July 2001
Divestment of HelpDesk and Rostrvm businesses

Following the announcement of 14 May 2001, royalblue group plc announces the proposed divestment of its royalblue technologies HelpDesk and rostrvm businesses to a management buy-out (MBO) company (NewCo) in order to focus exclusively on its highly successful Fidessa business in the financial sector.

Circular to shareholders

Key points:

John Hamer, royalblue CEO said:

"The proposed divestment will focus royalblue totally on our unique Fidessa business in the global equities trading market, whilst retaining considerable upside in the future success of the HelpDesk product range. royalblue financial grew revenues and profits at rates in excess of 60% in 2000 and the strong trading performance in 2001 means that we expect significant growth over last year's comparable figures for royalblue financial at both the interim and full year stages".

Introduction
Further to the announcement of 14 May 2001, the Board of royalblue announced today that it has reached agreement, conditional on Shareholders' approval, to divest its royalblue technologies HelpDesk and rostrvm businesses to its existing management team through NewCo. The consideration involves no net cash receivable by royalblue on Completion, but instead royalblue will be issued securities in NewCo with an aggregate subscription value of approximately £17 million.

On Completion, royalblue will have a 19% ordinary shareholding in NewCo with the balance being held by the NewCo management team and an employee benefit trust which will transfer shares to additional members of NewCo's management following Completion. In addition, at Completion, royalblue technologies plc will issue to royalblue Loan Notes with a principal amount of £4.7 million in order to refinance approximately £3.0 million of inter-company facilities and to provide additional working capital of approximately £1.7 million.

The NewCo Securities include warrants which will entitle royalblue to subscribe for additional NewCo Ordinary Shares representing up to 51% of NewCo's equity share capital in the event of a future flotation or sale of NewCo. Apart from the rights attributable to its 19% ordinary shareholding, royalblue will have no material financial or operational influence over NewCo.

Until recently, the Board was pursuing a venture capital backed MBO of the royalblue technologies business. However, due to market conditions, the Board decided that it was unlikely to achieve sufficient value immediately for Shareholders through either this route or a trade sale. The proposed Divestment is therefore structured to reflect the Board's belief that shareholder value would be enhanced by focusing the Group's resources on the royalblue financial business and that royalblue expects to realise the majority of its value in NewCo through a future flotation or sale of the business.

NewCo is an unlisted management buyout company formed specifically for the purpose of purchasing royalblue technologies. The principal members of the management buyout team are the existing managers of the business, Graham Ridgway (Chief Executive) and Lee Chadwick (Sales and Marketing Director). In addition, Ken Briddon is joining as Executive Chairman of NewCo. Mr Briddon has 25 years of experience in the software industry having previously held senior positions within Misys plc (Divisional Chief Executive Officer) and JBA Holdings Plc (Chief Executive Officer).

Following the Divestment, royalblue will be purely focused on its Fidessa business in the financial sector, which as reported in the final results for the year ended 31 December 2000, grew revenues by 69% to £37.4 million, representing over 65% of Group revenues, and achieved profits growth of 64% to £7 million before Group costs of £0.9 million. On 14 May 2001, the Board also announced signing a $25 million Fidessa contract with Merrill Lynch, which, together with a growing order book for Fidessa, provides strong evidence of royalblue's premium position in this marketplace. Orders booked by royalblue financial at the end of May 2001 now exceed the whole of last year's orders within that business.

With its Fidessa product set, royalblue leads the global market for advanced, industrial-strength equities trading software and services. The Board believes that adopting a focused approach with its Fidessa business will strengthen royalblue's ability to achieve its objective of establishing Fidessa as an essential component of any significant activity in equities trading worldwide, thereby creating substantial value for royalblue's customers, employees and Shareholders. A singular focus on the financial markets will also position royalblue more clearly amongst the investment community.

The royalblue technologies management team are related parties for the purposes of Chapter 11 of the Listing Rules. Due both to this and to its size, the Divestment is conditional on Shareholders' approval. Subject, to the passing of the Resolution to approve the Divestment, it is expected that Completion will take place on 16 July 2001.

Background to and reasons for the Sale
royalblue's Fidessa business now dominates the Group's results, representing over 65% of revenues in 2000. The Fidessa business also contributed 90% of the Group's profits in 2000. The performance by royalblue financial in 2000 reflects the strength of the competitive positioning and the enormous potential of the Fidessa product set in the global equities markets, and the Board believes that royalblue has a compelling opportunity to build a substantial and valuable world-leading business from this foundation.

The royalblue technologies' HelpDesk and rostrvm products have good positions and prospects within their markets, but there is no synergy with royalblue financial. Furthermore, the growth rates and profitability levels associated with the Fidessa business are significantly greater than those currently being achieved within royalblue technologies. The Board therefore believes that shareholder value would be enhanced by the proposed Divestment so that the Group's resources can be focused on royalblue financial. Furthermore, the Board believes that a singular focus on the financial markets will also position royalblue more clearly amongst the investment community.

As and when cash proceeds arise from the Divestment, through the redemption or sale of the NewCo Ordinary Shares or NewCo Preferred Shares, or the repayment of the Loan Notes, the Group intends to use these proceeds for general working capital purposes and to finance further product development and infrastructure investment within the Fidessa business. The proceeds will also be available for corporate development should suitable acquisition opportunities arise.

Information on royalblue technologies
royalblue technologies supplies software products and services to the technology management, customer management and call centre markets. The business is conducted through separate companies within royalblue technologies. Its core business, representing around 80% of revenues, is supplying help desk software for managing and supporting an organisation's IT infrastructure. During 2000, royalblue technologies grew revenues by 14% to £20 million and achieved profits before Group costs of £0.8 million.

Set out below is a summary of the recent results of royalblue technologies.

The year ended 31 December 2000 was challenging for royalblue technologies, which saw a transition to a new management team, a new organisational structure, and the resolution of problems in some of the overseas operations. Revenues in royalblue technologies to May 2001 have been ahead of 2000 and broadly in line with the budget, but higher costs have resulted in operating losses. These losses are expected to be recovered in the remainder of the year.

As at 31 December 2000, the net liabilities of royalblue technologies were approximately £1.7 million.

Principal terms of the Sale
The consideration for royalblue technologies involves no net cash being received by royalblue on Completion. Instead, royalblue will be issued a combination of NewCo Ordinary Shares, NewCo Preferred Shares and NewCo Warrants.

The Sale is being structured such that at Completion, royalblue will subscribe for the following:

Of the subscription proceeds received from royalblue of, in aggregate approximately £17.142 million, NewCo will use £17.0 million as consideration for the acquisition of royalblue technologies. As further consideration, NewCo Warrants will be issued to royalblue which entitle the Company to subscribe for additional NewCo Ordinary Shares at Nominal Cost representing up to an additional 51% (before dilution on account of employee share options) of NewCo's ordinary share capital upon a sale or listing.

In addition, at Completion, royalblue technologies plc will issue to royalblue 'B' Loan Notes with a principal amount of approximately £3 million in order to refinance inter-company facilities and 'A' Loan Notes with a principal amount of approximately £1.7 million to provide additional working capital, the aggregate of the Loan Notes being £4.7 million. The 'A' Loan Notes are secured by way of a fixed and floating charge over the assets of royalblue technologies plc. The Loan Notes are repayable in tranches of £500,000 per annum (with the 'B' Loan Notes being repayable before the 'A' Loan Notes) and will carry a variable interest rate of 4% over the base rate of Barclays Bank plc from time to time, payable quarterly. In addition, the obligations of royalblue technologies plc under the 'A' Loan Notes and 'B' Loan Notes will be guaranteed by NewCo, such guarantee to be secured by a charge over the shares in royalblue technologies plc.

The NewCo Preferred Shares are non-voting and carry a 0.5% cumulative dividend. In the event of any distribution of capital on a winding up, the NewCo Preferred Shares rank in priority to all other classes of share in NewCo.

The principal members of the management buyout team are the existing managers of the business, Graham Ridgway (Chief Executive) and Lee Chadwick (Sales and Marketing Director). In addition, Ken Briddon is joining as Executive Chairman of NewCo. Mr Briddon has 25 years of experience in the software industry, having previously held senior positions within Misys plc (Divisional Chief Executive Officer) and JBA Holdings Plc (Chief Executive Officer).

Other than certain specific indemnities, the Sale Agreement contains no warranties relating to the business of royalblue technologies and no general tax indemnity will be given by the Company on Completion.

The Sale is conditional upon obtaining the approval of Shareholders at the Extraordinary General Meeting to be held on 16 July 2001. Subject to the passing of the Resolution to approve the Sale, Completion is due to take place on the same day.

Planned Board changes
Subject to Shareholder approval of the proposed Divestment, the following Board changes will be effective from the end of the Extraordinary General Meeting and are planned to reflect the Group's strategic focus on the financial markets business.

John Hamer, currently Group Chief Executive Officer, will become Executive Chairman of royalblue, with responsibility for the strategic direction of the Group, corporate development and investor relations. Chris Aspinwall, currently Chief Executive of royalblue financial, will become Chief Executive of royalblue, with responsibility for the operational development of the business worldwide. Andy Malpass, Finance Director of royalblue, will continue in his role, and provide more focus on the cross-border financial functions within the business as it increases in size and complexity. Colin Amies will step down from his current position as non-executive Chairman and become the Senior Independent non-executive Director.

Financial effects of the Sale
The Sale will result in an estimated exceptional net loss of £2.8 million for royalblue, comprising net assets disposed £1.3 million, transaction costs £1.3 million and capital gains tax £0.2 million.

Apart from the rights attached to its 19% ordinary shareholding, royalblue will have no material financial or operational influence over NewCo, and therefore will account for its shareholding as a fixed asset trade investment. The value of the NewCo Preferred Shares, NewCo Ordinary Shares and the NewCo Warrants will not be recognised by royalblue until there is evidence that they will be redeemed, repaid or exercised within a reasonable period.

Current trading and prospects
As indicated in the 14 May announcement of the $25 million Fidessa contract with Merrill Lynch, the first half profitability of the Group will be held back by the operating losses in royalblue technologies, although the Group will still be comfortably profitable due to the continued strong performance within royalblue financial.

The Directors are confident in the outlook and prospects for the continuing Group due to the excellent strategic progress and trading performance of royalblue financial. At the end of May 2001, orders booked by royalblue financial exceeded the whole of last year's orders within that business. The Board therefore expects that the revenues and profits of the Fidessa business will be significantly ahead of last year's comparable figures at both the interim and full year stages.

Extraordinary General Meeting
NewCo is a related party under the Listing Rules because two directors of royalblue technologies, Graham Ridgway and Lee Chadwick, will hold, in aggregate, approximately 43% of the issued share capital of NewCo immediately following completion of the Sale, with 11% held by Ken Briddon and 27% by the Employee Benefit Trust.

For this reason, and because of the size of royalblue technologies in relation to the Company, the Listing Rules require that approval of the Sale is obtained from Shareholders. The Listing Rules also require that Graham Ridgway and Lee Chadwick and their associates abstain from voting on the Sale. Accordingly, Graham Ridgway and Lee Chadwick have undertaken to abstain from voting on the Resolution and to take all reasonable steps to ensure that their associates will do likewise.

The Sale requires the approval of Shareholders at an Extraordinary General Meeting. The Extraordinary General Meeting to be held at 10.30 a.m. on 16 July 2001 at 2 Suffolk Lane, London EC4R 0AT

Enquiries:
royalblue
John Hamer, Chief Executive
Tel 01483 206300
Fax 01483 206301

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