SC0TTISH online tyre fitter Blackcircles.com has appointed former Tesco chief executive Sir Terry Leahy to its board and is working on new financing plans which could lead to a flotation valuing the company at up to £150 million.
Leahy, who is an investor and 25 per cent shareholder in the Peebles-based business, is expected to work alongside chief executive Mike Welch and chairman Graeme Bissett on its next round of funding. The company is looking at a number of options including raising debt, private equity and possibly an initial public offering (IPO).
Welch, who launched the business in 2001, said he had received at least half a dozen approaches in recent weeks from City investors, including investments banks, with a view to taking the company to market.
“I have not thought too much about this so far, but given the approaches we have had it [a flotation] has to be an option,” said Welch, who owns 40 per cent of the business.
“An IPO is realistic. We need to raise a round of capital and there is a willingness by various investment banks for us to go for an IPO sooner.”
But Welch said some of the valuations he sees “are looking a bit nuts” and that the board needs time to assess its options. “It [the market] feels a bit bubbly so we will take a few months to think about the business.”
Valuations on Blackcircles.com, which has deals with 1,200 independent tyre fitters, vary from 1.5 times to five times revenue. On newly-released figures showing turnover up 20 per cent from £23.2m to £27.8m that would indicate a valuation of between £40m and £150m. Earnings before interest, taxation, depreciation and amortisation came in at just under £1m.
The company says repeat business makes up 35 per cent of sales and over the year it has opened the first three Click&Fit tyre bays at Tesco Extra stores, with more to come this year.
Welch said: “The next ten years are going to see an even bigger take-up of online business share in every retail market, and as the UK’s largest online tyre retailer we’re in great position to benefit from this shift.”
Blackcircles.com is well-capitalised with no debt, but Welch and his shareholders say it needs to move to its next level of growth which will require more funds. The number of franchised partners is expected to grow from 400 to 1,000 over the next 18 months. The firm also needs more investment in promotion, and Welch wants to move from next day to same-day delivery.
“We want to become a big medium-sized business and someone like Sir Terry will help enormously on fund-raising and strategic changes,” he said. “I have been fortunate to count Sir Terry as an adviser and shareholder, so securing his position on the board is fantastic news for the business at a time when we’re gearing ourselves up for a big push.”
Bissett, who holds a number of advisory positions in Scottish companies, said: “Sir Terry has been an investor in Blackcircles.com for a few years and has seen the exciting growth achieved by Mike and the team over that period. The online retail model is really developing momentum now, and I am delighted to welcome Sir Terry as a retailer of global standing to the board.”