Brown Group Regulatory News (BWNG)

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THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND DOES NOT CONSTITUTE A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. NOTHING HEREIN SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITIES, OR CONSTITUTE OR FORM PART OF ANY OFFER TO ACQUIRE ANY SECURITIES, IN ANY JURISDICTION. ANY DECISION TO PURCHASE, SUBSCRIBE FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF, ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT MUST BE MADE SOLELY ON THE BASIS OF THE INFORMATION THAT IS CONTAINED IN THE PROSPECTUS TO BE PUBLISHED BY THE COMPANY IN DUE COURSE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION WITHIN THE MEANING OF REGULATION 596/2014/EU (THE "MARKET ABUSE REGULATION"). THE PERSON RESPONSIBLE FOR MAKING THIS ANNOUNCEMENT IS THERESA CASEY, COMPANY SECRETARY OF N BROWN GROUP PLC

5 November 2020

N Brown Group plc("N Brown" or the "Group" or the "Company")

Placing and Open Offer to raise c. £100 million

Proposed Delisting and Admission to AIM

Recommended proposals for the approval of a related party transaction

Amendments to the Articles of Association

Notice of General Meeting

Clear opportunity to strengthen the balance sheet and accelerate profitable growth

N Brown, a top 10 UK clothing & footwear digital retailer, today announces a proposed pre-emptive equity raise of c. £100 million which is fully supported by Lord Alliance of Manchester CBE (the "Substantial Shareholder") (the "Capital Raising"), the proposed delisting of its Ordinary Shares from the premium listing segment of the Official List and from trading on the Main Market and the admission of its Ordinary Shares to trading on AIM, and the agreement of new and extended bank facilities conditional on completion of the Capital Raising.

Highlights

· The Group sees a compelling opportunity to derisk and accelerate its refreshed strategy; by eliminating unsecured net debt and bringing forward strategic investment

· Intention to raise c. £100 million of new equity capital alongside new extended facilities to strengthen the balance sheet and allow targeted investments to accelerate delivery of growth strategy to capitalise on the structural tailwinds in the Group's markets

· Pre-emptive Capital Raising to be completed by way of a conditional placing to the Substantial Shareholder and his son, Joshua Alliance, subject to clawback under the c. £100 million open offer to all Qualifying Shareholders at a price of 57 pence per share (equal to the 5 day closing average, rounded to the nearest penny) and on the basis of 11 Open Offer Shares for every 18 Existing Ordinary Shares

· An agreement with the Group's lending banks, subject to completion of the Capital Raising, to extend the maturity of its existing secured and unsecured facilities on revised terms and the proposed cancellation of the CLBILS facilities, providing N Brown greater flexibility on capital investment and returning capital to shareholders at the appropriate time

· Intention to cancel the admission of the Existing Ordinary Shares to listing on the premium listing segment of the Official List and to trading on the Main Market and apply for the admission of all of the Company's issued and to be issued Ordinary Shares to trading on AIM, with such cancellations and admission to take effect simultaneously with the Capital Raising

The Capital Raising is conditional upon, inter alia, Shareholder approval and the proposed cancellation of the admission of the Company's Ordinary Shares to listing on the premium listing segment of the Official List and to trading on the Main Market and the Company's Enlarged Share Capital being admitted to trading on AIM.

N.M. Rothschild & Sons Limited ("Rothschild & Co") is acting as the Lead Financial Adviser and Joint Sponsor along with Jefferies International Limited ("Jefferies") as Joint Financial Adviser and Joint Sponsor to the Company. Jefferies is acting as Global Co-ordinator in relation to the Capital Raising. Jefferies and Shore Capital Stockbrokers Limited are acting as Joint Corporate Brokers to N Brown. Shore Capital and Corporate Limited is acting as proposed Nominated Adviser in relation to Admission.

Steve Johnson, CEO of N Brown, commented:

"Having restructured the business and transitioned to more than 90% of revenues from digital, we now see a clear opportunity to capitalise on various industry drivers, not least the increasing trend towards online retail, and further improve our customer proposition.

"The proposed capital raise will give us the firepower to invest further in our digital capabilities and accelerate our growth strategy, whilst significantly strengthening the Group's balance sheet to provide us with ongoing flexibility and a strong platform from which to deliver returns for all of our shareholders."

Capitalised terms not otherwise defined in this announcement shall have the meaning set out in the Appendix to this announcement.

N Brown's results for the six months ended 29 August 2020 have also been released today in a separate announcement via RNS, which is available on the Company's website at www.nbrown.co.uk.

For further information:

Rationale for the Proposed Capital Raising

The Group's refreshed strategy is showing encouraging progress, with 92% of product revenue now digital, and management believes that there are significant opportunities available for N Brown to accelerate the drive towards profitable, digital growth over the medium term:

· Online retailing is expected to continue to take market share, accelerated by the impact of COVID-19 on customer behaviour;

· N Brown's target markets continue to be underserved, offering significant opportunity for growth through a streamlined and more focused brand portfolio; and

· The Group's new, refreshed customer-centric strategy will attract a broader range of customers to the Group's brands and flexible credit offering.

As a result, the Board is proposing the Capital Raising, which it believes will allow significant shareholder value to be delivered. In particular, it will allow N Brown to:

· Accelerate the Group's strategy by making targeted investments which are expected to achieve attractive returns

· Eliminate all unsecured debt in the business, leaving a core net cash trading position, providing the Group with increased financial resilience to navigate the COVID-19 environment and reducing the Group's total net indebtedness of £411.1 million as at 29 August 2020

· Cancel the CLBILS facilities which will:

o offer more freedom to invest in the business to support a more rapid delivery of the Group's strategy

o give the Board the flexibility to pay dividends at the appropriate time

· Extend the Group's existing facilities by a further two years and three months; without the Capital Raising, this extension will be considerably more difficult and costly

As a result, the Board will put in place the following medium term financial targets (the "Medium Term Financial Targets"):

· 7 per cent. medium term average product revenue growth

· 14 per cent. medium term EBITDA margin

The Board believes that the successful completion of the Capital Raising will significantly strengthen the Group's balance sheet and best position the Group to accelerate its strategy, for the benefit of all Shareholders. 

Overview of the Capital Raising

In preparing for the Capital Raising, which the Independent Directors believe is necessary for the future prosperity of the Group, the Independent Directors have endeavoured to achieve an outcome which is in the best interests of all N Brown's shareholders and provides the greatest certainty of funds for the Company. The Independent Directors have engaged extensively with the Substantial Shareholder as the Independent Directors believe that his support for the Capital Raising is crucial in order to achieve the necessary certainty of funds and to pass the Resolutions. The Substantial Shareholder has been clear with the Independent Directors throughout the process that he is supportive of the refreshed strategy and the Capital Raising. Having fully evaluated a range of transaction structures, the Independent Directors consider that the Open Offer structure (supported by the Placees pursuant to the Placing) is the best way of facilitating participation in the Capital Raising by all Qualifying Shareholders in proportion to their existing shareholdings in the Company, by way of their pre-emption rights, whilst providing the Company with the greatest level of certainty of funds, and allowing the Company to renegotiate and extend its debt facilities.

In addition, the Placees have agreed to support the Capital Raising at no cost to the Company (i.e. no fees or commissions are to be paid to the Placees) pursuant to the Placing and the Substantial Shareholder has irrevocably committed to support the Capital Raising, including by voting in favour of all of the Resolutions on which he is eligible to vote. The Company and the Placees have agreed that an excess application facility will be available to all Qualifying Shareholders as at the Record Date and will be allocated on the basis of demand and Shareholders' pro-rata holdings in the issued share capital as at the Record Date (subject to the terms and conditions described in the Prospectus). As the Independent Directors believe that the Substantial Shareholder's support is critical to the successful outcome of the Capital Raising, and that the Excess Application Facility provides all Qualifying Shareholders with the opportunity to increase their proportionate ownership of the issued share capital of the Company (provided not all new shares are taken up by Shareholders pre-emptively), the Independent Directors have agreed to recommend this structure. The Company has also received confirmation that the Placees are in possession of the necessary funds to undertake this arrangement.

· N Brown is proposing to raise gross proceeds of c. £100 million (approximately £94 million after deduction of estimated fees and expenses) by way of the fully pre-emptive Capital Raising comprising a Placing and Open Offer of 174,666,053 Open Offer Shares (the "New Ordinary Shares") on the basis of 11 Open Offer Shares for every 18 Existing Ordinary Shares

· In each case, the New Ordinary Shares will be issued at 57 pence each (the "Offer Price")

· The New Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares

· The Capital Raising is fully supported by the Substantial Shareholder and his son, Joshua Alliance (the "Placees"), who have agreed to subscribe for all of the Open Offer Shares (subject to clawback to satisfy valid applications made by Qualifying Shareholders under the Open Offer)

· All members of the Concert Party (defined as the Substantial Shareholder, Nigel Alliance, Joshua Alliance and the other persons set out in the Prospectus) who would be entitled to participate in the Open Offer have irrevocably undertaken not to take up their pro-rata entitlements under the Open Offer (the "Concert Party Basic Entitlement Shares")

· All New Ordinary Shares not taken up by Qualifying Shareholders under the Open Offer (other than those the subject of the Open Offer Entitlements of the members of the Concert Party) will fall into the Excess Application Facility

· The Excess Application Facility will be available to all Qualifying Shareholders as at the Record Date who have taken up their Open Offer entitlement in full and will be allocated by the Company in accordance with demand and Qualifying Shareholders' pro-rata holdings in the issued share capital as at the Record Date but subject to an Excess Share Allocation Cap, which respects the relative sizes of the holdings of Ordinary Shares on the Record Date of applicants for Excess Shares, including the aggregate holdings of the Concert Party

· The Directors intend to take-up their pro-rata entitlement in the Open Offer in full

With the potential for increasing his proportionate ownership, the Substantial Shareholder has agreed with SCC and the Company to enter into the New Relationship Agreement, which will take effect from Admission. Under the New Relationship Agreement, for so long as the Substantial Shareholder and his Shareholder Group holds above 30 per cent. of the Ordinary Shares, the Substantial Shareholder has the right to nominate two directors to the Board as non-executive directors (subject to the Company's and SCC's standard pre-appointment due diligence and vetting process, and to the other Board members' approval of new director candidates (such approval not to be unreasonably withheld or delayed)). The New Relationship Agreement separately states that, in the event that the Substantial Shareholder's shareholding and that of his Shareholder Group equates to above 20 per cent. but not more than 30 per cent. of the Ordinary Shares, the Substantial Shareholder has the right to nominate one director to the Board as a non-executive director (subject to the Company's and SCC's standard pre-appointment due diligence and vetting process, and to the other Board members' approval of new director candidates (such approval not to be unreasonably withheld or delayed)). Pursuant to the terms of the New Relationship Agreement, the Proposed Director shall, upon Admission, be appointed as a Nominated Director and the Substantial Shareholder shall, upon Admission, be designated a Nominated Director.

Notwithstanding that, under the New Relationship Agreement, committees of the Board shall be comprised of and chaired by independent directors, (being directors who, at the relevant time, are considered by the Board to be independent, as determined by reference to the UK Corporate Governance Code or following agreement with SCC (with such agreement of SCC not having been revoked due to a change in circumstances) and, as at the date of this announcement, the independent directors are Matt Davies, Ron McMillan, Lesley Jones, Gill Barr, Richard Moross, Michael Ross and Vicky Mitchell), the Substantial Shareholder shall be entitled to nominate one Nominated Director to be a member of the Remuneration Committee. The Substantial Shareholder has notified the Company that the first Nominated Director to be a member of the Remuneration Committee will be the Proposed Director. A Nominated Director will be subject to future re-election by Shareholders at the first annual general meeting of the Company following their appointment (save for in the event that such Nominated Director is an existing Director). If the Substantial Shareholder has not exercised his right to appoint a Nominated Director, the Substantial Shareholder has the right to appoint one person as a board observer, who shall have the right to attend Board meetings, but shall not have the right to vote at such meetings.

The Group is also proposing the Rule 9 Waiver and the Whitewash Resolution. The Independent Directors recommend that Shareholders vote in favour of the Whitewash Resolution. Further details of the Concert Party, the Rule 9 Waiver and the Whitewash Resolution are contained in the Prospectus.

As a consequence of the issue of the Open Offer Shares, the Substantial Shareholder would normally be required to make a general offer to Shareholders pursuant to Rule 9 of the Code.

In accordance with Note 1 on the Notes on the Dispensations from Rule 9, the Panel has been consulted and has agreed, subject to the Whitewash Resolution being passed by the Independent Shareholders (on a poll) at the General Meeting, to waive the requirement that would otherwise arise under Rule 9 of the Code as a result of the issue of the Open Offer Shares to the Substantial Shareholder. The Whitewash Resolution will be passed if approved by a simple majority of votes cast by Independent Shareholders on a poll.

The Board is seeking the approval of Shareholders at the General Meeting for, inter alia, the Move to AIM, the Capital Raising, the related party transaction which is part of the Capital Raising and the Rule 9 Waiver. The Capital Raising and the Move to AIM are inter-conditional and conditional, inter alia, upon:

· the Placing Agreement becoming unconditional by 8.00 a.m. on 23 December 2020 (or such later time and/or date as the Substantial Shareholder and the Company may agree, being not later than 8.00 a.m. on 15 January 2021) and not having been terminated in accordance with its terms prior to Admission; and

· the Introduction Agreement becoming unconditional by 8.00 a.m. on 23 December 2020 (or such later time and/or date as Shore Capital and the Company may agree, being not later than 8.00 a.m. on 15 January 2021) and not having been terminated in accordance with its terms prior to Admission.

The Placing Agreement is conditional, inter alia, upon:

· all of the Resolutions having been passed by Shareholders at the General Meeting;

· Delisting occurring prior to Admission; and

· Admission having become effective by not later than 8.00 a.m. on 23 December 2020 (or such later time and/or date as the Substantial Shareholder and the Company may agree, being not later than 15 January 2021).

The Introduction Agreement is conditional, inter alia, upon:

· all of the Resolutions having been passed by Shareholders at the General Meeting;

· the London Stock Exchange agreeing to admit the Enlarged Share Capital to trading on AIM; and

· Admission having become effective by not later than 8.00 a.m. on 23 December 2020 (or such later time and/or date as Shore Capital and the Company may agree, being not later than 15 January 2021).

If any of the conditions is not satisfied or, if applicable, waived, then the Capital Raising will not take place.

Use of Proceeds

The Board believes that the net proceeds of the Capital Raising of approximately £94 million will leave the Group with a significantly stronger balance sheet, enabling the Group to accelerate the delivery of its refreshed strategy announced in June 2020. The Group will use approximately £77 million to fully repay the current drawings under its existing Revolving Credit Facility and CLBILS facilities which will eliminate all of the Group's unsecured debt and bring it to a core net cash trading position, giving it stronger foundations from which to grow the business, including the funding of debtor book growth. This will also allow the Group to cancel the CLBILS facilities which will allow the Group greater flexibility to invest in the business as well as the ability to recommence dividends at the appropriate time.

The Group intends to use the remaining approximately £18 million of net proceeds alongside ongoing cash generation to accelerate its strategy to enhance growth prospects. This includes pulling forward and enhancing the following targeted investments in key areas which the Board expects to generate attractive returns:

- New Financial Services platform:

o Providing credit to make shopping affordable is at the heart of N Brown's business model and remains at the core of the strategy moving forwards. N Brown's current credit platform is built on a mainframe system which is robust but lacks flexibility to make changes to enhance the customer proposition. Customers' behaviours have evolved and are generally shifting towards a range of more flexible payment products, which the Group's current system cannot currently service

o To deliver more modern products, the Group needs to develop a new Financial Services platform that has the flexibility to offer these products. The Group is currently undertaking an extensive discovery process to identify the optimal delivery approach for the new platform, which will not only offer a broader suite of modern flexible credit products which should help drive Product and Financial Services income, but also have cost reduction opportunities and the ability to reduce bad debt provisioning

o In addition to the core Financial Services platform, the Group anticipates having to invest in other areas of the business operating with legacy technology, including data and telephony platforms to enable the business to successfully integrate the new Financial Services platform

o The Group intends to spend £6 million to £8 million of the net proceeds to begin developing this new platform and deliver it between now and 2023

- Acceleration of the new digital front-end website experience:

o The existing N Brown websites are built on a legacy technology stack, which has been built up over many years. The Group is investing in a new front-end website with the aim of improving the customer experience through a faster, cleaner website resulting in better conversion rates and search optimisation benefits. It will also iterate N Brown away from its complex, legacy web technology stack, improving stability and pace of future change

o The first phase of work on this project is underway, which replaces the core technology stack and builds a clean platform from which to build. The next phase of work will focus on delivering more specific functionality for each brand which will support building a differentiated customer experience relevant to the brand proposition

o The Group intends to spend £3 million to £5 million of the net proceeds to begin delivery of this new experience between now and 2023

- Accelerate customer acquisition:

o A core pillar of N Brown's strategy is having distinct brands which attract a broad range of customers. With significant work done on improving the brand and customer proposition, the Group is focused on acquiring new customers in its core target segments, particularly those where N Brown is under-represented today

o The Group will undertake a range of activities to accelerate the acquisition of new customers, including expanding the presence of the core retail brands through increased investment in brand building activity and through more specific, targeted activity through digital and social channels

o The Group intends to spend £4 million to £8 million of the net proceeds to pull forward the acceleration of new customer acquisition from 2023

The Group expects its capital expenditure to increase towards historic levels of approximately £40 million from FY22, taking into account the funding requirement to complete the new financial services platform and new digital front-end website experiences.

Proposed Move to AIM

The Substantial Shareholder has made his support for the Capital Raising contingent upon N Brown seeking to cancel its admission of the Existing Ordinary Shares to listing on the Official List (premium listing segment) and to trading on the Main Market and the Group applying for the admission of all its issued and to be issued Ordinary Shares to trading on AIM.

The Independent Directors have given due consideration to this and believe that there are a number of benefits that will be secured by the Move to AIM and have therefore decided to recommend that N Brown pursues the Move to AIM. The Independent Directors believe that the benefits of the Move to AIM include:

o Securing the support of the Company's largest shareholder in the Capital Raising, which is important in order to achieve the necessary certainty of funds and to pass the Resolutions

o A more appropriate environment, better suited to the Group's current market capitalisation and size, whilst also being a market which is operated and regulated by the London Stock Exchange. AIM is specifically designed for smaller companies, with a more flexible regulatory regime and provides a more suitable environment for growing companies. Being traded on AIM should simplify the ongoing administrative and regulatory requirements of the Company

o Launched in June 1995, AIM has an established reputation with investors and analysts and is an internationally recognised market, home to some of the UK's most successful digital retailers

o AIM offers greater flexibility with regard to corporate transactions and should therefore enable the Group to agree and execute certain transactions more quickly and cost effectively than a company on the Official List. AIM will also provide the Group with continuing access to the public equity capital markets should it be appropriate to obtain equity funding in the future. Should such opportunities or initiatives arise or become relevant to the Group, they could entail significant additional complexity and larger transaction costs if the Company were to remain on the Official List

o Companies whose shares trade on AIM are deemed to be unlisted for the purposes of certain areas of UK taxation. Following the Move to AIM, individuals who hold Ordinary Shares may be eligible for certain inheritance tax benefits. In addition, the UK government abolished stamp duty on shares traded on AIM with effect from 28 April 2014 which may help maintain or increase liquidity in the trading of Ordinary Shares. Shareholders and prospective investors should consult their own professional advisers on whether an investment in an AIM security is suitable for them, or whether the tax benefit referred to above is available to them

Subject to Shareholder approval, the Company anticipates that the Delisting and the AIM Admission will take effect simultaneously on or around 23 December 2020.

Banking Update

The Group has today announced an extension of its £500 million securitisation facility to 15 December 2023, from an original expiry date of 17 December 2021, which is not conditional on Admission. The Securitisation is currently subject to amended terms and covenants agreed with its lenders (the "COVID-19 Amendments") following the outbreak of COVID-19 in the UK as announced on 19 May 2020. The COVID-19 Amendments are scheduled to fall away on 18 December 2020.

With effect from Admission, the Group's banks have agreed to extend the RCF from 1 October 2021 to 31 December 2023. Given the receipt of the net proceeds of the Capital Raising significantly increasing liquidity on Admission, the Group has decided to agree to a more appropriately sized RCF of £100 million (currently £125 million) and will also terminate the CLBILS facilities to allow it flexibility to resume paying dividends at the appropriate time and increase capital expenditure immediately to accelerate its strategy. The agreed amendments to the RCF, and the intention to terminate the CLBILS facilities (together the "Financing Amendments"), are all conditional on the completion of the Capital Raising.

Should the Capital Raising not complete, the Group has fully agreed with its banks to put in place alternative financing arrangements (the "Alternative Refinancing Agreement"). Under the Alternative Refinancing Agreement, the Group will extend the RCF until 31 May 2022, consisting of a facility size of £100 million until 1 October 2021, which then drops to £50 million for the remainder of the term. As a result, and particularly given there is no injection of new equity, the Group will keep the CLBILS facilities in place. Whilst the Alternative Refinancing Agreement will enable the Company to continue to trade, it will not give the Group certainty of a longer-term bank deal, the necessary funding to accelerate its strategy, or to consider paying dividends in the foreseeable future.

Dividend Policy

On Admission, the Group will terminate the CLBILS facilities to allow it flexibility to resume paying dividends at the appropriate time. The Directors and the Proposed Director recognise that dividends are an important part of the Company's returns to shareholders and will consider implementing a new dividend policy in due course.

If Admission does not occur, the Group will continue to have access to the CLBILS facilities. A condition of being included in this scheme is the cessation of any dividends to shareholders whilst any facilities guaranteed by the CLBIL scheme are drawn.

The Board believes that the successful completion of the Capital Raising and the Move to AIM represents the best option available to the Group. The Capital Raising will provide the Group with a significantly stronger balance sheet and enable the Group to accelerate the delivery of its refreshed strategy, both of which the Board believes are necessary for the long-term success of the Group.

If the Resolutions are not passed by the requisite percentage of members of the Company, the Capital Raising and Admission cannot be implemented and the Ordinary Shares will not be admitted to trading on AIM and the Existing Ordinary Shares will continue to be admitted to listing on the premium listing segment of the Official List and to trading on the Main Market. In such circumstances, the proposed amendments to the financing facilities outlined above would fall away and the Alternative Refinancing Agreement would be implemented on less attractive financing terms and the Group would not have enough liquidity to be able to make the required investments to be able to accelerate its strategy, and thus would not be able to put in place the Medium Term Financial Targets which, if achieved, the Board expects will generate significant shareholder value. In the absence of the Capital Raising, the Group would need to review its medium term financing arrangements again in 2021. The Board strongly believes that the Alternative Refinancing Agreement is not in the best long-term interests of the Group or its Shareholders.

The Company expects to send a combined prospectus, circular and AIM admission document in connection with the Capital Raising, the Delisting and the Move to AIM (the "Prospectus") to Shareholders later today, in order to convene the General Meeting. Full details of the Placing and Open Offer will be included in the Prospectus. The Prospectus will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The Prospectus will also be available on the Company's website at www.nbrown.co.uk.

Market soundings, as defined in the Market Abuse Regulation, were taken in respect of the Capital Raising, the Delisting and the Move to AIM with the result that certain persons became aware of inside information, as permitted by the Market Abuse Regulation. That inside information is set out in this announcement and the announcement today of the Company's interim results for the six months to 29 August 2020, in accordance with paragraph 7 of article 17 of the Market Abuse Regulation. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.

An indicative timetable for the Capital Raising, the Delisting and the Move to AIM is set out below. The times and dates set out in the indicative timetable and mentioned throughout this announcement are times and dates in London and may be adjusted by the Company.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Principal terms of the Placing

Pursuant to the Placing Agreement (which is a direct agreement with the Company and none of the Banks are party to it), the Placees have, subject to certain conditions, irrevocably agreed to subscribe for all of the Open Offer Shares at the Offer Price subject to clawback to satisfy valid applications made by Qualifying Shareholders under the Open Offer. All members of the Concert Party who would be entitled to participate in the Open Offer have irrevocably undertaken not to take up their Open Offer Entitlements (or participate in the Excess Application Facility) and the Open Offer Shares the subject of the Open Offer Entitlements of the members of the Concert Party shall not be Excess Shares or otherwise available under the Excess Application Facility and will, instead, be subscribed for by the Placees on the terms and subject to the conditions of the Placing Agreement and in proportions to be agreed between the Substantial Shareholder and the Proposed Director and notified to the Company (at any time prior to 3.00 p.m. on 16 December 2020) and, in the absence of such notification, 100 per cent. to the Substantial Shareholder.

The Substantial Shareholder is entitled to assign his rights under the Placing Agreement to subscribe for New Ordinary Shares under the Placing as described below, up to a maximum of 15,789,473 Open Offer Shares, to one or more other members of the Concert Party provided that, if such assignee fails to make payment for such Open Offer Shares, the assignment shall be treated as not having taken place and the Substantial Shareholder shall be obliged to subscribe and pay for such Open Offer Shares (in addition to any other subscription and payment obligation that the Substantial Shareholder has under the Placing Agreement). The Company understands that the Significant Shareholder has assigned the right to subscribe for 15,789,473 Open Offer Shares in favour of certain members of the Concert Party who are relatives or related trusts of Nigel Alliance (including Joshua Adam Senior).

Principal terms of the Open Offer

Under the Open Offer, Qualifying Shareholders are being given the opportunity to subscribe for Open Offer Shares pro rata to their holdings of Existing Ordinary Shares on the basis of:

11 Open Offer Shares for every 18 Existing Ordinary Shares

held by them and registered in their name at the Record Date and, through the Excess Application Facility, to apply for Excess Shares, in each case on the terms and subject to the conditions set out in the Prospectus (and, in the case of Qualifying Non-CREST Shareholders, the Application Form). All members of the Concert Party who would be entitled to participate in the Open Offer have irrevocably undertaken not to take up their Open Offer Entitlements (or participate in the Excess Application Facility) and, pursuant to the Placing Agreement, the Placees have, subject to certain conditions, irrevocably agreed to subscribe for all of the Open Offer Shares at the Offer Price subject to clawback to satisfy valid applications made by Qualifying Shareholders under the Open Offer (including, for the avoidance of doubt, pursuant to the Excess Application Facility).

Qualifying Shareholders may apply for any whole number of Open Offer Shares up to their Open Offer Entitlement and, if they take up their Open Offer Entitlement in full, for Excess Shares under the Excess Application Facility. Fractions of Open Offer Shares will not be allotted, and each Qualifying Shareholder's Open Offer Entitlement under the Open Offer will be rounded down to the nearest whole number. Accordingly, Qualifying Shareholders with fewer than 18 Existing Ordinary Shares will not have the opportunity to participate in the Open Offer. Any fractional entitlements to New Ordinary Shares will be aggregated and made available under the Excess Application Facility. Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating Open Offer Entitlements.

Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non-CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim by Euroclear's Claims Processing Unit. Open Offer Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights, and will not receive any benefit, under the Open Offer. Any Open Offer Shares which are not applied for under the Open Offer will be subscribed for by the Placees pursuant to and subject to the terms and conditions of the Placing Agreement and in proportions to be agreed between the Substantial Shareholder and the Proposed Director and notified to the Company (at any time prior to 3.00 p.m. on 16 December 2020) and, in the absence of such notification, 100 per cent. to the Substantial Shareholder, with the proceeds retained for the benefit of N Brown.

Excess Application Facility and Allocations

The Excess Application Facility will enable Qualifying Shareholders who have taken up their Open Offer Entitlement in full to apply for Excess Shares. Qualifying Shareholders can apply for a maximum number equal to the number of Open Offer Shares less their Open Offer Entitlement. Excess Shares will, subject to their availability, be allocated in accordance with demand but subject to an Excess Share Allocation Cap, which respects the relative sizes of the holdings of Ordinary Shares on the Record Date of applicants for Excess Shares, including the aggregate holdings of the Concert Party. For these purposes, the members of the Concert Party will collectively be regarded and treated as a single Qualifying Shareholder which has taken up all of the Open Offer Entitlements of the members of the Concert Party and applied for the maximum aggregate number of Excess Shares for which the members of the Concert Party could therefore apply.

The Excess Share Allocation Cap for each Excess Share Applicant will be calculated as follows:

(a) the number of available Excess Shares

multiplied by

(b) the number of Ordinary Shares held by the relevant Excess Share Applicant on the Record Date divided by the aggregate number of Ordinary Shares held by all Excess Share Applicants

plus, in respect only of those Excess Share Applicants whose applications for Excess Shares exceed the product of (a) and (b) above:

(c) the aggregate number (if any) of New Ordinary Shares, by which individual applications for Excess Shares by Excess Share Applicants fall short of the respective products of (a) and (b) above

multiplied by

(d) the number of Ordinary Shares held by the relevant Excess Share Applicant on the Record Date divided by the aggregate number of Ordinary Shares held by all Excess Share Applicants whose applications exceed the respective products of (a) and (b) above.

For the avoidance of doubt, the Open Offer Shares the subject of the Open Offer Entitlements of the members of the Concert Party shall not be Excess Shares or otherwise available under the Excess Application Facility, and:

(a) any Excess Shares for which there is insufficient demand to be allocated to any Qualifying Shareholder (other than the Concert Party members) under the above mechanism; and

(b) the number of Excess Shares which are treated as allocated to the Concert Party under the above mechanism

will, in each case, be subscribed for by the Placees on the terms and subject to the conditions of the Placing Agreement and in proportions to be agreed between the Substantial Shareholder and the Proposed Director and notified to the Company (at any time prior to 3.00 p.m. on 16 December 2020) and, in the absence of such notification, 100 per cent. to the Substantial Shareholder, and will not be allocated to Qualifying Shareholders under the Open Offer.

Applications under the Excess Application Facility will be scaled back in accordance with the Excess Share Allocation Caps. As a result, no assurance can be given that the applications for Excess Shares by Qualifying Non-CREST Shareholders will be met in full or in part or at all. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant's risk) without interest as soon as practicable thereafter by way of cheque or CREST payment, as appropriate.

The Company will meet all applications from Qualifying Shareholders under the Excess Application Facility, subject to pro rata scaling as may be necessary due to demand, as mentioned above.

General Meeting

Set out at the end of the Prospectus is a notice convening the General Meeting to be held at the Company's offices at Griffin House, 40 Lever Street, Manchester, M60 6ES at 10.00 a.m. on 23 November 2020, at which the Resolutions will be proposed. The Resolutions are set out in full in the Notice of General Meeting.

Your attention is drawn to the fact that the Capital Raising, the Delisting and the Move to AIM are conditional, inter alia, upon the Resolutions being passed at the General Meeting.

Voting on the Resolutions will be by way of poll. Please refer to the notes contained in the Notice of General Meeting.

Whether or not you intend to be present at the General Meeting, you are asked to complete and return the Form of Proxy in accordance with the instructions printed on it as soon as possible and, in any event, so as to be received by the Registrar, Link Group, PXS 1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF, by not later than 10.00 a.m. on 19 November 2020 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting) or, alternatively, you can submit your voting instruction via the registrars' website www.signalshares.com by not later than 10.00 a.m. on 19 November 2020 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). If you are a member of CREST, you may be able to use the CREST electronic proxy appointment service. Proxies sent electronically must be sent as soon as possible and, in any event, so as to be received by not later than 10.00 a.m. on 19 November 2020 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). Completion and return of a Form of Proxy will not preclude you from attending and voting in person at the General Meeting, should you so wish.

In light of public health advice in response to the COVID-19 outbreak, including to limit travel and public gatherings, the Company strongly encourages all Shareholders to submit their Form of Proxy in advance of the meeting, appointing the Chairman of the General Meeting as proxy rather than a named person. If the current Stay Alert Guidance continues to apply on the date of the General Meeting, Shareholders will not be allowed to attend the General Meeting in person and anyone who attempts to do so will be refused entry. This situation is constantly evolving, and the UK Government may change current restrictions or implement further measures relating to the holding of general meetings during the affected period. Any changes to the General Meeting (including any change to the location of the General Meeting) will be communicated to Shareholders before the meeting through our website at www.nbrown.co.uk and, where appropriate, by announcement made by the Company to a RIS.

Related Party Transaction

Pursuant to the Placing Agreement, the Substantial Shareholder, who (together with his associates (as defined in the Listing Rules)) holds 96,643,694 Existing Ordinary Shares (representing 33.81 per cent. of the Company's issued ordinary share capital as at 4 November 2020 (being the last practicable date prior to the publication of the Prospectus)) and the Proposed Director have, subject to certain conditions, irrevocably agreed to subscribe for all of the New Ordinary Shares at the Offer Price (subject to clawback to satisfy valid applications made by Qualifying Shareholders under the Open Offer) in proportions to be agreed between the Substantial Shareholder and the Proposed Director and notified to the Company (at any time prior to 3.00 p.m. on 16 December 2020) and, in the absence of such notification, 100 per cent. to the Substantial Shareholder. To the extent that the Proposed Director fails to subscribe and pay for his proportion of the Open Offer Shares, the Substantial Shareholder shall subscribe and pay for such Open Offer Shares. The Placing will result in the Substantial Shareholder and the Proposed Director being interested in not more than 58.9 per cent., in aggregate, of the enlarged issued ordinary share capital of the Company immediately following completion of the Capital Raising (assuming no options granted under the Share Incentive Schemes are exercised between 4 November 2020 (being the latest practicable date prior to the publication of the Prospectus) and the issue of the New Ordinary Shares).

As a consequence of the Substantial Shareholder being a director of the Company, the current interest of the Substantial Shareholder in the Company and the relationship between the Proposed Director and the Substantial Shareholder, their proposed subscription, pursuant to the Placing Agreement, for the Ordinary Shares the subject of the Open Offer Entitlements of the members of the Concert Party who would be entitled to participate in the Open Offer (who have irrevocably undertaken not to take up those Open Offer Entitlements) constitutes a related party transaction for the purposes of Chapter 11 of the Listing Rules and such transactions require the prior approval of independent Shareholders. The Substantial Shareholder is not entitled to vote and he has undertaken to take all reasonable steps to ensure that he and his associates will abstain from voting, on the relevant resolution at the General Meeting. The Proposed Director has undertaken to take all reasonable steps to ensure that his associates will abstain from voting on the relevant resolution at the General Meeting. The other members of the Concert Party who are eligible to vote at the General Meeting have also undertaken to take all reasonable steps to ensure that they and their associates will abstain from voting on the relevant resolution at the General Meeting.

IMPORTANT NOTICES

This announcement is not intended to, and does not constitute, an offer to sell or the solicitation of an offer to subscribe for or buy, or an invitation to subscribe for or to purchase any securities, or an offer to acquire via tender offer or otherwise any securities, or the solicitation of any vote, in any jurisdiction.

This announcement has been issued by and is the sole responsibility of the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by any of the Banks (as defined below) or by any of their respective affiliates or agents or any of their respective directors, officers, employees, members, agents, advisers, representatives or shareholders as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement. The Prospectus will give further details of the New Ordinary Shares being offered pursuant to the Capital Raising and will, following publication, be available on the Company's website. This announcement is not a prospectus (or a prospectus equivalent document) but comprises an advertisement for the purposes of paragraph 3.3.1 of the Prospectus Regulation Rules made under Part VI of the FSMA, as amended and has been prepared solely in connection with the Capital Raising. Investors should not acquire any New Ordinary Shares referred to in this announcement except on the basis of the information contained in the Prospectus expected to be published by the Company in connection with the Capital Raising. This announcement is for informational purposes only and does not purport to be complete. No reliance may be placed by any person for any purpose on the information contained in this announcement or its accuracy or completeness. The information in this announcement is subject to change.

Each of the Banks is authorised and regulated in the United Kingdom by the FCA. None of the Banks will regard any person (whether or not a recipient of this document) other than the Company as its customer in relation to the Capital Raising and none of them will be responsible for providing the protections afforded to its customers to any other person or for providing advice to any other person in relation to the Capital Raising.

This announcement may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of the Company and the Group. This announcement includes statements that are, or may be deemed to be, "forward-looking statements". The words "believe," "estimate," "target," "anticipate," "expect," "could," "would," "intend," "aim," "plan," "predict," "continue," "assume," "positioned," "may," "will," "should," "shall," "risk", their negatives and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. An investor should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are in many cases beyond the control of the Company or the Group. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions investors that forward-looking statements are not guarantees of future performance and that its actual results of operations and financial condition, and the development of the industry in which it operates, may differ materially from those made in or suggested by the forward-looking statements contained in this announcement.

Past performance of the Company cannot be relied on as a guide to future performance. A variety of factors may cause the Company's or the Group's actual results to differ materially from the forward-looking statements contained in this announcement. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each investor or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

The Company, the Banks and any of their respective directors, officers, employees, agents, affiliates and advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where required to do so under applicable law.

The New Ordinary Shares have not been, and will not be, registered under the Securities Act, or under the securities laws of any State or other jurisdiction of the United States and may not be offered, sold, pledged, taken up, resold, transferred or delivered, directly or indirectly, in or into the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any State or other jurisdiction of the United States. There will be no public offer of the New Ordinary Shares in the United States.

The Open Offer (subject to certain limited exceptions) is only being extended to Qualifying Shareholders, and as such the Capital Raising (subject to certain limited exceptions) is not being extended into the United States or any other Excluded Territory. This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to sell, allot or issue, or any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, or an offer to acquire, any securities of the Company in the United States, Australia, Canada, Japan, New Zealand, the Republic of South Africa or in any other jurisdiction where the extension or availability of the Capital Raising would result in a requirement to comply with any governmental or other consent or any registration filing or other formality which the Company regards as unduly onerous or otherwise breach any applicable law or regulation. This announcement and any other document relating to the Capital Raising may not be sent into, distributed or otherwise disseminated (including by custodians, nominees or trustees or others that may have a contractual or legal obligation to forward such documents) in the United States by use of the mails or by any means or instrumentality of interstate or foreign commerce (including, without limitation, email, facsimile transmission, the internet or other form of electronic transmission) or any facility of a national securities exchange of the United States.

Information for Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the New Ordinary Shares have been subject to a product approval process, which has determined that they are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the New Ordinary Shares may decline and investors could lose all or part of their investment; the New Ordinary Shares offer no guaranteed income and no capital protection; and an investment in the New Ordinary Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Capital Raising.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the New Ordinary Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the New Ordinary Shares and determining appropriate distribution channels.

APPENDIX