Placing

16 November 2010

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, JAPAN, CANADA, AUSTRALIA OR THE REPUBLIC OF IRELAND

Electric Word plc

("Electric Word" or the "Company")

Placing of 58.18 million Ordinary Shares at 4.25 pence per share to raise £2.47 million

Highlights:

·; Placing at 4.25 pence per share to raise £2.47 million.

·; The Placing Price represents a discount of 2.9 per cent. to the closing price of 4.375 pence per Ordinary Share on 15 November 2010 (being the business day before the announcement of the Placing).

·; Proceeds of the Placing to be used to:

o fund the acquisition of Professional publisher Radcliffe Publishing Limited ("Radcliffe"), which serves the primary healthcare market; and

o fund the proposed buyout of a contract with an existing business partner in Electric Word's successful i-gaming affiliate marketing events and publishing business.

·; Trading in the Business Information division has continued to show growth as a result of further strong performance in the i-gaming sector. Challenging trading conditions in the schools market mean that although the period to 30 September 2010 was in line with market expectations, October trading and initial indications in the important month of November suggest that the Group's adjusted profit before tax in the current year is likely to be a little below market expectations.

·; Since the generally favourable settlement for Education and Health outlined in the Comprehensive Spending Review ("CSR"), bookings for 2011 events have started to return to expected levels, although we anticipate that in general schools' confidence to spend may take some time to recover in full while they wait for more detailed information on how policy will be applied in practice. Over the course of the next six months we expect to see a steady return to higher levels of activity.

Julian Turner, Chief Executive, commented on the Placing:

"The funds raised in the Placing will allow Electric Word to take advantage of two excellent investment opportunities. The acquisition of Radcliffe strengthens our Professional publishing by enabling us to expand into the primary healthcare sector where the Government's planned reforms will, we believe, require GPs and others in the Health sector to extend their professional development into new areas of management expertise and compliance responsibilities. We are also in advanced discussions to buy out our partner in the i-gaming affiliate marketing events and publishing business which will consolidate our profits and improve the margins in this part of our Business Information division. While recent conditions make the outlook for this year uncertain, we remain optimistic about the medium term opportunities for the Group, in part from the CSR and also from investments we have been making in the digital futures of our businesses. As a Group, we remain alert to opportunities to take advantage of in-fill and strategic acquisitions."

This summary should be read in conjunction with the full text of this announcement. 

For further information please contact:

This announcement has been issued by, and is the sole responsibility of, Electric Word. This announcement does not constitute an offer to underwrite, subscribe or otherwise acquire or dispose of any new Ordinary Shares or other shares in Electric Word.

The Ordinary Shares have not been, and will not be registered under the United States Securities Act of 1933, as amended (the 'Securities Act') or under the securities legislation of any state of the United States, and may not be offered or sold in the United States. The relevant clearances have not been, and will not be, obtained from the Securities Commission of any province or territory of Canada; no document in relation to the Placing has been, or will be, lodged with, or registered by, The Australian Securities and Investments Commission; no registration statement has been, or will be, filed with the Japanese Ministry of Finance in relation to the Placing; and no registration statement has been, or will be, filed with the Irish Stock Exchange in relation to the Placing. Accordingly, subject to certain exceptions, the Ordinary Shares the subject of the Placing may not, directly or indirectly, be offered or sold within the United States, Canada, Australia, Japan or the Republic of Ireland or offered or sold to a resident of the United States, Canada, Australia, Japan or the Republic of Ireland.

This press release may contain forward-looking statements with respect to Electric Word and its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe" or "continue" or the negative thereof or similar variations. The actual results and performance of Electric Word could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transactions contemplated herein are completed. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulation. The cautionary statements qualify all forward-looking statements attributable to Electric Word and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release and the parties have no obligation to update such statements.

Panmure Gordon (UK) Limited is authorised and regulated in the United Kingdom by The Financial Services Authority, is advising Electric Word and no-one else in connection with the Placing and will not be responsible to any person other than Electric Word for providing the protections afforded to their clients or for advising any other person in relation to the Placing.

Electric Word plc

("Electric Word" or the "Company")

Placing of 58.18 million Ordinary Shares at 4.25 pence per share to raise £2.47 million

Electric Word plc (AIM: ELE), the specialist information publisher, is pleased to announce that it has raised £2.47 million before expenses through a placing of 58,183,824 new Ordinary Shares at 4.25 pence each. The Placing Price is at a discount of 2.9 per cent. to the closing price of 4.375 pence per Ordinary Share on 15 November 2010 (being the business day before the announcement of the Placing). The Placing is not subject to Shareholder approval.

Reasons for the Placing and Use of Proceeds

In line with the Company's strategy, the Directors have continued to seek out opportunities to grow the business through complementary acquisitions, which offer Electric Word good value and opportunities to enhance its earnings. The Directors are pleased to announce that Electric Word has identified two such transactions: the acquisition of Professional publisher Radcliffe (the "Radcliffe Acquisition"), for which a legally binding contract has been exchanged and the buyout of our partner in the i-gaming affiliate events and publishing business (the "Contract Buyout"), for which it is in advanced discussions. It is intended to use the proceeds of the Placing to fund these transactions. Together the Radcliffe Acquisition and the Contract Buyout will add scale and increase profits in 2011.

Acquisition of Radcliffe Publishing Limited

Radcliffe is a UK-based specialist publisher founded in 1987, focused on professional development and compliance in primary healthcare. It produces a range of books for primary healthcare and general practice, including support for General Practitioners ("GPs"), GP practice managers and professions allied to heath; it covers general primary care, specialist areas such as child protection and palliative care, and medical education and exam support. It also produces six journals, including Education for Primary Care, and training courses for practice nurses and receptionists.

Radcliffe reported a profit on ordinary activities before taxation of £81,731 for the financial year ended 31 March 2010 and had gross assets of £1,183,157 at 31 March 2010. The estimated cash currently held by Radcliffe is £500k. The consideration for the Radcliffe Acquisition is payable to the shareholders of Radcliffe, namely Andrew Bax, Gillian Nineham and Margaret McKeown ("the Sellers") and consists of an initial aggregate consideration, gross of the cash acquired, of £1.529 million payable in November 2010, comprising £1.396 million payable in cash and £133k, to be satisfied by the issue of 3,125,507 Ordinary Shares, at the Placing Price (the "Consideration Shares").

There is a price adjustment mechanism calculated by reference to gross profit of Radcliffe for the twelve month period to 31 March 2011, whereby the consideration is increased by the amount by which gross profit exceeds £893k multiplied by 1.683, subject to an overall cap of £197k or reduced by the amount gross profit is less than £893k multiplied by 1.683, subject to a cap of £103k. In the 2011 price adjustment gross profit is according to the Radcliffe definition which excludes distribution and some marketing costs.

There is also an earn-out calculated by reference to the gross profit of Radcliffe for the twelve month period to 30 November 2012, whereby the consideration is increased to 74.9% of the amount by which gross profit exceeds £525k multiplied by 1.5, subject to a cap of £800k. In the 2012 earn-out gross profit is according to the Group definition, which is calculated after all distribution and marketing costs.

Completion of the acquisition of Radcliffe is conditional on completion of the Placing and is expected to complete on 23 November 2010. Under the terms of the agreement, the Sellers have agreed not to sell their Consideration Shares for twelve months after completion, have given the Company standard restrictive covenants for a period of two years from completion and have given warranties and a tax indemnity in usual form.

The Directors estimate annual cost synergies of £200k from savings on Radcliffe directors' fees and premises costs, and also expect to incur integration costs of approximately £150k which will be taken in the current year.

The Directors see good opportunities in the healthcare sector to add conferences, expand training, build subscription revenues and develop digital products - all areas where Electric Word has existing expertise in professional markets.

Proposed contract buyout of partner in i-gaming affiliate marketing business

In 2006, iGaming Business Ltd, Electric Word's 70 per cent. owned subsidiary, entered into a contract with the Casino Affiliate Programs business of Affiliate Media, Inc. ("CAP") to produce information serving affiliate marketing partners to the online gaming industry. This comprises a magazine and events business, all of which are wholly managed by Electric Word. Under the terms of the contract, CAP receives fees amounting to approximately 50 per cent. of profits.

Revenue for this business, which totalled £1.5 million for the financial year ended 30 November 2009, is currently recognised within Electric Word. Profits generated by this business totalled approximately £0.5 million for the financial year ended 30 November 2009, of which, £228k was payable to CAP. Electric Word now plans to buy Affiliate Media, Inc. out of its benefits and obligations under the existing contract. The consideration for the proposed buyout comprises £1.1 million in cash, of which £0.55 million is payable on completion of the Contract Buyout and £0.55 million is payable in November 2011. The Directors believe that the Contract Buyout will have a number of benefits for Electric Word, including a consolidation of the profits within Electric Word and reduction of complexity for management.

In addition, Electric Word is in discussions with the principals of Affiliate Media, Inc. about new areas of potential future co-operation.

Electric Word is in advanced discussions regarding the Contract Buyout and a further announcement is expected to be made in due course, although there can be no guarantee that Electric Word will conclude an agreement with Affiliate Media, Inc. for the Contract Buyout.

Financing Facilities

Electric Word has a £1.5 million revolving credit facility with RBS. Interest is charged at 2.25 per cent. over RBS's base rate from time to time and is due for repayment in May 2011. Electric Word is currently in constructive discussions with RBS to replace the revolver with a £1.5m term loan repayable over 3 years.

In addition to the revolving credit facility, Electric Word also has a £0.75 million overdraft facility that is currently unutilised and repayable on demand. Interest is charged at 2.25 per cent. over RBS's base rate from time to time. At the end of October 2010, Electric Word held £0.5 million of cash.

Current Trading and Prospects

Following a positive first half performance across the business, trading in the second half has continued to show growth in our Business Information division, but has been more challenging in the public sector markets between the general election and the Comprehensive Spending Review.

The plans outlined in the CSR provide as helpful a background to future trading as could be expected as cash budgets have been maintained in UK schools over the next four years and more money will go to schools with a higher proportion of children requiring additional educational support through the Pupil Premium. Increased autonomy for schools will help drive the demand for our school management information products and abolition of agencies such as the Teacher Development Agency and reductions in funding to Local Education Authorities are expected to reduce the provision of free professional development support from the centre.

Nevertheless, despite the medium-term opportunities arising from the CSR, we have experienced generally reduced demand from schools this year that has affected books, new subscriptions sales and latterly conference delegate bookings. In particular, advance conference bookings were very slow in the period from July to September. Since the generally favourable settlement for Education and Health outlined in the CSR, bookings for 2011 events have started to return to expected levels, although we anticipate that in general schools' confidence to spend may take some time to recover in full while they wait for more detailed information on how policy will be applied in practice. Over the course of the next six months we expect to see a steady return to higher levels of activity.

Trading in the Business Information division has continued to show growth as increased competition for customers between online gaming operators has driven revenues in our affiliate marketing magazine and events.

As a result, good first half trading and subsequent strong performance in the Business Information division meant that the Group was on course to meet expectations at the end of September. October trading and initial indications in the important month of November suggest that the Group's adjusted profit before tax in the current year is likely to be a little below market expectations.

We remain optimistic about the medium term opportunities for the Group, in part from the CSR and also from investments we have been making in the digital futures of our businesses. As a Group, we continue to remain alert to opportunities to take advantage of in-fill and strategic acquisitions.

Details of the Placing

The Company has conditionally raised approximately £2.47 million before expenses (approximately £2.32 million net of expenses) by the conditional placing of 58.18 million new Ordinary Shares at 4.25 pence per share to the Placees. The allotment of the Placing Shares is conditional, amongst other things, on Admission.

It is proposed to carry out the Placing in two stages. Application has been made to the London Stock Exchange for the Admission of the First Placing Shares to trading on AIM. It is expected that Admission of the First Placing Shares will occur and that dealings will commence at 8.00 a.m. on 19 November 2010 at which time it is also expected that the First Placing Shares will be enabled for settlement in CREST.

Application has also been made to the London Stock Exchange for the Admission of the Second Placing Shares to trading on AIM. It is expected that Admission of the Second Placing Shares will occur and that dealings will commence at 8.00 a.m. on 22 November 2010 at which time it is also expected that the Second Placing Shares will be enabled for settlement in CREST.

Application has also been made to the London Stock Exchange for the Admission of the Consideration Shares to trading on AIM. It is expected that Admission will occur and that dealings will commence at 8.00 a.m. on 24 November 2010 at which time it is also expected that the Consideration Shares will be enabled for settlement in CREST.

The Placing Shares and the Consideration Shares will be issued credited as fully paid and will rank pari passu in all respects with the Ordinary Shares then in issue, including the right to receive any future dividends and other distributions. The Placing Shares and Consideration Shares will be in registered form and no temporary documents of title will be issued.

Reasons for not carrying out a pre-emptive issue

The Directors have considered the most appropriate method to conduct the fundraising, including carrying out a placing and open offer or a rights issue. The Directors concluded that the time and costs associated with a pre-emptive offer were excessive. After careful consideration, they concluded that the benefit of minimising the costs of the fundraising by way of a non pre-emptive cash placing would be in the best interests of Shareholders.

Related Party Transactions

Placing

Stewart Newton (and entities associated with Stewart Newton) has subscribed for 15,882,353 Placing Shares at the Placing Price pursuant to the Placing. Stewart Newton (and entities associated with Stewart Newton) held a beneficial interest in 58,991,171 Ordinary Shares prior to the Placing (representing 24.85 per cent. of the Existing Ordinary Shares of the Company). Following completion of the Placing, the holding of Stewart Newton (and entities associated with Stewart Newton) in Electric Word is expected to be 74,873,524, representing 25.06 per cent. of the Enlarged Share Capital.

ISIS has subscribed for 22,352,941 Placing Shares at the Placing Price pursuant to the Placing. ISIS held 63,637,932 Ordinary Shares prior to the Placing (representing 26.81 per cent. of the Existing Ordinary Shares of the Company). Following completion of the Placing, the enlarged holding of ISIS in Electric Word is expected to be 85,990,873, representing 28.79 per cent. of the Enlarged Share Capital.

Under the AIM Rules for Companies, Stewart Newton (and entities associated with Stewart Newton that hold Ordinary Shares in the Company) and ISIS, are treated as related parties of Electric Word. The Directors of Electric Word consider, having consulted with Panmure Gordon, the Company's nominated adviser, that the terms of the transactions are fair and reasonable insofar as its shareholders are concerned.

Taxation

The Company has applied to HMRC to obtain confirmation that the First Placing Shares to be issued under the Placing will be regarded as eligible shares for the purposes of the Venture Capital Trust scheme. To date, the Company has not received confirmation from HMRC on whether the First Placing Shares will be eligible shares for the purposes of the Venture Capital Trust scheme.

The Company is unable to guarantee that the First Placing Shares will meet the requirements of a qualifying holding. If the Company does receive confirmation from HMRC that the First Placing Shares are eligible shares for the purposes of the Venture Capital Trust scheme, the Company is unable to guarantee that the Placing Shares will continue to meet the requirements of a qualifying holding in the future. The main ways in which the Placing Shares might cease to be qualifying are (i) if the Company were to become the subsidiary of another company, (ii) if the Company were to fail to use the proceeds of the Placing for a qualifying business activity within the relevant time limits, or (iii) if the activities of the Company and its subsidiaries were to include substantial non-qualifying activities as set out in section 303 ITA 2007.

Placees should note that eligibility is also dependent on a Shareholder's own position and not just that of the Company. Accordingly, investors should seek advice from their own independent professional advisers on their own eligibility.

Definitions

The following definitions apply throughout this announcement, unless the context requires otherwise.