Friday, 30 December 2016

More sticky business for equity crowdfunding

Sugru's recently published accounts show why we need to change the way company accounts are filed.

Sugru raised almost £3.4m on Crowdcube last year. 

More recently they tried to raised more equity funding via the Envestors platform. 

The problem here is that their accounts were due out about the time that the Envestors round was live; September 2016. But they were not filed until afterwards - or to be exact 2 weeks ago.

Now in the brief summary for the Envestors pitch the company showed a series of actual numbers for the financials which included YE December 2015 (the one they had failed to file on time). The 2014 'actual' accounts tally with the ones filed at CH - which they would have to as these were readily available for all to see.

The 2015 certainly 'actuals' do not.

One crucial figure, which is the main driver for all businesses, especially those in a rapid growth phase, has been incorrectly given to potential investors by the company and the platform. Assuming the platform have to work on the information given to them, then the responsibility lies with the company. The miscalculation is so large it is hard to believe it is a simple error.

The GPM for 2015 turned out to be only 42% against a given 'actual' figure on Envetsors of almost 51%. Now a difference of 8-9% on turnovers heading north of £3m is highly significant. Not just in cash terms. The projected GPM for future years is crucial to Sugru's progress and if the 50%+ figure is not attainable then investors should be asking why? They cannot ask if they are told it is 50% 'actual'. On the 2015 revenue figure, this 8% shortfall would lose around £280,000 of gross profit. In reality they were £306k down on GP for 2015. 

Losses were in fact lower than the 'actuals' shown by Envestors - by cutting the overheads by around £300k. This in itself should be of interest to investors, who were given the wrong figures. But the main point here is that the future 50% GMP for 2016 and beyond must now be in doubt. With projected turnover for 2020 of more than £28m, a change in the GPM of this magnitude will not be welcome.

At the end of November 2016, the company arranged three new facilities with the Clydesdale Bank - we'd love to know which figures it was working off.

If, as we have been demanding for sometime now, all companies raising ECF had to produce up to date filed accounts, then this wouldn't and couldn't happen. It would be a very simple fix for what is a very major problem - as anyone who reads this blog will know.

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