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BePure’s story is an inspiring one, as are our ambitions for a new and exceedingly better future of health for New Zealanders and across the globe where people are empowered to take ‘self health ownership’.
BePure was originally founded by leading clinical nutritionist Ben Warren. Ben had a vision of happier and healthier communities across New Zealand, achieved by creating a new future for health. His vision has become our company mission.
This mission is being realised through the three companies that will sit under the BePure Group umbrella: BePure Health products; the BePure Clinic; and Eve Health, our at-home health testing company that launched in February 2019.
At BePure we see optimal health as a basic human right. We believe that we all have a right to access the knowledge and appropriate support systems to support our own health journeys.
Widespread knowledge about how we should be looking after ourselves, and support in keeping ourselves optimally healthy has the power to transform our current health system from a treatment model to a prevention model. The concerning, ever-growing rates of health issues such as obesity, cancer, heart disease, diabetes, auto-immunity, degrading mental health, anxiety and depression are glaring signals indicating that a change is sorely needed.
The dramatic growth of the health and wellness space globally, New Zealand included, is another bright signal of change. Consumers are the drivers of this growth, having been roused by further education and awareness brought about by thought leaders such as Ben.
These educational messages are landing profoundly with people as they witness health issues impacting the people they love and/or as they seek to take control of their own health.
Our modern environment and pace of life is creating a population who are tired, sick and overweight.
BePure supplies nutritional products, clinical services and wellness testing nationwide, selling most of its products and services on a subscription basis. BePure is leading the holistic health and wellness space in New Zealand and enabling customers to be proactive and take back control of their health.
BePure has grown its combined revenue from $2.8m in FY16 to $7.5m in FY19 (a 39% CAGR), delivering consistently strong GP margins of between 44-57% and positive EBITDA over the same period. With new equity to execute the strategic growth plan, we believe we can grow revenues to $30.6m by FY23M, delivering $6.6m of EBITDA.
BePure has created and maintains its competitive position through a combination of:
BePure’s mission is to create a new future for health. BePure is currently championing a niche within this sector, paving the way in scientifically driven holistic health that complements our existing medical model. This focuses on educating and inspiring people to take action on adapting their diets and lifestyles to support their ongoing health, incorporating bioavailable high-quality essential micronutrient support where necessary; testing for optimal health markers; then guiding and supporting people through behavioural change and their ongoing health journeys. We invite investors to join us in achieving this mission.
The global wellness economy was a USD$4.2 trillion market in 2017. The industry grew by 6.4% annually from 2015 to 2017, nearly twice as fast as global economic growth, with the New Zealand market sharing in this growth.
Global growth in the wellness economy is being driven by:
We are undertaking the capital raise in order to:
It is BePure’s mission to create a new future for health. BePure is currently championing a niche within this sector.
The key points of difference that define BePure over other holistic health or nutrition companies are:
We know through our work at the BePure Clinic, and through the ever-growing body of literature that our research team procures, that our diets and lifestyles are two of the most powerful indicators of our current and future health risk factors. Armed with scientific knowledge and data, along with experience from our years of clinical practice, we are humbled to have guided clients towards huge successes in their health journeys. We have supported clients with chronic health issues (e.g. type 2 diabetes, rheumatoid arthritis, hormonal imbalance conditions, irritable bowel disease and other autoimmune conditions), as well as reduced risk factors for future health issues by optimising their lifestyles, diets and nutritional support.
The BePure Clinic is a microcosm for the entire BePure mission. The work we do here informs and directs the strategies for both BePure Health products and Eve Health. By working one-on-one with large volumes of New Zealanders, we are able to witness the reality of the health issues that people are living with, what testing and interventions are most impactful to assist them, and what nutritional support or natural health products they require the most. Then, through the Group we are able to nimbly develop effective and relevant products and solutions, driven by the authentic need of the people we are here to serve.
Optimal health testing has been a pillar at BePure for many years, and it is often through testing that our customers experience the breakthroughs that fuel the fire of change through their health journeys. The New Zealand market for direct to consumer testing is still in its infancy. However, the direct to consumer testing market is blowing up globally. In 2017 it was estimated as a USD 211 million market in the USA alone, and is predicted to be worth USD 340 million by 2022, growing at a CAGR of 10%. Eve Health’s Hormone Balance Test as our first steps on the road of transparency into our health, we see an extensive future for the BePure Group within the global testing arena.
BePure is on a path to educate, inform, support and inspire people to take ownership over their own health, in order to transition our population to the optimal end of the health spectrum, reversing the direction of the current shocking health statistics that are shaping our communities.
BePure Health: Supplies premium high quality, high efficacy nutritional health products, distributed direct to the consumer through an online store and subscription based model, as well as being stocked in 150 retail stores throughout New Zealand (e.g. Health 2000).
BePure Clinic: Provides clinical consultations and programmes on a monthly subscription based service. These are now mostly delivered in a digital format and directly links to the distribution of BePure Health product and Eve Health testing lines.
Eve Health: Provides an at-home collection health testing service. Launched in February 2019 with its first test, a Hormone Balance Test, Eve Health makes it much easier for customers to access this type of testing, with clearer and more actionable insights from the results.
BePure’s strength is in the interlinked nature of the group that generates a strong cycle of customer education and purchase of health products to alleviate issues and promote a healthy lifestyle. Ben Warren is one of the most popular wellness spokespeople in NZ and this has helped build an impressive social media following with highly engaged customers who understand the value in our offering in improving their lives. We have some of the strongest social media marketing statistics in Australasia, rating in the top 2% based on ROI, according to Facebook.
BePure Health is currently the strongest contributor to the group and presents unlimited organic opportunities for growth, including expanding the product range, increasing retail distribution and expanding internationally by replicating and adapting our successful digital and integrated strategies.
The transition of the BePure Clinic to a primarily online business has, although resulting in a temporary reduction in turnover, created a more scalable offering at higher gross margins. Opportunities in the corporate wellness space will generate additional revenue, as well as expand the group’s audience for all its products and services.
We believe Eve Health has significant opportunity to grow in New Zealand - an assumption that is supported by our own internal customer surveys and retail distribution opportunities. Our integrated industry leading analytics methodology and direct to customer online distribution approach enables the business to be competitively priced compared with alternative international services. Future research and development will focus on expanding the service offering with additional tests and enabling expansion overseas with its existing testing service.
BePure Health Clinic Limited and Eve Health Limited are wholly owned subsidiaries of BePure Health Limited. It is BePure Health Limited that will issue new shares to investors.
The BePure companies feed into each other, providing inter-company distribution opportunities.
2018 was a year of investment, which saw us set solid foundations for the Group, and provide a platform from which we can pursue multiple opportunities for each business in 2019.
BePure’s nutritional product range has been developed and formulated by our founder, Ben Warren, and our research team, utilising current scientific literature and years of clinical experience to guide effective formulation. Our products come as a response to the authentic need for natural and nutritional support to find true health, energy and vitality. Each product is focused on delivering the highest standards in quality and efficacy. Products are produced by 4 contract manufacturers: 2 based in New Zealand, and 2 based in the USA.
We are incredibly proud of our line up of 13 products in the BePure range. We support customers with their daily essential nutrients with products such as our BePure One, the ultimate multivitamin with over 50 ingredients, alongside our BePure Three, high strength omega 3 fish oil. Other products are designed for specific needs, such as the wildly successful BePure EstroClear, which works to upregulate the liver and clear excess oestrogen to support balanced hormones, or BePure Adrenal Regenerator, which supports overstressed adrenal glands for optimal cortisol levels, and our gut health range, BePure Gut Renew Probiotic and BePure Gut Assist. BePure’s product growth in 2018 has been phenomenal.
We quickly achieved monthly revenue of circa $100k in four short months from our retail outlet launch in August 2018 into 150 stores nationwide.
In 18 months we more than doubled our autoship customer numbers. Our subscriber numbers now sit at over 7,500. Becoming masterful at social media marketing has put us in the top 2% of advertisers in Australasia based on overall performance, including ad spend and ROI.
But the proof is in our customer feedback. Many of our products boast 5 star reviews and we hear daily of how taking BePure nutritional support has transformed people’s health. Whether it’s their energy, gut health, hormone balance and beyond, BePure products are changing people’s lives and creating a new future of health.
We consider the BePure Health products business to be the strongest of the three at present, the turnover of which has been fueling the growth of the wider group in recent times. This business presents unlimited organic growth opportunities.
International Expansion: While we continue to ever-optimise our digital sales strategies here in New Zealand, 2019 and beyond will see our BePure products business expand into new markets by replicating and adapting the strong digital and integrated strategies we have used in New Zealand.
New Products: The BePure product range is ever-growing as our research and clinical insight becomes more and more in-depth. We currently have approximately 9 new products planned for this year, all with strong consumer-driven concepts behind them.
Retail Expansion: Dipping our toes into retail for the first time has presented us with an untapped and hot market to further expand. Our partnership with Health 2000 has reaped extraordinary results for both parties within the first quarter of sales, signalling a strong future for BePure’s wholesale business going forward. We aim to expand our sales throughout existing BePure retailers (utilising new products as a means to gain larger in-store presence), as well as signing up new stores or distribution partners.
BePure Group cross-opportunity: Growth throughout the Group presents further distribution opportunity for BePure products. Specifically, Eve Health as we add further tests and also with the bePure Clinic as we add further services with greater scale.
Brand and Website Refresh for NZ and International: One of BePure’s keys to success since our 2015 re-launch has been our clean branding, marketing and engaging website. The brand and website, redesigned 4 years ago, is in need of a refresh to continue the strong resonance with people and to boost us in our overseas expansion. As part of the website redesign and rebuild, we aim to create an international facing shop front to optimise for global sales growth.
The founding BePure Clinic in BePure’s home of Havelock North opened in 2015, experiencing a hugely positive response early on, with the client list continually at full capacity.
The success of the Clinic saw the natural progression of opening our flagship BePure Clinic in Auckland and online offering to meet client demand and cement BePure as the authority within the natural health space in New Zealand ’s largest city and the nation.
On top of receiving dedicated training from Ben Warren, all Clinical Consultants are trained in a variety of health modalities such as human nutrition, naturopathy, dietetics, genetics, psychology, health coaching, nursing, herbalism and personal training.
Due to the unique collaborative approach of our clinical practice, clients of the BePure Clinic benefit from the expertise of every consultant while with us on their health journey.
Our consultants offer two levels of programme: an Essentials Programme, for those who want to establish better day to day health and energy in their lives; and a Comprehensive Programme, for those experiencing more in-depth health concerns who want dive deeper into using diet and lifestyle strategies to manage these.
Our programmes are subscription based, with clients paying monthly for services. Monthly programme payments range from $139 to $298 with additional products sales and testing on top.
During 2018 we transitioned the BePure Clinic service to run as a primarily online business, underpinned by a web app built in-house that provides a platform to support clients on their journeys. Having closed our Hawke’s Bay clinic in March ‘18, we centralised our clinical offering at our flagship clinic in Auckland, allowing for a higher gross profit margin. The bulk of our clinic services are now delivered via video conferencing, allowing wider support for Kiwis regardless of their location. Investing in these changes has seen a temporary reduction in turnover, but has allowed us to create a more scalable offering for the future at a higher gross profit margin.
As the cornerstone of the BePure mission, continual advancement of the Clinic mirrors the continual growth of the rest of the Group. There are some exciting opportunities that lie ahead in 2019.
Online Programmes: The depth and width of knowledge and experience we have in our BePure clinic is vast. It is our goal to continue take this knowledge and make it accessible to more people at an ever more accessible price. We see a great opportunity to build out our online programmes with more limited involvement from a consultant but still giving great value to the customer in achieving their health goals. There is a number of target customers that would benefit from this content including, general public, corporate clients and other practitioners.
We also see the number of people on our current clinic programmes growing as demand for Holistic health moves further into the mainstream.
Corporate Wellness: There is an existing demand to expand our services into the corporate wellness arena. We receive unprompted approaches from some of New Zealand’s most prominent companies to support them and their teams in living and working in healthier ways, and have been invited into many offices to give presentations to corporate teams. These talks are well received and are already a minor distribution channel for our products and services.
We plan to focus on growing this as a distribution channel by nurturing our developing relationships with corporates, and to work with them to strategically deliver our products and services to their teams in ways that will integrate well with their culture and wellness objectives. This is an opportunity to reach an audience that largely hasn’t yet experienced BePure.
We’ve put a proposal to New Zealand’s largest logistics company as our first potential corporate wellness client, putting together plans for two areas of their business: their 50-person senior management team, and one of their warehouse teams.
Eve Health, our new at-home health testing service, was born from the results of over 14,000 women completing a BePure health questionnaire around hormone health. We observed from the data that over 80% of women are experiencing the symptoms of moderate to severe hormonal imbalance.
The data told the story of a silent epidemic that is affecting the day to day lives of women across New Zealand. The epidemic is rooted in the lack of knowledge that we have around our hormones, the roles they play in our bodies and how to look after them. Therefore, the antidote to this epidemic starts with turning on the tap of knowledge.
Eve launched in February 2019 with its first test; a Hormone Balance test. Having collected a sample at home and free-posted it to our laboratory, Eve’s Hormone Balance Test measures 19 markers, including the major sex hormones and their metabolites. The results are delivered in a way that both educates and empowers the consumer, and gives them actionable diet, lifestyle and nutritional support recommendations to optimise their hormone health. Feedback around this service to date through user testing and initial marketing campaigns has been overwhelmingly positive.
Supported by clever technical solutions that link our laboratory with Eve’s web application (that was designed and built in-house by our software development team), the customer is able to track the progress of their test every step of the way. Through BePure we’ve seen how cleverly executed influencer strategies can be powerful for brand awareness and sales expansion. Therefore, this will form a strong part of our growth plans for Eve, alongside marketing campaigns and digital outreach.
The analytics method we have developed in- house is industry leading, and stands up strongly against Eve’s main competition: the DUTCH test. DUTCH is a US-based company offering hormone testing, available to New Zealanders.
The points of difference for Eve are price (we are competitive - set price of $349 vs. DUTCH’s price range of $350-$500 depending on where you purchase it); the lab machinery we use is the latest in analytical technology that DUTCH are still trying to transfer over to; and the fact that Eve is distributed D2C using e-commerce and social media distribution techniques. The DUTCH test is distributed through natural health practitioners, and customers are required to pay for a minimum of 2 consulting sessions with a practitioner: the first to purchase the test, and the second to receive interpretation of the results and a diet and lifestyle plan. Eve’s report stands alone requiring no professional interpretation or analysis, meaning that the consumer owns their testing journey from start to finish, and the total cost of accessing testing is at least 50% lower.
As global wellness media leaders such as Mind, Body Green, Well + Good and Well Insiders are announcing women’s health and hormones as top trends to watch, the timing for Eve’s launch of the Hormone Balance Test, could not be better.
Market Feedback: Gaining both proof of concept around the service and valuable market feedback to help us continue to optimise our offering guided by the customer experience.
Wider Distribution: We are looking to expand distribution for Eve test kits. Our BePure retailers (Health 2000) are already stocking Eve tests and we see this as a strong opportunity for both parties. Outside of our traditional channels, we are looking outside the box at other distribution solutions that may bring this service to a wider audience.
Scientific R&D: From a scientific perspective, ourfocuswillremainheavilyresearchand development oriented. We have proof of concept on a new method that will enable customers to collect and send us a dried urine sample on a card, rather than a urine pottle. This opens up exponential growth opportunities for Eve abroad. Due to the fast degradation of normal urine samples and strict customs laws, it is not possible to offer Eve’s services to overseas customers with the current standard method. However, once this method is complete, it will allow us to expand internationally, running samples from all over the world from our New Zealand laboratory.
Technological Innovation: The result reports that customers receive are currently 50% automated by our in-house built software, and 50% manually completed by BePure Holistic Health Consultants. Using our software engineering resource, there is an opportunity to develop higher levels of automation around recommending diet, lifestyle and nutritional advice. As we collect more data we aim to explore how machine learning can make the service smarter, delivering the best customer experience possible. We are also in conversations with an AI company, to assess the possibility of using avatars to deliver results and provide support to users.
Overseas Expansion: Pending the R&D around lab testing methods (detailed above), the Eve HormoneBalanceTesthasthepotentialto expand into overseas markets quite rapidly, giving New Zealand an opportunity to be put on the map for our Kiwi ingenuity in health.
Expand Service Offering: Having launched with our primary test: the Eve Hormone Balance Test, we are undergoing development to add further tests to our service offering. The next test we plan to launch is a ‘stress’ test that measures cortisol and cortisone (adrenal function). This test will be an exciting step for Eve, widening the market for our D2C testing. We also have proof of concept around further tests that we will look to launch in the future.
Supply Chain: We currently have arrangements with four different contract manufacturers, two of whom are based in New Zealand and two in the USA. We are confident they have the excess capacity to support BePure’s forecast growth in the years to come. Maintaining these relationships means we are not overly reliant on any one manufacturer and can work to keep costs reasonable across the group.
Stock and Warehousing: Increase our warehousing facility space and logistics to accommodate the additional stock.
Human Resources: Current staffing split is detailed on the following page. Growth in human resourcing is focused around building out our marketing team, along with warehousing and customer support as production scales. Additional lab technicians will be hired into the Eve Health business as we scale up to support growth in this area.
Distribution: While we are primarily focused on distributing D2C online and via our clinic solutions, we also are building relationships in the New Zealand market to make our solutions available wherever consumers are looking for health solutions. We have current distribution partnerships with Health 2000, Hardys and several community health stores. We are also in discussions with an additional significant NZ based health distributor.
New Product Development: We are aiming to release several new products in the market later this FY and will continue to innovate where we see potential opportunities. These releases include products focused on skincare with a market leading collagen solution, and a menopause product. This will widen the target age demographic for BePure’s products in the lucrative baby boomer segment.
The BePure Group operates in a relatively diverse set of markets from e-commerce subscription health solutions, to holistic health consultancy work and the retail sale of health supplements.
The diversity of our business units is relatively unique in both New Zealand and abroad, and the way each feeds into generating demand and customers for the others is a strong competitive advantage. BePure has additionally built a strong brand following over many years that supports its domestic growth and sales. The strength of the brand is another strong competitive advantage that cannot be easily replicated.
BePure Health: From our investigations in the subscription D2C space, we are the only New Zealand provider of any scale providing consumers with their supplements regularly. The key to our success has been our strong ability to build and reach our target audience via social media and Ben’s speaking events.
In the retail space we compete across distribution channels (e.g. Health 2000, Hardys), pricing, and the ultimate quality of the supplements we are selling versus competitors. Each of our products typically compares favourably on both quality and pricing with our competitors. Some examples of these competitors is Nuzest, a local NZ brand with a large focus on protein and a green wellness blend and Nordic Naturals, who have a popular fish oil product.
BePure Clinic: The BePure Clinic competes with other holistic health and nutritional consultants. This is largely a fragmented market and our advantages are our digitally enabled service delivery method (meaning we can serve clients anywhere in New Zealand), the strength of our brand and its supporting product lines.
Eve Health: Eve Health has no direct competition in New Zealand or abroad in the D2C space. Our online approach enables customers to manage their testing process and automatically receive results that don’t require professional interpretation or analysis, empowering them to take positive action. Although similar tests provided by a USA - based laboratory are available through health practitioners, they require at least two professional consultations on top of the price of the test, bringing the overall spend in at well over double the cost.
Communicating our message within the parameters of the Advertising Standards Authority (ASA)
Communicating the efficacy of our products and the work we do through the clinic has always presented a challenge. Due to ASA guidelines, we are not able to specify the results that we are able to achieve for people through our products and services. We have worked closely with the ASA to fully understand the parameters of their regulations to ensure that we operate within them. We have also engaged with TAPS (Therapeutic Advertising Pre-vetting Service) to regularly review our website to give us further guidance and security.
With a long term view to combating this challenge, we have backed a not-for-profit organisation called the New Zealand Wellness Association (NZWA). NZWA has succeeded in removing the Natural Health Products Bill that would not have been supportive of a thriving health and wellness industry in New Zealand, and has submitted a new bill. Previously supported as a member’s bill, NZWA’s new bill is now being reviewed for potential to be picked up as a government bill. This bill creates more opportunities for the health and wellness market in New Zealand to thrive and stand up against international companies who provide products to Kiwis, and who have less restrictions around what they can and cannot say.
Pushback from Medical Model
From time to time medical practitioners feel threatened by the modern, alternative approach businesses like BePure and Eve take towards health. Due to outdated regulations regarding health and wellness support in New Zealand, their fear is that we will misguide customers and clients, discouraging them from visiting a registered health professional in order to manage their health concerns. The reality of how we operate is that we aim to complement the medical model, and often refer our customers and clients to appropriate medical support. It’s worth noting that attitudes around this are starting to evolve quite quickly in some aspects, as the importance of diet and lifestyle factors around health become more widely accepted.
To combat this, we have created self-regulation for ourselves, as not a lot currently exists for the natural health space, to hold ourselves to the highest standards of care and compliance. WehavealsoassembledaScientificAdvisory Board who we meet with a minimum of once per quarter. It is the role of this board to give us appropriate guidance around the scientific integrity of our services, and how to best work alongside the medical model.
Expanding into Unfamiliar Markets
We are intimately familiar with our audiences here in New Zealand, however different markets present potential challenges around understanding the cultural intricacies of their consumers and their interests. We aim to ease this challenge by focusing on one market at a time for expansion, and conducting research into the target market in order to inform our launch strategy.
We will likely engage with a strategy agency, such as Spring, to perform a market scan and report for us. Additionally, by launching online from NZ we rule out any risks of over-investing in new markets by not requiring boots on the ground or overseas warehousing until we have gained proof of concept in a market. We have also agreed a deal with NZ Post that allows us to fulfil international shipping at very financially viable rates.
As with any business, retaining/attracting key staff is important. To help manage this risk, post capital raise we will be looking to make some share options and or shares available to key staff. This offer will be for the benefit of BePure, our staff and shareholders.
Increased Stockholding for BePure Health
The capital required to increase our stockholding stretches our cashflow beyond what we are capable of sustaining, putting us at risk of overstretch. The equity we are raising will ease this risk.
Damaged, Lost or delayed Stock
Working with long lead times on products and international contract manufacturers, our product supply is always under low level risk of damage or getting lost during shipping, or delays in manufacturing that are outside of our control. By spreading our product production across a number of manufacturers we safeguard against the possibility of all products meeting the same issues, at the same time.
Complications with New Products
For many reasons, there can sometimes be delays when manufacturing products, creating the challenge of planning around launch dates that run the risk of being pushed back.
Over 90% of our product orders have 30 - 45 day trading terms, from the date of dispatch from the manufacturer’s warehouse. As many of our products are made in the USA there is a 3 - 5 week delivery time before they reach our warehouse in NewZealand. This effectively makes our trading terms COD. To facilitate the planned new product development, additional contract manufacturers will be required. It is standard in contract manufacturing relationships for 50% deposits to be paid up front, with the balance due for payment on dispatch. It is usually around 12 months before they are willing to negotiate trading terms.
Corporates Investing in Employee Health
While many companies are waking up to the benefits of investing in the health of their employees to improve their quality of life and happiness, increase productivity and to reduce sick days, there is a difference between identifying a need and actually investing in that need. It may be a challenge to get businesses on board with such an investment. However, we have a few large businesses who are interested in developing a corporate wellness offering with us and once we can show success with one business, confirming further clients will be much smoother.
New Product LaunchAs with launching any new product or service, there is always a challenge to get the messaging, price point and offering exactly right to achieve maximum cut through in the target market. We hope to rise to this challenge by staying close to our customers and acting quickly to adapt to feedback. In user testing and research conducted thus far we have gained excellent feedback, and have been able to nimbly adjust our approach based on our audience’s preferences.
Turnaround Times of Results
Managing a commercial lab and implementing efficient lab processes is new territory for us. We are learning quickly, and as a safety catch we have exaggerated the lead times for customers to expect to receive results to allow for any delays or issues with machinery. We are also gaining advice from members of our scientific advisory board (Prof. Mike Eccles and Dr. David Woollard) around ways to find efficiencies in our lab processes.
Delays with R&D
Due to the need to prioritise processing client samples at the lab, R&D may only be started once we have been able to set up a second LC-MS machine for R&D. We will also require additional lab staff to free up one of our senior laboratory scientists to focus on the R&D work. This is something that without the additional capital we are seeking through this raise, would be hugely challenging to achieve. However, the funds we are looking to raise ease this challenge substantially.
We currently have one LC-MS machine to process client samples, and 2 lab scientists and a lab assistant. Therefore, we are confined to the capacity of our current machinery and staff. This limits the number of tests we are able to sell and process per month. In order to grow we will require another machine, and additional lab staff to increase capacity. As above, without further capital this would be a challenge, however the funds we are looking to raise will ease this challenge and allow for further growth.
The BePure group has focused on topline growth, with significant reinvestment of gross profits in developing the Eve Health business. Notwithstanding the material investment in Eve Health, the group has produced positive EBITDA over recent financial years, delivering $427k in FY19.
Revenues have grown by a CAGR of 39% over the period FY16 to FY19. Domestic D2C retail revenues are forecast to grow at 25% through to FY23. This is underpinned by the launch of new products in FY20, increased marketing spend and historical growth. Wholesale revenues are forecast to more than double in FY21 and thereafter grow at an average 45%, with growth based on the success of our existing wholesale partnerships, launch of new products and anticipated new partnerships that are expected to significantly increase our retail store distribution network. International revenues are projected from FY21 onward, with growth based on historical NZ performance, albeit in much larger markets, and is conservatively projected to be less than 40% of the size of domestic sales by FY23.
Revenues have grown by a CAGR of 49% over the period FY16 to FY19. The closure of the Hawkes Bay clinic and transition to a mostly online model in FY19 led to a temporary reduction in revenue, but created a more scalable offering with higher margins. Revenues are forecast to grow at an average rate of 25% from FY20 to FY23, underpinned by introducing corporate wellness programmes, increased consultations from testing products and increased marketing spend.
Eve health generated revenues of $82k from its first 10 weeks of FY19 operation and has completed more than 650 tests in the first 7 months of operation. Domestic revenues are forecast to grow from an average of 128 tests per month in FY20 to 600 per month in FY23, with an average price of $260 plus GST. These domestic forecasts are based on the estimated target market of 595,000 for our initial hormone test.
International revenues are projected from early FY21, once R&D on dried sample collection processes is complete, with an average of 200 tests per month in FY21 growing to an average of 1,000 tests per month in FY23. This revenue growth is further supported by increased marketing spend, expanding distribution channels, introducing new tests into broader target markets and implementing a re-testing programme that allows subscribers to track progress over time.
Projected gross margins are based on historical gross margins, with a slight decrease to 54%. All relevant products costs are known and it is assumed any pricing pressure will be offset by cost saving benefits arising from increased scale.
Projected overhead expenses are based on historical overheads, adjusted to reflect additional costs consistent with our business plan and inflation. The majority of forecast overheads will be managed in line with revenue growth as our expansion strategy is validated.
Increased occupancy costs over historical is based on additional costs for larger warehousing and laboratory space as required to manage planned growth. The forecasts do not include any potential occupancy costs savings (c. $200k per annum) arising from current efforts to sublet the original Hawkes Bay clinic space or surplus head office space.
Sales and marketing costs
Marketing expenditure as a percentage of total sales will increase from 4.1% in FY19 to 6.5% for FY20 and growing to 8.9% for FY23, as we target revenue growth and generate awareness in the Eve Health testing service.
Wages and salaries costs
Wages and salaries costs are projected to increase, particularly in the Eve Health business in the form of additional lab technicians, as we expand our testing capacity. Additional marketing staff will also be hired to ensure increased marketing spend is effective.
Development and software costs
Development and software costs are based on maintaining FY19 actual development costs.
Growth in other expense costs relate to additional laboratory operational costs, along with increased administrative costs, legal fees, intellectual property costs and travel costs related to the planned international growth.
Operating inflows are forecast to be broadly in line with sales, with receivables continuing to represent a small proportion of sales due to the D2C business model.
Cost of sales are forecast in line with historical gross profit margins and other operating outflows are broadly in line with operating expense forecasts, with some additional outflows arising from increased stock holdings.
Capital expenditure reflects investment in additional laboratory equipment to expand the capacity of the Eve Health business required to service forecast demand, along with investment in leasehold improvements and warehouse fitout.
As at 31 August 2019, there are shareholder loans of $1.1m. $576k of these will be capitalised as equity on completion of this equity raise. The balance of the shareholder loans attract interest at 10% per annum and will be refinanced with bank funding at more attractive funding rates as soon as practicable.
These loans can only be refinanced and/or repaid with the approval of all directors (including independent directors) where they determine it is in the best interests of the company.
Account receivables and accounts payables are based on historical trends, with receivables continuing to represent a small proportion of sales due to the D2C business model.
Stock holdings increase to equate to 5 months of sales, to ensure the business can satisfy expanding demand.
Increases in fixed assets reflect investment on two new pieces of lab equipment in FY21, an additional machine in FY23. Exact timing to be dependent on revenue growth. Further investment will be made in leasehold improvements and warehouse fit-out.
Depreciation methods are maintained from current practice.
As at 31 August 2019, there are shareholder loans of $1.1m. $576k of these will be capitalised as equity on completion of this equity raise. The balance of the shareholder loans attract interest at 10% per annum and will be refinanced with bank funding at more attractive funding rates as soon as practicable.
These loans can only be refinanced and/or repaid with the approval of all directors (including independent directors) where they determine it is in the best interests of the company.
We are raising a target of $1.6m to $2m in equity to invest in the following initiatives for future growth:
At BePure, our initial goals were to grow our product range into a profitable multi-million dollar business, establish ourselves as the leader in the health and wellness space in New Zealand through our clinical and educational work, and to expand our foundational offering to include health testing. We have substantial evidence to suggest that these goals can been achieved and we believe that we are on the cusp of the most exciting time our business has seen to date.
Shareholders investing in BePure will be acquiring an interest in all 3 of our businesses and will have the opportunity to go on this journey with us, putting their investment towards a business that is truly supporting change in people’s lives, enabling us to help even more people and capture a portion of the value for shareholders along the way.
We are looking to raise $1.6m to $2m of equity, including the conversion of $576k of shareholder loans. If this investment round is oversubscribed, we reserve the right to consider accepting further investment. Individual minimum investment is set at $1,000 for new investors or non-staff.
At this stage we have no plans to pay dividends to investors. Our plan is to reinvest all profit into further growth and expansion; to support capturing larger value in the future.
BePure Group is set to deploy a strong growth strategy over the next 4-6 years, to position us to carry out an IPO or trade sale within the same time frame, potentially creating liquidity for shareholders. However, the trading market for this investment is likely to be limited and you may not be able to sell it, as there is no guarantee that any IPO or trade sale will be undertaken.
Should a shareholder want to sell their shares prior to an IPO or trade sale we will try to match potential buyers and sellers, however, this may not always be possible. If a shareholder wishes to sell shares, we ask that they inform us of this intent.
The BePure board and existing shareholders, having regard to independent advice, have set the pre-money enterprise valuation for the existing Products and Clinic businesses at $19.5m and the newly established Eve Health business at $3m resulting in a total pre-money enterprise valuation for the BePure group of $22.5m and a pre-money total equity valuation (net of debt) of $21.0m.
The valuation has been determined having regard for:
The combined BePure Products and Clinic business has been valued based on a multiple of FY19 revenue. BePure sought high level independent advice in arriving at a valuation. The preferred valuation approach was a revenue multiple. This was on the basis of the high level of subscription revenues, less a discount for the higher churn rates relative to a software as a service (SaaS) business. Multiples for SaaS businesses with revenues exceeding $1m are typically between 4-7x revenue. A discounted cashflow (DCF) approach was considered unreliable due to its reliance on forecast accuracy and sensitivity to weighted average cost of capital (WACC) assumptions. The high level independent advice indicated a valuation for the existing Bepure Product and Clinic businesses as between $19.2m and $29.3m, with a midpoint valuation of $26m.
BePure set a pre-money enterprise valuation of $19.5m for the existing BePure Products and Clinic businesses, implying a multiple of 2.6x FY19 revenue of $7.5m. .
The D2C lab testing market is in relative infancy but is expected to achieve double digit growth. With no direct NZ or Australian competitors to compare with, Viome, a US company operating in the Gut Microbiome D2C at-home testing market with estimated revenues of US$3.4m, provides the closest capital raising comparison. In this regard, Investors have demonstrated recognition for the D2C testing market opportunity by investing capital of US$45.5m in Viome across two rounds between 2017- 2019. The Eve Health business differentiates itself from Viome by targeting the hormone space. This is where we believe is the greatest opportunity, based on clinical practice, large customer surveys and global wellness trends.
It is not possible to apply a revenue multiple to set a pre-money enterprise valuation, as the Eve Health businesses has only recently started generating revenue. Accordingly, the BePure board have set the pre-money enterprise valuation of $3m for the Eve Health business by taking into account the significant investment in laboratory infrastructure and test development, the inter-company distribution and leverage opportunities and the market opportunity.
The directors believe the most likely exit would be from a partial trade acquisition or IPO. Applying a multiple of 4-5x to forecast FY23 revenues of $30.6m implies an exit value of $120m to $155m.
Valuation of the company before funds are invested
Amount required for the offer to be deemed successful
The maximum amount the company is looking to raise
Percentage of the company offered at the minimum target
Percentage of the company offered at the maximum target
The cost of each share
The minimum investment amount for this offer
See the Subscription Agreement for details
BePure may have rights to shorten or extend this period
BePure may have rights to shorten or extend this end date
We are seeking to raise up to $2m of capital to fund our market growth strategies and product development activities, which are centered on our product, clinic and testing businesses.
The funding targets noted above include the conversion of $576k of shareholder loans into equity.
BePure is offering ordinary voting shares (Ordinary Shares) ranking equally with all other shares on issue. The Ordinary Shares to be issued by BePure are to be issued to Snowball Nominees Limited (“Nominee”), who will hold legal title to those Ordinary Shares on trust for the relevant beneficial owner of those Ordinary Shares (i.e. the investor). Further detail on why BePure is choosing to use a Nominee is described under the heading “Nominee Shareholding Structure” below.
Holders of Ordinary Shares have:
Holders of Ordinary Shares are also subject to drag and tag along rights (as set out in the Shareholders’ Agreement).
The Subscription Agreement, Shareholders’ Agreement and Constitution set out other terms that will apply to a shareholding in BePure. You should read these documents before subscribing for Ordinary Shares under the Offer.
The shareholder rights which will attach to the Ordinary Shares are set out in the New Shareholders' Agreement and Constitution.
The New Constitution includes some mechanisms which maintain the control of the majority shareholders. For example, the New Constitution provides that Ben Warren and Andrew Laloli shall each have the right to appoint one Director by notice in writing to the company, and a corresponding right to remove a Director so appointed.
The New Shareholders' Agreement and Constitution also contain mechanisms which restrict the control of the board and majority shareholders. For example:
The New Shareholders' Agreement sets out certain exceptions to the pre-emptive rights which apply for the issue of new equity securities (including shares, convertible debt and options), including exceptions for:
Copies of the Shareholders' Agreement and New Constitution are available for your review and you should read it carefully, (along with the subscription agreement setting out the terms of your investment) before applying for Ordinary Shares in this Offer. Your subscription is conditional on BePure adopting the New Shareholders' Agreement and Constitution. If this does not occur before the end of the Offer Period, your subscription funds will be returned to you from the Snowball Trust Account.
The BePure board have set an initial capital raise range of $1.6m to $2m. However, the BePure board have the right to accept over subscriptions of up to $0.5m as part of this capital raising round.
We intend to use Snowball Effect’s Share Registry service.
We are making use of a nominee shareholding structure to prevent BePure from becoming a “Code Company” for the purposes of the Takeovers Code. In broad terms, a company becomes a Code Company when it has 50 or more (voting) shareholders and share parcels, and shareholders of Code Companies can be restricted in how and when they are able to transfer their shares. Due to its size, the BePure directors do not believe it is in the best interests of BePure, its existing shareholders, or investors for BePure to become a Code Company and bear increased compliance costs.
The Ordinary Shares to be issued by BePure are to be issued to the Nominee, who will hold legal title to those Ordinary Shares on trust for the relevant beneficial owner of those Ordinary Shares (i.e. the investor). The full terms on which the Nominee will hold the shares are set out in the Nominee Deed Poll (which forms part of the Offer Documents).
In broad terms, the Nominee must:
Under the Nominee Deed Poll, each beneficial owner indemnifies the Nominee against any losses, damages, costs, actions, proceedings, claims and demands that may be made against or incurred by the Nominee as a result of it holding the Ordinary Shares under the Nominee Deed Poll (unless the Nominee has been fraudulent or grossly negligent).
Executives and other employees are remunerated by BePure through fair and reasonable salaries. All remuneration of key executives will be reviewed periodically by the directors to ensure that remuneration is market driven and reflects individual performance and achievement of role objectives.
To date no directors have received directors’ fees. Following closing of this offer all non-executive directors who hold less than or equal to 5% of the issued equity of BePure (either directly or indirectly) will be paid market based directors fees. Non-executive directors who hold more than 5% of the issued equity of BePure and executive directors will not receive directors’ fees. Director fees will be reviewed periodically to ensure that they are market driven.
BePure currently pays $1,200 per month for a gardener to assist with maintaining a large vegetable garden at Ben Warren's property in the Hawkes Bay. The garden is used regularly in BePure promotional imagery. BePure also pays rent of $250 per week to Andrew Laloli for a room used by Ben Warren when staying in Auckland.
Under the New Shareholders' Agreement the BePure directors have the right to issue employee options, shares or other securities up to 5% of the total shares on issue during any 12 month period. BePure intends to implement an employee share purchase plan for key employees following completion of this offer as a means of retaining and motivating those employees.
There are no litigations or disputes known to the BePure directors or management.
Andrew Laloli was the sole director and shareholder of Laloli Group Limited, a company that was liquidated following losses incurred due to a disputed construction contract. No breaches of legislation by the company or its director were found to exist.
The BePure group has operated out of three New Zealand based companies, called BePure Health Limited, BePure Health Clinic Limited and Eve Health Limited. BePure Health Limited holds all the shares in BePure Health Clinic Limited and Eve Health Limited. Investors will be buying shares in BePure Health Limited.
The following tables set out the current shareholding structure in BePure Health Limited (following a share split which will take place prior to close of the offer), as well as the projected ownership structure on completion of the offer (for both the minimum funding target of $1.6m and funding target of $2m). The final shareholder structure may vary from this due to factors such as the actual amount raised and rounding of individual allotments.
Upon the close of the offer, the existing majority shareholders, Ben Warren and Andrew Laloli, will each convert $476,000 and $100,000 respectively of existing loans to BePure into ordinary shares at a share price of $1.00.
We have no current plans to return internally generated cashflow to shareholders, instead preferring to reinvest in the business to enable us to best execute on its strategic plan. As we grow in scale and potential profitability, the BePure directors will consider all avenues for generating returns for shareholders.
We currently have two directors:
Biographies of the directors can be found on page 28 of the Information Memorandum.
The New Constitution requires that at least one, and up to two independent directors (as defined) shall be appointed by the Board (and may be removed or replaced by a majority of the Board). The New Shareholders Agreement requires decisions involving certain related party transactions to be agreed on by an independent director, including:
There is currently no independent director on the board, but one shall be appointed on completion of a successful capital raise, and on adoption of the New Constitution.
Board meetings are expected to be conducted monthly.
We currently have three members on the Scientific Advisory Board:
We have also had a business advisory board over the last few years. We are currently in the process of reviewing the future of the existing business advisory board with a view to establishing a business advisory panel best suited to advise on the key growth strategies of the business over the medium term.
While there is no existing plan, or identified requirement, to raise additional funds after this funding round, the BePure directors have received an approach from a potential strategic investor which may provide other benefits for BePure, if it progresses further. The directors may also elect to raise additional capital in the future to accelerate growth plans or take advantage of other opportunities that will increase shareholder value, as they arise.
We intend to keep our investors updated through:
Snowball Effect charges an initial fee of $5,000 and a fee if a company successfully reaches its funding target. This latter fee is the larger of $25,000 or up to 7.5% of the funds raised. Snowball Effect may amend this fee in discussions with a company before an offer is listed on Snowball Effect.
The distribution of this offer outside of New Zealand may be restricted by law. This is not intended to, and does not, constitute an offer of securities in any place which, or to any person to whom, the making of such offer would not be lawful under the laws of any jurisdiction outside New Zealand. This includes, but is not in any way limited to, Australia and the United States. It is the responsibility of any Snowball Investor to ensure compliance with all laws of any country outside New Zealand relevant to their subscription, and any such Snowball Investor should consult their professional advisers as to whether any governmental or other consents are required, or other formalities need to be observed to enable them to apply for securities pursuant to each offer. The failure to comply with any applicable restrictions may constitute a violation of securities law in those jurisdictions. The securities in each offer have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States.
It's crucial for you to understand the characteristics and risks of this investment opportunity. New Zealand law normally requires people who offer financial products to provide in-depth information to investors before they invest. The usual rules do not apply to offers by companies through Snowball Effect. As a result, you may not be given all the information you need to make an informed decision. Investing is risky. Some of the key risks include loss of capital, illiquidity, lack of returns, dilution, loss of key people and customers, and lack of control. You should only invest money that you can afford to lose.