Provexis Regulatory News (PXS)

28 June 2013

Provexis plc (the "Company" or "Provexis")

Proposed Reduction of Capital,

Demerger and admission of Science in Sport plc to AIM

The Board of Provexis today announces its intention to split the Provexis Group into two separate AIM quoted businesses. In order to achieve this, the Board is seeking Shareholder approval to demerge S i S (Science in Sport) Limited ("SiS") from the Provexis Group. It is proposed that this separation will be effected by way of a demerger of SiS to a new company called Science in Sport plc ("Science in Sport"). Science in Sport will seek admission of its entire issued and to be issued ordinary share capital to trading on AIM on or around 9 August 2013. The Demerger is conditional, inter alia, upon the approval of Provexis Shareholders at a General Meeting of Provexis to be held on 15 July 2013 and the confirmation of the Provexis Reduction of Capital by the Court.

If the Demerger proceeds, the Provexis Shareholders who are registered on the Provexis Share Register at the Demerger Record Time will receive:

one Science in Sport Ordinary Share for every one hundred Provexis Ordinary Shares

then held by them (save that all fractional entitlements to a Science in Sport Ordinary Share will be rounded up to the nearest whole number).

Provexis Shareholders will continue to own their existing Provexis Ordinary Shares. The Provexis Ordinary Shares will continue to be traded on AIM. The Demerger is expected to become effective on 9 August 2013.

It is proposed that, following the Demerger, Provexis will remain the ultimate holding company for the Fruitflow Business.

In order to provide ongoing working capital for each of the demerged businesses and to pay the costs associated with the Demerger, the Company today announces that Science in Sport has undertaken a conditional placing to raise £2.25 million (before commission and expenses) by the issuance of 4,018,000 Science in Sport Placing Shares at a price of 56 pence per share. On Science in Sport Admission, Science in Sport is expected to have a market capitalisation of £10.9 million, based on the Placing Price of the Science in Sport Placing Shares.

A circular has today been sent to Shareholders setting out the full details of the Demerger. Further to the circular, Shareholders have also been sent a copy of the Science in Sport Admission Document and a copy of the Annual Report and Accounts for Provexis for the year ended 31 March 2013. Copies of these documents will be available from the Company's website (www.provexis.com) shortly.

Defined terms within this announcement have the same meanings as those within the circular.

The expected timetable of principal events in relation to the Proposed Reduction of Capital, Demerger and Science in Sport Admission are set out in Appendix A of this announcement. The Science in Sport Admission statistics are set out in Appendix B of this announcement.

Background to and reasons for the Demerger

The Company has historically focused on the discovery, development and commercialisation of functional foods, medical foods and dietary supplements. Following the acquisition of the SiS Business in June 2011, the Company's focus was expanded to cover sports nutrition which accounts for a large proportion of the functional food market.

On 1 June 2010 the Company announced the Alliance Agreement with DSM for the commercialisation of its Fruitflow technology. The establishment of the Alliance Agreement was a significant milestone in the history of the Company. Under the Alliance Agreement, Provexis is responsible for contributing scientific expertise necessary for the successful commercialisation of Fruitflow, while DSM carries out final product development, manufacturing, marketing and selling of the product. Profits from the Alliance Agreement are shared between Provexis and DSM on an agreed basis, linked to various performance milestones. The Directors believed at the time of signing the Alliance Agreement, and still retain the belief, that the commercialisation of Fruitflow is best undertaken in conjunction with DSM as it enables Provexis to leverage the resources and relationships of DSM in the major global markets.

Since June 2010, the contribution of Provexis as part of the Alliance Agreement has reduced as the focus of commercialising Fruitflow has been on developing new formats, manufacturing, marketing and selling; all services principally undertaken by DSM. As the contribution required from Provexis to fulfil its obligations under the Alliance Agreement has reduced, the Board has undertaken on-going cost cutting measures to control the cost base of the Provexis Group. Since its last financial year end, Provexis has also closed its facility at the University of Aberdeen, as a continuation of the cost cutting exercise.

The Board now believes it is appropriate to further reduce the operating costs of the Provexis Group associated with the Fruitflow Business, given that the investment phase of Fruitflow is complete, in order to minimise the cost of services supplied under the Alliance Agreement by Provexis, and to maximise operating profit as Fruitflow revenues develop. The Board believes this action will maximise Provexis Shareholder value over the short, medium and long term. To this end, the Board has resolved to reduce the annual fixed operating costs of the Fruitflow Business to approximately £0.25 million per annum, whilst fully maintaining its contribution to the Alliance Agreement. The key strategy of Provexis going forward will be to fulfil its responsibilities under the Alliance Agreement, such as protecting the intellectual property of Fruitflow and assisting DSM with scientific work required to further commercialise Fruitflow, whilst also managing the relationship with DSM. The Board believe that these obligations can be met with a very small team comprising two part-time executives, together with two non-executive Directors to oversee strategy and governance matters. Subject to completion of the Demerger, each member of the existing executive Board will enter into new agreements with Provexis that reflect the services required to manage the Fruitflow Business only. All other operational staff currently employed by the Provexis Group will become employees of the Science in Sport Group following completion of the Demerger. John Clarke, currently a Non-Executive Director of the Company, will be resigning from Provexis at the Demerger Effective Date.

Further to the above, the Board does not believe that the market fully appreciates the value of the Science in Sport Business while it is combined with the Fruitflow Business. Businesses with similar characteristics and revenue growth to the Science in Sport Business historically command a multiple of sales valuation, something which has not been recognised in the valuation of the Provexis Group since the acquisition of Science in Sport.

Furthermore it is the opinion of the Board that the two divisions are less likely to maximise their potential performance if they continue to be operated as part of one group. Given these factors, the Board, together with Cenkos, has evaluated several options for maximising shareholder value, giving due consideration to a range of alternatives and factors. The Board concluded unanimously that a demerger, in which Provexis Shareholders remain shareholders in both businesses, would be the best way of maximising shareholder value.

In summary, the Board has therefore concluded that the Demerger is in the best interests of both the Fruitflow Business and the Science in Sport Business and will deliver value to shareholders over time by:

- allowing Provexis and Science in Sport to pursue their strategic objectives independently with greater control over resources and opportunities;

- allowing the Fruitflow Business or the Science in Sport Business independently to secure additional funding, as demonstrated by the Science in Sport Placing;

- allowing the Science in Sport Business to showcase its revenue growth, improving operating margins and prospects;

- minimising the cost base of the Fruitflow Business, thereby maximising its profit potential;

- allowing the sale of either the Fruitflow Business or the Science in Sport Business on a standalone basis which would be more attractive to any potential suitors; and

- providing Provexis Shareholders with added flexibility in their investment decisions.

The Demerger will create two distinct entities with different strategic, operational and economic characteristics and with separate operational management teams.

Working capital position of Provexis

As set out in the annual results of the Company for the 12 month period ended 31 March 2013, the Provexis Group incurred a loss before tax of £4.7 million. As at 31 May 2013, the Provexis Group had net cash of £0.3 million.

If the Demerger is not approved by Provexis Shareholders the Board will be limited in its ability to implement the strategies of both the Provexis Business and the Science in Sport Business. Further, the Company would quickly be forced to seek further finance, most likely through the Provexis Group's existing equity draw down facility with Darwin or through an equity fundraising with existing Provexis Shareholders, albeit, that such funds realised may be insufficient to meet the on-going working capital requirements of the Company. The Board believe either of these fundraising routes, even if they raised sufficient funds to meet the working capital requirements of the Company, would diminish the value of the Provexis Group. Accordingly, the Directors unanimously recommend that Provexis Shareholders vote in favour of the Resolutions.

Provexis Shareholders should be aware that if the Resolutions are not approved at the General Meeting and the Science in Sport Admission does not take place on or around 9 August 2013, the net proceeds of the Science in Sport Placing will not be received by the Science in Sport Business.

Subject to the Resolutions being approved at the General Meeting and the Science in Sport Placing taking place, the Directors believe the Provexis Group will have sufficient working capital, assuming no revenue or external funding, until March 2015.

Summary of how the Demerger is to be effected

The Demerger is to be effected by Provexis returning to Provexis Shareholders capital in an amount equal to the market value of the SiS Ordinary Shares as at the Demerger Effective Date. The return of capital to Provexis Shareholders will be satisfied by the transfer by Provexis to Science in Sport of the SiS Ordinary Shares and the allotment and issue of Science in Sport Ordinary Shares credited as fully paid to the holders of Provexis Ordinary Shares who are registered on the Provexis Share Register at the Demerger Record Time in accordance with the terms of the Demerger Agreement.

This will involve:

(i) the allotment and issue of the Science in Sport Cancellation Shares credited as fully paid;

(ii) the cancellation of the Deferred Shares of £3.6 million, followed by the cancellation of the Science in Sport Cancellation Shares and the reduction of Provexis' share premium account, which is expected to amount to £8.5 million in aggregate;

(iii) the return of capital by Provexis to Provexis Shareholders of an amount equal to the market value of the SiS Ordinary Shares. The return of capital to Provexis Shareholders will be satisfied by the transfer by Provexis to Science in Sport of the SiS Ordinary Shares and the allotment and issue of Science in Sport Ordinary Shares credited as fully paid by Science in Sport to Provexis Shareholders who are registered on the Provexis Share Register at the Demerger Record Time on the basis of one Science in Sport Ordinary Share for every one hundred Provexis Ordinary Shares then held.

Science in Sport's share capital comprises one ordinary share and 50,000 redeemable shares and, therefore, the Board intends to allot and issue Redeemable Shares in Provexis prior to the Demerger becoming effective in order to ensure that the share capital of Science in Sport mirrors as nearly as may be the share capital of Provexis as at the Demerger Record Time.

Provexis Shareholders will continue to hold their existing shares in Provexis and, following the Demerger, each Provexis Shareholder will hold as nearly as may be the same percentage of Provexis Ordinary Shares and Science in Sport Ordinary Shares in each of Provexis and Science in Sport respectively.

Board, organisational structures and corporate governance

The Provexis Group currently has a strong and experienced management team. Following the Demerger, this team will form the core of the management boards of each of Provexis and Science in Sport, ensuring appropriate continuity for both businesses.

One of the reasons for the Demerger is to align the Company's day to day operational management and on-going cost base to the needs of the Fruitflow Business. To this end Provexis intends to reduce the number of people engaged by Provexis following the Demerger to two part-time executive directors and two non-executive directors only.

Provexis

The Board of Provexis following the Demerger will be as follows:

Dawson Buck (Non-Executive Chairman)

Krijn Rietveld (Non-Executive Director)

Stephen Moon (Chief Executive Officer)

Ian Ford (Finance Director)

Mr Moon and Mr Ford will enter into revised terms of engagement with the Company, effective as of the Demerger Effective Date, governing their revised engagement terms with the Company.

John Clarke, currently a Non-Executive Director of the Company, will resign as a Director of Provexis following the Demerger Effective Date.

Corporate governance

Day to day management of Provexis

Following the Demerger, Stephen Moon, Chief Executive Officer, will manage the relationship with DSM, lead all commercial aspects of the business and deal (together with Dawson Buck) with investor relations. Ian Ford, Finance Director, will deal with financial reporting and controls, management of company advisers and company secretarial matters.

Science in Sport

The Board of Science in Sport following the Demerger will be as follows:

John Clarke (Non-Executive Chairman)

Dawson Buck (Non-Executive Director)

Stephen Moon (Chief Executive Officer)

Science in Sport is expected to have approximately 50 employees following the Demerger Effective Date. Further details on the Board of Science in Sport are set out in the Science in Sport Admission Document.

Financial effects of the Demerger

The illustrative financial effect of the Demerger on Provexis' assets and liabilities as at 31 March 2013 will be to reduce net assets by an estimated £7.1 million. The Board expects one-off cash costs arising from the Demerger and other proposals to be paid by the Company to be less than £0.1 million. The remaining one-off cash costs arising from the Demerger and proposals set out in the circular and the Science in Sport Admission Document will be paid by Science in Sport. These one-off cash costs totalling approximately £0.3 million will be paid by Science in Sport out of the gross proceeds of the Science in Sport Placing. Science in Sport will also make a payment of £0.25 million to satisfy an existing inter-company loan between SiS and Provexis.

The central costs of running Provexis following the Demerger are estimated to fall to £0.25 million per annum. The Directors believe the Provexis Group will have sufficient working capital, assuming no revenue or external funding, until March 2015.

As part of the Demerger the Company's existing equity draw down facility with Darwin will remain in place.

Share option schemes

The Company currently has three share option schemes being the Provexis 2005 Share Option Scheme, the Provexis 2005 EMI Share Option Contract Scheme and the Nutrinnovator 2004 Employee Share Option Scheme. The total number of unexercised options under the share option schemes is 90,071,648 Provexis Ordinary Shares.

On 27 June 2013, following a recommendation from the Company's Remuneration Committee at a meeting on 1 May 2012, the Company agreed to grant new options over Provexis Ordinary Shares, under the Provexis 2005 Share Option Scheme to certain individuals as follows:

The Company's Remuneration Committee resolved to grant the options set out above on 8 May 2012. Since this date however the Company has been unable to grant the options as the Company has been in an extended closed period as the Board has considered and pursued a number of corporate actions, including the proposals set out in this announcement.

The Company's Remuneration Committee believes options are the best way to align the interests of senior management with those of Provexis Shareholders, especially following the Demerger and the revised terms of engagement for Mr Moon and Mr Ford.

Following the issue of the new Options, as set out above, the total number of Provexis Ordinary Shares under option as of the date of this announcement which could be issued if all of the performance criteria are met is 130,071,648 Provexis Ordinary Shares.

Effect of the Demerger on the share option schemes

Following completion of the Demerger, the Remuneration Committee intend to make appropriate adjustments to the outstanding awards under Provexis' share option schemes. Adjustments may be made to the number of shares comprising, and the exercise price of, any award together with any performance conditions in respect thereof. An announcement will be made to Provexis shareholders as and when this adjustment is made.

The existing Provexis share option schemes will continue for the benefit of individual holders post-Demerger. In respect of options issued to individuals under the Provexis 2005 Share Option Scheme and under the Provexis 2005 EMI Share Option Contract Scheme, an advance assurance will be sought from HMRC to approve the variation in the exercise price arising out of the Demerger for unexercised options at the Demerger Effective Date.

Following the Demerger it is intended that further share options over Science in Sport Ordinary Shares will be issued to the directors and executive team of Science in Sport.

General Meeting

A General Meeting will be held at the offices of Shoosmiths LLP, Apex Plaza, Forbury Road, Reading RG1 1SH on 15 July 2013 at 10.00 a.m. at which the Resolutions will be proposed.

Recommendation

The Directors consider that the Resolutions are in the best interests of the Company and would promote the success of the Provexis Group for the benefit of Provexis Shareholders as a whole. Accordingly, the Directors recommend that Provexis Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as each Provexis Director has undertaken to do in respect of his own beneficial shareholdings, amounting in aggregate to 17,168,931 Provexis Ordinary Shares, representing approximately 1.1 per cent of the Company's existing issued share capital.

For further information please contact:

Appendix A

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

(1) The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement may be adjusted by Provexis and Science in Sport in consultation with Cenkos, in which event details of the new times and dates will be notified to the London Stock Exchange, and where appropriate, Provexis Shareholders.

(2) All references in this announcement to times are to London time unless otherwise stated.

* These dates are indicative only and will depend, amongst other things, on the dates on which the Court confirms the Provexis Reduction of Capital and on which the Provexis Reduction of Capital becomes effective.

Appendix B

SCIENCE IN SPORT ADMISSION STATISTICS

As part of the Science in Sport Admission, the following Directors have agreed to subscribe for Science in Sport Placing Shares:

*includes Science in Sport Ordinary Shares issued as part of the Demerger