Proposed Rights Issue

RNS Number:4909H
Innovation Group PLC
14 February 2003


Embargoed until 7.00am                               14 February 2003


               THE INNOVATION GROUP PLC ("TiG" or "the Company")
                             PROPOSED RIGHTS ISSUE

Highlights

  * Proposed 1 for 1 Rights Issue to raise approximately #9.18 million (net of
    expenses).

  * Up to 198,680,665 new Ordinary Shares to be offered at a price of 5 pence
    per share.

  * All of the Directors have irrevocably undertaken to take up their rights
    in respect of 41,318,585 new Ordinary Shares (representing 20.8 per cent. of
    the Rights Shares).

  * Certain of the Directors have agreed to sub-underwrite a proportion of the
    Rights Issue in respect of 15,900,000 new Ordinary Shares.

  * The Rights Issue has been fully underwritten by KBC Peel Hunt.

  * Proceeds to be used to strengthen Company's balance sheet.

  * The quarter ended 31 December 2002 showed a positive trading improvement
    over the previous quarter.

  * #1.8 million license agreement entered into with Zurich Insurance
    Company.


This summary should be read in conjunction with the detailed announcement which
follows.


Enquiries:

The Innovation Group plc                                         01489 898300
Paul Smolinski, Group Finance Director

KBC Peel Hunt                                                    020 7418 8900
Simon Hayes / Jonathan Marren

Weber Shandwick Square Mile                                      020 7067 0700
Tim Jackaman / Katie Hunt


Introduction

The Company today announces a proposed 1 for 1 rights issue of up to 198,680,665
new Ordinary Shares at 5 pence per share to raise approximately #9.18 million
(net of expenses). All of the Directors have irrevocably undertaken to take up
their rights in respect of 41,318,585 new Ordinary Shares and certain of the
Directors have agreed to sub-underwrite a proportion of the Rights Issue in
respect of 15,900,000 new Ordinary Shares. The Rights Issue has been fully
underwritten by KBC Peel Hunt.

The Rights Issue is conditional, inter alia, on the passing of the Resolutions
at an extraordinary general meeting of Shareholders to be held on 4 March 2003
and convened by a notice set out in a circular ("Circular") to Shareholders to
be posted later today.

The Issue Price represents a discount of 48.72 per cent. to the closing price of
an Ordinary Share of 9.75 pence on 13 February 2003, the last dealing date prior
to the date of this announcement.

Background to and reasons for the Rights Issue

In common with other technology businesses the Group found the second half of
its last financial year extremely demanding. The trading environment in the
insurance industry resulted in many insurers taking a cautious view on
technology infrastructure and systems investments, which in turn meant that new
business license sales and the timing of license deployments relating to
existing customer projects were proving difficult.

On 21 November 2002, the Company announced its preliminary results for the year
ended 30 September 2002, which were in line with revised market expectations.

Regardless of the cash available to the business at this time and the progress
being made on client implementations, the Directors are of the view that it
would be appropriate to raise additional funds for the Company at this stage to
strengthen the Company's balance sheet. This will provide further confidence to
clients and potential clients in the Group's ability to fulfil contracts and
thus assist in the negotiation of new business currently under discussion.

The Company has also entered into a license agreement with Zurich Insurance
Company which has paid a license fee of approximately #1.8 million into an
escrow account which will be released to the Company upon the passing of the
Resolutions in respect of the Rights Issue.

In addition, the recent restructuring of the Group's cost base to reflect the
new business environment necessitated the entering into of certain arrangements
on terms less favourable to the Group than could be achieved if the Group had
additional cash resources.  The Directors believe the strengthened balance sheet
will assist in the negotiation of more favourable terms with existing and future
suppliers.

Principal terms and conditions of the Rights Issue

Up to 198,680,665 new Ordinary Shares will be issued under the Rights Issue to
raise approximately #9.18 million, after expenses. The issue price of 5 pence
per Rights Share represents a 48.72 per cent. discount to the closing middle
market price of 9.75 pence per Ordinary Share on 13 February 2003, the last
dealing date prior to this announcement.

Qualifying Shareholders will be offered Rights Shares at a price of 5 pence per
Rights Share on the following basis:

            1 new Ordinary Share for every 1 Existing Ordinary Share

held at the close of business on 27 February 2003 and so in proportion for any
other number of Ordinary Shares then held.


The Rights Issue is conditional, inter alia, upon:

 i. the passing of the Resolutions at the Extraordinary General Meeting;
ii. the Underwriting Agreement having become unconditional in all respects (save
    for the condition relating to Admission) and not having been terminated in
    accordance with its terms; and
iii.Admission having occurred by not later than 8:00 a.m. on 5 March 2003 (or
    such later date, no later than 19 March 2003, as KBC Peel Hunt may agree).

The Rights Shares, when issued and fully paid, will rank pari passu in all
respects with the Existing Ordinary Shares, including the right to receive all
future dividends or distributions made, paid or declared thereafter.

Based on the Existing Issued Share Capital, up to 198,680,665 new Ordinary
Shares will be offered pursuant to the Rights Issue.  The Rights Issue has been
fully underwritten by KBC Peel Hunt.  KBC Peel Hunt, as agent for the Company,
has conditionally agreed to use its reasonable endeavours to procure subscribers
for those Rights Shares not taken up at the Issue Price.

Current trading and prospects

The quarter ended 31 December 2002 was an encouraging time for our supply chain/
e-procurement business. A significant new client win in our German operation is
already having a major effect on their run-rate revenues. In the UK, client
developments have resulted in our projected run-rates increasing by 25 per cent.
by the conclusion of the quarter ended 31 December 2002. The effect of this
increase should start to manifest itself in the results for the quarter ended 31
March 2003. These revenue gains within the UK and German supply chain and
e-procurement businesses are being achieved without any increase in the current
cost base. The Board is optimistic that this positive trend for revenue growth
will continue throughout 2003.

Overall, the quarter ended 31 December 2002 shows a positive trading improvement
over the previous quarter from continuing operations with the fixed cost base
being reduced significantly.  Amortisation of goodwill continued in line with
the announced policy.

The Directors consider that the Company's current cash position is satisfactory,
particularly following the recent sale of Motorcare Services SA, the French
e-managed services business.

Board changes

Following this announcement of the Rights Issue, and as was referred to in the
announcement of 4 February 2003, Hassan Sadiq has today been appointed as Chief
Executive of the Company.  Hassan Sadiq has been the Chief Operating Officer of
the Company since December 2001.

In addition Robert Terry, founder and previously Chief Executive of the Company,
has today been appointed as Non-Executive Vice Chairman and chairman elect.  The
Company has, however, secured the ongoing services of Robert Terry on the terms
of a management consultancy agreement on a two-year rolling basis.

John Birkmire, Gordon Crawford and Clive Vlotman all resigned from the Board on
3 February 2003. It is the Board's intention to appoint additional fully
independent non-executives directors to the Board in due course.

Intentions of Directors

All of the Directors and, in the case of Mr Terry and Mr Scott, their associated
family trusts, have irrevocably undertaken to take up their entitlement under
the Rights Issue in respect of 41,318,585 new Ordinary Shares at the Issue
Price. In addition, the Sub-Underwriting Directors have agreed to sub-underwrite
the Rights Issue in respect of 15,900,000 new Ordinary Shares at the Issue
Price. The Rights Shares underwritten by the Sub-Underwriting Directors and
those subject to irrevocable undertakings represent 28.80 per cent. of the
Rights Shares to be made available pursuant to the Rights Issue.

CREST

Qualifying CREST Shareholders (other than Overseas Shareholders) will be
provisionally allotted Rights Shares in uncertificated form to the extent that
their entitlement is based on Existing Ordinary Shares held in CREST unless
they, or the Company, specify otherwise in accordance with the procedure
detailed in the Circular.

Qualifying non-CREST Shareholders' banks or stockbrokers should be able to
provide them with information about the CREST system. More information can be
obtained from CRESTCo Limited by telephoning [phone] or accessing
its website at www.crestco.co.uk.

Extraordinary General Meeting

The Extraordinary General Meeting will be held at the offices of the Company,
Yarmouth House, 1300 Parkway, Solent Business Park, Whiteley, Hampshire PO15 7AE
at 10:00 am on 4 March 2003, at which two ordinary resolutions necessary to
enable the Rights Issue to proceed will be put to Shareholders for approval.

Expected timetable of principal events                       2003


Circular despatched to Shareholders                        14 February

Record Date for the Rights Issue                           27 February

Latest time and date for receipt of Form of Proxy          10:00 a.m. on 2 March

Extraordinary General Meeting                              10:00 a.m. on 4 March

Despatch of Provisional Allotment Letters (to              4 March
Qualifying non-CREST Shareholders only)                    

CREST shareholder accounts credited with Nil Paid Rights   5 March

Existing Ordinary Shares marked 'ex' by                    5 March
London Stock Exchange                                      

Dealings in Rights Shares, nil paid, commence on the       5 March
London Stock Exchange                                      

Nil Paid Rights and Fully Paid Rights enabled in CREST     5 March

Recommended latest time for requesting withdrawal of       4:30 p.m. on 20 March
Nil Paid Rights or Fully Paid Rights from CREST (i.e. 
if your Nil Paid Rights are in CREST and you wish to 
convert them into certificated form)

Latest time for depositing renounced Provisional           3:00 p.m. on 25 March
Allotment Letters, nil paid, into CREST or for 
dematerialising Nil Paid Rights or Fully Paid Rights 
into a CREST stock account

Latest time and date for splitting Provisional Allotment   3:00 p.m. on 26 March
Letters, nil paid or fully paid                            

Latest time for acceptance, payment in full and            9:30 a.m. on 28 March
registration of renunciation           

Rights Shares in registered form (and transferable         From 31 March
in the usual way)                   

Rights Shares credited to CREST stock accounts             31 March

Expected despatch of definitive share certificates         7 April
for Rights Shares                   


Miscellaneous

This announcement does not constitute or form part of, and should not be
construed as, an offer for sale or subscription of, or solicitation of an offer
to buy or subscribe for, any securities of The Innovation Group plc nor should
it, or any part of it, form the basis of, or be relied on in connection with any
contract or commitment whatsoever. Any decision in connection with the proposed
Rights Issue should be made solely on the basis of the information contained in
the Circular.

This announcement is not for publication or distribution or release, directly or
indirectly, in the United States, Canada, Japan, Australia, South Africa or
Ireland. This announcement does not constitute or form any part of any offer to
sell, issue or to acquire any securities of the Company in the United States,
Canada, Japan, Australia, South Africa, Ireland or in any other jurisdiction.
Neither the Rights Shares nor the Provisional Allotment Letters are being
registered under the US Securities Act of 1933, as amended (the 'Securities
Act') and may not be offered or sold in the United States (as such term is
defined in Regulation S under the Securities Act) at any time except pursuant to
the terms of an applicable exemption under the Securities Act and applicable
securities laws of the states of the United States.

KBC Peel Hunt is acting for the Company, and no one else, in connection with the
Rights Issue and will not be responsible to any other person for providing the
protections afforded to its clients or for providing advice in relation to the
proposed Rights Issue.

Terms in this announcement shall bear the same meaning, unless the context
otherwise requires, as defined in the Circular.

                                    - Ends -

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

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