Strictly private and confidential and not to be shared.

Document prepared for Le Goff, Yves on 29 Jun 2022

Investment Proposal
Spotless Water
£3.85m senior debt growth capital with equity into a high
growth B2B provider of ultra-pure water via an established
UK site network.

Private Equity Target net return Invest in multiples of Closing date

Private Debt
Alternative Funds 3.1x £25k End of
May 2022
Commercial Property

Private & Confidential
The Company
Want to participate?
Call Steve Wilson on
07990 556544
or email steve.wilson@
connectioncapital.co.uk
www.connectioncapital.co.uk
Connection Capital LLP is authorised
and regulated by the Financial Conduct
Authority No. 705640
• Senior secured debt for site roll out with equity warrant upside into
Spotless Water Ltd, a technology enabled B2B provider of ultra-pure ‘water
as-a-service’ into various industries, via a growing network of UK sites
(currently 67 with c7,000 active customers and a further 14,000 registered).
• Company experiencing strong growth in receptive market, with revenue
growth of 62% to £2.3m in 2021 and a further 56% forecast to £3.6m in 2022.
• Mature run-rate EBITDA for 67 sites, as at the end of 2021, of c£1.1m.
Targeting over 400 sites and £6.2m trailing 12 month EBITDA for 2025.
• Proven attractive business model with established KPI metrics, site capex
payback within 12 months, recurring revenues from repeat customers and
positive working capital.
• First mover advantage in the UK with above plan opportunities in Europe
and the USA.
• Water purification and consumer interface IP technology is fully
developed and registered.
• Strong management team with experienced chairman and professional
VC investors.
• £3.85m being raised from Connection Capital clients:
• Senior secured five-year loan note carrying 10% p.a. simple rolled
interest.
• 5% equity warrant to participate in potential growth in business value.
• Multiple exit options of financial purchaser, trade sale listing and/or
refinancing of debt.
• Day one value appraised at c1.2x from the embedded value of the warrant.
• Target net returns of 2.4x on a lower growth Connection Capital
Investment Case, rising to 3.1x on a Management Case.
 Strictly private and confidential and not to be shared.
Document prepared for Le Goff, Yves on 29 Jun 2022

Contents
i. Executive Summary  4
ii. Investment Classification  10

FURTHER MATERIALS
1. The Company 11
2. Management 19
3. Financials 21
4. Exit and Returns 26

APPENDICES
A. Connection Capital Terms 30
B. Due Diligence 30

Investment Proposal: Spotless Water 2

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Document prepared for Le Goff, Yves on 29 Jun 2022
Important note
This document is issued by Connection Capital LLP
(incorporated in England and Wales, Registered number
OC349617), which is authorised and regulated by the
Financial Conduct Authority (‘FCA’).
Connection Capital LLP has approved the contents of this
document for the purposes of section 21 of the Financial
Services and Markets Act 2000. This information is not
intended for retail clients and is provided to professional
investor clients on a confidential basis. It is provided for
information purposes only and should not be construed
as advice or recommendation. You are not authorised
to disclose it, or its contents, to any third party without
Connection Capital LLP’s prior written approval unless
required to do so by law. This document may not be
copied or reproduced without Connection Capital LLP’s
written permission. It is an invitation for self-select
investment only by investor clients of Connection Capital
LLP who have been classified as ‘professional clients’. As
a professional client, you are considered to have sufficient
experience, expertise and knowledge to make your own
investment decisions and to understand the risks involved,
and you should be aware that you will not be afforded the
same level of protection as a retail client would receive.
This document has been prepared with the assistance of
Spotless Water Ltd. Where information has been confirmed
by or sourced from third parties this has been identified
by way of note. No representation or warranty is made by
Connection Capital LLP (or any of its respective members,
officers, employees or agents) as to the information and
opinions contained in this document, which are given for your
assistance but are not to be relied upon as authoritative, or
as the basis of any contract or commitment.
In general, tranches in investment opportunities offered
by Connection Capital LLP are made available on a
first come, first served basis, but we reserve the right
to allocate tranches at our absolute discretion. Your
attention is drawn to the following: (i) the price, value or
income of or from securities is not guaranteed and may
fall against your interests and you may get back less
than you invested; (ii) no personal recommendation is
being made to you by Connection Capital LLP – you are
investing on an execution only (i.e. non-advised) basis;
(iii) the securities referred to may not be suitable for your
circumstances and if you have any doubts, you should
seek FCA-regulated advice from your investment adviser;
Investment Proposal: Spotless Water
(iv) investments in private companies are not readily
realisable or transferable and you may not be able to
realise your investment at short notice or until the exit
point; (v) this is an unregulated investment. Connection
Capital LLP will try to accommodate transfer requests
wherever possible, but we reserve the right to charge an
administration fee at our absolute discretion.
In certain limited circumstances, Connection Capital LLP
or the vehicle into which your investment is made (‘the
Investment Vehicle’) may apply a different or lower fee
structure or pay a fee (whether in cash or otherwise)
(‘the Fee’) to an investor client. The Fee payable by any
Investment Vehicle will not be material in the context of the
investment and will be included in the calculation of the
potential returns set out in this Investment Proposal or any
subsequent update. You should be aware that Connection
Capital LLP will receive fees from equity placed in this
round, which are contingent upon a successful introduction
of funds.
The responsibility of Connection Capital LLP in relation
to the investment ends when the investment exits. In
particular, Connection Capital LLP is not responsible for
generating any liquidity in securities after exit. Where
an exit from any investment is made via listing on any
regulated exchange, Connection Capital Investments LP
will generally sell any shares it holds in the investment
immediately on exit. It should be noted that the partners
and staff of Connection Capital LLP (or their named
investment vehicles) are entitled to participate in deals
alongside clients, subject to a lower minimum individual
pledge amount and, at Connection Capital LLP’s discretion,
may be exempt from the deduction of carried interest and
fees charged by Connection Capital LLP or any feeder
vehicles established to make the investment. In the event
that an investment is being made as a short-term bridge/
underwrite to allow the deal to proceed, Connection
Capital LLP may, at its discretion, apply different terms and
fees commensurate with the risk being taken.
Connection Capital LLP is not qualified to provide tax
advice and clients should seek independent advice on
their own tax position in the proposed investment vehicle
from a qualified tax specialist. Clients should disclose
all of their tax affairs to Her Majesty’s Revenue and
Customs (‘HMRC’)/their applicable tax authorities.
3
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i. Executive Summary
Business Overview
Spotless Water Ltd (‘Spotless’ or ‘Spotless Water’ or
‘the Company’) is a UK based, technology enabled,
B2B provider of ultra-pure ‘water as-a-service’. The
Company offers the UK’s first self-service, ultra-pure
water distribution network, servicing business customers
including window cleaners, car valeters, aquariums,
dentists, as well as new opportunities in solar farms and a
number of other niche industries.
Pure water is treated tap water, with solids and impurities
removed via various filtration technologies. It forms an
essential input to cleaning industries as end users seek to
sell their services on “green” credentials and meet health
and safety requirements.
Investment Proposal: Spotless Water
For cleaning applications, pure water’s key attribute is that
it does not smear, streak or leave residue, which require a
second chamois, squeegee or rag clean.
This is gaining significant traction as the performance
advantage coincides with health and safety legislation,
which is moving the window cleaning industry from use
of ladders to poles. These poles must use pure water,
as a second ‘wipe’ of the smears/residue is not possible.
The advantages for aquariums, valeters etc are more
performance driven. The pure water product is here
to stay. We believe that Spotless will be a key delivery
mechanism in the UK, with opportunities to expand in the
US and Europe where there are presently no comparable,
autonomous, site-based business models.
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Spotless site network and customer base

Spotless’s product is delivered via its proprietary
network, which is currently 67 autonomous filling stations,
strategically placed around the UK to best serve the
Company’s customer base.

Customer growth is driven by a combination of new

customers seeking an alternative to costly and labour-
intensive in-house investment in water purification systems
and customers switching from using their own systems,
for the reasons of cost and convenience, as well as wider
growth in new applications for pure water. Spotless’s
network is seen as a convenient low-cost alternative by its
customers.

Business customers sign up to the network, top up their

account with funds and can then access the service at
any time. The water treatment technology and customer-
facing software used in these stations is highly advanced
and proven in reliability, with best-in-class real time data
analytics and elements of registered IP.

Since the first sites commenced operation in 2017, the

Company has experienced significant growth, increasing
the total number of stations in the UK to 67 by the end
of 2021, up from seven sites in January 2018. Around
21,000 business customers are currently registered on
the Spotless platform, with 7,000 active, and there is a
transaction on the Spotless network every 70 seconds.
Spotless believes that the UK site saturation point is
c600 sites and that there is significant growth potential
internationally. Site capex payback currently averages
under 12 months.

Investment Proposal: Spotless Water 5

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Transaction
To date, Spotless has raised £2.7m of equity over a number of investment rounds from both high new worth (‘HNW’)
investors and, more recently, from Blackfinch Investments (www.blackfinch.com), a technology focused UK investment
fund with £600m AUM, which has invested £1.15m. Its last tranche was at a pre-money valuation of £11.2m (a 6x multiple
of annualised revenue for the period 1 August 2020 to 30 September 2020). Management and the NXC hold c72% of the
equity, Blackfinch 12.75% and HNWs, the balance.

The funds invested by Blackfinch have helped Spotless to expand its site network, which is now self-sustaining, generating
c£530k of operating cash flow in 2021, which should rise to in excess of £1m adjusting this to full site maturity. Given the cash
generative nature of Spotless, the Company has been exploring medium term debt finance options to fund further growth.
These are available – but come with a current pay coupon and potential amortisation which constrain cash for site roll out.

Sources £ Uses £

Connection Capital Client Facility 3,850,000 Growth Capital 2,850,000

Incumbent Debt Refinance 750,000

Transaction Costs 134,500

CC Arrangement Fee 115,500

Total 3,850,000 Total 3,850,000

Terms Summary
Interest: 10% simple rolled up to repayment.
Repayment: Bullet repayment on 5th anniversary, or earlier at the company’s option with interest on the sum repaid
or on an insolvency event, or for certain material breaches.
Equity: Warrant to acquire 5% equity at negligible cost, with anti-dilution provisions (i.e. a right to acquire further
equity in any subsequent fund raise at the prevailing price).
Covenants: The loan note will carry a suite of covenants including minimum cash on balance sheet and trailing twelve-
month EBITDA, allowing CC to monitor performance and ensure the Company maintains sufficient funding
to support its ongoing growth ambitions as well as securing repayment of the CC client facility.

Security: Secured obligations by first ranking fixed and floating charge on all assets of the Company, with a carve
out for a small incumbent hire purchase facility.

Connection Capital (‘CC’) has proposed a hybrid structure which has the security of senior debt but with interest rolling
up for the term at 10% p.a. and a bullet repayment. This provides additional cash and in return, attracts an equity warrant
of 5%. This warrant is exercisable for nominal value and gives the option of participation in future equity rounds if they
arise, which seems most likely if international expansion is pursued.

Applying the same methodology used by Blackfinch for its last funding round, to the most recent two months of trading,
being January and February 2022, the Company would be worth c£14m. This would value the 5% warrant at c£700k
(pre-Carried Interest), to provide an opening embedded value of c1.2x the investment. Furthermore, the debt would be
c3.6x covered by the business value. It should be noted that this is a prudent estimate given that January and February
trading reflect a seasonal low period.

Of the £3.85m loan being raised, £2.85m will be utilised by Spotless in pursuing expansion, with c£750k applied to the
repayment of existing temporary debt facilities, which have been funding growth pending a medium-term solution (the
exact figure will be confirmed to CC clients prior to completion). The remaining funds will cover transaction costs and
provide cash headroom. The CC client debt will have a senior charge over the assets of the Company, with the only
exception being a small hire purchase (‘HP’) facility of c£130k having senior security over specific leased assets, which
are non-essential to ongoing operations.

Investment Proposal: Spotless Water 6

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The CC client facility carries consent rights over any new debt raises and the loan will also carry a suite of covenants
including minimum cash on balance sheet and trailing 12 month EBITDA. This will allow CC to monitor performance,
ensure the Company maintains sufficient funding and, for higher growth cases or in any other circumstances that require
further capital, provide discretion over structuring with an option for CC clients to participate.

Financials
Management Forecast Forecast
Twelve Months Ending 31 December 1 Historical Historical 2022 Forecast Forecast Forecast Forecast Forecast
£000s 2020 20212 Outturn3 2023 2024 2025 2026 2027
Number of Sites at 31 December (units actual) 48 67 114 232 313 430 576 600
Revenue 1,447 2,337 3,547 6,699 11,501 15,659 21,672 26,880
Gross Profit 952 1,530 2,229 4,161 7,248 9,905 13,717 17,153
GP % 66% 65% 63% 62% 63% 63% 63% 64%
EBITDA (286) 337 377 1,401 3,921 6,227 9,600 12,794
EBITDA % -20% 14% 11% 21% 34% 40% 44% 48%
Year End Adjustment 55
Adjusted EBITDA (286) 392 377 1,401 3,921 6,227 9,600 12,794
Mature Run-Rate EBITDA 4
1,086 1,976 5,126 7,353 10,943 15,468 16,041
Operating Cash Flow 526 292 1,688 4,206 6,680 10,298 13,724
Operating Cash Flow Conversion % 134% 77% 120% 107% 107% 107% 107%
1
Accounting year end is April but figures have been prepared on a calendar year for the purposes of analysis.
2
FY21 EBITDA adjusted to reflect year end adjustments.
3
Includes two months of actual trading.
4
Assumes mature trading profile for all sites deployed and layers on operating costs for each relevant period from the management forecast.
Source: Management information.

Spotless has seen strong growth to date, with revenue up 62% to £2.3m in 2021, resulting in the Company’s first year of
profitability and driving very strong cash flow conversion of 134%.

The historical adjusted EBITDA figure represents a trailing 12 month period. Importantly, this does not reflect the full
trading potential for the 67 sites in place at the end the year, as many of the sites will not have reached operational
maturity (which typically takes eight months). To reflect this, we have included the mature run-rate EBITDA for the
calendar year 2021 of c£1.1m.

This represents profitability assuming all deployed sites are operating at full maturity and is based on the historical
average contribution of a fully operational site, scaled up for the total sites at the end of the year, net of operating costs
for the 12 month period. The same logic has been applied for each year in the forecast, resulting in £16m run-rate EBITDA
in 2027, based on 600 sites.

The management forecast assumes that, in addition to organic cash flows, £3.85m (c3.5x mature run-rate EBITDA for
2021) of new CC client funds are raised in May 2022, to expand the site network and support personnel, through to the
middle of 2023 (c151 sites). At that stage, it is assumed a further £2.5m in debt funding to continue with the pace of site
roll-out. This could come from CC clients or other sources, with the terms of CC clients’ initial debt having a say over this.

The Company does have control over the scale and timing of further investment by speeding up or slowing down its rate
of roll out. Whilst the management team is confident in achieving the plan set out, given the high rate of growth, CC has
sensitised the management forecast in assessing returns and headroom, as commented on below and set out in more
detail in Section 4.

Investment Proposal: Spotless Water 7

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Illustrative Returns
We envisage multiple exit routes being available, either
through further fundraises (debt and equity), a trade sale,
sale to private equity, or a listing.
Target illustrative returns on a Management Case and
CC Investment Case are summarised below. All returns
are based on a UK only site rollout and are based on an
annual forecast commencing on an estimated completion
date of 31 May 2022.
• Management Case:
A year five £160m exit at 10x run-rate EBITDA for 600
sites of c£16m, delivers a forecast 3.1x/25.7% IRR net
return to CC clients. Of this, 1.5x comes from the loan
repayment with rolled up coupon and the balance from
the warrant value.
• CC Investment Case:
A year two refinance to facilitate repayment of the CC
client loan and a year five £130m exit at 10x run-rate
EBITDA for 500 sites of c£13m, delivers a forecast
2.4x/42.5% IRR net return to CC clients. Of this, 1.1x
comes from the early loan repayment with rolled up
coupon and the balance from the warrant value.
We have also modelled a scenario in which only the
initial CC client raise is completed and deployed into new
sites. This would take the network up to 151 sites. We have
assumed any excess cash generated by the network
is simply retained on balance sheet, with the 151 sites
continuing to run on a static basis. We have then assumed
Spotless is sold in year three on a lower multiple than
in the two scenarios outlined above. Although we don’t
see this as a realistic basis on which to assess returns, it
provides insight into potential returns to CC clients in a
highly sensitised scenario.
• CC Illustrative Static 151 Sites Scenario:
A year three £22m exit for 151 mature sites with EBITDA
of £2.7m using an 8x exit multiple delivers a forecast
1.5x/14% IRR net return to clients. Of this, 1.3x comes
from the early loan repayment with rolled up coupon
and the balance from the warrant value.
It should be noted that in all returns scenarios, net debt,
and thus leverage, reduce to zero within the term of the
proposed investment.
Investment Proposal: Spotless Water
Why We Like This Investment
Management: Spotless is led by an ambitious, young
and capable management team with a broad skillset.
We have been impressed by the growth the team has
achieved to date. The team is clear in its ambition to grow
the Company to be the market leader, setting a goal of
exiting Spotless at a minimum enterprise value of £200m
(5% warrant value £10m). The core team is also well
supported by an NXC and investor directors with a wealth
of experience, both nationally and internationally, in the
growth space.
High Growth, Scalable Platform: The traction the team
has seen in growing its site network to 67 sites and its
customer base, is indicative of the appetite for its product
in the UK market. The Company already has good visibility
of potential revenues in the near term from the enlarged
network and has a significant pipeline of potential
sites. Customer numbers continue to grow at a strong
rate, adding further credence to the long-term growth
ambitions set out in the Company’s forecast.
Cash Generative: Despite being at a relatively early stage
in its journey, Spotless has already demonstrated its cash
generation capacity, with c£500k of operating cash flow
generated from a partially immature network in 2021 (in
excess of £1m cash generation at maturity of those 67
sites). The robust cash generation profile, in combination
with the proposed covenant suite and all assets debenture,
provides a good level of downside protection and cash
cover to CC clients’ senior loan.
First Mover Advantage: The Company is a first mover
in its market, with the only competition coming indirectly
from end user investment in purification systems. These
systems are expensive to acquire and present ongoing
challenges to maintain. This first mover advantage has
allowed the Company to build a strong initial footprint
in the UK market and management believes further
investment now will help to secure this position further.
Barriers to Entry: The team’s diverse skill set, which
includes a background in the development of technology-
enabled autonomous payment solutions, as well as water
purification systems, acts as a barrier to entry for direct
competitors. All IP is owned by the Company and any new
technological developments are registered to protect the
Company’s position. CC clients will be senior secured over
all IP and physical assets on investment.
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International Expansion Potential: Although at an early
stage in its assessment of the opportunity, Spotless
believes expansion into overseas markets presents a
significant upside opportunity for the Company where
there are currently no direct competitors. Based on initial
research, management believes the US market alone to
be c10x the size of UK capacity. No allowance has been
made for this potential.
Key Risks
The deal is subject to the normal risks of investing in
illiquid, unquoted investments and, as a small business,
is dependent on key people. Beyond these generic risks,
the following reflect the key (but not exhaustive) business
specific risks:
New Entrants: The entrance of a new competitor to the
market directly copying the high return on capital Spotless
model could limit the Company’s ability to reach its growth
targets. Management believes that any new entrant would
require a minimum of c£5m to compete with the Spotless
network as it stands. There is no sign of this currently
and even in such a scenario, the level of cash generation
should be capable of supporting repayment of the CC
client facility unless there is a forced material adverse
change to the economic model caused by a new entrant.
Site Identification and Retention: One limiting factor
to the network rollout is identification of new sites and
agreement of contracts with landlords. The team has
made good progress to date and has a strong pipeline
of sites. Thanks to the relatively diverse nature of the
Company’s current landlord base and the financial
benefits the relationship brings to landlords, we see the
risk of loss of sites as limited.
Investment Proposal: Spotless Water
Equipment performance: An unforeseen significant
adverse change in the performance or cost of maintaining
the on-site filtration and dispensing equipment could
cause capex or margin issues. To date, this has not
happened and so it seems unlikely that this will materialise
to any significant degree.
Finance Function: As referred to in the management
section of this paper, Spotless does not yet have a Finance
Director (‘FD’) in place, choosing to outsource preparation
of its financials to Morris Lane, a Poole based accountancy
practice. The quality of information is currently high,
but as part of our discussions, we have agreed with
management that a FD will need to be hired within the
first 12 months following completion. This will be included
in the loan documentation as a condition subsequent.
Conclusion
The Company has demonstrated excellent growth since
inception, led by a strong management team, with a
clear path to further growth over the next five years. Cash
flow generation and the proposed CC client investment
will enable the Company to continue with its growth and
further establish clear market leadership for pure water as
a service.
The proposed CC client investment provides a structure
which enables Spotless to grow its cash generation
capacity and value through adding further sites, whilst
preserving some controls over future financing. Whilst
there is risk associated with any roll-out strategy, the
senior secured position, cash flow and growth, afford
significant value cover for the debt and its 10% roll up
coupon. The warrant then provides attractive additional
returns potential and some embedded initial value.
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ii. Investment Classification

Spotless Water Ltd: £3.85m Growth Capital Facility.

Alternative Private Equity Real Estates

Connection Capital Debt and Niche
exposure to and Venture and Real
designation Financing Investments
Liquid Markets Capital Assets

Investment structure Direct (via a nominee) Fund

Return expectations High Medium Low

Market correlation High Medium Low

Medium
Return volatility High Low
(equity high and loan low)

Concentration High Medium Low

Investment life 10 years+ 7-10 years 4-7 years 1-4 years <1 year

Expected income/
10 years+ 7-10 years 4-7 years 1-4 years <1 year
distributions

Tax treatment
Capital for warrant and income for yield Income
(UK individual)

• Site roll out assumptions fail to be met.

• Unforeseen product issues.
Key exposures
• New market entrants undermine the business model.
• Key person.

To participate in this investment

call Steve Wilson on 07990 556544 or email steve.wilson@connectioncapital.co.uk

Investment Proposal: Spotless Water 10

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Further Materials
1. The Company
1.1 Formation and concept
Spotless was formed by Tim Morris (CEO), Courtney
Constant (Chief Engineer), Matt Boxold (COO) and Peter
Sheene (CTO) in 2017.

Prior to forming Spotless, Tim formed Spotless Mobile, a

car valeting service focused on UK based car clubs and
peer-to-peer car rental services, which has the exclusive
maintenance contract for the UK Zipcar fleet and retains
contracts with Avis, DriveNow, hiyacar, Transport for
London and Co Wheels. During his time as MD of Spotless
Mobile, Tim sought to improve the company’s offering by
sourcing purified water to support the cleaning services
offered. Purified water is water which has been filtered and
treated to have all of its contaminants removed. If water is
treated to a low enough TDS level (Total Dissolvable Solids),
it becomes a cleaning agent and no chemicals are required
in the cleaning process – making it an environmentally
friendly alternative to more traditional methods.

Having considered a number of in-house solutions, which

required a significant upfront capital outlay and ongoing
maintenance, Tim met Courtney who ran two sites
dispensing purified water manually to operators in the
cleaning industry. Having seen Courtney’s operation, Tim
believed there was an opportunity to expand the ‘water as
a service’ concept through automation.
Tim had previously worked with Peter and Matt who ran
Sentios Technology, a company specialising in the creation
and delivery of interactive software, unattended payment
and self-service solutions, including outdoor unattended
self-service and payment systems. After bringing the
team together, finalising the tech infrastructure and
water delivery system, Spotless began operation with
two sites deployed in 2017 and, following strong take-up
of the product, a further 10 sites were deployed shortly
thereafter.
Since that time, the Company has grown its presence in
the UK to 67 sites as at December 2021 and envisages the
UK saturation point to be c600 sites. It is management’s
intention is to achieve UK dominance and, as this
progresses, shift the focus to expand internationally, with
the US being the intended first target.
To date, the majority of Spotless’s customers have come
from the window cleaning industry, although the range
of uses for its product has started to broaden in the most
recent period. As a result of changing health and safety
regulations, and a requirement for window cleaners to
make their offering ‘greener’, there has been a dramatic
shift within the industry toward use of telescopic carbon
poles through which ‘pure water’ is pumped from a tank to a
brush on the end of the pole. A window cleaner with a pole
will be using purified water, as tap water will leave streaks.
Window cleaners have traditionally filtered water
themselves. The required equipment is expensive to
purchase and maintain, takes time to keep running
(flushing filters etc) and is expensive when it breaks down.
There are some outlets for buying pure water but these
tend to be expensive and restrictive in terms of capacity
and opening hours. If companies wish to expand, a large
upfront investment in purification units would be required.
Spotless’s autonomous network provides a low cost, easy
to use, and reliable alternative to its customers.

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1.2 Operations

Sites
Filling stations are generally situated in the car parks of
industrial sites, commercial properties, such as Homebase,
or petrol station forecourts. The Company holds contracts
with various landlords and has seen some significant new
wins in recent months. Currently, the largest contract is
10 sites with Access Self Storage, representing c14% site
concentration. Management monitors concentration
levels, ensuring that a 35% ceiling is never exceeded. A
typical contract is for three years, contains a six-month
notice period from either side at any point, requires 24/7
access to the site and generally contains non-compete
provisions. A review of contracts will be undertaken as
part of our legal due diligence work.

Where a site is seen to be underperforming or if an issue

were to arise with the site rental arrangement, each unit
can easily be removed from site and repositioned by
Spotless’s in-house team. Rent is low, typically c£250 per
month, compared to average monthly revenues of c£4,098.

A detailed heat mapping exercise is undertaken for

the deployment of new sites, which involves overlaying
site availability, customer locations, population density,
water hardness, and other metrics, onto a map of the UK.
Locations are then ranked to determine where the next
units should be deployed.

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Once a site has been identified for deployment, Spotless’s deployment team will prepare the site, ensuring that all utilities
are available to be connected to a unit. The cost of water and electricity are generally a variable cost of sale but in some
instances is captured by the site rental, making these sites particularly profitable.

The teams responsible for deploying and maintaining

sites are spread nationwide. The Company presently employs four senior skilled individuals within the maintenance team
and four within the deployment team. The intention is to recruit four junior members into each team in the coming year.

There is an identified pipeline of 148 sites with 11 being surveyed and a further six ready for deployment, which makes the
151 locations by mid-2023 an achievable target.

Return on Capital
An attractive feature of this investment is the return on capital. A site costs c£25k to get operational. At the average site
metric of 5,000 litres per month, priced at three pence per litre and standard rent of c£250 p.a., site payback is typically
achieved within 10-12 months of deployment.

Organisational Structure

BOARD

Chairman Director Founding Director Founding Director Founding Director Founding Director Investor Director BF Director BF Observer
Steve Morley-Ham Tim Morris Matt Boxold Peter Sheene Courntey Constant Krish Soni Bulent Osman Reuben Wilcock

EXEC AND OPERATIONAL

CEO
Tim Morris

Ch-Eng
COO CTO
Courtney
Matt Boxold Peter Sheene Constant

HR AND SUPPORT BUSINESS FILTRATION

MARKETING INSIGHTS BUILD AND INSTALL FIELD SUPPORT SOFTWARE
SERVICES HSE, R&D
AND ANALYTICS

Head of Business Insights Head of

Head of
HR and Support & Analytics Operations
Marketing
Services
Lindsey Barker Role Vacancy Adam Measor
Lucy Denham

Marketing Marketing Acquisitions Site HRSS HRSS Install Test Service Customer Senior
Manager Coordinator Manager Manager Coordinator Coordinator Manager Engineer Manager Services Dev
Abbie Robyn Richard Ashley Role Claire Dan Leo Jack Michelle Robin
Luxton Smith Campion Davis Vacancy Brown Lipscombe Sheene Coles Dispensari Tudball

Install Install Install Service Service Service Software

Engineer Engineer Engineer Engineer Engineer Engineer Dev
Aaron Ivaylo Stuart Ashley Stephen David James
Broom Vanko Churchill Gilbert Savage Skinner Eagling

Source: Management information.

All other staff are based in the Company’s head office in Basingstoke. The Company is broadly divided into two divisions,
being Technical and Commercial. Commercial is headed up by Matt Boxold, with senior managers reporting into him on
HR, Marketing and Analytics. Peter Sheene oversees Technical, with maintenance, install and software teams reporting
into him.

Investment Proposal: Spotless Water 13

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Manufacturing
A unit starts its life as a shipping container sourced in Southampton. Here, the container is painted and branded. Once
complete, the container is delivered to a third-party plastics specialist, which fabricates the water storage tanks and
assembles all the parts (the key control units and IP-related technology are produced by Spotless) within the unit, before
delivering to the final location from which the unit operates.

The Company intends to move to a new site in Basingstoke in 2022, where its head office will be based, and will allow
a move to full in-house assembly – using parts from the current water tank fabricator. Management believes this will
create cost savings and increase production capacity. The resultant cost savings are not reflected in the forecasts, for
reasons of prudence.

1.3 Customers
There is a growing, demonstrable demand for quick access pure water throughout the UK, with 21,000 customers signed
up on the Spotless platform to date and a transaction on the Spotless network every 70 seconds. Spotless believes, based
on house market research and sizing work, that the UK site saturation point is c600 sites and that there is significant
growth potential internationally as there are currently no other direct competitors in operation.

Cumulative Customer Signups Jan 17-Oct 21

25,000

20,000

15,000

10,000

5,000

0
Jan 17 May 17 Sep 17 Jan 18 May 18 Sep 18 Jan 19 May 19 Sep 19 Jan 20 May 20 Sep 20 Jan 21 May 21 Sep 21

Source: Management information.

The chart above shows the growth in customer numbers achieved between January 2017 and October 2021, with new
customers signed up at an average rate of 400 per month in the year to October 2021. Growth has improved since this
time, as discussed in the current trading section below.

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The marketing team maintains a list of all new targets and cold calls made to each company to discuss the Spotless
product. In addition, the marketing team use a full suite of marketing tools from cold calling, through radio advertising,
mailshots, cleaning industry conferences etc, in order to source sites and clients.

When a new client is signed up to the platform, they are issued with a welcome pack and key fob for each individual in
the organisation requiring access to a unit. Each customer is provided with an online account, which can be accessed via
the Spotless website or app, both of which are being upgraded imminently. Account holders generally set up auto top-up
functionality which prepays a set amount into their Spotless account, which is then drawn down when water is dispensed.

Spotless has a small in-house customer service team but outsources a proportion of the site maintenance service work
to a third party. Third party staff are trained by the Spotless team and are regularly monitored for performance. All
customer service representatives are available 24 hours a day and are provided with access to the Spotless live access
platform which allows the agent to provide real time support to any customer using a unit. Site maintenance is minimal,
as the sites autofill with water, have non-cash payments and have proven technology, so that in normal operation a visit
is required approximately every 28 days.

Of the 21,000 customers signed up, 7,000 are active, paying c3p per litre of Spotless water. The remaining 14,000 are
early sign ups to the Spotless network, awaiting delivery of a unit to their area. This provides strong support for the
assumed growth in litreage delivery in 2022, as the customers required to drive this already have accounts. The chart
below sets out historical growth in litreage, as well as forecast growth based on current customer growth rates and the
planned site deployment profile.

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Litres vs Stations
700 90,000,000

590
601601601601601 80,000,000
600 572
554
536
518 70,000,000
500
500 482
463
443 60,000,000
424
404

400 385
50,000,000
365
346
326
307

300 287 40,000,000

268
258
250
232

200
215 30,000,000
189
200 172
180
163
155
146
129
135 138 142 20,000,000
122
111 116
100105
92 95
100 74 77
83 88
63 63 69
50 52 54
57 61 10,000,000
43 48 48 48 48 48 48 48
35 35 38 38 38 38 38 38 38 38 38 38 40 41
24 25 26 28 30 33
20 22
14 14
7 7 10 10 10 11 12

0 0
Jan 18

Mar 18

May 18

Jul 18

Sep 18

Nov 18

Jan 19

Mar 19

May 19

Jul 19

Sep 19

Nov 19

Jan 20

Mar 20

May 20

Jul 20

Sep 20

Nov 20

Jan 21

Mar 21

May 21

Jul 21

Sep 21

Nov 21

Jan 22

Mar 22

May 22

Jul 22

Sep 22

Nov 22

Jan 23

Mar 23

May 23

Jul 23

Sep 23

Nov 23

Jan 24

Mar 24

May 24

Jul 24

Sep 24

Nov 24

Jan 25

Mar 25

May 25

Jul 25

Sep 25

Nov 25
Source: Management information.

Of the active customers in 2021, 89% dispensed more than once. 80% of Spotless’s customers have an online account with
the remaining 20% of customers operating on a pay as you go basis.

A subscription model is being introduced in FY2023, onto which the Company intends to transition customers, to provide
greater visibility of revenues and improve cash flow conversion.

Investment Proposal: Spotless Water 16

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1.4 Technology

The Spotless concept was born out of a desire to deliver purified water using an autonomous delivery network.
Management’s background in developing networks of this kind is a key differentiator for the Company. The autonomous
nature of the product delivery and the strategy of driving customers to open accounts, provides the Company with
deep data access. This data is used to analyse the performance of each site in real time, and on a monthly basis, and
to determine where the next site deployments should be. Marketing initiatives can also be pushed to clients via the
interactive screen at each site whenever a client logs in.

All in-house water purification and software developments are registered and owned by the Company. All branding and
websites are also owned. A full IP review will be undertaken as part of our legal due diligence work.

Investment Proposal: Spotless Water 17

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1.5 Market and Competition system. The equipment is challenging to run, as it is a

relatively complicated setup with a number of parts that
The Company delivered c70 million litres of water in 2021,
need to be regularly monitored, maintained and replaced.
with Spotless assessing the total addressable market for
Additionally, if a substantial storage tank does not form
window cleaning alone in the UK to be c43million litres
part of the setup, the fill rate for a mid-sized cleaning
per day, based on data gathered from the British Window
operation can take a number of hours as opposed to
Cleaning Academy and historical litreage levels dispensed
minutes using a Spotless filling station.
by Spotless. Spotless’s assumed growth to c600 units in
the UK is based on capturing 10% of this market. Spotless has not identified any international direct
competitors as part of its international market review. On
Alternatives to Spotless Water’s offering include the
that basis, the Company is keen to pursue growth into new
purchase or rental of water purification equipment from
territories at the earliest opportunity but is fully committed
suppliers such as Xline-Systems, Ionic Systems and Fluid
to achieving its UK targets in the first instance. Any
Science. Depending on the size of the units and whether
international expansion plans will be kept under review by
the equipment includes a storage tank, the upfront
CC post-completion.
investment can range between £3k to £10k for a single

Investment Proposal: Spotless Water 18

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2. Management
The Company has a young, dynamic, technically-minded, thorough and ambitious management team headed up by
Tim Morris as CEO and supported by Steve Morley-Ham, an experienced chairman. The core management team has
demonstrated an ability to rapidly grow the Company’s site network from a standing start in 2017. The broad skillset
including software development, water purification mechanics, sales and marketing, helps set the Company apart from
competition (equity percentages below are prior to dilution of the CC client warrants).

Tim Morris (CEO) - 25% equity

Tim is a results-focused entrepreneur with a background in fast-growth technology start-ups. He is the ambitious
driving force behind the Spotless Water concept. Our interactions with Tim have shown him to be a driven,
personable CEO with a particular aptitude for Sales and Marketing.
Prior to starting Spotless Water, Tim founded Spotless Mobile, a specialist maintenance business for Car Club and
fleet sharing markets, as well as Silver Arrow Systems, a Fintech business offering a diverse range of technology
services, including self-service last minute travel insurance. Tim retains a role as chairman of Spotless Mobile, but is
now the full time CEO and driving force at Spotless.

Matt Boxold (COO) - 12.3% equity

Matt oversees operations within Spotless, with heads of HR, Marketing and Business Analytics reporting directly
into him. Matt ran Sentios Technology with Peter Sheene, prior to its merger with Spotless Water in 2017. Sentios
was established in 2011 and specialised in the creation and delivery of interactive software, unattended payment
and self-service solutions (including outdoor unattended self-service and payment systems) to the public,
healthcare, corporate and education sectors. Sentios’s key clients included Heineken, Coca Cola, Travelex, Virgin
Trains, Her Majesty’s Passport Office and Citizens Advice Bureau amongst others.
Matt is a technically minded individual and directs the Company’s growth trajectory through analysis of data
produced by the Company’s tech-enabled platform.

Peter Sheene (CTO) - 12.3% equity

Peter is Chief Technical Officer for Spotless, with heads of Build and Install, Field Support, and Software reporting
into him. Peter led the design of Spotless’s technical solution from concept through to deployment. This included
development of the web portal and mobile applications.
Peter possesses a broad range of operational, management, project, and IT support skills and has over 20 years of
experience in project delivery for the likes of Her Majesty’s Passport Office, ASDA, Heineken, Coca-Cola, Fifa, and
O2 amongst others.

Courtney Constant (Chief Engineer) - 11.8% equity

Courtney is chief engineer and the originator of the ‘water as a service’ concept, amalgamating his business with
Spotless on meeting Tim and the wider team.
Courtney is responsible for development of the water filtration technology used in each of the Company’s sites and
is currently in the process of rolling out a new project which will remove resin from the water filtration process, in
turn reducing operating costs across the network as well as improving the environmental footprint of the network.

Investment Proposal: Spotless Water 19

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Steve Morley-Ham (Chairman) - 10.3% equity

Steve was one of the first investors in Spotless. Following his investment, Steve joined as chairman in June 2018 to
support the core team in growing the site network and bringing in additional investment to enhance growth.
Steve has a long and successful background in VC, insurance, employee benefits and financial services industries.
He has extensive M&A experience having led and stewarded several businesses from inception to successful exit,
and currently holds chairmanships for a number of companies in a range of industries, including Tiller Group
Limited, Global Wine Solutions, Rokuni Limited, and Sheer Rocks Limited, amongst others.
Prior to joining Spotless, Steve had been a shareholder and director of Primary Group, a VC fund specialising
in startups in the insurance and financial services industry. Steve joined Primary Group following its acquisition
of Health for Industry, a business he founded in 1990 and ran until its exit in 2002. At that point, the company
employed over 200 people, had 500+ corporate clients, and controlled annualised GWP in excess of £350m.
Steve has been very supportive of the proposed CC client investment and has been a good sounding board both
for the Spotless team and for ourselves during the process. We have confidence in Steve’s ability to support the
team in their growth ambitions following completion.

Other
The core management team is supported by two investor directors: Krish Soni, a private investor with 7.8% equity, and
Bulent Osman, who was appointed as part of the Blackfinch investment. Both have experience of investing in early-stage
businesses. Bulent also has experience of US expansion and is providing guidance to the Spotless management team in
this regard.

The Company does not currently have a FD but intends to bring someone on board in the coming year (a condition
subsequent of CC client investment) to migrate over the function which is currently outsourced to an accountancy
firm. Notwithstanding this, the financials and forecast provided have been of a very high quality and have always
been provided on a timely basis. The KPI data the Company monitors is of a high standard and is indicative of the
thoroughness with which this team plans and manages the Company.

Reuben Wilcock, who heads up the VCT team at Blackfinch, holds an observer role on the board of Spotless. Blackfinch
also introduced Bulent Osman as a Director. CC will also take a board observer seat post-completion.

Investment Proposal: Spotless Water 20

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3. Financials
3.1 Historical and Forecast P&L
Management Forecast Forecast
Twelve Months Ending 31 December 1 Historical Historical 2022 Forecast Forecast Forecast Forecast Forecast
£000s 2020 20212 Outturn3 2023 2024 2025 2026 2027
Number of Sites at 31 December (units actual) 48 67 114 232 313 430 576 600
Revenue 1,447 2,337 3,547 6,699 11,501 15,659 21,672 26,880
Rent and Rates (293) (479) (824) (1,586) (2,629)
Other Direct Costs (201) (328) (494) (952) (1,624)
Gross Profit 952 1,530 2,229 4,161 7,248 9,905 13,717 17,153
GP % 66% 65% 63% 62% 63% 63% 63% 64%
Staff Costs (823) (739) (1,283) (1,899) (2,253)
Travel Costs (59) (121) (89) (118) (160)
Premises Costs (66) (104) (130) (229) (255)
Shipping Costs (18) 0 (5) (10) (16)
IT (70) (94) (99) (116) (138)
Finance (20) (26) (43) (47) (48)
Sales and Marketing (55) (70) (151) (237) (295)
Repairs and Maintenance (19) (14) (23) (51) (82)
Other (108) (25) (29) (53) (80)
EBITDA (286) 337 377 1,401 3,921 6,227 9,600 12,794
EBITDA % -20% 14% 11% 21% 34% 40% 44% 48%
Year End Adjustment 55
Adjusted EBITDA (286) 392 377 1,401 3,921 6,227 9,600 12,794
Mature Run-Rate EBITDA 4
1,086 1,976 5,126 7,353 10,943 15,468 16,041
Operating Cash Flow 526 292 1,688 4,206 6,680 10,298 13,724
Operating Cash Flow Conversion % 134% 77% 120% 107% 107% 107% 107%
1
Accounting year end is April but figures have been prepared on a calendar year for the purposes of analysis.
2
FY21 EBITDA adjusted to reflect year end adjustments.
3
Includes two months of actual trading.
4
Assumes mature trading profile for all sites deployed and layers on operating costs for each relevant period from the management forecast.
Source: Management information.

Historical
Spotless’s year end is 30 April. However, the figures above are prepared on a calendar year basis for the purpose
of analysis.

Full year trading figures do not reflect the full trading potential of the sites in place at the end of each year as sites are
rolled out throughout the year and take an average of eight months to reach maturity (being c5,000 litres per day on
average). We have, therefore, included the mature run-rate EBITDA in the summary above to reflect the trading potential
for all sites deployed by the end of each year. This represents profitability, assuming all deployed sites are operating at
full maturity, and is based on the historical average contribution of a fully operational site, scaled up for the total sites at
the end of each year, net of operating costs for the 12 month period.

Investment Proposal: Spotless Water 21

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The Company saw good growth between 2020 and 2021 with revenues up 62% year on year. Site numbers grew from
37 at the beginning of 2020 to 67 by the end of 2021, supported by the funds raised from Blackfinch. Despite initial
concerns that Covid would disrupt trading in end customer industries, Spotless performed well as most customers
continued to trade.

The table below shows monthly revenue figures for the period January 2020 to February 2022, as compared to site
deployment, demonstrating the consistent growth experienced as new sites are rolled out. Trading is seasonal, with the
summer months representing a high point, reflecting the trading profile of the underlying cleaning services market.

Monthly Site v Trading Growth

250,000 80

70
200,000
60

50
150,000

Sites
40
£s

100,000
30

20
50,000
10

0 0
0

1
20

20

21

22
20

21
20

20

21
21
l2
21
l2

ar

Ju
n

v
p
ar

n
v
ay

ay
Ju

Ja

No
Ja

Ja
Se
No
Se

M
M

Sales Stations

Source: Management information.

Costs of sale include site rental, utilities, card processing and internet connection costs. The majority of this cost base is
variable with only site rental and internet costs being fixed. All sites are run profitably and are constantly monitored by
the Spotless team to ensure each site is operating in line with expectations. Where a site is seen to be underperforming,
Spotless will move the unit to an alternative site within the deployment pipeline. Gross margins have been maintained at
c65% in 2020 and 2021.

Staff, premises and travel cost form the majority of overheads. Given the autonomous nature of the site network,
operational gearing will diminish as the site network grows, resulting in increased EBITDA margin, as evidenced in 2021.

The adjusting item in 2021 relates to costs taken through the P&L which should have been capitalised and results in
adjusted trailing 12 month EBITDA of £392k or 14% margin. On a mature run-rate basis, EBITDA for the period is c£1.1m,
implying a 3.5x entry leverage multiple for the proposed CC client investment.

The Company currently outsources much of the assembly of each site but has the in-house knowledge and skills to
undertake the majority of the assembly work (not water tank building). As previously noted in the paper, the intention is
to move to an identified new site in 2022, allowing all divisions to be housed under one roof. The move is also expected to
create cost savings across the Company and increase unit deployment capacity.

Investment Proposal: Spotless Water 22

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Forecast
The forecast assumes 47 new sites in 2022 rising to 118 in
2023, 81 in 2024 and 117 in 2025. Historically, the maximum
rate of unit deployment has been three per month, which
is projected to increase to a maximum of 12 per month
in 2023 if the forecast is to be achieved. Management is
confident this will be achievable once the move to new
premises has taken place, but it is a risk in the proposal as
it relates to the level of growth.
The saturation level of 600 sites is based on the
Company’s market sizing, rate of new customer sign ups
and market mapping, as referred to earlier in this paper.
The annual rate of site deployment assumed is significant
and there is a risk that the Company may overtrade. The
CC client loan covenant regime should serve to mitigate
this risk, along with the role of the NXC, VC representative,
and in due course, the incoming FD.
The volume levels delivered by each new site are based
on historical data and seasonality profiles. It is assumed,
based on experience, that each new site in the forecast
takes eight months to become fully operational, where
fully operational means delivering 5,000 litres daily, the
historical average. A seasonality factor is then applied to
this figure to provide expected annual literage levels for
the enlarged network. The model is constructed such that
each site scales up incrementally in each month of the
eight month period.
Once the litreage levels have been constructed, pricing
per litre is applied based on the historical averages
experienced, which is c3 pence per litre. Where underlying
utility costs increase, these can be passed on to the
customer, helping to maintain margin.
Rent is also expected to reflect historical averages of
c£250 per site per month, experienced across the portfolio
of landlords with whom Spotless holds relationships.
Spotless continues to diversify this portfolio both to
mitigate the risk of site loss as well as rent inflation.
Margin is maintained at c63% throughout the forecast
period, just below the historical average. Management
believes this to be a prudent assumption as advances
have been made in reducing the level of consumables
used in the purification process. These improvements have
not been reflected in the forecast.
Operating costs see a disproportionate increase in the
first year of the forecast period as the Company deploys
capital into bolstering the team and investing more heavily
Investment Proposal: Spotless Water
in Sales and Marketing. One cost item is the engagement
of a FD, a key hire to support the Company as it grows.
Other key hires will take place within engineering and
maintenance to support the expanding nationwide
network. However, as referred to above, given the
autonomous nature of each site, the significant network
growth does not lead to a corresponding increase in fixed
costs in the longer term.
After an initial drop in EBITDA margin in 2022, margins
are expected to consistently increase year-on-year as
operational gearing diminishes, resulting in EBITDA
margin of 48% in 2027 as compared to 14% in 2021.
3.2 Current Trading
Trading in the first two months of the calendar year
2022 has been ahead of forecast with the initial EBITDA
expectations for this period being a loss of £25k, driven by
an expectation of low trading through the winter months,
in line with historical experience. However, actual EBITDA
for January and February was a c£56k profit.
This positive trading has continued into March with
historical daily litreage records being repeatedly broken
on consecutive days toward the end of the month. Data
for Monday, 21 March showed daily litreage exceeding
382,000, followed by another five days of litreage well
in excess of 340,000 litres per day. This, when averaged
across all sites, including those sites that are not yet fully
operational, shows the network as a whole operating
above the daily target of 5,000 litres per day per site, well
ahead of seasonal trends.
Spotless is now regularly seeing a number of stations
exceeding the daily litreage target before 9am in the
morning, with delivery for the rest of the day representing
upside to the forecast. Customer sign ups continue at a
good pace with the average monthly number of new
signups since October 2021 being 440, ahead of the
average for the period running up to October.
Sites continue to be deployed whilst negotiations between
CC and Spotless are ongoing. The Company is using a
bridging facility to support further site acquisitions, whilst
the CC client facility is completed, and we anticipate
that the Company will have c70 sites open by the time
of completion. The bridging facility forms part of the
total incumbent lending of £750k, to be refinanced at
completion of the CC client investment.
23
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3.3 Cash Flow

Twelve Months Ending Forecast
31 December 1 Historical Historical 2022 Forecast Forecast Forecast Forecast Forecast
£000s 2020 20212 Outturn3 2023 2024 2025 2026 2027
Adjusted EBITDA (286) 392 377 1,401 3,921 6,227 9,600 12,794
Movement in Working Capital 134 (85) 287 285
Operating Cash Flow 526 292 1,688 4,206 6,680 10,298 13,724
Operating Cash Flow Conversion % 134% 77% 120% 107% 107% 107% 107%
Capex (1,273) (1,964) (4,331) (3,168) (4,330) (4,988) (746)
Cash Flow From Financing 476 2,948 2,355 (60) (70) (80) (5,865)
Opening Cash 433 162 1,438 1,151 2,128 4,408 9,638
Net Cash Flow (271) 1,276 (288) 978 2,280 5,230 7,113
Closing Cash 162 1,438 1,151 2,128 4,408 9,638 16,752
1
Accounting year end is April but figures have been prepared on a calendar year for the purposes of analysis.
2
FY21 EBITDA adjusted to reflect year end adjustments.
3
Includes two months of actual trading.
Source: Management information.

As many customers top up their accounts in advance or pay at the point of delivery, the Company sees good levels of
EBITDA to Operating Cash Flow conversion, with 2021 seeing a conversion rate of 134%. The expectation is that a positive
conversion rate will be maintained as the site network grows. Management also plans to introduce a subscription model
in the coming year, which could further improve the cash conversion profile and will have a beneficial effect on revenue
visibility and exit multiple. However, deployment of the subscription model will be done cautiously so to ensure margins
are not disproportionately impacted.

It should be noted that the rate of cash conversion is expected to dip in 2021 as a result of the one-off impact of
investment in headcount following the CC client investment. Thereafter, conversion is assumed to increase back above
100%. The reasonableness of the ongoing cash conversion profile will form a part of the third-party due diligence being
carried out prior to completion.

To achieve the site deployment profile in the forecast, management believes total investment of c£19m will be required,
which is reflected in the Capex line. This is assumed to be financed by cash flows from operations plus c£6.5m of external
funding. This includes the loan advanced by CC clients plus the requirement for a further £2.5m of investment in early
2023 (at around c150 sites) to continue at the rate of growth set out in the Management Case. This results in the positive
cash movement seen in the Cash Flow from Financing line in 2023 (note that the figures in the table also contain other
movements from financing activities).

The source of this further investment could come from several options including (i) CC clients (priority would be given
to those participating in this raise), (ii) securing external debt finance on terms to be agreed, which could include the
refinancing of some or all of the CC client loan ahead of its term or (iii) the raising of some equity and debt which could
cover this purpose and other expansion plans.

The CC client loan will have a negative pledge regime which prohibits taking on other debt senior to its loan and as such,
CC will be in a position to able to assess whether the form and quantum of any further finance raised is likely to be value
enhancing for clients. Any proposal by the Company to raise further capital will be subject to a client note at the time. The
Management Case assumes further debt is raised with a roll up coupon.

The growth plan only reflects further UK deployment and does not take into account the potential for international
expansion or the required funding to support such a strategy. If performance is in line with plan, it is expected that the
option to commence US expansion and its funding will be explored at some point in the facility term, and will be subject
to the CC client loan control regime and the opportunity to participate in any equity raise in respect of the warrant element.

Investment Proposal: Spotless Water 24

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3.4 Balance Sheet

The most substantial assets on the Company’s balance 31 December 2021 £000
sheet are the filling stations, currently valued at c£1.8m, Fixed Assets
providing an element of asset coverage to investors, given
Computer Equipment 4
the senior CC client debenture.
Filling Stations 1,795
Long term loan balances will be refinanced at completion Intangibles 558
of the CC client investment. As per the sources and uses Motor Vehicles 98
outlined earlier in this paper, we expect the balance to be Office Equipment 25
c£750k immediately prior to completion.
Sub-total 2,479

Hire purchase, which holds a fixed charge over a small Current Assets
number of vans, will remain in place and will not impact Total Cash at bank and in hand 162
CC clients’ senior debenture. Directors’ loans will also Accounts Receivable 13
remain in place and are expected to amortise subject to Stock 34
performance. Any repayment of directors’ loans is at CC’s Other 67
full discretion.
Sub-total 277
Current Liabilities
Accounts Payable 168
Accruals 172
PAYE Payable 61
Pensions Payable 3
Directors Loan Account 60
VAT 51
Other (15)
Sub-total 500
Long Term Liabilities
Loans 665
HP 128
Deferred Tax (77)
Sub-total 717
Net Assets 1,539
Equity
Capital - A Ordinary Shares 1
Current Year Earnings 90
Retained Earnings (1,002)
Share Premium 2,450
Total Equity 1,539

Source: Management information.

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4. Exit and Returns

Multiple exit routes are available, either through further fundraises (debt and/or equity), a trade sale or sale to private
equity (‘PE’). Blackfinch’s view is that the establishment of a limited presence in the US would make Spotless an appealing
target to US PE.

We have modelled a Management Case and CC Investment Case and then shown a Sensitised Case which illustrates the
impact of stopping growth at 151 sites. The results are presented below.

All returns are based on a UK only site rollout and exclude the value of potential overseas expansion, with summary
financial data relating to the cases shown in the table below. It should be noted that each returns Case is based on an
annual forecast commencing on an estimated completion date of 31 May 2022, meaning that the annual financials do
not align directly to the information presented in the Financials section above.

12-Month Trading Profile Post-Completion Historical

£000s 20211 Year 12 Year 2 Year 3 Year 4 Year 5
Management Case
Number of Sites (units actual) 67 151 259 342 481 600
TTM Adjusted EBITDA 392 580 2,432 4,859 7,505 11,173
Net Debt 630 2,798 4,649 3,144 (46) (6,001)
Net Leverage 1.6x 4.8x 1.9x 0.6x 0x -0.5x
Mature Run-rate EBITDA3 1,086 2,732 5,760 8,178 12,492 16,135
Net Leverage 0.6x 1x 0.8x 0.4x 0x -0.4x
CC Investment Case
Number of Sites (units actual) 67 151 200 300 400 500
TTM Adjusted EBITDA 392 580 1,500 3,500 6,000 8,000
Net Debt 630 2,798 3,186 2,668 955 (1,920)
Net Leverage 1.6x 4.8x 2.1x 0.8x 0.2x -0.2x
Mature Run-rate EBITDA 3
1,086 2,732 5,760 8,178 12,492 16,135
Net Leverage 0.6x 1x 0.6x 0.3x 0.1x -0.1x
CC Sensitised Case
Number of Sites (units actual) 67 151 151 151
TTM Adjusted EBITDA 392 580 2,700 2,700
Net Debt 630 2,798 2,413 (687)
Net Leverage 1.6x 4.8x 0.9x -0.3x
Mature Run-rate EBITDA3 1,086 2,732 2,884 2,884
Net Leverage 0.6x 1x 0.8x -0.2x
1
12-months ending December 2021.
2
12-months post completion.
3
Assumes mature trading profile for all sites deployed and layers on operating costs for each relevant period from the management forecast.
Source: Management information.

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4.1 Management Case

Management Case returns are based on the forecast figures presented in the Financials section above, with the
site network growing to 600 units by the end of year five, supported by c£19m of capex deployment, predominantly
generated by trading cashflow, with management’s forecast assuming CC clients’ initial investment of £3.85m is followed
by a further £2.5m non-dilutive debt raise in c.two years.

We have prepared a debt capacity schedule below, which assesses the level of additional debt capacity at the end of the
first 12 months of trading, following completion of the CC client investment (assumed as the end of May 2022), based on
run-rate EBITDA for 151 sites and a leverage capacity of 2.5x EBITDA.

Expected Debt Capacity Following Deployment of CC Client Growth Cap @2.5x

Total Number of Sites Delivered 151

Average Historical Contribution per Site (£) 33,000
Run-rate Contribution for Sites (£) 4,983,000
TTM Operating Costs Following Deployment of CC Client Growth Cap (2,250,092)
Run-rate EBITDA for Network Following Deployment of CC Client Growth Cap 2,732,908
Debt Capacity a 2.5x Gross Leverage 6,832,270
Outstanding CC Client Facility at End of Year One 4,235,000
Headroom 2,597,270
Requirement Based on Management Forecast 2,500,000

Source: Management information.

Run-rate EBITDA of £2.7m is based on the historical average contribution of a fully operational site, scaled up for the 151
sites expected to be in operation after the first 12 months of trading, net of operating costs for the 12 month period per the
management forecast.

Applying a 2.5x leverage multiple (conservative in today’s market) to this figure results in total debt capacity of c£6.8m,
which, when adjusted for incumbent CC client debt plus accrued interest of £4.2m, results in £2.6m of further debt
capacity, demonstrating sufficient headroom to support management’s assumption of a further £2.5m fundraise at that
time (net of fees), either in addition to CC client investment or to permit CC client loan repayment.

For the purposes of our Management Case returns analysis, we have assumed that the additional funding is raised on
typical senior lender terms with the £2.5m carrying a five-year term, amortising at 10% p.a. and paying interest at 4%
p.a., with the CC client facility being retained. Though at this point, a larger facility could be raised with CC clients’ loan
repaid with accrued interest, leaving the equity only in place.

The initial CC client investment is assumed to redeem at the end of the five-year term as part of an exit process. The exit
enterprise value (‘EV’) is based on run-rate EBITDA for the 600 sites in operation of c£16m (using the same approach
to normalised trading as set out in the debt capacity table above) and an exit multiple of 10x. We feel the exit multiple is
likely to be prudent given the above value growth potential of Spotless. However, the £16m EBITDA is not yet a reliable
forecast, though the assumptions it is based on appear reasonable.

On this basis, we model net CC client year five returns of 3.1x and an IRR of 25.7%.

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4.2 CC Investment Case

CC Investment Case returns, again, assume that Spotless achieves its year one site deployment profile with 151 active
sites by the end of the first 12 months of trading following completion of the CC client investment. We have taken a more
prudent view of debt capacity at the end of the first year. The table below is a revised version of the debt capacity
schedule presented above, which now assumes that the leverage capacity at that time is 2x run-rate EBITDA, rather than
the 2.5x reflected in the Management Case above.

Expected Debt Capacity Following Deployment of CC Client Growth Cap @2x

Total Number of Sites Delivered 151

Average Historical Contribution per Site (£) 33,000
Run-rate Contribution for Sites (£) 4,983,000
TTM Operating Costs Following Deployment of CC Client Growth Cap (2,250,092)
Run-rate EBITDA for Network Following Deployment of CC Client Growth Cap 2,732,908
Debt Capacity a 2.5x Gross Leverage 5,465,816
Outstanding CC Client acility at End of Year One 4,235,000
Headroom 1,230,816
Requirement Based on Management Forecast 2,500,000

Source: Management information.

In this instance, only an additional £1.2m is available to the Company at the end of year one. On this basis, our Investment
Case assumes only a further £1m of debt finance is raised. We have also assumed that rather than retain the CC client
facility, which is relatively expensive as compared to typical senior debt terms, the Company chooses to refinance CC
clients as part of the additional fundraise.

This results in c£5.3m of senior debt being raised at the end of year one, refinancing CC clients’ principal and accrued
interest, and providing a further £1m of growth capital. The lower level of capital available for deployment, as compared
to the Management Case, results in a slower site deployment profile and a lower level of sites deployed by the end of
year five, which we have assumed to be c500 sites.

The CC client warrant is assumed to exercise when the CC client facility is refinanced, but the resultant 5% equity stake in
the Company will be retained until exit, in year five. The exit EV is based on run-rate EBITDA for 500 sites of c£13m and
an exit multiple of 10x, which we believe is still supportable, despite the lower growth experienced as compared to the
Management Case.

On this basis, we model net CC client year five returns of 2.4x and an IRR of 42.5%. The higher IRR relative to the
Management Case arises from the earlier repayment of the CC client loan.

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4.3 CC Static 151 Sites Scenario
This case assumes Spotless deploys the CC client facility in
full, reaching 151 sites by the end of year one, with growth
then ceasing and no further sites deployed. We assume
the enlarged network operates in line with historical
levels, with underlying operational costs maintained at
the forecast level, and with all sites achieving mature
trading, delivering a sustainable EBITDA for the 151
network of c£2.7m p.a. as set out in the debt capacity
schedules above.
On this basis, we model net CC client year five returns of
1.5x and an IRR of 14%.
In practice, if 151 sites are delivered with EBITDA of this
quantum, further expansion will be pursued, whether
in the UK or overseas, and a higher equity value can be
expected, so this case is purely to illustrative. If it took
longer to reach 151 sites but the same EBITDA multiple
was achieved, then the IRR would reduce. There is still
significant headroom to cover the CC client loan facility.

We have assumed the CC client facility stays in place for

three years, with repayment taking place by way of an
exit at the end of year three based on EBITDA of £2.7m, at
an exit multiple of 8x, which we expect to be achievable,
as there would still be an opportunity for international
expansion and the model has been clearly demonstrated
as profitable.

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Document prepared for Le Goff, Yves on 29 Jun 2022

Appendices
A. Connection Capital Terms
Arrangement Fee: £115,500 paid by Spotless Water Ltd on completion.

Monitoring Fee: £48,125 per annum (RPI linked) plus VAT payable quarterly in arrears by Spotless Water Ltd.

Carried Interest: CC or entities, partners, employees of or associated with CC as the context requires, will purchase
shares, or other instruments, in the Company with the right to received 20% of total CC client
profits (gross proceeds, before deduction of taxes if applicable, in excess of the initial investment
cost) provided clients receive all their initial capital plus accrued interest of 10% per annum thereon
for the applicable period outstanding.

All amounts are plus VAT where applicable.

B. Due Diligence
Financial: HMT LLP will undertake an investigation into the Company’s financial and tax matters with a
particular focus on reasonableness of forecast construction and historical cash conversion.

Legal: A review of key contracts and legal matters will be carried out by Gateley Plc.

The outcome of the above will be summarised and reported on in our Pre-Completion Memorandum, which will be
issued to clients who have pledged to invest in Spotless.

Investment Proposal: Spotless Water 30

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Document prepared for Le Goff, Yves on 29 Jun 2022

Connection Capital
020 3696 4010
www.connectioncapital.co.uk

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