Disposal of Eclectic

RNS Number:2296K
Glen Group PLC
19 December 2007



                                 Glen Group Plc

Date 19 December 2007


              Proposed Sale of IT Consulting and Training Business

Glen Group plc ("Glen" or "the Company") announced today that it has entered
into a conditional agreement ("the agreement") relating to the sale of the
business and assets of its wholly owned subsidiaries, Eclectic Group Limited
("Eclectic") and I G Software Limited ("inGroup") for the sum of up to £3.00m
payable in cash ("the Sale"). The agreement, which is subject to Glen
shareholder consent and final approval from the purchaser's bankers, is with
Maxima Information Group Limited, a wholly owned subsidiary of Maxima Holdings
plc ("Maxima"), an AIM listed IT solutions and managed services company. It is
understood that Maxima intends funding the purchase from operational cash flows
and existing facilities with their bankers. The maximum sale price represents a
value per issued Ordinary Share of 0.272p, which equates to a premium of 101.5%
compared to the closing middle market price on 18 December 2007 of 0.135p, which
valued the entire Glen group, including the businesses not being sold, at £1.6m.

Commenting today Graham J Duncan Chief Executive Officer said:

"This transaction will provide us with the funds to allow us to make further in
roads into the market we know best and to also build the Group by acquiring
communications and IT solutions businesses which address the SME market. In the
current economic climate and as a consequence of the proposed changes to the
capital gains tax rules, we are ideally placed, with our strengthened balance
sheet, to achieve this"

Enquiries:

Glen Group plc
Graham J Duncan, Chief Executive Officer                    Tel: [phone]

Jonathan Wright
Seymour Pierce                                              Tel: [phone]

Pelham PR
Alex Walters                                                Tel: [phone]



Background

Glen provides a range of communications and IT solutions to business customers.
It addresses market needs through two principal subsidiary groups of companies,
namely the Pinnacle group of companies which is focused on integrated
communication solutions for SMEs; and Eclectic, including inGroup, which
provides a range of IT consulting and training services focused on the
implementation of business intelligence and corporate performance management
solutions, mainly to corporate and middle market companies. These two businesses
operate independently of each other and, because of the very different markets
that they address, there are limited opportunities to cross sell each other's
services.

The Company acquired Eclectic in February 2006 and inGroup in August 2007 for a
combined adjusted consideration of £3.4m. Since the acquisition of Eclectic,
Glen has benefitted from income of£500k from this business in respect of
management fees earned in the ordinary course of business. Shortly after the
acquisition of inGroup, Eclectic also received a dividend paid by inGroup of
£275k.

Following the acquisition of Pinnacle Group Limited in June 2007, the Glen group
has been focused on delivering telecommunications related solutions to SMEs
which are capable of generating recurring revenue streams. Eclectic and inGroup
are project based businesses, which are IT-centric and do not fit these
criteria.
In the fast changing telecommunications market, your Board sees opportunities to
introduce new services and solutions to Pinnacle customers, based on IP
technologies, as well as continuing to expand the more traditional
telecommunications business and now seeks to focus on this opportunity.

The Proposed Transaction

The proposed transaction will take the form of a sale of the assets and
undertaking of the businesses of Eclectic and inGroup, including its people,
supply agreements, customer contracts, the Eclectic and inGroup names and other
related data, with effect as at close of business on 31 December 2007 ("the
Transfer Date"). The Company will guarantee the obligations of Eclectic and
inGroup under the agreement.

The consideration will be payable in cash as follows:

 1. At completion of the Sale on 4 January 2008, the sum of £2.25m;
 2. On 17 March 2008, an additional sum of up to £750k, calculated by reference
    to the value of a specified list of customers and customer contracts which
    have transferred to Maxima, adjusted for deferred income, pre-payments and
    costs accrued prior to transfer of the trade and assets; this payment may
    also be reduced if less than 90% by value of Eclectic's significant clients
    have not agreed to contract novations or indicated their willingness to
    continue trading with Maxima.

The Directors have received confirmation that, following the Sale, the Company
will not be classed as an investing company under the AIM rules but will
continue to be treated as an operating company.



Financial Statements

The financial statements of Eclectic for the year ended 30 September 2007 and
inGroup for the nine month period ended 30 September 2007 have not yet been
audited and the Group is not expected to issue its preliminary announcement of
the results to 30 September 2007 until February 2008.

For the 14 month period ended 30 September 2006, the latest period where audited
accounts are available, Eclectic generated revenues of £5.03 million and
reported an operating profit, adjusted for intra group charges, of £0.35
million. For the 12 month period ended 31 December 2006, the latest period where
audited accounts are available, inGroup generated revenues of £1.45 million and
reported an operating loss of £102k. In the half-year unaudited results of Glen
for the six month period ended 31 March 2007 it was reported that Eclectic had
generated revenues of £2.51 million and an operating profit of £0.19 million
over the six month period. On the acquisition of inGroup, announced on 9 August
2007, it was reported that the unaudited management accounts showed that inGroup
had delivered revenues of £0.70 million and an operating profit of £74k over the
six month period to 30 June 2007.
The Retained Business

Following completion of the Sale, Glen's trading operations will be materially
reduced in size.

After completion of the Sale, Glen Group will consist of four operating
companies ("the retained businesses") all addressing the SME market. These are:

   *Pinnacle Telecom plc which provides line rental and calls, utilising its
    own in-house billing system;
   *Pinnacle Mobile Limited which provides a range of mobile voice and data
    services;
   *Glen Communications Limited, which principally provides voice-based
    broadband services, more commonly known as VoIP; and
   *Explore IT Limited, which provides IT support services to the SME market

Following a strategic review of our SME focused businesses conducted after the
acquisition of Pinnacle Group in June this year, we have put in place a number
of fundamental changes to our business operations which allow us to concentrate
our efforts on services that generate recurring income. IT project work, which
we have traditionally undertaken by utilising a direct sales force and our own
engineers, has been terminated. Our historically wide portfolio of services has
been significantly reduced and there has been a significant reduction in staff.

Our customer acquisition strategy is now focused on generating customers to our
telecom solutions business where we package line rental and calls for business
customers. This service is at the core of the Pinnacle business and the strategy
going forward is to cross sell our other services into this customer base. Our
customer acquisition strategy is being driven by the use of an offshore call
centre under the control of an experienced consultant with several years of
success in this area. The use of an offshore call centre is a recent activity
and it is currently in a trial phase. However, early results are encouraging and
we fully expect to upscale this activity in the New Year.


These changes are designed to a) significantly lower our costs, b) deliver
services and cross selling opportunities into business areas which we perceive
to be the fastest growing in the integrated communications space, c) deliver
regular recurring income to our business and d) provide a much more focused
approach to the marketplace.

As part of this proposed transaction, Pinnacle has signed a letter of
understanding with Maxima which gives Pinnacle the opportunity to jointly
promote, alongside Maxima, a range of telecommunication services to Maxima group
customers.

Use of Proceeds

As well as being used for general trading expansion, working capital and the
elimination of bank debt, Glen expects to use some of the proceeds of the Sale
to acquire other communications and IT solutions businesses which address the
SME market, and your Board is actively engaged in seeking suitable
opportunities.

The Directors are of the opinion that the climate for cash-based acquisitions is
likely to be positive in the first half of 2008, helped by proposed changes to
the capital gains tax rules. The proposed Sale will give the Directors a pool of
cash which can be applied towards acquisitions allowing the Directors to move
quickly when opportunities arise.

Eclectic will pass £250,000 of the proceeds of the Sale as a bonus to be
distributed to an Eclectic director and certain Eclectic staff, none of whom is
a director of Glen. This payment will be made in full at completion of the Sale.
This element of the transaction does, however, fall under the related party
provisions contained in Rule 13 of the AIM Rules. Having consulted with Seymour
Pierce Limited, Glen's nominated adviser, the directors consider that the terms
of the bonus arrangements are fair and reasonable insofar as Shareholders are
concerned.
Extraordinary Meeting

An an Extraordinary General Meeting of the Company ("EGM") will be held at
10.30am on 4 January 2008 at the offices of the Company, 6 Straiton View,
Straiton Business Parc, Loanhead, Edinburgh EH20 9QZ.



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