Salix Accountants Ltd

Accountancy

Funds Requested

£75,000.00

Offered so far

£0.00

Loan term

60 MONTHS

Auction Closed

2014-07-21

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About the Business

Company Name: Salix Accountants Ltd Company Number: 08467002
Business Type: Accountancy Years Trading: 2-3 years
Business Location: GRAYS

About the Risk

Risk rating

C

Default rate

13.30%

Bad debt rate

5.47%

About the Security

Security Offered:

Personal Guarantee - PG from Daniel Mobbs

Est. Equity: 0.00

2nd Charge on Residential Property - Second priority legal charge over personally-owned residential property

Est. Equity: 0.00

Risk Indicators Identified:

Important Files

Who are we?

Salix Accountants Ltd – Background/History of the Business

Salix Accountants Ltd (Salix) established December 2012 first as Daniel Mobbs FCCA trading as Salix Accountants then incorporating in March 2013. Headed by the director, Daniel Mobbs the company offers accountancy and taxation services excluding investment advice and audit services. Current annual gross fee income is c£55,000 excluding c£19,000 billed to WR for consultancy work. Salix’s clients range from simple tax returns to small owner managed businesses plus a medium sized freight forwarding limited company.

Daniel Mobbs owns 51% of the issued share capital with the remaining 49% owned by his wife Nicole Mobbs. Both are company directors. Currently working from home, the business has outgrown its surroundings and requires office space and support staff. Daniel Mobbs (DJM)

  • DJM has known RR for more than 5 years and has subcontracted for WR since April 2013 as a consultant
  • Qualified as a Chartered Certified Accountant in 2002
  • Became a Fellow member (FCCA) in 2007
  • Worked in an 8 partner top 100 accountancy practice (1996-2012)
  • Has worked in the accountancy profession for over 18 years

    DJM’s experience in a top 100 accountancy practice managing over 10 key members of staff plus other support staff in a busy office as a manager and PA to the senior partner and 3 other partners has given him the expertise to run an accountancy practice of his own. Sitting in on the quarterly partners meetings has given DJM a useful insight into the running of the business and the key factors affecting decision making, marketing, motivating and monitoring staff.

    DJM specialises in small to medium sized family owner managed businesses, particularly towards the corporate tax aspect with regard to tax planning and complex HMRC investigations/enquiries and has extensive experience in business acquisitions, mergers and management buyouts of owner managed businesses, much like the proposal of Salix’s acquisition of WR and has considered the tax consequences and legal position in detail.

    The practice where DJM gained his experience and training is based less than 5 miles from WR’s premises and DJM has many connections in and around the surrounding area and with old clients from that practice and past colleagues within the profession.

    DJM has worked on a wide range of business types and sizes including Charities, Limited Liability Partnerships, Limited Companies, Sole Traders, Partnerships, Trusts, Clubs, Right to Manage Companies, Social Enterprises and Community Interest Companies. DJM has established himself as keen networker and has built up an impressive online presence and network of business contacts through regular network groups, Twitter, Facebook, LinkedIn and Google+ and will continue to promote the WR business with the focus is to reach clients that may have been too large for Salix on its own to handle with its minimal support staff.

    DJM already promotes Salix in such a way that existing clients regularly refer and recommend business to Salix from colleagues, family and friends. This has been a major contributing factor to Salix’s rapidly increasing client portfolio

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    Whittington Raymond Ltd – Background/History of the Business

    Whittington Raymond Ltd (WR) incorporated in September 2002 to enable the current director; Roma Raymond (RR) to purchase the trade and assets from the first generation sole trader Chris Whittington.

    WR is based in Radford Way, Billericay, Essex, a wealthy commuter town. The premises are rented on the border of a large industrial trading estate along a main road servicing the town and train station.

    RR (62) currently owns 60% of the issued share capital with the remaining 40% owned by her husband Paul Raymond. Both are directors. RR and WR are qualified fellow members of AAT and ATT.

    The office currently runs with 3 members of staff, plus the directors and Daniel Mobbs as a consultant. In early 2013 the company lost a major client (fees of c£40,000) who employed one of WR’s members of staff (earnings of c£30,000). RR recovered from this by losing a trainee and decreasing the rented office space from 3 rooms to 2. Annual turnover up to the loss of this major client was in the region of £190,000 and is currently in the region of £150,000.

    Services provided by the practice include:

    Bookkeeping Bookkeeping
    PayrollPersonal Taxation
    VAT registration & returnsCorporation tax
    Management accountsCapital gains tax
    Cashflows and budgetsStatutory services

    The practice is not registered to carry out investment advice or audit services.

    WR offers tax investigation insurance whereas Salix does not. WR already makes profit on clients who have taken this up. For each extra client added from the Salix portfolio generates a 100% profit. It is expected that over £2,000p.a. fee income will be generated from adding clients to the tax investigation insurance.

    The WR pricing structure has been identified as out of line with the local market and any increases in price would still be extremely competitive without causing an adverse reaction to the existing clients.

    Turnover for the company for the year ended 31 October 2013 was £191,929 and £86,468 for the six months ending 30 April 2014.

    RR has intended to retire for a number of years and has presented the opportunity to sell her business as a whole to Salix Accountants Ltd.

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  • Loan Offers

    What is the loan for?

    The Directors of Whittington Raymond Ltd (WR) have approached the Directors of Salix Accountants Ltd (Salix) with a view to acquire the trade and assets of WR via the purchase of 100% of the issued share capital in WR. The purchase price is based on a multiple of 1 x gross fee income plus adjusted net assets on completion, estimated to be £150,000 of which 50% is to be paid immediately and the remaining 50% is to be financed personally by Roma Raymond; Director of Whittington Raymond Ltd. To finance the purchase, a 5 year loan of £75,000 is required. The target purchase date is in the first half of 2014.

    Incorporating the two businesses into one has its advantages and cost savings on shared services. Both businesses individually are strong and run profitably and together will be even stronger and even more successful. The acquisition will generate sufficient profits after deduction for loan repayments to create employment for an apprentice. Having the support staff available to Salix, the Directors will have time to invest in the training of existing staff and meet new clients. The acquired goodwill at the current corporation tax rate of 20% generates an overall tax saving of £3,000 p.a.

    Areas of synergy between both companies have been identified and the business will benefit from economies of scale e.g. combined insurances, software costs.

    The proposed acquisition is an excellent opportunity for the Directors of Salix to grow the company into a much larger business, save overhead costs and acquire experienced support staff.

    Why consider investing?

    Salix’s Directors are offering a personal guarantee and security over their personal property which has sufficient equity to cover the loan amount.

    The company can offer a debenture over the trade and assets of the group as additional security to the lender. Said security is to be removed upon settlement of the loan.

    The directors have obtained quotes from its insurance brokers for additional critical illness and life cover to protect the Lenders loan and loan notes to RR. Trust deed documents have been drawn up to identify the beneficiaries of the policies as the company for unconditional settlement of the outstanding loan amount.

    These insurance policies have been agreed with Aviva and are ready to be put in place. A medical questionnaire has been satisfactorily completed and the policy documents have been signed and await a commencement date.

    Salix has secured a continuity agreement with an established accountancy practice to ensure the practice’s affairs are managed correctly in the event of any unforeseen future events. The continuity partner is professional, reliable and capable of undertaking the operation of Salix’s business. A continuity partner is a requirement of the company’s institute; the Association of Chartered Certified Accountants.

    Other requirements laid out by the institute are to maintain professional ethics, keep up to date with continuous professional development, hold adequate professional indemnity insurance and report annually to the ACCA. All these requirements have more than adequately been met.

    Pre-tax profits in WR alone give good interest cover on the loan. RR extracts approximately £60,000p.a. from the business via salary, dividends, pension and company car. It is from these profits that the loan will be serviced.

    We believe the prospect to potential lenders of the proposed purchase to be a financially sound opportunity generating good interest cover at a low risk in a secure professional and profitable sector.

    Notes on the Accounts

    The Accounts visible on the Financials Tab, are for Whittington Raymond, these have been shown due to having a longer trading history. The YE Accounts for SALIX can be found under Attachments on the Overview Page.

    Security

    The loan is to be secured on a 2nd Charge and a Director's Personal Guarantee's

    The Property is a personal property held by the Director, valued at approx. £275k with £89,000 equity.

    The Director's have a combined net worth of approx. £503,540

    DateAmountCapitalInterestReceived
    21/08/2014£1,956.70£752.33£1,204.37
    21/09/2014£1,956.70£764.41£1,192.29
    21/10/2014£1,956.70£776.68£1,180.02
    21/11/2014£1,956.70£789.15£1,167.55
    21/12/2014£1,956.70£801.83£1,154.87
    21/01/2015£1,956.70£814.70£1,142.00
    21/02/2015£1,956.70£827.79£1,128.91
    21/03/2015£1,956.70£841.08£1,115.62
    21/04/2015£1,956.70£854.58£1,102.12
    21/05/2015£1,956.70£868.31£1,088.39
    21/06/2015£1,956.70£882.25£1,074.45
    21/07/2015£1,956.70£896.42£1,060.28
    21/08/2015£1,956.70£910.81£1,045.89
    21/09/2015£1,956.70£925.44£1,031.26
    21/10/2015£1,956.70£940.30£1,016.40
    21/11/2015£1,956.70£955.40£1,001.30
    21/12/2015£1,956.70£970.74£985.96
    21/01/2016£1,956.70£986.33£970.37
    21/02/2016£1,956.70£1,002.17£954.53
    21/03/2016£1,956.70£1,018.26£938.44
    21/04/2016£1,956.70£1,034.61£922.09
    21/05/2016£1,956.70£1,051.23£905.47
    21/06/2016£1,956.70£1,068.11£888.59
    21/07/2016£1,956.70£1,085.26£871.44
    21/08/2016£1,956.70£1,102.69£854.01
    21/09/2016£1,956.70£1,120.40£836.30
    21/10/2016£51,776.89£50,958.23£818.66
    21/11/2016£0.00£0.00£0.00
    21/12/2016£0.00£0.00£0.00
    21/01/2017£0.00£0.00£0.00
    21/02/2017£0.00£0.00£0.00
    21/03/2017£0.00£0.00£0.00
    21/04/2017£0.00£0.00£0.00
    21/05/2017£0.00£0.00£0.00
    21/06/2017£0.00£0.00£0.00
    21/07/2017£0.00£0.00£0.00
    21/08/2017£0.00£0.00£0.00
    21/09/2017£0.00£0.00£0.00
    21/10/2017£0.00£0.00£0.00
    21/11/2017£0.00£0.00£0.00
    21/12/2017£0.00£0.00£0.00
    21/01/2018£0.00£0.00£0.00
    21/02/2018£0.00£0.00£0.00
    21/03/2018£0.00£0.00£0.00
    21/04/2018£0.00£0.00£0.00
    21/05/2018£0.00£0.00£0.00
    21/06/2018£0.00£0.00£0.00
    21/07/2018£0.00£0.00£0.00
    21/08/2018£0.00£0.00£0.00
    21/09/2018£0.00£0.00£0.00
    21/10/2018£0.00£0.00£0.00
    21/11/2018£0.00£0.00£0.00
    21/12/2018£0.00£0.00£0.00
    21/01/2019£0.00£0.00£0.00
    21/02/2019£0.00£0.00£0.00
    21/03/2019£0.00£0.00£0.00
    21/04/2019£0.00£0.00£0.00
    21/05/2019£0.00£0.00£0.00
    21/06/2019£0.00£0.00£0.00
    21/07/2019£0.00£0.00£0.00
    Total:£74,999.51£27,651.58