Investment Matters

Refocused and Repositioned

After a lot of work behind the scenes, we are excited to provide an update on two companies that have been a work in progress over the past year.

We have collaborated closely with the board of TZ Limited as it refocused and repositioned itself. This has included a restructure of the board, management refresh and rationalisation of the company’s operational cost base over the past three years.

These changes have been reflected by strong investor support, with the company recently conducting a large, successful capital raise. We are pleased that the proceeds will be used to pay down a significant proportion of debt, allowing us to return capital to clients.

Furthermore, after several years of foundational work, Innovate Access (formerly Mr Rental) has launched two new offerings: Gimmie and Solv’d, which are moving into their next phase of growth.

We are excited by the prospects for each of these offerings and will be providing additional capital to support this growth.

TZ Limited: Repositioned for growth.

Over the past year, we have worked closely with TZ during a period of change and repositioning, as the company approached the maturity of its existing debt positions.

The company’s evolution has included a complete refresh of the company’s board, a refocused strategy, new management and importantly and a diligent focus on costs.

A key appointment has been Scott Beaton – now CEO and Managing Director of the company. Scott was formerly CEO of ASX listed Sequoia group, a financial services group he successfully founded and grew to a $40 million business.

He has brought with him a wealth of experience and renewed focus within the business. This includes a greater focus on building the company’s longer-dated/continuing revenue base through enhancing its software offering.

Most importantly, the new management team and board have worked diligently to take costs out of the business. TZ’s underlying technology has always been strong, as evidenced by its “A-list” of customers. However, the company has been hampered by a bloated cost structure and headcount.

Over the past year, the board and management have rationalised expenses, significantly reducing the company’s cost base.

This now puts TZ in a position where it is operating at break-even and poised to grow from a much better base.

The extensive work that has been done has also been met with some good fortune. Changes in work and spending habits post-COVID bode well for TZ and have provided the company with positive momentum as it emerged from COVID-19.

The increase we have seen in e-commerce penetration and a shift towards working from home has accelerated the demand for parcel and day lockers and grown the pipeline of opportunities for TZ.

TZ’s customer list is a who’s who of multinationals

TZs companies

Source: TZ Limited

Rounding out the repositioning

The changes the business has made and opportunities ahead of it have not gone unnoticed.

The company recently conducted a rights issue, looking to raise additional capital. The company has firm commitments to raise approximately $5-7m, with the raise well supported by both existing and new shareholders.

As highlighted in a recent announcement, proceeds will be used to pay down debt.

This will save the company close to $1 million in interest per annum and round out the repositioning of the business over the past year.

The repayment of debt will also see a significant amount of capital returned to our clients.

This will re-size clients’ overall exposure to TZ in their portfolios: completing a part of the rebalancing process we began last year.

Importantly, this also allows us to re-structure our position to take advantage of TZ’s improved prospects. Features of a revised debt agreement in 2020 allow parts of the outstanding debt to be converted to equity (shares) (we note conversion would require approval of shareholders at an EGM).

We see that there is merit in this, given the progress the business has made. Rebalancing client exposure towards holding greater ‘equity’ will allow greater participation in the upside the business has moving forward.

Innovate Access - an update

After several years of foundational work, the investment Innovate Access is also poised to enter a growth phase.

This foundational work has seen the expertise and infrastructure from the existing Mr Rental business leveraged to create two offerings: one for consumers and one for the commercial market. These offers have been grown from concepts to fully-fledged commercial offerings that are now positioned for growth.

These offerings are:

Gimmie – a better way to pay (www.gimmie.com.au)

Gimmie has brought together two finance solutions (consumer leasing and buy now pay later) to bring consumers a transparent, flexible offer.

Its online marketplace allows consumers to shop for household items across a wide range of categories: from furniture to air conditioners and pay their way.

Consumers have the option to either Buy Now and pay the “Cash Price” within 90 days – with no interest or penalties or pay the “Plan Price” with fixed payments over 1 or 2 years.

While ‘buy now, pay later’ and ‘pay by instalments’ are by no means new concepts, there are few products that provide the flexibility of these solutions combined.

More importantly, the Gimmie difference is the product’s radical transparency: there are no hidden fees or charges. All fees and charges are outlined to consumers upfront in a single number – the “Plan Price”.

In contrast to rental models of old, Gimmie is targeting the informed, aspirational consumer who wants a no-fuss, transparent and honest experience.

Furthermore, unlike several buy now, pay later providers, Gimmie is a regulated provider of credit and holds an Australian Credit License. Credit is only extended after taking into consideration a customer’s financial circumstances.

Over the past few months, we have seen the business begin to gain real traction – with sales growing strongly despite limited marketing to date.

This has required additional funding to support sales and operations, including a ramp-up in marketing spend.

Gimmie

Source: Gimmie

Solv’d – furniture hire, re-defined (www.solvd.com.au)

Innovate Access has also developed a product for commercial customers - the home staging market.

Solv’d is a business that provides furniture to decorators in Queensland.

This leverages the company’s extensive experience in managing inventory and utilizing third-party logistics to provide a more seamless experience.

Once again, Innovate Access’ focus has been to deliver this service transparently and flexibly.

Solv’d offers flat rates and transparent pricing. Additionally, the business provides a unique and extensive range for decorators.

The business has grown rapidly, with Solv’d already accounting for a significant proportion of the home staging market across the Gold Coast.

With this has come a need for additional working capital, primarily to fund more inventory as demand for its services grows.

Solvd

Source: Solv’d

Supporting growth

With both offerings beginning to gain traction, we have looked to put in working capital facilities to support their growth.

Two new securities have been introduced to the Income Portfolio for clients this week.

They are the Gimmie Secured Working Capital Facility (MRGGSECWCF) and Solvd Working Capital Facility (SOLVDSECWCF) at reasonable weights.

The instruments are part of the “barbell” approach employed in the income portfolio. This is one where lower-yielding securities are complemented by higher-yielding securities to provide a better-blended overall return.

MRGGSECWCF and SOLVDSECWCF are both secured and liquid instruments, extended to businesses we are deeply familiar with (as owners and members of the board). They will attract interest rates of 12% and 10% respectively – bolstering the Income Portfolio’s overall yield.