FAQs: Five Points Raise 2021
1. The Essentials
So, what’s this crowdfunding campaign about?
We are raising a fresh round of investment to continue to grow our company. In particular we want to implement our exciting plans to build a new Five Points brewery in the heart of Hackney, bringing brewing, distribution and brand new on-site Taprooms together at a new combined location.
We are using the Crowdcube.com crowdfunding platform. Our campaign page is at www.crowdcube.com/fivepointsbrewing.
By investing in us you will become part of the Five Points family and will own shares in our company, The Five Points Group Ltd, and also have access to awesome rewards, including lifetime shareholder discounts and bar tabs at the new taproom.
Why are you turning to the crowd?
In 2018, we built a community of new Five Points investors, who are passionate beer lovers and supporters of independent, growing businesses, and who are literally invested in the success of our brewery and our pubs.
We want to use the Crowdcube platform again, because our existing investors are invested through Crowdcube, and because the Crowdcube platform provides a straightforward and structured way for our community, and everyday investors to invest in private limited companies.
What company am I investing in?
You will own shares in our overall parent company, The Five Points Group Ltd. The Five Points Group Ltd owns and operates the two divisions of our business, which are the brewery (The Five Points Brewing Company Ltd), and the pubs division, which currently operates the Pembury Tavern public house (Junction Five Ltd)
Do I get shares in the company?
Yes, every investor will receive shares in The Five Points Group Ltd. The number of shares you receive will be proportionate to the amount that you invest. The final number of shares issued will be dependent upon the final number of investors and amount of money raised. Our initial fundraising target is £350,000, equivalent to 2.5% of the company.
Are there rewards?
Yes. As well as owning shares in our company, every investor is also entitled to a range of rewards, depending upon the amount of money invested. Rewards include free birthday pints, lifetime shareholder discounts online and at The Pembury Tavern and new Taproom, invitations to exclusive shareholder parties and special events, free brewery tours and tastings. Plus, for investments of over £100, receive up to 30% of your investment back as a bar tab in the new Taproom (capped at £1,000 due to EIS rules). Please see our Crowdcube page for full details.
How much are you seeking to raise?
Our initial target, the minimum amount we are seeking to raise, is £350,000. Under Crowdcube rules, the requirement is “all or nothing”, i.e. we cannot “part-fund” if we receive less than the target amount. Our “stretch” target is £900,000, i.e. this is the largest amount of new investment we are currently seeking to raise and plan to issue shares for.
How long will your crowdfunding campaign run for?
We launched in Private Mode on 21st April 2021 exclusively for our existing investors and our subscriber community. On 6th May we opened up the opportunity for a short period of time to the wider Crowdcube community after giving all existing investors the opportunity to examine our plans, and to reinvest.
We plan to run the campaign for a total of 28 days, 14 days in private mode, and then for 14 days in public mode. The closing date is therefore planned to be Thursday 20th May.
What happens if you reach your initial target sooner than this?
If we hit our initial target of £350,000 we will remain open, and ‘overfund’, with the maximum investment round set at the stretch target. We will close before the target end date if we hit our maximum stretch target before then.
If we ‘overfund’ it simply means that we would make a larger % of the company available for sale, and it will not affect the share price.
What will you do with the money?
Please see page 26 of the investor Pitch Deck Presentation. In summary, we will use it to complete the relocation of the brewery to our new Mare Street site, build our new internal and external on-site Taprooms, continue to invest in brewing, production and distribution equipment, and help strengthen our cashflow positon as we build back from the challenges of Lockdown and Covid-19.
Depending upon the level of over-funding we achieve, any additional funds would help reduce our reliance on asset finance, for example, enabling us to buy rather than lease some production equipment including tanks, chillers, kegs and casks.
If we exceed our expectations substantially then we would bring forward plans to build upon the success of The Pembury Tavern and what we expect to be the success of the new Taproom, and expand a network of Five Points Taprooms.
2. Investment & Shares
What type of shares will I receive?
You will receive A Ordinary shares. These are the same shares that the founders and Directors own. Each share carries one vote per share, pre-emption rights in the event of a fresh share issue, and equal rights to a dividend. For all investments up to £20,000, the Crowdcube Nominee scheme will hold the shares on your behalf. Investments of £20,000 and above will be held directly.
When will the payment for my investment be taken?
Initially, your investment in our campaign will be recorded as a pledge, and no funds will be taken. Following the successful completion of the campaign, Crowdcube will contact you to confirm the date that payment for your investment will be taken, allowing you a final opportunity to review your investment.
When will I receive my shares?
We will issue shares following the successful completion of the campaign and after your investment has been processed. The completion of the round and the paperwork takes a little time to complete, but typically you can expect to receive your Share Certificate around 3-4 weeks after the campaign has ended.
Are there tax advantages? Are you EIS eligible?
Yes we are eligible for EIS on this funding round. We have received confirmation from HMRC that our raise is eligible for EIS and have uploaded the Advance Assurance letter from HMRC to the documents section of our Crowdcube Pitch Page.
What Is EIS?
EIS stands for Enterprise Investment Scheme. The tax advantages through EIS include that 30% of your investment can be claimed back as a refund against your income tax, and that no Capital Gains Tax is payable on the future sale of your shares. There are a number of conditions that have to be met, these include that the shares are held for a minimum of three years.
This is a useful Crowdcube summary about EIS – https://www.crowdcube.com/explore/investing/tax-relief/eis.
As always, all investors should rely on their own independent advice regarding their eligibility to apply for tax reliefs. The reason why generous tax relief benefits are available for investors under EIS is because it reflects the fact it is for investments in potentially high risk, high growth companies where there is a substantial risk to capital.
When the funding round is completed and shares issued, we will then make a further application to HMRC with details of all the investors who have declared themselves to Crowdcube as EIS eligible. HMRC then issue EIS certificates which will be sent to every investor. The investor then uses the EIS certificate to claim the cash refund against their tax return.
Can the shares I buy in The Five Points Group Ltd be traded / can I sell my shares at a later date?
We are a private limited company, and in common with all such companies, at present there is no formal public forum for buying and selling shares in the company. However Crowdcube has now launched a secondary share exchange which has the potential to allow shares to be traded and bought and sold on the Cubex exchange. Investors should always rely on their own enquiries and there is more information on the Crowdcube secondary share exchange here – https://www.crowdcube.com/explore/cubex.
Shares may also be bought and sold by private arrangement, provided the sale or transfer is conducted in accordance with the company’s Articles of Association, conditions include that the transfer must consist of a transfer of all of their shares to a single third party, and that the Company must be notified of the transfer or sale.
Are you likely to have a future share buyback scheme?
This is a possibility, and it is a future circumstance in which you could sell your shares.
Do my shares entitle me to vote?
All ‘A’ shareholders will be entitled to vote on all matters that require a vote of shareholders. This might be either online or in person.
Can I buy shares on behalf of someone else as a gift?
Under Crowdcube rules, it is not possible to purchase shares on behalf of someone else as a gift, please see this link to the Crowdcube help centre on the topic.
However it is possible for you to transfer the shares to another person, such as a family member, after the round has ended and once the shares have been issued. This must be done in accordance with the company’s Articles of Association. If you have any specific questions on this issue, please do not hesitate to email us on [email protected].
What rewards are available to me as an investor?
There are a range of rewards available to all investors, starting from investments of £10 and up. The rewards vary according to level of investment, and include bar tabs, lifetime shareholder discounts in our pub The Pembury Tavern, the new Taproom, sister venues and online, a free pint on your birthday, early bird access to new beer releases and special events,brewery tours, shareholder parties, and more. Please see our Crowdcube campaign pitch page for full details.
How does the bar tab reward work – why, when, and can I exchange it?
We are offering the opportunity to receive up to 30% of your investment value back as a bar tab at the new taproom (on investments over £100, with bar tab capped at £1,000 due to EIS rules). This is a thank you and to reflect the fact that one of the key aims of our investment round is to build the new on-site Taproom.
This will also bring benefits to the business for all investors, because it helps incentivise our investors to support the new Taproom venue, to spread the word, and increase the profile of the venue because we hope all investors will bring non-investor friends and family, who will then both spend money and, we hope, return themselves in the future. Furthermore, we hope it means that the Taproom will be busy from launch and ensure that we land with a bang!
We believe that what is good for the new taproom will be good for the long term success and growth of the business, and of our shareholders’ investments. In the long term, this will help to increase the value of the business for all investors, as well as providing a welcome perk and thank you for investors.
The bar tab will not be time-limited. It will be issued in the form of an investor card pre-loaded with credit. The bar tab perk is open to all investments of £100 and over, and capped at £1,000 due to EIS rules.
The bar tab can also be redeemed at our pub, The Pembury Tavern. For investors living in or visiting Yorkshire, the tab can be redeemed at our sister venue Whitelock’s Ale House in Leeds.
Can I use the bar tab offer online instead?
Because of the lower margins and higher fulfilment costs we operate with online, the 30% bar tab perk cannot be used on our online webstore. However for any investors unable to visit the Taproom for the foreseeable future, we can confirm we are happy to offer the option to swap it for a 10% back as a credit to spend online instead. Again, on investments over £100, and capped at £1,000. All investors will be able to make this choice at the end of the round, and before the Investor Cards are issued.
Where can my shareholder discount be redeemed?
Your shareholder discount is a “lifetime” discount and can be redeemed for as long as you remain a shareholder. Your discount can be redeemed online, at The Pembury Tavern, at the new Taproom, at all future bars that we open and also at our sister venue in Leeds, Whitelock’s Ale House.
When will I receive my shareholder card to claim my discounts and bar tab?
We will aim to have your shareholder card, bar tab and any other rewards available for collection or dispatch when share certificates are issued, around 4 weeks after the end of the campaign.
When and how will I receive my bar tab?
The bar tab value will be loaded as credit on your new shareholder card, which will be available to collect from the Taproom once share certificates have been issued.
What if my birthday is before I receive my card?
You can happily have a birthday pint on us! Just drop us an email and we’ll look after you.
What if I will be visiting the taproom before I receive my card?
You cannot start using your free bar tab until share certificates have been issued, however we can let you have your shareholder discount code to use for visiting the Taproom or Pembury Tavern, please just email us on [email protected] if you have invested, and plan to visit before the shareholder cards are issued.
4. The New Taproom & The Pembury Tavern
When are you opening the new Taproom on Mare Street?
We are opening our new Taproom in three phases this spring, summer and autumn. We are currently open outdoors only as a ‘Pop-up”, and our outdoor space will continue to evolve this summer as we add additional seating, lighting, signage and permanent pizza and bar units.
We currently have dates available for booking until late June, and we will always give our investors “1st dibs” on all new dates, and email our investors as soon as new dates go live. You can access the bookings diary here;
As Covid-19 restrictions are eased, our next phase will see us complete our new indoor mezzanine and viewing gallery with views over the brewery. And in Phase 3, we will build and launch the new indoor taproom and bar at the front of the building, in time for opening this autumn.
What are your plans for The Pembury Tavern?
The Pembury Tavern was our first Five Points pub, acquired, refurbished and relaunched in 2018. We are incredibly proud of what we have achieved with the pub, and how people have taken it to their hearts. It is an absolutely key and central part of our business that we expect to own and remain a part of the Five Points family for many years to come.
We would love to expand the pubs and bars division of our business as we grow, and look to open additional pubs, to showcase and sell Five Points beers, to contribute to our growth, and because we love pubs, and see them as core part of what the overall Five Points Group does as we grow.
You mention the plan to open additional pubs and bars in your pitch deck, how advanced are the plans?
We would love to expand our estate of pubs and bars, both in London, and potentially elsewhere in the UK. This would increase our routes to market, and improve our profit margins as we sell direct to the public, taking the full retail margin.
So if we exceed our expectations substantially then we would bring forward plans to build upon the success that we have had at The Pembury Tavern and what we expect to be the success of the new Mare Street Taproom, and seek to expand a network of Five Points Taprooms. In terms of locations we would initially focus on elsewhere in London which is our largest market and in particular our East London heartland. Examples of places which we would consider, but which is by no means an exhaustive list, include elsewhere in the borough of Hackney, Walthamstow, Highams Park, Leyton, Stratford, Bermondsey, and Finsbury Park. We would also seriously consider a site in Leeds, which is our second largest UK market after London due to both our long standing distribution arrangement with Kirkstall Brewery in Yorkshire and high sales in a number of flagship venues with links to our founder investors.
We would be really interested to hear any suggestions or ideas that you or other investors might have and we would also encourage our investors to share any leads for specific properties that they might come across or know of. So please do let us know!
What’s the link between Five Points and Whitelock’s Ale House?
Whitelock’s and The Turk’s Head in Leeds are owned and operated by the co-founder and Managing Director of Five Points, Ed Mason. We describe them as ‘sister’ venues, and part of the wider Five Points family. Depending upon your level of investment, you will be entitled to discounts at these venues as well as our new Five Points taproom and online. The Five Points Brewing Company does not own these venues, and you are not investing in Whitelocks and the Turk’s Head.
5. Valuation and Return On Investment
How will I make a return on my investment?
This is a long term investment in the relatively early stages of a fast growing company. We anticipate that the value of your investment will increase over time, giving you capital growth. The main way that an investor can make money from your investment is by selling your share for more than you paid for it.
We are a private limited company, and our shares are therefore not publicly traded at present. In the event of a future sale of the company you would be able to sell your shares at that stage to the acquiring company. Alternatively, if the business grows to a point where we float on a stock market (a long term aspiration), or the company management offer to buy back equity from investors, these are also the stages at which you are likely to be able to sell your shares.
You will be entitled to a share in the payment of dividends (please see the next question).
Please also note that, depending upon your personal circumstances, there are likely to be tax advantages to this investment (see the questions on EIS above). There are also a range of rewards available to all investors.
What are your plans regarding payment of dividends in future?
This is a long term investment in a rapidly growing company. We have ambitious plans for the future that will require ongoing investment, including in new capacity and possible in new premises in the future. Investments also qualify for the generous EIS tax relief scheme. It is therefore likely that in the first few years, i.e. the 3 years up until the end of the forecasts in our investor pitch deck presentation, that no dividends will be paid, and that our profits will be reinvested in order to continue to support the growth of the company.
It is our longer term ambition to pay a dividend to all shareholders, so that shareholders make a return on investment through dividends as well as through capital growth in the value of their shares, along with the ancillary benefits of being a shareholder (shareholder discounts and bar tab etc) and the EIS tax benefits..
I have further questions on the financial forecasts, who do I ask?
Please do not hesitate to email [email protected] with any questions that you might have and we will respond within 48 hours.
How did you arrive at your valuation?
In our successful 2018 investment round we based our valuation on a thorough benchmarking against M&A and fundraising in the sector at the time. In summary, our 2018 valuation was based on the following, which we felt was cautious and sensible compared to the available benchmarks;
– a multiple of 4x existing turnover, and 3x forecast turnover
– at that time our existing turnover was £3.1m, and our forecast turnover was £4.2m, leading to a valuation £12.5m
We received advice pre-pandemic from 3rd party professional advisers who are experts in the field of M&A, and who have successfully conducted the sale of a number of craft beer companies. They excluded what they considered to be the over-valued “outliers”, and on that basis their survey of the available data concluded that the average valuation metric for a “sensible” valuation is 5.4x turnover. This was based on available data pre-pandemic.
– based on 5.4 x our 2019 total sales (pre-Covid) of £4.8million, this would result in a valuation of £25.9 million
2020 saw us impacted by the Covid-19 Pandemic, with a temporary reduction in sales as a result. Based on our temporary Covid-impacted 2020 sales of £3m, the 3rd party benchmark would have been a valuation £16.2million.
We are now bouncing back from Covid-19 – although of course there remain uncertainties. Our forecast sales for 2021 as we come out of Lockdown are £3.6m for the year as a whole, which on the 3rd party valuation metrics, would be a valuation of £19.44m;
Given all the variables described above, we felt that the 3rd party metrics were bullish, we wanted to acknowledge the impact and uncertainties of Covid, and on balance we decided that it would be fair and sensible to maintain the valuation at the same level as the 2018 round.
In particular, this also has the benefit of recognising the loyalty of our existing shareholder base, and offers existing investors the chance to subscribe for further shares at the same valuation as the previous fundraising round.
This valuation clearly also provides room for upside for all investors in the event of a future exit.
If you have any further questions about the valuation please email us on [email protected]. We can also supply copies of the valuation metrics, in complete confidence.
What is your exit strategy?
We are committed to the long term success and growth of The Five Points as a successful independent company. We believe that our efforts are best aimed at, and shareholder interests best served by, focussing all of our efforts on hitting our growth targets and achieving our business plan.
This campaign is not about trying to find an external buyer for a high profile brand within the next 18 months. Our aspirations are to take investors along with us for the long term success of our company.
At the same time, we are realistic about the possibility that we might at some future point be approached with takeover enquiries. There have been plenty of examples of the sale and acquisition of strong craft brewing brands to the larger drinks industry companies.
We would always take any approach seriously, and judge it on its own merits, before taking any offer to the shareholders.
6. Existing Investors
What’s the difference between existing A shares and B shares?
Under the existing share structure and our 2018 Crowdcube raise, there are ‘A’ shares and ‘B’ shares in the company. Both share classes are equal in all ways regarding the right to share in dividends and capital distributions. Investors who invested at £5,000 and above were issued ‘A’ ordinary shares with voting rights and pre-emption rights (a pre-emption right is a first option or first refusal on buying any future shares that are issued in the company). ‘B’ ordinary shares for investors below £5,000 invested were the same shares, and retained all rights to payment of dividends, but do not have voting and pre-emption rights.
All new shares issued under this 2021 investment round will be issued as A shares. They will rank equal to the existing ‘A’ shares held by existing investors. This is because;
- In the past three years, Crowdcube have moved to a model whereby shares are legally owned by investors, but for administrative ease are administered through the Crowdcube Nominee structure. As a result, all new shares (at investments under £20,000) will be administered through this structure and therefore all have to rank equally with regard to voting and pre-emption rights
- Any repeat investors can combine their 2018 and 2021 shareholdings as one, in the nominee structure, and have full voting and pre-emption rights that way, on the whole tranche of both 2018 and 2021 shares
Any existing B shares held by investors that sit outside the Nominee will not attract the enhanced voting or pre-emption rights. There is no obligation for a certain minimum new level of investment in the latest funding round, which is a decision for the investor based on their own personal circumstances, amount they are comfortable investing, and desired access to perks and rewards etc.
Shares for all investments made during this current raise of under £20,000 will be held in the nominee scheme on behalf of the investor, and will have full legal rights to votes, dividends, and pre-emption for the investor.
- the exception is for any repeat investor who invests under £20,000 this time, but who take their total combined investment over the past and current rounds to £20,000 or higher, in which case the shares will automatically remain directly held by the investor on the share register
- existing shares can continue to be held directly outside the nominee, OR can be moved in to the nominee, at the discretion of the investor,
Will my current shareholding be diluted?
As the company is issuing additional shares, there will be a small element of dilution of percentage shareholding on the part of existing shareholders. However, this will be mitigated by the fact that the company is raising money to invest in the growth of the business which we expect to increase the value of the company for the benefit of all shareholders. Any existing shareholders who wish to avoid dilution are encouraged to participate in the current fund raise by subscribing for additional shares. Existing investors will be able to purchase additional shares at the same valuation as the original 2018 round.
How do you plan to meet your targets for growth?
Our business has continued to grow rapidly since 2013, through a combination of great beer, a reputation for excellent customer service, adding to our product range, a strong marketing strategy and continuing to invest in our team and our equipment. Previous investment rounds allowed us to invest in additional capacity, and enabled the acquisition of our first pub, developing export, rolling out fully the UK, developing new customer categories, and investing in our new product development.
We have demonstrated our ability to continue to grow the business, based on our successful track record of growth to date. We believe that the awards that our beers regularly win are testament to the regard with which our beers are held in the industry. Along with the number and nature of high profile, high volume venues in which our beer is stocked, and the success of The Pembury Tavern, this demonstrates the ability of our brand and our team to continue to push the business forward.
8. Loans & Finance
How has the company funded growth to date?
The company was founded in 2013 through equity investment by the founder shareholders, and subsequent growth and expansion has been financed through a mixture of fresh equity raises using SEIS and EIS, including the 2018 Crowdcube raise, and through loans from shareholders. In addition, the company has asset finance lease agreements in place which have been used to finance the acquisition of key items of brewing and production equipment. The company has an ‘invoice finance’ facility in place with Lloyds Bank which we use from time to time in order to assist with cashflow. We do not hold any bank loans or overdrafts, with the exception of a Covid-19 Bounceback loan which was extended to industry by the government during the Covid-19 Pandemic.
The existing shareholder loans have been issued on an interest-free basis, and there are shareholder loan agreements in place which do not envisage repayment of these loans until beyond the term laid out in our business plan.
It is a requirement of the EIS scheme that all funds raised are used for investment in and growth of the business. We can therefore confirm that none of the investment funds raised will be used to repay shareholder loans.
The founder shareholders have always remained extremely supportive of our plans to grow the business, and all the founder shareholders are re-investing into the business during this investment round, on the same terms and valuation as all new investors. This is a total of £100,000 of fresh investment.
N.B. Under the Crowdcube investment process, full details of all loans and finance within the business will be formally reviewed and confirmed by Crowdcube as part of the due diligence process and the details will then be disclosed in full to all investors as part of a formal Legal Review. This happens during the ‘cooling off’ period, prior to investments being drawn down.
What has been the impact of Covid-19 on Five Points Brewing?
The impact of the Covid-19 health pandemic led to the closure of pubs, bars, restaurants and all hospitality from March-June 2020, and then again from November 2020 until mid-April 2021. Pubs, bars and restaurants were allowed to re-open outdoor hospitality areas on 12th April. At the time of writing, pubs are not currently permitted to trade indoors, however the Government roadmap indicates that this will be permitted from 17th May in England.
During those months where hospitality was permitted to reopen, i.e. July-October 2020 (and in a few limited areas in early December) those venues which did reopen were operating with reduced capacity, curfews & tier restrictions.
Inevitably, this had a substantial impact on Five Points. The Pembury Tavern was forced to close, and the brewery saw much reduced demand for beer. Typically ~80% of our brewery beer sales are draught sales to the on-trade. The removal of our core market was a difficult challenge. We worked hard to adapt with a focus on both cutting costs, and on diversifying our operating model, including developing and pushing our webstore e-commerce operation hard. As a result, our webstore saw sales of £376,000 in the 12 months from March 2020.
We were therefore pleased to hold revenue for the company at £3million in 2020, being 61% of 2019 revenue, despite our overall brewery beer volumes falling by 55%.
We took advantage of the full range of support that was offered by the government, including placing staff on the furlough scheme where necessary, taking advantage of the business rates holiday for The Pembury Tavern, making use of a Bounceback Loan, of tax deferrals offered by the Government and of a number of hospitality grants available for those businesses forced to close. We have applied for discretionary grants for the brewery, and await responses in those cases. We have also been able to negotiate some rent-free periods with our landlords at both the Pembury Tavern and at our Mare Street location.
The impact of the pandemic has forced us to thoroughly review everything that we do. In particular, during Lockdown we reviewed our cost base, and we then did everything that we could to reduce those costs. We also decided to refocus what we do, with a greater degree of emphasis on direct retail sales. We are therefore now exiting Lockdown with a much lower, more efficient cost base, which will allow Five Points to grow more profitably than would otherwise have been the case.
We believe that this is now an opportunity to invest in a stronger and more efficient Five Points Group.
10. Further Questions?
Please do not hesitate to contact us on [email protected] if you have any further questions at all about our plans for the future or about any aspect of this raise.
Thank you for reading!
This edition issued 10th May 2021.
Copyright The Five Points Brewing Company Ltd, The Five Points Group Ltd 2018 & 2021
N.B. Please always Invest Aware – Investments of this nature carry risks to your capital as well as potential rewards. Please see our Pitch Deck Investor Presentation, and the Crowdcube website for full details of the Risk Warning.