finance in the south west 2016
TRANSCRIPT
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Finance in theSouth West 2016
Andrew Richards Managing Partner Elect
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www.francisclark.co.uk
Administration
Slides: available on request or at http://www.slideshare.net/FrancisClarkLLP
Questions: Q&A Panel, presenters and Francis Clark staff available during breaks and lunch. No questions during presentations, please.
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www.francisclark.co.uk
Merger with Princecroft Willis
• 1 April 2016• 11 partner office• 110 staff• Turnover £6.8m• 2 offices
- Poole
- New Forest
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www.francisclark.co.uk
PCW Princecroft Willis offices
PCW
PCW
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www.francisclark.co.uk
International Network
• Currently Leading Edge Alliance• Changing to PKF network
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www.francisclark.co.uk
Structure of morning• Background, Debt and Business Support
(8.30am to 9.45am)• Key Note Speaker• Banks: an overview• Debt • Growth Hub
• Coffee Break
• Grants, Equity, Investment Tax Reliefs and the LEP (10.05am to 11.30am)
• Coffee Break
• An SME perspective, Investment Ready, Q&A session and closing address(11.50am to 1pm)
• Lunch and Networking (1pm to 2pm)
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www.francisclark.co.uk
Key note speaker
Ben Thompson
• Highly respected business journalist
• Hosts a weekly morning briefing on the World Service (Business Live, Mon-Thurs)
• Business presenter on BBC Breakfast on Fridays
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www.francisclark.co.uk
Ben ThompsonFinance in the South West
2016
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Paul Crocker – Corporate Finance Partner
Banks - overview
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www.francisclark.co.uk
Banks
• Are banks lending?
• Appetite and leverage
• Rates and terms
• The funding gap
• Challenger Banks…
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www.francisclark.co.uk
Source: Bank of England
Banks – % change in lendingLending (net) to UK businesses
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www.francisclark.co.uk
Banks – absolute £ lending
https://www.bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes-3rd-quarter-2015/#.VsLkVz_cvct
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www.francisclark.co.uk
Appetite and Leverage: national
• Cash holdings continue to grow, reducing SME needs for bank finance. Deposit levels are growing by 8% annually and significantly exceed SME borrowing, by around £60 billion.
• For those SMEs applying for bank finance, approval rates are around 80% for smaller businesses and 90% for medium-sized.
• Medium businesses in particular are seeing an improving trend in new loans
https://www.bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes-3rd-quarter-2015/#.VsLhhT_cvct
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www.francisclark.co.uk
Appetite and Leverage: local
• Increasing flexibility in face of a competitive market
• Relationship focused (size dependent)
• Re-organised – greater emphasis on the SME / MME market (Good news for South West)
• Significant variation in approach/process between the Banks (credit v local)
• Depends on the nature and structure of a transaction – expansion/acquisition/MBO
• 2.5 - 3X EBITDA upper end for SMEs
• Competition may drive this up
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www.francisclark.co.uk
Rates and Terms
Source: Bank of England
Should look to achieve lower margins than above + care margin over what? Base or LIBOR
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www.francisclark.co.uk
Rates and Terms
• Base Rates likely to go up at some point! – but not by much for a while
• Rates – consensus from economists of base rate being c2% by 2019
• Fixed rates / interest rate protection – back on the agenda though will require mutual agreement and borrower sign
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www.francisclark.co.uk
Rates and Terms• Lending documentation continuing to grow• Bank’s relaxing terms / covenants on their
documentation? Examples witnessed• SME negotiating position mixed – but can to look to
very “standard terms” (side letter?)• Personal guarantees - easy to give, hard to get
back (build in their release to offer letters?)• FRS102…Impact on covenant definitions• Make sure your projections satisfy the covenants
with headroom (c20-25% on operational covenants)• For strong businesses / proposals – ability to
negotiate terms
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www.francisclark.co.uk
Funding gap
• 5 years since the Breedon Report
• Breedon Report predicted a funding gap btw £84bn and £191bn by 2016
• Developments since• Government interventions e.g., F4LS, EGF, Business Bank
• Challenger Banks
• Peer to Peer/ Crowdfunding
• Other “alternative finance providers”
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www.francisclark.co.uk
“Challenge to the Status Quo” - UK Challenger Banks Phrase coined by Vince Cable Big 4 (HSBC, LBG, RBS, Barclays) plus Santander and
Handlesbanken Metro bank – first new banking licence for more than 100
years Other challengers – Virgin, Paragon, Aldermore*,
Shawbrook*, OneSavings* Interestingly (*) are or were previously Private Equity
owned Can they “challenge” the Big 4. Time will tell
Flexible Speed of response Impact of a downturn? Critical mass? More consolidation?!!
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Paul Crockere: [email protected]: 01392 667000
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Aldermore Bank PLC.Richard Whitehouse – Regional Sales Director23.02.16
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Commercial & Residential Mortgages
Founded by CEO Phillip Monks with backing from AnaCap Financial Partners LLPMay 2009Successfully floated on the London Stock ExchangeMarch 2015
Total Lending to SME’s
£2.5bn
SME Deposits
£1.2bn
Number of Aldermore Clients
177,000
Working Capital Finance Products
Confidential Invoice DiscountingFactoringConstruction FinanceTrade FinanceBad Debt Protection
Asset Finance
Hire PurchaseLeasing
Savings
Market Leading Rates
FTSE 250
June 2015
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Start-Up
• Supplier Payment Terms• Cost of Credit Control• Weekly salaries
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Start-Up
Growth
• Organic Working Capital gap • Residential Mortgage
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Start-Up
Growth
Maturity
• Working capital headroom• Savings
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Start-Up
Growth
Maturity
Expansion
• Mergers and Acquisitions• Purchase premises• Plant and Machinery Investment
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Start-Up
Growth
Maturity
Expansion
Exit
• Succession – MBO• Savings
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Thanks for your time
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SWIG Finance
John Peters, Managing Director
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We finance businesses to start or grow
+ =
We can say yes when the bank says no
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Review of 2015• Delivered record lending of £5,000,000 to 430 SW
businesses• Created and safeguarded 621.13 FTE jobs • Established as leading Start Up Loans provider in the
South West• Launched the Seedbed fund for social ventures with DHT
and Plymouth University
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Lending Growth 2009 – 2015
2014-2015 2013-2014 2012-2013 2011-2012 2010-2011 2009-20100
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000458
360
153
100
37
15
Total Loans Drawn
Year
Loan
Am
ount
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Lending by County
17.9%
24.9%
7.4%18.6%
6.8%
12%
8.5%
3.9%
CornwallDevon DorsetBristolGlosHampshireSomersetWiltshire
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Funds Available February 2016
• Start Up Loans - Loans up to £25,000 for businesses trading up to 2 years in the SW with fully funded business support
• South West Loans Fund - Loans up to £50,000 for eligible businesses in Cornwall and the Isles of Scilly
• Seedbed - Loans up to £50,000 for social ventures in the SW with fully funded business support
• Fresh Start and Pesca - Loans for tenant farmers in Cornwall and fishing- related businesses in Devon and Cornwall
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Future OpportunitiesTwo new streams of finance becoming available in 2016:
• National £60m loan fund – providing loans up to £100k in the South West
• Recycled legacy funds – providing loans up to £250K in the South West
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Funding Circle
Jeremy CrinallBusiness Development Manager South West
Simple, affordable business loans
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“At present the largest four banks account for over 80% of UK SMEs’ main banking relationships.
Many SMEs only approach the largest banks when seeking finance…in the case of the first time SME
borrowers the rejection rate is 50%.”
Gov.uk, 2014
6
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What's the difference?
Traditional lending
Market place lending
4
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A simple model: Lenders can spread risk by lending small amounts to hundreds of businesses
Business loan
Loan parts
Loan parts
Loan parts
Loan parts
Loan parts
Loan parts
Loan parts
Loan parts
Loan parts
5
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The global leader in marketplace lending for small businesses
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
0
50
100
150
200
250
300
350
400
1 3 4 4 6 12 14 14 21 27 33 4355
6586
99122
175199 226
303
372
12 14 14 21 27 33 43 55 64 80 83111
150 167 170222
248
0.7745.92744316.701954
11.343063
24.77959131.841632
56.000971
81.340363
106
18
UK US CE Total
August 2010Founding of
Funding Circle
October 2015Launch in Germany, Spain &
Netherlands (acquisition)
October 2013Launch in the US
(acquisition)
Originated over $1.85 BN to thousands of small businesses since 2010
• £531 million lent in the UK in 2015 giving 90% YoY growth• # 1 player in the UK with ~50% market share• c. 500 employees globally
March 2015Series E round with $150M funding
from DST, Temasek, Blackrock, Baillie Gifford, Sands Capital
FC Q
uarte
rly N
ew L
endi
ng ($
m)2
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Funding Circle UK successfully fills part of the lending gap for SMEs left by the banks
RBS Group
Lloyds Banking Group
Funding Circle
Al-der-more
Arbuthnot Latham
Yorkshire Building Society
Close Brothers
OneSav-ings Bank
Julian Hodge Bank
Cam-bridge & Counties
Bank
Shawbrook Bank
Na-tion-wide
Building Society
- 400
- 300
- 200
- 100
-
100
200
300
400
Net lending £M
• Source: Bank of England - Funding for Lending Scheme Extension - Usage and lending data; for presentation 23 financial institutions with net lending between Shawbrook and Nationwide have been excluded
• ¹ Q3 2015, includes all participants of the Funding for Lending scheme (does not include HSBC & Barclays)
The Funding Circle marketplace is the third largest net lender to SMEs
in the UK vs. FLS reporting UK Banks & Building Societies¹
Q3 2015 Net Lending to SMEs
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• We are not a Bank - Funding Circle do not lend our own money
• Funding Circle are an online market-place – where investors lend directly to SME businesses
• £108m lent to SME’s in South West (February 2016)
• Liquidity depends on both the ‘Fractional Retail’ and ‘Institutional Whole Loan’ market-place
• Institutional investors agreed to invest £127m & $434m in our ‘Whole Loan’ market-place – UK & US & CE
Market-place lending
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• The Government lent an initial tranche of £20m through Funding Circle in 2013
• A further £40m has been committed in late 2014
• Forms part of the Business Finance Partnership scheme (British Business Bank)
• 10% of every loan on the platform is financed by Government
The Government’s commitment to Funding Circle
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Unsecured Loan
£5k - £250kSuitable for a wide range of purposes
6 months to 5 year termFixed interest rates from 6%
Arrangement fees between 3-4% of loan amount
No ERP’s
Secured Loan
£150k - £1m All asset security agreement
Charge on specific properties or assets
Types of borrowing
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£150k-£3m Development Commercial Investment Fixed interest rates
No early repayment fees
Circa 8% pa.
Property Finance
Asset finance
£20k - £1m Suitable for a wide range of hard assets
Hire purchase Flexible on LTV–100% considered
Individual deals up to £250k, credit lines of up to £1m
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Any business, any purpose……
8
Loan Purpose
Working capitalExpansion/growth CapitalAsset purchaseOtherResidential property developmentAsset financeRefinancing a loanTax paymentTax liabilityAnnual purchaseCommercial mortgage
Sector
Automotive FinanceLeisure & Hospitality Education & TrainingI.T and Telecommu-nications
Agriculture
Consumer Services HealthcareManufacturing and Engineering
Other
Professional and Business Support
Property and Construction
Retail Transport and Lo-gistics
Wholesale
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Minimum FC criteria includes
Companies:
History:
Directors:
Accounts:
Ownership:
Guarantees: Loan supported by PG
Beneficial ownership in UK
Min turnover £50,000, Upward growth trend and no consecutive losses.
Trading for 2+ years with at least 2 years of filed accounts
A good credit history – no CCJs, CVAs, CVLs or liquidated companies within 6 years. UK resident.
Limited companies, limited liability partnerships & non limited
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David Brown – Managing Director
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Not So ‘Alternative’ Finance
• Regulated industry
• Become a mainstream source of finance
• £5.5bn lent since 2005
• Only 55% of SMEs receive bank approval for loans
without issue*
* Source: BRDC SME Finance Monitor Q3 2015
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We look at things differently
What do we do?
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We are an ENABLER
• Simple
• Mobilising money in the countryside
• Enabling people to utilise property assets
• People Power
• Fair deal
• Help local community
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What We Offer Lenders
The ability to support and invest in their local community whilst receiving a competitive interest rate
* Based on the amount lost by a lender (excludes temporary delays in interest repayments)
• Minimum lending value of £25,000
• Secured return of 6.5% paid monthly
• Zero defaults to date*• Lending can be to a specific
borrower as a sole Lender, or as part of a ‘Lender Pool’
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What We Offer Businesses
The ability to utilise property assets to help business grow or boost working capital
• Interest only repayment at 6.5%• All lending secured against property• Offer up to 60% LTV• Loans of 3 months - 5 years• We take a holistic view: choosey but
fair
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Why work with us• Secured• Straightforward• Fast Enabler• Attractive rate 6.5%• People business• Local focus• Award winning
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www.folk2folk.comTwitter.com/Folk2FolkUKFacebook.com/folk2folk
Linkedin.com/company/folk2folk
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Growth Hubs – a new concept
What is a Growth Hub?
Growth Hubs bring together public and private partners to promote, co-ordinate and deliver local business support.
A single point of access for businesses support Signpost to grants, advice, events Assisting businesses to find the support that is right for them.
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Business support confusion
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For the Heart of the South West
Local ContextSince the closure of Business Link and the White Paper on Local Growth, there has been an increasing focus on localised interventions to help spur economic growth and rebalance the economy Heart of the South West Local Enterprise Partnership (LEPs) Growth Deals provide funds to LEPs for projects that benefit the local area and economy
Local Partnerships are critical to local economic growth
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So Growth Hub is the cheeseboard…
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And Business Support is the cheese?
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Or is Growth Hub the smart phone!
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Heart of the South West Growth Hub
Get in touch, stay updatedHeart of the South West Growth Hub is the first point of call for accessing local, regional and national business support initiatives.
Online Business Advisers – our experienced team will talk to you about your business goals and put you in touch with the best support to help you achieve them
Outreach events – we will be running events and workshops across the area
Website –provides access to information about the business support available in your local area & links to national programs.
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See us out & about
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Get In Touch, Stay Updated
Telephone 03456 047 047
Email [email protected]
Website www.heartofswgrowthhub.co.uk
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www.francisclark.co.uk
BreakSession 2 start time
10:05am
(Questions for Panel?)#FCFinanceSW
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Finance in theSouth West 2016
Andrew Richards Managing Partner Elect
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www.francisclark.co.uk
Structure of morning
• Background, Debt and Business Support (8.30am to 9.45am)
• Key Note Speaker• Banks: an overview• Debt • Growth Hub
• Grants, Equity, Investment Tax Reliefs and the LEP (10.05am to 11.30am)
• An SME perspective, Investment Ready, Q&A session and closing address (11.50am to 1pm)
• Lunch and Networking (1pm to 2pm)
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David Armstrong – Corporate Finance Director
Grants - overview
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www.francisclark.co.uk
Structure
• Grant landscape
• Which scheme is most appropriate for me?
• A selection of schemes
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www.francisclark.co.uk
Grant landscape
• Increasing number of schemes
• Revolving doors
• RGF - no more?
• European Programme 2014 – 2020 - ‘transformational year’
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www.francisclark.co.uk
Some recent successes
• £12m raised • 20 companies• 700 new jobs
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www.francisclark.co.uk
Which grant is for me?
• Common misconception
• Eligibility
• Commercial reality:
• How does it fit in with my business plan?
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www.francisclark.co.uk
Selection of schemes
• Disclaimer – not a complete list!
• Capital expenditure / job creation
• Rural businesses
• Research & development:• Innovate UK - SMART
• Innovation 4 Growth
• State Aid warning
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www.francisclark.co.uk
Selection of schemes ctd
• European Programme 2014-2020• Funding aligned to the European Structural & Investment
Funds Strategy
• Administered via around “calls”
• First calls in early 2015 - none open at present, expect some more in April
• More detail - http://www.heartofswlep.co.uk/news/european-structural-and-investment-funds-strategy
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www.francisclark.co.uk
Selection of schemes ctd
• European Maritime Fisheries Fund:• Investment in fishing vessels, infrastructure and aquaculture
• UK Game Fund• Video games development businesses create working
prototype games
• Grant of up to £25k
• Deadline – 18 April 2016
• Heart of the South West LEP• No direct discretionary funding to allocate to businesses or
organisations
• “Project bank”
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www.francisclark.co.uk
Keeping up to date
http://www.francisclark.co.uk/services/grant-advisory/
http://www.heartofswlep.co.uk/home
• Bi-monthly funding newsletter
David [email protected] 056164
Richard [email protected] 763049
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www.francisclark.co.uk
Final thought
Although Cornwall is considered the most lucrative grant
county, during 2015 we secured more grant funding for
businesses across Devon & Somerset than in Cornwall.
Is your business missing out?
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R G FGrant Funds
John HutchingsProgramme Manager, RGF Grant Funds
Plymouth University
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R G F Rounds 1, 3, 4
Cornwall & Isles of Scilly LEPHeart of the South West LEP
1000+ new jobs£15M+ of private sector co-investment
Helped over 90 businesses
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RGF4 SPREADRecipients under GAIN Growth Fund+ “GGF+”
Area Total Awarded Jobs
Cornwall (4) £349,642 59
Plymouth (12) £1,190,112 196
Torbay (3) £358,772 41
Devon (10) £796,815 124
Somerset (4) £460,000 73
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INDUSTRY SECTOR
Sector Amount Jobs %age
Marine £201,827 20 6
IT/Digital £500,628 81 16
Adv Manufacturing
£1,281,272 178 41
Environmental £286,090 43 9 (72%)
Food & Drink £418,396 72 13 (85%)
Retail/Wholesale
£316,028 59 10
Tourism £151,100 40 5
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R G F 5U B I through North Devon+
Target 373 new jobs£15M of co-investment
HotSW LEP ONLYMin £25k Max £499k
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R G F 5U B IContact
John Hutchings/John Lewis (Grants Team)[email protected]
[email protected]://s3.plymouth.ac.uk/ubi
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R G F 6South West Growth Fund
£10M Fund, grants from £15k to £1MTarget – 1068 new jobs
£22.3M of private sector co-investmentMainly supporting capital expenditure
projectsCARE : some restrictions
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R G F 6South West Growth Fund
State Aid restrictions will applyIntervention Rates most favourable in Cornwall
New job creation and private sector co-investment key to success
Competitive process giving maximum value for money for the public purse
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R G F 6South West Growth Fund
ContactJohn Hutchings/John Lewis (Grants Team)
[email protected]@plymouth.ac.uk
www.gaininbusiness.com
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…each application is assessed…
….and recommended or otherwise…
…by an expert and friendly team
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Hey, that last bid wasn’t half bad……..
……..no, it was all bad !!!!!
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Sectoral RestrictionsThe fisheries and aquaculture sectors.
The primary production and marketing of agricultural and horticultural products.
Forestry.Shipbuilding (although small craft building - vessels less than 100gt -
is not restricted).Airports.
The coal sector.Steel making.
Manufacture of synthetic fibres.Certain energy generation, distribution and infrastructure projects.The transport sector (excluding improvements to socially necessary
services in rural areas).
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Sectoral RestrictionsRetail.
Tourism (including hotels and leisure facilities).Warehousing.Education.
Health services (including medical services and residential care).Business services.Financial services.Franchise operations.
Property development and investment.
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DOMINIE DUNBROOK LEADER PROGRAMMES MANAGER
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An introduction to LEADER 2014 - 2020
104
Rural Development Programme 2014 - 2020
Countryside Stewardship
€3.875bn (£3.1bn)
Countryside Productivity
€176m (£141m)
Growth Programme
€221m (£177m)
LEADER€172.5m(£138m)
Aim: To grow the rural economy in EnglandKey outcomes: Creation of growth and jobsMinimum grant: £2,500
National priorities:• Support to increase farm productivity• Support for micro and small businesses (non-agricultural) and farm diversification• Support for rural tourism• Provision of rural services• Support for cultural and heritage activity• Support for increasing forestry productivity
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Where will LEADER fund?
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What will LEADER fund?
LEADER will fund farmers, foresters, rural businesses and rural communities to help:• create jobs• develop rural businesses • support the rural economy
70% of all projects must directly support the rural economy. 30% of projects will also need to demonstrate that they are contributing to improving the local rural economy.
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What will LEADER fund?
Projects must meet Local Development Strategy (LDS) priorities and at least one of the national 6 priorities for support as outlined below.
• Support to increase farm productivity• Support for micro and small businesses (non-
agricultural) and farm diversification• Support for rural tourism• Provision of rural services• Support for cultural and heritage activity• Support for increasing forestry productivity
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What LEADER can’t fund
• Most revenue costs – LEADER is predominantly a capital funder
• projects the applicant is required to do by law or to meet a legal requirement
• costs for anything that’s a standard industry obligation, for example requirements of the Basic Payment Scheme
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How much grant can you get?
The amount of funding available depends on:• type of project• size of business• the costs involved (not all costs of the project
may qualify for funding)• The minimum grant is £2,500• The maximum grant is €200,000 – set at the
de minimis limit
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LEADER Programme - process
• There is a two-tier application process for LEADER:– Outline Application– Main Application
• Matched funding is required – normally 60% of the project costs from your own sources
• Planning permission would need to be in place (together with any other statutory permissions)
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LEADER Programme - process
• Decision making processes can vary in time – on average 6 months
• If successful, grant payments are made retrospectively
• Monitoring requirements will be in place during the grant period and for a short while after
• The project activity needs to be maintained for at least 5 years after the final grant payment
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Further information:
You can find further information about the LEADER programme in your area through the
‘DEFRA RDPE 2014 – 2020’ web portal
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Finance in the South WestFebruary 2016
Angel InvestmentPhilip TellwrightChief Executive
SWAINEEN Finance Specialist
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Equity… mysterious and elusive
Copyright SWAIN 2013
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Copyright SWAIN 2013
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Reports of my death have been greatly exaggerated…
Mark Twain
Copyright SWAIN 2013
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Changing face of funding sources
Copyright SWAIN 2013Source Platform Black
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Market share of the “Crowd”
Copyright SWAIN 2013
Source: Beauhurst The Deal 2105/15 Making Sense of UK Equity Investment Public Summary
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Seed Crowd Funders v Angel Networks
Copyright SWAIN 2013
Source: Beauhurst The Deal 2105/15 Making Sense of UK Equity Investment Public Summary
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Ease of doing deals
Copyright SWAIN 2013
Simplified Challenging
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Speed of Deal
Copyright SWAIN 2013
Weeks 2+ Months
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Research into returns
Copyright SWAIN 2013
Emerging Significant
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Upper limit on funds available
Copyright SWAIN 2013
Smaller Larger
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Transaction costs for investor
Copyright SWAIN 2013
Lower Higher
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Structure of deal
Copyright SWAIN 2013
Bespoke Standardized
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Valuation
Copyright SWAIN 2013
Canny Flexible
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Deal architecture
Copyright SWAIN 2013
Investor / Advisor Led
Platform Led
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Confidentiality
Copyright SWAIN 2013
Discrete Widely accessible
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Engagement
Copyright SWAIN 2013
Low High
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Where value is generated
John - 30 investments• Currently @ 3.5x money
50%30% 20%
Value AddedSelection End Sale
Copyright SWAIN 2013
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Typical Investor Requirements
5x – 10x cash3-5 yearsExitSeat on the BoardSome influence and control
Copyright SWAIN 2013
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Nesta Research 2009 (2)
Copyright SWAIN 2013
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Copyright SWAIN 2013
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Atlas Genetics Limited
Copyright SWAIN 2013
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The Company construct white-label hire & return programmes for brand owners that deliver and maintain turnkey rental and returns management operations for them, dis-intermediating existing supply chains and taking the brand directly to its target market.
Copyright SWAIN 2013
?
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Innoverne Limited, the Circular Commerce specialists, today announced that it has been named runner-up in the ‘Circular Economy Digital Disruptor’ category of the 2015 Circular Economy awards.
Winners and runners-up awards were unveiled at the World Economic Forum event in Davos, Switzerland on the 20th January 2015.
Copyright SWAIN 2013
?
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Crowd plus lead investor
Copyright SWAIN 2013
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Creating value Fashion goods
Copyright SWAIN 2013
April 2013 £150k for 19% (£789k)£850; £2,140; £3,650 (£167); (£12); £397
Nov 2014 £219k 10.3% (£2,100k)2.7x in 18 approx. months
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Key features business angel activity
Copyright SWAIN 2013
• Personal – preferably regional• Confidentiality• Understand more complicated businesses
• Add value• Provide support• Will follow their money because of the relationship which has been established
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the shape of things to come morphs
Copyright SWAIN 2013
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TEJ PANESARHead of Credit and Equity Risk
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The Power of the Crowd
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What are the benefits?
New way to raise finance
Global Investor Reach Cost effective Marketing effect Crowd feedback Expertise
Financial return ‘Armchair Dragon’ Support friends and family Participation Lower/spread risk Simple to invest
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RAPID MARKET GROWTH
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TOP INVESTOR
#1 FOR SEED STAGE DEALS
BEAUHURST REPORT – “MAKING SENSE OF UK EQUITY INVESTMENT 2014/15”
MARKET POSITION
TOP INVESTOR
#1 FOR VENTURE STAGE DEALS
TOP INVESTOR
#1 FOR LONDON DEALS
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INVESTOR RETURNS
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EQUITY
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THE EVOLUTION OF SUCCESS
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THE EVOLUTION OF SUCCESS
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THE EVOLUTION OF SUCCESS
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THE EVOLUTION OF SUCCESS
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THE EVOLUTION OF SUCCESS
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THE EVOLUTION OF SUCCESS
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TEJ PANESARHead of Credit and Equity Risk
linkedin.com/in/tejpanesar
THANK YOU
WWW.CROWDCUBE.COM
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Growth Capital Investors
BGF is an investment firm that provides growth capital of £2m - £10m to UK businesses with turnover of £5m - £100m.
Who we are. Funding for growth and equity release
Investment of £2m – £10m for a minority stake
Long-term and patient capital, no forced exit
Access to huge network and support
Fast and focused investment process
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Growth Capital Investors
BGF in numbers…
£2.5bn – total funds available
£700m – invested to date
109 – total current investments
60 – non-executives introduced
40% – maximum stake
8 – investors in the Bristol team
8 – UK offices
£5m – minimum turnover threshold
5 – years old
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Growth Capital Investors
Investment of £2m-£10m
Cash-in: to support long term growth
Cash-out: for existing shareholders
Equity stake of up to 40%
Always a minority partner – you retain control
Flexible structures – equity / loan notes
Meets the needs of the company and shareholder
What we can offer. Working alongside the banks, BGF provides growth capital in a way that meets companies’ needs.
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Growth Capital Investors
No closed fund pressures
Patient capital. No drag rights, no forced exit
Fair legal approach Less onerous investor legal protections
Fast and focused investment process Minimises disruption and fees
More than money Access to impressive network and support
What we can offer. Working alongside the banks, BGF provides growth capital in a way that meets companies’ needs.
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Growth Capital Investors
October 2011£4.2m
Employee benefits software provider
Southampton
May 2012£4.0m
Online garden products retailerReading
June 2012£3.0m
Leading international supplier of parts for
ATMsCamberley
September 2012£5.4m
Technical scaffolding for petrochemical, oil
and power sectorsBarry
December 2012£3.5m
Niche developer of mobile phones for
major brandsReading
December 2012£7.0m
Design & manufacture of high composite pipes
for oil & gasPortsmouth
April 2013£3.9m
Design, manufacture & distribution of branded travel products for kids
Bristol
November 2013£2.5m
Specialist in millimetre wave wireless backhaul
solutions for mobile telecoms
Newton Abbot
South West Portfolio.
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Growth Capital Investors
April 2014£4.0m
Cloud based IT services to the public
sectorCorsham
August 2014£8.0m
Manufacturer & retailer of luxury kitchens
Devizes
August 2014£3.6m
Sustainable energy business that designs
& installs systemsTetbury
August 2014£6.0m
Furniture retailer with 40 stores across the
UKSlough
October 2014£7.0m
IT managed services and cloud hosting
Cirencester
March 2015£4.0m
Communications infrastructure and
outsourced IT services
Chippenham
July 2015£10.0m
Multi-channel retailer of clothing, footwear, household and fishing
tackle products
Brecon
South West Portfolio.
January 2016£4.4m
Web-based email marketing solution
Oxford
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Growth Capital Investors
BGF South West and South Wales Team
James AustinInvestor
07872 819093
Alex GarfittInvestor
07770 582021
Greg NormanInvestor
07557 747302
Edwin DaviesInvestor
07880 384983
Paul OldhamRegional Director
07887 657697
Sarah LedwidgeInvestor
07557 232034
Dan TapsonInvestor
07964 904443
Ned DorbinInvestor
07800 682195
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Finance in the South West
Claire Dorrian, London Stock Exchange
London Stock Exchange Group
23 February 2016
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168
The equity funding landscape
Private Equity
Venture Capital
Seed Capital
Business Angels
Friends Family
Start - Up Early Stage Expansion Consolidation & further capital raising
Diversification of investors, M&A and International Expansion
Concept & seed stage
Fund
ing
requ
irem
ent
£500k
£1m
£100k
£50k
£150m
£1bn
Strategic consideration
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169
Money raised (IPO)
(USDm)2014 2015 %
change
Main Market 23,811 19,377 -19%
AIM 4,607 908 -80%
Total 28,419 20,285 -29%
Further Issues (USDm)
2014 2015 % change
Main Market 39,035 47,461 +22%
AIM 5,322 7,633 +43%
Total 44,358 55,095 +24%
Number of IPOs 2014 2015 %
change
Main Market 58 62 +7%
AIM 80 31 -61%
Total 138 93 -33%
Source: Bloomberg and Dealogic, January 2016
2015 – IPOs Down from Record 2014, Further Issues Up
Further Issues on London Stock Exchange IPOs on London Stock Exchange
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2010
2011
2012
2013
2014
2015
0
0
0
0
5
10
15
20
25
30
35
40
45
50
New IssuesVFTSE
Dea
l Val
ue (U
SD b
n)
VFTS
E In
dex
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2010
2011
2012
2013
2014
2015
0
0
0
0
5
10
15
20
25
30
35
40
45
50
Further IssuesVFTSE
Dea
l Val
ue (U
SD b
n)
VFTS
E In
dex
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£1bn+£500 - 1bn£250 - 500m
£100 - 250m
£50 - 100m£25 - 50m£10 - 25m£5 - 10m£2 - 5m£0 - 2m
418
51
107123
151
197
122
144
99
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
2
4
6
8
10
12
14
16
18
Further
New
Mon
ey r
aise
d (£
bn)
1,044 companies*, aggregate value of
£73bn (199 Int’l companies)
A Snapshot of AIM
Source: LSE statistics, 31st of December 2015*28 companies either suspended or undetermined value
*ICB industry classification
Since 1995 over £95bn raised in total (£55bn
through further issues)
170
Profile of AIM Companies Admissions to AIM – 1995 to 2015
Industries* Represented – by Number of CompaniesFundraisings on AIM – 1995 to 2015
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
100
200
300
400
500
123145
10775
102
277
177 160 162
355
519
462
284
114
36
102 9071
99 118
61
UK Int'l
Num
ber
of a
dmis
sion
s
Oil & Gas; 116
Basic Materials; 160
Industrials; 174
Consumer Goods; 60Health Care; 86
Consumer Services; 117
Telecommunications, 15
Utilities; 14
Financials; 189
Technology; 113
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Diverse & deep pool of capital
Strong support from institutions
Funding for acquisitions & expansion to new
markets
The benefits of AIM
Access to capital
Wide support network
Profile
Nominated advisers
Accountants
Lawyers
Banks/Brokers
Analysts
Financial PR / IR
Media
Visibility
Bargaining power with customers & supplier
Access to incremental research coverage
Marketability of stock
Global peer group
171
Balanced regulatory approach
Disclosure requirements tailored to growing
companies
Based on EU FSAP Directives & UK Prescribed
Market Regime
Local & International investor confidence in regulatory framework
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Page 172
ELITE – our business support programme for ambitious private businesses
Delivered in partnership with Imperial College Business School in the UK, ELITE will enhance the growth prospects of member companies through a unique three-part package.
Continued access to the entire ELITE community across Europe via the online platform
PHASE 1 Stimulates company review
A comprehensive programme, delivered with entrepreneurs, investors and advisers, to stimulate organisational review and change.
Readiness Survey Diagnostic Interviews
PHASE 2 Plan for change
Practical and technical workshops designed to reflect on company-specific issues and plan for change with the support of the ELITE Partner network.
PHASE 3Capitalise on the benefits
Utilise the ELITE community and learnings from the first two phases to access new business opportunities and consider funding options and processes to explore in more detail.
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This document has been compiled by the London Stock Exchange plc (the “Exchange”). The Exchange has attempted to ensure that the information in this document is accurate, however the information is provided “AS IS” and on an “AS AVAILABLE” basis and may not be accurate or up to date. The Exchange does not guarantee the accuracy, timeliness, completeness, performance or fitness for a particular purpose of the document or any of the information in it. The Exchange is not responsible for any third party content which is set out in this document. No responsibility is accepted by or on behalf of the Exchange for any errors, omissions, or inaccurate information in the document.No action should be taken or omitted to be taken in reliance upon information in this document. The Exchange accepts no liability for the results of any action taken on the basis of the information in this document. All implied warranties, including but not limited to the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement, compatibility, security and accuracy are excluded by the Exchange to the extent that they may be excluded as a matter of law. Further, the Exchange does not warrant that the document is error free or that any defects will be corrected.To the extent permitted by applicable law, the Exchange expressly disclaims all liability howsoever arising whether in contract, tort (or deceit) or otherwise (including, but not limited to, liability for any negligent act or omissions) to any person in respect of any claims or losses of any nature, arising directly or indirectly from: (i) anything done or the consequences of anything done or omitted to be done wholly or partly in reliance upon the whole or any part of the contents of this document, and (ii) the use of any data or materials in this document.Information in this document is not offered as advice on any particular matter and must not be treated as a substitute for specific advice. In particular information in the document does not constitute professional, financial or investment advice and must not be used as a basis for making investment decisions and is in no way intended, directly or indirectly, as an attempt to market or sell any type of financial instrument. Advice from a suitably qualified professional should always be sought in relation to any particular matter or circumstances.The contents of this document do not constitute an invitation to invest in shares of the Exchange, or constitute or form a part of any offer for the sale or subscription of, or any invitation to offer to buy or subscribe for, any securities or other financial instruments, nor should it or any part of it form the basis of, or be relied upon in any connection with any contract or commitment whatsoever.London Stock Exchange and the London Stock Exchange coat of arms device are registered trade marks of London Stock Exchange plc. Other logos, organisations and company names referred to may be the trade marks of their respective owners.
© January 2016London Stock Exchange plc
10 Paternoster SquareLondon EC4M 7LS
Telephone +44 (0)20 7797 1000www.lseg.com
Legal Disclaimer
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Enterprise Investment Scheme (EIS) & Seed EIS
Heather Britton, Tax Director
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www.francisclark.co.uk
Aims of EIS & SEIS
• Help smaller higher risk trading companies raise finance
• Equity ownership
• Beneficial tax reliefs for investors
• Seed EIS = early stage funding
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www.francisclark.co.uk
EIS in numbers
Source: HMRC (National Statistics) October 2015
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SEIS – a growing opportunity?
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Maximum Investment
2015/16
Investments levels EIS SEIS
Maximum investment – individual £1m £100k
Maximum fund raise – company £5m p.a. £150k in 3 years
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www.francisclark.co.uk
Investor tax reliefs – Income Tax
2015/16
EIS SEIS
Income tax relief 30% 50%
Minimum holding period 3 years 3 years
One year carry-back Yes Yes
Dividends Taxable Taxable
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www.francisclark.co.uk
Investor tax reliefs – Capital Gains Tax
2015/16
EIS SEIS
Capital gains Exempt after 3 years Exempt after 3 years
Capital gains deferral Yes No
Capital gains tax holiday No Yes
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Application process
Advanced assurance
Optional process – is it likely to
qualify?
EIS 1Compliance statement
EIS 3Form for investors to claim tax relief
EIS 2HMRC issue if share
issue qualifies
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www.francisclark.co.uk
A year of change
• State aid restrictions
• CGT Entrepreneurs’ Relief – allowed on deferred gain
• Lifetime limits on issuing company (normally 7 years)
• Can’t be used to fund acquisition of existing trade
• Restrictions on existing shareholders
• All energy-generating activities will soon be excluded (April ’16)
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Heather Brittone: [email protected]: 01823 275925
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The LEP - Supporting Future Business Growth
Chris Garcia
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Our LEP is working to
Reposition the Heart of the South West: our prosperity, profile and reputation, nationally and globally. Connecting people, places, businesses and ideas to transform our economy, securing investment in infrastructure and skills to create more jobs and enable more rewarding careers.
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How can the LEP help – its your LEP
What the LEP is:A genuinely local platform for collaboration across public and private sectors, to achieve mutual economic aims.
What the LEP is not:An agency of HMG like the RDA, nor are we simply a funder body.
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What have we been doing
• Identify common priorities
• Attract resources and investment
• Make a difference to prosperity
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Supporting HotSW businesses
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Challenges & what business tells us
In 2012 the Heart of the South West economy was worth £27.4bn, or £16,318 per person, compared with £21,937 for England: a 26% shortfall.
• Insufficiently skilled workforce
• Limited labour market• Low rates of innovation• Inadequate infrastructure• Access to finance • Simplified business support.
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To summarise – the big future opportunities
Improving productivity through:• Road Transport• Railways• Attracting
investment• Devolution
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Devolution through a ‘Productivity Plan’ (SEP v2)
Single Productivity
Plan
Single investment
pot
People: who are healthy and with skills they need access higher value jobs and grow their careers with Heart of the South West businesses
Business: Better jobs and GVA uplift of £4 billion
Place: A long term plan for sustainable growth supported by modern infrastructure and accelerated housing delivery
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www.francisclark.co.uk
BreakSession 3 start time
11.50am
#FCFinanceSW
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Finance in theSouth West 2016
Andrew Richards Managing Partner Elect
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www.francisclark.co.uk
Structure of morning
• Background, Debt and Business Support (8.30am to 9.45am)
• Key Note Speaker• Banks: an overview• Debt • Growth Hub
• Grants, Equity, Investment Tax Reliefs and the LEP (10.05am to 11.30am)
• An SME perspective, Investment Ready, Q&A session and Closing Address (11.50am to 1pm)
• Lunch and Networking (1pm to 2pm)
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Investment Ready…
Matthew Willmott - Corporate Finance Senior Associate
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Funding options
Understand your
requirements
Understand funding
options and funders
requirements
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www.francisclark.co.uk
The Readiness Process
When, why and what funding is needed
Communicating the business proposition - business plan and projections
Viable plan and credible management
Building the relationship
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www.francisclark.co.uk
The Business
Case
Business Plan and Financial Projections
Purpose of funding needed?
Proof of market / Route
to market
Credibility including
‘catalyst’ for step change
Acknowledging risks and mitigate
Team: ability to deliver
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The numbers
Match funding to cash requirements and business model
Monthly profit and loss, cash flow and balance sheet projections
Review
Cash headroom and sensitivities
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Investment ready – housekeeping
Licences / contracts?
IPR ownership in the company?
Books and records in order?
VAT, PAYE/NI
Statutory Accounts/management accounts
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Requirements: Equity
Equity funder requirements » growth
Exit route and returns to the investor
Investors expertise vs. loss of independence?
Be prepared to discuss valuation
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Requirements: Grants
“Project” eligibility – sector, size, location…
Timescale – prescriptive, process and panels
Match funding
‘need for grant’ versus viable proposition
On going requirements
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Requirements: Debt
Serviceability & Headroom
Security / Personal Guarantees
Conduits for government initiatives
Covenants – achievable / appropriate?
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Investor Ready - Conclusions
Appropriate funding
Business Case
Know the ‘deal breakers’
Build in extra time
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Matthew Willmotte: [email protected]: 07714 397298
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Never underestimate the narrative
Paul TurnerFinance Director
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Never underestimate the narrative
Who are RGB?
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Never underestimate the narrative
Current RGB branches
+ watch this space!
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Never underestimate the narrative
Our Journey:
• Established 1850• Family owned (with all of the troubles that brings!)• I joined the business in 2004• Completed MBO in February 2015 (with the help of Francis Clark!)
• Kevin Fenlon (Chief Executive): 26%• Paul Turner (Finance Director): 26%• Remaining shareholding held by ‘family’ members who wished to support the MBO and remain involved in the business, plus a number of very small shareholders (past and current staff members etc…)
• Secured a stable future for RGB and everyone who works for us
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Never underestimate the narrative
What is the “narrative”?
We’re accountants…….
….aren’t the numbers more important?
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Never underestimate the narrative
NO!
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Never underestimate the narrative
When we talk about people and organisations who make funding available to us we use words like “partner”…….
……and “relationship”
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Never underestimate the narrative
What does the narrative do?• The narrative helps tell the story• The narrative promotes emotional ‘investment’• The narrative can answer difficult questions before they are asked (perhaps so they never get asked)
• If done well, the narrative can help potential funders reach an emotional decision to support you before they have seen any numbers
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Never underestimate the narrative
With some funders, you may never get to meet the person who makes the final decision about whether or not to support you.
The narrative gives the person you DO meet the best opportunity to understand and tell your whole story properly, as if they were you.
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Never underestimate the narrative
What do you include in the (written) narrative?• Pictures
• don’t make it boring!• Executive summary
• as a failsafe to make sure you have delivered the key information to anyone who doesn’t read past page three
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Never underestimate the narrative
What do you include in the (written) narrative?• Background, history and performance, including topics such as:
• the market you are in• how you compare to the competition• your customer base and your relationships with customers• seasonality• marketing strategy, pricing strategy, distribution methods• growth to date and future prospects• why you are successful at what you do
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Never underestimate the narrative
What do you include in the (written) narrative?• Use words and graphs (and pictures) so the message is delivered with minimal effort to the reader
• Identify and discuss any risks you can think of• Risk• Potential impact• Likelihood• Mitigations
• A description of key people in your organisation• Communicate your culture, core values and your approach to corporate social responsibility
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Never underestimate the narrative
What do you include in the (written) narrative?• Future opportunities and your strategy
• Then (at the end) include your tables of numbers/projections
(if the ‘projected numbers’ aren’t ready in time, consider providing the narrative/commentary to funders without projections…….)
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems, your risks,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems, your risks, your management,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems, your risks, your management, your strategy,
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems, your risks, your management, your strategy, your core values
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems, your risks, your management, your strategy, your core values and your future opportunity……… …………….
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Never underestimate the narrative
Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems, your risks, your management, your strategy, your core values and your future opportunity……… …………….to someone you may never meet.
If you can do this on paper, then when you are in front of potential funders, you already know what you need to say!
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Never underestimate the narrative
Matt has spoken about being ‘investment ready’ and ‘preparation’, and I can’t tell you how important that is.
Everything I have said today is pretty much repeating what Andy Killick, Matt and Rob said (over and over) to us during our MBO. We wouldn’t have reached
completion without an enormous amount of help and guidance from Francis Clark.
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Never underestimate the narrative
Thank you
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Q&A Panel
…and you
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Ben ThompsonFinance in the South West
2016
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Finance in theSouth West 2016
Andrew Richards Managing Partner Elect
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Structure of morning
• Background, Debt and Business Support (8.30am to 9.45am)
• Key Note Speaker• Banks: an overview• Debt • Growth Hub
• Grants, Equity, Investment Tax Reliefs and the LEP (10.05am to 11.30am)
• An SME perspective, Investment Ready, Q&A session and Closing Address (11.50am to 1pm)
• Lunch and Networking (1pm to 2pm)
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Presenters – thank you
…and most are here for networking/ one to one questions over lunch
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(c) copyright Francis Clark LLP, 2016
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