TORNADO GROUP PLC and VIRTUE BROADCASTING LTD ANNOUNCE MERGER TO CREATE Virtue Broadcasting PLC

28th May 2002
Tornado Group PLC (LSE:TDO), the established provider of digital media distribution solutions and VIRTUE Broadcasting Ltd, a leading European provider of Internet broadcast services, today announces plans for a merger that will result in the formation of a new company, Virtue Broadcasting plc, which aims to dominate the digital media space in Europe.

The merger brings together two of the most experienced and trusted brand-names in the digital distribution market place in a sector that is ready for intelligent consolidation. The merger is consistent with both company's long-standing business objectives to secure the position as the leading infrastructure, application provider and "one-stop-shop" in the digital distribution market place.

While VIRTUE Broadcasting Ltd, the name behind some of the worlds largest Internet broadcasts to date, has complimentary products and services to Tornado, it's focus has been on the delivery of marketing, promotional and internet broadcasting streaming services. VIRTUE has been extremely successful in both the media and corporate sectors in driving immediate revenues through the provision of these innovative applications, in what is still a maturing marketplace. Tornado, on the other hand, has seen success with a long-term strategy of providing the technical infrastructure and online distribution services to enable content owners to distribute their products online to retailers, who can then allow their consumers to purchase and download digital products such as music or games via their websites or in-store kiosks. The market for downloads of digital products is beginning to gain momentum, with Tornado at the forefront having secured commercial arrangements with major content owners of music and games products and key retailers in the UK and Europe.

The merger, will provide revenue synergies through the cross selling and bundling of their respective products and services to existing and targeted customer base. There will also be substantial cost savings resulting from the merger in areas such as development, headcount and office accommodation, thereby accelerating the anticipated time to break-even and profitability for the company.

"The combination of Tornado and VIRTUE represents a market consolidation of two of the strongest brands in this sector and demonstrates strong growth opportunities while enabling real cost savings." Says Neil Ferris, Chief Executive Officer of the newly formed Tornado Virtue plc, "By combining the strengths of Tornado and VIRTUE, we will be a considerable force in the industry and make it possible for us to provide a valuable proposition as a true "one-stop-shop" for the distribution of digital content to our corporate and media partners."

"It is clear that the online streaming and distribution market is in a period of substantial growth. This is evident, not only because more and more people are gaining access to the Internet and there are over 20,000 new broadband users a week in the UK, but also because we can see revenues increasing significantly." says Nick English, CEO of VIRTUE Broadcasting, "VIRTUE is already streaming several million digital files a month for media and corporate owners and this achievement, coupled with Tornado's success at building the infrastructure for the downloading of digital media, enables Tornado Virtue plc to be in prime position to benefit from this expanding market."

"It is exciting to see two major European players with whom EMI works, joining together to form one stronger entity." Says Jay Samit, Senior Vice President, New Media, EMI Recorded Music, "I am extremely encouraged that these two industry leaders are better positioned to develop new avenues of digital distribution for our artists and their fans.

About Tornado Group PLC

Tornado Group PLC is an established provider of robust, scalable technical solutions to deliver media (text, images, video and audio) digitally on a global scale. Our solutions are engineered to support multiple revenue models by securing content against piracy, providing full audit trails and supporting multiple technologies and platforms. We distribute digital content in a number of ways, including, paid-for-downloads and streams; subscription services; promotional downloads and streams; and secure e-mail distribution to defined lists of recipients. European content owners of entertainment products such as game publishers and record companies have chosen to use our system to distribute their products through their websites or where applicable, via the Tornado-enabled network of entertainment retailers. Tornado was founded in 1999 and floated on AIM in March 2000.

About VIRTUE Broadcasting Ltd

VIRTUE is Europe's most experienced and advanced audio/visual digital content distribution and service provider for both Media and Corporate communication solutions. It owns and operates an IP content distribution network. It services live and on-demand interactive production, digitisation, content licensing and rights management and its client base includes company's like Universal, Capitol, BMG, Siebel, Hemscott, News International and Morse. Established in 1998 the Company's head office is in London with a subsidiary in Australia. The company's shareholders include the EMI Group and Interoute (Europe's largest fibre optic network). VIRTUE currently operates one of the largest Global Internet Broadcast networks, operating in 46 co-locations in Europe, North America and Australasia with advanced live broadcast, content and digital rights management applications. VIRTUE was involved with high profile Internet Broadcasts including Madonna from The Brixton Academy, Paul McCartney from The Cavern, Popstars for Granada, and Survivor for Carlton.