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From the ground up

For David Tinsley of the Trederwen Springs bottled water company, achieving scale – and keeping a lid on production costs – has helped tap into profitability. Find out more about David’s decision to invest personal wealth to scale up and lessons learnt about sourcing overseas opportunities.

For David Tinsley of the Trederwen Springs bottled water company, achieving scale – and keeping a lid on production costs – has helped tap into profitability.

David Tinsley couldn’t have known the rotten trapdoor at the bottom of his garden hid a secret which would one day spring to life as a new business.

Discovering the ancient source of water on his newly purchased property initially inspired thoughts of a pool – but the sheer volume which flowed from underground led to bigger aspirations…and so was born Trederwen Springs.

The company now flavours and bottles up to 216 cubic metres of water each day, depending on demand. David says this achievement has only been possible thanks to substantial financial support from both himself and his brother John.

“People often think it’s like discovering a gold mine, but the reality is that we have invested a lot of personal wealth to get the business up and running,” David explains. “There were extensive up-front costs, from water testing to building production facilities. It costs £15,000 a month just to maintain our existing equipment. And, while the water itself tastes great, this is an industry with low profit margins and lots of competition. We realised early on that we had to diversify.”

Haines Watts helped Trederwen Springs to develop its accounting systems, processes and controls, ensuring the timely production of a credible reporting structure for finances. This system now has the capacity to keep pace with innovations such as adding fruit flavours to the spring water, which transformed the business’s profit margins, as it allowed Trederwen Springs to charge more per bottle (and gave greater visibility with premium outlets).

“We’ve also invested heavily in developing bespoke machinery that allows us to blow our own bottles onsite,” David says. “This is important because we’re less dependent on premade containers being delivered. We’ve been able to take 1,000 lorries a year off the road and are now more responsive to fluctuating demand. We don’t have the space to stockpile, so making our own bottles offered a novel solution and means we can better meet the needs of our customers.”

This expansion has meant Trederwen Springs needed to continue attracting a high-quality workforce, as well as offering incentives to key employees. Haines Watts worked to provide such options, ensuring Trederwen put its best foot forward with every new step.

Responsiveness is an important part of the brothers’ strategy for achieving 20% growth over the next year. “We are working towards becoming accredited by the British Retail Consortium, which is an essential global standard to achieve if you want to find your product on the shelves of stores like Waitrose,” he adds.

Discussions continue about the brand’s move into markets such as  Nigeria, Libya, the Middle East and Norway. “Our first foray into Africa proved how valuable it is to know your market,” David laughs, explaining that the tendency to cool drinks in large tanks of water proved fatal for the paper labelling they used at the time.

Today, with support from the Welsh Development Agency – and with new labels – the business is ready for its next venture into overseas markets.

David says development is only worthwhile if focus on quality is retained. “Our drinks taste great, which has been recognised by the industry – we received a gold award in a blind tasting by the British Bottlers’ Institute in 2016/7.”

By cutting the cost of bottling its water, and with help from Haines Watts, Trederwen hopes its investment in innovative, bespoke machinery will continue allowing the business to scale up. “We believe we’re well placed to increase our foothold in the market,” David says.

Haines Watts Partner view

“Haines Watts has worked with David and John Tinsley at Trederwen Springs for many years, starting from its earliest days as a business.

Our initial focus was on helping the fledgling venture to find its feet, and we were deeply involved in the development of its accounting systems, processes and controls. This helped it create an appropriate reporting structure to support the production of timely and credible financial reports.

The successful growth of Trederwen Springs means it now employs a fully qualified Chartered Certified Accountant, Richmond Amaihe, so our role has evolved to become that of a specialist advisor. That includes advising on the business’s re-financing and re-banking strategies, as well as on ownership and remuneration structures for directors and employees.

Growth has also meant Trederwen Springs needing to research and develop its own bespoke machinery to enhance its capabilities – the installation of a fully integrated bottle-blowing plant being a recent example. We’ve played a pivotal role in demonstrating to HMRC that these major R&D projects qualify for the appropriate tax credit, allowing the company to claim relief against its taxable profit at the 230% rate of the qualifying R&D expenditure.

Retaining talent to support the investment in bespoke machinery is a key focus for the business. That’s why we’re now working with the directors to put appropriate incentives in place for key employees. These may include tax-efficient share options under the HMRC-backed Enterprise Management Initiative, which will also allow qualifying employees some participation in the event of a third-party sale.

Being an external partner, we can provide our clients with a unique view of their business. Our work with Trederwen Springs is a great example of how we support and advise a business which has been built from the ground up, and one where the directors continue to think proactively about business challenges.”

Frank MurphyHaines Watts Partner