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Blueheath Holdings (BOK)

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Tuesday 30 May, 2006

Blueheath Holdings

Placing and Board Changes

Blueheath Holdings PLC
30 May 2006

For Immediate Release                                       30 May 2006

              Blueheath Holdings plc ('Blueheath' or the 'Company')
                            Placing and Board Changes

Blueheath today announces a placing (the 'Placing') in which it has placed,
conditional on admission, 26,250,000 new ordinary shares of 1 pence each in the
Company ('the Placing Shares'). The Placing Shares were placed at a price of 20
pence per share ('Placing Price'). The Placing has raised 5.0million of new
funds for the Company (net of expenses). In addition, the Board has also
announced that Richard Rose will be appointed Deputy Chairman with immediate
effect, taking on the role of Executive Chairman from 1 September 2006, and that
the current Chief Executive and company founder, Douglas Gurr, has announced his
intention to step down with effect from 31 August 2006. The Company has
identified a successor to Mr Gurr whose name will be announced shortly.

The necessary authority required for the allotment of the Placing Shares
pursuant to the Placing will be sought at an Extraordinary General Meeting
convened for 11.00 a.m. on 23 June 2006. The purpose of this announcement is to
provide information on the Placing and the EGM. Admission of the Placing Shares
is expected on 26 June 2006.

Background to and reasons for the Placing

Despite progress, it has taken longer than originally expected for the business
to achieve the level of sales required for it to be profitable through the
current infrastructure. This fact, and corresponding concerns over the impact on
the cash position, led the Board to perform a detailed review of the business.
The review has examined the current year forecasts, sensitivities to these
forecasts, the potential impact on cash flow and breakeven, and the
opportunities for further performance improvement.

Having considered the review the Directors believe that the integration work
delivered to date, together with a further logistics restructuring, should be
sufficient to generate satisfactory operating profits at the current level of
sales and gross margin.

The Directors have also identified that there is sufficient logistics capacity
within its existing warehouse operations at Thurrock and Wrexham for the Group's
current and foreseeable future needs and the decision has therefore been taken
by the Board to close the third party warehouse operation at Tamworth. This
closure will enable the Company to make considerable operational savings and the
reallocation of distribution operations should be achieved by September 2006.

In addition to the integration work delivered to date, this restructuring is
expected to save £2.2 million in the financial year ending 28 February 2007,
rising to £4.0 million in the financial year ending 28 February 2008. This
restructuring is likely to cost £0.5 million with all costs incurred in the
financial year ending 28 February 2007. The Company's proprietary technology
continues to operate well across multiple sites with excellent levels of
fulfilment and, on current progress, it is expected that breakeven for the Group
should be achieved by September 2006, once Tamworth is closed.

Once the cost savings are achieved, the Directors believe that the business
remains well placed, both operationally and commercially, to deliver attractive
returns from further sales and margin growth.

Whilst the Directors and Richard Rose believe that the current levels of sales,
cost reduction programme and restructuring proposals should enable the Company
to achieve cash flow breakeven, they believe that it would be prudent to raise
additional equity capital to fund the cost reduction programme and restructuring
and provide sufficient comfort within the working capital.

Board Changes

The Board has also undertaken a review of both executive and non-executive teams
to ensure the capability is in place to drive the necessary changes proposed
following the review of the business.

The Board has concluded that the immediate focus of the business should be to
implement the logistics restructure in order to go through breakeven into profit
on the current level of sales. The growth focus will return once the cost base
has been restructured. To help drive the necessary changes, Richard Rose will be
joining the Board with immediate effect in the role of deputy chairman. Colin
Smith, the Company's chairman, then intends to hand-over the role of chairman to
Richard, resulting in the chairman being an executive within the Group, with
effect from 1 September 2006. Richard was previously chief executive of Whittard
of Chelsea plc. Prior to that he has been a director of Hagemeyer (UK) Ltd and
chief executive of WF Electrical plc. Richard has a strong track record in
delivering business growth and shareholder value and will be taking primary
responsibility for business strategy and investor relations.

Having led the Company over the past five years from a start-up to its current
scale and position as a leading player in the wholesale market, the chief
executive and Company founder, Douglas Gurr, has announced his intention to step
down with effect from 31 August 2006. The Company has identified a successor
whose name will be announced shortly.

Incentives for Richard Rose and senior management are being reviewed and will be
awarded at the Placing Price. Further details will be sent to shareholders with
notice of the annual general meeting of the Company.


In summary, the Directors continue to believe that Blueheath offers an
attractive opportunity. The business is continuing to attract new customers and
to deliver excellent levels of fulfilment and on-time delivery. The technology
is continuing to operate well across multiple sites enabling the delivery of
this high level of fulfilment from exceptionally low stock levels. The market
remains fragmented with further opportunities to grow both organically and
through acquisition utilising the logistics capacity of the Group.

The Placing

The Company is proposing to raise £5.25 million (before expenses) through the
placing of the Placing Shares. As part of the Placing, Colin Smith has agreed to
subscribe for 250,000 new Ordinary Shares and Douglas Gurr has agreed to
subscribe for 150,000 new Ordinary Shares, together representing 1.5 per cent of
the Placing Shares. The Placing is to be effected on behalf of the Company by
Evolution Securities Limited on the terms of a placing agreement. The Placing
Shares are predominately being placed with existing Shareholders.

The Placing Price represents a discount of approximately 58.3 per cent. to the
closing mid-market price of 48p per Ordinary Share on 26 May 2006, being the
last dealing day prior to the publication of this announcement. The Directors
recognise that this level of discount is substantial to the current market
price. Nonetheless, taking into account the required restructuring costs and the
current working capital headroom, the Directors believe it is in the best
interests of the Company and its Shareholders as a whole to take a prudent view
and proceed with raising additional equity capital by way of the Placing.

The Placing Shares will represent approximately 36.5 per cent. of the issued
share capital of the Company immediately following admission of such shares to
AIM, as enlarged by the issue of such shares.

On 30 May 2006, the Company entered into a placing agreement with Evolution
Securities Limited, pursuant to which Evolution Securities Limited agreed to act
as agent for the Company and to use its reasonable endeavours to procure
subscribers for the Placing Shares, or failing which, to subscribe for such
Placing Shares itself, as principal, in each case at the Placing Price.

The Placing, which has been fully underwritten by Evolution Securities Limited,
is conditional, inter alia, upon:

*         the passing of the resolutions at the EGM;

*         the placing agreement becoming unconditional in all respects and not
          having been terminated in accordance with its terms; and

*         admission to trading on AIM by not later than 8.00am on 26 June

It is expected that the Placing Shares will be admitted to trading on AIM on 26
June 2006.

The new Ordinary Shares to be issued in connection with the Placing will be
issued credited as fully paid and free from all liens, equities, charges,
encumbrances and other interests and will, when issued, rank in full for all
dividends and distributions thereafter declared, made or paid and otherwise pari
passu in all respects with, and carry the same voting and dividend rights as,
the existing Ordinary Shares.

The placing agreement contains various warranties given by the Company with
respect to its business and the Group and certain matters connected with the
Placing. In addition, the Company has given indemnities to Evolution Securities
Limited in connection with the Placing and the performance by Evolution
Securities Limited of the services in relation to the Placing.

Shareholders who are in any doubt as to their tax position are strongly advised
to consult with their own independent financial advisor immediately.

Extraordinary General Meeting

A notice convening the EGM to be held at the offices of Buchnanan
Communications, 45 Moorfields, London EC2Y 9AE at 11.00 a.m. on 23 June 2006 has
been sent to shareholders. Resolutions will be proposed to authorise the
Directors to allot equity securities in connection with the Placing; otherwise
than in accordance with statutory pre-emption provisions. In addition, the
resolutions will renew the Company's general authorities to allot Ordinary
Shares and to do so otherwise than in accordance with the statutory pre-emption
provisions to reflect the changes to its issued share capital, as enlarged by
the Placing.


The Directors consider the terms of the Placing to be in the best interests of
the Company and its Shareholders as a whole. Accordingly, the Directors have
recommended that shareholders vote in favour of the resolutions to be proposed
at the EGM, as they intend to do in respect of their own holdings of Ordinary
Shares, totalling 2,216,000 Ordinary Shares, being approximately 4.8 per cent.
of the current issued share capital of the Company.

Buchanan Communications                        Tel: 020 7466 5000
Mark Edwards / James Strong

Evolution Securities                           Tel: 020 7071 4300
Michael Brennan / Bobbie Hilliam

Notes to editors:

Blueheath is a wholesaler of groceries to convenience stores in the £16.8
billion UK grocery wholesale sector. The Group sells and arranges the
distribution of approximately 3,500, primarily ambient, product lines to over
5,000 independent and multiple retail and leisure outlets within the UK.
Blueheath's innovative technology-driven business model is founded on the basic
principles of stripping out unnecessary supply chain costs and overheads and
passing on financial and operational benefits to customers. This enables
Blueheath to offer customers a wholesale delivery service of groceries at close
to Cash & Carry prices.

                      This information is provided by RNS
            The company news service from the London Stock Exchange