finance in the south west 2016

Finance in theSouth West 2016

Andrew Richards Managing Partner Elect

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.

Merger with Princecroft Willis

• 1 April 2016• 11 partner office• 110 staff• Turnover £6.8m• 2 offices

- Poole

- New Forest

PCW Princecroft Willis offices

International Network

• Currently Leading Edge Alliance• Changing to PKF network

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)

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

Ben ThompsonFinance in the South West

Paul Crocker – Corporate Finance Partner

Banks - overview

• Are banks lending?

• Appetite and leverage

• Rates and terms

• The funding gap

• Challenger Banks…

Source: Bank of England

Banks – % change in lendingLending (net) to UK businesses

Banks – absolute £ lending

https://www.bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes-3rd-quarter-2015/#.VsLkVz_cvct

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

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

Rates and Terms

Source: Bank of England

Should look to achieve lower margins than above + care margin over what? Base or LIBOR

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

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

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”

“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?!!

Paul Crockere: paul.crocker@francisclark.co.ukt: 01392 667000

Aldermore Bank PLC.Richard Whitehouse – Regional Sales Director23.02.16

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

Start-Up

• Supplier Payment Terms• Cost of Credit Control• Weekly salaries

Start-Up

Growth

• Organic Working Capital gap • Residential Mortgage

Start-Up

Growth

Maturity

• Working capital headroom• Savings

Start-Up

Growth

Maturity

Expansion

• Mergers and Acquisitions• Purchase premises• Plant and Machinery Investment

Start-Up

Growth

Maturity

Expansion

• Succession – MBO• Savings

Thanks for your time

SWIG Finance

John Peters, Managing Director

We finance businesses to start or grow

We can say yes when the bank says no

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

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

Total Loans Drawn

Lending by County

7.4%18.6%

CornwallDevon DorsetBristolGlosHampshireSomersetWiltshire

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

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

Thank you

www.swigfinance.co.ukinfo@swigfinance.co.uk

01872 223883

Funding Circle

Jeremy CrinallBusiness Development Manager South West

Simple, affordable business loans

“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

What's the difference?

Traditional lending

Market place lending

A simple model: Lenders can spread risk by lending small amounts to hundreds of businesses

Business loan

Loan parts

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

1 3 4 4 6 12 14 14 21 27 33 4355

175199 226

12 14 14 21 27 33 43 55 64 80 83111

150 167 170222

0.7745.92744316.701954

11.343063

24.77959131.841632

56.000971

81.340363

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

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

Shawbrook Bank

Na-tion-wide

Building Society

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

• 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

• 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

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

£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

Any business, any purpose……

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

Professional and Business Support

Property and Construction

Retail Transport and Lo-gistics

Wholesale

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

Thank you for listening

Jeremy CrinallBusiness Development Managerjeremy.crinall@fundingcircle.com0203 667 2250

David Brown – Managing Director

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

We look at things differently

What do we do?

We are an ENABLER

• Simple

• Mobilising money in the countryside

• Enabling people to utilise property assets

• People Power

• Fair deal

• Help local community

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’

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

Why work with us• Secured• Straightforward• Fast Enabler• Attractive rate 6.5%• People business• Local focus• Award winning

www.folk2folk.comTwitter.com/Folk2FolkUKFacebook.com/folk2folk

Linkedin.com/company/folk2folk

OverviewDavid Hynd, Programme & Partnership Manager

David.Hynd@heartofswgrowthhub.co.uk

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.

Business support confusion

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

So Growth Hub is the cheeseboard…

And Business Support is the cheese?

Or is Growth Hub the smart phone!

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.

See us out & about

Get In Touch, Stay Updated

Telephone 03456 047 047

Email info@heartofswgrowthhub.co.uk

Website www.heartofswgrowthhub.co.uk

BreakSession 2 start time

10:05am

(Questions for Panel?)#FCFinanceSW

Structure of morning

• Background, Debt and Business Support (8.30am to 9.45am)

• Key Note Speaker• Banks: an overview• Debt • Growth Hub

• An SME perspective, Investment Ready, Q&A session and closing address (11.50am to 1pm)

David Armstrong – Corporate Finance Director

Grants - overview

Structure

• Grant landscape

• Which scheme is most appropriate for me?

• A selection of schemes

Grant landscape

• Increasing number of schemes

• Revolving doors

• RGF - no more?

• European Programme 2014 – 2020 - ‘transformational year’

Some recent successes

• £12m raised • 20 companies• 700 new jobs

Which grant is for me?

• Common misconception

• Eligibility

• Commercial reality:

• How does it fit in with my business plan?

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

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

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”

Keeping up to date

http://www.francisclark.co.uk/services/grant-advisory/

http://www.heartofswlep.co.uk/home

• Bi-monthly funding newsletter

David ArmstrongDavid.Armstrong@francisclark.co.uk07810 056164

Richard WadmanRichard.Wadman@francisclark.co.uk07854 763049

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?

R G FGrant Funds

John HutchingsProgramme Manager, RGF Grant Funds

Plymouth University

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

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

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

R G F 5U B I through North Devon+

Target 373 new jobs£15M of co-investment

HotSW LEP ONLYMin £25k Max £499k

R G F 5U B IContact

John Hutchings/John Lewis (Grants Team)john.hutchings@plymouth.ac.uk

john.lewis@plymouth.ac.ukhttps://s3.plymouth.ac.uk/ubi

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

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

ContactJohn Hutchings/John Lewis (Grants Team)

john.hutchings@plymouth.ac.ukjohn.lewis@plymouth.ac.uk

www.gaininbusiness.com

…each application is assessed…

….and recommended or otherwise…

…by an expert and friendly team

Hey, that last bid wasn’t half bad……..

……..no, it was all bad !!!!!

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).

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.

DOMINIE DUNBROOK LEADER PROGRAMMES MANAGER

An introduction to LEADER 2014 - 2020

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

Where will LEADER fund?

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.

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

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

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

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)

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

Further information:

You can find further information about the LEADER programme in your area through the

‘DEFRA RDPE 2014 – 2020’ web portal

Finance in the South WestFebruary 2016

Angel InvestmentPhilip TellwrightChief Executive

SWAINEEN Finance Specialist

Equity… mysterious and elusive

Copyright SWAIN 2013

Reports of my death have been greatly exaggerated…

Mark Twain

Changing face of funding sources

Copyright SWAIN 2013Source Platform Black

Market share of the “Crowd”

Source: Beauhurst The Deal 2105/15 Making Sense of UK Equity Investment Public Summary

Seed Crowd Funders v Angel Networks

Source: Beauhurst The Deal 2105/15 Making Sense of UK Equity Investment Public Summary

Ease of doing deals

Simplified Challenging

Speed of Deal

Weeks 2+ Months

Research into returns

Emerging Significant

Upper limit on funds available

Smaller Larger

Transaction costs for investor

Lower Higher

Structure of deal

Bespoke Standardized

Valuation

Canny Flexible

Deal architecture

Investor / Advisor Led

Platform Led

Confidentiality

Discrete Widely accessible

Engagement

Low High

Where value is generated

John - 30 investments• Currently @ 3.5x money

50%30% 20%

Value AddedSelection End Sale

Typical Investor Requirements

5x – 10x cash3-5 yearsExitSeat on the BoardSome influence and control

Nesta Research 2009 (2)

Atlas Genetics Limited

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.

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.

Crowd plus lead investor

Creating value Fashion goods

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

Key features business angel activity

• Personal – preferably regional• Confidentiality• Understand more complicated businesses

• Add value• Provide support• Will follow their money because of the relationship which has been established

the shape of things to come morphs

TEJ PANESARHead of Credit and Equity Risk

The Power of the Crowd

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

RAPID MARKET GROWTH

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

INVESTOR RETURNS

EQUITY

THE EVOLUTION OF SUCCESS

TEJ PANESARHead of Credit and Equity Risk

tej@crowdcube.com

linkedin.com/in/tejpanesar

THANK YOU

WWW.CROWDCUBE.COM

Growth Capital Investors

Introduction to BGF

Edwin Davies, InvestorEdwin.davies@bgf.co.uk 07880 384983

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

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

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.

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.

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.

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

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

Finance in the South West

Claire Dorrian, London Stock Exchange

London Stock Exchange Group

23 February 2016

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

£500k

£100k

£150m

Strategic consideration

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

New IssuesVFTSE

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Further IssuesVFTSE

£1bn+£500 - 1bn£250 - 500m

£100 - 250m

£50 - 100m£25 - 50m£10 - 25m£5 - 10m£2 - 5m£0 - 2m

107123

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

Further

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)

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

123145

177 160 162

102 9071

99 118

UK Int'l

Oil & Gas; 116

Basic Materials; 160

Industrials; 174

Consumer Goods; 60Health Care; 86

Consumer Services; 117

Telecommunications, 15

Utilities; 14

Financials; 189

Technology; 113

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

Visibility

Bargaining power with customers & supplier

Access to incremental research coverage

Marketability of stock

Global peer group

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

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.

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.

10 Paternoster SquareLondon EC4M 7LS

Telephone +44 (0)20 7797 1000www.lseg.com

Legal Disclaimer

Enterprise Investment Scheme (EIS) & Seed EIS

Heather Britton, Tax Director

Aims of EIS & SEIS

• Help smaller higher risk trading companies raise finance

• Equity ownership

• Beneficial tax reliefs for investors

• Seed EIS = early stage funding

EIS in numbers

Source: HMRC (National Statistics) October 2015

SEIS – a growing opportunity?

Maximum Investment

2015/16

Investments levels EIS SEIS

Maximum investment – individual £1m £100k

Maximum fund raise – company £5m p.a. £150k in 3 years

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

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

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

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)

Heather Brittone: heather.britton@francisclark.co.ukt: 01823 275925

The LEP - Supporting Future Business Growth

Chris Garcia

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.

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.

What have we been doing

• Identify common priorities

• Attract resources and investment

• Make a difference to prosperity

Supporting HotSW businesses

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.

To summarise – the big future opportunities

Improving productivity through:• Road Transport• Railways• Attracting

investment• Devolution

Devolution through a ‘Productivity Plan’ (SEP v2)

Single Productivity

Single investment

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

The future – investing in better jobs growth and prosperity

It’s your LEP

chris.garcia@heartofswlep.co.uk

BreakSession 3 start time

11.50am

#FCFinanceSW

• An SME perspective, Investment Ready, Q&A session and Closing Address (11.50am to 1pm)

Investment Ready…

Matthew Willmott - Corporate Finance Senior Associate

Funding options

Understand your

requirements

Understand funding

options and funders

requirements

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

The Business

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

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

Investment ready – housekeeping

Licences / contracts?

IPR ownership in the company?

Books and records in order?

VAT, PAYE/NI

Statutory Accounts/management accounts

Requirements: Equity

Equity funder requirements » growth

Exit route and returns to the investor

Investors expertise vs. loss of independence?

Be prepared to discuss valuation

Requirements: Grants

“Project” eligibility – sector, size, location…

Timescale – prescriptive, process and panels

Match funding

‘need for grant’ versus viable proposition

On going requirements

Requirements: Debt

Serviceability & Headroom

Security / Personal Guarantees

Conduits for government initiatives

Covenants – achievable / appropriate?

Investor Ready - Conclusions

Appropriate funding

Business Case

Know the ‘deal breakers’

Build in extra time

Matthew Willmotte: Matthew.Willmott@francisclark.co.ukm: 07714 397298

Never underestimate the narrative

Paul TurnerFinance Director

Who are RGB?

Current RGB branches

+ watch this space!

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

What is the “narrative”?

We’re accountants…….

….aren’t the numbers more important?

When we talk about people and organisations who make funding available to us we use words like “partner”…….

……and “relationship”

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

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.

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

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

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

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…….)

Your aim is to provide a complete understanding of your business,

Your aim is to provide a complete understanding of your business, your customers,

Your aim is to provide a complete understanding of your business, your customers, your market,

Your aim is to provide a complete understanding of your business, your customers, your market, your products,

Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers,

Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises,

Your aim is to provide a complete understanding of your business, your customers, your market, your products, your suppliers, your premises, your systems,

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 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 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 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

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……… …………….

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!

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.

Thank you

Q&A Panel

…and you

Ben ThompsonFinance in the South West

• An SME perspective, Investment Ready, Q&A session and Closing Address (11.50am to 1pm)

Presenters – thank you

…and most are here for networking/ one to one questions over lunch

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To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP.

These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free.

Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales.

These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request.

Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by Francis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited.

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