Social Stock Exchange

Participatory notes United Kingdom 71 crowd investors so far
Where investment meets impact
€4,474,884
Pre money valuation
52.8%
Equity offered
€0
Already invested by crowd
€900,000
Committed by pros
0 days
Remaining
€250,000
Crowd target
0.0
Already 0% crowdfunded
This campaign ended on 2017-01-31

Historical accounts

The following description is taken from the Prospectus. For more information on the investment mentioned in this section, you are invited to read the Prospectus, in particular the risk factors described therein and summarised in the table "Risks", before making any investment decision (eg. loss of capital).

Social Stock Exchange closed its latest Financial Year on 31 July 2016. The audited financial accounts were approved by the Board of Directors and auditors for publication on 7th October 2016.

Balance sheet

The numbers presented below are expressed in GBP.

Bs hist

The attention of the potential Investors is directed to the fact that Social Stock Exchange has been in deficit since its incorporation in 2007 with cumulative losses over previous years totalling 3,502,703 GBP as at 31 July 2016.

Assets

The intangible assets booked for an amount of 16,465 GBP on the balance sheet consist of software development costs (website and platform development and CRM software development). Tangible fixed assets (8,639 GBP) represent plant and machinery. Receivables expected within one year include trade receivables, prepayments and a service retainer. Cash has decreased by 325k GBP in the year ended July 2016 in line with operational losses incurred during the year as Social Stock Exchange grows the business towards break-even, offset by cash raised from capital increases of 554k GBP and debt repayments in cash of 83k GBP in the year.

Liabilities

Social Stock Exchange must repay, over the rest of 2016 21,856 GBP to Panahpur, being the remaining balance of the two loans provided by Panahpur in April and June 2015. Social Stock Exchange has no other loans. Trade debts are accounts payables, including the usual trade creditors and PAYE and National Insurance contributions owing to HMRC.
The total amount of share capital as at 31st July 2016 was 3,690,702 GBP with a total number of ordinary shares issued of 1,889,953.

Income Statement

The numbers presented below are expressed in GBP.

Is hist

* EBITDA: Earnings before Interest, Taxes, Depreciation, and Amortization

Social Stock Exchange has been able to increase its revenues year-on-year since 2012. Social Stock Exchange counts 40 businesses- and organisations-Members – this more than doubled in 2016. All of whom support its vision of positive impact. The revenue increase has been generated thanks to an increasing number of impact companies, social company advisers and events.
Social Stock Exchange's main operational expense is remuneration, social charges and pensions. The increase in remuneration between the financial years of 2013, 2014, 2015, & 2016 are a result of the business beginning to operationalise and grow headcount to build out the organisation. By end of the financial year of 2014, the number of employees had grown to 6 (including the new CEO, Tomas Carruthers), by the end of the financial year of 2015, thenumber of employees had grown to 9 (including the new COO, Richard Cook, and CFO, Paul Burniston) and as at July 2016, it stood at 11. Moreover national Insurance, pension and medical insurance benefits are available to all the staff.
While remuneration is increasing, Social Stock Exchange has focussed in FY16 (from August 2015 to July 2016) on managing other operating expenses so that revenue growth could flow to the bottom line. Social Stock Exchange has reduced accommodation costs, research and development and platform operating costs and sales & marketing costs. On the contrary, legal and professional fees have increased in FY2016 as Social Stock Exchange became regulated as an Appointed Representative.

Cash flow statement

Cf statement hist

From the end of July 2015 to the end of July 2016, accounts receivables have increased significantly more than accounts payables as a result of increasing sales with flat or lower costs, leading to an increase in working capital requirement.

The main investments made by Social Stock Exchange are in website development, the design, configuration and implementation of a CRM system and in computer equipment and laptops for staff in line with hiring increases.
Since its incorporation, Social Stock Exchange has made several capital increases, with the latest in July 2016 (250,000 GBP invested by Inventures) and April 2016 (621,801 GBP) for a total balance as at 31st July 2016 of 3,690,702 GBP.

Financial plan

Social Stock Exchange is of the opinion that taking into account its available cash and cash equivalents on July 31, 2016, the Company does not have sufficient working capital for its present requirements, that is for at least the 12-month period from the date of the Prospectus. Based on current projections and expectations the Directors are of the opinion that the Company needs further funding of 250,000 GBP by the end of 2016 in order to have sufficient working capital for at least the next 12 months and to prevent a shortfall in working capital occurring in Q1 of 2017. If this capital raise does not successfully raise a minimum of 250,000 GBP by the year-end 2016 and alternative sources of financing cannot be identified to cover such a circumstance, there is a risk of insolvency in the short term.

The 3-year financial plan, developed by Social Stock Exchange's management, is presented here below. Social Stock Exchange has developed the key assumptions based on a combination of their experience, market practice, market statistics, if available, and performance of the Social Stock Exchange to date.

Revenue drivers

Social Stock Exchange has developed a financial plan that is built around six types of revenue.
- Impact companies and businesses memberships: These are the recurring annual membership fees received from social and environmental impact enterprises
- Adviser members fees: These are the recurring annual membership fees received from SCAs
- Cap raise fees: These are success fees where Social Stock Exchange has helped its members raise capital
- Listed market fees: Some Social Stock Exchange members are listed on ISDX social segment. These are then the revenue share arrangements from the collaboration agreement with ISDX
- Media Revenues: These revenues are sponsorship and advertising revenues from organisations that sponsor Social Stock Exchange’ events and / or website.
- Other Revenues

Volumes

Vol for

* From January to December 2016
** Issuer Members are companies and social enterprises delivering a social and/or environmental impact which become a member of the Social Stock Exchange after having been accepted by the Admissions Panel.
*** Fully Listed Members are Issuer Members of Social Stock Exchange whose shares, bonds or other financial instruments are listed on the Social Stock Exchange market segment of the ISDX market either the Main Board Market or Growth Market. To qualify for listing in the Social Stock Exchange
segment of the ISDX market, Issuer Members must pass both Social Stock Exchange and ISDX’s admission process requirements.

The main drivers of volumes are the following, controlled and influenced by the management and the board of directors:
- The number of issuer members (impact companies) is based on Social Stock Exchange experience. Social Stock Exchange has 44 issuer members to date (end of September 2016) and plans to reach more than 50 issuer members by the end of December 2016. This forecast includes the risk of Issuer Members de-listing or not renewing their membership.
- Social Stock Exchange forecasts an increase of the number of adviser members from 18 to 22 by the end of 2016. Based on the interest shown by some larger advisers, it is likely that the average revenue received per adviser may increase compared to the average fees charged in 2015.
- The assumptions for the capital raised by issuer members are based on the number of expected issuer members. Social Stock Exchange has assumed that 50% of new issuer members would be raising capital. Social Stock Exchange currently has several live projects where they are assisting issuer members to raise capital and forecasts to close them in early 2017.
- Social Stock Exchange expects 50% to 66% of the issuer members to list securities justified by the following two assumptions:
- Many new issuer members should be early stage companies looking for private placement rather than listing in the first instance;
- Social Stock Exchange is looking at businesses which are already listed on other exchanges to become members.
- Social Stock Exchange expects to be running 8 events per year based on their experience of running similar events and media sales.
These drivers should lead to an increase of the different volumes, except capital raised as conservative assumption.

Price

Price for

* From January to December 2016

The pricing of membership fees (issuer members and advisers), shown in the forecasts, is based on Social Stock Exchange’s current pricing model and does not take into account any increase for inflation or increased margin. Issuer membership fee depends on the instrument being issued (equity, bond or fund) and the market capitalisation of the issuer member. The price for cap raise fee (success fee) notably depends on the average size of raise. Listed market fee is based on the ISDX price list for transaction fees.

Revenues

Rev for

* From January to December 2016

There is a risk that the objectives of Social Stock Exchange will not be reached, which could lead to a significant reduction of the expected revenues and thus a risk of insolvency. This could result in a low return or even in a total loss of the investment for the investors.

Cost drivers

Costs for

Gross margin - Costs of goods/services sold (variable costs)

Cost of goods sold represents a proportion of the cap raise fees, as Social Stock Exchange will have to share these revenues with third parties (brokers and distributors) who will help Social Stock Exchange manage and generate this revenue. This item also includes the costs linked to the media revenues.

Fixed costs

Remuneration, social charges and pensions is the most important cost category as these make up just over 70% of the projected expenses over the 4-year forecast period. It will continue to increase between 2016 and 2019 due to several reasons:
- The on-costs include medical insurance, employer pensions contributions and employer’s National Insurance contributions;
- A continuous planned increase in workforce based on the expected increase of volume of business;
- From 2017 onwards, Social Stock Exchange expects the workload and business volumes to drive headcount on a more linear basis;
- A fall of average salary as the core executive management team is already in place and new staff will mainly be employed in sales and operational functions

The next major category of expense, after headcount related costs, is accommodation and general expenses. These are assumed to grow in line with headcount as accommodation requirements increase.
Sales and Marketing costs are expected to grow as Social Stock Exchange develops more case studies from success stories to promote and market them.
R&D is expected to increase as Social Stock Exchange move forward as Social Stock Exchange will want to innovate and develop its impact reporting methodology.

Financial tables

The financial plan below is the result of the assumptions explained above. Based on the above assumptions, it is expected that Social Stock Exchange will turn into a profitable business, from an operational point of view (see EBITDA: before depreciation & amortizations), over a full year, in 2017 on a sales volume over 1,500,000 GBP in that year.

Bs   is for

* From January to December 2016
** EBITDA: Earning Before Interest, taxes, Depreciation, and Amortization

Cf for

* From January to December 2016

This campaign ended on 2017-01-31

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