Investment Based Key Achievements
Investment Based Key Achievements
The Company has leveraged, and it is the aim of the Company going forward to continue to leverage, the experience, contacts and skills of the Company and, in particular, those of the Founding Shareholder, Board, and senior management to:
• source potential investment opportunities in public and private companies where it is considered that such assets are either undervalued and/or underperforming but where, with the support and guidance of the Company, value can be enhanced and assets can be realised for value with a targeted return of no less than 50% for our investment within 12 months.
Two Key Achievements are illustrative of this point. Firstly, the founder of 360Globalnet, required consultancy advice and funding to enable him to conduct a buy-out of a major investor at a very attractive valuation in 2015 and then quickly find a new funding and distribution partner. The Company provided c.£5m in funding in 2015 and easily met its targeted return (including fees and interest) and exited in 2016 with all monies including c.50% upside, returned within 12 months.
Secondly, the Company acquired c.9.9% of Envestors, to be part of Quob Park Portfolio, the Company’s investment division. Envestors is an ‘above the crowd funding’ investment platform company and licensed its FCA regulated technology platform for our own operations in this area. Envestors have already conducted an additional significant round of funding at a greater than 50% premium to our investment.
The other relevant investments for Quob Park Portfolio, are: an equity and debt investment in Asset Match ‘a market place for trading private company shares’; the division’s investment in a vineyard, based at Quob Park, for distribution of sparkling wine primarily in the UK and Canada with a long-term target profit contribution of up to £1m per annum; and The BE Smart Group, an outsourcing based investment primarily related to utilities sales and servicing, this business was acquired after being provided debt (under its prior management) to develop its business, assets of over £500K have been disposed of from this business so far and certain shares have been returned under warranty claims with a plan formulated to merge this business with other investments in this space made by some of the Company’s investors.
• utilise the Board’s unique M&A methodology to acquire and incubate companies in the startup phase with significant growth potential, whilst significantly reducing the risk typically associated with this type of investment.
The Company’s most significant Key Achievement has been forming the Company’s digital transformation led technology solutions division, named Quob Park Solutions. This division was formed from the assets of four of the Company’s main technology investments, which were only able to be acquired following the failure of their respective boards and management teams to deliver upon both their own independent strategies (including ongoing funding) as well as the Return on Investment (ROI) goals the Board had agreed with them when investing.
The Board recognise that a number of investments in the technology space struggle to grow independently and reach the critical mass needed to deliver a ROI for their investors, which is a key reason behind the M&A methodology developed. One only has to look at the performance of certain technology companies pre and post acquistion within the Board’s prior ventures. Particularly how they perform today when comparing the number of major deals won during the time they were controlled by members of the Company’s current Board, at which time they enjoyed rapid growth with significant new charter client wins in both Europe and North America, signed and announced frequently.
The most critical issues for any technology business are: the technical capability within its management team; the strategy being controlled by its chief executive and board; its contracting approach with its clients; its ability to control costs and generate cash with all of this needing to be very closely tied to its sales capability. It has always been the experience of the Company’s Board that, in rapid growth technology companies, major deals need to be led by board members or they will not be delivered on time or accurately forecast. This underpins the Board’s view that the experience, skill set and focus of the Board is key to success for these investments.
Beyond the investments discussed above the Company made three technology investments all of which ended, following a change of strategy by the Company, in technology asset purchases in 2015/16 and a deal which was structured from day one as a technology asset purchase in 2017. These deals completed the acquistion of all the assets needed to target the Company’s first IPO. These businesses were well known to the Company’s Board, the first three particularly, as they had been previously funded, directly or indirectly, by the Board’s last venture.
The ability to acquire these assets and then take over managing them as a single entity with a combined strategy, was only possible with the agreement of our Chairman and Chief Executive, and other members of the Company’s Board and management team, to take on the additional time commitment necessary to allow the Company to rationalise staffing and bring on key talent with a proven track record to supplement the management whilst the business prepares for its first IPO. There is a clear strategy and timescale in place, which has been fully communicated to existing clients, to move all our solutions towards a single digital platform with a modern microservices based architecture.
Consolidation and Rationalisation: To ensure the Company has the depth of experience within its management team to prepare for its first and subsequent IPOs Steve Scott, who has been crucial to the success of all prior ventures, has agreed to take on the role of Deputy Chairman.
Tim Scurry, who was Global Head of Digital Solutions at the Board’s prior venture, joined the Board of the Company in August 2016 and has now agreed to take on the role of Chief Investment Officer looking after Quob Park Portfolio but will also be mentoring the Deputy Chief Executive(s) the Company will develop to lead the various businesses being incubated. Tim was crucial, when working with the Company’s Chairman, in the signing of major technology charter clients in North America and is expected to use his contacts / skills to assist in doing so again.
Rod Cameron was an Executive Assistant to the Company’s Chairman in a prior venture, from before its IPO until the time the Chairman left, and has been appointed as the Company’s first Deputy Chief Executive. Rod will be supported by Keith Nisbet as Chief Operating Officer for the Company. Keith worked at the Board’s prior venture and has extensive experience in operations and development across a number of industries including insurance but most recently within the telecoms and health care sectors. Both joined the Board in September 2016.
Once the assets were acquired, the Board has aggressively consolidated the associated staffing levels to ensure ROI goals are met, appropriate people with the required talent and proven track records are in place and that they are incentivised to ensure they are retained and will deliver. Staffing has now been rationalised across all these businesses with combined staffing levels in the lead up to the asset purchases and subsequently being consolidated down from c.100 to c.20 full time equivalants. The Company has maintained all key people, including the Chief Technology Officers, in ongoing relationships, on a full time basis, where required.
Where appropriate, resources have been supplemented by individuals with specialist skills from the Chairman’s prior ventures particularly within leadership roles on the Company’s new Technology Committee responsible for ensuring the successful delivery of the Company’s combined digital solution roadmap. Most of these key resources, many of which are independently wealthy from their prior ventures with the Chairman, have agreed to 3 year contracts and to take significant parts of their compensation in shares that were issued at £15 per share and conditional warrants at £7.50 per share to align interests with investors. Delivery of this strategy has been time consuming and costly, both in terms of actual investment and Exceptional Costs incurred.
The c.£2.7m Exceptional cost incurred, primarily related to our write down to zero of the investment in the telecoms businesses and provisions for legal costs. These write downs included a £1.4m provision against the intellectual property assets acquired from these businesses, following the Company’s Board having met with all key clients, reviewed all contracts and considered the carrying value of the intellectual property and associated levels of investment needed to make this solution commercially viable for Company in the future.
Telecoms Businesses: The Telecoms businesses, similarly to 360Globalnet, had looked for the assistance of the Company with consultancy advice on restructuring and either raising new finance to operate independently from its largest investor and distribution partner (as they had chosen to cut off all funding) and / or to achieve a sale to their underlying technology partner.
The Company provided over £3m of funding in a combination of equity investment (with downside protection via warrants) and debt to the businesses in the form of loan notes. The Company’s investment for loan notes was made alongside further loan notes, from their previous largest investor to settle certain liabilities and from certain board members for the provision of funding. All loan notes were secured against the intellectual property held by the businesses with a repayment date of 30 June 2016 and these loan notes have all now been settled.
The original strategy for the Telecoms businesses pursued by its prior largest investor, had been to fund the businesses and act as a distribution partner while it transitioned the telecoms solution to run on its own underlying technology platform. This platform was also used for this prior investor’s insurance solutions. This strategy would enable the Telecoms businesses to no longer take just a small percentage of major client contracts, despite carrying most of the cost of sales, as it would be able to meet 80%+ of client requirements independently and thereby keep 80%+ of the profit making the Telecoms businesses commercially viable.
The above strategy could not have been pursued by the Telecoms businesses independently as they had no underlying platform. However, the Company, with its other technology assets and the level of R&D expenditure it is now able to undertake, is able to pursue this attractive strategy for future growth in the Telecoms sector.
The core technology underpinning the majority of the Company’s solutions is already proven with vertical industry suite offerings in both the Telecoms Sector (now branded OS3 OSS), and in Connected Health (now branded OS3 Care) and with the Insurance Sector planned to be added soon.
Platform Business: YooDoo was initially invested in and provided debt and then all assets were subsequently acquired. This deal included a 3 year earn out, for the old business, of which c.90% would be returned to Quob Park Portfolio due to its share ownership. This platform has been rebranded as OS3 and enhanced by internal R&D and acquired IPR in 2017 to add extensive OS3 Case and OS3 WFM (Workforce Management) capabilities similar to those found within the offerings developed at the Board’s prior ventures and 360Globalnet.
Connected Health Business: The Company has a number of solutions for the Health Sector. One of which was originally known as AioMed (now part of OS3 Care) and it was purchased via a 3 year earnout after the Company had funded it via its parent BioSign. Approaching 90% of this earnout will be paid back to Quob Park Portfolio due to its ownership. BioSign was a Canadian public company that originally owned both AioMed and also a more limited healthcare solution (focused on the Canadian market) which they sold prior to AioMed. This more limited solution is now known as InnoCare and is owned by the Founding Shareholder’s prior venture.
• advise, work with, fund and invest in entities operating in the North American insurance and technology market to deliver disruptive business solutions, with a view to transforming such markets through digital disruption and other such innovations. The initial focus of the Company in this area of activity will be in Canada, due to likely forthcoming legal and regulatory changes, targeting a level of disruption previously exploited in the UK by the Founding Shareholder and the Board in order to generate significant investor returns.
Before this part of the Board’s strategy could be fully pursued, the Company needed to allow time to pass to see how the Founding Shareholder’s previous ventures would perform, under their new management, in the Canadian market.
Clearly, these prior ventures should have been the Company’s future competition in this area, if they had been able to leverage the opportunity they had been provided with to become a dominant supplier of both technology and outsourcing for the insurance and health sectors in Canada, to the same extent that the Founding Shareholder and certain members of the Board had achieved with these ventures in the UK.
It is now clear, in the Board’s view, that this opportunity, for its previous ventures, has not been delivered upon. Therefore, once the Company’s current digital roadmap is delivered and the regulatory environment has settled in Canada, we shall start to invest there significantly.
In 2017, the Company has made initial investments in the health sector in the Canadian market, via Quob Park Portfolio, and the Board has once again reached out to key insurance industry contacts.
All indications are that the Board’s return to the Canadian market, with outsourcing and technology solutions for the health and insurance sectors, would be very well received by its industry contacts. With Tim Scurry based in Canada and having now taken up his new role and the Company’s Chairman planning to spend a significant amount of time in this market, the Company expects to see significant progress from 2018 and beyond.
The current investment objective of the Company is to achieve capital appreciation, primarily through privately negotiated acquisitions of interest in companies operating in the telecoms, connected health, insurance and related technology sectors, and the organic development of opportunities in this space.
The current intention is to return at least 50% of gains to investors within five years of the relevant investment being completed. The Company plans to make returns to shareholders from time to time by way of dividend, share repurchases or other returns of capital. In particular it will consider making returns to shareholders in the event of any profits made from the realisation of any of its material assets from time to time, or the listing of any part of the Company or other members of the Group, either in the UK or internationally, as required.
As already stated, the first IPO is anticipated to be by 2022, in North America, provided a value of £80+ per share can be delivered for our investors.