The Woodford Patient Capital Trust may invest approximately 75% of its assets in early-stage and early-growth businesses. While early-stage businesses are typically pre-revenue, with significant milestones still to reach in order to fulfil their potential, early-growth businesses have overcome some of these earlier challenges and will be starting to penetrate a clearly identified market opportunity. Gigaclear is a good case study of a company at this stage of its development.
Gigaclear is an unquoted business, founded in 2010 by Matthew Hare, Chief Executive. It builds and operates broadband networks to rural communities where larger scale telecoms businesses have underinvested. Rather than operating a ‘build it and they will come’ business model, Gigaclear identifies communities where there is strong demand for reliable, ultrafast broadband and customers have pre-committed to cover 10% of the company’s capital expenditure before any capital is deployed.
Once the network is built out, penetration rates accelerate and, on the 25 rural villages in the UK already benefiting from a Gigaclear broadband network, the company sees penetration rates of between 26% and 65% of all households using the service. Penetration rates continue to rise in all 25 villages and the company is currently building networks in a further 50 villages.
Gigaclear is growing rapidly and aims to pass 20,000 premises by the end of 2015, growing to 200,000 in 2018. This is an excellent example of a great business model being executed by a talented management team that knows its industry intimately and, although it is capital intensive, the long-term returns on that capital should be very attractive.
Gigaclear is currently held by the CF Woodford Equity Income Fund. The purpose of this case study is to illustrate the type of business in which the Woodford Patient Capital Trust plc may invest. It should not be assumed that the Woodford Patient Capital Trust plc will actually invest in this company. Investment in companies such as Gigaclear presents risks whereby the value of the Trust (or Fund) can go down as well as up and this may include permanent capital loss.