Q-Bot EIS

Offer at capacity (30 Nov 2020)

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IP-rich robotic underfloor insulation business, supplying local councils and now working with energy supplier E.ON and construction materials giant Saint‑Gobain

If you live in a period home, you’ll know a substantial amount of heat escapes not just through windows, roofs and walls – but through the floor, especially suspended floors.

As much as 80% of heat lost through uninsulated suspended floors could be saved by insulating. However, current floor insulation methods can be expensive, take several weeks and are highly disruptive (they require the whole floor to be lifted up). 

Q-Bot Limited (“Q-Bot” or the “Company”) has created Europe’s first fully accredited solution to this problem. As much as 75% lower cost than traditional methods, the company uses a robot that completes the process of surveying and insulating floors in just one or two days – with no need to move all furniture, lift the existing floor or extensively redecorate after. 

An estimated 20 million homes are in need of underfloor insulation in Northern Europe alone – giving an addressable market value of up to £45 billion.  

With sales of over £5 million and revenue of £3.5 million to date, Q‑Bot’s technology is already used by many local councils, housing associations and Registered Social Landlords (RSLs). Q‑Bot has also signed a joint development agreement with global construction materials giant Saint‑Gobain and is working with E.ON (one of the UK’s “big six” energy suppliers), to supply ECO funding and explore opportunities to roll out the service to their large customer base.

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.


Following a period of downtime during Covid-19 lockdown, social landlords and councils have restarted operations and demand from homeowners has surged, amid the launch of the UK Government’s Green Homes Grant. 

Now Q-Bot is raising £1 million under EIS to fund its planned growth and expand its network of installation partners. £380k of this has already been secured from existing investors. Wealth Club has secured an allocation of £300k. The target-case return is 15x, 73% IRR, after performance fees but before tax relief (not guaranteed).

Management has informed us the Company plans to raise a larger Series B round in 2021, for which management believes there will be significant institutional interest. It then aims to rapidly scale, taking annual sales to over £42.9 million by 2025 – this is a target, high risk and not guaranteed.

Q-Bot EIS – Nov 2020The deal at a glance

Type Single company EIS private offer
Stage Scale-up
Date started trading 2012
Funding to date £11 million
Co-investors Saint‑Gobain, EMV Capital and private investors
Sector Robotics
Fully diluted pre-money valuation £15.6 million
Market size £45 billion
Business model B2B and B2C
Revenue to date £3.5 million, £1.5 million expected in FY21 – not guaranteed
Revenue model Direct sales plus licence fees/revenue share through partners
Profitability forecast from 2022
Forecast revenue in year 5 £42.9 million
Forecast EBITDA in year 5 £21 million
Target return in year 5 15x
Target IRR 73% IRR
Projections and targets are for illustration only and are not guaranteed

Highlights

  • Commercialised, IP-rich, accredited, multi-award-winning robotics business
  • Providing underfloor insulation with significant cost and energy efficiency savings
  • Market driven by regulation and need for energy conservation
  • Significant opportunity under UK Government’s Green Homes Grant
  • Growing portfolio of patented products
  • Highly skilled management team with proven track record with successful exits
  • Last chance to invest ahead of proposed Series B round  
  • Limited capacity – £300k allocation secured for Wealth Club members
  • Minimum investment £20,600 (40 shares at £515)
  • Single company deal with no diversification – high risk

The technology

Q-Bot’s robotic solution is the first fully accredited system in Europe that does not require an entire floor to be lifted to insulate it – representing an opportunity to become the market leader.

This short video shows how Q-Bot's robotic underfloor insulation works

Video produced by Q-Bot – May 2019.

The Q-Bot robot can be inserted into the most hard-to-reach places through an air vent, or a small access hatch in the corner of the room to access the void space under the floor. Once inserted, it is remotely guided to apply spray foam insulation accurately to the underside of the floor. The robot is powerful yet compact, with intelligent control systems that can carry out complex procedures in difficult and hard-to-reach environments. 

In addition, the Company has developed a unique patented surveying platform which creates a 3D thermal floorplan of a property – enabling housing providers to create a valuable digital record of verifiable data on the condition of their property portfolios.

The business

Multi-award-winning Q-Bot was started up in 2012 after co-founder Tom Lipinski identified a gap in available methods for underfloor insulation.

He worked with co-founders Professor Peter Childs and Mathew Holloway, developing a robotic device that can apply insulation at a significantly lower cost and without the disruption of traditional methods. 

The Q-Bot underfloor insulation and survey platform is the first low-cost, fully accredited solution for the retrofit of insulation to suspended timber floors that does not require the floor to be lifted. The installation can be completed in one or two days.

Q-Bot has a well protected business model through its portfolio of 23 UK and International patents covering the spraying method, spray apparatus, robotic device, surveying and wall retrofitting. A further 24 patents are pending. Trademarks, know-how and accreditations (such as with the British Board of Agrément, BBA) act as significant barriers to entry. The BBA accreditation is difficult to achieve and takes two to three years.  

Q-Bot has won several awards, including the prestigious Queen’s Award for Innovation 2020.

More details about the business are in the full due diligence pack, which is available on request. Please note: you will be required to sign a Non Disclosure Agreement first.

Routes to market

Over 1,000 homes have already been given the Q-Bot treatment. 

Q-Bot sells its underfloor insulation through three key channels: to Registered Social Landlords (mainly housing associations and local councils), through installation partners, and directly to homeowners and private landlords.

Registered Social Landlords (RSLs)

There are approximately 1,700 RSLs in the UK with a combined housing stock of 4.6 million properties, all of which have targets to reduce fuel poverty and improve energy efficiency. Q‑Bot currently works with 33, including large housing associations such as L&Q, Clarion, Flagship and Guinness as well as local authorities such as Ealing, Camden and Islington Council. The aim is to grow this number significantly over the next five years.

Installation partners

A large part of the growth plan is selling through installation partners. These are often NGOs managing housing stock or regional contractors (insulation contractors, heating engineers, etc.) who have their own customers and can upsell the Q‑Bot insulation service. Installation partners pay Q‑Bot a minimum recurring payment for the use of its technology and a revenue share for each installation. Installation partners enable Q‑Bot to roll its service out at scale without the investment needed in labour and fleets of vehicles. 

The Company currently has installation partners covering the North of England and Scotland, while heads of terms have been recently been agreed with new partners in France and the Netherlands. 

International outlook

Adding to its list of overseas installation partners, in 2019 Q‑Bot signed a joint development agreement with Saint-Gobain – a €42-billion-turnover French multinational materials manufacturer operating in 67 countries. Saint‑Gobain and Q‑Bot are developing a new offering to be rolled out to Saint‑Gobain’s large customer base across Europe – market trials are expected to be completed in Spring 2021. New potential applications of the technology are also being developed with a view to launching in North America. 

Owner-occupiers and private landlords

Q-Bot also sells directly to homeowners and has seen a significant increase in demand from both homeowners and local authorities under the UK Government’s Green Homes Grant announced in July 2020.  The Company estimates the GHG has generated an additional pipeline worth £1.5 million.

At the same time, Q-Bot targets owner-occupiers through its relationship with Npower (now E.ON). E.ON subsidises customers’ Q‑Bot installations under government-backed ECO3 funding and is planning a targeted joint marketing campaign to promote Q‑Bot to its 5.7 million-strong customer base.

Additional revenue streams

In addition to its insulation service, the Company generates revenues from its surveying and retrofit management platform. Many RSLs have poor data on the quality of their housing stock, and asset management systems currently in use rely heavily on manual, unverified input. 

The platform creates a 3D floorplan of the property, including area dimensions, location of services, condition of building elements and thermal properties. Digital records are uploaded and accessed in a compliant format, creating a valuable database of verifiable data on the condition of the property. Better housing stock data enables property asset managers to plan maintenance in a much more informed, efficient and controlled way.

Covid-19 impact

Q-Bot was unable to deliver its services during lockdown, impacting forecast revenues and leading the Company to re-forecast post lockdown. In response, the Company cut costs by furloughing staff, reducing sales and marketing spend, and arranging a CBILS loan through Natwest for £250k (albeit this has not yet been taken up). During lockdown, Q‑Bot revised its survey and installation practices – enabling work to be completed from outside a property – and created a clear and concise plan demonstrating to potential customers why Q‑Bot was the “first safe measure” post lockdown. 

Q-Bot and its partners returned to work in June, completing installations across England, Scotland, France and the Netherlands. More recently, Q‑Bot has seen a significant increase in enquiries and leads from homeowners since the announcement of the Governments Green Home Grant in July 2020. More widely, management believes Q‑Bot’s services are aligned with industry trends – the transition to a cleaner economy, reduced contact and a move to smarter construction methods.

Operations

The Q-Bot in-house team carries out pilots, demonstrations and the training of installation partners at its training facilities in London and Newcastle.

Currently, it carries out the manufacture of robots in-house. However, as the Company grows it plans to outsource this. Improved robot design has helped to reduce build costs over the past 18 months, and all robots have an estimated useful life of 24 months. 

The Company is headquartered in Wandsworth in south-west London and has a second office and facility in Newcastle. Currently, the Company employs 38 people. 

The opportunity

Despite being behind its previous plan, since its last funding round in 2019 Q‑Bot has won over £2 million of new orders and has grown its product offering. The Company has also expanded internationally, validating the market opportunity in France and the Netherlands, and has a significant book of confirmed orders still to deliver in 2020 and 2021.

Q-Bot is now raising £1 million under EIS, to grow revenues and fulfil its order book, extend its network of contractors both in the UK and internationally, take advantage of the UK Government’s Green Homes Grant, and further develop new products and services. 

Around £380k has been secured to date from existing investors. Wealth Club has secured an allocation of £300k.

Management has informed us the Company plans to raise a larger Series B round in 2021, for which management believes there will be significant institutional interest. Note: the timing, valuation and completion of future funds rounds are not guaranteed.

The Company forecasts sales of £42.9 million and EBITDA of £21 million by 2025. The target-case return is 15x, 73% IRR, after performance fees but before EIS tax relief, not guaranteed.  

Management team 

CEO and co-founder Mathew Holloway leads the executive team. Over the past 20 years, Mathew has founded previous high-tech start-ups where he turned his ideas into desirable products and achieved successful exits. Mathew has a background in electrical, mechanical and innovation design engineering from Bath University (MEng First Class Honours), Imperial College and The Royal College of Art in Engineering and Design (Joint Masters, MA & MSc).

Mathew was awarded CNBC and Allianz’s Good Entrepreneur award. He has overall responsibility for delivering the business plan and driving shareholder value.

Co-founders Tom Lipinski and Professor Peter Childs both retain an active role in Q‑Bot as non-executive directors, providing strategic advice and assisting with product development respectively. Tom is an architect, an award-winning and serial green-tech entrepreneur, and founder of Ventive – a smart ventilation business. Peter is Head of the Dyson School of Design Engineering and the Professorial Lead in Engineering Design at Imperial College London. He has been principal or co-investigator on contracts totalling £80 million. 

Martin Jervis, appointed CCOO in February 2020, has significant experience in driving growth for new and emerging technologies, including over 20 years at executive level. Martin manages the day-to-day operations of Q‑Bot. 

Q-Bot’s CFO Matt Purcell has recently left the business to pursue other opportunities. A new CFO is currently being recruited. 

Board of Directors and Advisory Board

Stuart Black recently joined the business as Non-Executive Chairman. Stuart Black has over 30 years’ experience as an executive across several industries including facilities management, construction, housing and infrastructure. Stuart now leads the board and supports management in executing the growth strategy.

Along with the co-founders, Investor Directors Stephen Murdoch and Dr Ilian Iliev comprise the remainder of the board.

Stephen has over 15 years’ experience investing in early-stage growth companies across the UK and US, focusing on carbon-reducing technologies. Dr Ilian Iliev is the founder of EMV Capital (see below).

The board is supported by an experienced advisory team comprising experienced investment professionals and executives with strong networks to large housing associations.

EMV Capital

EMV Capital Ltd (“EMV”) is a London-based pan-European award-winning investor focused on B2B companies in industrial high-tech sectors. EMV invests in, and provides advisory services to, investments that involve a range of technologies, including robotics and AI. EMV’s team has led and structured investments alongside some of the world’s leading corporations, including ABB, Philips Lighting, Evonik Industries, Mitsubishi and Flex.

Dr Ilian Iliev, EMV's founder, is an Investment Director at Q‑Bot. He provides ongoing strategic advice, supports fundraising efforts and advises the Company on positioning itself for the most successful exit and driving shareholder value.  

Funding to date

To date, Q-Bot has raised over £11 million from venture capital, public sector bodies, as well as strategic and private investors – including £6.5 million in grants. A further £0.9 million of grant funding has been secured to be deployed across the remainder of 2020 and 2021. 

Q-Bot’s investor base includes several strategic investors who could provide potentially valuable business introductions as well as strong corporate governance. Foundamental, a German VC backed by one of the world's largest construction companies, aims to invest in high-tech companies that can innovate in this sector. Saint‑Gobain, the €42 billion French multinational building and infrastructure business, with which Q‑Bot signed a joint development agreement in 2019, has also invested in the business, while EMV Capital provides ongoing advice on how to drive shareholder value.

Investment to date has been used to develop Q‑Bot’s IP, fund R&D not covered by grant funding, and support sales growth.

Financials and target returns 

To date, Q-Bot has secured over £5 million in sales (confirmed orders), with revenue of £1.5 million estimated in the current financial year (ending March 2021). 

Sales are forecast to grow to £3.9 million in 2022 and to £11.2m in 2023, taking the company into profitability. Thereafter, rapid growth is forecast and by 2025 the Company estimates sales of £42.9 million and EBITDA of £21 million. Please note, these are all illustrative projections and not guaranteed. 

On the basis of the indicative returns provided by management, investors could achieve a target-case return of 15x, 73% IRR, after five years. These are illustrative projections, high risk and not guaranteed. The Company has also prepared baseline-case and low-case target returns – please refer to the Information Memorandum. 

The management team intends to stay in the business for the mid to long term to fulfil its growth ambitions. An exit might be considered after 3-5 years. An IPO, trade sale or sale to a large private equity house are some of the options, but timeframes and exits are not guaranteed. 

The Company currently has £190k of debt on its Balance Sheet and is loss-making with a monthly cash burn rate of c.£100k.

The Company was behind its previous forecasts, pre Covid-19, due to issues in the sales team and associated employee incentive structure. New recruits in key sales and operations roles have been made, while the employee incentive structure has been revised. Reflecting this and the impact of Covid-19, the company re-forecast in 2020, pushing back growth assumptions by 18-24 months.

Structure and fees 

The pre-money valuation is £15.6 million.

Wealth Club investors will invest using a nominee structure. This service is provided by subsidiary companies Wealth Club Asset Management Limited and Wealth Club Nominees Limited and is covered in a separate Nominee Services agreement. There is no direct initial or annual charge for investors using the nominee service. Q‑Bot will pay a fundraising fee of 4.5% of the funds raised to Wealth Club Ltd for arranging the investment. 

Wealth Club is entitled to a 10% performance fee if investors achieve an exit greater than 2x subscription amount (before tax relief): the fee will be deducted on exit. Please see more details in the Schedule of Charges

Wealth Club is acting as a broker and providing receiving agent and nominee services in this fundraise. Wealth Club does not take a seat on the board, so cannot influence the business.

Risks: important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

This investment is 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 Information Memorandum, which contains further details on the considerable risks, alongside the Wealth Club Risks and Commitments.  

This is a single company offer with no diversification. It involves investing in an early-stage loss-making business, which is by nature high risk and prone to failure. You could lose all your capital.

The Company is behind its previous plan and has revised its previous forecasts down. There is no guarantee the revised forecasts will be achieved.

As at August 2020, the Company had £48k of shareholder loans and £142k of finance lease liabilities on its Balance Sheet. If further debt were to be taken on this would increase the risk profile of the investment.

To achieve its forecast, the Company needs to grow the number of annual installations from 405 in FY19 to over 34,000 by FY25. While this represents a small proportion of the addressable market, it represents significant growth.

The Company is loss-making, with a current monthly cash burn rate of c.£100k. Funding in this round and the proposed Series B in 2021 is forecast to see the business through to profitability in FY22 – not guaranteed. If this funding is not secured, this will impact the Company’s ability to deliver its forecasts.

Q-Bot is an EIS-qualifying company. It has been previously granted EIS Advance Assurance and issued EIS certificates to investors in previous funding rounds. The Company is now awaiting confirmation from HMRC that a new application process for this funding round is EIS eligible. While it is anticipated this will be the case, the Company is waiting on formal confirmation from HMRC. 

The value of tax benefits depends on circumstances and tax rules can change. 

Achieving an exit may take longer than the three-year minimum holding period.

Our view

As is the case with many businesses, Covid-19 has slowed Q‑Bot’s top-line growth. However, the Company has a confirmed order book of £1.8 million to be carried out over the next 12 months, so more than 50% of next year’s budget should be secured. It has also seen a significant uptick in demand since the announcement of the UK Government’s Green Homes Grant. 

The business is IP-rich and appears to have a well-protected business model. It has a growing patent portfolio with new products and services already creating additional revenue streams. The Company has multiple routes to market across several geographical regions. Growing the number of installation partners, both in the UK and internationally will be key to scaling the business.

Whilst entrepreneurial, the Company appears to have robust corporate governance in place and receives ongoing advice from its board on how to drive shareholder value. 

We consider this an exciting, although high-risk, EIS opportunity with potential for attractive returns at the same time as having a positive impact on society and the environment. As always, you should form your own view.

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.

The details

Type
Single company
Sector
Technology
Target return
15x (target case)
Funds raised / sought
£300,000 sought
Minimum investment
£20,600
Deadline
4 Dec 2020 for allotment – limited capacity
Last updated: 24 November 2020

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