We thought the questions asked in the discussions area in our Crowdfunding Raise were superb so we wanted to replicate them here. Please let’s keep the discussions going and put forward your ideas to keep growing Crunch (and therefore your investment!)
Investor query (originally posted on Seedrs):
Hi Darren and team, Congratulations on getting the company where it currently is. Also, I know the product first hand and it is awesome for limited companies and small businesses. Well done. Had a couple of questions for you, looking at your previous filings (e-crunch ltd):
It seems the company has generated £575k and £562k of net income in FY (Mar) 2020 and 2019 respectively. For a £15m valuation, that’s roughly 26x P/E. Is this fair? How does FY22 look like (which is probably more relevant, but we don’t have the data)? It seems that revenues have been flat (£10m in FY19 and FY20). In the investor deck, it seems FY21 and FY22 (Mar-22) are in the same zip code. Is this correct? This is a four year period of flattish revenues, could you please explain if/why the growth was subdued? With regards to covid, this seems to have boosted businesses like yours (Xero for example saw increases in sales, in all geographies and including in the UK). Thank you for your guidance and explanations
Our response:
Thank you for your questions.
Your analysis of our P/E ratio is broadly correct. The industry has had a number of issues to deal with over the past few years, Brexit, IR35, and not forgetting the Pandemic. 2021 was a hard trading year where the businesses needed to move quickly to address a changing economy and Crunch was no different. However, we used the time well and accelerated our pivot to an accountancy and tax platform, and proved the scalability of the Crunch Accountancy Network out with our 3rd model that we tested. This has worked fantastically and by January 80% of the accounts production will be in our network. Due to the power of our platform, customers are unaware of this and only deal with Crunch Accountants and our Client Managers.
As you can see from the pitch deck (slide 22) we started the new platform build in 2016 and ensured the business delivered a ‘business sustaining’ level of growth until we were to launch our new platform in 2020 with its super scaling capabilities. The old Crunch model delivered great cash generation but could not scale easily past 300 new customers per month.
From 2018 to 2020 we have seen a Year On Year growth of over 9%. FY21 and FY22 take account of the impact on the industry as we recover from the effects of the Pandemic. Although we will post reduced turnover we have adjusted our cost base to ensure we are fit and agile for the next phase of Crunch.
We continually watch what the bigger software players are doing. What we are aware of is that a number of software providers heavily discounted their products to gain additional user numbers, and as Darren Fell, CEO outlined in his Competitors discussion response there are some significant differences between Crunch and the standard SAAS players like Xero.
Stephen Paynter
Head of Finance
