The clothes Project- A

PE fund Investment

David Brandão
Marc Harik
Operation Summary
The clothes project is a footwear company founded in 2017 by Mr.Smith and Mr.Will. Clothes
Project at this date as sold more than 20k units of its products which are charcaterized at the
Company same time by their innovation and their envioramental friendly raw materials. Their 2022
EBITDA was -21k and their revenue 2100k and its a company with huge growth potential

In order to capitalize on this growth Clothes Project seeks for cash to support CAPEX needed
for the opening of stores, the personnel needed to operate and support their marketing
expenses which will be crucial to grow.For this they aim to:
Operation and
• Raise 1200k in Equity from Skema Investments PE Fund
Investment stake
• Raise 1300k in debt which will also leverege the operations
• According to the business plan the IRR for the PE fund will be around 140% with an exit
year in 2027

• Launch phisical stores to enhance the brand´s name, revenues and growth.
• Marketing expenses to enhance growth on online sales.
Investment plan • Launch a new pair of running shoes to increase the average price per sale from 0.2 to 0.3
and therefore improve the margin over the client.
Presentation of the Business
Created in 2017 Clothes Project has a clearly focus on Sport´s
products. With the expirience and technological background of
their founders the company´s products are:

• Innovative
• Ethical
• Diffrentiated
• Competitive in terms of price

Which are key factors that explain their huge growth potential
and market niche. They do not only sell differentiated running
shoes but also extend their expertise to sport´s smartwatches
and other products that may expirience more profitability.
Strenght of the products
Running shoes:
• Ethical Products
• Technologically advanced
• Differentiated
• Acessories and Sport´s Smartwatches:
• Highly conectable with smartphones
• Complementary to the othe other products
(Running shoes per example)
Market Features and Future

• With new investment presence both in online platforms

through their website and also in phisical stores:
• E-Commerce has been growing since the covid pandemic, and
Clothes Project with extra marketing and advertisement
expenses expects to benefit from this trend ($6.3 trillion-$8.1
trillion; 2021-2026)
• This market is a very competitive one both from the running
shoes perspective and also from their acessories, however
there are lots of branches: Professional equipment;
Competitive; Casual and the market is expected to grow
($121.3 Bn-$171.9 Bn; 2018-2028)
• Clothes Project its expected to differentiate itself due to their
shoes highly connectivity and ethical compliance
Competitors
• Running shoes:
Market with lots of big players already Acessories:
well estabelished and some with loyal
customer´s base:
• Nike; Adidas; New Balance; Sketchers;
Hoka-One (In the running branch) Brands also with loyal customer´s
base but with not the same
• Allbirds; Reformation; ABLE; Cariuma complementary features with
etc (In the ethical products branch) shoes:
• Very little competition regarding
technological conectivity
Garmin; Wahoo; Polar etc
Points of attention
The increase in price of
sustainable raw materials
which can impact the
margins
Canibalization between e-
commerce sales, shop sales
and market places sales ,
which can impact the
revenues in a substantial way
Cost of debt financing due to
Increase of Wages due to
high interest rates
inflationary process
enviornament
Transportation and logistic
costs can be impacted by the
Increase competition in this
outcome of the actual
branch of the market
marcoeconomic and
geopolitical environment
Capital Table Before and After Operation

• Before: After Operation:

• 8800 Shares • Skema PE Fund cash in of 1200 000
• 13200 shares at $91
• Equity Value $800000 • Equates to 60% of the total share number
• Share value $91
Amount Expected to invest Number of shares Amount in reality
Investor 1200000 13200 1200000

Equity value Pre-money Share value Pre-Money

800000 91
Uses and Sources

New capital:

New assets New Capital

Equity 1200000
$1 200 000 Equity capital
from PE Fund Cash 2500000

Debt 1300000
Total 2500000 Total 2500000
$1 300 000 Debt Finance
with 5 years maturity at
4% interest rate
SWOT Analysis
Strenghts: Opportunities:
• Differentiated Product • High Growth Potential
• Innovative • Possibility to cooperate with big players due to
their expertise in the innovative/connectivity
• Social and environmental responsability branch of the running shoe business
• Competitive Prices • Claim their spot in the industry by exploring
Weaknesses: their ethical and enviornmental culture
• Innexprience in B2C business model Threats :

• Low recognition • Exposed to big players retaliation

• Canibalization between online and shop sales
• Scale
 Investment Plan and Horizon
Performance based on BP made by management of
• High IRR is justified by Sales´growth Clothes Project
Performance Based on Worst Case scenario
rate
Exit Multiple 10 Exit Multiple 10
• Profitability of the product
Exit Value 44823088 Exit Value 9 956 912
Enterprise Value 64875397.05 Enterprise Value 17 862 287
• Multiple based on first valuation of
Net Debt -9829750 Net Debt 1 267 434
the company and the very
Equity Value 74705147.27 Equity Value 16 594 853
conservative assumption that it will
be the same upon exit Entry Date 01/01/2023
Entry Date 01/01/2023
Exit Date 01/01/2028 Exit Date 01/01/2028
• Investment of 1200 000 by Skema Expected IRR 70%
Expected IRR 147%
PE Fund, through cash-in in equity Expected Money Multiple 37 Expected Money Multiple 8

Pre Money Valuation

Multiple 10
Financial Net Debt 204000
Value of Shares 800000
Enterprise Value 1004000
Historical Financial Statements
• Even without the new phisical shops Clothes
Project´s revenues have been experiencing very
high growth rates:
• Increase in online sales due to the catalog

• Their Gross Margin has also been growing, and

is in 2022 (76%)
• Especially because of the acerage price per
sale increase from $0.1k to $0.2k

• The Net Margin suffered some drawback

because of substantial increases in Marketing
expenses and also in transport and logistic

• Clothes´Ebitda is becoming less negative and is

in 2022(-$21000) when compared to 2021(-
$102000).
Historical Cash Flow Statement
FCFF
The Free Cash Flow to the Firm has been
Investment Period
improving and among this trend drivers are: Date 2018 2019 2020 2021 2022
• The improvement of the EBITDA EBITDA -149.0 -138.0 -171.6 -102.0 -21.0
• The lower Capex due to online channels Financial Result
Exceptional Result
0.0
0.0
0.0
0.0
-4.9
0.0
-4.2
100.0
-3.5
-30.0
• The Working Capital has been shifting and ΔWC -12.3 2.9 9.9 8.4 -19.6
Income Tax 0.0 0.0 0.0 0.0 0.0
2022 is charachterized by more credit due
CAPEX 305.0 20.0 20.0 15.0 15.0
to the high increase in Accounts Payable
Free Cash Flow to the Firm -441.7 -160.9 -206.4 -29.6 -49.8

The Financing Flow just comprehends: ΔDebt

Dividends
0.0
0.0
0.0
0.0
302.2
0.0
-48.5
0.0
-49.2
0.0
• The $880 000 of Equity Equity Capital 880.0 0.0 0.0 0.0 0.0

• The Debt assumed in 2020 in the amount Financing Flow 880.0 0.0 302.2 -48.5 -49.2

of $350 000 Variation of Cash 439.0 -160.9 95.8 -78.1 -99.1

Opening cash 0.0 439.0 278.1 373.9 295.7

Closing Cash 439.0 278.1 373.9 295.7 196.7
Control for Cash 439.0 -160.9 95.8 -78.1 -99.1
 Business
Plan
Management
 Business Plan
2 023 2 024 2 025 2 026 2 027
Online sales 3 188 4 463 6 248 10 086 14 121
Market place sales 1 275 1 530 1 658 1 792 1 792
Shops Sales 300 1 110 2 385 3 845 5 622

Business Plan Worst Case Scenario

Total revenues 4 763 7 103 10 290 15 723 21 535
% growth 127% 49% 45% 53% 37%

Cost of supplies online sales -1 084 -1 111 -1 309 -2 078 -3 040

Cost of supplies shop sales -102 -377 -811 -1 307 -1 911
Gross Margin 3 577 5 614 8 170 12 338 16 583
% Revenue 75% 79% 79% 78% 77%
% Revenue 75% 79% 79% 78% 77%

• Sales on shop drop to 300 instead of 500 Packaging

% revenue
Transport & logistic
-863
-15%
-578
-1 335
-15%
-776
-1 991
-15%
-1 023
-3 049
-15%
-1 531
-4 203
-15%
-2 051
% revenue -10% -10% -10% -10% -10%
Marketplaces fees -450 -540 -585 -630 -630
% revenue -30% -30% -30% -30% -30%

• Price not able to reach 0.3 instead 0.26 Payment fees

% revenue
Marketing
-105
-2%
-1 898
-141
-2%
-1 175
-186
-2%
-1 752
-278
-2%
-2 683
-373
-2%
-3 698
%Revenue -30% -12% -12% -12% -12%
Net margin -316 1 648 2 632 4 166 5 628
% revenue -7% 23% 26% 26% 26%

• Transport; logistic and Marketing raise IT costs

% revenue
-58
-1%
-89
-1%
-133
-1%
-203
-1%
-280
-1%

by 10% Offi ce rent

% revenue
Shops costs
-30
-1%
-60
-30
0%
-198
-30
0%
-374
-30
0%
-530
-30
0%
-713
% revenue -1% -2% -3% -3% -3%
G&A expenses -115 -178 -266 -407 -560
% revenue -2% -2% -2% -2% -2%

• Wages by an additional 5% Payroll (incl employees in shops)

%Revenue
Taxes
-583
-10%
-173
-798
-9%
-267
-1 134
-8%
-398
-1 386
-6%
-610
-1 607
-5%
-841
-3% -3% -3% -3% -3%

EBITDA -1 334 88 298 1 000 1 597

• DSO;DPO and DIO adjusted to more % CA

Depreciation and amortization

-28%

-19
1%

-105
3%

-120
6%

-136
7%

-144

conservative values Financial Result

Exceptional Result
-52 -56 -56 -56 -4

Income tax -374 -650 -1 118 -1 594

Net profit -1 404 -447 -528 -310 -145

% CA -29% -6% -5% -2% -1%

#clothes sold 12 500.0 17 500.0 24 500.0 39 400.0 55 160.0

#clothes sold on marketplace 5 000.0 6 000.0 6 500.0 7 000.0 7 000.0
# shop 1.0 3.0 5.0 6.0 7.0
Average price per article 0.255 0.255 0.255 0.256 0.256
ETP 10 12 14 15 15
Average wage (excluded people in shops) -55 -55 -55 -55 -55

DSO 10.0 10.0 10.0 10.0 10.0

DPO 30.0 30.0 30.0 30.0 30.0
DIO 75.0 75.0 85.0 85.0 85.0