MAGNETIC REFRIGERATOR A major evolution in refrigeration!
MAGNETIC REFRIGERATOR
A major evolution in refrigeration!
WHO WE ARE?
Liu QuFinance DirectorPhD of Economics in Nottingham University 5-year working experience in Finance Department in MEGS Cost optimisation
Mei ChewSales DirectorMBA & PhD in Mechanical Engineering in Loughborough University Lead bench to manufacturing line Main client contact
Philip KeenanManaging DirectorMBA in Birmingham University International consultancy Experience Lead development of
WHO WE ARE?
Ozak EsuCommercial and Marketing DirectorMBA, PhD in Electrical Engineering in Loughborough University Part-time marketing and sales advisor Business to business marketing
Jingjing LiuR&D DirectorPhD in Materials Engineering in Nottingham University Multi-disciplinary research background Product and technology development in
Executive Summary
Looking to secure funding of £500K for the next 5 years
Mr. COOL A research and development company in Magnetic Refrigeration
Short-term goals
Updating existing refrigerators
Build market-ready prototype
Long-term goals Explore further applications of the novel material
Operations Research and DevelopmentLicensing
Non-disclosure license agreement with two magneticmaterial manufacturers
Exclusive licensing (territorial) to two global leaders in refrigerator manufacturing (commercial/domestic)
2005: Research conducted into the development of new material
2009:Breakthrough – Development of a novel magnetic material
History
Patent Process
Provisional UK Patent
Application
International (PCT)
Application
National Application
Examination of National
Filing
Granted Patents
12 months
> 3 months
18 months
Theory
Benefits Green technology Noise-less technology Lower energy consumption Much cheaper cooling system Long lifetime (current and anticipated)
Before
19th Century
1879:
1st fridge invented
1927:
1st household fridge
1960s-2013:
Air-compressing
fridge
FROM NOW!
Operations
Maintain our patent
Develop a full-scale market-ready prototype
• Integration with refrigerator manufacturer’s product
Secure exclusive licensee
• Collaboration with major fridge manufacturer
The Industry
IBISWorld Global Industry Report (http://clients1.ibisworld.co.uk/reports/gl/industry/productsandmarkets.aspx?entid=930)
Global Household Appliance Manufacture Location 2013South East Asia - 44.1%
Europe - 36.2%
North America - 9.1%
India & Central Asia - 3.5%
South America - 3.3%
North Asia - 1.8%
Australia/Oceania - 1.2%
Africa & Middle East - 0.9%
Global Industry Revenue 2012 = £143.6 billion
The Industry Leaders
2,507
2,597
3,222
3,518
8,212
8,568
9,196
9,995
11,897
14,907
2,436
2,563
2,939
3,090
5,698
7,679
7,030
9,436
11,706
12,796
Indesit Company
Miele
Arcelik
Groupe SEB
Gree Electric Appliances
BSH Bosch and Simens Hausgerate
GD Midea Holding Co.
Electrolux
Whirlpool
Haier electronics
Global Net Sales in million GBP
2010 2011
China
Europe
Global Powers of Consumer Products (Top 10 Household Appliance Manufacturers) 2013, page 31 Published by: Deloittehttps://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Consumer%20Business/dttl_cb_GlobalPowersOfConsumerProducts2013_031913.pdf
North America
India
Australia
The Market
IBISWorld Global Industry Report (http://clients1.ibisworld.co.uk/reports/gl/industry/productsandmarkets.aspx?entid=930)Euromonitor International (http://www.euromonitor.com/refrigeration-appliances-in-germany/report)Statista (http://www.statista.com/topics/1068/home-appliances/)Harvard Business School “Case Study: Haier” (http://hbr.org/product/haier-taking-a-chinese-company-global-in-2011/an/712408-PDF-ENG)TV Veopar Journal, April,2012 (http://www.adi-media.com/PDF/TVJ/annual_issue/009-Refrigerators.pdf)The Economic Times (http://articles.economictimes.indiatimes.com/keyword/refrigerator)John Lewis (http://www.johnlewis.com/electricals/fridges-freezers/freezers/c80000512?_requestid=1881966)Sears (http://www.sears.com/appliances-refrigerators/c-1020022?adCell=W3)
Deciding Factors Willingness to invest in innovation Significant share of market in patent active areas In-house manufacturing capacity and access to retail distribution channels Proximity to the potential “raw material” manufacturer
Godrej 10.8%
Samsung14%
Other 16.2%
LG Electronic
18%Haier 21%
India Whirlpool 20%
8.4 million units
Other 38%
Haier37%
China BSH Refrigeration 25%
61.89 million units
Other 66%
Indesit12%
Europe BSH 22%
34.24 million units
Other 68.4%
Electrolux20.6%Australia Whirlpool
11% 1.66 million units
GE
17.2%
Other 17.2%
Electrolux22.8%North America Whirlpool
42.8% 21.89 million units
Industry Outlook
The Industry is mature however, innovation in energy efficiency and design are forecasted to lead to growth
Demand Trends (2013-2018) Rising environmental concern Rising energy cost Attractive Design (Increased longevity of food preservation) Increasing consumer interest in interior design Purchase by replacement deferral consumers
Economic Trend(Threatening from 2018): Rising steel and aluminium costs
0
1
2
3
4
5
2014 2015 2016 2017 2018 2019
Gro
wth
%
Year
Revenue Outlook For Global Household Appliance ManufactureYear
Revenue (£million)
Growth %
2014 149,210.95 4.1
2015 155,098.52 3.9
2016 161,311.76 4
2017 168,020.36 4.2
2018 175,252.98 4.3
2019 180,887.01 3.2
Existing refrigerators Research Groups
The Competition
Strategy
Strategy: Rapid Exploitation Patent gives Mr. Cool a head-start and competitive advantage Secure licence agreement with major/dominant market share holders within the
industry (Market concentration is low) High-level of knowledge management within Mr. Cool for potential modifications
Mr. Cool’s operational competitive priorities are; Innovation and Time
• Emerging technology (Challenging existing
concept)
• Compatibility with manufacturer’s current process
Potential Barriers to Acceptance
Operations Model
ConsumersTerritorial Licence
Profits
Profits• Upfront Payment (one-off)
• Royalty (2%)
• Upfront Payment (one-off)• Royalty (2%)
Link supplier with
manufacturer
Link supplier with
manufacturer
Investors
5 times more
Investment
Financial Analysis Equity investment: £ 500 000
Funding source: Research Councils UK
Royalty on one license: 2%
Markets:
Bosch (in Europe & China)
Whirlpool (in India, North America & Australia)
Material Manufacturers:
VACUUMSCHMELZE GmbH & Co. KG.(Germany)
Clime Magnet Manufactory Co. Ltd (China)
Accrual basis of accounting
*Upfront payments have not been included in financial projections as negotiations withsuppliers and manufacturers are ongoing
Cost Breakdown
£21.38
£10
£50
£15
£75
£104
Fixed expenses in 2013 (£ 000s)Establishment Costs (Office and labequipment rent)
Sundry Costs
Patent Fees (inc Examination,Translationand Agent fees)
Annual patent renewal fees
R&D Costs(inc. Prototype development,Outsourced manufacturer fee)
Admin Costs (Management Salaries andPension)
*Management salaries will increase by 5% each year from 2016 onwards
Financial Overview (1)
-1,000
0
1,000
2,000
3,000
4,000
5,000
2013 2014 2015 2016 2017 2018
£ 0
00s
Year
Profit & Loss (2013-2018)
Net Income
Costs
Profit
First licensing
deal
Financial Overview (2)
0
1000
2000
3000
4000
5000
2013 2014 2015 2016 2017 2018
£ 0
00
Year
Net income (2013-2018)
China
India
Australia
European region
North America
5% of the fridge markets; 5% increase on the sales units each year Bosch in China & Europe, Whirlpool in North America, India & AustraliaMaterials suppliers VACUUMSCHMELZE in Germany & Clime Magnet in China
Cash Flow (2013-2018)
0
40000
80000
120000
160000
200000
240000
0
2000
4000
6000
8000
10000
12000
2012 2013 2014 2015 2016 2017 2018 2019
Sale
s (0
00
s)
Y/E
cash
(£
00
0s)
Year
Y/E cash balance Total Sales
First licensing
deal
Finance Summary£ 000s 2013 2014 2015 2016 2017 2018
Total Net Income 200 200 3,397 3,567 3,746 3,932
Total Fixed Expenses 275 200 200 205 210 216
Profit Before Interest & Tax (75) 0 3,197 3,362 3,535 3,716
Dividends 0 0 0 300 350 400
Net Profit (100) 0 2,268 2,353 2,475 2,601
Y/E cash balance 400 400 2,668 4,721 6,846 9,047
First
DividendFirst
licensing deal
Funding needs: £ 500,000
Discount rate: 10%
Share of equity being offered: 7%
Exit Strategy
Potential sale of business after 10 years (to an investment company or refrigerator manufacturers)
License (Non-Disclosure Agreement) with magnetic material manufacturers
Exclusive license to selected manufacturers for 5 years
Continue with modification to add life to the patent
Potential license extension with manufacturers after 5 years
Summary
Developed a novel magnetic material Patented
Investment of £500K for the next 5 years. Market-Ready Prototype Production Patent Renewal Administration and Establishment Costs
Magnetic refrigeration – Updating existing fridges Innovative Efficient Environmental-Friendly
Thank you for listening
Any Questions?