Open Offer to raise up to £1 million

RNS Number : 0058V

Real Good Food PLC

18 July 2018

 

GENERAL TEXT AMENDMENT

The following amendment(s) has (have) been made to the 'Open Offer to raise up to £1 million' announcement released on 18.07.18 at 07.00 under RNS No 9944U

Under 14. Irrevocable undertakings, a table has now been included.

All other details remain unchanged.

The full amended text is shown below.

18 July 2018

Real Good Food plc

("Real Good Food", "the Company" or "the Group")

Open Offer to raise up to £1 million

Rule 9 Waivers

and

Notice of General Meeting

Further to the Company's announcements on 17 May 2018 and 06 June 2018, the Company is pleased to announce details of a proposed open offer to raise up to approximately £1.0 million of further funding and the replacement of the May 2018 Loan Notes with the Replacement CLNs which is subject to a whitewash process pursuant to Rule 9 of the Takeover Code (the "Transaction").

A Circular in respect of the Open Offer and Whitewash will be posted to shareholders today. The Circular also gives notice of a General Meeting of the Company, to be held at 11.00 a.m. on 13 August 2018 at the offices of finnCap, 60 New Broad Street, London EC2M 1JJ for Shareholders to consider these proposals.

Highlights

·      Open Offer of up to 20,115,190 Offer Shares at £0.05 per Offer Share to raise up to approximately £1.0m;

·      The net proceeds of the Open Offer will be used to provide future working capital to the Group;

·      Replacement of the May 2018 Loan Notes by the Replacement CLNs

o  On replacement of the May 2018 Loan Notes by the Replacement CLNs the NB Concert Party and Omnicane will have potential interests in 112,262,354 and 110,413,954 Ordinary Shares which could represent a maximum of 66.7 per cent. and 65.6 per cent. of the Company's enlarged share capital respectively.

o  In the absence of a waiver of the obligations under Rule 9 of the Takeover Code, this is an amount that would require each of the NB Concert Party and Omnicane to make general offers to Shareholders.

·      The Panel has agreed to grant waivers of these obligations provided that the Whitewash Resolutions (Resolutions 1 and 2) are approved at the General Meeting on a poll by Independent Shareholders.

Related Party Transaction

·      As each of NB, Omnicane and Downing are substantial shareholders of the Company and have Board representation, the replacement of the May 2018 Loan Notes by the Replacement CLNs is deemed to be a related party transaction pursuant to the AIM Rules for Companies. The Board considers that by replacing the May 2018 Loan Notes with the Replacement CLNs the Company avoids the higher interest rate provisions of the May 2018 Loan Note and substantially alleviates the pressure on the Company to source funding in order to make any such higher interest rate payments. Hugh Cawley and Harveen Rai, the Independent Directors of the Company for this purpose, having consulted with the Company's Nominated Adviser, finnCap Ltd, consider the replacement of the May 2018 Loan Notes with the Replacement CLNs to be fair and reasonable insofar as the Company's shareholders are concerned.

Notice of General Meeting

·      A Circular to Shareholders in respect of, inter alia, the Transaction is expected to be posted later today giving notice of a General Meeting of the Company, which will be held at 11.00 a.m. on 13 August 2018 at the office of finnCap, 60 New Broad Street, London EC2M 1JJ.

·      A copy of the Circular will be available on the Company's website at www.realgoodfoodplc.com

 Admission

·      Application will be made to the London Stock Exchange for up to 20,115,190 Offer Shares to be admitted to trading on AIM. It is expected that Admission of the New Ordinary Shares will occur at 8.00 a.m. on 17 August 2018.

Hugh Cawley, Chief Executive Officer, commented:

"We are pleased to launch the Open Offer today which allows all Qualifying Shareholders to participate in the refinancing of the Company.  The new funding arrangements we have put in place over the prior months of which the Open Offer and Loan Note Replacement are part, ensure that the Company will operate with a much more robust and sustainable financial platform, providing the certainty from which the Board will be able to implement its plan to improve the Group's performance."

Enquiries:

Real Good Food plc Hugh Cawley, Chief Executive Harveen Rai, Finance Director	Tel: [phone]
finnCap Limited (Nomad and Broker) Matt Goode / Carl Holmes / James Thompson (Corporate Finance)	Tel: [phone]
MHP Communications (Financial PR)  Reg Hoare / Katie Hunt	Tel: [phone] [e-mail]
About Real Good Food Real Good Food plc is a diversified food business serving a number of market sectors including retail, manufacturing, foodservice and export.  The Company focuses on three main markets: Cake Decoration (Renshaw and Rainbow Dust Colours), Food Ingredients (R W Scott and Brighter Foods) and Premium Bakery (Haydens and Chantilly Patisserie).

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

Unless otherwise defined herein, capitalised terms used in this announcement shall have the same meanings as defined in the Circular.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Record Date	6.00 p.m. on 13 July 2018
Publication and posting of the Circular, the Form of Proxy and (if relevant) the Application Form	18 July 2018
Ex-entitlement date	7.00 a.m. on 18 July 2018
Basic Entitlements and Excess Entitlements credited to stock accounts in CREST for Eligible CREST Shareholders	19 July 218
Recommended latest time and date for requesting withdrawal of Open Offer Entitlements from CREST	4.30pm 3 August 2018
Latest time and date for depositing Open Offer Entitlements in CREST	3.00 p.m. on 6 August 2018
Latest time and date for splitting Application Forms (to satisfy bona fide market claims only)	3.00 p.m. on 7 August 2018
Latest time and date for acceptance of the Open Offer and receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate)	11.00 am. on 9 August 2018
Latest time and date for receipt of Forms of Proxy	11.00am. on 9 August 2018
General Meeting	11 a.m. on 13 August 2018
Announcement of result of General Meeting and Open Offer	13 August 2018
Admission and commencement of dealings in the Offer Shares	8.00 a.m. on 17 August 2018
CREST accounts credited in respect of Offer Shares in uncertificated form	17 August 2018
Despatch of definitive share certificates in respect of Offer Shares to be issued in certificated form	week commencing 27 August 2018

Notes:

(1)   If any of the details contained in the expected timetable above should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service.

(2)   Admission and dealings in the Offer Shares are conditional upon the Open Offer becoming unconditional in all respects.

(3)   The ability to participate in the Open Offer is subject to certain restrictions relating to Qualifying Shareholders with registered addresses or located or resident in countries outside the United Kingdom, details of which are set out in paragraph 6 of Part IV of the Circular. Subject to certain exceptions, Application Forms will not be despatched to, and Open Offer Entitlements will not be credited to the stock account in CREST of, Shareholders with registered addresses in any of the Restricted Jurisdictions.

KEY STATISTICS RELATING TO THE OPEN OFFER

Number of Existing Shares	78,449,241
Number of Offer Shares	20,115,190.00
Offer Price	5 pence
Basis of Open Offer	10 Offer Shares for every 39 Existing Shares
Gross proceeds from the Open Offer	up to £1.0 million
Enlarged Issued Share Capital*	330,996,509
Offer Shares and Replacement CLN Shares as a percentage of the Existing Shares*	321.9 per cent.
Open Offer Basic Entitlements ISIN	GB00BD3FVC10
Open Offer Excess Entitlements ISIN	GB00BD3FVB03

* Assuming (i) take-up in full of the Open Offer by Qualifying Shareholders, (ii) the maximum number of Ordinary Shares that may arise on the conversion of the Replacement CLNs (and full extent of accrued interest) that may be held by NB and Omnicare and (iii) the maximum number of Ordinary Shares that may arise on the conversion of the Replacement CLNs (and full extent of accrued interest) that my be held by Downing on the basis that the Company does not receive the remaining £0.15m discretionary amount from Downing before 30 September 2018, but that no other Ordinary Shares are issued.

The following is extracted from the Circular

1.     Introduction

As detailed in the Company's announcement on 17 May 2018 (the "Announcement"), the Company had, at that time, secured at least £8.2 million (but with a maximum of £8.7 million) in new financing arrangements from the Company's three major Shareholders, NB. Ingredients Limited, Omnicane International Investment Co Ltd via its parent company Omnicane Limited, and certain funds managed by Downing LLP, by means of secured loan notes. As at the date of the Circular, Omnicane and NB had each provided £3.30 million and Downing had provided £1.95 million (of which £0.35 million was part of the up to £0.5m additional funding that was to be provided at the sole discretion of Downing on or before 30 September 2018) (together, the "May 2018 Loan Notes"). On 17 May 2018, the funds advanced to the Company pursuant to the May 2018 Loan Notes were used in part to fund the payment of £4.5 million deferred consideration due to the vendors of Brighter Foods, and have provided the Company with up to £4.2 million (depending on whether the further £0.15 million is received from Downing) to fund the Company's continuing working capital needs, including for the build-up of inventory in advance of the Group's third quarter in October to December 2018.

As stated in the Announcement, it was proposed that the May 2018 Loan Notes be replaced with convertible loan notes within three months of the date of the Announcement, with the issue of such convertible loan notes (the "Replacement CLNs") being subject to a whitewash process pursuant to Rule 9 of the Takeover Code (as any conversion by either the NB Concert Party or Omnicane of their respective Replacement CLNs would increase the total voting rights under their control to equal to or over 30 per cent. of the total voting rights of the Company). The Company announced today that the Takeover Panel has agreed to waive the obligation on each of the NB Concert Party and Omnicane to make a general offer to Shareholders under Rule 9 of the Takeover Code that could otherwise arise on conversion of the Replacement CLNs into new Ordinary Shares, subject to the NB Whitewash Resolution and the Omnicane Whitewash Resolution, respectively, being approved at the General Meeting. Accordingly, the Company is seeking the approval at the General Meeting of, amongst other things, the Whitewash Resolutions.

The Company has also announced today that it proposes to raise up to approximately £1.0 million by way of an open offer of up to 20,115,190 Offer Shares at a price of 5 pence per Ordinary Share to Qualifying Shareholders.

Accordingly, the Company is seeking the authority of the Shareholders to provide the Directors with the authority to allot and issue the Offer Shares and to disapply pre-emption rights in relation to the issue of the Offer Shares at the General Meeting, notice of which is set out at the end of the Circular.

The Open Offer is conditional on: (i) the passing by Shareholders of the Resolutions at the General Meeting and (ii) Admission having become effective by no later than 8.00 a.m. on 17 August 2018 (or such time and date as the Company and finnCap may agree, being no later than 8.00 a.m. on 31 August 2018). Subject to all relevant conditions being satisfied it is expected that the Offer Shares will be issued and admitted to trading on AIM on or around 17 August 2018.

The Offer Price is at a discount of 54.5 per cent. to the closing middle market price of 11.0 pence per Existing Share on 17 July 2018 (being the last practicable date before publication of the Circular).

The purpose of the Circular is to explain the background to, and the reasons for, the Resolutions and to explain why the Independent Directors (in the case of paragraphs 19(a), (b) and (c)) and the Directors (in the case of paragraph 19(d)) recommend that you vote in favour of the relevant Resolutions.

2.     Real Good Food plc - Nature of business

Real Good Food was incorporated in February 2003 as an investment holding company to build, through acquisition and organic growth, a food group focusing on the supply of a range of chilled, frozen and ambient products to food retailers, the foodservice sector and industrial customers.

Employing approximately 1,100 full time employees as at 31 March 2017, the Group's previous strategy was to integrate acquired businesses into its infrastructure to achieve cross-selling opportunities into high-growth, premium-priced, specialist markets with higher trading margins, thereby building businesses which are strategically attractive to third parties.

Following the disposal of Napier Brown Sugar Limited in May 2015, the Group has had a focus on three synergistic areas (or divisions): Cake Decoration; Food Ingredients; and Premium Bakery.

Cake Decoration

The Cake Decoration division contributed approximately £47.0 million of revenue and approximately

£6.5 million EBITDA in FY17. As at 31 March 2017 the division employed 358 people full time. The division comprises four parts, J F Renshaw Limited (trading as Renshaw), Rainbow Dust Colours Limited ("RDC"), Real Good Food Europe SA (trading as Renshaw Europe) and Renshaw US Inc. (trading as Renshaw Americas). Renshaw manufactures and distributes a broad range of cake decorating products such as sugarpaste, marzipan and mallows through the mainstream, specialist retail, wholesale, foodservice and food manufacturing channels. RDC produces a range of edible glitters, dusts,  powders  and food paints,  brushes  and pens for the specialist sugarcraft market. Renshaw Europe sells, markets and distributes Renshaw and RDC products across continental Europe, and Renshaw Americas markets the same products into the Americas.

Food Ingredients

The Food Ingredients division comprises R&W Scott which manufactures chocolate coatings, sauces, jams and dry powder blends for the industrial, retail, wholesale and foodservice markets and Brighter Foods which manufactures snack bars, both branded and own label, targeted at areas such as diet control, gluten free, lactose free, low or no added sugar, sports nutrition, organic and fair trade. The Food  Ingredients  division  contributed  approximately  £27.3  million  of  revenue  and  approximately

£(1.6) million of EBITDA in FY17, including the contribution from Garretts which was then part of the division but was disposed of in April 2018. As at 31 March 2017 the division employed 121 people full time.

Premium Bakery

Operating through the Haydens and Chantilly businesses, the Premium Bakery division bakes premium tarts, pies and crumbles, danish pastries, sweet buns, yum yums and doughnuts, selling to major retail customers and through foodservice channels, and manufactures premium quality frozen desserts (e.g. gateaux, cheesecakes, tarts and flans) and sells them to pubs and restaurants. It operates both an ambient and frozen supply chain and also operates a same day consolidation service for all Waitrose stores for both Haydens and third-party products. In FY17 the division contributed approximately

£33.9 million of revenue and approximately £1.2 million EBITDA. As at 31 March 2017 the division employed 520 people full time.

3.     Background to and reasons for the Rule 9 Waivers

Over the past 12 months the Company has been heavily and repeatedly reliant upon financial support from the Major Shareholders in order to continue trading as a going concern as the effects of poor historic management decisions have become progressively more apparent. Notwithstanding this the Group is dependent upon some combination of the disposal of both its freehold properties within the next six months and the divestment of at least one of its business units to have sufficient working capital for present requirements, as further detailed in paragraph 5 below. The stated rationale for the support provided by the Major Shareholders has altered, as circumstances have changed. The Directors believe that over the last six months it has been clear that the Company needs longer term funding in order to have any prospect of a financially secure and stable future. There has been a requirement for the Major Shareholders to provide funding at relatively short notice to support the Group's working capital requirements and fund the payment of the deferred consideration for Brighter Foods. Over the past year, in aggregate, the Major Shareholders have injected/made available over £32.8 million to the Company, against a backdrop of diminishing profitability, underlined by a number of profit warnings, the last of which was announced on 31 January 2018.

On 29 June 2017, the Group announced that it had raised up to £15.5 million of expansion capital, comprising a secured loan note instrument ("June 2017 Loan Notes") of up to £8.75 million from Downing redeemable in full after three years, and attracting interest of 6.5 per cent. per annum with a 3 per cent. non-utilisation fee on any undrawn balance; two £2.0 million secured, one-year-term loans from each of NB and Omnicane; and, £2.75 million in new equity (representing 10 per cent. of the issued share capital of the Company at that time) via a subscription by Downing. This expansion capital was raised in the expectation of being used to fund the expansion plans of the Company, plans that were already well underway.

At the same time, the Company announced, inter alia, that its expectations for EBITDA for the year to 31 March 2017 were between £5.0 million and £5.4 million.

Just over one month later, on 1 August 2017, two further announcements were released by the Company disclosing that:

·      during the audit process it had become apparent that two material claims against the Company in respect of its sugar buying arrangements had come to light;

·      certain development costs previously capitalised should more properly have been expensed;

·      the Group's consolidated EBITDA for FY17 was, as a result of these factors, and other accruals, likely to be closer to £2.0 million;

·      trading conditions were slightly softer than expected in Q1 of the year to 31 March 2017;

·      delays in the investment programme, referred to above, meant that the Board's expectation for the Group's consolidated EBITDA for FY18 would be approximately £2.3 million less than previously expected;

·      payments to Pieter Totte and Peter Salter, former directors of the Company, and to the Company's current Interim Non-Executive Chairman Patrick Ridgwell made in prior financial years had not previously been disclosed as required under the AIM Rules and in the Group's annual report and accounts as related party transactions, or included in the notes on directors' remuneration (although the financial impact had been reflected in the years' results); and

·      Peter Salter, a non-executive director of the Company at that time and chair of both the Audit and Remuneration Committees, stood down with immediate effect.

Following this, significant Board changes were announced on 8 August 2017, through which:

·      Harveen Rai was appointed as Group Finance Director, replacing David Newman;

·      Pieter Totte, Executive Chairman, stood down with immediate effect, with Pat Ridgwell standing in as Interim Non-Executive Chairman;

·      Hugh Cawley was appointed as an independent Non-Executive Director and chair of the Audit Committee; and

·      Judith MacKenzie, who had been appointed to the Board on 29 June 2017 took over as chair of the Remuneration Committee.

On 16 August 2017 NB and Omnicane, in equal measure, underpinned a cash-collateralised overdraft facility of £2.0 million for working capital purposes as, in the Board's opinion at that time, the Company's working capital position was insufficient. This £2.0 million carried an interest rate of 6.5 per cent. per annum, reflecting the risk associated with this funding, and mirroring the rate that Downing's cash injection on 29 June 2017 carried. At the same time, Downing notified the Company that it would not be subscribing for the second tranche of the June 2017 Loan Note of £1.5 million, such that no more than £7.25 million of principal is therefore outstanding under that particular arrangement.

On 29 August 2017 the Company announced, following a detailed financial review by the newly appointed Finance Director, a further downgrade to expectations of EBITDA for FY18, to approximately £1.0 million. In the same announcement, it was stated that the Major Shareholders "have confirmed that they will, if required, provide additional funds to support the Company's working capital requirements". Ultimately, this support would continue to be required over the following eight months on a number of occasions.

The Directors believe that at this stage (and indeed well before it and since), had the Major Shareholders chosen at any point to cease to support the business through their provision of working capital injections, then the Board would have had to commence an accelerated disposal process of the business and assets of the Company and/or to conduct the Company in the interests of creditors as a whole, rather than in the interests of Shareholders.

In parallel to running the business, the newly constituted Board had investigatory work undertaken to establish, amongst other things, so far as reasonably practicable, the full nature and extent of payments made to Pieter Totte, Peter Salter and Patrick Ridgwell in order that an appropriate announcement could be made to Shareholders as to what had happened during their stewardship. The broad outcome of these investigations was announced by the Company on 14 September 2017.

On 20 September 2017, the Company announced that the Major Shareholders were again to provide emergency funding in the form of a £4.0 million short-term debt facility through additional loan notes (the "September 2017 Loan Notes"). It was the Board's view at that time that the EBITDA for FY18, prior to exceptional costs, would be in the region of £6.5 million, based on each business unit's own forecasts of their likely profitability. The Group's results for FY17 were announced on 29 September 2017, reporting EBITDA of approximately £1.2 million and the then Chief Executive Officer of the Company expressed confidence in the future of the Company on the basis of the considerable investment that had been made. Net Debt stood at £16.2 million as at 31 March 2017.

Following a comprehensive review of the Company's operations to begin the process of rebuilding profitability, the management team further revised expectations down a month later in an announcement on 23 October 2017. No quantum was specified but the announcement stated that there would be a "materially reduced level of EBITDA" and that the Company would make a loss before tax in FY18. Again, in this announcement, the Company made reference to the continuing support of the Major Shareholders and how they would be willing to provide further funding should it prove necessary.

On 22 December 2017 the Company published its interim results for the six months to 30 September 2017, reporting an EBITDA loss of £1.4 million, and indicating that the remainder of the financial year  was  expected  to  be  EBITDA  breakeven  with  Net  Debt  as  at  30  September  2017  being £35.8 million - approximately £20 million more indebted than six months previously. It was also announced that, again, the Major Shareholders would support the Company with further funding with another injection of, this time, £3.0 million (the "December 2017 Loan Notes"). The Board also announced that Chris Thomas would step down as Chief Executive Officer, to become Non-Executive Deputy Chairman and Hugh Cawley would take over as Chief Executive Officer, effective 1 January 2018.

On 31 January 2018, following an unexpectedly poor peak trading period over Christmas and an initial review by the new leadership team, revised expectations for FY18 were announced to be an EBITDA loss of £3.5 million alongside reference to the Board having formulated and begun to execute a turnaround plan. The Major Shareholders again expressed support for the Company by offering to provide what further capital might be required to continue as a going concern.

Between late June 2017 and 31 January 2018 the Major Shareholders had made available, in aggregate, £23.0 million of emergency funding, in order to provide the Company with working capital and allow it to continue to trade as a going concern.

Since 31 January 2018, there have been no further profit warnings announced by the Company, although the Company's need for cash has been clear, well-signposted and consistent. In order to satisfy  this  cash  requirement  the  Company  disposed  of  the  business  of  Garrett  Ingredients  for £1.8 million on 23 April 2018 and sourced a further injection of at least £8.2 million from the Major Shareholders which was announced on 4 May 2018 via the May 2018 Loan Notes. At the same time the terms of a longer-term funding package from the Major Shareholders was announced. The documentation of that funding package was signed on 17 May 2018 and the terms included the proposed issue of the Replacement CLNs (to repay the May 2018 Loan Notes) and completion of Rule 9 Waivers with respect to the NB Concert Party and Omnicane.

Since June 2017 (and not taking into account the May 2018 Loan Notes), the Company has therefore received up to, in aggregate, £27.0 million of support (in various forms) from the Major Shareholders, as summarised in the below table. Notwithstanding that, the Major Shareholders have also recently lent a further £8.5 million to the Group (via the May 2018 Loan Notes), and it is with this final tranche of lending that the Major Shareholders have required the replacement of the May 2018 Loan Notes by the Replacement CLNs.

Completion date	Amount	Method of funding	Major Shareholder(s)
27 March 2018	£4.0 million	Unsecured loan notes	NB (£1.7 million) Omnicane (£1.7 million) Downing (£0.6 million)
12 January 2018	£3.0 million	Unsecured loan notes	NB (£1.3 million) Omnicane (£1.3 million) Downing (£0.4 million)
20 September 2017	£3.0 million	Loan facility and loan notes	NB (£1.3 million) Omnicane (£1.3 million) Downing (£1.3 million)
16 August 2017	£3.0 million	Secured loan facility (applied as collateral for bank overdraft)	NB (£1.0 million) Omnicane (£1.0 million)
24 July 2017	£3.0 million	Equity placing	Downing
28 June 2017	£3.0 million	Shareholder loans	NB (£2.0 million) Omnicane (£2.0 million
28 June 2017	Up to £8.75 million £7.25 million to date1	Loan Notes	Downing

1     On 16 August 2017 the Company announced that Downing, at that time, had elected not to subscribe for the second tranche of loan notes in the sum of £1.5 million.

Against this backdrop, the Directors have formulated a turnaround plan to improve the profitability of the majority of the Group's business units, especially those which are underperforming and/or loss-making. To supplement this turnaround plan the Group requires additional capital which is currently expected to be generated from some combination of the sale and leaseback of the Company's two freehold properties and the sale of certain component businesses of the Group. The Directors' expectations for trading in the first half of FY19 are such that should the Company not achieve the sale and leasebacks or divest any of the Group's business units, the Company will have sufficient working capital only until the end of September 2018. Furthermore, should Resolutions 1, 2 and 3 not be duly approved by the relevant Shareholders (and the May 2018 Loan Note repaid) this would accelerate the burn of the Company's cash due to the higher rate of interest that would then apply to the outstanding May 2018 Loan Notes (an increase in the total annualised return to 30 per cent.) which would mean the Company would need to raise additional funds at that time. Please see the paragraph 5 below entitled "Working Capital" for further information.

4.     Real Good Food Plc - Strategy

Objectives

It is the intention of the Directors to restore the Company's operations to profitability and cash generation in order to provide returns to Shareholders. This objective may be common to any turnaround but the Directors believe that it carries particular relevance to the Company based on its recent history where substantial sums have been invested (particularly by the Major Shareholders) without any return paid or immediate prospect of such.

The Board believes that the basic tenet of the required strategy is to work appropriately with the management of each of the Company's businesses in order to improve the performance of each individual business unit, thereby increasing the return on investment within the period but also increasing the longer-term value of  each  of  the  constituent  enterprises.  However,  some  of the businesses in the Company are further developed along  the  profit  improvement  track  than others - Brighter Foods is a profitable and cash generative company in its own right, which the Board believes requires very little adjustment or improvement, other than continuing support and modest, expansion-related investment. The Cake Decoration division, comprising RDC and the UK, European and US operations of Renshaw, which the Directors believe are potentially the most valuable enterprises, operates from a strong position in a global niche market but recent results demonstrate that the businesses are currently under-performing and under-delivering against their potential; Hayden's, a well-invested company, remains loss-making, though marked with a projected improvement whilst R & W Scott's continues to trade in a challenging market.

M&A Activity

The Board has no intention to acquire further businesses in the short to medium term.

In calculating the working capital needs of the Group over the foreseeable future, the Board has concluded that if the net value to Shareholders of a business currently within the Group is demonstrably greater were it to be sold in the short term than if it were retained and turned around, then it should be considered a candidate for sale. Garrett Ingredients was a recent example of where the Board believed the Company would be better served financially through the disposal of this business rather than through  its  continued  operation;  hence  the  decision  was  taken  to  dispose  of  that  business  for £1.8 million.

The Board believes that this is unlikely to be the case with J F Renshaw or Brighter Foods, the profit growth potential for both of which is considered to be substantial. Should external parties express interest in any of the businesses of the Group, then the Board will give any such interest due and proper consideration, including the value equation of retention versus disposal.

Given the recent adverse publicity that the Company has received, a variety of parties have approached the Company with a view to exploring the possible purchases of certain of the Group's businesses. The Board has, against that background, assumed that some business disposals will be effected, and, although the Company has of late received expressions of strong interest in a number of its businesses which may or may not lead to a divestment, possibly even in the relatively short term, there can be no certainty as to timing or quantum nor, indeed, about achieving a value-accretive disposal at all. Should the sale of any of its business units not be achieved, or should any such sale not achieve the level of cash consideration that has been assumed, there would be a cash shortfall against the Board's forecasts.

Cash realised through other means

Other assets owned by the Group include two freehold properties, both in Liverpool. The Board is in advanced discussions with interested parties regarding both the Company's freehold properties with regards  to  sale  and  lease  back  arrangements  which  are  expected  to  complete  within  the  next six months. The Directors intend to seek sufficient protections in the lease documentation to ensure that the use of the properties remains a decision in the hands of the Company.

Central profit improvement initiatives

In addition to the initiatives which are underway within each business to improve the profitability of the divisions, considerable activity has also been underway to improve the profitability of the Group through rationalising the central functions and ensuring that the infrastructure of the Group as a whole is lean and fit for purpose. The central functions now comprise the Board, finance and information technology, with just one individual responsible for Group oversight of each of the innovation and technical functions. This is considerably more focused than previously and, as part of this process, a number of employees have left or will shortly be leaving the Group.

The bulk of the central technical function is currently focused on Renshaw and its ongoing commercial development programme. Therefore the costs are allocated in large part to Renshaw. The Board believes that its ability to provide technical support to a wider base remains a significant asset in the context of a larger group.

5.     Working capital

As a result of the lack of certainty of any business disposals or sale and lease back transactions, the Directors are of the opinion that, even taking into account the recent May 2018 Loan Notes or Replacement CLNs, the working capital available to the Group is not sufficient for the Group's present requirements, which is for at least 12 months from the publication of the Circular.

In order for the Group to have sufficient working capital for its present requirements, the Group is dependent upon some combination of the disposal of both of its freehold properties within the next six months and the divestment of at least one of its business units. If the disposals and divestment(s) were not to occur and the Open Offer were not to be taken up by any Shareholders, the Group is expected to have a working capital shortfall by the end of September 2018.

Assuming that the disposals and divestments are completed at the levels the Directors currently anticipate and £0.5 million net proceeds are received from the Open Offer (but Shareholders should note that the Open Offer is not being underwritten), the Directors believe that the working capital available to the Group, will be sufficient for the Group's present requirements for at least 12 months following the publication of the Circular.

Shareholders should be aware that if Resolutions 1, 2 and 3 are not approved at the General Meeting a higher rate of interest would apply to the principal amount of the May 2018 Loan Notes. As a result of these higher interest rate provisions, when added to interest already payable on the May 2018 Loan Notes, the coupon payable by the Company would amount to a total annualised cost of 30 per cent., and the Company would not then, without further remedial action, be able to meet its liabilities as they fell due. In these circumstances the Directors would be forced to seek alternative funding in order to refinance the May 2018 Loan Notes. If the Directors were unable to find any other sources of finance, having exhausted all other options, the Directors would have no alternative but to apply immediately for administration or to commence an insolvent liquidation of the Company. Existing secured creditors of the Group would then be expected to appoint receivers in respect of those properties subject to their security.

6.     Profit Estimate

In due course, the FY18 operating results will be announced and they will be in line with the market's expectations, as indicated in late January this year, of an EBITDA loss before exceptional items in the order of £3.5 million from continuing operations. This constitutes a "profit estimate" for the purposes of Rule 28 of the Takeover Code (the "Profit Estimate").

The Profit Estimate is based on:

·   the unaudited full year results of the Company for FY18; and

·   the unaudited management accounts of the Company for FY18.

The Directors confirm that the Profit Estimate remains valid and has been properly compiled according to the bases stated above and that the basis of accounting used is consistent with the current accounting policies of the Group. Given that the period to which the Profit Estimate relates has been completed, there are no other principal assumptions underpinning the Profit Estimate.

7.     Current trading

The current financial year is trading in line with management's expectations for the full year, during which the Board expects to see considerable operational improvements. These improvements will arise partially as a result of the measures the Company has taken to control and reduce costs, both centrally and within the business units, and partially from reasserting the units' focus on the importance of margin generation, rather than simply on revenue growth, together with a more favourable raw material price environment. Notwithstanding a challenging retail environment, the Board anticipates that each business units' results will be in line with management's expectations, with an increased focus also on cash generation and markedly lower levels of one-off exceptional costs.

8.     Proposed appointment of non-executive directors

As the Company announced on 6 June 2018 the Board is currently in the process of seeking to appoint two appropriately qualified and experienced candidates as independent non-executive directors, being part of its improved corporate governance practices. When suitable candidates have been identified and have agreed to join the Board, the Company will make further announcements to the market.

9.     Proposed executive management incentivisation

It is the intention of the Remuneration Committee to finalise a new incentive plan for the executive management team of the Company, in particular, Hugh Cawley, Chief Executive Officer and Harveen Rai, Finance Director. This may include an option package over Ordinary Shares or a cash bonus, tied to achieving specific targets that drive Shareholder returns.

The terms of this incentive plan are intended to be finalised by the end of August 2018.

10.   Information on the Open Offer

Pursuant to the Open Offer the Company is proposing to raise up to approximately £1.0 million (before expenses). A total of up to 20,115,190 Offer Shares are available to Qualifying Shareholders pursuant to the Open Offer at the Offer Price, payable in full on acceptance. Any Offer Shares not subscribed for by Qualifying Shareholders will be available to Qualifying Shareholders under the Excess Application Facility. The balance of any Offer Shares not subscribed for under the Excess Application Facility will not be allotted or issued. The Open Offer is not underwritten (in whole or in part).

Qualifying Shareholders may apply for Offer Shares under the Open Offer at the Offer Price on the following basis:

10 Offer Shares for every 39 Existing Shares

and so in proportion for any number of Existing Shares held by Qualifying Shareholders on the Record Date. Entitlements of Qualifying Shareholders will be rounded down to the nearest whole number of Offer Shares. Fractional entitlements which would otherwise arise will not be issued to the Qualifying Shareholders but will be aggregated and made available under the Excess Application Facility. The Excess Application Facility enables Qualifying Shareholders to apply for Excess Shares in excess of their basic Open Offer Entitlement. Not all Shareholders will be Qualifying Shareholders. Shareholders who are located in, or are citizens of, or have a registered office in Restricted Jurisdictions will not qualify to participate in the Open Offer. The attention of Overseas Shareholders is drawn to paragraph 6 of Part IV of the Circular.

Valid applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements as shown on the Application Form. Applicants can apply for less or more than their basic entitlements under the Open Offer but the Company cannot guarantee that any application for Excess Shares under the Excess Application Facility will be satisfied as this will depend in part on the extent to which other Qualifying Shareholders apply for less than or more than their own Open Offer Entitlements. The Company may satisfy valid applications for Excess Shares of applicants in whole or in part but reserves the right not to satisfy any excess above any Open Offer Entitlement. The Board may scale back applications made in excess of Open Offer Entitlements on such basis as it reasonably considers to be appropriate.

The Open Offer Entitlements and Excess CREST Open Offer Entitlements will be enabled for settlement in CREST until 11.00 a.m. on 9 August 2018. Applications through the CREST system may be made only by the Qualifying CREST Shareholder originally entitled or by a person entitled by virtue of bona fide market claims. The Offer Shares must be paid in full on application. The latest time and date for receipt of completed Application Forms or CREST applications and payment in respect of the Open Offer is 11.00 a.m. on 9 August 2018. The Open Offer is not being made to certain Overseas Shareholders, as set out in paragraph 6 of Part IV of the Circular.

Qualifying Shareholders should note that the Open Offer is not a rights issue and therefore any Offer Shares which are not applied for by Qualifying Shareholders will not be sold in the market for the benefit of the Qualifying Shareholders who do not apply under the Open Offer. The Application Form is not a document of title, is not a negotiable document and cannot be traded or otherwise transferred.

Further details of the Open Offer and the terms and conditions on which it is being made, including the procedure for application and payment for Offer Shares, are contained in Part IV of the Circular and in the case of Qualifying Non-CREST Shareholders, on the accompanying Application Form.

The Open Offer is conditional upon, the Resolutions being duly passed and becoming effective (without material amendment) at the General Meeting and Admission becoming effective. If the Open Offer does not proceed, the Offer Shares will not be issued and all monies received by the Receiving Agents from applicants will be returned to such applicants (at the applicants' risk and without interest) as soon as possible thereafter. Any Open Offer Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will thereafter be disabled.

The Offer Shares will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the then Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of their issue.

Application will be made to the London Stock Exchange for the admission of the Offer Shares to trading on AIM. It is expected that Admission will occur and that dealings will commence at 8.00 a.m. on 17 August 2018 at which time it is also expected that the Offer Shares will be enabled for settlement in CREST.

Patrick Ridgwell and the Major Shareholders have irrevocably undertaken not to apply for any Offer Shares under the Open Offer. Therefore, in aggregate, a minimum of 13,077,238 Offer Shares will be available under the Excess Application Facility.

The attention of Qualifying Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Existing Shares for the benefit of such persons, (including, without limitation, custodians, nominees, trustees and agents) or who have a contractual or other legal obligation to forward the Circular or the Application Form to such persons, is drawn to the information which appears in paragraph 6 of Part IV of the Circular.

In particular, Qualifying Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the UK (including, without limitation, the United States of America), should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their entitlements under the Open Offer.

11.   The Takeover Code

The Takeover Code is issued and administered by the Panel. The Takeover Code applies to all takeover and merger transactions, however effected, where the offeree company is, inter alia, a listed or unlisted public company resident in the United Kingdom (and to certain categories of private limited companies). The Company is a United Kingdom incorporated public company whose Ordinary Shares are admitted to trading on AIM, and its Shareholders are therefore entitled to the protections afforded by the Takeover Code.

Under Rule 9 of the Takeover Code, any person who acquires an interest (as such term is defined in the Takeover Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights in a company that is subject to the Takeover Code, is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights but does not hold shares carrying more than 50 per cent. of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired which increases the percentage of shares carrying voting rights by any such person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the company during the 12 months prior to the announcement of the offer. The Takeover Panel may agree to waive an obligation that would otherwise arise to make a mandatory offer under Rule 9 of the Takeover Code where that obligation arises as a result of an issue of new shares and the waiver is approved by independent shareholders.

NB Concert Party

Pursuant to the Takeover Code, a concert party arises when persons, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control of, or frustrate the successful outcome of an offer for, a company. Control means an interest or interests in shares carrying in aggregate 30 per cent. or more of the voting rights of a company irrespective of whether the interest or interests give de facto control.

The Company's largest Shareholder, NB, together with Patrick Ridgwell, Non-Executive Interim Chairman of the Company have an aggregate holding of 22,502,354 Ordinary Shares, representing approximately 28.7 per cent of the Existing Shares, as at 17 July 2018 (being the last practicable date prior to the publication of the Circular). NB and Patrick Ridgwell are considered to be acting in concert for the purposes of the Takeover Code.

Should NB convert all its Replacement CLNs (including the full extent of the accrued interest) into Ordinary Shares, and assuming no other Ordinary Shares are issued by the Company following the date of the Circular (including (i) pursuant to the Replacement CLNs that may be held by Omnicane and Downing and (ii)  the  Offer  Shares),  then  the  NB  Concert  Party  would  have  an  interest  in the Company of 112,262,354 Ordinary Shares representing approximately 66.7 per cent. of the Company's issued share capital at that date.

Full details of the NB Concert Party's interests on 17 July 2018 (being the last practicable date prior to publication of the Circular) and potential interest in Ordinary Shares if NB converts all its Replacement CLNs into Ordinary Shares are set out below:

	As at 17 July 2018		Immediately following conversion of NB's Replacement CLNs and full extent of accrued interest(1)		Immediately following conversion of NB's Replacement CLNs and full extent of accrued interest (2)
Shareholder	No. of Existing Shares	% of Existing  Shares	No. of Ordinary Shares	% of Enlarged Issued Share Capital	% of Enlarged Issued Share Capital
NB	22,139,998	28.2	111,899,998	66.5	33.8
Patrick Ridgwell	362,356	0.5	362,356	0.2	0.1
Total	22,502,354	28.7	112,262,354	66.7	33.9

(1)   Assuming no other Ordinary Shares are issued by the Company following the date of the Circular (including (i) pursuant to the Replacement CLNs that may be held by Omnicane and Downing and (ii) the Offer Shares).

(2)   Assuming no other Ordinary Shares are issued by the Company following the date of the Circular other than (i) the maximum number of Ordinary Shares that may arise on the conversion of the Replacement CLNs (and full extent of accrued interest) that may be held by NB and Omnicane (ii) the maximum number of Ordinary Shares that may arise on the conversion of the Replacement CLNs (and full extent of accrued interest) that may be held by Downing on the basis that the Company does not receive the remaining £0.15 million discretionary amount from Downing before 30 September 2018, and (iii) the Offer Shares).

Shareholders should be aware that if Resolutions 1 and 3 are passed and become effective, the NB Concert Party will be able to convert its Replacement CLNs which could result in an interest in Ordinary Shares carrying more than 50 per cent., of the voting rights of the Company's voting share capital. In these circumstances, the NB Concert Party will be free to acquire further interests in shares in the Company (including Ordinary Shares) without being obliged to make any general offer to all Shareholders under Rule 9 of the Takeover Code and will not be restricted from making a general offer to all Shareholders under Rule 9 of the Takeover Code.

Shareholders should also be aware that if Resolutions 1 and 3 are passed and become effective, NB will be able to convert its Replacement CLNs which could result in an interest in Ordinary Shares carrying more than 50 per cent., of the voting rights of the Company's voting share capital. In these circumstances, NB will be free to acquire further interests in shares in the Company (including Ordinary Shares) without being obliged to make any general offer to all Shareholders under Rule 9 of the Takeover Code and will not be restricted from making a general offer to all Shareholders under Rule 9 of the Takeover Code.

Omnicane

Should Omnicane convert all its Replacement CLNs into Ordinary Shares (including the full extent of the accrued interest), and assuming no other Ordinary Shares are issued by the Company following the date of the Circular (including (i) pursuant to the CLNs that may be held by NB and Downing and (ii) the Offer Shares), then Omnicane would have an interest in the Company of 110,413,954 Ordinary Shares representing approximately 65.6 per cent. of the Company's issued share capital at that date.

Full details of the Omnicane's interests on 17 July 2018 (being the last practicable date prior to publication of the Circular) and potential interest in Ordinary Shares if it converts all its Replacement CLNs into Ordinary Shares are set out below:

	As at 17 July 2018		Immediately following conversion of Omnicane's Replacement CLNs and full extent of accrued interest(3)		Immediately following conversion of Omnicane's Replacement CLNs and full extent of accrued interest (4)
Shareholder	No. of Existing Shares	% of Existing  Shares	No. of Ordinary Shares	% of Enlarged Issued Share Capital	% of Enlarged Issued Share Capital
Omnicane	20,653,954(5)	26.33	110,413,954(5)	65.6	33.4

(3)   Assuming no other Ordinary Shares are issued by the Company following the date of the Circular (including (i) pursuant to the Replacement CLNs that may be held by NB and Downing and (ii) the Offer Shares).

(4)   Assuming no other Ordinary Shares are issued by the Company following the date of the Circular other than the maximum number of Ordinary Shares that may arise on the conversion of the Replacement CLNs (and full extent of accrued interest) that may be held by Omnicane and NB, (ii) the maximum number of Ordinary Shares that may arise on the conversion of the Replacement CLNs (and full extent of accrued interest) that may be held by Downing on the basis that the Company does not receive the remaining £0.15 million discretionary amount from Downing before 30 September 2018, and (iii) the Offer Shares).

(5)   20,653,954 Existing Shares are held by Omnicane's wholly owned subsidiary Omnicane International.

 

Shareholders should be aware that if Resolutions 2 and 3 are passed and become effective, Omnicane will be able to convert its Replacement CLNs which could result in an interest in Ordinary Shares carrying more than 50 per cent., of the voting rights of the Company's voting share capital. In these circumstances, Omnicane will be free to acquire further interests in shares in the Company (including Ordinary Shares) without being obliged to make any general offer to all Shareholders under Rule 9 of the Takeover Code and will not be restricted from making a general offer to all Shareholders under Rule 9 of the Takeover Code.

Rule 9 Waivers

The Panel has agreed to waive the obligation on each of the NB Concert Party and Omnicane to make a general offer that would otherwise arise as a result of the conversion of NB's and Omnicane's (respectively) Replacement CLNs, subject to the approval of the Independent Shareholders, (to be taken on a poll). Accordingly, the Whitewash Resolutions are being proposed at the General Meeting to approve a Rule 9 Waiver in respect of each of the NB Concert Party and Omnicane for the future conversion of any of the Replacement CLNs. Members of the NB Concert Party, Omnicane, Chris Thomas and Downing will not be entitled to vote on the Whitewash Resolutions.

12.   Information on the NB Concert Party

Summary

The NB Concert Party comprises NB and Patrick Ridgwell.

NB is an investment holding company whose registered office is at International House, St Katherine's Way, London E1W 1XB. Its directors are Patrick Ridgwell, a director of the Company, and Anthony Ridgwell.

At 31 March 2017, being the latest date for which financial information on NB is publically available, NB had net assets of approximately £9.5 million. For the year ended 31 March 2017, NB reported a loss after taxation of approximately £4.2 million. Its sole investment was the Ordinary Shares it holds in the Company.

NB is a wholly owned subsidiary of Napier Brown Holdings Limited ("NBHL") an investment holding company whose registered office is at International House, St Katherine's Way, London E1W 1XB. The directors of NBHL are Patrick Ridgwell, Anthony Ridgwell and Anthony Drake.

Patrick Ridgwell and Anthony Ridgwell control NBHL as a result of controlling directly and indirectly the majority of its issued share capital. NBHL seeks to generate a risk-adjusted return above inflation through holding a diversified portfolio of traditional asset classes.

At 31 March 2017, being the latest date for which financial information on NHBL is publically available, it had consolidated net assets of approximately £42.5 million. For the year ended 31 March 2017, NHBL reported consolidated turnover of approximately £1.6 million and a consolidated profit after tax (and fair value gain on investments) of approximately £1.8 million.

Patrick Ridgwell, aged 72, has extensive experience of the sugar industry and other food sectors, having acquired and developed a number of food businesses during his career. He joined Napier Brown & Company Limited ("NBCL") in 1964, became a director in 1969 and managing director in 1972, following its acquisition of his family interests in 1970. NBCL focused on the supply of sugar, value- added sugar and nut products, dairy powders and sugar derived food products. NBCL was the largest independent, non-refining, distributor of sugar in the UK and also supplied sugar, dairy products, blends and associated ingredients to the food industry. The business of NBCL was listed on AIM during 2003 and subsequently merged with the Company during 2005. Patrick Ridgwell was appointed non-executive deputy chairman of the Company on completion of the merger and became Non- Executive Interim Chairman on 8 August 2017.

Anthony Ridgwell, aged 46, has been working within the Napier Brown group of companies since leaving university. He is the son of Patrick Ridgwell. He is also a director of NB and of NBHL where he deals with and manages their investments.

Should NB convert all of its Replacement CLNs into Ordinary Shares, its resultant holding is not expected to have a material impact on NBHL's financial position, including upon its earnings, assets and liabilities.

Relationship between the NB Concert Party, the Independent Directors and the Independent Shareholders

Patrick Ridgwell is a director of NB and NBHL and is the Interim Non-Executive Director of the Company. Paragraph 4.3(a) of Part VI contains details of Patrick's letter of appointment with the Company. Anthony Ridgwell is Patrick Ridgwell's son and is also a director of NB and NBHL.

The Group currently processes the payroll and life insurance for certain NBHL employees for an annual fee of £500 excluding VAT.

Save as disclosed above there are no relationships (personal, financial or commercial), arrangements or understandings between any member of the NB Concert Party and any of the Independent Directors.

The NB Concert Party has no relationships (personal, financial or commercial), arrangements or understandings with any of the Independent Shareholders or any person who is, or is presumed to be, acting in concert with any such Independent Shareholder.

 

Material contracts

Details of the material contracts (not being contracts entered into in the ordinary course of business) which have been entered into by the NB Concert Party during the period commencing on 18 July 2016 (being the date two years prior to the publication of the Circular) and ending on 17 July 2018 (being the last practicable date prior to the publication of the Circular) are set out in paragraphs 6.1, 6.2, 6.3, 6.5, 6.6, 6.8, 6.9 and 6.10 of Part VI of the Circular.

Intentions of the NB Concert Party

The NB Concert Party has confirmed that, if the NB Whitewash Resolution is passed by the Independent Shareholders on a poll, there is no agreement, arrangement or understanding for the transfer of their Ordinary Shares to any third party. Save as disclosed in paragraph 4 above in relation to the potential disposal of certain of the Group's business units and freehold properties, the NB Concert Party is not intending to seek any changes in respect of: the future of the Group's businesses; any planned investment in research and development; the continued employment of the Group's employees and management, including any material change in conditions of employment or balance of skills and functions; the location of the Group's places of business, headquarters and headquarter functions; employer contributions into the Group's pension schemes, the accrual of benefits for existing members and the admission of new members; any redeployment of the fixed assets of the Group as a result of such proposals; and the maintenance of any existing trading facilities for the relevant securities of the Group.

13.   Information on Omnicane

Omnicane International is a wholly owned subsidiary of Omnicane Limited. Omnicane Limited, incorporated in 1926 (originally as Mon Tresor & Mon Desert Limited until its name change to Omnicane Limited on 9 July 2009) in Mauritius and headquartered in Port Louis is listed on the Official List of the Stock Exchange of Mauritius. Omnicane's primary activity consists of the cultivation of sugarcane and the production of refined sugar, bioethanol, thermal energy, and electricity. For the year to 31 December 2017 Omnicane generated revenues of 4.5 billion Mauritian Rupees and a total comprehensive income for the year of 2.5 billion Mauritian Rupees having produced 184,243 tonnes of refined sugar and

17.9 million litres of bioethanol. As at 31 December 2017 it had net assets of 10.9 billion Mauritian Rupees and 1,577 employees. Omnicane has operations in Mauritius, the United Kingdom, Rwanda and Kenya.

Further information on Omnicane is available on its website: www.omnicane.com.

Omnicane's majority shareholder is Omnicane Holdings Limited of which Mrs Valentine Therese Marie Helene Koenig and Mrs Marie Fernande Lise de Chazal are the ultimate controllers. Mrs Valentine Therese Marie Helene Koenig is a Mauritian national who was born in 1946, resides in Curepipe, Mauritius and has never held any post of employment. Mrs Marie Fernande Lise de Chazal, also a Mauritian national, was born in 1935, resides in Curepipe, Mauritius and has also never held any post of employment.

Should Omnicane convert all of its Replacement CLNs into Ordinary Shares, its resultant holding is not expected to have a material impact on Omnicane's financial position, including upon its earnings, assets and liabilities.

 

Relationship between Omnicane, the Independent Directors and the Independent Shareholders

Jacques d'Unienville is a director of Omnicane and is a Non-Executive Director of the Company. Paragraph 4.3(e) of Part VI contains details of Jacques' letter of appointment with the Company.

Save as disclosed above there are no relationships (personal, financial or commercial), arrangements or understandings between Omnicane and any of the Independent Directors.

Omnicane has no relationships (personal, financial or commercial), arrangements or understandings with any of the Independent Shareholders or any person who is, or is presumed to be, acting in concert with any such Independent Shareholder.

Material Contracts

Details of the material contracts (not being contracts entered into in the ordinary course of business) which have been entered into by Omnicane during the period commencing on 18 July 2016 (being the date two years prior to the publication of the Circular) and ending on 17 July 2018 (being the latest practicable date prior to the publication of the Circular) are set out in paragraphs 6.1, 6.2, 6.3, 6.5, 6.6, 6.8, 6.9 and 6.10 of Part VI of the Circular.

Intentions of Omnicane

Omnicane has confirmed that, if the Omnicane Whitewash Resolution is passed by the Independent Shareholders on a poll, there is no agreement, arrangement or understanding for the transfer of their Ordinary Shares to any third party. Save as disclosed in paragraph 4 above in relation to the potential disposal of certain of the Group's business units and two freehold properties, Omnicane is not intending to seek any changes in respect of: the future of the Group's businesses; any planned investment in research and development; the continued employment of the Group's employees and management, including any material change in conditions of employment or balance of skills and functions; the location of the Group's places of business, headquarters and headquarter functions; employer contributions into the Group's pension schemes, the accrual of benefits for existing members and the admission of new members; any redeployment of the fixed assets of the Group as a result of such proposals; and the maintenance of any existing trading facilities for the relevant securities of the Group.

14.   Irrevocable undertakings

The Company has received the following irrevocable undertakings from the following Directors and Shareholders to vote in favour of Resolution 4 in respect of the following number of Existing Shares:

Name	Aggregate number of Existing Shares voted in favour	% of Existing Shares
Patrick Ridgwell	362,356	0.5
NB	22,139,998	28.2
Omnicane International	20,653,954	26.3
Downing	7,844,924	10.0
Total	51,001,232	65.0

In addition, Patrick Ridgwell, NB, Omnicane International and Downing have irrevocably committed not to apply for any Offer Shares under the Open Offer. Therefore, in aggregate, a minimum of 13,077,238 Offer Shares will be available under the Excess Application Facility.

15.   Independent advice provided to the Board

The Takeover Code requires the Board to obtain competent independent advice regarding the merits of the Rule 9 Waivers which are the subject of the Whitewash Resolutions, the increase of each of the NB Concert Party's and Omnicane's controlling positions on conversion of their respective Replacement CLNs and the effect it will have on the Shareholders generally. Accordingly, finnCap, as the Company's financial adviser, has provided formal advice to the Board regarding the Rule 9 Waiver. finnCap confirms that it is independent of each of NB (and the NB Concert Party) and Omnicane and has no commercial relationship with any of them.

16.   General Meeting

You will find set out at the end of the Circular a notice convening the General Meeting to be held at 11.00 a.m. on 13 August 2018 at finnCap, 60 New Broad Street, London, EC2M 1JJ. Details of the Resolutions which will be proposed at the General Meeting are set out below:

Ordinary Resolutions

Resolution 1: proposes the NB Whitewash Resolution. The reasons for this Resolution are described above.

Resolution 2: proposes the Omnicane Whitewash Resolution. The reasons for this Resolution are described above.

(together the "Whitewash Resolutions")

In accordance with the requirements of the Takeover Panel for granting the Rule 9 Waivers, the Whitewash Resolutions will be taken on a poll of Independent Shareholders.

Special Resolutions

Resolution 3: proposes the resolution seeking the authority of the Shareholders to provide the Directors with the authority to allot and issue the Replacement CLNs and to disapply pre-emption rights in relation thereto.

Resolution 4: proposes the resolution seeking the authority of the Shareholders to provide the Directors with the authority to allot and issue the Offer Shares and to disapply pre-emption rights in relation to the issue of the Offer Shares.

17.   Action to be taken

In respect of the General Meeting

A Form of Proxy is enclosed for use at the General Meeting. Whether or not you intend to be present at the meeting you are requested to complete, sign and return the Form of Proxy to the Company's registrars, Link Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF by no later than 11.00 a.m. on 9 August 2018. The completion and return of a Form of Proxy will not preclude you from attending the meeting and voting in person should you wish to do so.

In respect of the Open Offer

Qualifying Non-CREST Shareholders wishing to apply for Offer Shares or the Excess Shares must complete the enclosed Application Form in accordance with the instructions set out in paragraph 3.1 of Part IV of the Circular and on the enclosed Application Form and return it with the appropriate payment to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to arrive no later than 11.00 a.m. on 9 August 2018.

If you do not wish to apply for any Offer Shares under the Open Offer, you should not complete or return the Application Form. Shareholders are nevertheless requested to complete and return the Form of Proxy to the Company's registrars, Link Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF by no later than 11.00 a.m. on 9 August 2018. The completion and return of a Form of Proxy will not preclude you from attending the meeting and voting in person should you wish to do so.

If you are a Qualifying CREST Shareholder and do not hold any Ordinary Shares in certificated form, no Application Form will be sent to you. Qualifying CREST Shareholders will have Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to their stock accounts in CREST. You should refer to the procedure for application set out in paragraph 3.2 of Part IV of the Circular. The relevant CREST instructions must have settled in accordance with the instructions in paragraph 3.2 of Part IV of the Circular by no later than 11.00 a.m. on 9 August 2018.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with the Circular and the Open Offer.

18.   Further information

Your attention is drawn to the further information set out in Parts II to VI of the Circular, which provides additional information on the matters set out in the Circular, and to the Company's consolidated financial statements for FY16 and FY17, which are incorporated by reference into the Circular and are available at www.realgoodfoodplc.com/investor-information/. You are advised to read the whole Circular and not merely rely on key or summarised information in this announcement.

19.   Recommendations and Opinions

Whitewashes

(a)     The Independent Directors consider the Whitewash Resolutions to be in the best interests of the Company and its Shareholders as a whole. The Independent Directors, who have been so advised by finnCap, consider that the Rule 9 Waivers are fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. In providing advice to the Independent Directors, finnCap has taken into account the Independent Directors' commercial assessments.

(b)     The Independent Directors unanimously recommend that Shareholders vote in favour of the Whitewash Resolutions (Resolutions 1 and 2). Patrick Ridgwell, who is a member of the NB Concert Party, Jacques d'Unienville who is Chief Executive Officer of Omnicane, Judith MacKenzie who is a Head of Public Equity at Downing and Christopher Thomas, who was a director of NBHL until November 2003, are not deemed to be independent for the purpose of this recommendation.

Other Resolutions

(c)      The Independent Directors consider the allotment and issue of the Replacement CLNs to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Independent Directors unanimously recommend that the Shareholders also vote in favour of Resolution 3. Patrick Ridgwell, who is a member of the NB Concert Party, Jacques d'Unienville who is Chief Executive Officer of Omnicane, Judith MacKenzie who is a Head of Public Equity at Downing and Christopher Thomas, who was a director of NBHL until November 2003, are not deemed to be independent for the purpose of this recommendation.

(d)     The Directors consider that the Open Offer is in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors unanimously recommend that the Shareholders vote in favour of Resolution 4 as they intend to do in respect of their own beneficial holdings, representing approximately 0.8 per cent. in aggregate of the Existing Shares.

20.   Related Party Transaction

As each of NB, Omnicane and Downing are substantial shareholders of the Company and have Board representation, the replacement of the May 2018 Loan Notes by the Replacement CLNs is deemed to be a related party transaction pursuant to the AIM Rules for Companies.

The Board considers that by replacing the May 2018 Loan Notes with the Replacement CLNs the Company avoids the higher interest rate provisions of the May 2018 Loan Note and substantially alleviates the pressure on the Company to source funding in order to make any such higher interest rate payments. Hugh Cawley and Harveen Rai, the Independent Directors of the Company for this purpose, having consulted with the Company's Nominated Adviser, finnCap Ltd, consider the replacement of the May 2018 Loan Notes with the Replacement CLNs to be fair and reasonable insofar as the Company's shareholders are concerned.

Yours sincerely

Hugh Cawley

Independent Director and Chief Executive Officer

DEFINITIONS

The following words and expressions shall have the following meanings in the Circular unless the context otherwise requires:

"Admission"	the admission of the Offer Shares to trading on AIM becoming effective in accordance with the AIM Rules
"Act"	the Companies Act 2006, as amended
"acting in concert"	shall have the meaning ascribed thereto in the Takeover Code
"AIM"	the AIM market operated by the London Stock Exchange
"AIM Rules"	the AIM Rules for Companies published by the London Stock Exchange, as amended or reissued from time to time
"Application Form"	the personalised application form which accompanies this Circular (where appropriate) on which Qualifying Non-CREST Shareholders (other than certain Overseas Shareholders) may apply for Offer Shares under the Open Offer
"Audit Committee"	the audit committee of the Company's board of directors from time to time
"Board"	the board of directors of the Company from time to time
"Brighter Foods"	Brighter Foods Limited
"Business Day"	a day (other than a Saturday, Sunday or public holiday in England) when banks in the City of London are open for business
"Cancellation"	the cancellation of the May 2018 Loan Notes issued to the Major Shareholders
"Cancellation Deed"	the loan note deed of release and cancellation dated 1 May 2018 pursuant to which the Cancellation will be effected
"certificated" or "in certificated form"	a share or other security not held in uncertificated form (i.e. not in CREST)
"Circular"	the document posted to Shareholders on 18 July 2018 relating to the Open Offer and Rule 9 Waivers
"Company" or "Real Good Food"	Real Good Food plc
"CREST"	a relevant system for paperless settlement of trades in securities and the holding of uncertificated securities operated by Euroclear in accordance with the CREST Regulations
"CREST Manual"	the rules governing the operation of CREST consisting of the CREST Reference Manual, the CREST International Manual, the CREST Central Counterpart Service Manual, the CREST Rules, the CREST Courier and Sorting Services Operations Manual, the Daily Timetable, the CREST Application Procedures and the CREST Glossary of Terms (as updated from time to time);
"CREST member"	a person who has been admitted to CREST as a system-member (as defined in the CREST Manual)
"CREST member account ID"	the identification code or number attached to a member account in CREST
"CREST participant"	a person who is, in relation to CREST, a system-participant (as defined in the CREST Regulations)
"CREST participant ID"	shall have the meaning given in the CREST Manual
"CREST payment"	shall have the meaning given in the CREST Manual
"CREST Regulations"	the Uncertificated Securities Regulations 2001 (SI 2001/3755), including: (i) any enactment or subordinate legislation which amends or supersedes those regulations; and (ii) any applicable rules made under those regulations for the time being in force, as amended
"CREST sponsor"	a CREST participant admitted to CREST as a CREST sponsor
"CREST sponsored member"	a CREST member admitted to CREST as a sponsored member
"Directors"	the existing directors of the Company whose names are set out on page 6 of the Circular, each a "Director"
"Downing"	certain funds managed by Downing LLP
"EBITDA"	earnings before interest, tax, depreciation and amortisation (and amounts expressed in brackets before such term shall denote a negative amount)
"Euroclear"	Euroclear UK & Ireland Limited
"Excess Application Facility"	the arrangement pursuant to which Qualifying Shareholders may apply for additional Offer Shares in excess of their Open Offer Entitlement in accordance with the terms and conditions of the Open Offer
"Excess CREST Open Offer Entitlement"	in respect of each Qualifying CREST Shareholder, the entitlement (in addition to his Open Offer Entitlement) to apply for Offer Shares pursuant to the Excess Application Facility, which is conditional on him taking up his Open Offer Entitlements in full
"Excess Shares"	Offer Shares applied for by Qualifying Shareholders under the Excess Application Facility
"Existing Shares"	the 78,449,241 Ordinary Shares as at 17 July 2018 (being the last practicable date prior to the publication of the Circular)
"FCA"	UK Financial Conduct Authority
"finnCap"	finnCap Ltd, nominated adviser to the Company
"Form of Proxy"	the form of proxy accompanying the Circular for use at the GM
"FSMA"	Financial Services and Markets Act 2000, as amended
"FY16"	the financial year of the Company ended 31 March 2016
"FY17"	the financial year of the Company ended 31 March 2017
"FY18"	the financial year of the Company ended 31 March 2018
"FY19"	the financial year of the Company ending 31 March 2019
"Garretts"	Garrett Ingredients Limited
"GM" or "General Meeting"	the general meeting of the Company convened for 11.00 a.m. at the offices of finnCap, 60 New Broad Street, London, EC2M 1JJ on 13 August 2018 by the Notice of GM and any adjournment thereof
"Group"	the Company and its subsidiaries
"Haydens"	Haydens Bakery Limited
"IFRS"	International Financial Reporting Standards, as adopted for use in the European Union
"Independent Directors"	Hugh Cawley and Harveen Rai
"Independent Shareholders"	Shareholders other than Omnicane, the NB Concert Party, Christopher Thomas and Downing
"Independent Shares"	the Ordinary Shares held by the Independent Shareholders
"Link Asset Services"	a trading name of Link Market Services Limited, Receiving Agent to the Company
"London Stock Exchange"	London Stock Exchange plc
"Major Shareholders"	NB, Omnicane and Downing
"May 2018 Loan Notes"	the 12 per cent. loan notes allotted to the Major Shareholders on 17 May 2018
"NB"	NB. Ingredients Limited, a company incorporated in England and Wales with its registered office at c/o Napier Brown Holdings Limited, International House, St Katharine's Way, London E1W 1BX
"NBHL"	Napier Brown Holdings Limited a company incorporated in England and Wales with its registered office at International House, St Katherine's Way, London E1W 1XB
"NB Concert Party"	NB and Patrick Ridgwell
"NB Directors"	Patrick Ridgwell and Anthony Ridgwell
"NB Whitewash Resolution"	Resolution 1
"Net Debt"	the net value of a company's indebtedness less its cash and cash equivalents
"Notice of GM"	the notice of the GM set out at the end of the Circular
"Offer Price"	5 pence per Ordinary Share
"Offer Shares"	up to 20,115,190 Ordinary Shares being made available to Qualifying Shareholders pursuant to the Open Offer
"Omnicane"	Omnicane Limited, a company incorporated in Mauritius with its registered office at 7th Floor, Anglo-Mauritius House, Adolphe de Plevitz Street, Port Louis
"Omnicane Directors"	Didier Maigrot, Jacques d'Unienville, Nelson Mirthil, Marc Hein, Pierre d'Unienville, Therry Merven, Preetam Boodhun, Sachin Kumar Sumputh and Valentine Lagesse
"Omnicane International"	Omnicane International Investment Co Ltd, a company incorporated in Mauritius with its registered office at 7th Floor, Anglo-Mauritius House, Adolphe de Plevitz Street, Port Louis
"Omnicane Whitewash Resolution"	Resolution 2
"Open Offer"	the conditional invitation made to Qualifying Shareholders to apply to subscribe for the Offer Shares at the Offer Price on the terms and subject to the conditions set out in Part IV of the Circular and, where relevant, in the Application Form
"Open Offer Entitlement"	the basic entitlement of Qualifying Shareholders to subscribe for Offer Shares allocated to Qualifying Shareholders on the Record Date pursuant to the Open Offer
"Ordinary Shares"	ordinary shares of £0.02 each in the capital of the Company
"Overseas Shareholders"	a Shareholder with a registered address outside the United Kingdom or who is a citizen of, or incorporated, registered or otherwise resident in, a country outside the United Kingdom
"Panel" or "Takeover Panel"	the Panel on Takeovers and Mergers
"Prospectus Rules"	the prospectus rules published by the FCA under section 73A of the FSMA, as amended from time to time
"Qualifying CREST Shareholders"	Qualifying Shareholders holding Existing Shares in certificated form
"Qualifying Non-CREST Shareholders"	Qualifying Shareholders holding Existing Shares in un-certificated form
"Qualifying Shareholders"	holders of Existing Shares on the register of members of the Company at the Record Date (but excluding, subject to certain exceptions, any Overseas Shareholder who is located or resident or who has a registered address in, or who is a citizen of, the United States of America or any other Restricted Jurisdiction)
"Record Date"	the record date for the Open Offer, being 6.30 p.m. on 13 July 2018
"Receiving Agents"	Link Asset Services, a trading name of Link Market Services Limited
"Registrar"	Link Market Services Limited
"Regulation S"	Regulation S promulgated under the Securities Act
"Remuneration Committee"	the remuneration committee of the Company's board of directors from time to time
"Replacement CLN Shares"	the up to 236,640,000 new Ordinary Shares to be issued to the CLN Holders in the event that they exercise all of their rights to convert the Replacement CLNs into Ordinary Shares
"Replacement CLNs"	the convertible loan notes to be issued by the Company to the Major shareholders in consideration for the cancellation of the May 2018 Loan Notes conditional upon, amongst other things, the passing of the Whitewash Resolutions
"Relevant Company Securities"	Ordinary Shares (or derivatives referenced thereto) and securities convertible into, rights to subscribe for and options (including traded options) in respect thereof, including, for the avoidance of doubt, the Ordinary Shares
"Resolutions"	the resolutions to be proposed at the General Meeting as set out in the Notice of GM, and each a "Resolution"
"Restricted Jurisdictions"	United States of America, Canada, Australia, Japan, the Republic of South Africa and the Republic of Ireland and any other jurisdiction where the extension or availability of the Open Offer would breach any applicable law
"Rule 9 Waivers"	the waiver by the Panel of any requirement under Rule 9 of the Takeover Code for each of the NB Concert Party and Omnicane to make a general offer to Shareholders that would otherwise arise as a result of conversion of their respective Replacement CLNs
"Securities Act"	the US Securities Act of 1933, as amended
"Shareholder(s)"	holder(s) of Ordinary Shares
"Shareholder Loans"	up to £8.7 million in new financing arrangements from the Major Shareholders by means of the May 2018 Loan Notes.
"Takeover Code" or "Code"	the City Code on Takeovers and Mergers
"UKLA"	the United Kingdom Listing Authority, being the Financial Conduct Authority in its capacity as the competent authority for the purposes of Part VI of FSMA
"uncertificated" or "uncertificated form"	recorded on the register of members of the Company as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
"United Kingdom" or "UK"	the United Kingdom of Great Britain and Northern Ireland
"United States" or "US"	the United States of America, its territories and possessions and the District of Columbia
"voting rights"	means all voting rights attributable to the share capital of the Company which are currently exercisable at a general meeting
"Whitewash Resolutions"	the NB Whitewash Resolution and/or (as the context requires) the Omnicane Whitewash Resolution, and each a "Whitewash Resolution".

 

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