Friday, 9 June 2017

Crowdcube 2016 results are as we predicted - abysmal.



Crowdcube, the UK's largest ECF platform, has announced more heavy losses on falling margins and increasing costs. Pretty much as we expected. You might say, as predictable as The Donald.


The big time backers of Crowdcube must be worried. A 48% rise in revenues has resulted in a considerable fall in GPM and large increases in costs. Net result - an increase in losses for the year to £5.4m. At this rate the company has roughly another 18 to 24 months before closure.

The fall in GPM, caused by their rather panicked urge to make larger deals for PR reasons, from 57% to 52% must be a cause for concern. And the increase in revenues of £1.3m has been more than wiped out by this and their increased costs. It all looks out of control.

The really bad news is that even with these increased losses, they are not heading in the right direction - large deals are clearly impacting margins and the smaller ones are stalling - other platforms do these better. They have now lost their first mover advantage. The accounts are for YE September 2016, the same 2016 that Luke Lang predicted would be such a great one for the company - endlessly. Now the spin doctor is way out of his depth. 

As with all things, the end game will take a while to play out, but end it must. Maybe a white knight will step up and take over - god knows they need radically new management and some sensible strategy to turn this loss making business around. Accrued losses now sit at £12.7m as at September 2016 and will right now be way higher as we predict even greater losses for 2017. 

In the 2016 raise, that they performed on their own platform, they had some interestingly colourful graphs showing their success. One of these showed quarterly (stated calendar) revenue increases. So for Q4 15 and Q1 16 they showed 78% and 125% respectively. As we now know, the overall annual increase in revenues was 48% for YE September 2016. You do the math. Q2 and Q3 16 must have taken a vacation in Acapulco.

In the same MI, Crowdcube stated that their revenues to March 2016 or the first 5 months of its financial year, were £2.07m - this is the section where they try to explain their £65m ticket price......unsuccessfully. According to Crowdcube, the March to September period is more productive than the October to February one on a month by month basis - or that's the line that was sold  Yearly revenues for YE September 16 were under £4m. Bummer.

Management were careful not to include simple revenue projections - too easily scoffed at later on. But just to give you an idea of how clueless these guys are, in their 2012 pitch on CC, they predicted 2014 net profits of £3.7m on revenues of just £4.4m. Where are we in reality? Revenues of £3.95m with loses of £5.4m. That is staggeringly inept even for CC. Do you think people would have invested if the real figures had been known? It may help to explain why Darren and Luke have never run a successful business. 

On these current figures, they need revenues of over £16m or at a 5% average commission rate (their stated rate is only 4%) annual completions of £320m just to reach BE. This year saw revenues of under £4m. At the current rate of increase pa, we are looking at a minimum 4 to 5 years to break even. So that's roughly another £25m of losses. That's without any increase in costs and a continued 40% increase in business every year. Unlikely? You bet. Their dream of a secondary market is just that and is already being trialled (rather weakly) by their arch rivals Seedrs.

Who will go first - the orange guy or the spinners? 

4 comments:

  1. PR is clearly costly.

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  2. Where did you get the info? Is it publically available?

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    1. Companies House beta site - and its free.

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  3. I never understood how they would make enough margin in the long term without taking a "carry" on the future upside of an exit.

    Seedrs take a carry of any future upside, so if any of their companies hit it really big and sell for hundreds of millions then they get a cut, as well as any smaller successes.

    I think that model has more longevity for the platform, because they get the long term long tail revenue from sales years down the line. Whereas crowdcube have to keep hammering out as many deals as possible as they only get paid when the company first raises money.

    That may have changed since I last looked, but the seedrs model seems more lucractive (for seedrs) in the long term.

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