World Class Finance Ltd
Co-invest with Development Bank of Wales at a 40% discount to previous round (non-EIS offer)
Established mobility product supplier World Class Finance Ltd sells its products directly to consumers (under the Oak Tree Mobility brand) and through retail stores (under the Middletons brand).
Both the Oak Tree Mobility and Middletons arms of the business were adversely affected by lockdown measures earlier in the year but have since bounced back with sales and cash flow ahead of management expectations.
Since the initial fundraise in February 2018, the business has grown: the number of stores has increased from two to 18 and Group revenues from £9.8 million in FY18 to £21.7 million in FY20. Since July 2020, the business has been operating a small profit at a Group EBITDA level and forecasts to be cash generative by mid 2021 – not guaranteed.
The aim, as set out in the original Information Memorandum (dated February 2018), remains to open 24 stores, generating £50 million of turnover and £4 million EBITDA although the target date for this is now 2022 – this delay of at least 12 months is due to the impact of the pandemic. Note: these are targets and not guaranteed; it may take longer for the Company to achieve this.
Now, to strengthen the Company's balance sheet and provide a cash buffer against potential further Covid-19 disruption, World Class Finance is seeking to raise up to £1 million.
Development Bank of Wales (DBW) is seeking to invest £500k of debt and £250k of equity in this round, conditional on existing Wealth Club investors investing a total of £250k. Please note: this investment does not qualify for EIS tax relief. To offset this, the share price is reduced by 40% from the 2018 Ordinary share price. The minimum investment is £5,100.
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Investor Update highlights
- Trading heavily reduced during lockdown period, but now bounced back
- Recent sales performance now matching or exceeding like-for-like sales from previous year
- £21.7 million Group revenue in FY20 (ending August 2020)
- Group EBITDA loss of £327k in FY20 – despite an estimated £11.2 million of sales lost during lockdown
- Group EBITDA generation back to a positive trend post-lockdown, with a small profit since July 2020
- Forecast revenue of £47.9 million and EBITDA of c.£4 million from FY22 – not guaranteed
- Co-invest with Development Bank of Wales
- Minimum investment £5,100
- High-risk single company with no diversification (non EIS qualifying)
- 40% discounted share price (£0.60 vs. 2018 Ordinary share price of £1.00)
- Discounted pre-money valuation of £3 million
Open to existing shareholders only
World Class Finance is seeking to raise £1 million: £500k in debt and £500k in equity from existing investors (equity split between DBW and Wealth Club investors).
Investment in this round will not be eligible for EIS tax relief, as the business now exceeds its seven-year time horizon under EIS. To offset the absence of EIS tax relief, the £250k of equity from Wealth Club investors will be raised at a 40% discounted share price of £0.60 per share, equating to a pre-money valuation of £3 million.
Capital is expected to be used to strengthen the Company's Balance Sheet and provide an adequate cash buffer against potential further COVID-19 disruption.
The minimum investment is £5,100.
The management is still aiming to achieve the plan set out in the original Information Memorandum (dated February 2018) – to achieve Group sales of £50 million and EBITDA of c.£4 million – albeit this plan has been pushed back by at least 12 months (to 2022) due to Covid-19. Therefore, the management considers the target returns for this round will be broadly the same as the illustrative returns set out in the original Information Memorandum (3.3x to 4.9x). Returns and timings are not guaranteed. The management anticipates the business to become cashflow positive from mid 2021 – not guaranteed.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
Direct investments into a single company with no diversification are high risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
This offer involves investing in an early-stage business which is by nature high risk and prone to failure. There are no tax benefits associated with this offer – this investment does not qualify for EIS. An exit could take longer than the two-year period management is targeting.
DBW's proposed £500k debt and £250k equity investment is conditional on matched funding of £250k equity being provided by Wealth Club investors. Once the latter invest the full £250k, DBW will seek final sign off to complete the transaction. If the full £250k is not raised, DBW may scale down its debt and equity investments proportionately (not guaranteed) or may not invest at all. Should the latter be the case, Wealth Club investors' capital will be returned. Investor funds will be held with Acuity Law until DBW has confirmed its funding.
Fees and charges
No fees are charged directly to investors. The investee company will pay fees out of funds raised, including an introducer fee for investors sourced via Wealth Club of 5%.
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Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Single company direct investment (non EIS)
- Target raise from Wealth Club investor
- Development Bank of Wales matched equity
- Minimum investment
- Target return
- 3.3x to 4.9x
- 18 December 2020