RNS Number:8949M
Proactive Sports Group PLC
27 June 2003

Proactive Sports Group PLC ("Proactive" or the "Company" or the "Group")
Proposed disposal of Proactive Sports Management B.V,
Proposed share capital reduction
Goodwill impairment review



Summary



Proactive Sports Group PLC, a leading football representation and sports
marketing company, announces the proposed disposal of its subsidiary Proactive
Sports Management B.V. ("PSM Europe"), a goodwill impairment review of the
Company's investment in certain subsidiary companies together with the proposed
cancellation of the Company's share premium account.



In light of the continuing uncertainties in the football sector, the Board has
undertaken a strategic review of the Group, including a review of any impairment
in the carrying value of goodwill on the Company's balance sheet relating to
Proactive's Football Representation Division.   As a result of this review, the
Board has agreed a non-cash exceptional goodwill write down of #12.4 million
relating to the Company's investments in subsidiary companies and, subject to
approval by shareholders, the disposal of PSM Europe.



The Board believes that PSM Europe has not developed under the Group's umbrella
as anticipated.  To date, the Group has been unable to develop complementary
revenue streams, such as sports marketing, in this geographic market and PSM
Europe therefore remains dependent on football representation revenue streams
only.  Given the continuing uncertainties in the European football sector and
the size of the Dutch market in particular, the Board is unable to predict
future growth opportunities for this company with any degree of certainty.
Accordingly, Proactive is proposing to enter into, subject, inter alia, to
shareholder approval, an agreement ("Sale Agreement") for the sale of the entire
issued share capital of its subsidiary, PSM Europe to Kaj B.V. (the "Purchaser
").  As part of the consideration for Proactive's entry into the Sale Agreement,
Kaj B.V. and Jan Van Baal (the "Relevant Shareholders") will agree to the
cancellation of 6,160,000 ordinary shares in the issued share capital of the
Company that they own ("Ordinary Shares Cancellation").  The Ordinary Shares
Cancellation is also subject to the confirmation of the High Court.  In
addition, the Purchaser will repay inter-company debt and loans totalling
Euro403,370 to the Group and the Company will receive a maximum of  Euro347,880
relating to commission payments in respect of work completed on player
contracts.



The effect of the goodwill write-down will be that the Company will have a
deficit on the Company's profit and loss account reserve.  Whilst there is a
deficit on the profit and loss account, the Company is not permitted under the
Companies Act 1985 to pay dividends.  Accordingly, the Company is proposing to
cancel the Company's share premium account to eliminate the deficit on the
Company's profit and loss account.  Therefore the Company will seek approval by
shareholders for the Ordinary Shares Cancellation and the cancellation of the
Company's share premium account ("SPA Cancellation"), which are both subject to
confirmation by the High Court.



Goodwill impairment



In the light of the current global economic climate and the continuing
uncertainties in the football sector the Board has undertaken a review in
conjunction with its auditors, Deloitte & Touche, of the carrying value of
goodwill in the Company's balance sheet relating to Proactive's Football
Representation Division.   This review has concluded that there has been a
permanent diminution of the carrying value of Proactive's Football
Representation Division.   The Board therefore proposes that goodwill of #12.4
million be written-down relating to: #7.4 million in respect of Proactive Sports
Management Limited, #0.1 million in respect of PSM Europe, #1.9 million relating
to Proactive Sports Management Balkans CLL, #0.1 million relating to PSM
Australia, #0.2 million relating to PSM Scandinavia and #2.7 million relating to
Proactive Sports Management Midlands Limited.  After this exceptional goodwill
write-down, the carrying value of the goodwill on the Company's balance sheet is
anticipated to be #11.7 million.



The effect of the goodwill write-down will be that the Company will have a
deficit on the Company's profit and loss account reserve.  Whilst there is a
deficit on the profit and loss account, the Company is not permitted under the
Companies Act to pay dividends.  Accordingly, the Company is proposing to offset
the deficit on the profit and loss reserve of the Company created by the
goodwill write-down in the following manner.  First, the profit and loss reserve
of the Company will be credited with the sum of approximately #10.8 million
presently standing to the credit of the merger reserve.  The Company's
calculation of the amount which may be transferred from the merger reserve to
the profit and loss reserve in respect of the goodwill write down have been
reviewed by the Company's auditors.  In order to eliminate the deficit that is
anticipated to remain on the profit and loss account following this transfer,
the Board is proposing to effect the SPA Cancellation, subject to approval by
shareholders and confirmation of the High Court.



Disposal of PSM Europe



Under the terms of the Sale Agreement, which is conditional inter alia upon
approval by shareholders, and completion, of the Ordinary Shares Cancellation,
Proactive will dispose of its shares in PSM Europe to the Purchaser. As part of
the consideration for Proactive's entry into the Sale agreement the Relevant
Shareholders will agree to the Ordinary Shares Cancellation.  The nominal amount
of the 6,160,000 Ordinary Shares proposed to be cancelled is #61,600 and the
market value, based on the mid-market closing share price of 4.375 pence per
Ordinary Share on 26 June 2003, was #269,500.



Proactive and the Purchaser will agree, under the terms of the Sale Agreement,
to the settlement of various inter-company arrangements as described below:



(i)       PSM Europe will repay Euro457,370 of an inter-company loan balance of
Euro528,000 to the Company.  The balance of Euro70,630 of the inter-company loan will
be written-off to the profit and loss account of the Company.  PSM Europe will
also pay to the Company a commission payment of Euro192,630 in respect of work
completed by the Company on player contract negotiations prior to the date of
the Sale Agreement.  PSM Europe will pay the amount due in two instalments.
Euro325,000 of the inter-company loan due to the Company is payable on 31 August
2003 and the balance of the inter-company loan and the amount due in respect of
commissions (in aggregate Euro325,000) is payable on 31 August 2004.



(ii)      PSM Scandinavia will repay to PSM Europe an inter-company loan of
Euro29,000 on completion of the Sale Agreement and a sum of Euro55,750 over a period
of four years in respect of work completed by PSM Europe on player contract
negotiations prior to the completion of the Sale Agreement.



(iii)      PSM Australia will repay to PSM Europe an inter-company loan of
Euro25,000 on completion of the Sale Agreement.  PSM Europe will repay to PSM
Australia  Euro143,500 in respect of work completed by PSM Australia on player
contract negotiations prior to completion of the Sale Agreement.  A further
Euro67,500 is repayable on 31 January 2004 by PSM Europe to PSM Australia if
certain conditions are met on existing player contracts.



Soren Lerby and Jan Van Baal (one of the Relevant Shareholders) will both agree
(under the Sale Agreement) to guarantee the payment by PSM Europe of Euro392,500
payable to the Company on 31 August 2003 and Euro325,000 payable to the Company on
31 August 2004.



Soren Lerby will resign as a director of Proactive with effect from completion
of the Sale Agreement.



On completion of the Sale Agreement, 840,000 options over Ordinary Shares,
currently held by employees of PSM Europe, will lapse.



PSM Europe was incorporated and registered in the Netherlands on 14 July 1994
and is based in leasehold premises in Amsterdam, Holland.   PSM Europe currently
represents 60 football players, primarily based in Europe, and employs 4 full
time and 2 part time employees.  The Group acquired PSM Europe on 17 May 2001
for a consideration satisfied by the issue of 1.2 million Ordinary Shares.



For the year ended 31 August 2002 PSM Europe had audited turnover of #831,981
and a profit before taxation (and before the allocation of central management
charges) of #348,523.  At 31 August 2002, PSM Europe had net assets of #64,010.
For the six months ended 28 February 2003, PSM Europe had unaudited turnover of
#158,763 and a loss before taxation (and before the allocation of central
management charges) of #210,510.  At 28 February 2003, PSM Europe had unaudited
net liabilities of #100,172.



The Purchaser has made what the Directors, with the exception of Soren Lerby
(the "Independent Directors") consider to be a fair and reasonable offer for PSM
Europe.  The disposal of PSM Europe will, if approved by shareholders, increase
the cash reserves of the Company, which the Board believes can be utilised to
generate greater returns elsewhere in the Group.  Furthermore, the Ordinary
Shares Cancellation being effected as part of this sale, should directly enhance
the Group's future earnings per share.



Notwithstanding the proposed sale, the Group maintains its commitment to an
international network of offices and on completion of the disposal of PSM Europe
the Group will have nine offices in seven countries and will represent 269
football players worldwide.



Related party transaction



Soren Lerby, a director of the Company and PSM Europe, is also a shareholder of
the Purchaser.  Jan Van Baal is also a director of PSM Europe.  Both Soren Lerby
and Jan Van Baal will agree to guarantee certain obligations of PSM Europe and
the Purchaser under the Sale Agreement as set out above.  The proposed disposal
of PSM Europe is therefore a transaction with a related party for the purposes
of Rule 12 of the AIM Rules and a substantial property transaction for the
purposes of section 320 of the Companies Act 1985.   Consequently, the proposed
disposal of PSM Europe is conditional upon the approval of shareholders.



Collectively, the Relevant Shareholders have a beneficial interest in 6,160,000
Ordinary Shares representing 5.90 per cent. of the issued share capital of the
Company.



The Independent Directors, who are all independent for the purposes of Rule 12
of the AIM Rules, having consulted with Charles Stanley and Company Limited, the
Company's Nominated Adviser, consider the terms of the proposed disposal of PSM
Europe to be fair and reasonable insofar as the Company's shareholders are
concerned.



Ordinary Shares Cancellation and the SPA Cancellation



To proceed with the Ordinary Shares Cancellation and the SPA Cancellation, for
the reasons outlined above, the Company is proposing to effect a reduction of
the Company's share capital and a cancellation of the Company's share premium
account subject to approval by shareholders and confirmation by the High Court.



For the proposed Ordinary Shares Cancellation and the SPA Cancellation to take
effect it will be necessary, following shareholder approval at the forthcoming
extraordinary general meeting of the Company, to obtain an order of the High
Court confirming the reduction in the Company's share capital and cancellation
of its share premium account.   Accordingly, as soon as practicable after the
passing of resolutions 2 and 3 at the EGM the Company will apply to the High
Court for a court order confirming both resolutions.  The Ordinary Shares
Cancellation and the SPA Cancellation will become effective once the court order
confirming them is registered with the Registrar of Companies.  Although it is
not possible to determine the precise date when the petition for such a court
order will be heard, your Directors anticipate that this will be during August
2003.



Circular to shareholders and extraordinary general meeting



A circular to shareholders providing further details of the proposals outlined
above and convening an extraordinary general meeting of the Company to be held
at 12.00 noon on the 22 July 2003 at the offices of DLA, 101 Barbirolli Square,
Manchester  M2 3DL to consider and, if thought fit, pass the resolutions
required to effect the proposals outlined above will be sent to shareholders
today.



Copies of the circular will be available from the registered offices of the
Company at 9-13 Manchester Road, Wilmslow, Cheshire, SK9 1BQ and the offices of
Charles Stanley & Company Limited, 25 Luke Street, London, EC2A 4AR.



Enquiries:



Proactive Sports Group PLC                      01625 536411
Neil Rodford, Chief operating officer
Mark Page, Finance director



Charles Stanley & Co Limited                    020 7739 8200
Mark Taylor


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