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Blackcircles appoints ex-Tesco chief to board

ONLINE tyre retailer Blackcircles has appointed former Tesco boss Sir Terry Leahy to its board as it mulls a range of fundraising options, including a possible flotation of the business.

WELCOME: Blackcircles founder Mike Welch has taken on new board member Sir Terry Leahy to help target growth.
WELCOME: Blackcircles founder Mike Welch has taken on new board member Sir Terry Leahy to help target growth.

Founder Mike Welch said the company had received several approaches in recent months, with options also including debt financing or private equity investment.

Mr Welch was speaking after revealing a 20% growth in turnover for 2013 from £23.2m to £27.8m.

Earnings before interest tax, depreciation and amortisation came in at £1m, which was up on the £600,000 recorded in 2012.

Now Mr Welch plans to spend the next few months examining which fundraising options to take and how much money to raise.

He intends to use the funds to increase marketing spend while also investing further in supply chain and systems.

As well as that there is a plan to more than double garage franchisee numbers from around 430 to in excess of 1000 over the next 18 months.

At the moment independent garages pay Blackcircles a fee once certain tyre volumes are reached while the Peebles company also provides branding and support.

Mr Welch said: "Fundamentally the model is there. When we are trying to evaluate capacity and stress test the business we reckon there is £250m of sales in the current capacity in terms of garages, systems, servers and people.

"So it is about getting more people through the Blackcircles funnel and getting them to use us."

Mr Welch, who started the company in 2001, admitted he had not previously thought about a flotation but it was now one of the options he was discussing with his board and shareholders.

He said: "As projects go you can look at it and we are in a position where there is no debt and we have a great group of shareholders.

"If there was any time to raise some money and do something on a bigger scale then now is it. We have got to consider [a flotation] as we had people who wanted to test our appetite for it.

"It is something we have got to look at as it seems there is such an appetite for internet retail business in the investment community.

"At the right time I think we could do quite a successful float but it is just whether it is a wee bit too soon for us. Part of this process will be making sure we have considered that fully and properly."

Sir Terry has been an adviser to Mr Welch for many years and a shareholder but will now join the company's board as a non-executive director.

Chairman Graeme Bissett said: "Sir Terry has been an investor in Blackcircles.com for a few years and has seen the exciting growth achieved by Mike and the team over that period.

"I am delighted to welcome Sir Terry as a retailer of global standing to the board."

Mr Welch said: "[Sir Terry] is going to help us develop that growth strategy and I have a great chairman as well.

"During the second quarter we will begin having discussions and from there it is about, in the second six months of the year, putting the right deal together and getting the business to push on."

The company is this year expanding its tyre-fitting services at Tesco petrol stations, where it has three operating in England already, with two more planned to open in the next few weeks. Mr Welch is targeting 30 locations in the near to medium term.

He said: "It is working really well in high-footfall parts of the country where we don't have franchise garages.

"There is quite a nice overlay with Tesco Extra stores, as space is something they have and want to work harder."

Mr Welch still retains a long-term aim to take the model into Europe but admits he would need a greater scale in the UK before taking that leap.

He said: "I think we need to be at £100m of sales in our home market before we think about other markets."

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