COMPANY INFORMATION

OVERVIEW OF STRATEGY AND BUSINESS MODEL

We generate revenue from two main sources: licensing brands and software, and manufacturing product.

We license our brands, software and technology to partners in the UK and internationally. They pay us subscription fees in exchange. That bit is growing. We’re putting our effort into scaling it more quickly.

We also directly manufacture a range of printing, signage, promotional items and expo displays in the UK.

The majority of our printing is sold via resellers. We split those into two types: Brand Partners and Trade Partners. With Brand Partners, our brands are exposed to the end client. With Trade Partners, the end client is unaware that we are manufacturing under ‘white-label’.

We also sell directly to some end clients in our own stores. We think that’s really important. We do this to learn first-hand what clients want and what our partners need to deliver for their clients. We adapt and develop our offering, to ensure it fits those needs.

Our products are used by all sizes of business – from startups to large corporates. Our different channels tailor their message and service to address different parts of the market.

We launched Nettl in September 2014. Nettl system is for established graphic design or print businesses enabling the simplified delivery of websites, ecommerce shops and other web services. Today we have over 200 Nettl partners.

Nettl puts web and ecommerce first, because that’s what clients are doing. The majority of revenue in most Nettl studios still comes from the sale of print and display. However, to win new clients and retain existing ones, we’ve got to take care of all their creative and marketing needs. Those needs now start with web. So that’s where we start.

Most Nettl locations are independent print shops, design agencies, web designers and sign companies. We partner with them and they “bolt-on” Nettl to their business.

The Nettl solution is a suite of training, marketing and software which helps a graphics business to deliver higher value web projects, with their existing team’s skillset. We show them how. We train them in sales and tech. The Nettl marketing collateral, updated monthly, gives them the tools to connect with existing clients and win new ones.

Printing.com supplies SMEs with graphic design and printing services via its partner network. Today we have over 90 printing.com partners.

W3P is a web-to-print SaaS solution utilised by other printers and graphic design agencies. Flyerzone is an online print businesses. BrandDemand provides print management services via online portals to franchise networks and other multisite businesses.

Marqetspace is a trade supplier that sells print and display to graphic professionals, it acts as our funnel for new brand partners. They try us. They buy stuff. We deliver on time. They like our quality. And we start a relationship. We ask them about their challenges. Then we try to help. It’s easier to have that conversation once we’ve got to know each other. Our aim is to turn Marqetspace clients into brand partners. So far nearly 40 have made the leap.

The above channels are not isolated developments, but utilise a common core SaaS ‘platform’ which is adapted for each activity.

We license our systems and brands internationally. Master Licensees typically have print hubs and reseller networks and use our software and, in some instances, marketing in their country. Each agreement is structured slightly differently, however we are either paid a share of local licence fees, transaction fees, or both.

We’re also experimenting with ways of launching Nettl directly in international markets. In June 2017, we signed four ‘founding’ partners in The Netherlands. They helped us to adapt the Nettl formula for the Dutch market. Today we have 21 Nettl Partners in the Netherlands, 1 in Belgium and 6 in France.

Last year we diversified our product mix and invested in direct-to-textile printing kit. We call it ink-on-fabric. Because that’s what it is. We now sell a range of expo display and custom furniture through Marqetspace and other channels. And that’s growing well. Clients are choosing these next generation fabric displays because they’re lighter and look better than the alternatives. We expect this to grow and become a bigger share of our revenues.

In January 2017 we made our first signs acquisition. ADD Signs in Liverpool. In the first full year of our ownership, sales grew over 30% on the previous year. We’ve since rebranded them as Nettl of Liverpool Waters and relocated them to become our first Nettl superstore. The doors opened in April 2018.

We look at the signs sector and we think, well, we already sell some signage to our clients. Sign companies already sell some print. The market has converged. It’s highly fragmented. We think there’s an opportunity to roll up sign businesses and create value.

In July 2017 acquired Image Group in Manchester. The acquisition of Image was a significant step in our sign roll-up strategy, and enables us to scale our business more quickly.

In July 2018 we acquired AG Signs in Exeter. We’ll roll this business together with our Nettl of Exeter studio (acquired in December 2017) and create the next Nettl superstore in Exeter.

PRINCIPLES OF CORPORATE GOVERNANCE

The Company’s Board of Directors appreciates the value of good corporate governance not only in the areas of accountability and risk management but also as a positive contribution to business prosperity. It believes that corporate governance involves more than a simple ‘box ticking’ approach to establish whether a company has met the requirements of a number of specific rules and regulations. The key objective is to enhance and protect shareholder value. Details of the Company’s Corporate governance arrangements can be found here.

BOARD STRUCTURE

The Board comprises Chairman J-H Mohr (Non-Executive Director), C C Bona (Non-Executive Director), P R Gunning (Chief Executive), S G Barrell (Interim Finance Director), G G Cockerill (Chief Operating Officer) and R A Lightfoot (Director and Company Secretary). Director biographies are set out here.

BOARD COMMITTEES

The following Committees, which have written terms of reference, deal with specific aspects of the Group’s affairs:

Remuneration Committee – comprises J-H Mohr (Chairman) and C C Bona (Non-Executive Director). Audit Committee – comprises J-H Mohr (Chairman) and C C Bona  (Non-Executive Director).

COMPANY & COMPANY ADVISERS

INCORPORATION & OPERATION

1. Grafenia plc incorporated in England & Wales Reg. No.3983312.
2. Principle countries of operation are currently UK, Ireland, France and the Netherlands.
3. Company Number: 03983312 (England and Wales)

Registered Office

Third Avenue
The Village
Trafford Park
MANCHESTER
M17 1FG

Company Secretary
Richard A. Lightfoot, BSc (Hons)
richard.lightfoot@grafenia.com

NOMINATED ADVISERS AND OTHER KEY ADVISERS TO THE COMPANY

FINANCIAL ADVISER, NOMINATED ADVISER & BROKER

Allenby Capital Limited
5 St Helen’s Place
London
EC3A 6AB

SOLICITORS

Gateley LLP
Ship Canal House
98 King Street
M2 4WU

AUDITORS

RSM UK Audit LLP
3 Hardman Street
MANCHESTER
M3 3HF

REGISTRARS AND RECEIVING AGENTS

Link Asset Services
Northern House
Woodsome Park
Fenay Bridge
HUDDERSFIELD
HD8 0LA

BANKERS TO THE GROUP

The Royal Bank of Scotland plc
1 Spinningfields Square,
Manchester
M3 3AP

CONSITUTIONAL DOCUMENTS OF THE COMPANY

Memorandum of Association
Articles of Association

TRADING PLATFORMS

• The Company’€™s securities are only traded on AIM.
• Grafenia is subject to the UK City Code on Takeovers and Mergers.
• There are no restrictions on the transfer of the Company’s AIM Securities.

AIM SECURITIES

AIM Securities in issue as at 3^rd May 2018, totalled 76,816,166 (No shares are held in treasury).

Of these securities 52.86% are not held in public hands.