NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE"). IT DOES NOT REPRESENT AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

 19 May 2023

Unbound Group plc

("Unbound", the "Company" or the "Group")

Operating Review Update, Initiation of Strategic Review and Formal Sale Process

Introduction

The Company's board of directors (the "Board") provides an update on the operating review and cost reduction programme as announced on 17 January 2023. The Board also announces the initiation of a strategic review of the Group and formal sale process.

Update on Operating Review

Background

As announced on 17 January 2023, the Board had initiated a review of the operating structure of the Group with a view to streamlining activities and simplifying processes in order to drive growth of revenue and profits, covering the following areas:

·      The most appropriate structure and strategy for the future of the US business, which contributes 11% of Group revenues;

·      Broadening the product range to ensure that styles remain relevant and attractive to the consumer but with reduced SKUs and resultant business complexity; and

·      Further development of the Unbound Group trading platform, which now has 11 partner brands selected for relevance to our over 55-year-old target customer demographic.

On 17 January 2023, the Board also announced a cost reduction programme to optimise the Group's trading performance in the prevailing challenging economic and market conditions, with a focus on managing costs, protecting margins and cashflow to ensure that appropriate levels of working capital were maintained, and capital investment was tightly managed. In line with strategy, annualised cost savings of approximately £2.3 million had at the time been identified within the Group's existing operating model, with £1.3 million planned to be realised across Q4 of FY23 and into Q2 of FY24 and a further £1 million planned to be realised across Q2 and Q3 of FY24.

On 10 May 2023, the Board reported that the trading environment had worsened over Q1 of the Group's current financial year ("FY24"), with Q1 revenues lower than the Board previously anticipated, the impact of which was offset by the Board's cost reduction programme which is on-track to deliver the previously notified £2.3 million of annualised savings by the third quarter of FY24.

Key outputs of the Operating Review

The operating review is now complete and the Board's principal findings and actions arising from the operating review are as follows:

·      The Board believes that in the short term the greatest opportunity for resilient and profitable growth comes from the simplification of the Group's business with a focus on development of the core Hotter brand within the UK market;

·      Whilst remaining anchored to its brand DNA of comfort, the Group is further evolving the product portfolio to offer more choice. New styles, materials and constructions will be sourced as an increased mix of finished products, and our manufacturing operations will be rebalanced accordingly. The Board believes that this will allow for greater consumer choice, less duplication within the Group's product range and an overall reduction in SKUs within the business. As such the proportion of product purchased as 'finished goods' will continue to increase progressively. The Board considers that the development of the product portfolio arising from this will significantly improve product appeal and will in due course drive revenue and improve margins;

·      The Group has temporarily ceased its loss-making direct-to-consumer sales in the US and EU (other than Ireland). This contributed to c 11% of Group revenue in FY23. The Board will continue to investigate opportunities to service and grow the Group's US consumer base profitably in the future; and

·      Whilst the Board remains confident in the opportunity of the Unbound Partnership Platform, it has temporarily paused further development activity to allow focus on the more rapidly incremental growth opportunities available from the core Hotter business in the short term.

Initiation of Strategic Review and Formal Sale Process

Background to and reasons for the Strategic Review and Formal Sale Process

Although Q1 revenues were lower than previously anticipated, profitability for Q1 was broadly in line with the Board's expectations as a result of the impact of the cost reduction programme. The trading position in the second half of 2022 outlined in the trading update of 17 January 2023 has left the Company with cash constraints. The Board continues to seek additional funding to provide the working capital necessary to complete the Group's restructuring and ensure its long-term profitability, stability and resilience.

The Group's ongoing debt service requirements (including £1 million capital repayments due on 31 July 2023 and 31 January 2024 under the existing banking arrangements) mean that any underperformance against the Board's trading expectations would result in a worsening of the Group's cash position. The Board anticipates that the Group will be able to make the scheduled bank repayment on 31 July 2023, however, based on the Board's current plans for the Group, a temporary working capital shortfall could arise in September and October 2023 due to the planned build-up of inventory ahead of the launch of AW24.

Whilst the Board currently believes that this anticipated shortfall could be addressed via working capital management and other measures that are ready to be implemented if required, the Board also believes that such measures could damage the longer term growth prospects of the Group.

The Group is maintaining its regular dialogue with its core banking partners who have continued with their support throughout this period, including the waiver of certain covenants under existing borrowing facilities. The Board re-confirms that it is likely that the Group will require further covenant waivers or deferrals in the short-term and will continue with its constructive dialogue with its banking partners.

The Board previously communicated that it was in discussions regarding an injection of further equity to recapitalise the Group but announced on 10 May 2023 that these discussions had been terminated. The Board is continuing to work with the Group's advisers and banking partners with a view to raising additional funding or refinancing its existing borrowing facilities in order to provide the appropriate balance sheet structure and level of working capital headroom. As a consequence of the factors described above, the Board has also decided to initiate a formal review of strategic options available to the Group, including a formal sale process, pursuant to which the Board will consider the options available to maximise value for the Company's shareholders and the Group's other stakeholders. Such options could include, but not be limited to, a full sale of the Company, raising additional funding from a specialist debt provider and/or strategic investor and/or by realising value from an accelerated sale of the Group's trade and assets and/or of the shares in the Group's main operating subsidiary.

The Group has appointed Interpath Advisory Ltd ("Interpath") to act as joint financial adviser alongside Singer Capital Markets Advisory LLP ("Singer Capital Markets", its current financial adviser, nominated adviser and broker) to manage the strategic review and formal sale process. Any interested party should contact Interpath or Singer Capital Markets at the contact details set out below.

Takeover Code considerations

The Takeover Panel has agreed that any discussions with third parties in relation to an offer for the Company will take place within the context of a "formal sale process" as defined in the Code in order to enable conversations with parties interested in making such a proposal to take place on a confidential basis.

The Takeover Panel has granted a dispensation from the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Code such that any interested party participating in the formal sale process will not be required to be publicly identified (subject to note 3 to Rule 2.2 of the Code) and will not be subject to the 28 day deadline referred to in Rule 2.6(a), for so long as it is participating in the formal sale process. Following this announcement, the Company is now considered to be in an "offer period" as defined by the Takeover Code, and the disclosure requirements as set out below will apply.

The Company is not currently in discussions with, nor in receipt of an approach from any potential offeror relating to an acquisition of the issued and to be issued share capital of the Company. As described above, the Board emphasises that a sale of the Group is only one of a number of strategic options to be considered under the Strategic Review. Another option under consideration is to seek a strategic investment in the Group. This may offer the scope for existing investors to participate but the Board recognises that, given the current market capitalisation of the Group, a significant investment could trigger the requirement for a waiver under Rule 9 of the Takeover Code.

It is currently expected that any party interested in submitting any form of proposal for consideration within the strategic review (including within the formal sale process) will, at the appropriate time, enter into a non-disclosure agreement and standstill arrangement with the Group on terms satisfactory to the Board and on the same terms, in all material respects, as other interested parties before being permitted to participate in the process. The Group then intends to provide such interested parties with certain information on its business, following which interested parties shall be invited to submit their proposals. The Group will update the market in due course regarding timings for the formal sale process.

Shareholders are advised that there can be no certainty that any offer(s) will be made, nor as to the terms of any offer, and thus whether any offer will be completed.

The Board reserves the right to alter any aspect of the process as outlined above or to terminate the process at any time and in such cases will make an announcement as appropriate. The Board also reserves the right to reject any approach or terminate discussions with any interested party at any time.

Shareholders are advised that this announcement does not represent a firm intention by any party to make an offer under Rule 2.7 of the Takeover Code and there can be no certainty that any offers will be made as a result of the formal sale process, that any sale, strategic investment or other transaction will be concluded, nor as to the terms on which any offer, strategic investment or other transaction may be made.

The person responsible for arranging the release of this announcement on behalf of the Company is Gavin Manson, Chief Financial Officer.

Enquiries

Important Information

This announcement (including any information incorporated by reference in this announcement) contains statements about the Group that are or may be deemed to be forward looking statements. Without limitation, any statements preceded by or followed by or that includes the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance of the negative thereof, may be forward looking statements.

These forward looking statements are not guarantees of future performance. Such forward looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statement. Due to such uncertainties and risks, readers should not rely on such forward looking statements, which speak only as of the date of this announcement, except as required by applicable law.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of such jurisdictions.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes; interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44(0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Market Abuse Regulation

The information contained within this announcement would have, prior to its release, constituted inside information as stipulated under Article 7 of the Market Abuse Regulation (EU) No.596/2014 as incorporated into UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended by virtue of the Market Abuse (Amendment) (EU Exit) Regulations 2019 ("UK MAR"). Upon the publication of this announcement via a regulatory information service, this inside information will be considered to be in the public domain. For the purposes of UK MAR, the person responsible for arranging for the release of this information on behalf of Unbound is Gavin Manson.

Publication on website

In accordance with Rule 26.1 of the Code, a copy of this announcement will be available on the website of Unbound at www.unboundgroupplc.com promptly and by no later than 12 noon (London time) on the business day following this announcement. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Other notices

Singer Capital Markets Advisory LLP ("Singer Capital Markets"), which is authorised and regulated by the UK Financial Conduct Authority, is acting exclusively for Unbound and for no one else and will not be responsible to anyone other than Unbound for providing the protections afforded to its clients or for providing advice in relation to the matters referred to in this announcement. Neither Singer Capital Markets, nor any of its affiliates, owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Singer Capital Markets in connection with this announcement, any statement contained herein or otherwise.

Interpath Ltd (trading as Interpath Advisory) is authorised and regulated in the United Kingdom by the Financial Conduct Authority ("FCA") and is acting exclusively for the Group and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than the Group for providing the protections afforded to its clients nor for providing advice in relation to the subject matter of this announcement.