Trading update

RNS Number:7867H
Greatfleet PLC
15 November 2007



For immediate release                                          15 November 2007

                                 Greatfleet plc

                        ("Greatfleet" or the "Company")



                                 Trading update



Introduction



On 5 November 2007 the Company announced that the outcome for the current year
was likely to be significantly below their previous expectations. This was due
to the Company's trading in October being significantly below budget and the
Board becoming aware, as a result of a review being conducted at the request of
the Board by Colin Gerstein (the Company's recently appointed Chief Executive
Officer), of certain matters which may have an impact on the outcome for the
current year.



The Company are today providing the results of the review, current trading and
an outline of the new management team's strategy for the future.



Key findings of the review



Since 30 June 2007 the monthly management accounts presented to the Board have
included revenues which were incorrectly included under the Company's revenue
recognition policy. In addition it appears that certain costs and accruals
incurred by the Company were not included in the management accounts in the
period in which they were incurred.



During the review it was identified that several unprofitable arrangements had
been entered into between the Company and some senior recruitment consultants
and their teams. These arrangements included commission rates significantly in
excess of industry norms and significant one off loyalty bonuses without
targets. These arrangements have now ceased or been re-negotiated to enable the
Company to go forward on a basis in line with current industry standards.



The new senior management team, led by Colin Gerstein and Antony Cox (Executive
Director), have undertaken a full review of the sales, back office and hiring
process. All of the Company's consultants and administration staff have been
interviewed and assessed and consequently a number of support and
non-contributing sales staff have left the business.



The Board has also become aware of certain undertakings included in the loan
agreement  which was entered into between General Capital Venture Finance
Limited ("General Capital") and the Company on 12 September 2007 have been
breached. The non-executive directors were not made aware of these undertakings
at the time the loan agreement was entered into. The undertakings which have
been breached include a fixed minimum profit covenant and a clause in relation
to a previous member of the executive management team's personal borrowing
arrangements with General Capital. The Board of Greatfleet have discussed these
breaches with General Capital who have provided assurances to the Company that,
whilst reserving all their rights under the loan agreement, they will not seek
repayment of the loan at this time (provided the Company continues to meet the
repayment schedule and that there are no further breaches of the loan
agreement).  In addition, General Capital has indicated that they would be
willing to amend the terms of the loan agreement or enter into a new loan
agreement with Greatfleet.



The review has also highlighted that Project Technology Limited ("Project
Technology"), a company of which past members of the executive management team
are both shareholders and directors, was allowed by the previous executive
management team to increase its credit facilities by #99,000 with Greatfleet in
July 2007. This was despite a statement in the admission document dated 30
November 2005 that all decisions in relation to Project Technology should be
taken only by Jonathan Hill (the Company's former Chairman), Keith Lassman and
John Baker. In addition, these actions were taken even though the Board had
instructed the previous executive management team not to increase the Company's
credit facilities to Project Technology. As at 14 November 2007, Project
Technology owed a total of #140,000 to Greatfleet and the Board are now taking
active steps to recover the outstanding amount.



These factors, combined with October's poor trading results (which consisted of
corrections relating to the management accounts since 30 June 2007 and reduced
levels of activity), have led the Board to conclude that it is likely that the
Company will make a small loss in the current financial year. The Company's new
management team are now rigorously enforcing the Company's revenue recognition
policy and are monitoring the Company's costs closely.



In light of the findings of the review, the Board are seeking advice on any
action that the Company may take to protect the interests of shareholders.



The Company holds a vacant leasehold property in Ludgate Hill, London, which has
been vacant since December 2005 and the Company continues to incur the rental
cost of the property. In addition, the Company also owns a leasehold property in
Leeds which has been vacant since December 2004. The Board intend to mitigate
the costs of these properties by refurbishing and seeking to sub-let the
property in Ludgate Hill and refurbishing and using the property in Leeds.



Significant further cost reduction measures are being implemented by the new
management team to improve net margins and robust reporting structures are now
in place to support the business.



Current trading



Through this difficult period the Board of Greatfleet have been greatly
encouraged by the enthusiasm of the staff retained in the business and the
levels of current activity being generated. The Board believes that with the new
executive management team in place, the revised cost and commission structure
and a rationalisation of the Company's brands, Greatfleet is now capable of
moving forward with a view to rebuilding shareholder value in the future.



The Board has considered the working capital requirements of the Company and
assuming that: (i) the Company's trading continues as expected by the Board;
(ii) there are no unforeseen events; and (iii) the Company continues to enjoy
the support of General Capital, then the Company currently has sufficient
working capital for its present requirements.



Outline strategic plan for the future



Greatfleet currently operates under eight brands of which only two (Longbridge
Search & Selection ("Longbridge") and Qualitas People Solutions ("Qualitas"))
will form the basis of the Group going forward. Longbridge will provide research
led services and Qualitas will provide contingent based services. Longbridge
currently operates out of London and Frankfurt and the new management team plan
to grow Longbridge's presence through the Company's Dublin and Edinburgh
offices. In addition, it is expected that Qualitas will add London, Norwich and,
in due course, Leeds, to its existing Dublin and Edinburgh regional operations.



The executive management team have identified strong management resource within
the existing business and are putting in place a revised operational management
structure to enable the business to move forward.



The Company intends to focus its activities in four key sectors (being legal,
banking, finance and IT) and to grow the business organically in the short to
medium term. In addition to the UK, the Company will continue to provide
services to the Middle East, Asia and across Europe from its UK headquarters and
through its Frankfurt operation. The Company has no plans to expand its offices
further outside of the UK in the foreseeable future.



For further information please contact:



Greatfleet plc
John Baker, Non-Executive Chairman                           Tel: [phone]
Colin Gerstein, Chief Executive Officer


Noble & Company Limited                                      Tel: [phone]
Nick Naylor
Nick Athanas


Parkgreen Communications                                     Tel: [phone]
Simon Robinson
Ben Knowles


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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