THIS ANNOUNCEMENT IS NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE PUBLICATION, DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN MCCOLL'S RETAIL GROUP PLC OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF MCCOLL'S RETAIL GROUP PLC.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

12 August 2021

McColl's Retail Group plc

("McColl's", the "Company", or the "Group")

Proposed Firm Placing and Open Offer to raise up to £35 million
at a price of 20 pence per New Ordinary Share

Background

McColl's, the leading neighbourhood retailer, with an estate of over 1,200 managed convenience stores and newsagents, today announces, further to the separate announcement of its H1 2021 interim results today, its intention to conduct a capital raising to accelerate the Company's growth strategy (the "Capital Raising").

The Capital Raising will comprise:

i.             a non-pre-emptive firm placing of 150,000,000 new ordinary shares of £0.001 each in the capital of the Company (the "New Ordinary Shares") at the Offer Price (as defined below) per New Ordinary Share to raise up to £30 million (the "Firm Placing"); and

ii.           a pre-emptive open offer of up to 25,000,000 New Ordinary Shares at the Offer Price to certain holders of existing ordinary shares of the Company who are registered on the Company's register of members as at 6.00 p.m. on 10 August 2021 (the "Record Date") at the Offer Price to raise up to £5 million (the "Open Offer").

The Board believes the Capital Raising is in the best interest of the Company and Shareholders as a whole and intends to use the net proceeds of the Capital Raising to:

1.             Increase the number, and accelerate the pace of rollout, of Morrisons Daily stores, from 56 to 350 by the end of the financial year ending November 2022 (an increase of 50 stores against the Group's previous target of 300 stores by the end of December 2023);

2.             Improve the grocery infrastructure in the Morrisons Daily sites, thus enhancing the standard of the refit and expanding the chilled offer with more refrigeration, adding further profit potential;

3.            Further invest in the store estate, including the potential to extend the rollout of Morrisons Daily beyond 350 stores; and

4.              To reduce the Group's financial leverage.

Further details as to the background to, and reasons for, the Capital Raising are set out in Appendix III of this Announcement, together with further details on the intended use of net proceeds.

Jonathan Miller, Chief Executive of McColl's, said:

"Today's Capital Raising represents a transformational opportunity to accelerate our strategy and capitalise on the growth opportunity available to us in food-led convenience."

"We are delighted with the progress we have made so far with the roll-out of Morrisons Daily conversions within our store estate. We have a supermarket-quality offer and now also a proven blueprint that offers a strong return on investment, delivering double-digit sales uplifts and fast payback."

"The proceeds of the Capital Raising will enable us to build on this foundation by accelerating the pace of the roll-out of our Morrisons Daily conversions to deliver 50 additional conversions on top of the original 300 planned, and to complete the roll-out a year earlier than current plans. The Capital Raising will also enable us to further improve the grocery infrastructure of these sites to enhance profit potential, as well as further invest in our wider estate and reduce leverage."

"Morrisons' core grocery proposition, with its brand, quality and product range, is perfectly complemented by McColl's' neighbourhood store locations, strengths in core impulse sales categories, and expertise in running services such as Post Offices."

"Convenience is a growing market and the Covid-19 pandemic has served to expedite structural customer trends that play to our competitive strengths and that we believe are here to stay, including more frequent top-up shops alongside a focus on fresh food and groceries at great value."

"We have a clear plan for growth and the Capital Raising will enable us to drive long-term sustainable growth to drive shareholder returns."

Details of the Capital Raising

The Firm Placing will be conducted through an accelerated bookbuild (the "Bookbuild") which will be launched immediately following this announcement. The Firm Placing is subject to the terms and conditions set out in Appendix IV of this announcement (which forms part of this announcement, such announcement and its Appendices together being this "Announcement").

The timing of when the Bookbuild will close and allocations will be at the discretion of the Joint Bookrunners in consultation with the Company. Details of the results of the Firm Placing will be announced as soon as practicable after the close of the Bookbuild.

The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares.

The offer period for acceptances by Qualifying Shareholders is expected to commence on Friday 13 August 2021 and is expected to end on Friday 27 August 2021.

The Capital Raising is subject to approval by Shareholders at a General Meeting which is expected to be held at Ground Floor West, One London Road, Brentwood, Essex, England, CM14 4QW at 11.00 a.m. on Wednesday 1 September 2021. The Capital Raising is conditional and dependent upon the Resolutions being passed.

Pursuant to the terms and conditions of the Placing and Sponsor Agreement, the Joint Bookrunners have agreed to underwrite the settlement risk in the event that, following completion of the Bookbuild, any Firm Placees fail to take up their allocation of the New Ordinary Shares under the Firm Placing. The Joint Bookrunners will not underwrite settlement risk in respect of the Open Offer.

Each Director who is a Shareholder, who hold in aggregate 12,090,353 Existing Ordinary Shares, representing in aggregate approximately 10.49 per cent. of the issued share capital of the Company as at the Reference Date, has irrevocably committed to vote in favour of the Resolutions to be proposed at the General Meeting (except for Jonathan Miller and his associates in respect the Fourth Resolution (as defined below) who, because of his status as a related party under the Listing Rules, must abstain from voting on that Resolution). In addition, all of the Directors have irrevocably committed to participate in the Capital Raising via the Firm Placing. Each Director has irrevocably committed to not take up any of their Open Offer Entitlements.

A combined prospectus and circular (the "Prospectus") setting out full details of the Capital Raising is expected to be published on the Company's website on 13 August 2021 following completion of the Bookbuild.

Qualifying Shareholders are being given the opportunity to subscribe for New Ordinary Shares under the Open Offer ("Open Offer Shares") at the Offer Price pro rata to their existing shareholdings. Qualifying Shareholders who take up their Open Offer Entitlements in full may apply to subscribe for Excess Shares using the Excess Application Facility.

The Company's unaudited interim accounts for the twenty six weeks ended 30 May 2021 have also been published today and are available on the Company's website.

Current trading and outlook

Current trading

Total revenue for the twenty six week period ending 30 May 2021 was £572.7 million and like-for-like sales growth for the period was +1.0%, building on top of the exceptional sales performance during the same period last year (H1 2020 LFL +8.3%). The third national lockdown in the UK saw trading patterns revert to those seen previously, with customers favouring lower-margin take home rather than higher-margin impulse products, and a preference for multi-buys and value packs, resulting in a reduction in the gross margin rate of 140 basis points. This margin dilution was partly offset by continued cost discipline and business rates relief leading to an adjusted EBITDA (before IFRS 16) decline of £2.8 million to £10.3 million.

Outlook

Like-for-like sales increased 1.0% in the period, this was achieved against the strong comparative period in Q2 last year as a result of the onset of the pandemic. On a two year view, like-for-like sales were up 7.4% in the first half, highlighting the continued momentum the business has seen, growing on top of last year's exceptional sales.

As social distancing restrictions have eased, the Group has started to see a stabilisation in underlying gross margin trends as customers revert to pre-pandemic buying patterns. This includes more frequent visits with lower basket sizes and increased sales of higher-margin impulse products.

Despite this, the Group has seen revenues impacted by availability issues in stores over recent months due to supply chain disruption. This has been caused by the widely publicised nationwide shortage of delivery drivers due to a combination of external factors. The Group has put in place a number of temporary mitigating actions and continue to work closely with its supply chain partner to resolve these challenges as quickly as possible.

If these challenges to trading do not materially improve in the second half of the financial year, the performance in the full year is likely to fall short of management expectations. Notwithstanding these short-term headwinds, the Group remains optimistic for the future. Management believes that a post pandemic trading environment, coupled with the significant benefits of the acceleration and scaling up of its Morrisons Daily roll out, will allow the Group to significantly exceed its current performance.

The Board considers that the strong demand for the Group's convenience offering, an expected step change in growth and a strong investment case from its Morrisons Daily stores, and the ability to leverage new opportunities such as the demand for local delivery options, is likely to deliver sustainable profitable growth in 2022 and beyond.

This Announcement should be read in its entirety. In particular, you should read and understand the information provided in Appendix II (Important Notices) and Appendix V (Risk Factors), of this Announcement. Appendix IV of this Announcement sets out further information relating to the terms and conditions of the Firm Placing. Unless otherwise stated, capitalised terms in this Announcement have the meanings ascribed to them in the Appendix VI (Definitions) (which forms part of this Announcement).

The notice convening the General Meeting will be included in the Prospectus.

Enquiries

For further information please contact:

Notes to editors

McColl's is a leading neighbourhood retailer, with an estate of over 1,200 managed convenience stores and newsagents. We operate McColl's and Morrisons Daily branded convenience stores as well as newsagents branded Martin's across the UK, except in Scotland where we operate under our heritage brand, RS McColl.

This announcement contains inside information for the purposes of Article 7 of the UK Market Abuse Regulation.

LEI: 213800R1TLR536P8YJ67

The preceding summary should be read in conjunction with the full text of this Announcement and its appendices, together with the Prospectus which will be published in due course.

Appendix I

Expected Timetable of Principal Events

Appendix II

Important Notices

THIS ANNOUNCEMENT (INCLUDING THE APPENDICES) AND THE TERMS AND CONDITIONS SET OUT HEREIN (TOGETHER, THIS "ANNOUNCEMENT") IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM ANY PART OF AN OFFER TO SELL OR ISSUE, OR A SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY SECURITIES IN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA (COLLECTIVELY, THE "UNITED STATES")), AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NO PUBLIC OFFERING OF THE NEW ORDINARY SHARES IS BEING MADE IN ANY SUCH JURISDICTION. ANY FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE SECURITIES LAWS OF SUCH JURISDICTIONS.

This Announcement is not for public release, publication, distribution or forwarding, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada, the Republic of South Africa, Japan or any other jurisdiction in which such release, publication, distribution or forwarding would be unlawful. No public offering of the securities referred to herein is being made in any such jurisdiction or elsewhere.

The securities referred to herein have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States, except pursuant to an exemption from 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. No public offering of the New Ordinary Shares is being made in the United States.

No action has been taken by the Company, the Joint Bookrunners or any of their respective affiliates, or any of its or their respective directors, officers, partners, employees, advisers or agents (collectively, "Representatives") that would, or is intended to, permit an offer of the New Ordinary Shares or possession or distribution of this Announcement or any other publicity material relating to such New Ordinary Shares in any jurisdiction where action for that purpose is required. Persons receiving this Announcement are required to inform themselves about and to observe any restrictions contained in this Announcement. The distribution of this Announcement, and the Capital Raising and/or the offer or sale of the New Ordinary Shares, may be restricted by law in certain jurisdictions. Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this Announcement should seek appropriate advice before taking any action. Persons distributing any part of this Announcement must satisfy themselves that it is lawful to do so.

This Announcement has not been approved by the Financial Conduct Authority or the London Stock Exchange.

Members of the public are not eligible to take part in the Firm Placing. This Announcement is directed at and is only being distributed to persons: (a) if in member states of the European Economic Area, "qualified investors" within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (the "Prospectus Regulation") ("Qualified Investors"); or (b) if in the United Kingdom, Qualified Investors within the meaning of Article 2(e) of the UK version of Regulation (EU) 2017/1129 as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018 (the "UK Prospectus Regulation") who are (i) persons who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), or (ii) persons who fall within Article 49(2)(a) to (d) of the Order; or (c) persons to whom they may otherwise lawfully be communicated (each such person above, a "Relevant Person"). No other person should act or rely on this Announcement and persons distributing this Announcement must satisfy themselves that it is lawful to do so. By accepting the terms of this Announcement, you represent and agree that you are a Relevant Person, if in the United Kingdom, or a Qualified Investor, if in a member state of the EEA. This Announcement must not be acted on or relied on by persons who are not Relevant Persons, if in the United Kingdom, or Qualified Investors, if in a member state of the EEA. Any investment or investment activity to which this Announcement or the Firm Placing relates is available only to Relevant Persons, if in the United Kingdom, and Qualified Investors, if in a member state of the EEA, and will be engaged in only with Relevant Persons, if in the United Kingdom, and Qualified Investors, if in a member state of the EEA.

The information in this Announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction or disclosure of this Announcement, in whole or in part, is unauthorised. Failure to comply with this directive may result in a violation of the Securities Act or the applicable laws of other jurisdictions.

This Announcement does not constitute a recommendation concerning any investor's options with respect to the Capital Raising. Recipients of this Announcement should conduct their own investigation, evaluation and analysis of the business, data and other information described in this Announcement. 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 New Ordinary Shares. The price and value of securities can go down as well as up and investors may not get back the full amount invested upon the disposal of the shares. Past performance is not a guide to future performance. The contents of this Announcement are not to be construed as legal, business, financial or tax advice. Each investor or prospective investor should consult with his or her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, business, financial or tax advice.

Any indication in this Announcement of the price at which the Company's shares have been bought or sold in the past cannot be relied upon as a guide to future performance. Persons needing advice should consult an independent financial adviser. No statement in this Announcement is intended to be a profit forecast or profit estimate for any period and no statement in this Announcement should be interpreted to mean that earnings, earnings per share or income, cash flow from operations or free cash flow for the Company for the current or future financial periods would necessarily match or exceed the historical published earnings, earnings per share or income, cash flow from operations or free cash flow for the Company.

The New Ordinary Shares to be issued pursuant to the Capital Raising will not be admitted to trading on any stock exchange other than the main market for listed securities of the London Stock Exchange.

In connection with the Capital Raising, the Joint Bookrunners and any of their respective affiliates or any of their respective Representatives, acting as investors for their own account, may take up a portion of the New Ordinary Shares in the Firm Placing  as a principal position and in that capacity may retain, purchase, sell, offer to sell for the own accounts or otherwise deal for their own account in such Firm Placing Shares and other securities of the Company or related investments in connection with the Firm Placing or otherwise. Accordingly, references to Firm Placing Shares being offered, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or acquisition, placing or dealing by, the Joint Bookrunners and any of their respective affiliates and their respective Representatives acting in such capacity. In addition, the Joint Bookrunners and any of their respective affiliates or their respective Representatives may enter into financing arrangements (including swaps, warrants or contracts for difference) with investors in connection with which the Joint Bookrunners and any of their respective affiliates may from time to time acquire, hold or dispose of shares. The Joint Bookrunners do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

Appendix IV of this Announcement sets out the terms and conditions of the Firm Placing. By participating in the Firm Placing, each Firm Placee will be deemed to have read and understood this Announcement (including the Appendices) in its entirety, to be participating in the Firm Placing and making an offer to acquire and acquiring Firm Placing Shares on the terms and subject to the conditions set out in the Appendix IV of this Announcement and to be providing the representations, warranties, undertakings and acknowledgements contained in the Appendix IV of this Announcement.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this Announcement.

This Announcement has been prepared for the purposes of complying with applicable law and regulation in the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside the United Kingdom.

UK Product Governance Requirements

Solely for the purposes of the product governance requirements contained within of Chapter 3 of the FCA Handbook Production Intervention and Product Governance Sourcebook (the "UK Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the UK 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 such securities are: (i) compatible with an end target market of investors who meet the criteria of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in paragraph 3 of the FCA Handbook Conduct of Business Sourcebook; and (ii) eligible for distribution through all distribution channels (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, distributors (for the purposes of UK Product Governance Requirements) should note that: (a) the price of the New Ordinary Shares may decline and investors could lose all or part of their investment; (b) the New Ordinary Shares offer no guaranteed income and no capital protection; and (c) 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. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Joint Bookrunners 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 Chapter 9A or 10A respectively of the FCA Handbook Conduct of Business Sourcebook; 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 III

Further Information regarding the Company and the Capital Raising

1. INTRODUCTION

The Board of McColl's Retail Group plc has today announced that it intends to raise up to approximately £35 million (before expenses) by way of a Capital Raising comprising a Firm Placing of up to £30 million (before expenses) and an Open Offer of up to £5 million (before expenses). Up to 150,000,000 New Ordinary Shares will be issued through the Firm Placing and up to 25,000,000 New Ordinary Shares will be issued through the Open Offer, on the basis of 3 New Ordinary Shares for every 14 Existing Ordinary Shares, in each case at an Offer Price of 20 pence per New Ordinary Share. The Open Offer will include an Excess Application Facility.

The purpose of this Announcement is to explain the background to, reasons for, and to summarise the key terms and conditions of, the proposed Capital Raising and to explain why the Directors believe the Capital Raising to be in the best interests of Shareholders as a whole and why the Directors unanimously recommend that Shareholders should vote in favour of all the Resolutions.

Prior to the COVID-19 pandemic, it was the Board's belief that consumer preferences were trending away from large supermarkets towards local food-led convenience offerings and online shopping. Local convenience stores were also increasingly being used as a top-up shop in between the regular big weekly supermarket grocery shops. To take advantage of the trend towards local convenience offerings, the Group's strategy has been to progressively transform the Group's proposition away from heritage newsagent categories, such as tobacco and newspapers, which the Board believes are in long term structural decline, towards a more comprehensive grocery offering. The Board believes that the COVID-19 pandemic has further amplified these trends and the Group intends to accelerate its strategy to capture the market opportunity. A key component of delivering the opportunity is through rapidly converting existing stores to the Morrisons Daily format which the Board believes will deliver a strong return on investment.

In addition, the Group has operated with significant levels of leverage which has inhibited its ability to invest in growth and has prevented the rapid development of the proposition towards the exciting market opportunity. The Board considers that it is now the correct time for the business to raise further equity funding to accelerate its journey towards being a grocery-led business serving local communities with high quality branded and own- label groceries. The Board believes that its strategy can improve the growth of the business and deliver significantly enhanced performance.

In response to these factors, the Board is today proposing the Capital Raising and intends to use the net proceeds:

·      to increase the number, and accelerate the pace of rollout, of Morrisons Daily stores from 56 to 350 by the end of the financial year ending November 2022 (an increase of 50 stores against the Group's previous target of 300 stores by the end of December 2023);

·      to improve the grocery infrastructure in the Morrisons Daily sites thus enhancing the standard of the refit and expanding the chilled offer with more refrigeration, adding further profit potential;

·      to further invest in the store estate, including the potential to extend the rollout of Morrisons Daily beyond 350 stores, or reduce financial leverage of the Group; and

·      to reduce the Group's financial leverage.

The quantum of the Firm Placing has been arrived at based on the cash requirement to support the investment and deleveraging objectives which assumes:

·      that the cost of converting a store to Morrisons Daily, based on previous rollouts, is approximately £60,000 per store. In order to accelerate the rollout of Morrisons Daily stores from 56 to 350 by the end of the financial year ending November 2022 the Group will need access to approximately £10 million of incremental funding;

·      that the cost of improving the grocery infrastructure in Morrisons Daily stores, based on previous rollouts, is approximately £30,000 per store. In order to meet the Group's ambition to fit out 350 stores in this way by the end of the financial year ending November 2022, the Group will need a further approximately £10 million of available funds; and

·      that the balance of the net proceeds of the Firm Placing will be deployed in the best interests of the Group as a whole which, as at the date of this Announcement, the Board intends to use as follows, either: (i) to (together with the Group's existing resources) voluntarily prepay and cancel the Term Loan and/or Revolving Facility commitments in an aggregate amount of at least £10 million by late August 2022 or (ii) to further accelerate the rollout of Morrisons Daily stores. If the Group was to proceed with option (i) and to use the balance of proceeds of the Firm Placing (together with the Group's existing resources) to voluntarily prepay and cancel the Term Loan and/or Revolving Facility commitments in an aggregate amount of £10 million by late August 2022, an additional deferred arrangement fee would be reduced. The Board will explore its options in relation to any prepayment of up to £10 million received in the Firm Placing by the end of Q2 2022.

Any proceeds raised pursuant to the Open Offer will be deployed in the best interests of the Group as a whole which, as at the date of this Announcement, the Board intends to use to reduce the Group's financial leverage.

The Board has considered the best way to structure the proposed Capital Raising. The decision to structure the Capital Raising by way of a combination of a Firm Placing and Open Offer takes into account a number of factors including the total net proceeds to be raised. The Board believes that the Firm Placing will enable the Company to satisfy demand from potential new investors as well as current Shareholders wishing to increase their equity positions in the Company. The Board has sought to balance the dilution to existing Shareholders arising from the Firm Placing with the need to bring in substantial investors with guaranteed commitments to ensure the success of the Capital Raising. As a result, 14 per cent. of the New Ordinary Shares being issued will be available to existing Shareholders through the Open Offer on a pro rata basis. The Board is seeking the approval of Shareholders, by way of the Resolutions at the General Meeting, to the Capital Raising.

A General Meeting is being convened for 11.00 a.m. on Wednesday 1 September 2021 at the Company's Head Office at Ground Floor West, One London Road, Brentwood, Essex, England, CM14 4QW for Shareholders to consider and, if thought fit, approve the Resolutions. Further details of the General Meeting will be set out in the Prospectus.

2. BACKGROUND TO AND REASONS FOR THE CAPITAL RAISING

Background

McColl's is a leading neighbourhood retailer with an estate of 1,222 managed convenience stores and newsagents as at 30 May 2021. The Group operates 'McColl's' and 'Morrisons Daily' branded convenience stores as well as newsagents branded 'Martin's Newsagents' across the UK, except in Scotland which is operated under its heritage brand, 'RS McColl'.

Convenience stores make up the majority of the estate, with 1,093 convenience stores in operation as at 30 May 2021 compared to 172 newsagents. While overall store numbers have remained broadly the same (the Group operated 1,263 stores in 2011 compared to 1,265 in 2020) the mix has changed significantly. In 2011, there was a broadly equal proportion of convenience stores (47%) and newsagents (53%), whereas in 2020 the proportion of convenience stores had risen to 86% with newsagents at 14%. This shift has been achieved through acquisition of new larger stores more suited to food-led convenience and the divestment and closure of less suitable newsagent stores. At its peak the Group traded through 1,651 sites in 2017.

McColl's convenience stores and newsagents are mostly located close to residential areas, in neighbourhoods and villages, for ease of access. The stores operate in locations with little competition and have therefore performed resiliently during the pandemic, particularly against retailers located in high streets and urban city centres which saw steep footfall declines during the same period. According to research from the Association of Convenience Stores, 51% of customers of a typical convenience store live within 400 meters, and 22% visit a local store every day, every week. The Group processes four million customer transactions per week with c.15,000 colleagues across the business and is committed to delivering great service to customers.

The convenience stores provide a vital service to many communities across the UK including everyday access to fresh food and groceries plus a range of services such as ATMs, bill payment, and internet collection points. The Group is also the largest operator of Post Offices in the United Kingdom with 516 in operation as at 30 May 2021.

The partnership with Morrisons is of key strategic importance to the Group and the Group agreed a significant letter of variation to the Wholesale Supply Agreement with Morrisons in February 2021 which, inter alia, extended the term to 1 January 2027 thus securing the Group's continuity of supply until this date. The variation to the Wholesale Supply Agreement represented a key enabler in the Group's strategic goal of becoming a food-led convenience retailer, giving even greater access to Morrisons' grocery expertise and brand.

Morrisons is the wholesale supplier for the Group's entire estate, supplying the Group with all of its groceries, tobacco, confectionery, beers, wines and spirits. This enables the Company to work in partnership with Morrisons to seek continuous improvement and to further simplify its operations, whilst seeking the best value across an enhanced product range for customers. Certain of the Group's non-grocery products (for example, cards, news, magazines and food-to-go) are supplied by other suppliers.

Under the terms of the existing Wholesale Supply Agreement, Morrisons originally agreed to support the ongoing conversion of 300 McColl's convenience stores to the 'Morrisons Daily' fascia and format over the next three years. Due to the initial success of the trial Morrisons Daily stores and more recent openings, the Group has successfully negotiated with Morrisons the opportunity to convert a further 50 stores, which would bring the total number of conversions to 350 stores which the Group intends to do if the Firm Placing is successful.

Actions taken in response to the Covid-19 pandemic

In March 2020, due to the rapid escalation of the COVID-19 pandemic, the UK Government took unprecedented action to control the virus by implementing measures such as a national lockdown. This led to the temporary closure of many businesses with only essential retailers allowed to remain open.

The Group was classed as an essential retailer as it provides a crucial service to local neighbourhoods by selling food and providing other services such as the Post Office and internet collection/return points. The majority of the Group's stores were kept open during the crisis, and continue to be so, a testament to the dedication and hard work of everyone at McColl's.

The Group moved quickly to adapt stores for social distancing and health and safety measures in line with Government guidance. The Group temporarily removed non-essential items from sale such as scratch cards due to potential transmission risks, reduced trading hours to manage deliveries and staff absence levels, fitted stores with the necessary protections such as perspex screens at the till counter and worked closely with suppliers to keep supply chains open.

A full range of personal protective equipment (PPE) was also deployed for store colleagues who were offered double discounts on selected products for an extended period to help to support them during the period. In addition, remote working was rapidly deployed for head office (Retail Support Centre) colleagues.

As a neighbourhood retailer the Group implemented numerous initiatives to help serve its local communities during the COVID-19 pandemic. The Group provided essential food and goods to colleagues at NHS Great Ormond Street Hospital for free to support the NHS and the invaluable service it provides. In its stores, the Group offered free coffee to all emergency and NHS workers and delivery drivers that kept goods flowing to stores. The Group was also the first convenience retailer to support the Free School Meals voucher scheme, as well as stocking The Big Issue in-store for the first time in the magazine's history to support its vendors.

Market overview

The grocery sector has seen significant change as a result of the COVID-19 pandemic which the Board believes has led to significant changes in food retail and accelerated trends which would otherwise have taken years. Lockdown restrictions and the move to home working materially affected how customers shop, and validated the changes the Group was already making to its offering.

Firstly, the Group has experienced an acceleration of shopping to community convenience stores and the significant growth of grocery shopping online. The Directors believe that what was a temporary channel shift is becoming permanent mainly to the detriment of the large supermarket format. Demand has been stronger for convenience stores with more people visiting their local store as they continue to work from home. As a result, local neighbourhood retailing came into focus in 2020, the Group's food-led stores outperforming the wider convenience market according to Nielsen. While demand for convenience retail is likely to moderate from the high levels seen in 2020, there will be opportunities for stores to further enhance their role as destinations to meet local community needs. According to Mintel research, 80% of convenience store shoppers agree that they provide essential services to local neighbourhoods, with 94% of store users visiting at least once a month. The Institute of Grocery Distribution (IGD) estimates that the convenience channel will grow by 13.2% from 2019 to 2022 calculated by value, with market share increasing by 60 basis points to 22% during the same period. This contrasts with supermarkets which the IGD estimates will have 42.3% market share by 2022 (down from 46.1% in 2019).

Secondly, the Board also identified changes in the shopping behaviour of the Group's customers with a shift towards less frequent visits, but with larger shopping baskets and more food-based missions. Some categories benefitted from this change, with fresh food, BWS (beers, wines and spirits) and tobacco growing quickly, at the expense of other products such as food-to-go and impulse confectionery, snacks and soft drinks. As a result of this strong demand, the business was able to deliver materially higher like-for-like sales in FY 2020, up by 12.0%.

Thirdly, as a result of the COVID-19 pandemic, the Group experienced a significant shift in the pattern of trade, and additional costs related to the implementation of COVID-19 protection measures for staff and customers, which impacted overall operating margins. For example, the Group experienced the following changes to its activities: the mix of customer purchases away from higher margin single-pack items to lower margin multipack products, higher sales growth rates, some stores experiencing temporary closures and disruption to the supply of some products and greater staff sickness levels. The overall impact was to reduce profitability and change the working capital profile of the business. To offset those impacts, action was taken to reduce costs, refine the proposition and access some government reliefs including business rates relief and use of the Coronavirus Job Retention Scheme for the furlough of the Group's most vulnerable employees.

Strategy and proposed actions

Partnership with Morrisons, rollout of Morrisons Daily and enhancement of grocery infrastructure

The pandemic has reinforced the Group's conviction that its strategy of increasing fresh food and grocery mix and keeping the customer central to the Group's strategy remains the right one. The partnership with Morrisons is critical to deliver this.

Morrisons is the Group's sole wholesale supplier across its entire estate to January 2027. The relationship gives the Group access to Morrisons food retail expertise, breadth of product offering and brand. The wholesale agreement with Morrisons gives the Group continued access to a supermarket quality fresh food and grocery offer through the Safeway brand, which is continuing to be developed as part of a broader programme of range reviews.

In addition, the Group currently operates 56 stores with the Morrisons Daily fascia. The Group's Morrisons Daily stores are owned and operated by the Group, but have the Morrisons Daily fascia with ranges that include Morrisons own-branded products. Under the terms of the existing Wholesale Supply Agreement, Morrisons will support the conversion of 300 McColl's convenience stores to the 'Morrisons Daily' fascia and format over the next three years, including those currently in operation, which will sell Morrisons own-brand products. Due to the initial success of the first Morrisons Daily stores and more recent openings, the Group has successfully negotiated with Morrisons the opportunity to convert a further 50 stores, which would bring the total number of conversions to 350. The proceeds of the Firm Placing will fund an accelerated conversion of these stores and to a higher standard.

Over the last two years, the Group's Morrisons Daily conversions have been through a rigorous controlled assessment process. At each stage, the Group has evaluated the trading of these sites compared to the rest of the estate, as well as assessing the pre and post Morrisons Daily conversion trading performance, to gather an understanding of the factors that contribute to the performance of the site. These sites, in aggregate, have shown superior economics to the control groups mentioned, with the Morrisons Daily conversion sites generally delivering higher revenues and improved profitability.

In the Company's experience so far, a newly converted Morrisons Daily store experiences almost immediate revenue uplifts, highlighting a short maturity period for each store conversion. Taking all of the opportunities to optimise the delivery of the Morrisons Daily conversion programme, the Group expects to be able to achieve a cash payback on the capital expenditure invested of between two and three years. The performance across each Morrisons Daily conversion is driven by an expanded grocery offering, improved customer value, and attractiveness of the Morrisons brand, in particular for its own-brand product offering. While more competitive pricing in these sites erodes the average percentage gross margin, this is more than offset by higher volumes leading to a higher cash contribution per store.

Having completed an analysis of the Morrisons Daily roll out to date, with a particular focus on the necessary demographics and operational factors that contribute to a successful conversion, the Group believes that there are at least 350 sites within the current estate where the Morrisons Daily format would be a success. One key attribute is the available square footage of the site, with larger sites, in general, more suitable to the Morrisons Daily format compared to smaller sites. However, the Morrisons Daily fascia has worked successfully in stores as small as 1,200 square feet, highlighting the importance and competitive strength of its neighbourhood locations. Half of the Group's store estate are 1,200 square feet or larger, indicating a choice of around 700 stores for the proposed 350 Morrisons Daily sites.

In addition, the Group believes there is a compelling opportunity to optimise the space, range and pricing of its product offering to substantially improve the economics of each Morrisons Daily conversion. The Group has engaged Scalene Group, a third-party retail analytics company, to analyse each specific trading line, comparing basket economics and a customer's propensity to buy. Scalene specializes in space optimisation, range management, customer insights and operating model optimisation. As part of this evaluation, it has been established that the trading of the Morrisons Daily sites could be significantly improved with increased investment in the physical infrastructure of the store, particularly additional fridges to enable the rebalancing of the range away from news and ambient grocery to chilled ranges. This would add meaningful profit upside per store without changing the payback period on capital expenditure deployed.

The Morrisons Daily stores have the highest revenues out of all stores operating in the Group's estate, due to a high grocery mix and wider product choice for customers. The Morrisons Daily format allows the Group to grow customer spend, frequency and loyalty by growing the basket size, offering customers access to great value fresh food at close to supermarket prices on their doorstep under the Morrisons brand, which is synonymous with fresh food. The rollout of Morrisons Daily stores ties in with the Group's strategic focus on the larger convenience store format, to drive incremental sales in grocery, fresh food and BWS, providing opportunities for sales mix improvement.

A large portion of the Group's store estate is located in low-income neighbourhoods where offering value-for money is critical to local customers. The Morrisons own-brand offering within Morrisons Daily stores delivers this value across a core range of grocery essentials, at a significant discount to the equivalent branded product. The Board believes that this leads to a higher frequency of shop, basket size and loyalty for those customers looking to shop on a budget in between their weekly grocery shops at a local supermarket or discount retailer.

On average, Morrisons Daily stores generated like-for-like sales growth of 25% in FY 2020, compared to the Group average of 12%. The Morrisons Daily stores also had the highest proportion of grocery and alcohol sales (50%) compared to the Group average (34%). The ambition to grow grocery and alcohol sales as a proportion of total revenues is a key performance indicator for the Group. A growing grocery and alcohol mix leads to a higher basket size and higher operating efficiency metrics. In addition, the growth in grocery and alcohol products drives accretive margin mix over medium term. This is in contrast to lower margin categories such as news and tobacco that are in structural decline.

Current covenant headroom levels and liquidity allow for only a moderate rollout and investment in Morrisons Daily conversions. The Board believes that this restricts the ability of the business to capture the opportunity presented. The proximity to banking covenants also inhibits all other investment and deflects management focus from running the business to the maximum benefit of its key stakeholders including Shareholders.

The Firm Placing will enable the Company to accelerate the rollout of Morrisons Daily stores and help to improve the grocery infrastructure in the Morrisons Daily sites thus enhancing the standard of the refit and expanding the chilled offer with more refrigeration.

Bank facilities and reduction in leverage

A proportion of the net proceeds of the Capital Raising may be used to reduce financial leverage in the business. In March 2021, the Company announced a revision to its then existing banking facilities in order to give the business greater financial certainty and flexibility to execute its strategy. The Amended Credit Facility (made available to the Group pursuant to the Facilities Agreement), which consists of the £100m Revolving Facility and an amortising £67.0 million Term Facility (of which £61.7 million was available and fully committed as at the date of this Announcement), provides increased headroom against covenants, a realigned amortisation schedule and extends the maturity from May 2022 to February 2024. The Amended Credit Facility was arranged with the existing syndicate of six banks, comprising AIB Group (UK), Barclays Bank PLC, HSBC UK Bank plc, National Westminster Bank plc, Santander UK PLC, and Bank of Ireland.

As at 30 May 2021, the Group's net debt, excluding lease liabilities, was £109.7 million relative to total committed facilities of £167.0 million. The Amended Credit Facility includes two covenants which are tested on a 'last twelve months basis' every three months. The covenants are 1) a consolidated total net debt to adjusted EBITDA ratio (the "Leverage Ratio") covenant of 3.5x and 2) a fixed charge cover covenant of 1.5x. The amortisation schedule of the term loan has also been weighted to year three, which previously had fixed payment terms of £2.5 million per quarter. Amortisation will now be due as follows: £5 million in FY 2021, £10 million in FY 2022 and £15 million in FY2023. One of the restrictions relates to the payment of dividends which are only payable once the leverage ratio is lower than 1.75x trailing EBITDA.

Under the terms of the Facilities Agreement, an additional deferred arrangement fee (calculated depending on the amount of voluntary prepayments the Company makes within a given period) would be reduced if the Company voluntarily prepays and cancels the Term Loan and/or Revolving Facility commitments in an aggregate amount of at least £10 million by late August 2022. Accordingly, the Board may, if it sees fit, use a proportion of the net proceeds of the Firm Placing (together with the Group's existing resources) to repay the £10 million of the funds drawn down under the Term Loan and/or Revolving Facility ahead of such time. The Board will explore its options in relation to any prepayment of up to £10 million received in the Firm Placing by the end of Q2 2022.

3. PRINCIPAL TERMS OF THE FIRM PLACING AND OPEN OFFER

The Company is proposing to raise proceeds of:

i.      up to £30 million (before expenses) by way of a Firm Placing of up to 150,000,000 New Ordinary Shares; and

ii.     up to £5 million (before expenses) by way of an Open Offer of 25,000,000 Open Offer Shares,

(together, the "Capital Raising") in each case at an Offer Price of 20 pence per New Ordinary Share. The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares. Estimated net proceeds of the Capital Raising after expenses are £32.7 million assuming that the Open Offer is taken up in full.

Subject to fulfilment of, among other things, the conditions set out below (and, in the case of Qualifying Non- CREST Shareholders, the Application Form), the Open Offer Shares will be offered to Qualifying Shareholders on the following basis:

3 Open Offer Shares for every 14 Existing Ordinary Shares

held and registered in the name of each such Qualifying Shareholder on the Record Date (and so in proportion for any other number of Existing Ordinary Shares then held) and otherwise on the terms and conditions set out in the Prospectus. Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Open Offer. Fractions of Open Offer Shares will be disregarded in calculating Qualifying Shareholders' Open Offer Entitlements and each Qualifying Shareholder's entitlements to Open Offer Shares will be rounded down to the nearest whole number.

Qualifying Shareholders who take up their Open Offer Entitlements in full will be able to subscribe for Excess Shares using the Excess Application Facility. Qualifying Non-CREST Shareholders wishing to apply to subscribe for Excess Shares may do so by completing the relevant sections on the Application Form.

Qualifying CREST Shareholders who wish to and are able to apply to subscribe for more than their Open Offer Entitlements will have Excess Open Offer Entitlements credited to their stock account in CREST and information on how to apply for Excess Shares pursuant to the Excess Application Facility will be set out in the Prospectus.

The Excess Application Facility will comprise Open Offer Shares that are offered to Qualifying Shareholders under the Open Offer as Open Offer Entitlements but are not taken up. Qualifying Shareholders' applications for Excess Shares will, therefore, be satisfied only to the extent that applications by other Qualifying Shareholders are made for less than their pro rata Open Offer Entitlements. All applications under the Excess Application Facility will be subject to the Excess Application Cap. If there is an over subscription resulting from excess applications, allocations of Excess Shares will be determined by the Excess Allocation Method. Further details regarding the Excess Allocation Method will be set out in the Prospectus.

The Offer Price represents a discount of approximately 31.03  per cent. to the Closing Price on 11 August 2021 (being the last Business Day prior to the date of this Announcement). The Offer Price (and the discount) has been set by the Directors following their assessment of the prevailing market conditions and anticipated demand for the New Ordinary Shares. The Board, having taken appropriate advice from its advisors, believes that the Offer Price (including the discount) is appropriate in the circumstances.

Firm Placing

Pursuant to the Placing and Sponsor Agreement, the Joint Bookrunners have severally agreed to use reasonable endeavours to procure subscribers for the Firm Placing Shares at the Offer Price. The Firm Placing will not be subject to clawback to satisfy Open Offer Entitlements taken up by Qualifying Shareholders under the Open Offer. Qualifying Shareholders are not being offered the ability to participate in the Firm Placing on a pre-emptive basis. Pursuant to the terms and conditions of the Placing and Sponsor Agreement, the Joint Bookrunners have agreed to underwrite the settlement risk in the event that any Firm Placees fail to take up their allocation of the New Ordinary Shares under the Firm Placing following completion of the Bookbuild. The Firm Placing is conditional upon, amongst other things, the Resolutions being passed without material amendment at the General Meeting.

Open Offer

Qualifying Shareholders will have the opportunity under the Open Offer to subscribe for Open Offer Shares at the Offer Price, payable in full on application and free of expenses, pro rata to their existing shareholdings, on the basis of 3 Open Offer Shares for every 14 Existing Ordinary Shares held by them and registered in their names at the Record Date. Fractions of Open Offer Shares will be disregarded in calculating Qualifying Shareholders' Open Offer Entitlements and each Qualifying Shareholder's entitlements to Open Offer Shares will be rounded down to the nearest whole number. The Joint Bookrunners will not underwrite settlement risk in respect of the Open Offer.

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 further note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess 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. Open Offer Shares not taken up by Shareholders under the Open Offer will be allocated to Qualifying Shareholders who apply under the Excess Application Facility (in accordance with the Excess Allocation Method) with the proceeds ultimately accruing for the benefit of the Company.

Conditionality

The Capital Raising is conditional upon the following:

·      all of the Resolutions being passed by the Shareholders without material amendment at the General Meeting;

·      the Placing and Sponsor Agreement becoming or being declared unconditional in all respects (save in respect of Admission) and not having been terminated in accordance with its terms prior to Admission; and

·      Admission becoming effective by no later than 8.00 a.m. on 6 September 2021 (or such later time and/or date as the Company and the Joint Bookrunners may determine).

Each of the Resolutions will be conditional on all of the other Resolutions being passed because (a) all of the Resolutions are required to be passed in order for the Capital Raising to complete successfully; and (b) certain of the Resolutions, if passed, would not be effective to complete the Capital Raising unless certain other Resolutions are passed.

Accordingly, if any of such conditions are not satisfied, or, if applicable, are not waived, the Capital Raising will not proceed and any Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies will be returned to applications (at the applicant's risk) without interest as soon as possible.

The Placing and Sponsor Agreement is conditional, inter alia, upon:

·      all of the Resolutions being passed by Shareholders without material amendment at the General Meeting; and

·      Admission becoming effective by no later than 8:00 a.m. on 6 September 2021 (or such later time and/or date as the Company and the Joint Bookrunners may determine.

Dilution

If a Qualifying Shareholder does not take up any of his Open Offer Entitlements, such Qualifying Shareholder's holding, as a percentage of the Enlarged Share Capital, will be diluted by approximately 60 per cent. pursuant to the Capital Raising (assuming that the Open Offer is taken up in full).

If a Qualifying Shareholder does take up all of his Open Offer Entitlements, such Qualifying Shareholder's holding, as a percentage of the Enlarged Share Capital, will be diluted by approximately 52 per cent. pursuant to the Capital Raising (assuming that the Open Offer is taken up in full).

Shareholders in the United States and certain other Excluded Territories will not be able to participate in the Open Offer.

4. DIRECTOR PARTICIPATION

All of the Directors have irrevocably committed to participate in the Capital Raising via the Firm Placing as set out in the table below. Each Director has irrevocably committed to not take up any of their Open  Offer Entitlements.

Jonathan Miller's subscription constitutes a related party transaction for the purposes of paragraph 11.1.7 of the Listing Rules as described in further detail in paragraph 5 (Related Party Transactions) below.

Each Director's subscription (other than Jonathan Miller's) constitutes a smaller related party transaction for the purposes of paragraph 11.1.10 of the Listing Rules as described in further detail in paragraph 5 below.

5. RELATED PARTY TRANSACTIONS

Shareholder related party transaction

Aberforth is a related party of the Company for the purposes of the Listing Rules as it is a substantial shareholder of the Company which is entitled to exercise, or control the exercise of, approximately 11.9 per cent. of the votes able to be cast at general meetings of the Company.

If Aberforth participates in the Bookbuild, such transaction would constitute a Related Party Transaction pursuant to Chapter 11 of the Listing Rules, and will require Shareholder approval under the Listing Rules to approve the Related Party Transaction. In this event, Shareholder approval will be sought at the General Meeting to approve the subscription by Aberforth (in the form of the Fifth Resolution) and, in accordance with paragraph 11.1.7 of the Listing Rules, the Company is required to ensure that Aberforth do not vote on the Fifth Resolution. Any New Ordinary Shares issued to Aberforth as a result of it taking up its Open Offer Entitlements are exempt from the rules regarding related party transactions under chapter 11 of the Listing Rules.

Director related party transaction

Each Director is a related party of the Company for the purposes of the Listing Rules. Each Director has irrevocably committed to not take up any of their Open Offer Entitlements and will only participate in the Capital Raising via the Firm Placing. However, such subscriptions by the Directors for Firm Placing Shares fall within the scope of the rules regarding related party transactions.

The subscription by Jonathan Miller for 15,000,000 New Ordinary Shares at the Offer Price for the total amount of £3 million constitutes a related party transaction for the purposes of paragraph 11.1.7 of the Listing Rules and, consequently, such subscription requires Shareholder approval under the Listing Rules which will be sought at the General Meeting. Jonathan Miller is not entitled to vote on the Fourth Resolution at the General Meeting and has taken all reasonable steps to ensure that his associates do not vote on the Fourth Resolution.

Each of the subscriptions by the Directors set out in the table below also constitute a smaller related party transaction for the purposes of paragraph 11.1.10 of the Listing Rules:

6. GENERAL MEETING

A notice convening a general meeting of the Company to be held at 11:00 a.m. on 1 September 2021 at Ground Floor West, One London Road, Brentwood, Essex, CM14 4QW, at which the Resolutions will be proposed will be included in the Prospectus. The purpose of the General Meeting is to consider and, if thought fit, pass the Resolutions, as set out in full in the Notice of General Meeting.

The purpose of the General Meeting is to seek Shareholders' approval for the following resolutions:

Resolution 1-Authority to allot New Ordinary Shares

The First Resolution is an ordinary resolution authorising, in addition to all existing authorities, the Directors to allot shares in the Company or to grant rights to subscribe for shares in the Company up to a nominal amount of £175,000 in connection with the Capital Raising. This authority will expire at close of business on the date that is six months from the date of the General meeting.

Resolution 2-Disapplication of Pre-emption Rights

The Second Resolution is a special resolution authorising, in addition to all existing authorities, the Directors to allot shares in the Company for cash under the authority bestowed by the First Resolution above as if section 561 of the Companies Act did not apply to such allotment.

Resolution 3-Approval of Offer Price

The Third Resolution is an ordinary resolution authorising the issue of up to 175,000,000 New Ordinary Shares at the Offer Price of 20 pence per share, being a discount of 31.03 per cent. to the closing middle market quotation of an Existing Ordinary Share of 29 pence per share on the business day prior to the date of this Announcement, and otherwise approving the various terms set out in the Prospectus.

Resolution 4-Related Party Transaction (Jonathan Miller participation in the Firm Placing)

The Fourth Resolution is an ordinary resolution authorising Jonathan Miller's application for 15,000,000 New Ordinary Shares under the terms of the Firm Placing, which constitutes a related party transaction for the purposes of Chapter 11 of the Listing Rules.

Resolution 5-Related Party Transaction (Aberforth participation in the Firm Placing)

The Fifth Resolution is an ordinary resolution authorising Aberforth's application for New Ordinary Shares under the terms of the Firm Placing, which would constitute a related party transaction for the purposes of Chapter 11 of the Listing Rules if Aberforth were to participate in the Firm Placing. Aberforth's participation in the Firm Placing will be determined during the course of the Bookbuild.

The First Resolution, Third Resolution, Fourth Resolution and any Fifth Resolution (on the assumption that Aberforth will participate in the Firm Placing) must be approved by Shareholders who together represent a simple majority of the Ordinary Shares being voted (whether in person or by proxy) at the General Meeting, whilst the Second Resolution must be approved by Shareholders who together represent three quarters or more of the Ordinary Shares being voted (whether in person or by proxy) at the General Meeting. Jonathan Miller and his associates will not vote on the Fourth Resolution. If Aberforth participates in the Firm Placing, and such participation constitutes a Related Party Transaction for the purpose of Chapter 11 of the Listing Rules, the Company is required to ensure that Aberforth and its associates will not vote on the Fifth Resolution.

Each of the Resolutions is conditional on all of the other Resolutions being passed because (a) all of the Resolutions are required to be passed in order for the Capital Raising to complete successfully; and (b) certain of the Resolutions, if passed, would not be effective to complete the Capital Raising unless certain other Resolutions are passed.

7. DIVIDEND POLICY

Subject to the provisions of the Companies Act and the Articles, the Company may pay dividends upon a recommendation by the Board and approval by a majority of the Shareholders, who have the right to decrease but not to increase the amount of the dividend recommended by the Board. Such dividends are known as final dividends and become a debt payable to Shareholders when they are approved by the Shareholders. Subject to the provisions of the Companies Act and the Articles, the Board may declare and pay dividends without Shareholder approval. Such dividends are known as interim dividends and, unlike final dividends, become a debt payable to the Shareholders only upon actual payment.

The Board understands that dividend payments are an important part of the Group's returns to Shareholders and believes in balancing those returns to Shareholders with investment in the business to support future growth. However, the Board has not declared any dividend (final or interim) for FY 2020 or a final dividend for FY 2019 for reasons of affordability and because the Company is currently restricted from paying a dividend until certain conditions of its Amended Credit Facility are satisfied (including achieving Group leverage below 1.75x trailing EBITDA). The Board does not expect that the funds received by the Group pursuant to the Capital Raising will be sufficient to reduce the leverage below 1.75x trailing EBITDA. The Board will keep the Group's dividend policy under review with the aim of reinstating the payment of dividends at an affordable and sustainable level once the Group's strategic change programme has gathered momentum and the Group has delevered.

8. IMPORTANCE OF VOTE

Each of the Resolutions will be conditional on all of the other Resolutions being passed because (a) all of the Resolutions are required to be passed in order for the Capital Raising to complete successfully; and (b) certain of the Resolutions, if passed, would not be effective to complete the Capital Raising unless certain other Resolutions are passed. Shareholders will therefore be asked to vote in favour of each of the Resolutions at the General Meeting in order for the Capital Raising to proceed.

The proceeds of the Firm Placing will enable the Group to increase and accelerate the rollout of Morrisons Daily stores, and help to improve the grocery infrastructure in the Morrisons Daily sites thus enhancing the standard of the refit and expanding the chilled offer with more refrigeration. Any proceeds raised pursuant to the Open Offer will be deployed in the best interests of the Group as a whole which, as at the date of this Announcement, the Board intends to use to reduce the Group's financial leverage.

Each Morrisons Daily conversion provides a strong return on capital and accelerating the pace of these rollouts will provide a step-change to the profitability of the business over time. The Directors believe this will enable the business to reduce its leverage through higher profits, giving the Group the capacity to both pay down existing debt and to further invest in its estate.

Consequences of the Firm Placing failing to complete

In connection with the Capital Raising, and as part of the Group's business planning, the Board has closely monitored the Group's financial forecasts, key uncertainties and sensitivities. As part of this exercise, the Board has reviewed a number of scenarios, including base case and reasonable worst case downside scenarios, which includes potential further impacts of COVID-19 on the Group's business. The base case and reasonable worst case downside scenarios reviewed by the Board include the minimum net proceeds of the Capital Raising which only includes the proceeds from the Firm Placing (which is underwritten) and does not include proceeds from the Open Offer.

If the Group's results over the relevant period were to be in line with the Company's current base case scenario, it would not be in breach of the financial covenants contained in its financing documents or have insufficient liquidity headroom at any point within the 12-month period following the date of this Announcement, even if the Firm Placing does not proceed. The Company confirms that its outlook remains unchanged from that outlined in the interim results statement for the twenty six weeks to 30 May 2021.

However, if a reasonable worst case downside scenario were to occur and the Firm Placing were not to proceed, and no other mitigating actions were able to be taken, then the Company's liquidity headroom would be £8.9 million lower than the required level in its financing documents which will breach the financial covenants contained in such financing documents.

Under the reasonable worst case scenario, the Group would breach the Consolidated Net Debt to EBITDA ratio covenant for the testing period ending November 2021, as the Consolidated Net Debt to EBITDA ratio on that date is forecasted in those projections to exceed the 3.5 times multiple threshold which would also constitute an event of default under the terms of the Facilities Agreement. An event of default caused by a covenant breach would give the lenders the right to immediately withdraw and cancel the Group's facility and demand repayment of all outstanding drawings on the facility which would be approximately £161.7 million as at the date of this Announcement.

A range of mitigating actions would be put in place to defer payments to creditors, reduce costs and reprioritise capital expenditure in order to conserve cash and remain within the Group's banking covenants. In this reasonable downside scenario, the headroom against the Group's covenants is such that adjusted leverage, the Group's most sensitive covenant, would show 0.1x of headroom at the lowest point. Other mitigating actions could be deployed to reduce operating costs further, such as deferring supplier and other payments and eliminating any non-essential capital expenditure. In addition, the Group could seek to secure agreement with its key suppliers and creditors to extend payment terms over critical periods and to secure advance payment of amounts due to it under its supply agreements.

There can be no assurance that the reasonable worst case downside scenario will be avoided or that the Company's low levels of liquidity headroom will be sufficient in circumstances where the Company's actual performance is below the reasonable worst case downside scenario projections. If a reasonable worst case downside scenario were to occur then, in addition to the mitigating actions set out in the paragraph above, the Directors would take mitigating actions including delaying strategic investment in Morrisons Daily sites and seeking to obtain alternative sources of funding. However, there is no certainty that the Group would be able to obtain an alternative form of funding or effect a sale of whole or part of the Group's business, on acceptable terms and within reasonable timescales.

This would leave insufficient cash resources to repay the Group's lenders in the event that the Group's creditors accelerate the payment amounts owing to them and/or continue trading. As a result, the Group could be forced into bankruptcy or liquidation, with Shareholders at risk of losing all or a substantial part of the value of their investments in the Company.

The Directors believe that successful completion of the Capital Raising is imperative for the long term sustainability of the business as the Group rapidly completes the transition to being a grocery-led business, reducing its reliance on long term declining categories such as tobacco and newspapers.

Accordingly, the Directors believe that the Capital Raising and the Resolutions are in the best interests of the Company and its Shareholders as a whole and consider it critical that Shareholders vote in favour of all of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings.

9. RECOMMENDATION

The Board has received advice from the Sponsor in connection with the Capital Raising. In providing advice to the Directors the Sponsor has relied upon the Directors' commercial assessment of the transaction.

The Board considers that the Capital Raising is of critical importance to the Group's future prospects, will promote the success of the Company and is in the best interests of its Shareholders as a whole. The Board has received financial advice from the Sponsor in relation to the Capital Raising.

The Board, which has been so advised by the Sponsor, considers that the related party transaction with Jonathan Miller by virtue of his participation in the Firm Placing is fair and reasonable as far as Shareholders are concerned. Jonathan Miller, as a related party due to his existing shareholding in the Company, has not taken part in the Board's consideration of such related party transaction. In providing advice to the Board the Sponsor has taken account of the commercial assessment of the Directors of such related party transaction.

Accordingly, the Board unanimously recommends that Shareholders vote in favour of all of the Resolutions to be proposed at the General Meeting, as the Directors intend to do in respect of their own beneficial holdings (except for Jonathan Miller and his associates in respect of the Fourth Resolution who, because of his status as a related party under the Listing Rules, must abstain from voting on that Resolution), amounting in aggregate to 12,090,353 Ordinary Shares, which represent approximately 10.49 per cent. of the total voting rights in the Company as at 11 August 2021 (being the last Business Day prior to the date of publication of this Announcement).

Appendix IV

TERMS AND CONDITIONS OF THE FIRM PLACING

IMPORTANT INFORMATION ON THE FIRM PLACING FOR INVITED FIRM PLACEES ONLY

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE FIRM PLACING. THE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATION PURPOSES ONLY AND ARE ONLY DIRECTED AT, AND BEING DISTRIBUTED TO: (A) IF IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA ("EEA"), PERSONS WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(E) OF REGULATION (EU) 2017/1129 (TOGETHER WITH ITS DELEGATED AND IMPLEMENTING REGULATIONS) (THE "EU PROSPECTUS REGULATION") ("QUALIFIED INVESTORS"); (B) IF IN THE UNITED KINGDOM, PERSONS WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(E) OF THE EU PROSPECTUS REGULATION WHICH FORMS PART OF UK LAW BY VIRTUE OF THE EU (WITHDRAWAL ACT) 2018 (THE "UK PROSPECTUS REGULATION") AND WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND FALL WITHIN THE DEFINITION OF "INVESTMENT PROFESSIONAL" IN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE "ORDER") OR ARE HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS OR PARTNERSHIPS OR TRUSTEES OF HIGH VALUE TRUSTS WHO FALL WITHIN ARTICLE 49(2) OF THE ORDER; OR (C) ANY OTHER PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED; AND, IN EACH CASE, HAVE BEEN INVITED TO PARTICIPATE IN THE FIRM PLACING BY THE JOINT BOOKRUNNERS (ALL SUCH PERSONS AT (A), (B) AND (C) TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY PERSON WHO HAS RECEIVED OR IS DISTRIBUTING THESE TERMS AND CONDITIONS MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THESE TERMS AND CONDITIONS RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THESE TERMS AND CONDITIONS DO NOT THEMSELVES CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY INCLUDING, WITHOUT LIMITATION, IN AN EXCLUDED TERRITORY OR IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS UNLAWFUL.

THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "US SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD, ACQUIRED, RESOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY WITHIN, INTO OR IN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT AND IN COMPLIANCE WITH THE SECURITIES LAWS OF ANY RELEVANT STATE OR OTHER JURISDICTION OF THE UNITED STATES.

EACH FIRM PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO THE LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF AN INVESTMENT IN THE FIRM PLACING SHARES (AS DEFINED BELOW).

Unless otherwise defined in these terms and conditions, capitalised terms used in these terms and conditions shall have the meaning given to them in this Appendix IV and the announcement of which it forms part ("this Announcement").

In connection with the Capital Raising and Admission, the final approved combined circular and prospectus (the "Prospectus") prepared by, and relating to, the Company is expected to be dated on 13 August 2021. The Prospectus will, subject to approval by the FCA, be published on the Company's website and made available to you and will be despatched by the Company to its Shareholders. The Prospectus is not expected to be approved and published prior to Firm Placees entering into a legally binding commitment in respect of the Firm Placing with either of the Joint Bookrunners, each acting as agent of and on behalf of the Company. As such, any commitments made under the Firm Placing will be on the basis of this Announcement.

The Firm Placing will consist of an offer of New Ordinary Shares in the Company (the "Firm Placing Shares") by way of a placing with institutional investors. The Firm Placing Shares will not be subject to clawback by Qualifying Shareholders pursuant to the Open Offer. If a person (including individuals, funds or otherwise) indicates to either Joint Bookrunner that it wishes to participate in the Firm Placing by making an oral or written offer to acquire Firm Placing Shares pursuant to the terms of the Firm Placing (each such person, a "Firm Placee"), such person will be deemed: (i) to have read and understood in their entirety these terms and conditions in this Appendix IV and the Announcement of which it forms part; (ii) to be participating and making such offer on the terms and conditions contained in this Appendix IV; and (iii) to be providing the representations, warranties, indemnities, agreements, undertakings, acknowledgements and confirmations contained in these terms and conditions in this Appendix IV.

In particular, each Firm Placee represents, warrants and acknowledges that:

a)               it is a Relevant Person and undertakes that it will subscribe for, hold, manage or dispose of any Firm Placing Shares that are allocated to it for the purposes of its business;

b)               in the case of any Firm Placing Shares subscribed for by it as a financial intermediary, as that term is used in Article 5(1) of the EU Prospectus Regulation or the UK Prospectus Regulation (as applicable), if in a member state of the EEA or the UK, it understands that: (i) the Firm Placing Shares acquired by and/or subscribed for by it pursuant to the Capital Raising will not be acquired and/or subscribed for on a non-discretionary basis on behalf of, nor will they be acquired or subscribed for with a view to their offer or resale to, persons in a member state of the EEA or the UK (as applicable) other than Qualified Investors (as such term is defined in either the EU Prospectus Regulation or the UK Prospectus Regulation (as applicable)), or in circumstances which may give rise to an offer of securities to the public other than an offer or resale, in a member state of the EEA or the UK, to Qualified Investors, or in circumstances in which the prior consent of the Joint Bookrunners has been given to each such proposed offer or resale; or (ii) where the Firm Placing Shares have been acquired or subscribed for by it on behalf of persons in any member state of the EEA or the UK other than Qualified Investors, the offer of those Firm Placing Shares to it is not treated under the EU Prospectus Regulation or the UK Prospectus Regulation (as applicable) as having been made to such persons;

c)                it acknowledges that the Firm Placing Shares have not been and will not be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States and may not be offered, sold, acquired, resold, transferred or delivered, directly or indirectly, within, into or in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States;

d)               the Firm Placing Shares are being offered and sold on behalf of the Company outside the United States in offshore transactions (as defined in Regulation S) pursuant to Regulation S or pursuant to an exemption from, or in transactions not subject to, the registration requirements of the US Securities Act. There will be no public offering of the Firm Placing Shares in the United States;

e)                it acknowledges that these terms and conditions do not constitute an offer to sell or issue or the invitation or solicitation of an offer to buy or acquire the Firm Placing Shares in, or otherwise to residents of, any Excluded Territory;

f)                it is acquiring the Firm Placing Shares for its own account or is acquiring the Firm Placing Shares for an account with respect to which it exercises sole investment discretion and has the authority to make (and does make) the representations, warranties, indemnities, acknowledgements and agreements contained in this Appendix IV;

g)                it understands (or, if acting for the account of another person, such person understands) the resale and transfer restrictions set out in this Appendix IV; and

h)               the Company and the Joint Bookrunners will rely upon the truth and accuracy of the foregoing representations, warranties and acknowledgements.

These terms and conditions and the information contained herein are not for release, publication or distribution, directly or indirectly, in whole or in part, to persons in, or who are residents of, any Excluded Territory, subject to certain exceptions.

The Firm Placing Shares have not been approved or disapproved by the U.S. Securities and Exchange Commission, or any state securities commission in the United States, or any other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Capital Raising or the accuracy or adequacy of these terms and conditions. Any representation to the contrary is a criminal offence in the United States.

The distribution of these terms and conditions and the offer and/or placing of the Firm Placing Shares in certain other jurisdictions may be restricted by law. No action has been or will be taken by the Joint Bookrunners or the Company that would, or is intended to, permit an offer of the Firm Placing Shares or possession or distribution of these terms and conditions or any other offering or publicity material relating to the Firm Placing Shares in any jurisdiction where any such action for that purpose is required, save as mentioned above. Persons into whose possession these terms and conditions come are required by the Joint Bookrunners and the Company to inform themselves about and to observe any such restrictions.

Each Firm Placee's commitment will be made solely on the basis of the information set out in the terms and conditions in this Appendix IV and this Announcement. Each Firm Placee, by participating in the Capital Raising, acknowledges and agrees that it has not relied on any other information, representation, warranty or statement made by or on behalf of any of the Joint Bookrunners or the Company or any of their respective affiliates and none of Joint Bookrunners, the Company or any person acting on such person's behalf or any of their respective affiliates has or shall have liability for any Firm Placee's decision to accept the invitation to participate in the Capital Raising based on any other information, representation, warranty or statement. Each Firm Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting the invitation to participate in the Capital Raising.

No undertaking, representation, warranty or any other assurance, express or implied, is made or given by or on behalf of either of the Joint Bookrunners or any of their respective affiliates or any of their respective directors, officers, employees, agents or advisers (collectively, "Representatives"), or any other person, as to the accuracy, completeness, correctness or fairness of the information or opinions contained in the Prospectus (when published), this Announcement or for any other statement made or purported to be made by any of them, or on behalf of them, in connection with the Company or the Capital Raising and no such person shall have any responsibility or liability for any such information or opinions or for any errors or omissions. Accordingly, save to the extent permitted by law, no liability whatsoever is accepted by the Joint Bookrunners, their respective affiliates or any of their respective Representatives or any other person for any loss howsoever arising, directly or indirectly, from any use of this Announcement or such information or opinions contained herein or otherwise arising in connection with the Prospectus (when published).

These terms and conditions do not constitute or form part of, and should not be construed as, any offer or invitation to sell or issue, or any solicitation of any offer to purchase, acquire or subscribe for, any Firm Placing Shares or any other securities or an inducement or recommendation to enter into investment activity, nor shall these terms and conditions (or any part of them), nor the fact of their distribution, form the basis of, or be relied on in connection with, any investment activity. No statement in this Announcement is intended to be nor may be construed as a profit forecast and nor should any such statement be interpreted to mean that the Company's profits or earnings per share for any future period will necessarily match or exceed historical published profits or earnings per share of the Company.

Proposed Firm Placing of Firm Placing Shares

Firm Placees are referred to these terms and conditions in this Appendix IV and this Announcement containing details of the Capital Raising. These terms and conditions in this Appendix IV, this Announcement, and the Prospectus have been prepared and issued, or will be issued, by the Company, and each of these documents is and will be the sole responsibility of the Company.

The Capital Raising consists of a Firm Placing of up to 150,000,000 Firm Placing Shares and an Open Offer of up to 25,000,000 Open Offer Shares. Qualifying Shareholders are being given the opportunity to apply for the Open Offer Shares at the Offer Price on and subject to the terms and conditions of the Open Offer, pro rata to their holdings of Existing Ordinary Shares on the Record Date. Fractional entitlements of Open Offer Shares will be rounded down to the nearest whole number.

The Joint Bookrunners have severally agreed, pursuant to the Placing and Sponsor Agreement, to use reasonable endeavours to procure subscribers for the Firm Placing Shares, each as agent for the Company, at 20 pence per Firm Placing Share (the "Offer Price"). The Firm Placing Shares are not subject to clawback and do not form part of the Open Offer.

The Capital Raising is conditional upon, among other things:

a)               the Prospectus being approved by the FCA;

b)               the passing of the Resolutions at the General Meeting on 1 September 2021 (or such later date as the Joint Bookrunners may agree);

c)                the Placing and Sponsor Agreement having become unconditional in all respects and not having been terminated by the Joint Bookrunners in accordance with its terms prior to Admission; and

d)               Admission becoming effective by not later than 8.00 a.m. on 6 September 2021 (or such later time and/or date (being not later than close of business on 20 September 2021) as the Joint Bookrunners may agree).

The full terms and conditions of the Open Offer will be contained in the Prospectus to be issued by the Company in connection with the Capital Raising. The Prospectus to be issued by the Company is expected to be approved by the FCA under section 87A of the FSMA and made available to the public in accordance with Rule 3.2 of the Prospectus Regulation Rules.

Applications for listing and admission to trading

Applications will be made to the FCA for admission of the New Ordinary Shares to listing on the premium listing segment of the Official List of the FCA and to the London Stock Exchange for admission of the New Ordinary Shares to trading on its main market for listed securities (together, "Admission").

Application will also be made to Euroclear for the entitlements to the Open Offer Shares (the "Open Offer Entitlements") to be admitted as separate participating securities within CREST. Subject to the conditions of the Placing and Sponsor Agreement being satisfied, it is expected that Admission of the New Ordinary Shares will become effective on 6 September 2021 and that dealings for normal settlement on the London Stock Exchange in the New Ordinary Shares will commence at 8.00 a.m. on the same day.

The New Ordinary Shares issued under the Capital Raising, when issued and fully paid, will be identical to, and rank pari passu in all respects with, the Existing Ordinary Shares including the right to receive all dividends and other distributions declared, made or paid on the Existing Ordinary Shares by reference to a record date on or after Admission.

Bookbuild

Following this Announcement, the Joint Bookrunners will commence an accelerated bookbuilding process in respect of the Firm Placing (the "Bookbuild") to determine demand for participation in the Firm Placing. The Joint Bookrunners will seek to procure Firm Placees as agents for the Company as part of this Bookbuild. This Appendix IV gives details of the terms and conditions of, and the mechanics of participation in, the Firm Placing.

Principal terms of the Bookbuild

1.                By participating in the Firm Placing, Firm Placees will be deemed: (i) to have read and understood the terms and conditions in this Appendix IV and this Announcement; (ii) to be participating and making an offer for any Firm Placing Shares on these terms and conditions; and (iii) to be providing the representations, warranties, indemnities, agreements, undertakings, acknowledgements and confirmations contained in these terms and conditions.

2.                Participation in the Firm Placing will only be available to persons who may lawfully be, and are, invited to participate by the Joint Bookrunners. The Joint Bookrunners and their respective affiliates are entitled to enter bids in the Bookbuild as principals.

3.                To bid in the Bookbuild, Firm Placees should communicate their bid by telephone or in writing to their usual sales contact at the relevant Joint Bookrunner. Each bid should state the aggregate number of Firm Placing Shares which the prospective Firm Placee wishes to acquire at the Offer Price. Bids may be scaled down by the Joint Bookrunners on the basis referred to in paragraph 6 below.

4.                The Bookbuild is expected to close no later than 5.00 p.m. (London time) on 12 August 2021 but may be closed earlier or later at the discretion of the Joint Bookrunners. The Joint Bookrunners may, in agreement with the Company, accept bids that are received after the Bookbuild has closed.

5.                An offer to subscribe for Firm Placing Shares in the Bookbuild will be made on the basis of these terms and conditions in this Appendix IV (which shall be deemed to be incorporated in such offer) and this Announcement and will be legally binding on the Firm Placee by which, or on behalf of which, it is made and will not be capable of variation or revocation by such Firm Placee.

6.                Subject to paragraphs 4 and 5 above, the Joint Bookrunners reserve the right not to accept bids, either in whole or in part, on the basis of allocations determined at the Joint Bookrunners' discretion and may scale down any bids as the Joint Bookrunners may determine, subject to agreement with the Company. The acceptance of bids shall be at the Joint Bookrunners' absolute discretion, subject to agreement with the Company.

7.                If successful, each Firm Placee's allocation will be agreed between the Joint Bookrunners and the Company and will be confirmed to Firm Placees orally or in writing by the relevant Joint Bookrunner following the close of the Bookbuild. That oral or written confirmation from the relevant Joint Bookrunner (at the Joint Bookrunners' discretion) to such Firm Placee will constitute an irrevocable legally binding commitment upon such person (who will at that point become a Firm Placee) in favour of the Joint Bookrunners and the Company, under which such Firm Placee agrees to subscribe for the number of Firm Placing Shares allocated to it and to pay the Offer Price for each such Firm Placing Share on the terms and conditions set out in this Appendix IV (which shall be deemed to be incorporated in such legally binding commitment) and in accordance with the Company's articles of association. Each Firm Placee will also have an immediate, separate, irrevocable and binding obligation, owed to the relevant Joint Bookrunner, to pay it (or as it may direct) as agent for the Company in cleared funds an amount equal to the product of the Offer Price and the number of Firm Placing Shares that such Firm Placee has agreed to subscribe for.

8.                The Company will make a further Announcement following the close of the Bookbuild detailing the number of Firm Placing Shares to be issued (the "Results Announcement"). It is expected that the Results Announcement will be made as soon as practicable after the close of the Bookbuild.

9.                Irrespective of the time at which a Firm Placee's allocation pursuant to the Firm Placing is confirmed, settlement for all Firm Placing Shares to be acquired pursuant to the Firm Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

10.             No commissions are payable to any Firm Placees in respect of the Firm Placing.

11.             By participating in the Bookbuild, each Firm Placee agrees that its rights and obligations in respect of the Firm Placing will terminate only in the circumstances described below in these terms and conditions and will not be capable of rescission or termination by the Firm Placee. All obligations under the Firm Placing will be subject to fulfilment or (where applicable) waiver of the conditions referred to below under the heading "Conditions of the Firm Placing and Termination of the Placing and Sponsor Agreement".

12.             To the fullest extent permissible by law, neither of the Joint Bookrunners nor any of their respective affiliates or Representatives shall have any responsibility or liability to any Firm Placee (or to any other person whether acting on behalf of a Firm Placee or otherwise). In particular, neither of the Joint Bookrunners nor any of their respective affiliates nor any of their respective Representatives shall have any responsibility or liability (including to the extent permissible by law, any fiduciary duties) to any Firm Placee (or to any other person whether acting on behalf of a Firm Placee or otherwise) in respect of the Joint Bookrunners' conduct of the Bookbuild or of such alternative method of effecting the Firm Placing as the Joint Bookrunners and their respective affiliates and the Company may agree.

Conditions of the Firm Placing and Termination of the Placing and Sponsor Agreement

Firm Placees will only be called on to subscribe for Firm Placing Shares if the obligations of the Joint Bookrunners under the Placing and Sponsor Agreement have become unconditional in all respects (other than as to Admission) and the Joint Bookrunners have not terminated the Placing and Sponsor Agreement prior to Admission.

The obligations of the Joint Bookrunners under the Placing and Sponsor Agreement in respect of the Firm Placing and the Open Offer are conditional upon, amongst other things:

a)               the Prospectus being approved by the FCA not later than close of business on 13 August 2021 (or such later time and/or date as the Joint Bookrunners and the Company may agree);

b)               the passing of the Resolutions at the General Meeting;

c)                the Company having complied with its obligations under the Placing and Sponsor Agreement which fall to be performed or satisfied prior to Admission;

d)               in the opinion of the Joint Bookrunners, each of the warranties and undertakings on the part of the Company in the Placing and Sponsor Agreement being true and accurate in all respects and not misleading at all times before Admission; and

e)                Admission occurring by no later than  8.00 a.m. on 6 September 2021 (or such later time and/or date (being not later than 20 September 2021) as the Joint Bookrunners and the Company may agree),

(all such conditions included in the Placing and Sponsor Agreement being, together, the "Conditions").

The Joint Bookrunners shall be entitled, in their absolute discretion, to terminate the Placing and Sponsor Agreement at any time before Admission, in certain circumstances, including (but not limited to) if: (i) any statement contained in the Prospectus is or has become untrue or inaccurate in a material respect or misleading; (ii) matters have arisen which would, if the Prospectus were issued at that time, constitute a material omission therefrom; (iii) it has become necessary to publish a supplementary prospectus; or (iv) in the good faith opinion of either Joint Bookrunner following consultation with the Company, there has been any development or event (or any development or event involving a prospective change of which the Company is aware) which will or is likely to have a material adverse effect on the financial, or trading position or prospects of the Company whether or not arising in the ordinary course of business.

If any Condition has not been satisfied or has become incapable of being satisfied by the required time and date (and is not waived by the Joint Bookrunners as described below) or if the Placing and Sponsor Agreement is terminated, all obligations under these terms and conditions will automatically terminate.

By participating in the Firm Placing, each Firm Placee agrees that its rights and obligations hereunder are conditional upon the Placing and Sponsor Agreement becoming unconditional in all respects and that its rights and obligations will terminate only in the circumstances described above and will not be capable of rescission or termination by it after oral or written confirmation by the relevant Joint Bookrunner (at the Joint Bookrunner's discretion) following the close of the Bookbuild.

The Joint Bookrunners may, at their discretion, waive (where capable of waiver) fulfilment of certain of the Conditions in the Placing and Sponsor Agreement or extend the time provided for fulfilment of such Conditions. Any such extension or waiver will not affect Firm Placees' commitments as set out in these terms and conditions.

By participating in the Firm Placing each Firm Placee agrees that the exercise by the Joint Bookrunners of any right or other discretion under the Placing and Sponsor Agreement, including (without limitation) any decision made by the Joint Bookrunners as to whether or not to waive or to extend the time and/or date for the fulfilment of any of the Conditions in the Placing and Sponsor Agreement and/or whether or not to exercise any termination right, shall be within the absolute discretion of the Joint Bookrunners.

Neither the Company, the Joint Bookrunners nor any of their respective affiliates or Representatives shall have any liability or responsibility to any Firm Placee (or to any other person whether acting on behalf of a Firm Placee or otherwise) in respect of any decision it or another person may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any Condition nor for any decision it may make as to the satisfaction of any Condition generally.

Withdrawal Rights

Firm Placees acknowledge that their agreement to subscribe for Firm Placing Shares is not by way of acceptance of the public offer made in the Prospectus and the Application Form but is by way of a collateral contract and as such Article 23(2) of the EU Prospectus Regulation and the UK Prospectus Regulation does not entitle Firm Placees to withdraw in the event that the Company publishes a supplementary prospectus in connection with the Capital Raising.

Firm Placing Procedure

Firm Placees shall subscribe for the Firm Placing Shares to be issued pursuant to the Firm Placing and any allocation of the Firm Placing Shares to be issued pursuant to the Firm Placing will be notified to them on or around 12 August 2021 (or such other time and/or date as the Company and the Joint Bookrunners may agree).

Registration and settlement

Settlement of transactions in the Firm Placing Shares following Admission will take place within the CREST system, subject to certain exceptions. The Company and the Joint Bookrunners reserve the right to require settlement for, and delivery of, the Firm Placing Shares to Firm Placees by such other means that they deem necessary, including in certificated form, if delivery or settlement is not possible or practicable within CREST within the timetable set out in the Prospectus or would not be consistent with the regulatory requirements in the Firm Placee's jurisdiction. Each Firm Placee will be deemed to agree that it will do all things necessary to ensure that delivery and payment is completed in accordance with either the standing CREST or certificated settlement instructions which they have in place with the relevant Joint Bookrunner.

Settlement for the Firm Placing will be on a delivery-versus-payment basis and settlement is expected to take place on or around 6 September 2021. Interest is chargeable daily on payments not received from Firm Placees on the due date at the rate of two percentage points above prevailing LIBOR. Each Firm Placee is deemed to agree that, if it does not comply with these obligations, the relevant Joint Bookrunner may sell any or all of the Firm Placing Shares allocated to that Firm Placee on such Firm Placee's behalf and retain from the proceeds, for its own account and benefit, an amount equal to the aggregate amount owed by the Firm Placee to the Joint Bookrunner plus any interest due. By communicating a bid for Firm Placing Shares, each Firm Placee confers on the relevant Joint Bookrunner and the Company all such authorities and powers necessary to carry out any such sale and agrees to ratify and confirm all actions which the Joint Bookrunner lawfully takes in pursuance of such sale. The relevant Firm Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and shall be required to bear any stamp duty, stamp duty reserve tax or other stamp, securities, transfer, registration, execution, documentary or other similar impost, duty or tax (together with any interest, fines or penalties) which may arise upon any transaction in the Firm Placing Shares on such Firm Placee's behalf. The foregoing is without prejudice to any cause of action the Joint Bookrunners may have against a defaulting Firm Placee.

If Firm Placing Shares are to be delivered to a custodian or settlement agent, Firm Placees should ensure that, upon receipt, the electronic contract note and/or electronic trade confirmation is copied and delivered immediately to the relevant person within that organisation. Insofar as Firm Placing Shares are registered in a Firm Placee's name or that of its nominee or in the name of any person for whom a Firm Placee is contracting as agent or that of a nominee for such person, such Firm Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or UK stamp duty reserve tax. If there are any circumstances in which any other stamp duty or stamp duty reserve tax (and/or any interest, fines or penalties relating thereto) is payable in respect of the allocation, allotment, issue or delivery of the Firm Placing Shares (or for the avoidance of doubt if any stamp duty or stamp duty reserve tax is payable in connection with any subsequent transfer of or agreement to transfer Firm Placing Shares), neither of the Joint Bookrunners nor the Company shall be responsible for the payment thereof.

Acceptance

By submitting a bid and/or participating in the Firm Placing, each Firm Placee (and any person acting on such Firm Placee's behalf) irrevocably acknowledges, confirms, undertakes, represents, warrants and agrees (as the case may be) with the Joint Bookrunners (in their capacity as placing agents of the Company in respect of the Firm Placing) and the Company, in each case as a fundamental term of its application for Firm Placing Shares, that:

1.                it has read and understood this Announcement, including this Appendix IV, in its entirety and that it has neither received nor relied on, and will not rely on, any information given or any investigations, representations, warranties or statements made at any time by any person in connection with the Capital Raising, the Bookbuild, the Firm Placing, the Company, the Firm Placing Shares or otherwise, other than the information contained in this Announcement and that its participation in the Bookbuild and the Firm Placing and its subscription for Firm Placing Shares is solely in reliance on the information contained in this Announcement;

2.                neither of the Joint Bookrunners nor the Company nor any of their respective affiliates or Representatives nor any person acting on behalf of any of them has provided, and none of them will provide, it with any material or information regarding the Capital Raising, the Firm Placing Shares, the Bookbuild, the Firm Placing or the Company or any other person other than this Announcement, nor has it requested the Joint Bookrunners, the Company, any of their respective affiliates or Representatives or any person acting on behalf of any of them to provide it with any such material or information;

3.                unless otherwise specifically agreed with the Joint Bookrunners, it and/or the person on behalf it is participating is not, and at the time the Firm Placing Shares are subscribed for, neither it nor the beneficial owner of the Firm Placing Shares will be, a resident of any Excluded Territory or any other jurisdiction in which it is unlawful to make or accept an offer to acquire the Firm Placing Shares;

4.                the Firm Placing Shares have not been and will not be registered or otherwise qualified, for offer and sale nor will an offering document, prospectus, offering memorandum or admission document be cleared or approved in respect of any of the Firm Placing Shares under the securities legislation of any Excluded Territory and, subject to certain exceptions, may not be offered, sold, transferred, delivered or distributed, directly or indirectly, in or into those jurisdictions or in any country or jurisdiction where any such action for that purpose is required;

5.                the content of this Announcement and this Appendix IV have been prepared by and are exclusively the responsibility of the Company and that neither of the Joint Bookrunners nor any of their respective affiliates or Representatives nor any person acting on its or their behalf has or shall have any responsibility or liability for any information, representation, statement or opinion contained therein or any information previously or subsequently published by or on behalf of the Company and will not be liable for its decision to participate in the Capital Raising based on any information, representation, statement or opinion contained in such documents or otherwise;

6.                the only information on which it is entitled to rely and on which it has relied in committing itself to subscribe for the Firm Placing Shares is contained in this Announcement (including this Appendix IV), such information being all that it deems necessary or appropriate to make an investment decision in respect of the Firm Placing Shares, and that it has neither received nor relied on any other information given or investigations, representations, warranties or statements made by the Joint Bookrunners or the Company or any of their respective affiliates or Representatives or any person acting on its or their behalf and neither of the Joint Bookrunners nor the Company nor any of their respective affiliates or Representatives will be liable for any Firm Placee's decision to accept an invitation to participate in the Firm Placing based on any other information, representation, warranty or statement;

7.                it has relied on its own investigation, examination and due diligence of the business, financial or other position of the Company in deciding to participate in the Firm Placing;

8.                it has not relied on, and will not rely on, any information relating to the Company contained or which may be contained in any research report or investor presentation prepared by either or both of the Joint Bookrunners, any of their respective affiliates or any person acting on its or their behalf and understands that (i) neither of the Joint Bookrunners nor any of their respective affiliates nor any person acting on its or their behalf has or shall have any responsibility or liability for (x) public information relating to the Company; or (y) any additional information that has otherwise been made available to it, whether at the date of publication of such information, the date of this Announcement or otherwise; and (ii) neither of the Joint Bookrunners nor any of their respective affiliates nor any person acting on its or their behalf makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of such information, whether at the date of publication of such information, the date of this Announcement or otherwise;

9.                (i) the allocation, allotment, issue and delivery to it, or the person specified by it for registration as holder of Firm Placing Shares will not give rise to a liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services); (ii) it is not participating in the Firm Placing as nominee or agent for any person to whom the allocation, allotment, issue or delivery of the Firm Placing Shares would give rise to such a liability; and (iii) the Firm Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer Firm Placing Shares into a clearance service;

10.             that no action has been or will be taken by the Company, the Joint Bookrunners or any person acting on behalf of the Company or the Joint Bookrunners that would, or is intended to, permit a public offer of the Firm Placing Shares in the United States or in any country or jurisdiction where any such action for that purpose is required;

11.             it (and any person acting on its behalf) is entitled to subscribe for the Firm Placing Shares under the laws of all relevant jurisdictions which apply to it and that it has fully observed such laws and obtained all such governmental and other guarantees, permits, authorisations, approvals and consents which may be required thereunder and complied with all necessary formalities and that it has not taken any action or omitted to take any action which will or may result in the Joint Bookrunners, the Company or any of their respective affiliates acting in breach of the legal or regulatory requirements of any jurisdiction in connection with the Firm Placing;

12.             it (and any person acting on its behalf) has all necessary capacity and has obtained all necessary consents and authorities to enable it to commit to its participation in the Firm Placing and to perform its obligations in relation thereto (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms set out or referred to in these terms and conditions) and will honour such obligations;

13.             it has complied with its obligations under the Criminal Justice Act 1993, the UK Market Abuse Regulation and in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002, the Terrorism Act 2000, the Anti-Terrorism Crime and Security Act 2001, the Terrorism Act 2006, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and the Money Laundering Sourcebook of the FCA and any related or similar rules, regulations or guidelines issued, administered or enforced by any government agency having jurisdiction in respect thereof (together the "Regulations") and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations. If within a reasonable time after a request for verification of identity, the relevant Joint Bookrunner has not received such satisfactory evidence, the relevant Joint Bookrunner may, in its absolute discretion, terminate the Firm Placee's participation in the Firm Placing in which event all funds delivered by the Firm Placee to the relevant Joint Bookrunner will be returned without interest to the account of the drawee bank or CREST account from which they were originally debited;

14.             it is acting as principal only in respect of the Firm Placing or, if it is acting for any other person: (i) it is duly authorised to do so and has full power to make, and does make, the acknowledgments, representations and agreements herein on behalf of each such person; and (ii) it is and will remain liable to the Joint Bookrunners and the Company for the performance of all its obligations as a Firm Placee in respect of the Firm Placing (regardless of the fact that it is acting for or on behalf of another person);

15.             if in a member state of the EEA, it is a "Qualified Investor" within the meaning of Article 2(e) of the EU Prospectus Regulation;

16.             if in the United Kingdom, it and any person acting on its behalf is a "Qualified Investor" within the meaning of Article 2(e) of the UK Prospectus Regulation: (i) who falls within the definition of "investment professional" in Article 19(5) of the Order; or (ii) who falls within Article 49(2) of the Order; or (iii) to whom this Announcement may otherwise lawfully be communicated and it undertakes that it will subscribe for, hold, manage and (if applicable) dispose of any Firm Placing Shares that are allocated to it for the purposes of its business only;

17.             it understands that any investment or investment activity to which this Announcement relates is available only to Relevant Persons and will be engaged in only with Relevant Persons, and further understands that this Announcement must not be acted on or relied on by persons who are not Relevant Persons;

18.             it will not distribute, forward, transfer or otherwise transmit this Announcement or any part of it, or any other presentation or other materials concerning the Firm Placing or the Open Offer (including electronic copies thereof), in or into the United States to any person and it has not distributed, forwarded, transferred or otherwise transmitted any such materials to any person;

19.             where it is subscribing for the Firm Placing Shares for one or more managed accounts, it is authorised in writing by each managed account to subscribe for the Firm Placing Shares for each managed account and it has full power to make, and does make, the acknowledgements, representations and agreements herein on behalf of each such account;

20.             if it is a pension fund or investment company, its subscription for Firm Placing Shares is in full compliance with all applicable laws and regulations;

21.             if it is acting as a financial intermediary, as that term is used in Article 5(1) of the EU Prospectus Regulation or the UK Prospectus Regulation (as applicable), if in a member state of the EEA or the UK, it understands that: (i) the Firm Placing Shares acquired by and/or subscribed for by it in the Firm Placing will not be acquired and/or subscribed for on a non-discretionary basis on behalf of, nor will they be acquired or subscribed for with a view to their offer or resale to, persons in a member state of the EEA or the UK (as applicable) other than Qualified Investors (as such term is defined in either the EU Prospectus Regulation or the UK Prospectus Regulation (as applicable)), or in circumstances which may give rise to an offer of securities to the public other than an offer or resale, in a member state of the EEA or the UK, to Qualified Investors, or in circumstances in which the prior consent of the Joint Bookrunners has been given to each such proposed offer or resale; or (ii) where the Firm Placing Shares have been acquired or subscribed for by it on behalf of persons in any member state of the EEA or the UK other than Qualified Investors, the offer of those Firm Placing Shares to it is not treated under the EU Prospectus Regulation or the UK Prospectus Regulation (as applicable) as having been made to such persons;

22.             it has not offered or sold and, prior to the expiry of a period of six months from Admission, will not offer or sell any Firm Placing Shares to persons in the United Kingdom, except to Relevant Persons or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of FSMA;

23.             any offer of Firm Placing Shares may only be directed at persons in member states of the EEA who are Qualified Investors and that it has not offered or sold and will not offer or sell any Firm Placing Shares to persons in the EEA prior to Admission except to Qualified Investors or otherwise in circumstances which have not resulted in and which will not result in an offer to the public in any member state of the EEA within the meaning of the EU Prospectus Regulation;

24.             it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Firm Placing Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person;

25.             it has complied and will comply with all applicable laws (including, in the United Kingdom, all relevant provisions of FSMA and the Financial Services Act 2012) with respect to anything done by it in relation to the Firm Placing Shares;

26.             if it has received any "inside information" as defined in the UK Market Abuse Regulation and the EU Market Abuse Regulation about the Company in advance of the Firm Placing, it has not: (i) dealt (or attempted to deal) in the securities of the Company; (ii) encouraged, recommended, induced or required another person to deal in the securities of the Company; or (iii) disclosed such information to any person except as permitted by the UK Market Abuse Regulation and the EU Prospectus Regulation, prior to the information being made publicly available;

27.             (i) it (and any person acting on its behalf) has the funds available to pay for, and has the capacity and authority and is otherwise entitled to acquire, the Firm Placing Shares under the laws of all relevant jurisdictions which apply to it; (ii) it has paid any issue, transfer or other taxes due in connection with its participation in any territory; (iii) it has not taken any action which will or may result in the Company, the Joint Bookrunners, any of their respective affiliates or any person acting on behalf of any of them being in breach of the legal and/or regulatory requirements and/or any anti-money laundering requirements of any territory in connection with the Firm Placing; and (iv) the subscription for the Firm Placing Shares by it (or any person acting on its behalf) will be in compliance with applicable laws and regulations in the jurisdiction of its residence, the residence of the Company, or otherwise;

28.             it (and any person acting on its behalf) will make payment for the Firm Placing Shares allocated to it in accordance with this Announcement (including these terms and conditions) no later than the due time and date set out herein against delivery of such Firm Placing Shares to it, failing which the relevant Firm Placing Shares may be placed with other persons or sold as the Joint Bookrunners may in their discretion determine and without liability to such Firm Placee. It will, however, remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such Firm Placing Shares and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest, fines, charges or penalties) due pursuant to the terms set out or referred to in these terms and conditions which may arise upon the sale of such Firm Placee's Firm Placing Shares on its behalf;

29.             its allocation (if any) of Firm Placing Shares will represent a maximum number of Firm Placing Shares to which it will be entitled, and required, to acquire, and that the Joint Bookrunners or the Company may call upon it to acquire a lower number of Firm Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;

30.             neither the Joint Bookrunners nor any of their respective affiliates or Representatives nor any person acting on its or their behalf, is making any recommendations to it or advising it regarding the suitability or merits of any transactions it may enter into in connection with the Firm Placing and participation in the Firm Placing is on the basis that it is not and will not be a client of either Joint Bookrunner and neither of the Joint Bookrunners has any duties or responsibilities to it for providing the protections afforded to its clients or customers or for providing advice in relation to the Firm Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing and Sponsor Agreement nor for the exercise or performance of any of the Joint Bookrunners' rights and obligations thereunder including any rights to waive or vary any Conditions or exercise any termination right;

31.             the person whom it specifies for registration as holder of the Firm Placing Shares will be (i) itself; or (ii) its nominee, as the case may be. Neither the Joint Bookrunners, the Company nor any of their respective affiliates or Representatives will be responsible for any liability to stamp duty or stamp duty reserve tax or other similar duties or taxes (together with any interest, fines or penalties) resulting from a failure to observe this requirement. Each Firm Placee and any person acting on behalf of such Firm Placee agrees to indemnify the Company, the Joint Bookrunners and their respective affiliates and Representatives in respect of the same on an after-tax basis on the basis that the Firm Placing Shares will be allotted to the CREST stock account of a Joint Bookrunner who will hold them as nominee on behalf of such Firm Placee until settlement in accordance with its standing settlement instructions;

32.             these terms and conditions and any agreements entered into by it pursuant to these terms and conditions (including any non-contractual obligations arising out of or in connection with such agreements) shall be governed by and construed in accordance with the laws of England and Wales and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Firm Placing Shares (together with any interest chargeable thereon) may be taken by the Joint Bookrunners or the Company in any jurisdiction in which the relevant Firm Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange;

33.             each of the Joint Bookrunners, the Company and their respective affiliates and others will rely upon the truth and accuracy of the representations, warranties, agreements, undertakings and acknowledgements set forth herein and which are given to the Joint Bookrunners on their own behalf and on behalf of the Company and are irrevocable and it irrevocably authorises the Joint Bookrunners and the Company to produce or otherwise disclose this Announcement, pursuant to, in connection with, or as may be required by any applicable law or regulation, administrative or legal proceeding or official inquiry with respect to the matters set forth herein;

34.             it will indemnify on an after-tax-basis and hold the Company, the Joint Bookrunners and their respective affiliates and Representatives and any person acting on behalf of any of them harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of, directly or indirectly, or in connection with any breach by it of the representations, warranties, acknowledgements, agreements and undertakings in these terms and conditions and further agrees that the provisions of these terms and conditions shall survive after completion of the Firm Placing;

35.             it irrevocably appoints any director of a Joint Bookrunner as its agent for the purposes of executing and delivering to the Company and/or its registrars any documents on its behalf necessary to enable it to be registered as the holder of any of the Firm Placing Shares agreed to be taken up by it under the Firm Placing;

36.             its commitment to acquire Firm Placing Shares on the terms set out herein and in the contract note or form of confirmation will continue notwithstanding any amendment that may in future be made to the terms and conditions of the Firm Placing and that it will have no right to be consulted or require that their consent be obtained with respect to the Company's or the Joint Bookrunners' conduct of the Firm Placing;

37.             in making any decision to subscribe for the Firm Placing Shares: (i) it has sufficient knowledge, sophistication and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for the Firm Placing Shares; (ii) it is experienced in investing in securities of this nature in this sector and is aware that it may be required to bear, and is able to bear, the economic risk of participating in, and is able to sustain a complete loss in connection with, the Firm Placing and has no need for liquidity with respect to its investment in the Firm Placing Shares; (iii) it has relied solely on its own investigation, examination, due diligence and analysis of the Company and its affiliates taken as a whole, including the markets in which the Group operates, and the terms of the Firm Placing, including the merits and risks involved, and not upon any view expressed or information provided by or on behalf of either of the Joint Bookrunners; (iv) it has had sufficient time and access to information to consider and conduct its own investigation with respect to the offer and purchase of the Firm Placing Shares, including the legal, regulatory, tax, business, currency and other economic and financial considerations relevant to such investment and has so conducted its own investigation to the extent it deems necessary to enable it to make an informed and measured decision with respect to making an investment in the Firm Placing Shares; (v) it is aware and understands that an investment in the Firm Placing Shares involves a considerable degree of risk; and (vi) it will not look to the Joint Bookrunners, any of their respective affiliates or Representatives, or any person acting on its or their behalf for all or part of any such loss or losses it or they may suffer;

38.             neither the Company nor the Joint Bookrunners owes any fiduciary or other duties to it or any Firm Placee in respect of any representations, warranties, undertakings or indemnities in the Placing and Sponsor Agreement or these terms and conditions;

39.             it may not rely on any investigation that the Joint Bookrunners or any person acting on their behalf may or may not have conducted with respect to the Company and its affiliates or the Firm Placing and the Joint Bookrunners have not made any representation or warranty to it, express or implied, with respect to the merits of the Firm Placing, the subscription for or purchase of the Firm Placing Shares, or as to the condition, financial or otherwise, of the Company and its affiliates, or as to any other matter relating thereto, and nothing herein shall be construed as any investment or other recommendation to it to acquire the Firm Placing Shares. It acknowledges and agrees that no information has been prepared by, or is the responsibility of, the Joint Bookrunners for the purposes of the Firm Placing;

40.             in connection with the Firm Placing, either Joint Bookrunner and any of their respective affiliates acting as an investor for its own account may take up shares in the Company and in that capacity may retain, purchase or sell for its own account such shares in the Company and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the Firm Placing. Accordingly, references in these terms and conditions to Firm Placing Shares being issued, offered or placed should be read as including any issue, offering or placement of such shares in the Company to the Joint Bookrunners or any of its affiliates acting in such capacity. In addition, the Joint Bookrunners or any of their respective affiliates may enter into financing arrangements and swaps with investors in connection with which the Joint Bookrunners or any of their respective affiliates may from time to time acquire, hold or dispose of such securities of the Company, including the Firm Placing Shares. Neither of the Joint Bookrunners nor any of their respective affiliates intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so;

41.             it understands, and each account it represents has been advised that the Firm Placing Shares have not been and will not be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States and may not be offered, sold, acquired, resold, transferred or delivered, directly or indirectly, within, or into or in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any securities laws of any state or other jurisdiction of the United States; and

42.             (i) it and the person(s), if any, for whose account or benefit it is acquiring the Firm Placing Shares are purchasing the Firm Placing Shares in an "offshore transaction" as defined in Regulation S under the US Securities Act; (ii) it is aware of the restrictions on the offer and sale of the Firm Placing Shares pursuant to Regulation S; and (iii) the Firm Placing Shares have not been offered to it by means of any "directed selling efforts" as defined in Regulation S.

The foregoing acknowledgements, agreements, undertakings, representations, warranties, indemnities and confirmations are given for the benefit of each of the Company and the Joint Bookrunners (for their own benefit and, where relevant, the benefit of their respective affiliates and any person acting on their behalf) and are unconditional and irrevocable.

The agreement to allot and issue Firm Placing Shares to Firm Placees (or the persons for whom Firm Placees are contracting as nominee or agent) free of UK stamp duty and UK stamp duty reserve tax relates only to their allotment and issue to Firm Placees, or such persons as they nominate as their agents, direct from the Company for the Firm Placing Shares in question. Neither the Company nor the Joint Bookrunners will be responsible for any UK stamp duty or UK stamp duty reserve tax (including any interest, fines and penalties relating thereto) arising in relation to the Firm Placing Shares in any other circumstances.

Such agreement is subject to the representations, warranties and further terms above and also assumes, and is based on a warranty from each Firm Placee, that the Firm Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer the Firm Placing Shares into a clearance service. Neither the Company nor the Joint Bookrunners are liable to bear any stamp duty or stamp duty reserve tax or any other similar duties or taxes (including, without limitation, other stamp, issue, securities, transfer, registration, capital, or documentary duties or taxes) ("transfer taxes") that arise (i) if there are any such arrangements (or if any such arrangements arise subsequent to the acquisition by Firm Placees of Firm Placing Shares) or (ii) on a sale of Firm Placing Shares, or (iii) otherwise than under the laws of the United Kingdom. Each Firm Placee to whom (or on behalf of whom, or in respect of the person for whom it is participating in the Firm Placing as an agent or nominee) the allocation, allotment, issue or delivery of Firm Placing Shares has given rise to such transfer taxes undertakes to pay such transfer taxes forthwith, and agrees to indemnify on an after-tax basis and hold the Joint Bookrunners and/or the Company and their respective affiliates (as the case may be) harmless from any such transfer taxes, and all interest, fines or penalties in relation to such transfer taxes. Each Firm Placee should, therefore, take its own advice as to whether any liability for such transfer taxes arises.

Each Firm Placee, and any person acting on behalf of each Firm Placee, acknowledges and agrees that the Joint Bookrunners and/or any of their respective affiliates may, at their absolute discretion, agree to become a Firm Placee in respect of some or all of the Firm Placing Shares. Each Firm Placee acknowledges and is aware that the Joint Bookrunners are receiving a fee and/or commission in connection with their role in respect of the Firm Placing as detailed in the Placing and Sponsor Agreement.

When a Firm Placee or person acting on behalf of the Firm Placee is dealing with the Joint Bookrunners any money held in an account with a Joint Bookrunner on behalf of the Firm Placee and/or any person acting on behalf of the Firm Placee will not be treated as client money within the meaning of the rules and regulations of the FCA made under FSMA. The Firm Placee acknowledges that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated from the relevant Joint Bookrunner's money in accordance with the client money rules and will be used by the relevant Joint Bookrunner in the course of its own business; and the Firm Placee will rank only as a general creditor of the relevant Joint Bookrunner.

Time is of the essence as regards each Firm Placee's obligations under this Appendix IV.

Any document that is to be sent to a Firm Placee in connection with the Firm Placing will be sent at its risk and may be sent to it at any address provided by it to either of the Joint Bookrunners.

The rights and remedies of the Joint Bookrunners and the Company under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of any one such right or remedy will not prevent the exercise of others.

Each Firm Placee may be asked to disclose, in writing or orally to the Joint Bookrunners: (a) if he or she is an individual, his or her nationality; or (ii) if he or she is a discretionary fund manager, the jurisdiction in which the funds are managed or owned.

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

All times and dates in this Announcement may be subject to amendment. The Joint Bookrunners shall notify the Firm Placees and any person acting on behalf of the Firm Placees of any changes.

APPENDIX V

Risk Factors

Any investment in the Company or the New Ordinary Shares is subject to a number of risks. Prior to investing in the New Ordinary Shares, prospective investors should review and consider this Announcement carefully and, in its entirety and consult with their professional advisers before acquiring any New Ordinary Shares. You should carefully consider the risks and uncertainties associated with any such investment, the Group's business, strategy and the industry in which it operates, together with all other information contained in this Announcement including, in particular, the risk factors described below.

The following is not an exhaustive list or explanation of all risks which prospective investors may face when making an investment in the Company or the New Ordinary Shares and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, results of operations or financial condition and, if any such risk should materialise, the price of such securities may decline and investors could lose all or part of their investment. Prospective investors should carefully consider whether an investment in the New Ordinary Shares is suitable for them in the light of the information in this Announcement and their personal circumstances.

1.                RISKS RELATED TO THE GROUP'S FINANCIAL SITUATION, BUSINESS AND INDUSTRY

1.1             If the Firm Placing is not completed successfully and a 'reasonable worst case scenario' occurs, as per the Company's financial forecasts and sensitivities scenarios, and no other mitigating action was taken by the Company, the Company's liquidity headroom would fall to such a level that the Company will breach the financial covenants contained in its financing documents which would have a material adverse effect on the Group's business, financial condition and results of operations and could result in the Group being forced into bankruptcy or liquidation with Shareholders at risk of losing all or a substantial part of the value of their investment in the Company

In connection with the Capital Raising and as part of the Group's business planning, the Board has closely monitored the Group's financial forecasts, key uncertainties and sensitivities and has reviewed a number of scenarios, including base case and reasonable worst case downside scenarios. The base case and reasonable worst case downside scenarios reviewed by the Board include the minimum net proceeds of the Capital Raising which only includes the proceeds from the Firm Placing (which is underwritten) and does not include proceeds from the Open Offer.

If the Group's results over the relevant period were to be in line with the Company's current base case scenario, it would not be in breach of the financial covenants contained in its financing documents or have insufficient liquidity headroom at any point for the 12 month period following the date of this document, even if the Firm Placing does not proceed. The Company confirms that its outlook remains unchanged from that outlined in the interim results statement for the twenty six weeks to 30 May 2021.

However, if a reasonable worst case downside scenario were to occur and the Firm Placing were not to proceed, and no other mitigating action was able to be taken, then the Company's liquidity would be £8.9 million lower than the required level in its financing documents which will breach the financial covenants contained in such documents.

Under the reasonable worst case scenario, the Group would breach the Consolidated Net Debt to EBITDA ratio covenant for the testing period ending November 2021, as the Consolidated Net Debt to EBITDA ratio on that date is forecasted in those projections to exceed the 3.5 times multiple threshold which would also constitute an event of default under the terms of the Facilities Agreement. An event of default caused by a covenant breach would give the lenders the right to immediately withdraw and cancel the Group's facility and demand repayment of all outstanding drawings on the facility.

There can be no assurance that the reasonable worst case downside scenario will be avoided or that the Company's low levels of liquidity headroom will be sufficient in circumstances where the Company's actual performance is below the reasonable worst case downside scenario projections. Furthermore, in this scenario there is no certainty that the Group would be able to obtain an alternate form of funding or effect a sale of the whole or part of the Group's business, on acceptable terms and within the relevant timescales. This would leave insufficient cash resources to repay the Group's lenders in the event that the Group's creditors accelerate the payment amounts owing to them and/or to continue trading. As a result, the Group could be forced into bankruptcy or liquidation, with Shareholders at risk of losing all or a substantial part of the value of their investments in the Company.

Furthermore, if the Firm Placing is not completed successfully then, absent alternative measures, the Group does not expect to capitalise on its strategy to increase the number of Morrisons Daily stores or increase the pace of the rollout of the Morrisons Daily stores. If the Group fails to meet the intended pace of its rollout of Morrisons Daily stores, it may create an opportunity for the Group's competitors to take market share in key convenience store locations which may have an adverse impact on the Group's growth prospects, profitability and results of operations.

The Group currently operates with significant levels of leverage. Such levels of leverage have and continue to inhibit the ability of the Group to invest in growth and to take advantage rapidly and effectively of new market opportunities. Absent a successful Firm Placing, the leverage ratio will continue to inhibit the Group's ability to invest in its store estate and to capitalise on various emerging opportunities, thereby having an adverse impact on the Group's growth prospects, profitability and results of operations.

1.2             The COVID-19 pandemic has had, and is expected to continue to have, a significant impact on the Group's business, financial condition, results of operations and prospects

The national lockdowns associated with the COVID-19 pandemic have led to increased footfall to the Group's stores as customers work from home with strong like-for-like sales. However, the COVID-19 pandemic has resulted in a shift in sales to lower-margin take-home products and multi-packs, with consumers being less likely to spend money on one-off, discretionary higher margin items. If the sales product mix does not normalise it may mean that the Group's margins are slower to revert to their pre- COVID-19 pandemic levels, and there can be no guarantee these margins may recover in the wake of the COVID-19 pandemic. Such developments would have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

In addition, the COVID-19 pandemic has increased the operational risks and challenges faced by the Group, including the need to limit the number of customers in stores and to invest more heavily in creating a safe shopping environment for staff and customers. As a consequence, the Group has recorded an increase in operating costs since March 2020 and there can be no guarantee that such increased operating costs can be avoided in the future.

Furthermore, if the stay-at-home restrictions are re-introduced and social-distancing restrictions continue in their current form, or, if new restrictions are introduced to combat the spread of COVID-19 this is expected to continue to have a significant impact on the Group's margins and profitability as the Group expects that such restrictions would continue the trend of a shift towards lower-margin products and away from discretionary, higher-margin purchases.

1.3             The Group is exposed to general UK economic conditions as well as general market trends in the areas in which it operates. Changes in general UK economic conditions and customer discretionary trends could have a material adverse effect on the Group's business, financial condition, results of operations and prospects

The entirety of the Group's revenue is generated within the United Kingdom. Consequently, any deterioration in consumer confidence, particularly in respect of the convenience and newsagent offerings which constitute the core of the Group's customer proposition, could affect spending levels and the cost of goods. In particular, consumer confidence may be linked to broader economic conditions such as inflation, currency fluctuation, interest rates, supply and demand of capital and industrial disruption. A general decline in economic conditions or disruptions in specific industries characterised by falls in consumer spending could have an adverse effect on the Group's business, prospects, results of operations, financial condition and prospects.

Furthermore, the COVID-19 pandemic has resulted in the acceleration of certain pre-existing trends (such as the move towards online retailing) that could undermine the Group's fundamental financial position. For example, the greater commonality of working from home during the COVID-19 pandemic, whilst increasing the footfall in local convenience store locations, has been accompanied by reduced spending on discretionary spending such as impulse confectionery. The Directors believe that the Group's ability to deal with such a trend will depend on its ability to offer more high quality, better value, day-to-day grocery products within its convenience stores in order to prevent consumers defecting to other convenience outlets, discounters or larger supermarkets which may have more extensive, or better value, grocery product lines.

1.4             Adverse developments with respect to the safety or the contents of the groceries that the Group sells and/or the grocery industry in general may damage the Group's reputation, increase its costs of operations or decrease demand for its products

As a grocery retailer, the Group is subject to various regulations and laws in respect of the safety and contents of grocery products. Most notable in this regard is the proposed introduction of legislation by the UK Government to restrict the promotion of products which are high in fat, salt and sugar ("HFSS") in store entrances, aisle ends and checkouts for stores over 185.8 square metres (2,000 square feet) and in the equivalent locations in online marketplaces which is currently expected to come into force in April 2022. The Group currently has 228 stores which are 2,000 square feet or more. Typically, HFSS items are higher margin. If the regulations come into force they would likely affect the Group's existing sales of items such as confectionery and sugared drinks, reducing sales and ultimately having an adverse effect on the Group's business, prospects, results of operations and financial condition.

1.5             Increases in the Group's operational cost base could impact the Group's profitability if it is unable to pass such cost increases on to its customers

The Group has a high operational cost base and could experience higher operational costs should there be an increase in its operational costs which it is unable to pass on to its customers through higher prices. Such cost increases may be caused by an increase in any of the following: rent and business  rates; the cost of energy (in running the Group's stores); the cost of fuel which would increase the cost of delivering products to the Group's stores; the cost of groceries (and the other products stocked by the Group); compliance costs resulting from changes in law, regulations or government policies; insurance premiums; payroll costs; and costs associated with maintaining safety precautions in relation to the COVID-19 pandemic. In addition, a rise in inflation would affect the Group generally by increasing the overall cost of operations. Although the general inflation rate in the UK has been low in recent years the rate has increased markedly with the Consumer Prices Index rising to 2.5% in the twelve months to June 2021.

In the event that operating costs increase without a corresponding rise in revenues the Group's profitability is likely to be adversely affected which would have a negative impact on the Group's business, prospects, results of operations and financial condition. In particular, if the Group increases the costs of its products it may lead to a reduction in the average basket size sold to its customers which is also expected to have a negative impact on the Group's revenue and profitability.

If the Group experiences an increase in its operational cost base which it is unable to pass on to its customers it would be likely to have an adverse impact on the Group's profitability, results of operations and financial performance.

1.6             The Group operates in a competitive industry and new entrants continue to emerge, particularly in the online environment

The Group operates in a competitive market. In the context of an increasing focus by consumers on quality groceries during the COVID-19 pandemic, the Group competes with a wide variety of retailers of varying sizes both locally and nationally, including multiples, supermarkets, co-operatives, discounters and independents. Certain of the Group's competitors, including supermarkets, have greater resources than the Group and may be able to offer products at lower prices. In addition, if a competitor adopts an aggressive expansion programme, and opens a significant number of stores in or near to the locations in which the Group's stores are located, the Group may experience reduced footfall in its stores which may ultimately lower the Group's revenues and profits. Failure by the Group to compete successfully with competitors on factors such as price, product range, quality, convenience, location and service could impact its future results and revenues.

In addition, the Group has experienced an increase in competition from online retailers since 2019 which often do not sustain a physical estate of stores and deliver convenience products directly to customers. A rising number of online retailers can offer customers access to the Group's core product categories via the internet. More recently, the Group has also experienced competition from online convenience store aggregators such as Gorillas.

Despite the Group's current attempts to meet consumer demand for a grocery-led convenience offering and increasing online presence, there can be no assurance that it will be able to maintain its competitive position in the future. To remain competitive and to ensure that it does not lose market share to such new entrants, the Group may need to invest more heavily in product prices, promotional activity and further develop its online presence which may have an adverse impact of the Group's profitability, results of operations and financial condition.

1.7             Failure by the Group to anticipate consumer trends and tastes correctly could have a material adverse effect on the Group's business

The success of the Group's business depends in part on the Group's ability to identify and develop services in line with customer trends regarding consumer tastes, preferences and spending patterns. If the Group fails to predict such trends effectively, or is unable to source products and adjust purchases to match such trends, it may be unable to generate income from these new developments.

The Group may also accrue excess inventory which it may have to sell at reduced prices, which could have a material adverse effect on the Group's business, prospects, results of operations and financial condition. An example of a consumer trend which the Group will need to anticipate suitably is the possible fall in demand for tobacco products, which represented 33.4% of the Group's revenue for FY 2020 and which plays a significant role in driving customers to the Group's stores. Government legislation designed to restrict the attractiveness of tobacco purchases to the public and the increasing popularity of tobacco substitutes is expected to result in a continued decrease in tobacco popularity throughout the 2020s. Similarly, the introduction of restrictions around alcohol purchases such as minimum unit pricing may restrict the attractiveness of alcohol purchases to the public. This trend may result in decreased footfall at the Group's stores, a reduction in the average basket size and ultimately reduce revenues and profits for the Group.

1.8             A failure to implement the Group's strategy may adversely affect its business

In the context of the COVID-19 pandemic, the Group's current core strategy involves providing a leading convenience grocery proposition to customers, consolidating its store estate by disposing of unprofitable sub-scale sites and benefitting from the Morrisons brand by converting 350 McColl's- branded convenience stores into the 'Morrisons Daily' format.

The success of this core strategy will depend on several factors, including the pace at which the Group is able to rollout the Morrisons Daily stores, selection of appropriate, unprofitable sub-scale sites to sell and negotiating acceptable financial terms with prospective buyers of those sites. Against the backdrop of the COVID-19 pandemic when many stores have been forced to close and there has been a reduction in demand for commercial real estate, there is no guarantee that the Group will be able to find willing buyers and negotiate acceptable financial terms, meaning that the Group may be left with the cost of unprofitable sites of which it is unable to dispose. In addition, if the Group is unable to implement its strategy quickly then there is a risk that it will cede market share to its competitors who may be better placed to capitalise on prevalent market trends.

The Group is seeking to convert 350 McColl's branded convenience stores into the 'Morrisons Daily' format in order to bring Morrisons own-brand products to customers within a well-recognised Morrisons fascia. However, there is a risk the Group may be unable to convert its existing stores into this format or that following conversion the stores prove to be less profitable than is currently expected based on the performance of the limited number of pilot sites.

1.9             The Group is reliant on the reputation of its brands, and damage to the image and reputation of the Group could adversely impact the Group's financial results and operations. Additionally, damage to the reputation of Morrisons could adversely affect the Group's business and future profitability

The McColl's, Martin's and RS McColl brands are important assets of the Group's business. The Group is exposed to risks which could damage these brands, including complaints being made or litigation being initiated by customers, employees or other third parties, employee misconduct (including fraudulent acts or the taking of bribes), safety or operational failures, adverse regulatory investigations, negative publicity or press speculation (including adverse social media commentary) and poor service.

In addition, adverse publicity about another operator in the Group's market may have a negative impact on the Group even though the Group is not (or has not been) directly involved. Due to the Group's partnership with Morrisons and increasing reliance on the 'Morrisons Daily' convenience store format, the Group is also at particular risk of Morrisons' own reputation becoming diminished in the public eye.

Failure to protect the Group's own brands or damage to the reputation of Morrisons could affect the Group's operations in a number of ways, ranging from-but not limited to-a loss of consumer confidence in the Group and consequently a loss of customers. Such effects may adversely impact partnerships with suppliers and the Groups ability to recruit and retain the best staff. All of these factors could in turn have a material adverse effect on the Group's business, prospects, results of operations and financial condition.

1.10           The Group is reliant on a small number of key third party suppliers and may be negatively affected by supply chain disruptions and changes in supplier dynamics

The Group is reliant on a small number of key third party suppliers such as Morrisons and is thus exposed to supply chain disruptions, changes in supplier dynamics and interruptions in supply all of which may adversely impact the Group's prospects and results of operations.

In relation to supply chain disruptions, the Group is also entirely reliant on third party suppliers to supply the Group's products by road, and is therefore exposed to the risks of traffic congestion, fuel shortages, roadworks and inclement weather (particularly snow), all of which could render deliveries from its suppliers difficult or even impossible. Furthermore, the Group has also experienced disruption in the supply of certain products for short periods of time following the UK's withdrawal from the European Union. If the supply of products to the Group's stores is interrupted or stopped, there could be a material adverse effect on the Group's business, prospects, results of operations and financial condition.

In relation to supplier dynamics, the Group has no warehousing and distribution operation of its own and relies on a limited number of suppliers for delivery of products to its stores, such as Morrisons, with whom the Group has entered into an exclusive supply agreement covering the vast majority of the Group's product range. Termination of the Group's agreement with Morrisons or the failure of Morrisons to comply with its obligations under that agreement could result in the interruption or loss of supply of core category products to the Group's stores. Furthermore, if Morrisons comes under new ownership or changes its strategy away from wholesale, the Group would need to find alternative suppliers at the expiry of the Morrisons supply contract in 2027. The Group maintains good relationships with other suppliers and has previously mitigated the effect of any disruption by obtaining supplies from alternative sources, however interruption or loss of supply from Morrisons could nevertheless have a material adverse effect on the Group's business, prospects, results of operations and financial condition.

1.11           The Group relies on key third party suppliers to deliver outsourced services to the Group

The Group outsources certain of its back-office services such as payroll and aspects of its information technology infrastructure and is thus reliant on such third party suppliers to deliver these services for the Group. If one or more key third party suppliers terminate their service agreements with the Group for any reason, the Group may not be able to source alternative suppliers, prior to expiry of the contractual notice period, with similar capabilities at a cost that is the same or lower than the Group currently pays. In addition, should the third party supplier become unable to perform the contracted service, the Group may:

·                       incur additional costs in order to deliver on its commitments to employees or to maintain its information technology in working order which may adversely impact the Group's profitability;

·                       be unable to pay staff on a timely basis leading to staff dissatisfaction and resignations coupled with reputational damage that may adversely affect customer footfall and sales;

·                       be unable to maintain a functioning information technology infrastructure leading to loss of sales or customer dissatisfaction which may adversely impact the Group's reputation and sales; and/or

·                       no longer be able to provide information to regulators, including tax authorities, that could lead to fines or penalties.

1.12           If there is a shortage of delivery drivers available to work in connection with the Group's business, it may negatively impact the results of the Group's operations

The Group is reliant on delivery drivers, and in particular lorry drivers, to deliver products to its stores for onward sale to the Group's end-customers. The UK is currently experiencing a shortage of suitably qualified lorry drivers which is commonly understood to be as a result of COVID-19 and Brexit. If the recent driver shortages in the UK continues, it may negatively impact the Group's ability to ensure adequate and timely delivery of products to its stores. This may lead to increased distribution costs for the Group which could have a material adverse effect on the Group's business, profitability, results of operations and financial conditions.

1.13           Increases in the minimum wage and the availability of workers could increase staff costs

Inflation affects the Group by increasing employee costs and the overall cost of operations. Although the general inflation rate in the UK has been low in recent years, the rate has increased markedly with the UK Consumer Prices Index rising to 2.5% in the 12 months to June 2021. Where increases in inflation are not offset by higher sales, there may be a negative impact on the Group's revenues.

A significant proportion of the Group's employees are paid the National Minimum Wage or the National Living Wage (depending on the age of employee), the latter of which was introduced in April 2016. In April 2021 the National Living Wage was increased with to £8.91 for adults who are 23 or over, £8.36 for adults who are between the ages of 21 and 22, £6.56 for adults between the ages of 18 and 20, £4.62 for colleagues under the age of 18 and £4.30 for apprentices.

Further increases in the National Minimum Wage or the National Living Wage, and other wages above inflation may impact the business, results of operations and financial condition of the Group. Such impacts may also result from the lack of availability of minimum wage workers in certain areas, which may be exacerbated by increasing restrictions placed on migration into the UK following the UK's departure from the European Union.

In addition, if the Group is unable to attract the sufficient number of staff in stores, or the Group's key suppliers are unable to attract a sufficient number of staff (such as delivery drivers), it may adversely impact the Group's ability to sell its products to its customers at competitive prices which may in turn have an adverse impact on the Group's profitability and results of operations.

1.14           The Group's business may be impacted by weak sales during peak selling seasons

The Group's convenience offerings, especially its food product ranges, enjoy their best sales periods during peak seasons including Christmas. However, the competition amongst grocery retailers at these times of years is particularly high, with heavy expenditure made in respect of marketing campaigns and extensive pricing promotions. Consequently, should the Group fail to appeal sufficiently to consumers at this time of year it would be likely to lose out to a greater extent than at other times of year in terms of market share and lost revenue. In turn, the profitability of the Group may be adversely affected, having a negative effect on the Group's business, prospects, results of operations and financial condition.

1.15           The Group relies on a limited number of key personnel to operate its business, and the loss of any of these personnel or the Group's inability to attract new personnel could have a material adverse impact on the Group's business

The Group's success is dependent upon the specialist skills of its Executive Directors plus other senior managers and personnel. The departure and/or loss of any of its Executive Directors or other senior managers or key personnel, and an inability to find a suitable replacement on a timely basis, could have a material adverse effect on the Group's business, prospects, results of operations and financial condition and there can be no assurance that the Group will be able to attract or retain suitable replacements for such roles. Furthermore, if any of the Group's Executive Directors or other senior managers or key personnel transfer to a competitor, this could have a material adverse effect on the Group's competitive position within the convenience sector.

In addition, the Group's ability to recruit, retain and motivate suitability qualified and experienced staff is important for the Group's ongoing success. There can be no assurance that the Group will be able to recruit and retain sufficient personnel of the right calibre or may incur significant costs in order to do so.

1.16           The Group is exposed to fluctuations in the property market

As at 30 May 2021, the Group had 1,222 trading stores and two offices (a Retail Support Centre in Brentwood, and finance support function in Stockport). Of these properties, two are held on a freehold basis and the remaining are held on a leasehold basis. The Group also sub-lets space, for example, in circumstances where the Group has leased an entire building (which may contain a residential unit or an adjoining commercial unit) it will, from time to time, lease that residential unit, or adjoining commercial unit, or where a unit has been let after a branch has closed and the assignment of the relevant lease has not been possible. As at 30 May 2021, the Group had 265 residential properties and 70 commercial properties which it sub-leases.

The leasehold estate is generally held with a five-year review pattern. On this basis almost all of the Group's leases will either be reviewed or will expire within the next five years. As at 30 May 2021, 612 leases have either expired (but the Group has remained in occupation i.e. held over), or, will expire before 30 May 2026. These leases will require renegotiation. In consequence of the Group's significant leasehold property portfolio, it is susceptible to changes in the property rental market such as increases in market rates which may affect the economic viability of certain of the Group's stores. In line with standard practice in the retail property market the rent review provision within the Group's leases are drawn on an upward only basis. Thus, the Group may find that its operational costs increase following these upcoming renegotiations in the event that the landlords can substantiate an increase in market rent levels above pre-review levels, under such leases. Whilst this holds true for lease renewals, these also provide an opportunity to reduce rents on leases where the market rental level has fallen behind the passing rent.

1.17           Any breakdown or failure in the Group's information technology systems could result in a disruption in the Group's business and could have a material adverse effect on its results of operations

The Group is highly dependent on the efficient and uninterrupted operation of its information technology systems. In particular, the Group's ability to maintain financial controls and provide the appropriate level of service to customers relies in part upon the continued functioning and technical support of management information systems, which encompasses computer systems and the EPOS system which records sale of goods to customers.

Such computer systems are vulnerable to damage or interruption from flood, fire power loss, telecommunications failure and similar events, in addition to sabotage, vandalism and similar misconduct. Any damage to, malfunction, breach or failure of the Group's systems could result in disruptions to the Group's financial controls and/or levels of customer service. Such disruption could have a material adverse effect on the Group's business, prospects, results of operations and financial condition.

1.18           The Group is transitioning its core financial processing to new systems and updating its approaches to the measurement of costs. On completion of these processes, the changes in approach may result in material changes to the Group's financial results

The Group is in the process of replacing its legacy financial system that has been in operation for more than two decades. In so doing, the Group is adopting new processes that the Group expects will improve the accuracy and timeliness of its financial information. However, should the implementation of the replacement system and associated processes not be successful, such expected benefits may not be realised. In addition, should the replacement system and associated processes change the basis for calculating financial figures, material differences may occur in those figures that could have a material adverse effect on the Group's results of operations and financial condition.

1.19           Privacy breaches or any failure to protect customers' confidential information could harm the Group's reputation and expose it to litigation

By virtue of the nature of the Group's business and the volume of customer transactions processed, the Group regularly transmits, receives and holds personal, confidential and proprietary information such as debit and credit card details and residential addresses. As a Group subject to various privacy and data protection laws (including the General Data Protection Regulation (Regulation (EU) 2016/679), as domesticated into UK law by the EUWA ("GDPR")), the Group must take appropriate steps to adhere to the requirements of such legislation in respect of the processing, storage and transmission of such personal data.

In the event of any failure to adhere to these requirements, which might involve data breaches leading to such data being misappropriated or lost, the Group could face significant fines or regulatory action along with associated negative publicity. Such results may harm the Group's reputation, negatively affect turnover, reduce popularity of the Group among customers and lead to a material adverse effect on the Group's business, prospects, results of operations and financial condition.

1.20           The Group is subject to laws and regulations with which it may be found to be non-compliant or, through the changing of, which the Group may otherwise be adversely affected

The Group is subject to a significant number of legal and regulatory requirements, including in relation to employment, pensions, trading hours, health and safety, products and services (including alcohol licensing, food safety, labelling and health and safety) and environment and energy efficiency.

A breach by the Group of, or any change to, any of the above laws and regulations could have a materially adverse effect on the Group's operations and financial results through, for example, increased compliance costs, expenses, material fines and/or civil claims.

One example of forthcoming increased compliance costs is the proposed introduction of the Deposit Return Scheme in Scotland pursuant to which customers will pay a deposit of £0.20 when they buy a drink in a single-use container which is then refunded when they return the empty bottle or can. The Deposit Return Scheme is currently expected to be introduced in Scotland on 1 July 2022 and is likely to place an additional cost burden on the Group in order to comply with the scheme.

The Group is also subject to regulatory supervision in respect of consumer protection. UK regulators can conduct industry-wide investigations into certain products, selling practices or other aspects of the business of concerns regulated by those regulators. Such investigations can follow adverse publicity in respect of another participant in the same market as the Group, rather than any action or omission by the Group. Should a regulator determine that the Group has failed to comply with applicable laws, regulations or rules or has not taken requested corrective action, the impact would depend on the regulator and regulatory regime in question. Such inquiries could result in financial penalties, adverse publicity or negative public perceptions being suffered by the Group, affect its relationships with regulators, current and potential customers and suppliers, and divert management attention.

1.21           The Group may suffer if taxation rates or laws change

Changes in taxation rates or laws, misinterpretation of taxation law or a failure to manage adequately taxation risks may result in increased charges, financial loss (including penalties) and reputational damage. These outcomes may have an adverse effect on the Group's business, prospects and financial condition.

In particular, various products sold by the Group, including alcohol and tobacco, are subject to various forms of taxation including VAT and duty the level of which can be changed by the government at short notice. Future material changes in the level of taxes and duties levied on such products may have a significant adverse effect on the Group's revenues and profits.

Finally, the Group's profits are taxed according to UK taxation laws, with the Group's tax returns subject to regular review and examination. The Group cannot be certain that any taxation audit or dispute affecting the Group would result in a favourable outcome for the Group. There is a risk that such a dispute might result in additional taxes becoming payable by the Group, in addition to negative publicity and reputational damage. The imposition of substantial additional taxation liabilities and ancillary charges could be associate with such outcomes, serving to increase the Group's effective taxation rate.

1.22           The actual or perceived sale of faulty or hazardous products by the Group could significantly impact customer trust and confidence

The sale of food or other products involves the risk of injury to the Group's customers. The safety and quality, as well as freshness, of the Group's products is essential and the actual or perceived sale of contaminated food or other products by the Group could significantly impact customer trust and confidence. Even if any allegations or claims against the Group are unsuccessful or not fully pursued, the negative publicity surrounding any assertion that the products sold by the Group caused or could cause illness or injury could adversely affect both the Group's reputation with existing and potential customers and the Group's corporate and brand image.

1.23           The Group's agreement with Camelot is important in driving footfall to the Group's stores. If the agreement is terminated, or if Camelot's national lottery licence is not renewed without a suitable replacement being found, it could disrupt the Group's business and negatively impact the Group's results of operations

National Lottery products are sold by all the Group's stores and these constitute key drivers of customer footfall. The Group's agreement with Camelot (under which the Group is authorised to sell National Lottery products from its stores) contains Camelot's standard set of terms and conditions. These terms and conditions include wide-ranging termination rights, including a right for Camelot to terminate the agreement upon a change of control of the Group, and a right for either party to terminate the agreement without cause at any time on 60 days' notice. There is a risk that Camelot may choose to exercise these rights to terminate the agreement prior to its term, and if it were to do so, there would likely be a reduction in footfall to the Group's stores which would be likely to have a negative impact on the Group's revenues and results of operations.

In addition, the Group could experience disruption to its business if Camelot fails in its bid to retain its role running the national lottery after the end of the current licence period which expires in 2024. Such disruption could be a result of a transition to a new provider, a reduction in the popularity of the national lottery as a result of the transition to a new provider or otherwise. Any significant disruption in the continuity of the Group's arrangements with Camelot and the National Lottery could adversely impact the Group's business, profitability and results of operations.

1.24           The Group's income from manufacturers may not remain at current levels

Separate to the Group's supply agreements, the Group enters into direct trading agreements with product manufacturers whose products are supplied to the Group by Morrisons. A significant proportion of the Group's gross profit is generated through income received from manufacturers through these trading agreements because the Group is able to negotiate discounts against the prices it pays to Morrisons and the Group is also able to obtain funding to support promotional price reductions. These trading arrangements typically have a duration of up to 12 months and there is a risk that such revenue may not remain at current levels if the Group is unable to successfully negotiate future agreements with manufacturers.

1.25           Failure of the Post Office's systems may adversely affect the Group's financial results or lead to damage to the Group's reputation

The Group is a major supplier of Post Office services to the public through its network of 516 stores as at 30 May 2021 that include a Post Office. As such, it uses Post Office systems in order to provide those services and any failure may lead to a loss of revenue and damage to the Group's reputation and loss of sales.

The Post Office has been involved in adverse publicity and reputational damage from its use of the Horizon information technology system to prosecute Post Office employees in relation to fraud. Thirty- nine convictions related to these prosecutions were over-turned in April 2021. In addition, between 2000 and 2014, the Post Office prosecuted more than 700 sub-postmasters, after an error in the computer system Horizon information technology system led to financial shortfalls in branch accounts. Should the Post Office allege fraud based on the Horizon information technology system in relation to the activities of any of the Group's employees, the Group may be exposed to additional costs in order to investigate these allegations and, where a prosecution is sought, may incur reputational damage in relation to its workforce that may adversely impact on recruitment or increase staff turnover. In addition, any prosecutions based on the Horizon information technology system may be difficult to investigate or defend given the nature of the issues with quality of data provided by the Horizon information technology system.

1.26           The Group is exposed to funding risks in respect of its pension schemes

The Group operates two defined benefit pension schemes, the TM Group Pension Scheme and the TM Pension Plan, both of which are now closed to future accrual. As at the period end date of 29 November 2020, total assets across both schemes had a value of £141.7 million with the combined accounting surplus, including adjustments for Guaranteed Minimum Pension provision, decreasing from £7.9 million as at 24 November 2019 to £3.9 million as at 29 November 2020. The last actuarial review of the two schemes (concluded in June 2020) identified a combined funding deficit of £2.9 million as at 31 March 2019. As at  30 May 2021 being the date of the Group's interim results, total assets across both schemes had a value of £136.7 million.

The last completed triennial full actuarial valuation of the schemes was carried out as at 31 March 2019. Deficit repair contributions were agreed at £1.5 million per annum until 30 June 2022. From 1 July 2022, deficit contributions will increase to £1.75 million per annum. Whilst it is not the Group's present intention to declare a dividend prior to 1 July 2022, if for any reason this changes and the Group announces a dividend before 1 July 2022, the increase in the Group's deficit contributions to £1.75 million per annum will be triggered from such earlier date. Contributions will increase annually in line with the Retail Prices Index excluding mortgage interest (RPIX).

The pension schemes are subject to risks in relation to their liabilities as a result of changes in life expectancy, inflation and future salary increases, alongside volatility in the value of the underlying investments and the returns generated by those investments. A significant increase in the Group's contribution obligations regarding the schemes could have a materially adverse effect on the Group's results of operations and financial condition.

1.27           Litigation and other adversarial actions (including legal, regulatory and similar proceedings) in the ordinary course of business could materially adversely affect the Group

Save for litigation relating to Livingstone Consultancy Limited, whilst the Group is not currently subject to any other material litigation, it may be subject to such litigation in the future or to other proceedings by a regulatory or other authority. In addition, the Group may be subject to other disputes, claims and complaints, including adversarial actions, by customers, employees, suppliers, insurers and other individuals or entities in the ordinary course of business.

Significant claims or a substantial number of small claims may be expensive for the Group to defend, may divert the time and focus of management away from the Group's operations and may result in the Group having to pay monetary damages, any of which could have a material adverse effect on the Group's results of operations and financial condition. In addition, adverse legal publicity or substantial litigation against the Group could negatively affect its reputation, even if the Group is not found liable, which could also adversely affect the Group's business, prospects, results of operations and financial condition.

1.28           The Group's risk management procedures may fail to identify or anticipate future risks

Although the Directors believe that the Group's risk management procedures are adequate, the methods used to manage risk may not identify or anticipate current or future risks or the extent of future exposures, which could be significantly greater than historical measures indicate. In particular, the emergence of COVID-19 and the UK's departure from the European Union represent a set of risks (along with opportunities) which the Group will need to anticipate and address appropriately.

Risk management depends on the evaluation of information regarding markets or other matters that is publicly available or otherwise available to the Group. Any failure (or the perception that the Group has failed) to develop, implement and monitor suitable risk management policies and procedures and, when necessary, to pre-emptively upgrade them could make the Group liable to such risks and give rise to reputational and trading issues that could have a material adverse effect on the Group's business, prospects, results of operations and financial condition.

1.29           If there is a change in ownership of Morrisons, there is no guarantee that Morrisons will seek to continue its relationship with the Group once the Group's contract with Morrisons expires in 2027 which may cause disruption to the Group and may negatively impact the Group's business and results of operations.

Morrisons is currently the target of a takeover bid. Although it currently remains unclear as to whether the Morrisons group will be acquired by a third party, if Morrisons was to be sold, whilst Morrisons can't terminate the agreement unilaterally without cause, without compensation to the Group, there can be no guarantee that the new owners would seek to continue Morrisons' supply agreement with the Group when the term of the supply agreement expires on 1 January 2027. Furthermore, whilst a new owner of Morrisons may wish to keep supplying the Group, following the termination of the Group's supply agreement with Morrisons, there can be no guarantee that a new owner would not seek to negotiate new terms which may be more onerous than the Group's current terms. The expiry of the Morrisons supply agreement, without renewal, may disrupt the Group's operations whilst it finds alternative suppliers and may lead to sunk costs should the Group need to re-convert its rollout of Morrisons Daily stores away from the Morrisons branding. This may negatively impact the Group's business, profitability and results of operations.

2.                RISKS RELATING TO THE CAPITAL RAISING

2.1             The market price for New Ordinary Shares issued pursuant to the Capital Raising may decline below the Offer Price

The public trading market price of the New Ordinary Shares issued pursuant to the Capital Raising may decline below the Offer Price. Should that occur prior to the latest time and date for acceptance under the Open Offer, relevant Shareholders will suffer an immediate loss as a result. Moreover, Shareholders may be unable to sell the New Ordinary Shares at a price equal to or greater than the acquisition price for those shares. If the public trading market price of the New Ordinary Shares declines below the Offer Price, investors who have acquired any such New Ordinary Shares will likely suffer a loss as a result.

2.2             Shareholder ownership percentages may be diluted in connection with the Capital Raising or as a result of issuances of Ordinary Shares that may occur in the future

If a Qualifying Shareholder does not take up any of his Open Offer Entitlements, such Qualifying Shareholder's holding, as a percentage of the Enlarged Share Capital, will be diluted by approximately 9 per cent. pursuant to the Capital Raising (assuming the Open Offer is taken up in full). If a Qualifying Shareholder does take up his Open Offer Entitlements in full, such Qualifying Shareholder's holding, as a percentage of the Enlarged Share Capital, will be diluted by approximately 9 per cent. pursuant to the Capital Raising (assuming the Open Offer is taken up in full).

For these purposes, any dilution which may result from the vesting or exercise of any awards under the Share Plans between the Reference Date and the Record Date has been disregarded.

In addition, although the Group has no current plans for an offering of its Ordinary Shares or of rights to subscribe for its Ordinary Shares other than in connection with the Capital Raising and the Share Plans, it is possible that the Group may decide to offer additional Ordinary Shares in the future. An additional offering of Ordinary Shares by the Group or significant grants of Ordinary Shares under employee share option schemes could dilute ownership and thereby have an adverse impact on the market price of outstanding Ordinary Shares.

2.3             Admission of the New Ordinary Shares issued pursuant to the Capital Raising may not occur when expected

Application for Admission of the New Ordinary Shares issued pursuant to the Capital Raising is subject to the approval of the FCA. Admission will only become effective once a dealing notice has been issued by the FCA and the London Stock Exchange has acknowledged that the New Ordinary Shares issued pursuant to the Capital Raising will be admitted to trading. There can be no guarantee that the conditions for Admission will be met or that the FCA will issue a dealing notice.

2.4             Shareholders outside the United Kingdom may not be able to participate in the Capital Raising or future issues of Ordinary Shares

Securities laws of certain jurisdictions, including Excluded Territories, may restrict the Company's ability to allow participation by shareholders in the Capital Raising. In particular, the Capital Raising will not be registered under the US Securities Act and therefore holders of Existing Ordinary Shares who are located in the United States may not be able to participate in the Capital Raising unless a registration statement under the US Securities Act is effective with respect to the New Ordinary Shares or an exemption from the registration requirements is available thereunder. Securities laws in certain other jurisdictions may restrict the Company's ability to allow participation by shareholders in such jurisdictions in the Capital Raising or any future issued of shares carried out by the Company. Qualifying Shareholders who have a registered address in or who are resident in, or who are citizens of, countries other than the UK, should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to receive New Ordinary Shares.

3.                RISKS RELATED TO THE NATURE OF THE SECURITIES

3.1             The market value of the Ordinary Shares may fluctuate significantly as a result of factors beyond the Company's control and may not always reflect the underlying asset value or prospects of the Company

The market price of the New Ordinary Shares and/or the Ordinary Shares could be volatile and subject to significant fluctuations due to a variety of factors, including:

(a)                    the market's perception of the likelihood of completion of the Capital Raising;

(b)                    any industry sector changes affecting the operations of the Group;

(c)                    variations in the operating and financial results of the Group;

(d)                    changes to the taxation and/or regulatory environment in which the Group operates;

(e)                    business developments of the Group and/or its competitors;

(f)                     involvement of the Group in litigation;

(g)                    future issues or sales of shares;

(h)                    the operating and share price performance of other companies in the industries and markets in which the Group operates; or

(i)                     speculation about the Group's business in the press, media or the investment community.

Changes in the political and economic climate may also cause volatility and significant fluctuations in the market. Stock markets have, from time to time, experienced significant price and volume fluctuations that have affected the market prices for securities, and which may be unrelated to the Group's operating performance or prospects. Furthermore, the Group's business, prospects, financial condition and/or results of operations, or the underlying value of the Group's assets, from time to time may be below the expectations of market analysts and investors.

Any of these events could result in a decline in the market price of the New Ordinary Shares and/or the Ordinary Shares.

3.2             There are limitations on the Company's ability to pay dividends

Under English company law, a company can only pay cash dividends to the extent that it has distributable reserves and cash available for this purpose. The Company's ability to pay cash dividends in the future is affected by a number of factors including underlying growth in the Group's business and the Company's ability to receive sufficient dividends from subsidiaries. The payment of dividends to the Company by its subsidiaries is, in turn, subject to restrictions, including certain regulatory requirements and the existence of sufficient distributable reserves and cash in the Company's subsidiaries.

Indeed, whilst the Board understands that dividend payments are an important part of the Group's returns to Shareholders, the Board has not declared any dividend (final or interim) for FY 2020 or a final dividend for FY 2019. This decision was taken for reasons of affordability and because the Company is currently restricted from paying a dividend until certain conditions of its Amended Credit Facility are satisfied (including achieving Group leverage below 1.75 trailing EBITDA). The Board does not expect that the funds received by the Group pursuant to the Capital Raising will be solely sufficient to reduce the leverage below 1.75 trailing EBITDA. The Board will keep the Group's dividend policy under review with the aim of reinstating the payment of dividends at an affordable and sustainable level once the Group's strategic change programme has gathered momentum and the Group has de-levered.

3.3             Overseas Shareholders may have fewer rights than they would as UK Shareholders or as shareholders of companies organised in their local jurisdiction

The ability of an Overseas Shareholder to bring an action against the Company may be limited under law. The Company is a public limited company incorporated in England and Wales. The rights of holders of Ordinary Shares are governed by English law and by the Company's Articles of Association. These rights differ from the rights of shareholders in typical US corporations and some other non-UK corporations. In particular, English law significantly limits the circumstances under which shareholders of companies may bring derivative actions. Under such law generally, only a company can be the proper pursuer or claimant in proceedings in respect of wrongful acts committed against it. In addition, it may be difficult for an Overseas Shareholder to prevail in a claim against the Company under, or to enforce liabilities predicated upon, non-UK securities laws.

An Overseas Shareholder may not be able to enforce a judgment against some or all of the Directors of the Company. All of the Directors and executive officers of the Company are residents of the UK. Consequently, it may not be possible for an Overseas Shareholder to effect service of process upon the Directors of the Company within the Overseas Shareholder's country of residence or to enforce against the Directors judgments of courts of the Overseas Shareholder's country of residence based on civil liabilities under that country's securities laws. There can be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the UK against the Directors of the Company who are residents of the UK or countries other than those in which judgment is made. In addition, English or other courts may not impose civil liability on the Directors in any original action based solely on the foreign securities laws brought against the Company or the Directors or executive officers in a court of competent jurisdiction in England or other countries.

3.4             Holders of the Ordinary Shares in certain jurisdictions, including the United States, may not be able to exercise their pre-emptive rights or participate in future equity offerings if the Group increases its share capital

A holder of Ordinary Shares generally has the right to subscribe and pay for a sufficient number of Ordinary Shares to maintain its relative ownership percentage prior to the issuance of any new Ordinary Shares to another person. US holders of Ordinary Shares may not be able to exercise their pre-emptive rights unless a registration statement under the US Securities Act is effective with respect to such rights and the related Ordinary Shares or an exemption from the registration requirements of the US Securities Act is available. Similar restrictions exist in certain other jurisdictions.

The Group does not intend to register the Ordinary Shares under the US Securities Act or the laws of any other jurisdiction, and no assurance can be given that an exemption from the registration requirements will be available to the Company for transactions with US or other holders of Ordinary Shares or, if available, that the Company will use it. To the extent that US or other holders of Ordinary Shares are not able to exercise their pre-emptive rights, the pre-emptive rights would lapse and their proportional interests in the Company would be reduced.

3.5             Shareholders may be subject to exchange rate risks

The New Ordinary Shares are priced in Pounds Sterling and will be quoted and traded in Pounds Sterling. In addition, any dividends the Company may pay will be declared and paid in Pounds Sterling. Accordingly, Shareholders resident in non-UK jurisdictions are subject to risks arising from adverse movements in the value of their local currencies against the Pounds Sterling, which may reduce the value of the New Ordinary Shares, as well as that of any dividends paid.

APPENDIX VI

Definitions

The definitions set out below apply throughout this Announcement unless the context requires otherwise: