Investment Completion - IconX Holdings Limited
30 November 2016
- Investment will finance roll-out of in-store machine fleet in major supermarkets and other retail venues amid strong demand
An innovative British manufacturer of semi-automated key cutting machines which sit in high-footfall retail sites, is poised to unlock growth with £4.6million of capital provided by clients of Connection Capital, the specialist private client investment business.
The company, called IconX, is the developer of “My Key Machine”, a unique, self-contained key cutting machine that is able to scan and cut more than 90% of the UK’s domestic key range. The service uses cutting edge technology to replicate keys quickly, efficiently and more accurately than a traditional key cutter, removing the requirement for skilled labour or large retail space. The high-margin machines are small in footprint, requiring minimal floor space, and are conveniently positioned in busy shopping locations such as supermarkets or large home stores.
Clients include Asda, Morrison, Homebase and The Range, with machines provided on a revenue share basis. Given that they have a very high profit generation per square foot, and can be located in areas of low revenue generation such as store entrances, demand from retailers is high – hence the need for an injection of growth capital to expand capacity.
The investment will be used to fund machine capex, accelerate production and boost marketing activities to increase volumes of keys cut per week, with IconX forecasting that the injected growth capital will facilitate a four-fold increase in the number of machines installed, whilst also permitting completion of a variety of new product offerings throughout 2017.
Currently the company has over 370 machines at sites across the UK, each generating c90+% annual return on capital when mature, thanks to low build and maintenance costs and high contribution margins in key sales. However, the roll-out pipeline is extensive, with the potential for 2000+ machines nationwide.
The company was set up in 2010, and is run by a management team including former Photo-Me senior executives, replicating its successful business model with a well-designed product and mutually beneficial customer relationships with retail partners. Its current order book equates to six full years’ production.
Private investors attracted by potential for value creation
Connection Capital’s clients were attracted by the strong opportunity for value creation in a differentiated product with sound economics, driven by a highly experienced management team and with excess demand from its blue chip customer base.
The structure of the deal - a combination of shares and loan notes - also means that investors benefit from downside protection, while having sufficient equity to reap the rewards of an attractive potential upside.
“Our clients spotted the opportunity value in IconX immediately: this is a profitable operation with significant growth potential, whose unique product is well ahead of the competition and whose business model is win-win for the company and its customers alike.” Pascal Wittet, Investment Director
If you are interested in receiving more information about future investment opportunities and are not yet a client of Connection Capital, please contact Steve Wilson.