The Ralph Veterinary Referral Centre EIS

Offer now closed

This EIS offer is now oversubscribed (9 December 2019). 

In the UK we tend to view our pets not so much as animals kept in the household, but as valued members of the family. Should they fall ill or be injured, we’ll probably expect them to be afforded the same quality of treatment and chance of recovery as would a human loved one. 

This regard we have for our pets is fuelling increasing demand for specialist veterinary healthcare.

To meet such a demand, The Ralph Veterinary Referral Centre opened its doors in February 2019 with funding help from Wealth Club EIS investors – offering 24-7-365 Emergency and Critical Care services for pets, alongside a wide range of highly specialised clinical veterinary services. The business has grown rapidly since to become one of the largest vet hospitals of its calibre in the UK. In fact, demand is exceeding capacity in some of its clinical departments.

The Ralph is now seeking growth capital to secure additional specialist staffing, to accelerate its growth. It aims to move into profitability in the next 12 months – not guaranteed. The Company has secured c. £520k from existing investors and aims to raise a further c. £500k under EIS exclusively through Wealth Club. The offer targets returns of 2.5x before EIS tax relief for investors in this round (not guaranteed).

Highlights

  • Growing specialist and Emergency & Critical Care small animal referral hospital  
  • State-of-the-art facility and equipment, specialist clinical services 
  • £2.5 million revenue generated from over 1,600 cases in 8 months since opening; demand already exceeding capacity in some disciplines  
  • Revenue growing 14% per month on average, forecasting £8.3 million in year to 30 September 2020 (not guaranteed) 
  • A leading referral centre for major pet insurance provider Royal & Sun Alliance 
  • Majority of cases paid for by insurance – this means quick payment 
  • Growth in pet-related expenditure driving M&A activity and valuations 
  • £1 million EIS fundraise to fund growth and help move towards profitability 
  • Pre-money valuation of £13.1 million  
  • Target returns of 2.5x (pre tax relief) 3.5x (post tax relief) after 2022– not guaranteed 
  • High-risk single company deal with no diversification
  • Minimum investment £10,000 

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.

The Ralph EIS – reviewThe offer

The Ralph Veterinary Referral Centre ("The Ralph" or "The Company") is a small pet referral hospital. This means that if a pet has a serious or persistent condition, the vet may refer it to a specialist clinician at The Ralph in the same way a GP may refer a human patient to a consultant at a hospital.

Cases are referred to The Ralph by vet practices in its catchment area (within an hour’s drive or sometimes even further afield), or by pet insurance providers such as Allianz (which owns Petplan) and Royal & Sun Alliance.

The Ralph provides a wide range of clinical healthcare for small animals, including Emergency and Critical Care, Orthopaedics, Ophthalmology, Soft Tissue Surgery, Neurology and Neurosurgery, Internal Medicine, Dentistry, Physiotherapy, Diagnostic Imaging, Cardiology and Oncology (cancer) services.

The demographic served is within an overall UK market in which pet-related expenditure was estimated at £24.5 billion in 2018.

Since opening its doors in February 2019, The Ralph has achieved double-digit business growth and generated £2.5 million revenue from over 1,600 cases. Note this is not a full year yet and past performance is not a guide to the future.

Management forecasts sales of £8.3 million in the 12 months ending 30 September 2020 (not guaranteed). If these are met, the Company expects to move into profitability within that period. The long-term plan for the business is £12.7 million of sales and £2.9 million of EBITDA by September 2022. Please note, these are forecast and in no way guaranteed. 

To achieve the plan, the Company needs to invest in additional specialist and support staff to meet demand. The business is currently having to turn cases away due to lack of capacity in Neurology & Neurosurgery, Internal Medicine, Diagnostic Imaging/Radiography and Anaesthesia. This not only limits revenue potential but also means The Ralph is missing out on internal referrals between these and other clinical areas.

The Ralph is now aiming to raise £1 million under EIS by issuing 8,000,000 Ordinary A shares at a price of £0.125 per share to help support growth. Of this, £520k has already been funded by existing investors. 

Investor capital will be deployed towards recruiting the required extra staff and to provide working capital. Management expects to improve utilisation in all clinical areas, which in turn should improve margins and generate profits. 

In our view, this is an exciting opportunity to support a growing business with an established referral network in a buoyant sector with the benefits of EIS tax relief. Note: as with all EIS opportunities, your capital is at risk. Tax rules can change and tax benefits depend on circumstances.

Target returns and exit options

The Company targets returns of 2.5x pre tax relief and 3.5x post tax relief based on an exit after year 3 (2022). As profits are forecast to increase further in year 4, an exit at that point could potentially increase returns further, should the forecast EBITDA be achieved. Neither the returns nor the exit and its timing are guaranteed: as with all EIS investments, capital is at risk.

Profitability is forecast to occur by March 2021, albeit there are no guarantees.

The Company aims to achieve sales of £12.7 million and EBITDA of £2.9 million by September 2022, also not guaranteed.

In the current market, a specialist referral centre that can demonstrate excellent care and a strong growth track record with consistently high profit margins has the potential to achieve double-digit EBITDA multiples based on recent comparable deals. However, remember this is an early-stage single company and a high-risk investment.

The management team intends to stay in the business for the long term to fulfil its growth ambitions. Management considers refinancing to be a likely exit route. However, recent acquisitions of referral centres by large corporations and private equity firms show there is confidence in the continued growth in the sector, thus representing other potential exit options. Timeframes and exits are not guaranteed.

Management team

Shailen Jasani (Founder, CEO and Clinical Director) is a specialist clinician and ECC service manager. With significant experience and highly regarded in the industry, Shailen is a regular speaker at key UK veterinary events.

Iqbal Dhanji (Founder and Finance Director) is an MBA-qualified accountant with extensive business, financial and commercial experience across a range of sectors. Iqbal brings a track record of success in managing the growth, acquisition and integration of clinical businesses. 

Andrew Zychowski, a significant investor in The Ralph, is expected to join the Board as a Non-Executive Director after this funding round. Andrew brings over thirty years of experience as an investment and corporate governance advisor.

Risks – important 

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

EIS / SEIS investments 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 is a single company EIS offer with no diversification. It involves investing in an early-stage business which is by nature high risk and prone to failure.

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

Fees and charges

No fees are charged to investors. The investee company will pay fees out of funds raised, including an introducer fee for investors sourced via Wealth Club of 5%, and 1% for investors sourced by the Company.

Our view

The hospital now has everything in place to start treating patients.

Pet owners continue to seek the most advanced healthcare for their pets. With only a few top-tier centres in the UK, it would appear demand outstrips supply providing an opportunity for a skilled and experienced management team to grow a successful business. 

Profit margins and cash generation are strong in the sector. However, whilst the Company has achieved a great deal this year, it now needs to prove it can deliver its business plan: there are no guarantees of success.

The Ralph’s forecasts are based on dog and cat ownership not declining and pet insurance remaining stable. Based on the increasing pet-related expenditure and M&A in the sector we think these are reasonable assumptions.

For experienced investors who are comfortable with the considerable risks, The Ralph has the potential to generate attractive returns if it is successful.

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
Consumer
Target return
2.5x investment
Funds raised / sought
£1.0 million / £1.0 million
Minimum investment
£10,000
Deadline
CLOSED
Last updated: 3 December 2019

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