Trading Update

Parity Group PLC
26 July 2002

26 July 2002



  Parity provides an update on trading and announces discussions involving  a
technology staffing joint venture and involving acquisitions for Parity's other
                               European divisions



Parity Group plc ('Parity'), the IT services group, provides an update on
current trading and announces it is currently in substantive discussions with a
third party.



Trading update

  • First half performance in the staffing businesses in Europe and Parity US
    is disappointing although in line with general market conditions

  • Real progress in Business Solutions and Training

  • Group profit before tax and goodwill expected to be around breakeven for
    the first half

  • Improved performance expected in the second half based on first half
    contract wins

  • Framework agreement reached on new multi-million pound contract for
    Training



Discussions

  • The Group is in substantive discussions with a third party involving a
    technology staffing joint venture and acquisitions from the same third party
    for Parity's other European divisions

  • The proposed transaction would enable both Parity and the third party to
    gain from the economies of scale beneficial to the profitability of
    technology staffing businesses in current market conditions and to focus on
    their respective areas of strength and strategic interest



Trading Update

As stated at the time of Parity's AGM in June 2002, markets across Europe and
the US have remained difficult to read throughout the first half and the Group
has not been immune to market conditions, especially in Resourcing Solutions in
Europe and in the US.



Resourcing Solutions

The technology staffing market in particular has seen acute pressure on volumes
and margins.  In the UK, Resourcing Solutions remained profitable throughout the
first half of 2002, although at reduced margins.  However, in mainland Europe,
despite the considerable reductions in overhead costs made in 2001, this
business ceased to be profitable towards the end of the first half of 2002.



First half revenues in Resourcing Solutions are expected to be down by
approximately 20% on the second half of last year and a small loss is
anticipated for the period.



A further cost reduction programme was implemented from early July in Resourcing
Solutions, including office closures and headcount reductions.  Parity expects
this business to achieve an improved performance in the second half as a result
of these actions.



Business Solutions and Training

Comparing the first half of 2002 to the second half of 2001, Business Solutions
and Training has maintained near flat sequential revenues.  From contracts
signed in the first half, the order book for Business Solutions has increased by
45% (excluding the latest award from the Post Office Limited, won in June 2002)
and the order book for Training has increased 300%.



Business Solutions and Training was profitable throughout the first half of 2002
but profits were considerably impacted by sales costs of over £1.3 million
invested in winning new contracts and new accounts, including multi-million
pound outsourcing contracts with British American Tobacco, ICI, the Post Office
Limited and HBoS.  Under Parity's long-standing accounting policy, all selling
and bid costs associated with the winning of new contracts are charged in full
to the Profit and Loss account for the period when incurred.



While no income has yet been realised from them, the contracts awarded in the
first half should underpin growth in revenues and improve performance in the
second half.



As announced in March, the results of Business Solutions and Training will be
separated out for the first time in the interim results.



Parity US

Parity US has maintained profitability in the first half due to tight cost
management, albeit at significantly reduced levels as compared to the second
half of last year.  Revenues are down approximately 17% over the same period.
The outlook for the second half is difficult to forecast as the US economy
remains unclear and US clients remain reluctant to commit to spending on IT
projects.  Further cost reduction measures continue to be implemented.



Current trading

The Board anticipates that Group results for the first half will be
significantly lower in revenue terms than those achieved in the same period last
year and, more particularly, expects the Group's profit before tax and goodwill,
and after the sales costs described above, to be approximately breakeven.  It
has already taken prompt action to implement corrective measures including cost
reduction programmes in the Resourcing Solutions and Parity US businesses.



Looking ahead to the second half, the Board anticipates that the increased order
book and major new contract wins achieved in the first half will provide the
basis for an improved second half performance.  In addition to these, Parity
Training has very recently reached a framework agreement with a new customer to
provide training services over a three year period.  Further details on this
multi-million pound contract will be announced shortly.



Parity expects to report its interim results towards the end of September 2002.



Discussions

Parity is currently in substantive discussions with a third party concerning a
possible joint venture involving its UK and mainland European technology
staffing businesses and the possible acquisition of businesses from the same
third party for Parity's other European divisions.



The proposed transaction would enable both companies to gain from the economies
of scale beneficial to the profitability of technology staffing businesses in
current market conditions and to focus on their respective areas of strength and
strategic interest.



Such discussions are at a preliminary stage, and there can be no certainty that
any transaction will result.  A further announcement on this matter will be made
in due course.



Commenting on today's announcements, Ian Miller, Group Chief Executive of
Parity, said: 'We are making real progress in Business Solutions and Training,
where we believe we are out-performing our general market.  The further action
already taken in Resourcing Solutions and in the US should provide an improved
second half.  We will announce an update on our current discussions in due
course.'




Further information


Parity Group plc                                     Financial Dynamics
Bill Cockburn, Chairman                              Giles Sanderson
Ian Miller, Chief Executive                          Harriet Keen
Alison Leyshon, Finance Director                     Tel [phone]
Tel: [phone]


web site: www.parity.co.uk





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