Proposed Disposal of Bullock

Montpellier Group PLC
31 August 2005



Montpellier Group Plc

('Montpellier' or the 'Group')



Proposed Disposal of Bullock Construction


The Board of Montpellier is today pleased to announce that is has conditionally
agreed to sell Bullock Construction Limited ('Bullock'), its principal social
housing subsidiary, to DTB Holdings, a company which has been established by a
Management Buy-Out team led by John Gaffney, managing director of Bullock, who
resigned as a director of Montpellier on 30 August 2005 to facilitate the
transaction.


The total consideration of the proposed disposal is £42.2 million, which
represents Bullock's estimated net worth at completion and goodwill valued at
£23 million.  Net cash receivable by Montpellier after repayment of intra-group
debts will be £22 million.


The Board firmly believes that funds from the agreed disposal of Bullock will:


  • Provide the Group with the scope to deal fully with all remaining legacy
    contract and property valuation issues


  • Establish the necessary resources to develop the Group's remaining
    businesses in line with the skills and experience of their management teams
    and progressively grow earnings from the existing overhead base


  • Significantly strengthen the Group's balance sheet, allowing appropriate
    banking and bonding facilities to be established and providing financial
    security to support future contract tendering


  • Provide greater security for all stakeholders in the Group



Background and Reasons for Disposal


Following a change of management in the winter of 2003/2004, the new Board
conducted a strategic review of the Group's activities, performance and
prospects, having inherited a group of companies which proved to be in a serious
financial position. Subsequent Board actions, including making major provisions
in respect of identified problem contracts, implementing a comprehensive
restructuring of the Group's operations, and addressing the material deficit in
the Group's pension scheme, led to a significant loss before tax for the 2004
financial year.


Together with delays in anticipated property sales, this has weighed heavily on
the Group's financial position, making it difficult to compete successfully for
new business and support ongoing trading.  The Board has also continued to
review all the Group's contracts and restructuring exposures on a regular basis,
and has identified the necessity for a further provision in respect of a legacy
contract exposure in one of its subsidiaries.


Having considered a number of alternatives, the Board believes that the proposed
disposal of Bullock on the agreed terms will provide the Group with the
certainty and scope to deal fully with all remaining legacy contract and
property valuation issues.  It will also greatly strengthen the Group's balance
sheet and allow appropriate banking and bonding facilities to be established,
enabling the Board and management to focus on the Group's two remaining core
business streams free of financial constraint.


The Board firmly believes that funds from the disposal of Bullock will provide
the necessary resources to develop these businesses in line with their skills
base, focused on margin enhancement and low risk contracting. The strengthened
balance sheet will provide the necessary financial security to support future
contract tendering and progressively grow earnings from the reduced overhead
base.


Future Shape of the Group


The Group recently announced the appointment of Brian May as Chief Executive.
Mr May has extensive experience in the construction industry, and under his
leadership the Group will be well positioned to take maximum advantage of the
strong markets in which its businesses operate, thereby delivering satisfactory
and reliable returns.  In addition, the actions taken by management, their
approach to securing new work and the control mechanisms which are in place
across the Group are resulting in a much reduced risk profile going forward.


Through VHE, the Group provides specialist remediation services across the UK.
VHE itself deals with brownfield land reclamation, principally of former
industrial sites to enable development and includes soil and waste treatment
services, and Shepley Engineers focuses on nuclear decommissioning. All of VHE's
specialist services are in high demand, underpinned by the Government's
commitment to the development of brownfield land and to maintenance and
decommissioning of UK nuclear assets, a long-term multi-billion pound commitment
by the Nuclear Decommissioning Authority.


The Group's partnered building operations consists of a number of specialist
construction businesses - Allenbuild, Britannia, Walter Lilly, YJL London and
YJL Infrastructure - each of which operates in niche market sectors and benefits
from strong regional brands. All of these businesses are well positioned to take
advantage of good market opportunities and, following the reorganisation of
Allenbuild, are winning new work through partnering agreements with key clients
in both the public and private sectors.


The combined turnover of the Group's residual businesses for the year ended 30
September 2004 was £402 million.  In line with the Group's refocusing the order
book as at 31 July 2005 was £226 million, reflecting the downsizing and closure
of certain problematic businesses.  In addition, the Group has a number of
property assets both in the US and UK which are being actively managed. The
Board is pursuing options to maximise the realisable value from these properties
over the next five years, in turn providing further funding to support growth in
the core construction businesses.


Conclusion


In the sale of Bullock, the Board received approaches regarding Bullock from a
number of parties in addition to the management team, including a venture
capital group and some of its trade competitors.  Following professional
evaluation of the value of Bullock, on the terms of the approaches received and
the transaction risk involved with each approach, the Board has concluded that a
disposal of Bullock to its management team provides fair value and the highest
degree of certainty both to Shareholders and the Group as a whole.


As a result, the Directors of Montpellier, having been so advised by Rowan
Dartington, the Company's nominated adviser, which has confirmed its opinion
that the terms of the transaction are fair and reasonable, are unanimously and
strongly recommending all Montpellier shareholders to vote in favour of the
disposal.





Roy Harrison, Executive Chairman, commented:


'The new Board inherited a business which subsequently proved to have a number
of issues, including major legacy contract exposures and inappropriate property
valuations.  Together with the Group's pension deficit, these have resulted in a
drain of more than £30 million on the Group's finances.


'Over the past 18 months we have worked tirelessly to resolve many of these
issues, most of which have been successfully dealt with and the remainder of
which we are confident can now be fully addressed.  However, these have
ultimately threatened the ability of our subsidiary companies to continue
trading competitively, despite having made considerable progress in implementing
good control mechanisms throughout the Group and reducing its risk profile,
while improving the quality and focus of its order book.


'Having explored a number of avenues to resolve the Group's resulting financial
difficulties, we received an approach from the management of Bullock.  After
assessing several competitive approaches, we considered this to be an attractive
solution, sufficient to resolve all remaining legacy issues and immediately
provide the Group with the necessary financial security to support the remaining
businesses and provide certainty to all our stakeholders.


'The Group's core construction businesses have excellent opportunities to take
advantage of resilient markets in their specialist areas of activity.  Under
Brian May's leadership and with strong management teams and the right structures
in place, the Board is confident that the Group has a sound future.'



The transaction is conditional only on the approval of Montpellier's
shareholders and a Circular containing a Notice convening an Extraordinary
General Meeting to be held at 12 noon on Friday 16th September has today been
posted to shareholders.


                                                                  31 August 2005


Enquiries:


Montpellier Group Plc                            Tel: [phone]

Roy Harrison, Executive Chairman
Sandy McArthur, Group Financial Controller

College Hill                                     Tel: [phone]
Matthew Gregorowski



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