Redcentric Regulatory News (RCN)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR IN ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014/EU ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

For immediate release

26 June 2020

Redcentric plc

Proposed Restitution Scheme

and

Placing and Subscription to raise £5.775 million

Redcentric plc (AIM: RCN) ("Redcentric" or the "Company"), a leading UK IT managed services provider, is pleased to announce that it has reached a settlement (the "Settlement") with the Financial Conduct Authority ("FCA") in connection with the FCA's investigation into the Company in relation to certain historical accounting misstatements. As part of the Settlement, the Company has agreed to implement a restitution scheme (the "Scheme").

Highlights

Commenting, Peter Brotherton, CEO, said:

"I am pleased that we have now achieved an agreed settlement, having worked closely with the FCA over a number of years and having acted promptly to issue a corrective statement to the market when the misstatements were discovered. This is positive news for Redcentric and follows a positive start to the year.

The conclusion of the investigation removes significant uncertainty and costs, enabling management to focus solely on future growth.

Over the last three years a new board of directors and management team have been appointed and have worked to transform the Company, optimising its products, platforms, networks, processes and structure. As a result, we now have a modern, resilient and scalable business that is fit for growth.

With good visibility of sales pipeline and future revenues, strong and improving margins and continued strong cash conversion, we are well placed to capitalise on opportunities across both the public and private sector markets."

General Meeting

Although the Company has existing shareholder authorities in place, which were granted by shareholders at its last annual general meeting, and would permit the board of directors of the Company (the "Directors" or the "Board") to issue the Placing shares for cash on a non-pre-emptive basis, the Board considers that it is appropriate (given the unusual nature of the Scheme) to seek specific shareholder approval for the fundraising and the potential issue of Ordinary Shares under the Scheme.

A circular (the "Circular") and notice convening a general meeting to be held at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place, 78 Cannon Street, London, EC4N 6AF at 11.00 a.m. on Monday 13 July 2020 (the "General Meeting"), will be published and posted to shareholders shortly and will be available on the Company's website at www.redcentricplc.com. The General Meeting will be convened to consider, and if thought fit, approve the proposals set out in the Circular and notice. Relevant extracts from the Circular are set out below.

Due to the COVID-19 pandemic, Shareholders are requested not to attend the General Meeting. Information regarding the arrangements for the General Meeting due to the COVID-19 pandemic and what Shareholders should do in order to vote at the General Meeting will be set out in the Circular.

The Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole.

Accordingly, the Directors intend unanimously to recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. The Directors have irrevocably undertaken to vote, or to direct that votes are cast, in favour of the Resolutions in respect of 135,249 Existing Ordinary Shares, in aggregate, representing approximately 0.09 per cent. of the Existing Ordinary Shares in issue. The Company has also received irrevocable undertakings or letters of intent from certain other shareholders which in relation to an aggregate (including the irrevocable undertakings from Directors) relate to 110,629,270 Ordinary Shares, representing approximately 74.50 per cent. of the existing share capital of the Company.

The person responsible for arranging the release of this Announcement on behalf of the Company is Harn Jagpal, the Company Secretary of the Company.

Enquiries:

Redcentric plc +44 (0)800 983 2522

Peter Brotherton, Chief Executive Officer

David Senior, Chief Financial Officer

finnCap Ltd - Nomad and Sole Bookrunner +44 (0)20 7220 0500

Marc Milmo / Simon Hicks / Charlie Beeson (Corporate Finance)

Andrew Burdis / Sunila de Silva (ECM)

IMPORTANT NOTICES

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This Announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.

The distribution of this Announcement and/or the Placing and/or issue of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company, finnCap, or any of their respective affiliates, agents, directors, officers or employees that would, or which is intended to, permit a public offer of the Placing Shares in any jurisdiction or the possession or distribution of this Announcement or any other offering or publicity material relating to the Placing Shares in any jurisdiction where action for that purpose is required. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. Persons into whose possession this Announcement comes are required by the Company and finnCap to inform themselves about, and to observe any such restrictions.

No prospectus will be made available in connection with the matters contained in this Announcement and no such prospectus is required to be published.

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN, IS FOR INFORMATION PURPOSES ONLY, IS NOT INTENDED TO AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO PURCHASE OR SUBSCRIBE FOR, UNDERWRITE, SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO PURCHASE OR SUBSCRIBE, SELL, ACQUIRE, DISPOSE OF THE PLACING SHARES OR ANY OTHER SECURITY IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR IN ANY JURISDICTION IN WHICH, OR TO ANY PERSONS TO WHOM, SUCH OFFERING, SOLICITATION OR SALE WOULD BE UNLAWFUL.

This Announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the Placing Shares. Any investment decision to buy Placing Shares in the Placing must be made solely on the basis of the information in this Announcement and publicly available information, which has not been independently verified by finnCap.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States. The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the Placing Shares; the relevant clearances have not been and the Placing Shares have not been, nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of Australia, Canada, Japan or the Republic of South Africa. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction outside the United Kingdom.

Persons (including, without limitation, nominees and trustees) who have a contractual right or other legal obligations to forward a copy of this Announcement should seek appropriate advice before taking any action.

This Announcement may contain and the Company may make verbal statements containing "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, United Kingdom domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its respective affiliates operate, the effect of volatility in the equity, capital and credit markets on the Company's profitability and ability to access capital and credit, a decline in the Company's credit ratings; the effect of operational risks; and the loss of key personnel. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this Announcement by or on behalf of the Company speak only as of the date they are made. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

finnCap Ltd is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing. finnCap will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this Announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on finnCap by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, finnCap does not accept any responsibility whatsoever for the contents of this announcement, and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the Placing Shares or the Placing or the Subscription, and nothing in this announcement is or shall be relied upon as, a promise or representation in this respect whether as to the past or future. finnCap accordingly disclaims to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

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 finnCap or by any of its affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.

No statement in this Announcement is intended to be a profit forecast or estimate, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

The price of Ordinary Shares and any income expected from them may go down as well as up and investors may not get back the full amount invested on disposal of the Ordinary Shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than AIM. The Subscription Shares to be issued pursuant to the Subscription will not be admitted to trading on any stock exchange other than AIM.

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.

All references to time in this announcement are to London time, unless otherwise stated.

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 Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) 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 Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing 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 Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, finnCap will only procure investors who meet the criteria of professional clients and eligible counterparties.

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 Placing Shares.

Each distributor is responsible for undertaking its own target market assessment in respect of the New Ordinary Shares and determining appropriate distribution channels.

Expected timetable of principal events

Announcement of the proposed Fundraising and the Scheme 7.00 a.m. on 26 June 2020

Publication of this document 26 June 2020

Publication of the Scheme Circular 26 June 2020

Latest Date for receipt of Proxy Votes 11.00 a.m. on 9 July 2020

General Meeting 11.00 a.m. on 13 July 2020

Scheme opens 12.00 p.m. on 13 July 2020

Admission of New Ordinary Shares 8.00 a.m. on 14 July 2020

Latest Date for receipt of Claim Forms 5.00 p.m. on 30 October 2020

Notes:

The dates set out in the Expected Timetable of Principal Events above and mentioned throughout this document may be adjusted by the Company and finnCap, in which event details of the new dates will be notified through a Regulatory Information Service.

Statistics RELATING TO THE FuNdraisiNG AND SCHEME

Number of Existing Ordinary Shares in issue at the date of this document1 148,488,286

Number of New Ordinary Shares to be issued pursuant to the Fundraising 5,250,000

Issue Price for each New Ordinary Share 110 pence

New Ordinary Shares as a percentage of Existing Ordinary Shares 3.54%

New Ordinary Shares as a percentage of Enlarged Share Capital2 3.28%

Enlarged Share Capital following completion of the Proposals2 160,138,286

Notes:(1) Being the 149,310,713 Ordinary Shares in issue and excluding the 822,427 Ordinary Shares held in treasury.

(2) Assuming no further issue of Ordinary Shares prior to Admission and assuming the maximum number of Ordinary Shares that may be allotted pursuant to the Fundraising and the Scheme is 11,650,000.

Proposed Restitution Scheme, Proposed Placing and Subscription of 5,250,000 New Ordinary Shares at 110 pence per Ordinary Share and Notice of General Meeting

1. Introduction

The Board of Redcentric announces that the Company has agreed a settlement with the FCA in connection with its investigation into the Company (the "Settlement") in relation to certain historical accounting misstatements. The FCA investigation commenced on 17 March 2017 and related, amongst other things, to the 2015 Interim Results published by the Company on 9 November 2015. Under the terms of the Settlement, the Company has agreed with the FCA to implement a restitution scheme to compensate those who suffered loss (the "Scheme") as a result of the accounting misstatements contained in announcements issued by the Company in the period from 9 November 2015 to 4 November 2016 and, as such, the FCA will not impose a fine on the Company. The Company has committed to pay up to approximately £11.4 million pursuant to the Scheme (including costs) by way of a combination of cash and share consideration. In order to allow valid claimants under the Scheme the flexibility to receive the amounts due to them either in cash or Ordinary Shares or a mixture of both, the Company is conducting the Placing and the Subscription with certain institutional and other investors. Although the Company has existing shareholder authorities in place, which were granted by Shareholders at its last annual general meeting and would permit the Directors to issue Ordinary Shares for cash on a non-pre-emptive basis, the Board considers that it is appropriate (given the unusual nature of the Scheme) to seek specific shareholder approval for the issue of Ordinary Shares pursuant to the Proposals. This will be sought at the General Meeting of the Company to be held on Monday 13 July 2020.

In addition, the Company has entered into a Settlement Deed with Harwood Capital whereby funds managed by it have agreed to waive all their claims against the Company in exchange for the issue of 308,000 Ordinary Shares in the same manner as if they had participated in the Scheme. Further details of the Settlement Deed are set out in paragraph 12 below.

2. Background to and reasons for the Proposals

On 17 March 2017, the FCA notified the Company that it was conducting an investigation in connection with the Company's publication of accounting information and other announcements concerning its financial information. The investigation involved allegations that the Company may have committed certain offences. The Company has cooperated fully with the FCA throughout its investigation but the investigation has led to the Group incurring significant additional costs and has diverted substantial management time away from the running of the Group's business.

The Company has now reached a settlement with the FCA which is set out in the Final Notice published by the FCA earlier today. This settlement involves the Company agreeing to implement the Scheme, details of which are set out in this document. The Company will publish full details of the Scheme in the Scheme Circular which will shortly be published on the Company's website.

Under the Scheme, Potential Claimants who were Net Purchasers of Ordinary Shares during the relevant period, from 9 November 2015 (the date on which the 2015 Interim Results were published) to 4 November 2016 (the last dealing day before the Company's release of an announcement issuing a corrective statement) (the "Relevant Period") have a Basic Entitlement to claim 0.13 of an Ordinary Share and 2.66 pence in cash for each net Ordinary Share purchased during that period. Potential Claimants will be entitled to vary what they receive under the Scheme so that instead of the Basic Entitlement, they can receive any of the following: (a) 100 per cent. in Ordinary Shares; (b) 100 per cent. in cash; or (c) 50 per cent. in Ordinary Shares and 50 per cent. in cash. The value of entitlements under the Scheme has been calculated using a value for an Ordinary Share equal to the Issue Price. On the basis of the Issue Price of 110 pence per New Ordinary Share, the value of the Basic Entitlement is approximately 17 pence for each net Ordinary Share purchased during the Relevant Period. Further details of the bases of valuation are set out in Part 2 of this document.

The Company is committing £2.2 million from its existing cash resources to fund part of the potential cash element of the Scheme. In order to fund the maximum potential cash cost of the Scheme, the Company has placed, through finnCap, the Placing Shares with institutional and other investors and agreed the Subscription for the Subscription Shares with Coltrane.

The Directors set out in paragraph 5 below why they think that the Proposals are in the best interests of Shareholders as a whole and benefit valid claimants under the Scheme.

3. Principal terms of the Scheme

The principal terms of the Scheme are set out below and further details are set out in the Scheme Circular, which will be published later today and will be available on the Company's website.

Potential Claimants

It is proposed that the Scheme will cover all impacted shareholders (both retail and institutional, existing and former, subject to certain exceptions) who were Net Purchasers ("Potential Claimants") during the Relevant Period. The Company believes that the aggregate net purchases of Ordinary Shares ("Net Relevant Share Purchases") amounts to approximately 62.5 million Ordinary Shares.

Basic Entitlement of Claimants

Each Potential Claimant will have a basic entitlement to receive 2.66 pence in cash and 0.13 of an Ordinary Share for each net Ordinary Share purchased over the Relevant Period (the "Basic Entitlement"). At the Issue Price, 0.13 of an Ordinary Share has a value of 14.3 pence and so the Basic Entitlement has an aggregate initial value of approximately 17 pence for each Net Relevant Share Purchase covered by the Scheme. Potential Claimants will not be entitled to receive any fractions of Ordinary Shares or fractions of a penny and any such fractions will be disregarded. Part 2 of this document sets out the basis of valuation of entitlements under the Scheme.

Mix and Match Facility

The Company will implement a "Mix and Match" facility as part of the Scheme which shall offer Potential Claimants to elect (instead of the Basic Entitlement) to receive either (i) a full cash payment, (ii) a full share payment, or (iii) an equal split of cash and shares. The ability to offer the "full cash payment" and the Mix and Match Facility will be underpinned by the Fundraising and the ability to offer the "full share payment" and the "split payment" will be subject to the Share Cap.

Share Cap

In order to avoid the possibility of the Company having to issue a prospectus, the number of Ordinary Shares which can be allotted to satisfy valid elections under the Scheme is limited to 6,400,000 Ordinary Shares. On the basis that the Company believes that there are approximately 60,500,000 Net Relevant Share Purchases (excluding the 2,000,000 Net Relevant Share Purchases which are the subject of the Settlement Deed) which are covered by the Scheme, the Company believes that it is extremely unlikely that the Share Cap will be reached. However, if the Share Cap is reached any further Restitution Payments will be settled in cash only.

Waiver of Claims

Each Potential Claimant who receives a Restitution Payment will be required to waive any and all claims they may have against the Company including in relation to (i) any matters arising out of or in any way connected with the matters referred to in the Final Notice including, in particular, the accounting misstatements contained in the 2015 Interim Results and all subsequent announcements relating to the financial position of the Company up to 4 November 2016 or (ii) any matters in any way connected to the administration of the Scheme.

Scheme Timeframe

Assuming the Resolutions are passed, the Administrator of the Scheme will start processing claims from the passing of the Resolutions until the closure of the Scheme at 5.00 p.m. on 30 October 2020 during which time Potential Claimants will be able to submit their elections. Assuming the Resolutions are passed at the General Meeting, the Company will make payments under the Scheme and apply for admission to trading on AIM of any Ordinary Shares issued to satisfy valid claims under the Scheme as and when the claims are completed by the Scheme administrator.

Value of the Scheme

Based on the Issue Price, the Scheme (assuming 100 per cent. take up in cash) is expected to have an aggregate value of approximately £11.4 million (inclusive of costs of approximately £0.5 million and a contingency of £0.3 million) which will be funded by the issue of the New Ordinary Shares at the Issue Price, the issue of Ordinary Shares under the Scheme and £2.2 million of cash from the Group's existing cash resources.

The Company has included a contingency of £0.3 million as it has not been possible to establish yet whether there are any Net Purchasers in the underlying clients' holdings shown on the share register as held in the names of nominee companies related to various retail client intermediary platforms. As such, the contingency is in place to cover any claims from additional Net Purchasers deriving from those intermediary platform holdings. The Company believes that this contingency should be adequate to cover this eventuality but, if not, the Company will have to settle valid claims under the Scheme which may exceed this contingency.

Administration of the Scheme

The Company has appointed Deloitte LLP to administer the Scheme to verify claims from Potential Claimants and to notify the Company that it should arrange payments to valid claims from Potential Claimants.

4. The Fundraising

Pursuant to the Placing Agreement, finnCap has agreed to use its reasonable endeavours to procure Placees for 3,910,000 Placing Shares at the Issue Price. In addition, Coltrane has agreed to subscribe for 1,340,000 Subscription Shares at the Issue Price. The Fundraising will raise aggregate gross proceeds of £5.775 million for the Company.

The Fundraising is conditional, inter alia, on the following:

(i) the Resolutions being passed (without amendment) at the General Meeting;

(ii) the Company not suffering an insolvency event prior to Admission (which would allow termination of the Placing Agreement by finnCap) and the Placing Agreement becoming unconditional in all respects; and

(iii) Admission of the Placing having become effective on or before 8.00 a.m. on 14 July 2020 (or such later date and/or time as the Company and finnCap may agree, being no later than 8.00 a.m. on 31 July 2020).

Application will be made for the New Ordinary Shares to be admitted to trading on AIM, subject to the passing of the Resolutions at the General Meeting. It is expected that Admission will become effective on or around 14 July 2020 and that dealings for normal settlement in the New Ordinary Shares will commence at 8.00 a.m. on that date. The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with the Ordinary Shares in issue at that time, including the right to receive all dividends and other distributions declared, made or paid after the date of Admission.

Coltrane, ND Capital Investments ("ND Capital") and Richard Griffiths, (together the "Substantial Shareholders") are individually substantial shareholders in the Company holding 10 per cent. or more of the Existing Ordinary Shares and consequently are considered to be a related party pursuant to Rule 13 of the AIM Rules.

Coltrane are subscribing for 1,340,000 Subscription Shares by way of a direct subscription with the Company at the Issue Price representing approximately 25.5 per cent. of the Fundraising. ND Capitial are subscribing for 1,300,000 Placing Shares in the Placing at the Issue Price representing approximately 24.8 per cent. of the Fundraising. Richard Griffiths is subscribing for 1,000,000 Placing Shares in the Placing at the Issue Price representing approximately 19.0 per cent. of the Fundraising

The subscriptions by each of the Substantial Shareholders are related party transactions for the purposes of the AIM Rules. The Directors consider, having consulted with the Company's nominated adviser, finnCap, that the terms upon which the Substantial Shareholders are participating in the Placing and the Subscription in the case of Coltrane are fair and reasonable insofar as the Company's shareholders are concerned.

5. Benefits of the Proposals

The Directors believe that the FCA investigation has had a negative impact on the Group's business, leading to the Group incurring significant additional costs and diverting substantial management time away from the running of the Group's business. If the Settlement had not been agreed with the FCA, the Company would be subject to continued uncertainty and the potential threat of proceedings brought by the FCA. The Directors consider that this would have had a material and adverse impact on the Group's business through continuing additional costs, diversion of management time and a significant effect on the ability to retain and/or obtain additional contracts (particularly with public sector organisations).

As a result, the Directors believe that the Proposals are in the best interests of the Company and its Shareholders as a whole and should afford the following benefits:

· conclude the FCA investigation which has been ongoing for the past three years and remove the threat of potential proceedings being brought against the Company;

· provide compensation to impacted shareholders and reduce the risk of litigation being brought by impacted shareholders as valid claimants under the Scheme will be required to sign a waiver of all claims against the Company and its affiliates;

· remove the distraction of management time and allow the Group to focus on the future and growing its business;

· remove the uncertainty created by the FCA investigation with potential customers (especially public sector organisations); and

· give the Company the ability to engage with entities within the regulated sector which has been restricted during the FCA investigation.

In addition, the Proposals give valid claimants under the Scheme: (a) the flexibility to receive any Restitution Payment in cash or Ordinary Shares or a mixture of both; and (b) (if the valid claimant elects to receive some or all of the entitlement in Ordinary Shares) the chance to participate in any future growth in the Company's share price.

6. Notice of General Meeting

The issue of the New Ordinary Shares is conditional upon, inter alia, the approval by the Shareholders of the Resolutions. A notice convening the General Meeting to be held at 11.00 a.m. on Monday 13 July 2020 at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place, 78 Cannon Street, London, EC4N 6AF is, for the purpose of considering and, if thought fit, passing the Resolutions, is set out at the end of this document.

Resolution 1 - Authority to allot shares

Resolution 1 is an ordinary resolution to authorise the Directors under section 551 of the Act to issue and allot the New Ordinary Shares. The Act requires that the authority of Directors to allot shares and to make offers or agreements to allot shares in the Company or grant rights to subscribe for or convert any security into shares (the "relevant securities") should be subject to the approval of Shareholders in a general meeting or to an authority set out in the Company's articles of association. Accordingly, Resolution 1 will be proposed to authorise the Directors to allot relevant securities in respect of the issue of the New Ordinary Shares and any Ordinary Shares to be issued pursuant to the Scheme. This authority is in addition to all existing authorities under section 551 of the Act and will expire at the conclusion of the Company's next annual general meeting or 15 months after the passing of the Resolution, whichever is the earlier.

Resolution 2 - Disapplication of statutory pre-emption rights

Resolution 2 is a special resolution to disapply the statutory pre-emption rights under section 570 of the Act in respect of "equity securities" (as defined in section 560 of the Act). The Act requires that any equity securities issued wholly for cash must be offered to existing Shareholders in proportion to their existing shareholdings unless otherwise approved by Shareholders in a general meeting or accepted under the Company's articles of association. A special resolution will be proposed at the General Meeting to give the Directors authority to allot equity securities for cash other than on a pro rata basis pursuant to the issue of the New Ordinary Shares and any Ordinary Shares to be issued pursuant to the Scheme. This authority is in addition to all existing authorities under section 570 of the Act and will expire on the conclusion of the Company's next Annual General Meeting or 15 months after the passing of the Resolution, whichever is the earlier.

7. Arrangements for the General Meeting

The Board strongly urges Shareholders to comply with Government public health instructions in respect of the COVID-19 pandemic and social contact, public gatherings and non-essential travel. Please note that the Company currently intends to refuse entry to Shareholders who do attempt to attend the General Meeting in order to comply with those public health instructions. The health of the Shareholders, as well as its officers and employees, is of paramount importance. It is expected that the Company's attendance in person at the General Meeting will be limited to satisfy the requirements of a quorum. The General Meeting will end immediately following the formal business required and there will be no corporate presentations, Q&A or refreshments. Social distancing measures will be in place and strict hygiene arrangements in force. Shareholders are therefore requested to participate in the General Meeting by proxy rather than attend the General Meeting in person.

The results of the General Meeting will be available on the Company's website shortly after the General Meeting has closed. The Board continues to follow advice issued by the Government with respect to the COVID-19 pandemic and will issue further guidance if necessary.

In light of this request to not attend the General Meeting, the Board shall accept any questions relating to the business being dealt with at the General Meeting to be submitted by Shareholders in advance to the Company and the Company shall publish the question and the response on the Company website in advance of the General Meeting. Any such questions should be sent to the following email address investorrelations@redcentricplc.com so as to be received by no later than 11.00 a.m. on Thursday 9 July 2020.

8. Action to be taken

We are not sending out a form of proxy and Shareholders are encouraged to vote online by logging on to www.signalshares.com and following the instructions provided. The proxy appointment and instructions must be received electronically by the Company's Registrar, Link Asset Services, at 34 Beckenham Road, Beckenham, Kent BR3 4ZF as soon as possible and, in any event, so as to arrive no later than 11.00 a.m. on Thursday 9 July 2020.

If you hold your Existing Ordinary Shares in uncertificated form in CREST, you may vote using the CREST Proxy Voting service in accordance with the procedures set out in the CREST Manual. Further details are also set out in the notes accompanying the notice of General Meeting at the end of this document. Proxies submitted via CREST must be received by Link Asset Services (ID RA10) by no later than 11.00 a.m. on Thursday 9 July 2020 (or, if the General Meeting is adjourned, 48 hours (excluding any part of a day that is not a working day) before the time fixed for the adjourned meeting).

In order for the Proposals to proceed, Shareholders will need to approve the Resolutions set out in the Notice of General Meeting.

9. Irrevocable undertakings to vote in favour of the Resolutions

As at the date of this document, the Company has received irrevocable undertakings to vote in favour of the Resolutions from Shareholders (excluding Directors) accounting for 110,494,021 Existing Ordinary Shares representing 74.41 per cent. of the Existing Ordinary Shares in issue at 25 June 2020 (being the latest practicable date prior to the publication of this document)

In addition, the Directors have irrevocably undertaken to vote in favour of all of the Resolutions in respect of their direct holdings, amounting, in aggregate, to 135,249 Existing Ordinary Shares, representing approximately 0.09 per cent. of the Existing Ordinary Shares in issue as at 25 June 2020 (being the latest practicable date prior to the publication of this document).

Accordingly, the Company has received irrevocable undertakings to vote (or procure the vote) in favour of the Resolutions at the General Meeting in respect of an aggregate of 110,629,270 Existing Ordinary Shares, representing approximately 74.50 per cent. of the Existing Ordinary Shares in issue as at 25 June 2020 (being the latest practicable date prior to the publication of this document).

10. Settlement Deed

The Company has also entered into a Settlement Deed with Harwood Capital whereby funds managed by it have agreed to waive all their claims against the Company in exchange for the issue of 308,000 Ordinary Shares, in the same manner as if they participated in the Scheme and elected to receive their entitlement wholly in Ordinary Shares. The Ordinary Shares issued pursuant to the Settlement Deed will be issued out of existing authorities that the Company obtained at its last annual general meeting but the Settlement Deed is conditional on the Resolutions being passed at the General Meeting.

the Settlement Deed relates to 2,000,000 Net Relevant Share Purchases, which the Company believes is approximately 3.2 per cent. of the aggregate number of Net Relevant Share Purchases.

11. Recommendation

The Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole.

Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. The Directors have irrevocably undertaken to vote, or to direct that votes are cast, in favour of the Resolutions in respect of 135,249 Existing Ordinary Shares, in aggregate, representing approximately 0.09 per cent. of the Existing Ordinary Shares in issue as at 25 June 2020 (being the latest practicable date prior to the publication of this document).

Yours faithfully,

Ian JohnsonChairman

PART 2

SOURCES AND BASES OF VALUATION

The valuation of entitlements under the Scheme has been made on the basis that Ordinary Shares are valued at the Issue Price under the Fundraising which gives the following values:

Basic Entitlement

The basic entitlement of 0.13 of an Ordinary Share is valued at 14.3 pence which, together with the 2.66 pence in cash, gives an aggregate value of approximately 17 pence per Net Relevant Share Purchase.

Cash Payment

An election for a full cash payment under the Mix and Match Facility will give rise to a cash only payment of approximately 17 pence per Net Relevant Share Purchase.

Share Payment

An election for the full share payment under the Mix and Match Facility will give rise to a share only payment comprising 0.154 of an Ordinary Share, with a value at the Issue Price of approximately 17 pence per Net Relevant Share Purchase.

Split Payment

An election for a split payment comprising payment by way of 50 per cent. in cash and 50 per cent. by way of issue of Ordinary Shares under the Mix and Match Facility will give rise to a payment comprising 0.077 of an Ordinary Share (valued at the Issue Price at 8.48 pence) together with 8.48 pence in cash, giving an aggregate value of approximately 17 pence per Net Relevant Share Purchase.

DEFINITIONS

The following definitions apply throughout this document, unless the context requires otherwise:

"2015 Interim Results" means the unaudited interim results of the Company for the six months ended 30 September 2015 published on 9 November 2015

"Act" means the Companies Act 2006

"Admission" means admission of the New Ordinary Shares to trading on AIM becoming effective in accordance with the AIM Rules

"AIM" means the AIM market operated by the London Stock Exchange

"AIM Rules" means the AIM Rules for Companies, as published by the London Stock Exchange from time to time

"Basic Entitlement" has the meaning set out in paragraph 3 of Part 1 of this document

"Board" means the board of Directors of the Company

"certificated" or "certificated form" means not in uncertificated form

"Coltrane" means Coltrane Asset Management

"Company" or "Redcentric" means Redcentric plc

"CREST" means the relevant system for the paperless settlement of trades and the holding of uncertificated securities operated by Euroclear UK & Ireland Limited in accordance with the Regulations

"CREST member" means a person who has been admitted by Euroclear UK & Ireland as a system-member (as defined in the Regulations)

"CREST participant" means a person who is, in relation to CREST, a system-participant (as defined in the Regulations)

"CREST sponsor" means a CREST participant admitted to CREST as a CREST sponsor

"CREST sponsored member" means a CREST member admitted to CREST as a sponsored member (which includes all CREST Personal Members)

"Directors" means the directors of the Company at the date of this document whose names are set out on page 7 of this document

"Enlarged Share Capital" means the issued share capital of the Company following completion of the Proposals, as enlarged by the New Ordinary Shares and the Ordinary Shares issued under the Scheme

"Euroclear UK & Ireland" means Euroclear UK & Ireland Limited, the operator of CREST

"Existing Ordinary Shares" means the 148,488,286 Ordinary Shares in issue at the date of this document excluding the 822,427 Ordinary Shares held in treasury

"FCA" means the Financial Conduct Authority

"FCA Rules" means the handbook of rules and guidance published by the FCA, as amended from time to time

"Final Notice" means the final notice issued by the FCA to the Company on 26 June 2020 given under, and in accordance, with section 390 of FSMA

"finnCap" means finnCap Ltd, the Company's nominated adviser, broker and sole bookrunner

"FSMA" means the Financial Services and Markets Act 2000

"Fundraising" means the Placing and the Subscription together

"General Meeting" means the general meeting of the Company convened for 11.00 a.m. on Monday 13 July 2020, notice of which is set out at the end of this document

"Group" means the Company and its subsidiary undertakings

"Issue Price" means 110 pence per New Ordinary Share

"London Stock Exchange" means London Stock Exchange plc

"Mix and Match Facility" means the election by Potential Claimants to receive Restitution Payments in a proportion different to the Basic Entitlement either by way of a payment of cash and/or issue of Ordinary Shares or both

"Net Purchasers" means, subject to certain exceptions, those Shareholders who made a positive number of Net Relevant Share Purchases

"Net Relevant Share Purchase(s)" means the number of Ordinary Shares that were purchased by a Potential Claimant in the Relevant Period less the number of Ordinary Shares sold by a Potential Claimant in the Relevant Period

"New Ordinary Shares" means the Placing Shares and the Subscription Shares together

"Ordinary Shares" means ordinary shares of 0.1 pence each in the capital of the Company

"Placee" means any person who has agreed to subscribe for Placing Shares pursuant to the Placing

"Placing" means the conditional placing by finnCap as agent on the Company's behalf of the Placing Shares at the Issue Price pursuant

to the Placing Agreement

"Placing Agreement" means the agreement dated 26 June 2020 between the Company and finnCap relating to the Placing

"Placing Shares" means 3,910,000 new Ordinary Shares which have been conditionally placed with institutional and certain other investors pursuant to the terms of the Placing

"Potential Claimants" has the meaning set out in paragraph 3 of Part 1 of this document

"Proposals" means, together, the Placing, the Subscription, Admission and the Scheme, as detailed in this document and the Scheme Circular

"Prospectus Regulation" means Regulation (EU) 2017/1129

"Prospectus Regulation Rules" means the prospectus regulation rules made by the FCA under Part VI of FSMA

"Registrars" means Link Asset Services of The Registry, Beckenham Road, Beckenham, Kent, BR3 4TU

"Regulations" means the Uncertificated Securities Regulations 2001

"Regulatory Information Service" means any of the services for the dissemination of information by quoted issuers on the list of Regulatory Information Services maintained by the FCA

"Relevant Period" means the period from 9 November 2015 (the date of the announcement of the 2015 Interim Results by the Company) to 4 November 2016 (the last dealing day before the announcement by the Company of accounting misstatements) inclusive

"Resolutions" means the resolutions set out in the notice of General Meeting at the end of this document

"Restitution Payments" means any payment satisfied by the payment of cash and/or issue of Ordinary Shares to Potential Claimants in respect of valid claims under the proposed Scheme

"Scheme" has the meaning set out in paragraph 1 of Part 1 of this document

"Scheme Circular" means the circular setting out the terms of the Scheme to be published on or around the date of this document by the Company

"Settlement" has the meaning set out in paragraph 1 of Part 1 of this document

"Settlement Deed" means the deed of settlement dated 26 June 2020 between the Company and Harwood Capital settling all claims against the Company in the same manner and on the same restitution basis as if they had participated in the Scheme

"Share Cap" means the limit of 6,400,000 Ordinary Shares which can be allotted under the Scheme as described in paragraph 3 of Part 1 of this document

"Shareholders" means holders of Ordinary Shares from time to time

"Subscription" means the subscription for 1,340,000 Subscription Shares by Coltrane

"Subscription Shares" means the 1,340,000 new Ordinary Shares being subscribed by Coltrane pursuant to the Subscription

"uncertificated" or means recorded on the relevant register or other record of the share

"uncertificated form" or other security concerned as being held in uncertificated form in CREST, and title to which, by virtue of the Regulations, may be transferred by means of CREST

"United Kingdom" or "UK" means the United Kingdom of Great Britain and Northern Ireland

"United States" or "US" means the United States of America, its territories and possessions and any state of the United States and the District of Columbia