The End


Don’t say you weren’t warned!

To all of you, my fellow long-suffering Black Sheep Brewery PLC (“Black Sheep”) shareholders, now you have nothing but befuddled memories to console you, please never say I didn’t warn you!

Long before Covid, when interest rates were at all-time lows and trading conditions were relatively benign, I clearly identified the coming apocalypse, and tried to spell out to those few of you who would listen that “The End was nigh”.

Back then, there was still an opportunity to raise new equity, properly invest in our brand, arrange for regulatory accreditation of the packaging plant, smell the coffee, or rather understand where national beer consumption, and indeed alcohol, trends were heading, and to truly “Build a better Black Sheep”. My prescient web-site spelled it all out for you.

So, to those brave souls who did listen to my wise words, I say a heartfelt “Thank you”.

But to the majority of you, I can only remind you, now your shares in Black Sheep are worthless, that fools and their moneys are easily parted!


The Theakston Family

Like a slow-moving Shakespearean tragedy, Black Sheep was destroyed by a combination of internal and external conflicts.

A sad mixture of laziness, stupidity, self-interest, incompetence, entitlement, a lack of energy, or entrepreneurialism, or vision, or common sense, and worse, led to our Company being driven into insolvency, and for us shareholders, our brewery’s disastrous financial outcome.

You may also want to forget that back in 2016, it was our founder and former chairman, Paul Theakston (“Paul”), who batted away a purely indicative approach from Marston’s at £4 per
share, without ever giving shareholders a chance to consider and perhaps pursue that possible
opportunity. Thank you, Paul.


What really went wrong?

Charlene Lyons (“Charlene”), our CEO and latterly Chairman, blamed Covid and the “Cost of Living crisis” for the collapse of our brewery. A case of anyone or anything, but not me Sir!
But it just isn’t true.

The destruction of Black Sheep and our investments in it was achieved through a combination of variable product quality, lousy branding, poor marketing, an appalling web-site, long-term static and then declining sales, increasing costs, Black Sheep’s inability to meet its totally irresponsibly over-extended financial obligations, its failure to recognise changing consumer preferences and adapt to market trends, and much smarter and more nimble local and national competition.

Poor management decisions, inadequate strategic planning, lack of governance, and ineffective leadership, all led to disaster. Allowing the accumulation of such significant levels of bank debt without a feasible plan to repay it, was entirely the irresponsibility and fault of our grossly inadequate Board.

CMIC
We should also single out for blame, John Hattersley (“John”), Chairman of the CAMRA (Campaign for Real Ale) Members Investment Club (“CMIC”). CMIC, through Rulegale, was Black Sheep’s largest shareholder, holding 329,137 Ordinary shares, representing 13.57% of its issued equity capital, and John is a very experienced brewery sector investor.

The large and publicly declared investment by CMIC may well have positively influenced or reassured other less sophisticated investors in Black Sheep, so, when it was clear things were going seriously wrong, John should have taken a lead role as an activist investor to enforce the necessary changes.

I twice wrote to John, before the proverbial hit the fan, but never even had the courtesy of a reply, and interestingly, for an investment that was worth a little more than 3% of its investment portfolio, there is no mention of Black Sheep’s demise on the News pages of CMIC’s web-site!


Charlene Lyons

In January, one of our fellow shareholders, on the basis of financial projections supplied by Black Sheep’s executive management, generously advanced £500,000 as a seemingly secured loan to enable Black Sheep to achieve its equity refunding, on the basis that such a sum would be sufficient to see our Company through to at least July 2023. That good shareholder has now lost not only that £500,000 advance, but the value formerly represented by their 200,879 Ordinary shares (8.26%) shareholding in Black Sheep.

I visited Charlene and John Hunt (“John”), at that time still Black Sheep’s CFO, in Masham on 14th March 2023 in company with another supportive shareholder. At that time, we were seeking to develop a workable spread-sheet to, with others, find fresh equity funding for Black Sheep, but Charlene and John refused to provide us with the necessary detailed financial information despite my having signed a non-disclosure agreement, thus blocking our attempt to help. Curiously, John Hunt resigned a fortnight later on 30th March 2023, sighting “personal reasons”, in the middle of that supposedly vital fund-raising. An odd thing that!

All along, Charlene refused to accept non-executive board oversight, and most notably never owned a single share in Black Sheep, so had no skin in the game.


Acquisition by Breal Capital – But nothing for shareholders

Breal Capital Limited (“Breal”), via its new holding company, Black Sheep Brewing Company Limited (“NewCo”), have purchased our brewery’s assets for a pittance (a headline price of £5.8 million).

Jobs, some deserved and some not, have been saved, while some creditors and very noticeably, we, the shareholders, have been totally screwed and get nothing, not even an apology!


A disguised management buy-out?

Significantly, Charlene, and Rob and Joe Theakston (“Rob and Joe”) were all appointed as directors to the board of NewCo on 23 rd May 2023, but, according to Companies House, Breal own only circa 75% of the equity of NewCo, suggesting that Charlene, Rob and Joe may now each have significant equity interests in what was our Company. Did they pay for their new shares, or were they awarded them as “sweat equity”? It makes you wonder.


Conclusion

In sum, I am very angry at the long-term mismanagement of our Company, and believe we shareholders have been woefully mistreated and worse. As the smoke clears and it becomes apparent what really happened, I promise that I and others with me will investigate the potential for bringing a “class action”, or what is commonly referred to in the UK as a 'group litigation' on behalf of myself and all our fellow shareholders, against all those who served as directors of Black Sheep during the past three years.

Any shareholders who would like to be enjoined in such “group litigation” are encouraged to contact me urgently by e-mail at david.nabarro@buildingabetterblacksheep.com, as also are
any shareholders who would specifically like to be excluded from such “group litigation”.
Please let me know. Thank you.

I will continue to keep you all updated on any developments in this regard, via my www.buildingabetterblacksheep.com web-site and on Twitter, where this update is available, and in the meantime, will be drinking pints of Theakstons Old Peculier or Timothy Taylors, as I suggest you should do too. Somehow, unsurprisingly, Black Sheep leaves a rather bitter taste in my mouth!

Yours very faithfully,

David Nabarro
An angry and deeply disappointed shareholder in the now worthless Black Sheep Brewery PLC

5th June 2023