MAD SQUIRREL CORPORATE REPORT

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1 MAD SQUIRREL CORPORATE REPORT MAD SQUIRREL 1 Copy Right The Right Crowd

2 RED SQUIRREL GROUP LTD ( ) A MODERN ARTISAN BREWERY AND CRAFT BEER CHAIN Total Investment Required: 1.5m Min Commitment: 62 or 200 shares Price per Share: 31p EIS: Yes Equity Available: 4,838,710 Number of shares after Fund Raise 30,589,660 Pre-Money Valuation: 8m Current number of shares in issue 25,750,950 Post- Money Valuation: 9.5m Sector: Brewing/ Retail/ Brand ESTABLISHED IN 2010, AWARD WINNING NOW EXPANDING The Red Squirrel Group is an award winning modern craft brewer and is expanding its beer brands and its Tap & Bottle Shop chain together with its distribution business. The business started commercially in SW Hertfordshire in 2010 as a real ale brewery and originally built its reputation on the production of dark beers and American IPA s, such as Redwood IPA and London Porter. These premium beers together with new stars such as $umu APA, De La Creme and Flying Squirrel have achieved CAMRA and SIBA gold medal awards and its London Porter is a frequent multiple award winning beer. There are currently 30 staff, a modern Brew House, four Tap & Bottle Shops in the home counties; it owns the Mad Squirrel brand, and a distribution division. The management are keen to accelerate the rate of growth. Mad Squirrel is passionate about beer and on a mission to spread knowledge and create beers to stimulate drinker s minds as well as mouths. GROWTH MODEL / USE OF FUNDS/ EXIT PRICE A clear coherent growth strategy is being pursued, as RSG further builds on its established innovative brewery and experience of building the Tap & Bottle Shop. This funding, of up to 1.5m is to roll-out the Tap & Bottle Shop concept, which is not only a lucrative profit center and cashflow generator it s also an effective strategy for building the brands, a win-win growth strategy. The shop concept has been refined with the four existing outlets and the target is to open a further four outlets over the next 18 months. The company forecast that eight outlets will achieve a critical mass and profitability by There could be no need for further funding, if projections are met, unless it is to further accelerate this attractive growth plan. The finance is already in place to upgrade the modern brew house to being state of the art, which is to be completed by summer This upgrade not only increases production, it will allow greater control and flexibility compared to bigger kits so enable the company to set trends and develop beer styles as it produces a new range of Limited Release craft beers. 2 Copy Right The Right Crowd

3 USE OF FUNDS The majority of funds will be used to extend the Mad Squirrel Tap & Bottle Shop retail chain. The forecast is for a further 4 new stores to be opened in the next 18 months, with the first two to open by August However, the company has scope to accelerate this store opening. In addition, the company expects to extend its modest export market sales and further develop its brand on a UK national scale. ILLUSTRATIVE EXIT POTENTIAL AFTER THE EIS QUALIFYING PERIOD The company s most likely exit routes are through a trade sale or a listing of shares on a Recognized Investment Exchange. In regards to a trade sale. There have recently been examples of small companies in this space with successful retail concepts, such as RSG, being taken over by much larger companies on significant multiples to turnover. For example, Meantime Brewery was taken over for 120m by SAB Miller in a trade sale, when its profits were 1.5m on Sales of 17m. Applying the same sort of multiple to forecast sales of RSG in 2020 would give an implied valuation of 54m or 176p per share. If the company was to choose to IPO the typical price earnings for a listed branded drinks/ retail/pub chain/ is in the range of 20-30x. Taking a middle of the range price earnings ratio of 25x and applying it to the June 2020 forecasts would give a 13m market valuation for the company or 44p per share. A further comparison would be Chapel Down, which is listed on the NEX Exchange. It was loss making last year and was recently valued at 88m, which is 10.7x its 8.2m turnover. If RSG was to be valued at even half this multiple to turnover, then the market cap would be 30m or 98p per share. DIFFERENTIATION / EXPANSION STRATEGY Red Squirrel Group has over the last seven years established Mad Squirrel as an award winning premium branded beer, which will continue to expand. The growth strategy is to develop a second range of Limited Release or seasonal beers, which will stimulate drinkers interest and sales. This growth will be accelerated by the soon to be opened state of the art brew house allowing greater control and flexibility. The Brewery Shop was incorporated in February 2015 which now consists of four Mad Squirrel Tap & Bottle Shops. These outlets are premium quality with elements and characteristics of an old-fashioned pub, but with the aesthetics and service of a high-end retail business. The outlets sell the Mad Squirrel brand range complimented by sought after independent UK and International breweries. This range of genuine independent small breweries craft-beer products, is a key USP about the Tap & Bottle Shop as it makes a clear point of difference against large brewery competitors who own substantial number of pubs, but in the main dispense brands from larger breweries. Social media is playing a significant part with the consumer, increasing demand for smaller super premium cutting edge breweries such as Beavertown and Cloudwater, RSG fits into this sector. 3 Copy Right The Right Crowd

4 Mad Squirrel outlets were voted into the Top 50 Independent UK Retailers, by Harper s Magazine and came first in the beer retailer s category. The Tap & Bottle Shops vary in size from 1000 to 3000 sqft and offer customers the chance to sample and purchase up to 200 world-class beers; in the High Wycombe outlet, the newest expanded concept you can eat fresh pretzels and artizan stone oven cooked pizza on the premises at competitive prices. All outlets have Leading-edge beer dispense systems allowing customers to keep take-home beer fresher longer. Current outlets are at Amersham, Chesham, Berkhamsted and High Wycombe. The distribution division to date heavily targets London and its suburbs, which has helped cement a strong brand base. The beer is supplied in kegs, casks, bottles and cans down several channels, such as; public houses, hotels, beer and music festivals and direct to consumers. There is a plan to increase attendance at UK festivals and investment has been made in a Mad Squirrel craft beer Bar on wheels, which has 8 keg taps and can dispense beer within minutes of setting-up. The four new shops will help expand the brand and UK distribution reach. The plan is to also target national and then international distributors with the initial focus on Scandinavian countries, Italy, North America and the Far East. KEY POINTS Premium beers justify a premium price. Focus on increasing and developing the strength of the brands. Roll-out the Mad Squirrel Tap & Bottle Shops chain. Increase exports and UK sales. Projections show sufficient funds being raised to be cash flow positive. BOARDROOM TEAM Greg Blesson, Managing Director, 26.6 % Shareholder (Blesson Family hold a further, 9.1%) Greg has worked in the premium alcoholic beverage market throughout his career at mid and senior management level including at Oyster Bay, The Remy Martin Group and Freixenet. Jason Duncan-Anderson Financial Director, 26.4% Shareholder Jason originates from Zimbabwe and has worked with some of the world s leading drinks brands including Oyster Bay Peter Wright, Project Director, 6.2% Shareholder Peter has experience at board level in the printing, design and marketing industries. Peter is one of the founders of the Buryfields music and comedy festivals. Tim Baldwin, Chairman, 3.9% Shareholder Tim is an investment analyst, authorized by the FCA and has worked for several banks including Investec. There are currently 30 staff and the number is likely to increase with new appointments. 4 Copy Right The Right Crowd

5 ILLUSTRATIVE FINANCIALS FOR RSG LTD CONSOLIDATED June A* 2017E 2018E 2019E 2020E Total Sales - 2,000 3,500 5,400 6,000 Gross Profit ,924 3,000 3,500 Margin % PBT *Consolidated accounts not available KEY POINTS The forecast assumes 4 new outlets in 18 months. An upgraded production facility under development. Cashflow positive expected in Strong Balance sheet with Negligible long term debt and unused 150k loan facility. The NAV for June 2017 is estimated at 2.3m. INVESTMENT RISK MAIN RISK FACTORS: Competition with other craft beer brands. Reduction in distribution channels and market size for craft beer. Government intransigence on licensing laws and sensible drinking. A new holding company Corporate Structure make accounting comparisons awkward. CONTACT DETAILS Unit 24 Boxted Farm Berkhamsted Rd Potten End Hertfordshire HP1 2SG This document relies on information supplied by the company and The Right Crowd does not take responsibility for its accuracy. 5 Copy Right The Right Crowd

6 ABOUT THE AUTHOR Jon Levinson MBA. His experience of small cap companies stretches back many years in capacities ranging from Analyst, Head of Research (Teather & Greenwood, Journalist (Penny Share Focus, Business Opportunities Digest ) Fund Manager Best Investment, T1ps Investment and a Corporate Broking Director. He has a deep and wide knowledge of the small cap sector and has advised on many public and private transactions. Including Pre-IPO, fund raisings, IPOs, Secondary capital raisings, EIS fundings as well as M&A advice. Jon completed his MBA in 1992 with a dissertation on Filling the Equity Gap. 6 Copy Right The Right Crowd