairplace Direct brand name. Working inpartnership with Jim Horsted and Neil Lewis Fairplace will continue to lead theUK market in the provision of high quality distance-based career transitionservices." For further information contact: Mark Allsup, Chairman 020 7816 0707Fairplace Consulting plc Mark Baker / Brian Thorn 020 7845 7900The Wriglesworth Consultancy Jonathan Gray / Michael Shaw 020 7588 7511Williams de Broe Plc, Nominated Adviser/Broker This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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