manufacturing process
NATURE OF BUSINESSES | Manufacturing Process |
STAGE OF DEVELOPMENT | Established |
INVESTMENT BEING SOUGHT | £125k package (or £225k with property option) |
20% EIS TAX RELIEF POTENTIALLY AVAILABLE | Yes |
PREPARED TO HAVE MULTIPLE INVESTORS | Yes |
INVEST ALONGSIDE VENTURE CAPITAL FUND | Yes (to be negotiated) |
EQUITY STAKE | Realistic |
INVESTOR PARTICIPATION | Non-exec or part-time |
MANAGERIAL SKILLS SOUGHT | Strategic or Financial |
LOCATION | Coventry - Warwickshire |
The business has been under-capitalised from the start. It has mushroomed to £1m turnover and is currently fending off contracts worth another £0.7m pa because of a lack of working capital (they are already factoring). They have won several 2 and 3-year contracts with major manufacturing companies, and £5m turnover is a realistic target.
Their landlord has offered to sell them the freehold, so £125k is sought to fund the working/operating capital, plus (optionally) another £100k to cover the deposit on the premises. Unfortunately the business' accounting systems have not kept pace with its growth, therefore up-to-date management accounts are not available, nor is there a formal business plan.
Few businesses of this size have a comparable list of blue chip companies and high value long-term contracts on their order book. It happened because they focus intensely on quality and deadlines. Recently two experienced managers were recruited (one on production/quality and the other on sales), and except for a finance professional the business for the first time has a complete management team. A suitable Non-exec Chair will be welcomed to the Board.
The business' cash shortfall is probably a result of its small initial capital base and the major replacement and refurbishment of the facilities and equipment after the acquisition of its main site. The work cost more than planned, and took longer than expected, meaning production was lost. Now fully ready-to-go, it is working at a fraction of its capacity because there is not enough working capital to take on the increased turnover that is apparently available.
Without up-to-date management accounts it is impossible to be certain that the underlying business, now free of the one-off effects of the refurbishment, is actually in the robust good health that it appears to be, and that banging those extra £700k of contracts through the factory each year will in itself be enough to generate very healthy profits. However there seems to be enough evidence to warrant taking a closer look. Success should result in a very much higher valuation of the business in 2 years than it has now.
Further information: Harry Stott, University of Warwick Science Park Limited
024 7632 3123 or capital@uwsp.co.uk