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Co Cars

Financial performance

Co Cars is offering up to 600,000 Community Shares in the Society, each with a nominal value of £1. These shares will have a target interest rate of 5% p/a and interest will start to accrue from 1 August 2020. There is a non withdrawal period of 18 months and the share withdrawal notice period is 6 months.

Business Model

Co Cars earns the core of its income through fees for membership of the car club and pay as you go hire of cars and bikes. Information on pricing bands and rates is available on its website. The pricing is reviewed on an annual basis to ensure it remains competitive.

Some membership is secured through corporate schemes and corporate car club provision. To date, this has focused on cars but a corporate offer for usage of e-bikes will be rolled out in 2020. Corporate memberships reduce risk around utilisation rates and secure a wider audience for the Society's services. It is also reviewing scope for sponsorship deals as the business expands, particularly around bikes and cargo bikes, to maximise earning potential for the assets.

Co Cars is generating increasing income from providing authorities, housing developers and other partners with zero emission shared mobility solutions.

Historic financial performance

The table below shows Co Cars' historic financial performance; for the two financial years ending (FYE) 31 March 2018 and 2019, and for the current financial year to 31 March 2020.

Co Cars Limited: financial summary (2018-20)

Key aspects to note from the historic financial performance are:

  • A strong revenue growth projected in current year to 31 March 2020, to c. £400k, representing year on year sales growth of 46%.
  • Approximately a break-even position at Operating Profit level (before depreciation, interest and tax) of £11k in FYE2018 and negative £1k in FYE2019. Co Cars anticipates it will generate a small operating profit of £22k in the current financial year.
  • Net losses (after all expenses) due to large depreciation charges against vehicles and other assets (no cash impact).
  • Fixed assets comprise motor vehicles and investments into property, plant and equipment.
  • Limited long-term liabilities of £31k (in FYE2019) are composed of director loans and finance lease liabilities, expected to be cleared by year end.

Investment

The table below shows how Co Cars expects to deploy the target  share capital raise of £600,000 in the next financial year (FYE2021).

The investment being sought is focused on:

  • Operational efficiencies - improvements to internal infrastructure in the first year in advance of the expansion of the fleet in the medium term;
  • Improve service offer and efficiencies – including software development;
  • Increased reach - 50 new e-bikes and associated charging hubs (purchased) into Exeter; and
  • Increased reach - 25 electric cars (leased) and associated charge points, with 20 part funded from the Innovate UK grant.

As at February 2020, Co Cars has 30 cars and just under 100 bikes in Exeter. The business expects to add more cars and bikes by the end of this financial year (31 March 2020) before expanding significantly next year so it will have more than 55 cars and 150 e-bikes in Exeter. Co Cars expects to double the cars it operates to over 100 by the end of the 2024 with, in addition, over 250 e-bikes.

Following the investment and deployment, there will additionally be investment in technology to enable integration with other transport services. This investment will support future expansion, drive increased revenue and reduce costs through:

  • App-based booking systems, single ticketing solutions and fleet management software which will enable the customer to move seamlessly between different modes of transport;
  • These will be smartphone enabled to facilitate improvement and efficiency savings in the back-office processes (e.g. reducing the time required to support customers, time required to answer queries, management of maintenance field workforce); and
  • Provision of much better back end data on customer transport modes.

The investment will also allow Co Cars to significantly expand its marketing campaigns, PR, events, advertising and member engagement activities to ensure it is promoting its services and attracting new members across the whole of the network.

The minimum capital raise is for £100k. This will still allow the Society to significantly grow and scale the Co Cars business. In this scenario, the priority would be on adding new electric cars to the fleet and improve the IT infrastructure and staffing.


Forecast financial performance

The table below shows the historic and forecast Profit and Loss account for Co Cars.

Revenues

  • Revenues are forecast to increase by more than four times over the period from c. £400k (FYE2020) to c. £1.6m in the financial year ending March 2024. This is largely driven by increases in the size of the car and bike network that Co Cars offers and income from new members. The number of cars operating in Exeter will more than treble, as will the number of bikes.
  • Co Cars expects to receive substantial revenue grants over the forecast period; from c. £320k in the next financial year (FYE2021) falling to c. £100k in FYE2024.
  • Revenue is expected to grow significantly in the next financial year (to c.£860k) based on investment already made into the car and bike fleet and through deployment of community share capital raised.
  • This doubling in revenue will be generated from: a projected 90% increase in income from cars, and a very large projected increase in income from bikes (over 500%) based on bikes already ordered and ready to be deployed, as well as £320k of agreed revenue grants.
  • The provision of larger numbers of cars and bikes will increase their convenience (improving the likelihood of one being available when needed) aligned with increases in the provision of docks or drop off points close to the journey start and destination; increasing usage by those who are already members or users.
  • The prudent projections for bike utilisation are forecast to increase from a baseline of 3.5% at the beginning of year one, reaching an average of 10% in year five. The business has monitored seasonal patterns in bike usage during the pilot phase of the bike scheme and has built in expected fluctuations in usage across the year. As bikes will be increasing from 95 to over 250, and bike hubs (pick up and drop off points) from 10 to 25 over the same period, with most of this expansion happening in the first two years, this is believed to be a reasonable time frame for reaching maturity in network utilisation.
  • Each additional car, bike and docking station also acts as a “sandwich board” for the offer, increasing membership through visibility to those travelling past, without additional marketing costs.
  • This combined expansion and refinement of the offer will have a "network effect", where usage and revenues increase at a faster rate than numbers of cars and bikes themselves.
  • The Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) increases to c.£260k in FYE 2023 before falling to c.£200k in FYE 2024 when Co Cars expects to make another substantial investment to renew the car and bike fleet.
  • The underlying profitability of the business (i.e. without revenue grants) is also projected to increase with the EBITDA margin, excluding revenue grants, rising to c.10% in FYE 2023.
  • This means the business will be grown sustainably and demonstrates there will not be a reliance on revenue grants in the long term.
  • Finally, there is no taxation over the forecast period; tax not payable until EBIT (Earnings Before Interest & Taxation) exceeds receipts of capital and revenue grants in financial year.

Costs

Corporate costs will not grow at the same rate as the network because of the following:

  • The investment in the core team, in the first year of the forecast period, will establish a team and infrastructure that can be grown flexibly and effectively.
  • The investment in software and supporting processes will ensure that processes are efficient, customer services are effective and that technology is leveraged to ensure that the services are easy to navigate for new members and users.
  • Together, these improvements will ensure that core costs are contained as Co Cars grows, supporting the ambitious network and revenue growth that is projected.

 

Cash flow summary

 The table below shows the cash flow summary for Co Cars for the period 2019 - 2024.

Commentary

  • There are strong operational cash flows from FYE2021, based on revenue growth outlined above and in context of declining revenue and capital grants over the forecast period.
  • The large investment of c.£820k in FYE2021 is using share capital proceeds (target of £600k) and (agreed) capital grant funding of c. £210k.
  • The capital grants fall over forecast period from c. £210k in FYE2021 to just £10k in FYE2024.
  • The share capital withdrawals (allowed after 18 months) are expected to be £15k in FYE2022, and approximately £30k p.a. thereafter.
  • The forecast return to shareholders is based on the target 5% interest payment at end of first year of investment (31 March 2021).
  • As the business grows and succeeds, Co Cars may carry out a further investment raise but this is not included in this financial model.

Balance sheet

The table below shows the historic and forecast Balance Sheet for Co Cars.

Commentary

  • Fixed assets (largely cars and bikes) will grow over the forecast period with some substantial additions to the fleet.
  • Through proactive working capital management, Co Cars will ensure Current Assets (debtors etc.) are balanced with liabilities (trade and other creditors) over forecast period.
  • There is a strong balance sheet with investment (£600k project community share raise) and receipt of capital grants (approximately £500k already received to date, and expected to raise to c.£840k over the forecast period).

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