Here in the MidlandsSeptember 2015 | Viewpoint
There’s a definite sense of optimism in the Midlands’ business community, and it’s one that has been building over the past 18 months, writes Gavin Petken BGF's regional director in the Midlands. Manufacturing is experiencing a revival (thanks in no small part to the expansion plans of JLR), exports are on the up and stronger in the East Midlands than anywhere else in the UK, and established businesses – including our shareholder bank HSBC – are relocating or expanding here, creating jobs and, in time, prosperity.
Big businesses aren’t the only driving force behind this change. Throughout the region, pockets of small to mid-sized businesses are beginning to deliver sustained growth at the same time as demonstrating that they are capable of competing on a national and international stage. And this applies to companies in the newer digital, marketing and hi-tech industries as much as to those engaged in traditional manufacturing activities. Diversification has been key.
We have seen these trends play out in our own portfolio.
TCL Group, a provider of landscaping services led by chief executive Simon Cashmore, has experienced exceptional growth over the past 18 months having more than doubled its revenues from £22m to £54m since we invested in the business in May last year. In the space of eight months, Simon and his team delivered organic growth, re-branded the firm and completed three acquisitions, all of which was helped by the £15m initial and follow-on capital BGF has been able to provide.
On international expansion, another of our investee companies, Leamington Spa-based Palmer Hargreaves, commenced operations in China with the opening of a new office in Shanghai, and has recently announced a major new contract with Porsche China.
Perhaps another indicator of the growing confidence within the region’s business community is that the pace of our investments has accelerated over the past 18 months too. We backed eight new businesses and made additional investments in existing investee companies to accelerate further growth. We have also seen a significant surge in the number of business we have met with and that are seriously thinking about their options for funding over the next 12-18 months.
Every company we invest in is different – each has its own history, values, structure and risk profile. Every entrepreneur or management team we speak with is different too. Their aspirations for their businesses and the questions they have about funding are personal to them: no two meetings are ever the same.
So our job is to listen. Our goal is to support entrepreneurs and management teams that are focused on growth and have the potential to achieve it. When we meet with people who fulfil this criteria we do all we can to align ourselves with their aspirations, which means from the offset we are heading in the same direction and working in true partnership.
We achieve this by being flexible in the way we invest and by adapting to the individual needs of each business.
Take Dudson, a fourth-generation, family-owned business based in Stoke-on-Trent that has been making ceramic tableware for the hospitality trade for more than 200 years. Already a profitable, established business, Dudson’s management team came to BGF because it wanted to inject fresh capital into the business, without losing control. Chief executive Max Dudson believes in the opportunities for further growth and feels passionately about making sure the business is in the best possible shape when the time comes to pass it on to the next generation.
In May 2014 we provided a £3m funding package that is allowing Dudson to pursue growth without any pressure for the business to move outside of family control. This is something that no other funder appeared able to provide, and it is just one of the ways in which we have demonstrated that both culturally and financially BGF is different from traditional private equity.
Another example of our flexible, scalable model of investing came just a few months later, in September 2014, when the Midlands team went on to lead BGF’s first investment in an AIM-listed company, Kidderminster-based Victoria plc, a manufacturer of carpets and floorcoverings. This was another significant milestone for BGF.
Victoria was looking for a funder that could provide additional growth capital, without immediate equity dilution. We were able to meet this need through our unsecured, long-term offering, putting the company on the strongest growth course. Since our investment, Victoria has completed the acquisitions of Abingdon Flooring and Whitestone Weavers and taken annualised turnover to more than £200m.
We’re looking forward to the next 12-18 months. If the business community in the Midlands continues to galvanise itself, and if small and mid-sized companies can retain the confidence to take calculated risks, then I am confident that the outlook will remain positive. And who knows: the region may even start gaining national recognition for the super-region that it is quietly but determinedly becoming.