Acquisition of 298 stores from the Co-Op

This announcement is not for release, publication or distribution directly or indirectly, in whole or in part, into or from any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.

13 July 2016

McColl's Retail Group plc

Transformational Acquisition of 298 convenience stores from the Co-Op and related Placing

McColl's, a leading neighbourhood convenience retailer, today announces the conditional acquisition of 298 convenience stores from the Co-operative Group Limited for an aggregate consideration of £117m in cash.  The Acquisition will be carried out by Martin McColl Limited, a wholly owned subsidiary of the Company.

The Company is also pleased to announce the Placing of 10,460,732 Placing Shares to new and existing investors, to raise approximately £13.1m (before expenses). The net proceeds of the Placing will be used to help fund the consideration payable for the Acquisition.

The Acquisition is of sufficient size relative to McColl's to constitute a Class 1 transaction under the Listing Rules, and the Acquisition is therefore both subject to and conditional upon the majority approval of Shareholders. The Acquisition is also conditional upon the Company obtaining approval from the CMA.

Jonathan Miller, Chief Executive, commented:

"I am delighted to announce the acquisition of 298 quality convenience stores in a transformational deal for McColl's. This opportunity substantially accelerates our growth strategy and expands our neighbourhood presence for the benefit of our customers.

"These stores are profitable, well invested, and the perfect size for our operating model. We expect the transaction to be significantly earnings enhancing for our shareholders.

"I look forward to welcoming all of our new colleagues to the business."

Strategic rationale

The Board believes that the Acquisition will:

·      be a strong strategic fit with the Group's existing portfolio of 933 convenience stores based on turnover, size, store fabric, location and demographics

·      provide an opportunity to deliver on, and accelerate, the Group's long term strategy of continuing to expand its convenience retail operations

·      further increase sales and EBITDA of the Group and therefore provide an opportunity to increase the scale of the Group's operations

·      allow McColl's to benefit from potential synergies through the application of its established operating model to the Enlarged Group

·      increase the Group's exposure to the growth category of fresh and chilled food products

The Board expects the Acquisition to be significantly earnings enhancing in the first full year following completion of the Acquisition.  This statement is not intended to be, and should not be construed as, a profit forecast and should not be interpreted to mean that earnings per Ordinary Share for the current or future financial years will necessarily match, or be greater or less than, the historical earnings per Ordinary Share.

Completion of the Acquisition, consideration and financing

The Acquisition is conditional upon the majority approval of Shareholders and the approval of the CMA. McColl's expects to obtain CMA approval in phase 1 and consequently expects the initial acquisition of stores in the Portfolio to occur in January 2017.  Following satisfaction of the conditions for the Acquisition, the Portfolio will be acquired by the Group in batches of up to 20 stores a week over a period of time, anticipated to be approximately five months. The consideration payable for each store will become payable by the Group on the transfer of that store to the Group and will therefore be paid by the Group in tranches over the handover period from the first to the last transfer stores in the Portfolio to the Group. All acquisitions of stores by the Group must be completed within 7 months of the initial acquisition of stores by the Group.

The consideration for the Acquisition will be satisfied entirely in cash. McColl's will fund the  consideration and related transaction costs of the Group as follows:

·     £12.7 million raised from the net proceeds of the Placing; and

·     the balance from the Senior Facilities Agreement.

Following the Acquisition, McColl's will continue to benefit from strong cash generation providing financial flexibility for ongoing investment and potential for a net increase in dividends per Ordinary Share.

The Placing is not conditional upon completion of the Acquisition. Should the Acquisition not become unconditional, the Board will consult Shareholders and consider the appropriate application of the net proceeds of the Placing.

At the Company's annual general meeting on 19 April 2016, the Board was authorised by Shareholders to issue Ordinary Shares on a non pre-emptive basis with an aggregate nominal value of up to £10,471.20 (which represents approximately 10% of the Company's issued share capital), with half of that authority reserved for the issue of Ordinary Shares in connection with an acquisition or special capital investment. No new Ordinary Shares have been issued by the Company since the annual general meeting and the proceeds of the Placing are to part fund the Acquisition.

The participations of certain significant Shareholders in the Placing are expected to be smaller related party transactions, as described in the section headed "the Placing" in the full announcement below.

About the Portfolio

The Portfolio comprises 298 convenience stores, located in an extensive range of residential areas throughout the United Kingdom. The stores have an average store size of 1,727 sq. ft. This is consistent with the size of stores recently acquired by the Group, including a number of stores previously acquired from the Co-op, and the Group's existing convenience stores.

116 of the Portfolio stores are freehold properties, 172 stores are leasehold properties and the remaining 10 stores are mixed freehold/leasehold properties. The average remaining term of the leases for the stores on leasehold properties is between six and seven years.

As is the case with the Group's existing stores, Portfolio stores stock a broad range of products including grocery, fresh and chilled food, confectionery, alcohol, news and tobacco. In 2015, the  average weekly sales per store in the Portfolio was c.£22,800 and the average basket value was £4.98.

The stores within the Portfolio also offer a range of neighbourhood services: for example, the stores have PayPoint, 38 stores contain post offices and 252 stores have on-site ATMs.

The Portfolio has approximately 3,800 employees. Management consider the employees of the Portfolio to be integral to the success of the stores. The employment contracts of all such employees will automatically transfer to the Group under TUPE on the transfer of the store in which such employees work, in accordance with the terms of the Sale and Purchase Agreement.

Circular to Shareholders and Notice of General Meeting

Further details of the Acquisition and Placing, together with a notice convening a General Meeting to approve the Acquisition, will be contained in the Circular that will be sent to Shareholders in due course. The Circular will include a recommendation from the Board of McColl's that shareholders vote in favour of the Acquisition.

Information on McColl's Retail Group plc

McColl's is a leading neighbourhood retailer in the independent managed sector running 1,366 convenience and newsagent stores. We operate 933 McColl's branded UK convenience stores as well as 433 newsagents branded Martin's, except in Scotland where we operate under our heritage brand, RS McColl. We have more than doubled our number of convenience stores over the last eight years, which now accounts for over half of the estate. In addition we are also the largest operator of Post Offices in the UK.

Notes to editors

Numis is authorised and regulated by the FCA, is acting for the Company only in connection with the Placing and the Acquisition and will not be responsible to anyone other than the Company for providing the protections offered to the clients of Numis Securities Limited, nor for providing advice in relation to the Placing, the Acquisition or any matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed upon Numis by FSMA or the regulatory regime established thereunder, Numis accepts no responsibility whatsoever nor makes any representation or warranty, express or implied, concerning the contents of this announcement, including its accuracy, completeness or verification, or concerning any other statement made or purported to be made in connection with the Company, the Placing or the Acquisition, and nothing in this document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Numis accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to herein) which it might otherwise have in respect of this announcement.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with the UK Listing Rules and MAR 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 laws and regulations of any jurisdiction outside of England.

This announcement contains inside information.

This announcement contains certain forward-looking statements. No forward-looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as 'may', 'will', 'seek', 'continue', 'aim', 'anticipate', 'target', 'projected', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'achieve' or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of these influences and factors are beyond the Company's control. As a result, actual results may differ materially from the plans, goals, and expectations contained in this announcement.

Any forward-looking statements made in this announcement speak only as of the date they are made. Except as required by the FCA, London Stock Exchange plc or applicable law, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this document to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

McColl's Retail Group plc

Proposed acquisition of 298 convenience stores located throughout the United Kingdom and Placing of 10,460,732 Placing Shares

McColl's, a leading neighbourhood convenience retailer, today announces the conditional acquisition of 298 convenience stores from the Co-operative Group Limited for an aggregate consideration of £117m in cash.  The Acquisition will be carried out by Martin McColl Limited, a wholly owned subsidiary of the Company.

The Company is also pleased to announce the Placing of 10,460,732 Placing Shares to new and existing investors, to raise approximately £13.1m (before expenses). The net proceeds of the Placing will be used to help fund the consideration payable for the Acquisition.

Background to, and reasons for, the Acquisition

At the time of the Company's IPO in 2014, the Group stated that it planned to enhance its offering in the retail convenience sector by transforming its store portfolio into higher quality convenience stores through store conversions and selective acquisitions, with the aim of targeting a store portfolio of approximately 1,350 stores by the end of 2016, consisting of approximately 1,000 convenience stores and 350 newsagents. The Group currently has 1,366 stores, including 933 convenience stores and is on track, independently of the Acquisition, to have more than 1,000 convenience stores by the end of 2016.

The Acquisition represents an important opportunity for the Group to further strengthen its position as a leading UK neighbourhood convenience retailer. Specifically, the Board believes the key opportunities and benefits of the Acquisition are:

·      The Portfolio would be a strong strategic fit with the Group's existing portfolio of 933 convenience stores based on turnover, size, store fabric, location and demographics

·      The Acquisition provides an opportunity to deliver on, and accelerate, the Group's long term strategy of continuing to expand its convenience retail operations

·      The Acquisition will further increase sales and EBITDA of the Group and therefore provide an opportunity to increase the scale of the Group's operations

·      McColl's can benefit from potential synergies through the application of the established operating model to the Enlarged Group

·      The Acquisition will increase the Group's exposure to the growth category of fresh and chilled food products

For the reasons set out above, the Directors believe that the Acquisition presents an exciting and rare opportunity to the Group that will bring financial and strategic benefits to the Group in both the short and longer term.

There may also be the opportunity to introduce additional products and services, such as food-to-go and additional Post Offices into the Portfolio.

Appendix 2 sets out certain risk factors relating to the Acquisition.

Financial information on the Portfolio

The following Net Sales, Gross Profit and Adjusted EBITDA (pre central costs and exceptional items) of the Portfolio have been based on unaudited financial information from the management accounts of the Co-op for the financial years ended 2015, 2014 and 2013. The historical financial information on the Portfolio to be included in the Circular will be audited according to the same accounting policies as the Group. Accordingly, these figures may therefore be subject to change once audited for the purposes of the circular to be published by McColl's in connection with the Acquisition, with the result that the historic financial information in the Circular may differ from that set out below.

Summary income statement

The Portfolio product mix is: 24% tobacco, 18% confectionery, 4% news, 34% food grocery, 14% alcohol and 6% non-food. This compares to the following product mix for McColl's 1,352 store portfolio as at November 2015: 38% tobacco, 22% confectionery, 15% news, 11% food grocery, 9% alcohol and 5% non-food.

McColl's store estate mix will move from 65% convenience stores to 74% convenience stores with the Acquisition.

As the table above shows, the Portfolio has shown consistent revenue growth throughout 2013, 2014 and 2015, growing at a 3.0% CAGR between 2013 and 2015.

In 2015, 268 of the 298 stores in the Detroit Portfolio generate positive EBITDA (before the allocation of central overheads), with the majority of these stores also growing net sales between 2013 and 2015. 90 stores have grown revenues by a CAGR of 5.0% or more over the last two years with only 24 stores experiencing a CAGR revenue decline of 2.0% or more. The stores in the Portfolio have low average rent of below c.£24,000.

As at 2 January 2016 the Portfolio's total tangible fixed assets were £44.4 million.

Summary of the key terms of the Acquisition

Under the terms of the Sale and Purchase Agreement, McColl's has agreed to purchase the Portfolio from the Co-op for an aggregate consideration of £117 million in cash. McColl's will also acquire, subject to certain pre-conditions, all of the non-Co-op branded stock in the Portfolio for additional cash consideration. £117 million consideration represents an implied historic EBITDA multiple of 7.1x, or 5.9x when adjusted for freeholds and rent, based on management estimates.

The Acquisition is of sufficient size relative to McColl's to constitute a Class 1 transaction under the Listing Rules, and the Acquisition is therefore both subject to and conditional upon the approval of a majority of Shareholders. The Acquisition is also conditional upon approval of the Acquisition by the CMA. 

Further details of the Acquisition, together with a notice convening a General Meeting to approve the Acquisition, will be contained in the Circular. The Circular will include a recommendation from the Board of McColl's that Shareholders vote in favour of the Acquisition.

McColl's expects to obtain CMA approval in phase 1 and consequently expects the initial acquisition of stores in the Portfolio to occur in January 2017. Following receipt of CMA approval, completion of the Acquisition will be a staged process with up to 20 stores being transferred per week, which means that it is expected to take approximately 23 weeks to complete the transfer process for the entire Portfolio.  Consequently the Acquisition is expected to be completed by approximately 30 June 2017. All acquisitions of stores by the Group must be completed within 7 months of the initial acquisition of stores by the Group.

Transaction costs of approximately £4.5 million will be incurred by McColl's in relation to the Acquisition and Placing.

Financial effects of the Acquisition

It is expected that the Acquisition will be accretive and significantly earnings enhancing. However, no statement in this announcement is a profit forecast and nor is any such statement intended to be interpreted to mean that the future earnings per Ordinary Share of the Enlarged Group will necessarily match or exceed the historical published earnings per Ordinary Share.

The Board believe that the Enlarged Group will be appropriately leveraged and retain significant financial flexibility. The Company is targeting net debt/EBITDA, as at November 2017, 2018, 2019 and 2020 of 2.2x, 1.9x, 1.6x and 1.3x respectively. A sale and leaseback of freehold stores would further reduce leverage.

The Board have identified a number of potential synergies which the Enlarged Group could benefit from following completion of the Acquisition, including:

·     a sales vs. gross margin opportunity, based on the Group's local rather than national pricing architecture

·     store cost improvements through the application of the Group's lean operating model

·     other economies of scale opportunities from the enlarged trading presence of the Enlarged Group

·     the existing support structure may be leveraged to maximise cost efficiency

Financing of the Acquisition

The consideration for the Acquisition will be satisfied by the payment of cash payable in tranches on the transfer of the Portfolio stores following completion. The consideration for the Acquisition will be satisfied entirely in cash. McColl's will fund the consideration and related transaction costs of the Group as follows:

·      £12.7 million from the net proceeds of the Placing; and

·      the balance from the Senior Facilities Agreement.

The Senior Facilities Agreement was amended and restated today pursuant to an amendment and restatement agreement. The Facilities to be used towards financing the Acquisition will be available to finance the Acquisition until 20 April 2017, subject to customary conditions precedent (including, without limitation, the absence of certain major events of default and the satisfaction of the remaining conditions to completion under the Sale and Purchase Agreement).

Further information on the Senior Facilities Agreement will be contained in the Circular.

McColl's Current Trading and Prospects

Trading results in the first half and the outlook for the full year are both in line with the Board's expectations. Strong cash generation and reduction in leverage year on year is anticipated. McColl's interim results are expected to be released on 27 July 2016.

The shift towards an increased proportion of convenience stores continues to progress, with a resultant improvement in gross margins and this will further accelerate with the Acquisition. Convenience plus and food & wine stores have outperformed standard convenience and newsagents and the Company is already on track to deliver 1,000 convenience stores by the end of 2016.

Certain costs associated with the Acquisition are anticipated to be treated as exceptional in the second half. Certain integration costs may also be incurred in the second half prior to migration.

Dividend Policy of the Enlarged Group

A final dividend for 2015 of 6.8 pence per Ordinary Share was paid in May 2016. Following the Acquisition, the Board will reduce the pay-out ratio of the Group, from 60% to 50% (of annual reported profits, before exceptional gains, but after exceptional costs and post-tax) due to the level of earnings accretion that Management expect as a result of the Acquisition. The net value of the dividend payments is anticipated to increase post completion. This is in line with the dividend policy aligned to the free cash generation of McColl's and the investment required to deliver sustainable growth in revenue and profit over the medium term. The Placing Shares will rank for the 2016 interim dividend. Further information on the interim dividend will be included in their interim results.

The Placing

The Company is proposing to issue 10,460,732 Placing Shares at the Placing Price to help fund the consideration payable for the Acquisition.

The Placing Price represents a discount of 2.7 per cent. to the closing price of 128.5 pence per existing ordinary share on 12 July 2016. The Placing Shares represent approximately 9.99 per cent. of the issued share capital of the Company as enlarged by the Placing Shares.

The issue of the Placing Shares is being effected by way of an institutional placing. The Company will allot and issue the Placing Shares on a non pre-emptive basis to the placees in accordance with the authority granted to directors under section 570 of the Companies Act at the Annual General Meeting of the Company on 19 April 2016.

Numis, who is acting as bookrunner in connection with the Placing, subject to the conditions and termination rights set out in the Placing Agreement will use its reasonable endeavours to procure placees for the Placing Shares at the Placing Price.  Should any placee default on its payment obligation Numis will itself subscribe for those Placing Shares at the Placing Price.

The Company has agreed to pay to Numis a placing commission together with certain costs and expenses incurred in connection with the Placing.

The Placing is not conditional upon completion of the Acquisition. Should the Acquisition not become unconditional, the Board will consult shareholders and consider the appropriate application of the net proceeds of the Placing; it is anticipated that they may be used to support McColl's strategic objectives, to reduce net debt or for general corporate purposes.

Further details of the Placing Agreement and the terms and conditions of the Placing are set out in Appendix I to this announcement.

Prospective investors should read Appendix 1 (which forms part of this announcement, such announcement and appendices, together being, the "Announcement") for the terms and conditions of the Placing. Prospective investors should be aware that an investment in the Company involves a degree of risk and that, if certain of the risks described in this Announcement occur, investors may find their investment materially adversely affected. Accordingly, an investment in the Placing Shares is only suitable for investors who are particularly knowledgeable in investment matters and who are able to bear the loss of the whole or part of their investment.

The Placing Shares, when issued, will be credited as fully paid and will rank pari passu in all respects with the Ordinary Shares, including the right to receive all dividends and other distribution declared, made or paid on or in respect of such Ordinary Shares after the date of issue. The Company's total issued share capital following completion of the Placing will consist of 115,172,774 Ordinary Shares.

Applications have been made to the FCA for the Placing Shares to be admitted to the Official List and to the London Stock Exchange plc for the Placing Shares to be admitted to trading on its main market for listed securities. It is expected that Admission will become effective at 8.00 a.m. on 18 July 2016 and that dealings in the Placing Shares will commence at that time. The Placing is conditional upon, amongst other things, Admission becoming effective and upon the Placing Agreement not being terminated in accordance with its terms.

This Announcement should be read in its entirety. In particular, your attention is drawn to the "Important Notices" section of this Announcement, to the detailed terms and conditions of the Placing set out in Appendix 1, and to the risk factors set out in Appendix 2. By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety and to be making such offer on the terms and subject to the conditions in it, and to be providing the representations, warranties and acknowledgements contained Appendix 1.

Aberforth Partners LLP on behalf of its clients has agreed to participate as a placee in the Placing in respect of up to 1,059,285 Placing Shares for a total consideration of £1.32 million. Aberforth Partners LLP is a related party of the Company for the purposes of the Listing Rules by virtue of their clients holding in excess of 10 per cent. of the Company's issued share capital. The entry into the Placing of Aberforth Partners LLP on behalf of its clients in respect of its placing commitment constitutes a smaller related party transaction for the purposes of 11.1.10R of the Listing Rules.

Cambridge Global Asset Management has agreed to participate as a placee in the Placing in respect of up to 1,400,000 Placing Shares for a total consideration of £1.75 million. Cambridge Global Asset Management is a related party of the Company for the purposes of the Listing Rules by virtue of holding in excess of 10 per cent. of the Company's issued share capital. The entry into the Placing of Cambridge Asset Management on behalf of its clients in respect of its placing commitment constitutes a smaller related party transaction for the purposes of 11.1.10R of the Listing Rules.

APPENDIX 1: TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR PLACEES ONLY REGARDING THE PLACING

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. ALL OFFERS OF THE PLACING SHARES WILL BE MADE PURSUANT TO AN EXEMPTION UNDER DIRECTIVE 2003/71/EC (AND AMENDMENTS THERETO), AND INCLUDING ANY RELEVANT IMPLEMENTING MEASURE, IN THE RELEVANT MEMBER STATE OF THE EUROPEAN ECONOMIC AREA ("EEA")) (THE "PROSPECTUS DIRECTIVE"), FROM THE REQUIREMENT TO PRODUCE A PROSPECTUS FOR OFFERS OF THE PLACING SHARES. THE PRESS ANNOUCEMENT AND THE TERMS AND CONDITIONS SET OUT IN THE PRESS ANNOUNCEMENT ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT PERSONS WHO ARE: (A) PERSONS IN AN EEA MEMBER STATE WHICH HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (A "RELEVANT MEMBER STATE"), UNDER THE FOLLOWING EXEMPTIONS UNDER THE PROSPECTUS DIRECTIVE, IF AND TO THE EXTENT THEY HAVE BEEN IMPLEMENTED IN THAT RELEVANT MEMBER STATE: (I) TO ANY LEGAL ENTITY WHICH IS A "QUALIFIED INVESTOR" AS DEFINED IN THE PROSPECTUS DIRECTIVE; (II) TO FEWER THAN 150 NATURAL OR LEGAL PERSONS (OTHER THAN QUALIFIED INVESTORS AS DEFINED IN THE PROSPECTUS DIRECTIVE), AS PERMITTED UNDER THE PROSPECTUS DIRECTIVE; OR (III) IN ANY OTHER CIRCUMSTANCES WHICH DO NOT REQUIRE THE PUBLICATION BY THE COMPANY OF A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE, PROVIDED THAT NO SUCH OFFER TO THE PUBLIC SHALL RESULT IN A REQUIREMENT FOR THE PUBLICATION BY THE COMPANY OR NUMIS OF A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE; AND (B) (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, (THE "ORDER"); OR (II) HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS AND OTHER PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS IN (A) AND (B) TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THE PRESS ANNOUNCEMENT (INCLUDING THESE TERMS AND CONDITIONS)) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO THE LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF A PURCHASE OF PLACING SHARES.

The Press Announcement (including these terms and conditions) is for information purposes only and does not constitute an offer to sell or issue or the solicitation of an offer to buy, subscribe for or otherwise acquire any Placing Shares in any jurisdiction in which any such offer or solicitation would be unlawful.

All offers of the Placing Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. The Press Announcement (including these terms and conditions) is being distributed and communicated to persons in the UK only in circumstances to which section 21(1) of FSMA does not apply.

The Placing Shares referred to in the Press Announcement (including these terms and conditions) 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, sold or transferred in, into or within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the securities laws of any relevant state or jurisdiction of the United States.

The distribution of the Press Announcement (including these terms and conditions) and the Placing and/or issue of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company, Numis or any of their respective affiliates that would permit an offer of the Placing Shares or possession or distribution of the Press Announcement (including these terms and conditions) or any other offering or publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required. Persons into whose possession the Press Announcement (including these terms and conditions) comes are required by the Company and Numis to inform themselves about and to observe any such restrictions.

The Press Announcement (including these terms and conditions) should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notices" section of the Press Announcement (including these terms and conditions).

By participating in the Placing, Placees will be deemed to have read and understood the Press Announcement (including these terms and conditions) in its entirety, to be participating, making an offer and acquiring Placing Shares on the terms and conditions contained in this Appendix and to be providing the representations, warranties, indemnities, acknowledgements and undertakings contained in this Appendix. In particular, each such Placee represents, warrants, undertakes, agrees and acknowledges (amongst other things), that:

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

2        in the case of a Relevant Person in a Relevant Member State who acquires any Placing Shares pursuant to the Placing:

(a)      it is a Qualified Investor; and

(b)      in the case of any Placing Shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive,

(i)       the Placing Shares acquired by it in the Placing have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than Qualified Investors or in circumstances in which the prior consent of Numis has been given to the offer or resale; or

(ii)      where Placing Shares have been acquired by it on behalf of persons in any member state of the EEA other than Qualified Investors, the offer of those Placing Shares to it is not treated under the Prospectus Directive as having been made to such persons; and

3        it is acquiring the Placing Shares for its own account or is acquiring the 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 the Press Announcement (including these terms and conditions); and

4        it (and any account referred to in paragraph 3 above) is outside the United States acquiring the Placing Shares in an offshore transaction as defined in and in accordance with Regulation S under the Securities Act.  

No prospectus

No prospectus or other offering document has been or will be submitted to be approved by the FCA in relation to the Placing and Placees' commitments will be made solely on the basis of the information contained in the Press Announcement (including these terms and conditions) and any information publicly announced through a Regulatory Information Service (as defined in the Listing Rules) by or on behalf of the Company on or prior to the date of the Press Announcement (including these terms and conditions) (the "Publicly Available Information") and subject to any further terms set forth in the contract note or trade confirmation sent to individual placees. Each Placee, by participating in the Placing, agrees that it has neither received nor relied on any information, representation, warranty or statement made by or on behalf of Numis or the Company other than the Publicly Available Information and none of Numis, the Company nor any person acting on such person's behalf nor any of their affiliates has or shall have any liability for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Details of the Placing Agreement and the Placing Shares

Numis has entered into the Placing Agreement with the Company under which it has undertaken, on the terms and subject to the conditions set out in the Placing Agreement, to use reasonable endeavours to procure Placees for the Placing Shares at the Placing Price.  In accordance with the terms of the Placing Agreement, to the extent that any Placee procured by Numis fails to subscribe for any or all of the Placing Shares which have been allocated to it by Numis in the Placing, Numis has agreed to take up such shares at the Placing Price and the Company agrees to allot such shares to Numis accordingly, in each case on the terms set out in the Placing Agreement. 

The Placing Shares will be allotted and issued fully paid and will rank pari passu in all respects with the existing ordinary shares in the capital of the Company then in issue, including the right to receive all dividends and other distributions declared, made or paid in respect of such ordinary shares after the date of the Placing Agreement.

As part of the Placing, the Company has agreed that it will not, and will procure that no Group Company will, between the date of the Placing Agreement and the date falling 180 days following the date of Admission issue or sell any ordinary shares without prior consent from Numis. This is subject to certain customary exceptions and does not prevent the Company from allotting and issuing ordinary shares pursuant to options granted under the existing share options or incentive plans operated by the Company or any member of the Enlarged Group and the granting of options to employees in the ordinary course of business.

Application for admission to listing and trading

Application has been made to the FCA for admission of the Placing Shares to listing on the premium segment of the Official List and to the London Stock Exchange for admission to trading of the Placing Shares on the London Stock Exchange's main market for listed securities (together "Admission").

It is expected that Admission will take place on or before 8.00 a.m. (London time) on 18 July 2016 and that dealings in the Placing Shares on the London Stock Exchange's main market for listed securities will commence at the same time.

Principal terms of the Placing

1        Numis is acting as the agent of the Company in connection with the Placing on the terms and subject to the conditions of the Placing Agreement and the Issue Documents.

2        Participation in the Placing will only be available to persons who may lawfully be, and are, invited by Numis to participate. Numis and its affiliates are entitled to participate in the Placing as principal.

3        The Placing Price will be a fixed price of 125 per Placing Share.  

4        Each prospective Placee's allocation (in each case the "Placing Participation") will be determined by Numis in its sole discretion and will be confirmed by Numis as agent of the Company, to the Placee, either in writing or orally.  Numis' confirmation of an allocation, either in writing or orally, will give rise to an irrevocable legally binding commitment upon that person (who will at that point become a Placee), in favour of Numis and the Company, under which that person agrees to acquire the number of Placing Shares allocated to it at the Placing Price on the terms and subject to the conditions set out in this Appendix (a copy of the terms and conditions having been provided to the Placee prior to or at the same time as such confirmation) and in accordance with the Company's Articles of Association.

5        An offer to acquire Placing Shares, which has been communicated by a prospective Placee to Numis which has not been withdrawn or revoked prior to publication of the Press Announcement (which includes these terms and conditions) shall not be capable of withdrawal or revocation immediately following the publication of the Press Announcement (which includes these terms and conditions) without the consent of Numis.

6        Each Placee will have an immediate, separate and irrevocable legally binding obligation owed to Numis to pay Numis (or as Numis may direct) in cleared funds the aggregate settlement amount for their total Placing Participation regardless of the total number of Placing Shares (if any) subscribed for by any other investor(s).  

7        Each Placee's allocation and commitment will be evidenced by a contract note issued to such Placee by Numis or by email confirmation from Numis. The terms of this Appendix will be deemed incorporated therein.

8        Except as required by law or regulation, no press release or other announcement will be made by Numis or the Company using the name of any Placee (or its agent), in its capacity as Placee (or agent), other than with such Placee's prior written consent.

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

10      All obligations under the Placing will be subject to fulfilment of the conditions referred to below under 'Conditions of the Placing' and to the Placing not being terminated on the basis referred to below under 'Termination of the Placing Agreement'.

11      By participating in the Placing, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

12      Each Placee will be deemed to have read and understood the terms and conditions set out in the Press Announcement (including this Appendix) in their entirety, to be participating in the Placing upon the terms and conditions contained in the Press Announcement (including this Appendix), and to be providing the representations, warranties, agreements, acknowledgements and undertakings, in each case as contained in the Press Announcement (including this Appendix).

13      To the fullest extent permitted by law and applicable rules of the FCA (the "FCA Rules"), none of (i) Numis, (ii) any of its respective directors, officers, employees or consultants, nor (iii) to the extent not contained within (i) or (ii), any person connected with Numis as defined in the FCA Rules ((i), (ii) and (iii) being together "affiliates" and individually an "affiliate"), shall have any responsibility or liability to Placees or to any person (whether acting on behalf of a Placee or otherwise) other than the Company in respect of the Placing or the method of effecting the Placing.

Registration and Settlement

Settlement of transactions in the Placing Shares following Admission will take place within the system administered by Euroclear UK & Ireland Limited ("CREST"), subject to certain exceptions.  Each 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 Numis or otherwise as Numis may direct.

Participation in the Placing is only available to persons who are invited to participate in it by Numis.

Each Placee allocated Placing Shares in the Placing will be sent a contract note stating the number of Placing Shares allocated to it, the Placing Price and the aggregate amount owed to Numis and settlement instructions.

Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with the standing CREST or certificated settlement instructions that it has in place with Numis.  Settlement of transactions in the Placing Shares (ISIN: GB00BJ3VW957) following Admission will take place within the CREST system, subject to certain exceptions.  Settlement through CREST will be on a T+2 basis unless otherwise notified by Numis and is expected to occur on 18 July 2016. Settlement will be on a delivery versus payment basis. However, in the event of any difficulties or delays in the admission of the Placing Shares to CREST or the use of CREST in relation to the Placing, the Company and Numis may agree that the Placing Shares should be issued in certificated form. Numis reserves the right to require settlement for the Placing Shares, and to deliver the Placing Shares to Placees, by such other means as it deems necessary if delivery or settlement to Placees is not practicable within the CREST system or would not be consistent with regulatory requirements in a Placee's jurisdiction.

The Company will deliver the Placing Shares to the CREST accounts operated by Numis as agent for the Company and Numis will enter their delivery (DEL) instruction into the CREST system. The input to CREST by a Placee of a matching or acceptance instruction will then allow delivery of the relevant Placing Shares to that Placee against payment.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above, in respect of either CREST or certificated deliveries, at the rate of 2 percentage points above prevailing LIBOR as determined by Numis.

Each Placee agrees that, if it does not comply with its obligations, Numis may sell any or all of the Placing Shares allocated to it on such Placee's behalf and retain from the proceeds, for Numis' own account and benefit, an amount equal to the Placing Price of each share sold plus any interest due.  The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by such Placee and for any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of their Placing Shares on their behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees must ensure that, upon receipt, the conditional contract note is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.

Conditions of the Placing

The Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms.

The obligations of Numis under the Placing Agreement are, and the Placing is, conditional on, (among others):

a)   the Company having complied with its obligations under the Placing Agreement (to the extent such obligations fall to be performed prior to Admission);

b)   each of the warranties contained in the Placing Agreement not being untrue, inaccurate or misleading in any respect when made, nor becoming nor which would become untrue, inaccurate or misleading in any respect if repeated by reference to the facts and circumstances existing at such time;

c)   the Debt Financing Arrangements having been entered into by the parties thereto and having, and continuing to have, full force and effect and not being varied, modified, supplemented, rescinded or terminated  (in whole or part);

d)   the Company allotting the Placing Shares, prior to and conditional only on Admission, in accordance with the Placing Agreement; and

e)   Admission taking place not later than 8.00 a.m. (London time) on 18 July 2016 (or such later time and/or date as the parties may agree).

(all conditions to the obligations of Numis included in the Placing Agreement being together, the "conditions").

If any of the conditions set out in the Placing Agreement is not fulfilled or, where permitted, waived to the extent permitted by law or regulations in accordance with the Placing Agreement within the stated time periods (or such later time and/or date as the Company and Numis may agree), or the Placing Agreement is terminated in accordance with its terms (as to which, see the "Termination of the Placing" section below), the Placing will lapse and the Placee's rights and obligations shall cease and terminate at such time and each Placee agrees that no claim can be made by or on behalf of the Placee (or any person on whose behalf the Placee is acting) in respect thereof.

By participating in the Placing, each Placee agrees that its rights and obligations cease and terminate only in the circumstances described above and under "Termination of the Placing" below and will not be capable of rescission or termination by it.

Numis may, at its absolute discretion and upon such terms as it thinks appropriate, waive fulfilment, in whole or in part, of all or any of the conditions in the Placing Agreement (to the extent permitted by law or regulation) by giving notice in writing to the Company or extend the time and/or date by which any of such conditions are required to be fulfilled to no later than 3.00 p.m. on the Long Stop Date.  Any such extension or waiver will not affect Placees' commitments as set out in this Appendix.

Neither Numis nor any of its affiliates nor any of its or its affiliates' agents, directors, officers or employees nor the Company shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision any of them may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to the Placing nor for any decision any of them may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of Numis and the Company.

Termination of the Placing

Numis may in its absolute discretion terminate the Placing Agreement (provided that, where reasonably practicable prior to giving such notice, Numis shall consult with the Company) at any time up to and including Admission in certain circumstances, including (among others) a breach of the warranties given to Numis in the Placing Agreement, the failure of the Company to comply with all of its obligations under the Placing Agreement, any of the parties to the Acquisition Agreement not having complied with its obligations under the Acquisition Agreement, the Circular not being formally approved by the FCA and issued to Shareholders, a material adverse change in the opinion of Numis (acting in good faith) in the Group's or Enlarged Group's condition or prospects having occurred at any time prior to Admission or the occurrence of a force majeure event which, in the opinion of the Numis, makes it impractical or inadvisable to proceed with the Placing. 

Notice of termination may be communicated by Numis as soon as is practicable to any director of the Company orally or by fax or email or otherwise and announced to a Regulatory Information Service.

If the Placing Agreement is terminated in accordance with its terms, the rights and obligations of each Placee in respect of the Placing as described in the Press Announcement (including this Appendix) shall cease and terminate at such time and no claim may be made by any Placee in respect thereof.

By participating in the Placing, each Placee agrees with the Company and Numis that the exercise by the Company or Numis of any right of termination or any other right or other discretion under the Placing Agreement shall be within the absolute discretion of the Company or Numis (as the case may be) and that neither the Company nor Numis need make any reference to such Placee and that none of the Company, Numis, their respective affiliates or their or their respective affiliates' agents, directors, officers or employees, respectively, shall have any liability to such Placee (or to any other person whether acting on behalf of a Placee or otherwise) whatsoever in connection with any such exercise or failure to exercise.

By participating in the Placing, each Placee agrees that its rights and obligations terminate only in the circumstances described above and under the "Conditions of the Placing" above and will not be capable of rescission or termination by it after oral confirmation by Numis following the close of the Placing. 

Representations, warranties and further terms

By participating in the Placing, each prospective Placee (and any person acting on such Placee's behalf) represents, warrants, acknowledges and agrees (for itself and for any such prospective Placee) to Numis that:

1        it has read and understood the Press Announcement (including these terms and conditions) in its entirety and that its acquisition of the Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, indemnities, acknowledgements, agreements and undertakings and other information contained in this Appendix and that it has not relied on, and will not rely on, any information given or any representations, warranties or statements made at any time by any person in connection with Admission, the Placing, the Company, the Placing Shares or otherwise, other than the information contained in the Press Announcement (including these terms and conditions) and the Publicly Available Information;

2        it has not received a prospectus or other offering document in connection with the Placing and acknowledges that no prospectus or other offering document has been or will be prepared in connection with the Placing or the Placing Shares;

3        the Company's ordinary shares are listed on the premium listing segment of the Official List, and that the Company is therefore required to publish certain business and financial information in accordance with the rules and practices of the FCA, which includes a description of the nature of the Company's business and the Company's most recent balance sheet and profit and loss account and that it is able to obtain or access such information without undue difficulty, and is able to obtain access to such information or comparable information concerning any other publicly traded company, without undue difficulty;

4        that the Placing is not conditional on completion of the Acquisition and although it is proposed to use the net proceeds of the Placing to part fund the Acquisition, that the Acquisition is dependent upon certain conditions being satisfied and that, accordingly, none of the Company or Numis warrant or represent that the Acquisition will take place;

5        neither Numis nor the Company nor any of their respective affiliates, or their or their respective affiliates' agents, directors, officers or employees, respectively, nor any person acting on behalf of any of them has provided, and will not provide, it with any material regarding the Placing Shares or the Company or any other person other than the information in the Press Announcement (including these terms and conditions) or any other Publicly Available Information, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares; nor has it requested Numis, the Company, any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them to provide it with any such information;

6        neither Numis nor any person acting on its behalf nor any of its affiliates, or its or its affiliates, agents, directors, officers or employees, has or shall have any liability for the Press Announcement (including these terms and conditions) or any other Publicly Available Information, or any representation relating to the Company, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;

7        the content of the Press Announcement (including these terms and conditions) and the Publicly Available Information has been prepared by and is exclusively the responsibility of the Company and that neither Numis, its affiliates  nor any persons acting on its behalf are responsible for or have or shall have any liability for any information or representation, warranty or statement relating to the Company contained in the Press Announcement (including these terms and conditions) or any other Publicly Available Information, nor will they be liable for any Placee's decision to participate in the Placing based on any information, representation, warranty or statement contained in the Press Announcement (including these terms and conditions), any other Publicly Available Information or otherwise. Nothing in this Appendix shall exclude any liability of any person for fraudulent misrepresentation;

8        it is not, and any person who it is acting on behalf of is not, and at the time the Placing Shares are acquired will not be, a resident of Australia, Canada, South Africa, New Zealand, or Japan;

9        (i) the Placing Shares have not been and will not be registered under the Securities Act or with any state or other jurisdiction of the United States, nor approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any other United States regulatory authority, (ii) it will not offer, sell or deliver, directly or indirectly, any Placing Shares in or into the United States other than pursuant to an effective registration statement under the Securities Act or in a transaction exempt from, or not subject to, the registration requirements thereunder and in compliance with any applicable securities laws of any state or other jurisdiction of the United States, and (iii) it is outside of the United States, not acting on a non-discretionary basis for the account or benefit of a person located within the United States at the time the undertaking to acquire the Placing Shares is given and is otherwise acquiring the Placing Shares in an "offshore transaction" meeting the requirements of Regulation S under the Securities Act;

10      it (i) has such knowledge and experience in financial and business matters to be capable of evaluating the merits and the risks of an investment in the Placing Shares, (ii) will not look to Numis for all or part of any such loss it may suffer, (iii) is able to bear the economic risk of an investment in the Placing Shares, (iv) is able to sustain a complete loss of the investment in the Placing Shares and (v) has no need for liquidity with respect to its investment in the Placing Shares;

11      (i) the only information on which it is entitled to rely and on which it has relied in committing to subscribe for the Placing Shares is contained in the Press Announcement (including these terms and conditions), the Publicly Available Information such information being all that it deems necessary to make an investment decision in respect of the Placing Shares and it has made its own assessment of the Company, the Placing Shares and the terms of the Placing based on Publicly Available Information, (ii) Numis and the Company (or any of their respective affiliates) have not made any representation to it, express or implied, with respect to the Company, the Placing or the Placing Shares or the accuracy, completeness or adequacy of the Publicly Available Information, (iii) it has conducted its own investigation of the Company, the Placing and the Placing Shares, satisfied itself that the information is still current and relied on that investigation for the purposes of its decision to participate in the Placing and (iv) it has not relied on any investigation that Numis or any person acting on its behalf may have conducted with respect to the Company, the Placing or the Shares;

12      the Placing Shares have not been registered or otherwise qualified for offer and sale nor will a prospectus be cleared or approved in respect of the Placing Shares under the securities laws of United States, Australia, Canada, South Africa, New Zealand or Japan and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, within the United States, Australia, Canada, South Africa, New Zealand or Japan or in any country or jurisdiction where any action for that purpose is required;

13      it and/or each person on whose behalf it is participating:

(a)      is entitled to acquire Placing Shares pursuant to the Placing under the laws and regulations of all relevant jurisdictions;

(b)      has fully observed such laws and regulations;

(c)      has capacity and authority and is entitled to enter into and perform its obligations as an acquirer of Placing Shares and will honour such obligations; and

(d)      has obtained all necessary consents and authorities (including, without limitation, in the case of a person acting on behalf of a Placee, all necessary consents and authorities to agree to the terms set out or referred to in this Appendix) to enable it to enter into the transactions contemplated hereby and to perform its obligations in relation thereto;

14      it will not distribute, forward, transfer or otherwise transmit the Press Announcement (including these terms and conditions) or any part of it, or any other presentational or other materials concerning the Placing in or into the United States (including electronic copies thereof) to any person, and it has not distributed, forwarded, transferred or otherwise transmitted any such materials to any person;

15      none of Numis, its affiliates and any person acting on its behalf is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of Numis and that Numis has no duties or responsibilities to it for providing the protections afforded to Numis' clients or customers or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

16      it will make payment to Numis (as Numis may direct) for the Placing Shares allocated to it in accordance with the terms and conditions of the Press Announcement (including these terms and conditions) on the due times and dates set out in the Press Announcement (including these terms and conditions), failing which the relevant Placing Shares may be placed with others on such terms as Numis may determine in its absolute discretion without liability to the Placee and it will remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such Placing Shares and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to the terms set out or referred to in the Press Announcement (including these terms and conditions)) which may arise upon the sale of such Placee's Placing Shares on its behalf;

17      its allocation (if any) of Placing Shares will represent a maximum number of Placing Shares which it will be entitled, and required, to acquire or subscribe for, and that it may be called upon to acquire or subscribe for a lower number of Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;

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

19      the person who it specifies for registration as holder of the Placing Shares will be (i) the Placee or (ii) a nominee of the Placee, as the case may be. Numis and the Company will not be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. It agrees to acquire Placing Shares pursuant to the Placing on the basis that the Placing Shares will be allotted to a CREST stock account of Numis who will hold them as nominee directly or indirectly on behalf of the Placee until settlement in accordance with its standing settlement instructions with it;

20      the allocation, allotment, issue and delivery to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to a stamp duty or stamp duty reserve tax liability under (or at a rate determined under) any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depository receipts and clearance services) and that it is not participating in the Placing as nominee or agent for any person or persons to whom the allocation, allotment, issue or delivery of Placing Shares would give rise to such a liability;

21      it and any person acting on its behalf falls within Article 19(5) and/or 49(2) of the Order, as amended, and undertakes that it will acquire, hold, manage and (if applicable) dispose of any Placing Shares that are allocated to it for the purposes of its business only;

22      it has not offered or sold and will not offer or sell any Placing Shares to persons in the United Kingdom prior to Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business 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      if within the EEA, it is a Qualified Investor as defined in section 86(7) of FSMA, being a person falling within Article 2.1(e) of the Prospectus Directive;

24      it has only communicated or caused to be communicated and it 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 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 it will comply with all applicable laws with respect to anything done by it or on its behalf in relation to the Placing Shares (including all relevant provisions of FSMA, the Financial Services Act 2012 and MAR in respect of anything done in, from or otherwise involving the United Kingdom);

26      if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive (including any relevant implementing measure in any member state), the Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the EEA which has implemented the Prospectus Directive other than qualified investors, or in circumstances in which the express prior written consent of Numis has been given to the offer or resale.

27      it has not offered or sold and will not offer or sell any Placing Shares to persons in the European Economic Area prior to Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in any member state of the EEA;

28      if it has received any confidential price sensitive information about the Company in advance of the Placing, it has received such information within the marketing soundings regime provided for in article 11 of MAR and associated delegated regulations and has not: (a) dealt in the securities of the Company; (b) encouraged or required another person to deal in the securities of the Company; or (c) disclosed such information to any person, prior to the information being made publicly available;

29      neither Numis, the Company nor any of their respective affiliates, or their or their respective affiliates' agents, directors, officers or employees, respectively, nor any person acting on behalf of such persons is making any recommendation to it, advising it regarding the suitability of any transaction it may enter into in connection with the Placing nor providing advice in relation to the Placing nor in respect of any representation, warranty, acknowledgement, agreement, undertaking or indemnity contained in the Placing Agreement nor the exercise or performance of any of Numis' rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

30      acknowledges and accepts that Numis may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the Placing Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise and, except as required by applicable law or regulation, Numis will not make any public disclosure in relation to such transactions;

31      it has complied with its obligations in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002, the Criminal Justice Act 1993, the Terrorism Act 2000, the Terrorism Act 2006 and the Money Laundering Regulations 2007 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;

32      its commitment to acquire Placing Shares on the terms set out in the Press Announcement (including these terms and conditions) will continue notwithstanding any amendment that may in future be made to the terms and conditions of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's or Numis' conduct of the Placing;

33      it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of acquiring the Placing Shares. It further acknowledges that it is experienced in investing in securities of this nature and is aware that it may be required to bear, and is able to bear, the economic risk of, and is able to sustain, a complete loss in connection with the Placing. It has relied upon its own examination and due diligence of the Company and its affiliates taken as a whole, and the terms of the Placing, including the merits and risks involved;

34      the Company, Numis and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements, which are given to Numis on its own behalf and on behalf of the Company and are irrevocable;

35      if it is acquiring the Placing Shares as a fiduciary or agent for one or more investor accounts, it has full power and authority to make, and does make, the foregoing representations, warranties, acknowledgements, agreements and undertakings on behalf of each such accounts;

36      time is of the essence as regards its obligations under this Appendix;

37      any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to Numis;

38      the Placing Shares will be issued subject to the terms and conditions set out in this Appendix; and

39      this Appendix and all documents into which this Appendix is incorporated by reference or otherwise validly forms a part will be governed by and construed in accordance with English law. All agreements to acquire shares pursuant to the Placing will be governed by English law and the English courts shall have exclusive jurisdiction in relation thereto except that proceedings may be taken by the Company or Numis in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange.

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) agrees to indemnify and hold the Company, Numis and each of their respective affiliates and each of their and their respective affiliates' agents, directors, officers and employees, respectively, harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings given by the Placee in this Appendix and further agrees that the provisions of this Appendix shall survive after completion of the Placing.

The agreement to allot and issue Placing Shares to Placees (or the persons for whom Placees are contracting as agent) free of stamp duty and stamp duty reserve tax in the UK relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, directly by the Company. Such agreement assumes that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to transfer the Placing Shares into a clearance service. If there were any such arrangements, or the settlement related to other dealings in the Placing Shares, stamp duty or stamp duty reserve tax may be payable, for which neither the Company nor Numis would be responsible. If this is the case, it would be sensible for Placees to take their own advice and they should notify Numis accordingly. In addition, Placees should note that they will be liable for any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the acquisition by them of any Placing Shares or the agreement by them to acquire any Placing Shares and each Placee, or the Placee's nominee, in respect of whom (or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue or delivery of Placing Shares has given rise to such non-UK stamp, registration, documentary, transfer or similar taxes or duties undertakes to pay such taxes and duties, including any interest and penalties (if applicable), forthwith and to indemnify on an after-tax basis and to hold harmless the Company and Numis in the event that either the Company and/or Numis have incurred any such liability to such taxes or duties.

The representations, warranties, acknowledgements and undertakings contained in this Appendix are given to Numis for itself and on behalf of the Company and are irrevocable.

Numis is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing and Admission and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Placing and will not be responsible to anyone (including Placees) other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or other matters referred to in the Press Announcement (including these terms and conditions).

Each Placee and any person acting on behalf of the Placee acknowledges that Numis does not owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings, acknowledgements or agreements or indemnities in the Placing Agreement.

Each Placee and any person acting on behalf of the Placee acknowledges and agrees that Numis may (at its absolute discretion) satisfy its obligations to procure Placees by itself agreeing to become a Placee in respect of some or all of the Placing Shares or by nominating any connected or associated person to do so.

When a Placee or any person acting on behalf of the Placee is dealing with Numis, any money held in an account with Numis on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the relevant rules and regulations of the FCA which therefore will not require Numis to segregate such money, as that money will be held by it under a banking relationship and not as trustee.

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 the Press Announcement (including these terms and conditions) may be subject to amendment. Numis will notify Placees and any persons acting on behalf of the Placees of any changes.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, the Press Announcement (including these terms and conditions).

APPENDIX 2: RISK FACTORS

RISKS RELATING TO THE ACQUISITION

McColl's may sustain losses in excess of the limitations on the Seller's liability under the Sales and Purchase Agreement and/or the Seller may not be in a financial position to satisfy any claims

(a) Material Risks relating to the Acquisition

The Acquisition is conditional and the conditions may not be satisfied

Completion of the Acquisition is conditional upon satisfaction or, in the case of the Competition Condition, waiver of the following conditions, prior to 13 January 2017 (or such later time as the parties may agree):

·      approval by Shareholders of the Acquisition at the General Meeting; and

·      the Competition Condition.

In the event that the conditions are not satisfied or, in the case of the Competition Condition, waived by 13 January 2017 (or such later date as the parties may agree), the Sale and Purchase Agreement will automatically terminate.

There can be no assurance that the conditions will be fulfilled (or waived in the case of the Competition Condition) or that the Acquisition will be completed.

In addition, the Company may be unable to complete the Acquisition if there is an event of default under the Senior Facilities Agreement which causes the Banks to withdraw the availability of the Facilities prior to each Completion and the Company is unable to raise alternative financing for the Acquisition.

The Company has incurred significant transaction costs in connection with the Acquisition and a failure to complete the Acquisition may have an adverse effect on the financial condition and future operating results of the Group and/or the trading price of Ordinary Shares may decline.

Subject to CMA approval from the CMA, completion will occur in stages, with up to 20 stores being transferred on a weekly basis. There is a risk that the acquisition of some stores will not complete and the Company would acquire some, but not all, of the 298 stores from the Co-op. In addition, the Acquisition is conditional on approval from the CMA.  Any approval granted by the CMA may take longer than expected to obtain or may be granted subject to conditions, such as the divestment by the Group of certain assets. The completion of the acquisition of some, but not all, stores, or any such conditions required by the CMA could have a material adverse effect on the operations and financial results of the Enlarged Group.

There may be a general deterioration in the economy

There is an increased risk of a general deterioration in economic and market conditions in the United Kingdom as a consequence of the majority vote in favour of the United Kingdom leaving the European Union. This may result in a fall in the demand for the products of the Group and may also put other pressures on the operations of the Group which could have a materially adverse effect on the operations and financial results of the Group.

Adverse change in the financial condition of the Portfolio

The initial transfer and migration of stores is expected to occur in January 2017, subject to satisfaction or, in the case of the Competition Condition, waiver of the conditions. McColl's is aiming to transfer up to 20 stores per week from that date, which means that it will take approximately 23 weeks or more to complete the transfer process for the entire Portfolio. It is possible that there could be an adverse event affecting the Portfolio prior to Completion including without limitation, as a result of an adverse change in the financial, political, economic or stock market conditions in the United Kingdom, any other European Union member state or the United States of America following the majority vote in favour of the United Kingdom leaving the European Union. McColl's would not have a right to terminate the Sale and Purchase Agreement in those circumstances. In such an event, the value of the Portfolio may be less than the consideration paid by McColl's and, accordingly, the net assets of the Enlarged Group could be reduced.

The protections provided to McColl's by the Co-op in the Sale and Purchase Agreement are limited

The liability of the Seller pursuant to the Sale and Purchase Agreement is limited in time and amount. Accordingly, McColl's may not have recourse against, or otherwise be able to recover from, the Seller in respect of material losses which it may suffer in respect of a breach of warranty or otherwise in respect of liabilities of the Co-op.

The Enlarged Group may fail to realise the perceived benefits of the Acquisition, including synergies

The Enlarged Group may not realise the expected benefits from the Acquisition or may encounter difficulties in achieving these anticipated benefits. There can be no assurance that the Enlarged Group will realise these benefits in the time expected or at all. This could have a negative impact on the business, operating profit or overall financial condition of the Enlarged Group.

Contractual arrangements with the Post Office

Currently 38 of the stores in the Portfolio are subject to an agreement with the Post Office pursuant to which a Post Office operates within such stores. That agreement is not capable of assignment to the Group and the Group will need to enter into a new agreement with the Post Office in order for such arrangements to continue. The Group may not be able to negotiate a new agreement with the Post Office or may not be able to negotiate a new agreement on as favourable terms, each of which may have a material adverse effect on the operations and financial results of the Enlarged Group.

Landlord consent may not be granted in respect of the leasehold properties currently used by the Detroit Business

If landlord consent is not obtained in respect of its occupation of leasehold properties in the Detroit Business following completion of the Acquisition, the landlord of each such property may have a right to forfeit the lease. The forfeiture of one of more of such leases may have a material adverse effect on the operations and financial results of the Enlarged Group.

The Portfolio may not perform in line with expectations

If the results and cash flows generated by the Portfolio are not in line with the Company's expectations, it may materially impact on the financial performance of the Enlarged Group, and a write-down may be required against the carrying value of the Group's investment in the Portfolio which might have an adverse effect on the Enlarged Group's financial position and operating results. Such a write-down will reduce the Company's ability to generate distributable reserves by the extent of the write-down and consequently may affect the Enlarged Group's ability to pay dividends.

(b) Material new risks relating to the Enlarged Group as a result of the Acquisition

The Enlarged Group may experience difficulties in integrating the Group and the Portfolio

The Acquisition will require the integration of the Group and the Portfolio and the success of the Enlarged Group will depend, in part, on the effectiveness of the integration process. Some of the potential challenges in combining the businesses may not be known until after Completion and issues may come to light during the course of integrating the Portfolio into the Enlarged Group that could have an adverse effect on the financial condition and results of operations of the Enlarged Group.

The process of integrating the businesses could be complex and may potentially lead to the interruption of operations of the businesses which could have an adverse effect on the business, financial condition and results of operations of the Enlarged Group.

Any delays or difficulties encountered in connection with the integration of the businesses could also lead to reputational damage to the Enlarged Group. There is a risk that the challenges associated with managing the integration of the Group and the Portfolio will result in management distraction and that consequently the underlying businesses will not perform in line with expectations. Management expect that the Enlarged Group will incur a number of costs in relation to the Acquisition, including integration and post-Completion costs, which could exceed amounts estimated. There may also be further additional and unforeseen expenses incurred in connection with the Acquisition. These costs could have an adverse effect on the operating results, business, financial condition and prospects of the Enlarged Group.

The recognition of trade unions by the Portfolio could cause disruptions

A large proportion of the colleagues in the Portfolio are members of the USDAW trade union. Although the Group does not recognise USDAW or any other any trade union, the Acquisition exposes it to a risk of material disagreements or disputes with USDAW and its representatives among the colleagues in the Portfolio, which could result in localised or national industrial action. Any such disagreements or actions following completion of the Acquisition could have a material adverse effect on the operating results, business, financial condition and prospects of the Enlarged Group.

The Enlarged Group may experience difficulties in supplying the larger portfolio of stores following the Acquisition

The Acquisition will put increased pressure on the Group's supply and distribution arrangements. There is a risk that the Enlarged Group's suppliers may not be able to fulfil their obligations with regards to the increased number of stores after the Acquisition. That could result in the interruption or loss of the supply of core category products to the Group's stores. Although the Enlarged Group could obtain supplies from alternative sources if a supplier was experiencing such difficulties, this disruption could have a material adverse effect on the Enlarged Group's business, prospects, results of operations and financial condition.

The Enlarged Group will have further indebtedness as a result of the Acquisition and any failure to comply meet the repayments or comply with the banking covenants may have a material adverse effect on the Enlarged Group

The Enlarged Group will have further indebtedness as a result of the Acquisition. Failure to meet the repayment or comply with the covenants in the Facilities Agreement will result in an event of default which would allow the lenders under the Facilities Agreement to enforce their security.

The use of borrowings requires the Enlarged Group to service interest payments, make principal repayments and comply with other requirements of the Senior Facilities Agreement. Any failure to meet repayments or comply with the banking covenants may have a material adverse effect on the business, financial condition, results of operations and future prospects of the Enlarged Group and the price of the Ordinary Shares.