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Morning Briefing for pub, restaurant and food wervice operators

Thu 28th May 2015 - Notes launches £600,000 crowdfunding push
Notes launches £600,000 crowdfunding push: Notes, the five-strong London-based coffee shop and wine bar concept, has launched a crowdfunding drive on Crowdcube, looking to raise £600,000 in return for 7.5% of its equity, which values the company at £8m – so far £104,430 has been pledged by investors. The company is forecasting sales of £4.8m in the year to June 2016 with Ebitda of £539,939, rising to £18,702,462 and Ebitda of £2,957,241 by the financial year ending in June 2019. The pitch states: “We are raising money so we can open new outlets, and grow our roastery. Having successfully opened four sites over the past 12 months we are planning another three over our next financial year (begins 1 July). Our roastery was designed to supply a handful of Notes outlets and third party accounts. With our recent high-volume openings we need to invest in the roastery, to satisfy both our own needs and growing demand in the third party and home-brew markets. From 2016 onwards we plan five sites per annum. We envisage a modest debt raise of 2x Ebitda in late FY 2016 / early FY 2017 to further support the growth of the business. We target currently c. 70% gross margin, which we have been achieving at our Moorgate shop and are close to reaching at Trafalgar Square. We are confident that as we grow, with increased buying power, we will be able to lower supplier prices and increase Gross Margin to 72%. Staff costs vary according to shop type. For a site with a lot of takeaway (e.g. Canary Wharf tube station) our target is 30% of sales, for a site with a lot of sit-down service in the daytime (such as Trafalgar Square) and less takeaway, we target 35%. As such we are forecasting 32% of sales for new sites. On a site level we strive for an ebitda margin of 20%, this is based on hitting the targets above. Over the past year we have started to invest in our central team, in our accounts and training departments, as well as hiring a PR firm. We will continue to invest in our central team to ensure that growth is supported by a strong framework. We expect central costs to increase from 5% of sales to 7% in 2016 and then return towards 5% thereafter. The debt in the business at year-end will be £80,000 held with Coutts, plus £180,000 of short term shareholder debt attracting 6% cash pay interest pa. We would like to re-finance both these facilities with a new debt package at the end of FY2016. We also have a £60,000 overdraft facility with Coutts. There are also £590,000 of shareholder investment held in long term notes, that would be repayable on an exit. The interest is non cash pay and is accruing at 6% per annum. We are forecasting an exit for investors four years post-investment. Businesses in the sector are valued predominately on an Ebitda multiple basis, and based on comparable transactions within the sector we would expect to achieve a multiple of at least 10x Ebitda. Whitbread’s (Costa) most recent acquisitions, Coffee Nation and Coffeeheaven, were at 10.3x and 14.6x current year EV/Ebitda respectively. Two fast growing casual dining restaurant chains, Cote and Byron, were bought by private equity firms in late 2013 and they achieved 10.5x (Byron) and 8.7x (Cote) current year EV/Ebitda multiples.” Key personnel are founders Alan and Marion Goulden, Robert Robinson, who oversees operations and Edward Halton, who worked on the acquisitions of Carluccio’s, Strada, and Wagamama during eight years working in mergers and acquisitions at Rothschild. For those investing £20,000 plus, rewards include free coffee, 50% off food and 30% off all wine and beer for the lifetime of the investment. Of its existing sites, it stated: “Trafalgar Square, our first branch, is a beautiful Grade II listed building on St Martin’s Lane with floor-ceiling antique mirrors. It is well known as an oasis of calm in the West End, and is coming up to its 5th birthday; Moorgate, our first City location on the ground floor of the iconic CityPoint building, opened in summer last year and proved our concept was adaptable to high volume, take-away centric locations; Canary Wharf Jubilee is a take-away only unit in one of London’s busiest underground stations. We opened in February this year, and are showing impressive trading over our first four months; The Kings Cross branch, which also opened in February this year, is in the heart of one of London’s most exciting new developments. We are adjacent to a newly built tube entrance, and positioned in Pancras Square which boasts 6,000 sq foot of offices; Canary Wharf Crossrail, just open on May 1st represents a huge jump forward for Notes. Competition for this site was intense, and being chosen by arguably the most discriminating landlord in the UK represents a major endorsement of our brand.”

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