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York Cocoa Works

Platform:
Crowdcube
Stage:
Expansion
Industry:
Food & Drink
Location:
UK - Yorkshire
Date Rated:
03/08/17
Raise:
£250,000
Equity:
12.5%
Valuation (Pre Money):
£1,750,000
Industry: Food & Drink
Location: UK - Yorkshire
Platform: Crowdcube
£250,000 Expansion
Valuation: £2,000,000
Date Rated: 01/08/17

MANAGEMENT

PRODUCT

INVESTMENT
Tax Status: EIS

Business Summary

York Cocoa Works (YCW) is a proposed new facility by small-batch chocolate maker and chocolatier York Cocoa House that would enable them to create greater quantities of their artisanal chocolate in the heart of York, capitalising on that City's history of chocolate making and reinvigorating the sector through education and training efforts. They have been operating for almost 6 years and achieved sales of £350k last year from a mix of retail and wholesale sales, and from training and experience workshops. The proposed expansion would also enable them to produce specialist couverture for sale to trade.

Financial Overview

Dec-20
Date (y/e) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
Sales Dec-16£350,916 Dec-17£1,119,200 Dec-18£1,798,500 Dec-19£3,017,500 Dec-20£5,062,500
Gross Profit Dec-16£270,454 Dec-17£898,186 Dec-18£1,492,298 Dec-19£2,524,900 Dec-20£4,218,350
GP as % sales Dec-1677% Dec-1780% Dec-1883% Dec-1984% Dec-2083%
Overheads Dec-16£264,917 Dec-17£733,600 Dec-18£812,400 Dec-19£870,900 Dec-20£1,343,400
Operating Profit Dec-16£5,537 Dec-17£164,586 Dec-18£679,898 Dec-19£1,654,000 Dec-20£2,874,950
OP as % sales Dec-162% Dec-1715% Dec-1838% Dec-1955% Dec-2057%
Closing Cash Dec-16£264,981 Dec-17£371,312 Dec-18£1,051,210 Dec-19£2,705,210 £5,580,160

Note: This financial information has been sourced from the company on 31/07/2017 or from public sources. Financial data is NOT verified by Wheatfromchaff Ltd. Closing Cash from 2018 onwards based on projections from EBITDA.
65%
SKILLS:
EXPERIENCE:
COMMITMENT:
The team lacks a dedicated sales/marketing lead, but the business development manager role (to be filled) may cover this. A Finance Director would provide much needed re-assurance.
The team are experienced in both working with chocolate and in running this business. There is no evidence of previous exits, though, or commercial success at the intended scale.
The team appears able to dedicate sufficient portions of their time to YCW - at least two members may have other commitments but these are unlikely to be a significant distraction.
69%
MARKET:
PRODUCT:
COMPETITION:
With products for trade, wholesale, retail and services there are many opportunities. While the UK market is large, for the first few years YCW will be targeting local producers and vendors.
YCW's skills have garnered praise from major industry players and since launching they have generated revenues in excess of £1m from chocolate products, cementing their reputation.
There is some significant established competition, though there is always rooms for new artisans to enter the industry. Being a UK brand may provide some slight advantage.
48%
PROFITABILITY:
CASHFLOW:
RETURNS:
YCW has been running for almost seven years and finally became profitable last year. Jumping from £300k in sales to over £1m within a year will be very challenging.
Early difficulties managing cashflow have left the company with outstanding debts and a CCJ. Ongoing repayment of these is allowed for in the business plan but needs careful management.
The share structure is more complex than most Crowdcube pitches, with two classes of share above those being offered now. There is a heavily engaged investor on the board of directors.


Conclusion

There are a few areas of concern that investors should consider investigating further before investing and further public clarification on these matters would be welcome.

Namely, regarding the company's significant accounts payable:

  • What is the current value of accounts payable relating to debts arising from cashflow problems?
  • When are these accounts expected to be cleared?
  • What steps have been taken to ensure the company doesn't find itself repeating past mistakes?
Regarding the initial fundraising attempts for this expansion:

  • Since the plan was for YCW to be open by now, what has caused the delay and what guarantee is there that there won't be further significant delays?
  • How does this £250k round fit into the original plans to raise £300k of £700k from private investors, given at least £100k has been invested by said investors?
  • What justifies the valuation of the company increasing from £750k to £1.75m since last October, especially given the delays?
A full update as to the current capital structure and funding situation would be helpful, too.

Finally, there are complicated rules around providing State Aid such as the EIS Scheme to companies in “financial distress.” Therefore investors should ensure they have seen the Advanced Assurance letter that confirms EIS is available, from HMRC, before investing.

Related Links

Crowdcube Pitch

www.yorkcocoaworks.com

 

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The Ratings we publish have been approved and issued at Financial Promotions in the United Kingdom by Wheatfromchaff in the United Kingdom who is Authorised and Regulated by the Financial Conduct Authority FRN: 751017. Wheatfromchaff Limited registered office is Kilver Court, Kilver Street, Shepton Mallet, Somerset, BA4 5NF and telephone number +44 (0) 1749 347 577. Telephone calls may be recorded. VAT No: 214 0196 49

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