Van Elle Regulatory News (VANL)

5 December 2017

Van Elle Holdings plc

("Van Elle" or the "Group")

BOARD RESPONSE TO THE ELLIS STATEMENT

1. Introduction

On 27 November 2017, your Board received notice that, pursuant to section 314 of the Companies Act 2006, Mr Michael Ellis (holding greater than 5% of the total voting rights in the Company) wished to exercise his right to request the Company to issue to Shareholders, on his behalf, a statement with regard to the Ellis Resolutions (the "Ellis Statement"). In fulfilment of the Company's obligations under the Companies Act 2006, the Ellis Statement was set out in a circular sent to Shareholders on 29 November 2017.

2. The Board response to the Ellis Statement

In the circular dated 29 November 2017, the Board stated that it did not consider that any points raised in the Ellis Statement called into question the views it had previously expressed in the circular sent to Shareholders on 22 November 2017, within which the Board unanimously and strongly recommended that Shareholders VOTE AGAINST the Ellis Resolutions.

The Board's position remains unchanged and it now makes the following comments in response to the Ellis Statement:

Increased risk that Mr Ellis exerts significant influence over the conduct of the Board

In the Board's opinion, the Ellis Statement reinforces its previous concerns that the Ellis Resolutions serve to promote the interests of Mr Ellis and his family (the "Ellis Family"), not necessarily to the benefit of the Company and its other Shareholders, and that it is his intention that the Ellis Family exert significant influence over the conduct of the Board in the future.

The Ellis Statement, while vague as to the exact roles Mr Ellis and his son-in-law, Thomas Lindup, would have on the Board, makes it clear they would hold executive positions within a reduced Board containing only two independent non-executive directors. In addition, the Board notes with concern that Mr Ellis has already secured indications from three additional unnamed non-executive directors to join the Board, presumably once he has secured his own election through the Ellis Resolutions. This board of eight directors, envisaged by Mr Ellis, would include himself, his son-in-law and the three unnamed non-executive directors selected by Mr Ellis without an independent Board selection process. The Board believes this board composition could allow the Ellis Family to exert significant influence over the conduct of the Board in the future.

In the Board's view, this again demonstrates that Mr Ellis has failed to accept that Van Elle is no longer a private family business in which he has majority control.

Van Elle is growing and its prospects remain good

In the Ellis Statement, Mr Ellis expresses his view that the Group is going backwards.

The Board does not accept this view.

As previously stated in the circular dated 22 November 2017, Van Elle reported record revenue and underlying* operating profit for the year ended 30 April 2017, with growth reported across all four divisions. This growth in the Group's trading performance has continued with the Board anticipating it will report revenues of approximately £53 million (H1 2016: £43.1 million) and underlying* profit before tax increasing by approximately 15% for the six months ended 31 October 2017.

Mr Ellis also seeks to cast doubts on the ability of the Company to forecast its future trading performance. The Board does not understand Mr Ellis' concerns in this regard as its internal financial reporting procedures and budgeting process have been in place since the date of Admission, when Mr Ellis was chairman of the Company.

On 22 November 2017, Van Elle published its half-year trading update which included the following statement regarding the Board's expectations for the current financial year:

"The Group has a seasonal weighting towards a stronger second half and the Board expects this will be the case again in the current year. As the Group enters H2, enquiry levels are encouraging and the current order book as at November remains strong. The Board continues to monitor market conditions closely and whilst mindful that the Group is subject to clients' decisions regarding contract call-off timing, its expectations for the full year remain unchanged."

* Stated before share-based payments and exceptional costs.

Staff morale at Van Elle is good

Mr Ellis has sought to portray staff morale at Van Elle as being low due to management's failure to recognise the importance of its staff and to treat them accordingly.

The Board refutes this representation completely.

The Company actively engages with staff across the Group and this continued successful focus on staff engagement and well-being was formally recognised in May this year when Van Elle was upgraded to a Silver "Investors in People" accreditation. This award represents an improvement on the Group's previous Standard accreditation achieved in 2013.

While inevitably staff will leave the Group from time to time, the level of voluntary staff leavers at Van Elle improved from 13% in calendar year 2016 to 10% in the current calendar year and stands testament to the inaccuracy of Mr Ellis' representation.

In the Ellis Statement, Mr Ellis states that "VNL had the best employees in the sector". The Board strongly disagrees with Mr Ellis, believing instead that Van Elle continues to have the best employees, and considers it damaging to the Company and disrespectful to its workforce for him to suggest otherwise. Your Board continues to view the actions of Mr Ellis as causing unnecessary and unhelpful ongoing disturbance within the Group's senior management and the wider workforce.

Mr Ellis' actions could adversely impact the proper succession process for Chief Executive Officer

As reported on 22 November 2017, the Board has initiated a formal process to identify the best possible successor to Mr Jon Fenton as Chief Executive Officer.

The Board remains focussed on ensuring that this succession process is conducted in the best interests of all stakeholders, without impacting the Group's business. The Board is concerned that the uncertainty caused by the Ellis Resolutions and the intended board composition envisaged by Mr Ellis, including himself, his son-in-law and the three unnamed non-executive directors selected by Mr Ellis, will deter potential candidates from coming forward and risks de-stabilising the Group.

Delivering the Group's acquisition strategy

The Ellis Statement highlights that the Company has not yet undertaken an acquisition and that Mr Ellis seemingly remains anxious we spend the net proceeds raised at the time of Admission.

The Board re-iterates again its intention to make selective acquisitions to complement its organic growth plans and has investigated a number of potential targets. However, your Board remains disciplined in its approach and focused on ensuring it makes the right acquisitions at the right value and at the right time. 

3. Board recommendation

The Board unanimously recommends that Shareholders VOTE AGAINST all of the Ellis Resolutions to be proposed at the General Meeting for the following reasons:

· the Company's strategy remains unchanged with the Board working to deliver this strategy;

· the Company delivered profit growth in FY2017 and the Board's expectations for FY2018 are

unchanged;

· the Board is actively engaged in an independent process to identify a new Chief Executive Officer;

· the Ellis Resolutions would significantly weaken the independence of the Board and the overall level of corporate governance within the Company; and

· IF NOT VOTED DOWN, once on the Board, it would appear Mr Ellis intends to appoint additional non-executive directors selected by himself which could allow him and his family to exert significant influence over the conduct of the Board in the future.

It is very clear to the Board that Mr Ellis still fails to accept that Van Elle is no longer his private family business.

ACCORDINGLY, THE BOARD UNANIMOUSLY AND STRONGLY RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE ELLIS RESOLUTIONS.

Enquiries:

Market Abuse Regulation

The information contained within this announcement is deemed by Van Elle to constitute inside information as stipulated under the Market Abuse Regulation. Upon the publication of this announcement via a regulatory information service, this inside information is now considered to be in the public domain.