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Welcome to

Employee Ownership Association

Annual Conference 2017

Where employee ownership meets

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Welcome to “How equity finance can help

you transition and grow your business”

Facilitated by Christina Bush – Social Facilitators

Supported by Capital for Colleagues

National Self Build and Renovation Centre

Bright Ascension

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Our businesses

Castlefield Corporate Advisory Partners

Advice, GrowthInvestment

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• The answer is often – 100% shares in an Employee

Ownership Trust and Vendor finance

• The question should be – what is right for the business

and vendor?

• Vendor finance may be right…

• Equity investment may be a better option – particularly

patient capital

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Vendor financeTypical scenario:

• One or more founder directors in their 60s want to exit

• Sell 100% of equity to EOT

• Debt finance provided by bank, secured by PGs and

charge over business assets

• Directors receive 20% cash up front, balance payable

over +/- 10 years

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Pros

• Founder stays or retains interest in business and retains de facto control

• Less risk of additional charge holder

• Debt recovery flexibility?

Vendor financeCons

• Nothing has changed

• Could constrain growth opportunities

• Employees can’t drive business with founder still in place

• Debt has to be paid irrespective of business profitability

• Real employee ownership?

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Case studyThe scene:

• Vendor wanted to set up an EO business

• Wanted EOT to become majority shareholder

• But he wanted to retire in 12 months

• Couldn’t loan or gift money to EOT

– Close company participator rules – tax implications

– Damage balance sheet – trade finance implications

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Case study - 2The solution:

• Capital for Colleagues:-

– invested equity in company

– Enabled EOT to become majority shareholder

– Helped fill management gap left by exiting owner

– Close to completing acquisition that will double business

– Focusing on driving efficiency and productivity

– Vendor left business after 12 months, with capital…

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• Capital for Colleagues specialise in equity finance

• Over 16 companies supported with equity investment,

additional finance and support

• Here are two…

• Here’s their story

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Our story…

The Homebuilding Centre Ltd

(T/A The NSBRC)

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WHO are we?

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The National Self Build & Renovation Centre (NSBRC) is unique, as the UK’s only permanent visitor centre for self builders and

renovators. Currently, around 13,000 people ‘self build’ their own home each year.

Our aim is to inspire, educate and provide impartial advice.

The NSBRC covers 67,000ft2 (about the size of a football pitch) and is separated into different educational zones.

Renovation House – Helpdesk – Trade Village – Shows & Workshops – Self Build Courses – Guided Educational Tours

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The Homebuilding Centre Ltd (NSBRC) has three main sources of revenue:

1. Income from exhibition stands.

Our exhibitors (Partners) pay between £2,000 to £30,000 annually dependant on the size & location of their display. Our average spend is c£6,500pa and we

currently have 243 exhibitors.

Our partners range from internationally known brands to small, family businesses.

2. Conferencing

We offer conference and meeting room hire and this part of our business has grown significantly in 2016 & ‘17 due to investment made in the technology and

aesthetics of our rooms.

We have secured several multiple booking clients including well-known businesses within Wiltshire such as Nationwide Building Society,

Thames Water, Sovereign Housing and RWE Npower.

3. Training Courses

We have a range of courses that we have written and produced aimed at first time builders.

We charge £150 for a one day course and £375 for our comprehensive three day self build course.

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WHY Employee Ownership?

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The Homebuilding Centre Ltd was born out of a difficult period for the NSBRC:

• The visitor centre was not previous operators core business

• The building had not been well maintained

• Disillusioned staff

• Customers disengaged

• The business was not profitable and in financial difficulty

In September 2014, the previous operator was put into administration, with all staff made redundant.

However, There was light at the end of the tunnel…

A dedicated team of 6 individuals kept the centre open and formed the core of

A new business. All 6 are still with the company and are all direct shareholders.

Our new business has a ‘hybrid’ model with a mix of direct & trust shares…

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The Homebuilding Centre Ltd (T/A NSBRC)

Share holding – Hybrid Model

37.5%

39.5%

23.0%

Direct Employee Ownership Trust Capital for Colleagues

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WHAT we did.

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We wrote our Business Plan TOGETHER!

- This ensured we have a collective sense of ownership

of the business – in every sense of the word.

We established the values that feed our CULTURE.

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WHERE did advice come from?

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We recognised our weaknesses as a young(ish) team (and identified

Friends & Mentors)

We tapped into Capital for Colleagues’ wider business experience

(in addition to their finance expertise).

Peter & Jeremy offer support & act as sounding boards.

Crucially – we have been allowed SPACE – and yes,

we have made some mistakes (but only a few!)

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• We have also been able to access economies of scale by using

‘group’ companies such as our accountants and IT support.

• Importantly, they both have a good understanding of EO too.

• C4C have allowed a flexible approach – We changed early from a

simple ‘Trust only’ model to a ‘Hybrid’ model, providing security

for key-individuals - which is an advantage both ways.

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HOW does it feel today?

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Louise Jarmey (Front of House Manager)…

“We don’t see ourselves as working for the National

Self Build & Renovation Centre, we are the National

Self Build & Renovation Centre! Coming to work each

morning is exciting, and we all feel the same passion

for seeing the company thrive and are proud to be a

part of its success”.

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2017:

• Wiltshire Small Business of the Year• Outstanding Contribution to Self-Build• Shortlisted: Rising Star of the Year, Employee Ownership Awards

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1. Nov 14 to Mar 16 (extended 17 month period)

• Turnover of £1.46m

• A trading loss of £325,603.

• In the final month of this period we made a profit (this was the first recorded profit

ever for the NSBRC)

2. Apr 16 to Mar 17

• Turnover was £1.44m (39.6% increase)

• A profit of £47,886 (a turn-around equivalent to £23,143 each month)

3. Apr 17 to Sept 17 (6 months)

• Turnover £748,696 (x 2 = c£1.5m)

• A profit of £59,690 (x 2 = c£120,000) (Ahead of forecast)

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Ongoing funding part of our plans?

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C4C’s original investment of £250,000 converted in to Equity – Proving

their long-term commitment in our business.

We are re-paying our additional ‘top-up’ loan (with potential to re-pay

early) and aiming to ‘buy-back’ more shares over next 4 years.

We currently take a ‘prudent’ approach and pay for improvements (LED

lighting, Electric Car Charging points, New Conference space & AV

equipment) through Cash Reserves.

Larger projects (Mezzanine flooring) may need funding and we will

discuss with C4C but don’t feel tied to them.

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Summary

• The question should be – what is right for the business

and vendor?

• Equity, debt, vendor finance, patient investment

• Take professional advice

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Bright Ascension

Mark McCrum – Technical Director

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Questions and Discussions

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Thank you. Enjoy the rest of the

conference.

Please make your way to the Kings

Suite for lunch