Squirrel Group is made up of Squirrel Mortgages, Squirrel Money, and TenanSee. It is this unique combination of (proprietary) technology working alongside our brand and growing market share of mortgage brokering that we think puts us in the right place at the right time to lead market disruption.

Minimum investment: $5,000 NZD

Min target: $1,000,000 (7.90% equity) Max target: $4,970,000 (17.90% equity)
Ended 2016-04-10 21:00:00
163 Number of investments
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$3,424,400 Funded
163 No. of investments
$1,000,000 Min. target (7.90% equity)
$4,970,000 Max. target (17.90% equity)
Offer closed 9:00 pm, 10 Apr 2016
Squirrel hero image

An update from CEO John Bolton

skwɪr(ə)l/ (noun)

An agile tree-dwelling rodent with a bushy tail, typically feeding on nuts and seeds.

The squirrel is a metaphor for what we do. While you might think this is simply about saving - the classic Squirrel metaphor - in reality it’s more than that. Much more.

A squirrel gathers nuts for the winter, but is compelled to do so through the knowledge of what is coming. It’s planning for the future. This forward-looking and prudent aspect of the squirrel is often overlooked. It’s a foundation behaviour, genetically hardwired over millennia of evolution.

This obsessive gathering is our way of reminding ourselves that you cannot know the future, you can only prepare for it as best as you can, by laying great financial foundations.

At Squirrel, we are far more focused on a customer’s financial future than simply making a sale.

And in today’s world of financial services we think that makes us very different. It makes us think, not only about our relationship with customers in a more holistic way - but also about the products and services we develop for them. Squirrel Mortgages is about using our expertise to help people make better, future focused decisions.

It’s why our innovations like Squirrel Money are founded on ways to inform, empower and liberate our customers from a market where odds are often stacked against them getting ahead.

For us, focusing on the big picture is everything. It’s why we’re making a difference for kiwis everyday.

The opportunity

Banking is the most profitable industry in New Zealand generating profits in excess of $5.17 billion1 per year. Technology is reducing barriers-to-entry for banking services and creating opportunities to disrupt the sector.

Squirrel Group Limited (Squirrel Group) already has skin in the game through Squirrel Mortgages Limited (Squirrel Mortgages). As a mortgage broker we have been around since 2008. In eight years Squirrel Mortgages has gone from a start up to one of the largest mortgage brokers in the country and is targeting to arrange over $1 billion of mortgages in the financial year ending 31 March 2017.

But Squirrel Group is not ‘just’ a mortgage broker. The group has always had a technology focus and in late 2015 through Squirrel Money Limited (Squirrel Money) we launched our peer to peer lending platform.

It is this unique combination of (proprietary) technology working alongside our brand and growing market share of mortgage brokering that we think puts us in the right place at the right time to lead market disruption.

[1] KPMG Financial Institutions Performance Survey (FIPS) Quarterly Report December 2015.

References to dollars and $ refers to New Zealand dollars (NZ$) unless otherwise stated.

Squirrel Group is currently profitable with Squirrel Mortgages and Squirrel Money having consolidated pre-tax operating earnings of $605,000 for the financial year ended 31 March 2015 and forecast pre-tax operating earnings of $612,000 for the current financial year ending 31 March 2016.2

Beneath this result are two distinct businesses.

Squirrel Mortgages will have pre-tax operating earnings of $1.6m for the year ended 31 March 2016, which is projected to increase to $5.7m in the financial year ending 31 March 2019. The reintroduction of trail commission by banks will contribute significantly to profit growth in Squirrel Mortgages even if our volume of loans arranged each year remains the same.

Our mortgage volumes have grown on average by 57% per year for the past four financial years from $130m in the financial year ended 31 March 2012 to a forecasted $800m in the financial year ending 31 March 2016.

Growing our market share of mortgage brokering is the backbone of our Squirrel Mortgages strategy. In addition, currently, the value of mortgages arranged by brokers is estimated to be around 33% of the mortgage market in New Zealand. Australian experience suggests that mortgage brokers are likely to trend towards 50% share of the mortgage market.

Mortgage brokering is a fragmented industry. There are a number of brokers who are part of small non branded companies that are often reliant on the owner’s personal reputation. Squirrel sets itself apart by being a single, well recognised operation that provides a one stop shop for the customer.

Squirrel Money is a peer to peer lending platform that launched in November 2015. It is in start-up phase and is forecast to have a pre-tax operating loss of $1m for the year ended 31 March 2016. Our low operating costs and shared infrastructure means it is forecast to reach break even during the financial year ended 31 March 2018.

The consumer finance market in New Zealand currently has around $15 billion of outstanding loans of which around $12 billion is interest earning. In New Zealand peer to peer lending is a nascent industry, however overseas the peer to peer markets, while still new, have quickly gained traction. In the US peer to peer lenders issued approximately USD5.5 billion in loans in 2014 with volumes growing at an average of 84% per quarter since 2007.3

With high margins, the New Zealand consumer finance market is ripe for disruption. Borrower interest rates typically range from 15%-20% which contrasts with bank funding costs around 4.00% and low expected credit losses for high quality borrowers.

We have always had a focus on technology. Squirrel Mortgages was an early adopter of online mortgage applications and cloud technology, and as a business we will continue to invest in technology. Squirrel Group is at the cutting edge of technological change in financial services. We are well positioned to take advantage of a rapidly changing market.

Historically we have funded our growth and technology development programme through operating cash flow and a bank overdraft. The need to manage cash flow (and avoid big debt commitments) has become a constraint on growth.

We are raising up to $4.97m of capital in these offers to fund our IT capital expenditure programme, fund our Squirrel Money peer to peer lending platform (by seeding a reserve fund and having a liquidity buffer), cover working capital for our growth initiatives, and cover capital restructure and offer costs.

We believe there is nobody like us, doing what we do in quite the same way. By investing in Squirrel Group you will gain exposure to an established high growth financial services business and potential market disruptor.

[2] Operating profit is earnings before tax, interest, depreciation, and one-offs (also referred to as EBITDA). Our 2015 financials were audited by KPMG.
[3] Peer pressure: How peer-to-peer lending platforms are transforming the consumer lending industry” (February 2015) PwC Consumer Finance — www.pwc.com/us/en/consumer-finance/publications/assets/peer-to-peer-lending.pdf

Funding and corporate structure

Squirrel Group is seeking to raise up to $4,970,000 through a combination of the Snowball Offer and the Wholesale Offer for a maximum shareholding of 17.9% and a pre-offer valuation of $22.9m.

The Snowball Offer is for a maximum of $1,970,000 and the Wholesale Offer is for a maximum of $3,000,000. The minimum amount to be raised is $1,000,000 in total across both offers.

Investors who invest either via the Snowball Offer or the Wholesale Offer must subscribe for at least 5,000 shares ($5,000). The shares on offer will be investment class shares in Squirrel Group with no general right to vote for investors who invest less than $100,000. Investors who invest $100,000 or more will receive ordinary shares in Squirrel Group with voting rights. Further detail of the rights attaching to these shares is set out in the Offer section.

The Squirrel Group is a financial services group of companies. Squirrel Group is the group holding company for three trading subsidiaries (and two non-trading subsidiaries) as shown above.

Squirrel Mortgages – Mortgage brokering and advice

Squirrel Mortgages is targeting to arrange over $1 billion of residential mortgages in the financial year ending 31 March 2017. It is a mortgage brokerage that arranges mortgages through the major New Zealand banks. Squirrel Mortgages is highly regarded in the industry, is often quoted in the media, and has won a stack of industry awards for mortgage brokering.4

Squirrel Money – Peer-to-Peer lending platform

Squirrel Money is a recent start-up. It has been licensed by the Financial Markets Authority to provide a peer-to-peer lending platform to match investors with borrowers. Since commencing business in November 2015, Investors have been receiving interest returns on average between 8% and 9% which is significantly above the current interest rates they would be paid if they put funds on deposit with a New Zealand bank.

TenanSee – Cloud-based property management for DIY investors

Property Cloud Systems Limited (TenanSee) is a recent start-up. It is a software-as-a-service platform that allows property investors to manage every aspect of their property portfolio on the cloud. We consider the TenanSee platform as still in beta testing.

Squirrel Money Services and Squirrel P2P Trustee – Non-trading companies

Squirrel Money Services Limited is non-trading and a holding company for licenses relating to the peer to peer lending platform. Squirrel P2P Trustee Limited is non-trading and is the bare trustee for money paid and received by Squirrel Money investors.

[4] NZFSG No.1 Broker in NZ for 2015, 2014, 2013, ANZ No.1 Broker in NZ 2014, 2013 NZ Mortgage Magazine No.1 Broker in NZ 2014 PAA Broker of the Year Finalist 2014, NZMBA Auckland Broker of Year 2012, Allied Kiwi No.1 Broker in NZ 2012, 2011, 2010.

Who can invest in the Snowball Offer?

Retail investors

Persons applying to participate in the Snowball Offer must be New Zealand citizens or permanent residents who are registered with Snowball Effect, or certify that they are compliant with all relevant laws and have their application approved by Squirrel Group at Squirrel Group’s sole discretion.

Wholesale investors

Persons applying to participate in the Wholesale Offer must be New Zealand citizens or permanent residents who are registered with Snowball Effect, or certify that they are compliant with all relevant laws and have their application approved by Squirrel Group at Squirrel Group’s sole discretion.

In addition, applicants must also meet the requirements of clause 3 of Schedule 1 of the Financial Markets Conduct Act 2013.

Team overview

Squirrel Group currently has a team of 42 people across four branches in Auckland. We have 28 advisers and support staff in Squirrel Mortgages and 14 staff in head office and Squirrel Money.

Photo of John Bolton (JB)

John Bolton (JB) Chief Executive Director, BCA (Finance)

JB launched Squirrel Mortgages eight years ago and his family trust is currently the majority shareholder in Squirrel Group. He was previously General Manager Products for ANZ Bank where he managed over $60 billion of lending and deposit products. Prior to that he was Head of Marketing and Strategy and Head of Business Advisory at Westpac.
Photo of Stewart McRobie

Stewart McRobie Chairman and Non Executive Director, B.Com, CA, CMInstD

Stewart was recently appointed Chief Financial Officer for the Ministry of Business, Innovation and Employment. Prior to that he was Chief Financial Officer at the NZ Racing Board, Chief Executive of Relationship Banking at ASB, and Chief Financial Officer of ASB, AMP and Westpac’s New Zealand business.
Photo of Vaughan Underwood

Vaughan Underwood Non Executive Director, Dip Business and MBA

Vaughan is the former CEO of Sentinel, which pioneered the reverse mortgage market in Australasia. He is also a former Chief Executive at AXA NZ and Sterling Grace fund managers.
Photo of Nikki Gardyne

Nikki Gardyne Acting Chief Financial Officer, B.Com, CA

Nikki is a qualified chartered accountant and has been with Squirrel for 3 years. Prior to Squirrel she was with BDO.
Photo of Ruth Hamlin

Ruth Hamlin Marketing Director, BSc (Hons) Psych, PGCert Business

After 8 years in the marketing and ad industry in London, New Zealand and a stint in New York, Ruth joined the team at Squirrel. She has previously worked in advertising for Leo Burnett, Wieden+Kennedy, TBWA and Colenso BBDO.
Photo of Colin Gardyne

Colin Gardyne Chief Technology Officer, BCS (Computer Systems)

Colin leads the development of our TenanSee and Squirrel Money platforms. He was previously a senior web developer with Ubiquity.

Warning statement

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.