MOLECULAR PRODUCTS GROUP
In September 2014, BGF built on its record of backing British manufacturers by injecting £4m of growth capital into Molecular Products Group Limited (MPG), a developer and manufacturer of medical devices, gas filters and oxygen generators.
It marked the twentieth growth capital investment that BGF made to help UK manufacturing-led businesses realise their growth ambitions. It also brought the total invested into the chemical technology sector to nearly £7m, coming shortly after BGF’s investment in BHR Group, an expert fluid engineering consultancy.
MPG is owned by the McKernan family and managed by Ian (Group CEO) and Andrew (Group Commercial Director). Its manufacturing facilities are based in Harlow, Essex and in Boulder, Colorado, from which it makes sales throughout the world to customers through a network of subsidiaries and distributors.
The company’s chemical based technology is applied in a number of specialised and demanding end-markets within the healthcare, military and industrial sectors with customers including the MoD. MPG was also commissioned by NASA to design and build an emergency oxygen system for the International Space Station.
BGF’s investment is enabling the company to build share in existing markets as well enter new geographies such as India and Japan and to deliver further innovations in its product lines. Key new technologies in development include high performance activated carbons, which offer enhanced filtration and adsorption of harmful gases for use in military and industrial respirators; and a portable lightweight oxygen generator that delivers emergency medical grade, oxygen to the battlefield.
Paul Barnard joined the MPG Board as Non Executive Chairman at the completion of BGF’s investment. Paul’s executive career included 14 years at ITW Inc (the final two as President of the Fluids Platform business) and 6 years as Group MD at Rocol. Paul was introduced to MPG via BGF’s Talent Network of experienced business leaders.
Canburg, owner of two of the world’s most renowned luxury fitted furniture businesses – Smallbone of Devizes and Mark Wilkinson Furniture – secured £8m capital investment from BGF in September 2014. BGF took a 20% stake in the business enabling the group to accelerate its UK and international growth strategy. This will build on the success and vision that has seen its products take centre stage in the world’s most exclusive developments, becoming the choice of A-List celebrities such as Dustin Hoffman, Sir Elton John and Oprah Winfrey.
It will also create up to 40 jobs at the group’s UK showrooms and the workshop in Devizes, Wiltshire, where all its products are hand-made by 170 experienced craftsmen and women. Further jobs will be created overseas.
CEO Leo Caplan established Canburg in 2009 to purchase Smallbone and Mark Wilkinson Furniture. The British entrepreneur committed more than £10 million to the long-established businesses, enabling them to return to profitability.
“This is a really exciting time for Canburg,” said CEO Leo Caplan. “I first invested in these businesses because of my passion for the luxury furniture they both make. The fact that the furniture is hand made in the UK and supplied globally is a fantastic testament to our cabinet-making heritage. I have inherited a love of timber as my grandfather was a timber merchant. Canburg is proud of its highly skilled workforce, many of whom have been with the companies for decades. I started considering the strategic options for the group almost a year ago after being approached by prospective buyers, and instructed Cavendish Corporate Finance to assess these. I wasn’t looking to sell but started exploring how best to take the business to the next level. The process reminded me why I fell in love with these companies in the first place and the fantastic opportunities that are available.
“Perhaps most exciting are the opportunities overseas, where Canburg already generates a third of its revenues thanks to the reputation we have gained with customers in the US and elsewhere. I am delighted that in BGF we have found the perfect long-term partner to help us reach our full potential and create the value that clearly exists in this business. I am confident that, over the next five years, we can grow the business from its current valuation of over £50 million (post investment) to a global luxury group worth in excess of £500 million.”
Smallbone is the ultimate in bespoke cabinetry, founded on a time-honoured British craft tradition, with a passion for quality and design. Internationally recognised as the leading global luxury kitchen company, it has revolutionised the form of kitchens, establish enduring fashions and been instrumental in the kitchen’s metamorphosis from cooking space to social hub.
Mark Wilkinson Furniture has set the style icons for classic and contemporary furniture for over three decades and has brought fitted furniture for the kitchen and rooms throughout the home into the highest echelons of fine luxury living.
The group has multiple routes to market, selling directly to high net worth customers through showrooms, in partnership with in-market dealerships, as well as selling to developers of luxury properties in leading locations such as New York City.
The heritage and prestige of the group has resonance with discerning customers throughout the world. Since 2009, the group has substantially grown its presence in North America and the Middle East, winning prestigious contracts for luxury apartment developments that include ONE57, the most expensive residential building in New York overlooking Central Park (135 apartments ranging from $17 million to $115 million), Walker Tower Chelsea New York (52 apartments ranging from $8.5 million to $60 million) and 530 Park Avenue New York (100 apartments ranging from $3 million to $25 million). The group now generates a third of its sales from international customers, who are attracted by inspirational design and British craftsmanship. Canburg’s performance in international markets resulted in the company receiving endorsement from the Minister for Trade and Investment, Lord Livingston.
BGF’s commitment of capital and wider support will enable Canburg to further expand its domestic and international reach and will support Leo Caplan’s ambitions to create a global luxury group.
Paul Oldham, Regional Director at BGF, said: “Smallbone and Mark Wilkinson Furniture represent the highest standards of British design and manufacturing, which are held in high esteem all over the world. Leo and his management team have very successfully capitalised on this, building an impressive international reputation and broad customer base. They have looked to BGF to put investment behind their ambition to create a truly global business; we share this vision and over the next few years fully expect to see Canburg take a dominant role among a select group of successful British design and manufacturing businesses operating on the international stage.
“Too often we see UK entrepreneurs sell out of their businesses prematurely – before they have really achieved full potential. This does not have to be the case as Leo and his team at Canburg are demonstrating. It is in these situations that BGF investment can make a difference, helping entrepreneurs to realise their ambitions in full.”
Ninth generation family business partners with BGF
BGF tailors its offer to support family’s long-term plans for hereditary business
BGF has invested £3m in Dudson (Holdings) Limited (“Dudson”), one of the UK’s oldest family-owned businesses that produces ceramic tableware for the travel and hospitality industry . Operating since 1800, Dudson is currently under the stewardship of 8th generation family members Ian, Max and Mark Dudson who act as Non-Executive Chairman, CEO and Group Operations Director respectively. The 9th generation is already represented by Ian’s daughter, Katie, who is the company’s Marketing Manager. The business is headquartered in Stoke-on-Trent and employs over 500 people, with turnover approaching £30m.
Dudson supplies the travel and hospitality industry with high quality durable tableware, which it manufactures at its factories in Stoke-on-Trent and Digoin, France. Dudson acquired its fully automated French manufacturing facility in 2009 and also owns a stake in Furlong Mills, a Stoke-on-Trent clay materials supplier. It sells to customers globally from its six international commercial centres, as well as through a range of distributors and agents in countries throughout the world. Customers include Virgin Rail, Pizza Hut, Virgin Atlantic, Nandos, Princess Cruises, Hilton & Hyatt Hotels.
BGF has provided £3m of long term capital to allow the family to invest in the business, whilst retaining the flexibility to pass the company onto the next generation. The funding will enable Dudson to invest in more efficient manufacturing equipment, streamline production processes at its manufacturing facilities and enhance its sales and marketing capabilities.
This investment comes one month after BGF’s £2.8m investment in another Midlands based family business, Rutland Cycling.
Ian Downing, Investment Director at BGF who joined the company’s board, commented:
“Dudson has an impressive 200-year track record and has carved out a strong niche position in the international market for hospitality tableware. It is a great example of a British manufacturing business that has invested heavily in product and process innovation and successfully taken it products into an international marketplace.
“The company’s board has now identified a clear strategy to develop and grow the business, with the objective of being able to pass on a larger, stronger organisation to future generations. We look forward to bringing both financial and strategic support to the table and to working with the team to deliver on their ambitions.”
Gavin Petken, Regional Director, added:
“This investment is a great example of how BGF can offer flexibility in the way that it structures investment – to best meet the needs of shareholders and put the company on the strongest course of growth. Dudson’s motivation is to invest in the business so it is in the best possible shape for future generations, and the long-term strategy to deliver growth will provide new job opportunities both in Stoke-on-Trent and across its global operations. Our capital is long term, unsecured, and flexible; and there is no pressure for the business to move outside of family control.
We believe this is an approach that will resonate with many family businesses. With the right partner on board, these businesses have a great opportunity to achieve their ambitions, to outperform their competitors and to secure long-term financial security for future generations.”
Max Dudson, CEO of the company is delighted with the new partnership and BGF’s approach to the investment.
“Having been through a restructure we have a clearly identified strategy for growth which requires capital investment to deliver improvements in manufacturing efficiency, new machinery to support growing product categories and further investment to support the expansion of our sales, marketing and design teams to exploit new and developing market opportunities. We were keen to find a partner who had the foresight to invest in our strategy as a supportive partner who could add commercial value to our business as well as inject required capital. BGF’s modus operandi of providing unsecured capital and allowing the incumbent board of directors to retain full control of the business, coupled with their long term perspective, makes this a perfect partnership for Dudson, allowing us to deliver our strategy for growth.”
Is Britain enjoying a manufacturing renaissance?
by David Wighton
One thing British manufacturers have not lacked in recent years is unsolicited advice. Sales may have been hard to find and finance harder still, but there has been no shortage of helpful criticism. Report after report has bemoaned the alleged underperformance of UK manufacturing and identified a multiplicity of failings. Companies were too short-termist and lacking in ambition, said the critics. They did not invest enough, particularly in technology. They were too timid about attacking growth markets in emerging economies.
Whatever the truth of these claims, one thing is clear. They do not apply to some of the smaller companies that are now leading Britain’s manufacturing renaissance.
Take VTL Group, the Huddersfield-based motor components manufacturer where BGF has just agreed a £4m investment. Bruno Jouan, VTL’s Chief Executive, believes the critics have a point when it comes to the sector’s commitment to long-term investment in technology. “In the past, if you generalise, most businesses in the UK, and certainly in the automotive sector, have been really short-sighted in terms of investment in innovation and technology.” And he concedes that VTL probably was too. But over the past couple of years the company has been investing heavily in the technology behind its precision engineered transmission and turbo components which it supplies to leading manufacturers including Cummins, Toyota, Renault and Nissan. It has ploughed £2m into a new technology centre to be the base for all its research and development and for the training of its new generation of engineers. “This shows our commitment to be a world-class manufacturer and a strong partner for our customers in the future.”
Among the common criticisms of British manufacturers is that they should be thinking more in terms of solutions and increasingly looking for ways to offer broader packages of products and services.
That is exactly what VTL has been doing. “If you just ‘make to print’ it is only for today and tomorrow. You have to move up the value chain. You have to offer your customers technical solutions where they can rely on you rather than other people. You must become, if not indispensable, then less disposable.”
Paddy Collins, Chief Executive of Aubin, an Aberdeen-based supplier of chemicals for the oil industry, also stresses the importance of focusing on the customers’ needs rather than the products. “Although we sell chemicals, what we really do is sell expertise and knowledge to people who don’t have that.”
Aubin has spent five years developing a low density fluid that can be used to provide buoyancy for subsea oil equipment allowing them to be moved around the seabed more easily. While he is convinced he has a world beater on his hands, Collins concluded that having the chemical was not enough. Aubin also had to produce the engineering solutions wrapped around the chemical. That requires a big investment, not least in new people, which is why Collins decided the company needed some external capital.
“We needed money in the bank to have some confidence that we could go forward, rather than doing it on a shoestring and a hope. We wanted to hire new people and in Aberdeen there is a real shortage of good quality personnel. To persuade people to leave a good safe job we needed to give them the confidence that they were going to have the resources to do what we wanted to do.”
Aubin opted to go with BGF, which invested £2.25m in February 2013, partly because it was prepared to take a much longer-term view than most investors. “Some of the things we are doing will take time to come to fruition and BGF wasn’t looking to get its money out in four years’ time.”
Collins certainly can’t be accused of lacking ambition. Sales jumped by a third to £6.25m in 2013 and are expected to grow at a similar pace this year. “We think we could go faster than that. We have a unique material and the subsea industry is worth tens of billions of pounds annually.”
Mark Bryant, Head of Manufacturing at BGF, regrets that such ambition is not more common in British manufacturing. “So many of the manufacturers I have met have been severely bruised surviving the last five years or the last twenty years and their ambition is very limited. They are happy to tick along.” Manufacturing tends to be more cyclical than services businesses and many entrepreneurs are worried about becoming overextended if they are dependent on banks for finance, he says.
Another weakness critics often point to is that British manufacturers, and indeed UK companies in general, have not made the most of growth in emerging markets.
That is certainly not true of Aubin, which exports 80% of its sales and is very strong in the Middle East. Nor can the accusation be levelled against Rob Law, founder of kids luggage maker Trunki, whose now very successful business idea was famously rubbished by Theo Paphitis on Dragons’ Den in 2006.
“We looked at overseas markets from the outset, and South East Asia is now one of our biggest markets.”
Ironically, Trunki has done less well in markets closer to home such as France and Germany, where it has relied on distributors. Some of the £3.92m Trunki raised from BGF will be used to support the move to sell directly into France and Germany.
In the face of rising costs in China, Trunki recently joined the growing trend for British companies to repatriate some manufacturing to the UK. Law explains that having local manufacturing reduces shipping costs and the company’s carbon footprint, as well as cutting the amount of capital tied up in stock and making it easier to respond quickly to market changes.
He was also keen to grasp the PR opportunity of being able to claim that the Union Jack-adorned Team GB Trunki case it produced for the Olympics was made in Britain. Law signed up a supplier in Devon but the company then got into financial difficulty and Law decided to buy it out at the end of last year. The focus now is on turning the operation into a “world-class manufacturer”, he says.
While companies in many different sectors are reshoring some manufacturing to Britain that is not really an option for Bullitt, which designs and makes rugged mobile phones. David Floyd, the company’s co-Chief Executive, says that much as he would like to see his products made in the UK there is no realistic alternative to China and Taiwan, which dominate the manufacturing of phones. Rising costs are an issue but Bullitt has recently been able to get much better terms from its suppliers thanks to the strengthening of its balance sheet provided by BGF’s £3.5m investment in December 2012. This enabled it to move to normal 30-day terms with its suppliers rather than paying a 30% cash deposit when placing an order and settling the rest on shipment.
Although its balance sheet was stretched, Bullitt has been cash-positive almost since it was formed four years ago. Set up by Floyd and two colleagues who had worked together at Freeplay Energy, the Aim-listed wind-up radio group, Bullitt has had little need for external finance until recently. Floyd turned to BGF having become very frustrated with banks. The company was generating cash, arguably had a relatively low-risk business model and a management team with a solid track record, but Floyd said that the banks were just too risk averse. “We dealt with a couple but to be honest they couldn’t give us what we wanted.”
One of the frequent criticisms of British manufacturers is that many do not pay enough attention to design despite the wealth of design talent in the UK. That cannot be said of Trunki or Bullitt, for which design is at the heart of their business. Bullitt’s biggest sellers are a range of rugged mobile phones it designed for Caterpillar (CAT), the American construction equipment giant which has licensed its brand for other products such as boots, clothing and watches.
In the competition for the mobile phone licence, Bullitt saw off challenges from some of the industry giants, including Samsung. Floyd says Bullitt’s key attraction for CAT was that it was proposing to come up with entirely new designs that reflected the CAT brand rather than merely slapping the name on an existing product. Bullitt’s designers worked with the designers of CAT’s vehicles at its headquarters near Chicago and Floyd says the result was a phone that has all the attributes of the CAT brand. The handsets use a lot of steel and have mouldings that echo those on CAT’s vehicles.
Bullitt is generating heady growth with sales rising tenfold to £10m in 2012 and nearer £30m expected in 2013. In addition to the phones it makes under the CAT and JCB names, Bullitt will next year launch a range of audio products for a well-known high street name and it is working with another household brand.
Floyd hoped to have some of the products for the high street retailer made in the UK but found he could not get prices close to those on offer in Asia. This is a reminder that international competition remains intense. But there is no doubt that the prospects for British manufacturers – and for manufacturing in Britain – are brighter than for some time.
Nowhere are the hopes higher than in a sector where Britain was almost written off just a few years ago – automotive. The turnaround since the financial crisis has been remarkable and VTL’s Bruno Jouan sees no reason why it should not continue. The big car makers are keen to rebuild the supply chain in Britain and are getting strong support from the government.
Big challenges remain, not least in terms of skills shortages. “There haven’t been enough people going into engineering over the last 20 years,” says Jouan. But the way manufacturing has been put back on the agenda in the last three years has been very helpful in terms of attracting young people into the industry. “Now we are seeing young kids who have better results choosing to go into engineering because it is being promoted and there are so many good stories about people being successful.”
Jouan says the UK is a great place to do business and believes that British manufacturers can confound the critics and take on the best in the world, including the Germans. And that is a Frenchman talking.
THAMES CARD TECHNOLOGY
Plastic card manufacturer draws £3.2m investment from BGF
BGF’s final investment of 2013 was in Essex-based Thames Card Technology Ltd (“TCT”), one of the UK’s largest plastic card manufacturers. BGF’s £3.2m growth capital investment will enable TCT to acquire new manufacturing equipment, increasing capacity and efficiency. Its financial and operational support will also help the company to capitalise on the significant growth opportunities offered in the international bankcard market and the prepaid card market.
This was BGF’s 14th investment in the manufacturing sector. Since its inception in May 2011, BGF has injected over £60 million of growth capital into UK manufacturing-led businesses.
From its site in Rayleigh in Essex, TCT provides a full-service offering to organisations that wish to distribute plastic cards to their customers, including design and manufacture of cards as well as personalisation and dispatch. It services a range of markets with an international blue chip customer base across banking, retail, telecoms and ID. In 2013, TCT manufactured over 175m credit/debit, gift and loyalty cards, generating sales of £18m.
The business was founded in 1994 by the current MD, Paul Underwood, initially focusing on non-secure cards (e.g. gift, loyalty and membership cards) before expanding into secure cards (e.g. credit, debit and prepaid cards) and achieving Visa and MasterCard accreditation in 2000.
The increasing number of banking customers in the developing world, particularly in Africa, combined with the move towards chip cards presents a considerable growth opportunity. There is also strong demand for prepaid cards that are pre-loaded with funds; prepaid cards represent the fastest growing form of payment method in the past five years and the prepaid card base in Europe is expected to reach 418m in 2015.
In addition, the investment enabled TCT to add to its senior team and, at the introduction of BGF, Andy Caffyn, the former CEO of Deloro Stellite Group and Avery Weigh-Tronix, joined the TCT board as Non-Executive Chairman. BGF’s Head of Manufacturing Mark Bryant also provides operational support and Investment Director Rory Pope joined the board as BGF’s representative.
Paul Underwood, MD and founder of Thames Card Technology, said:
“After 19 years of building TCT and funding growth from our own cash proceeds, I took the decision with my senior team that it was time to secure an injection of equity finance so that we could go further, faster, to realise our growth ambitions. There are significant opportunities to go for in the next three years and we wanted to ensure that lack of finance did not hinder us from doing that.
“Having made the decision to bring in external funding, it was then a question of which provider would suit us best. BGF stood out as not only can they provide us with the necessary capital but they will also offer us valuable guidance and support. One of their directors, himself an experienced manufacturing entrepreneur, is working with our operations team and a BGF representative will sit on our board. Undoubtedly we know our business well but this additional experience can only be a good thing for the company, its staff, suppliers and ultimately our customers.”
BGF Investment Director, Rory Pope, said:
“Thames Card Technology is an excellent example of a business that is suited to the growth capital investment that BGF is offering. It has done exceptionally well to reach the position that it occupies today as a respected card manufacturer and a leading company in its space. It has been able to fund steady upward growth from its own balance sheet.
“However Paul and the senior team now want to see that growth accelerate and recognise that we can help them to capitalise on the opportunities in the international banking market and the prepaid card market.
“For BGF, this is an exciting opportunity to support a UK manufacturing business that is looking to grow its domestic and export sales and we look forward to working with the team.”
BGF’s Head of Manufacturing, Mark Bryant, said:
“The UK has a tremendous depth and breadth of manufacturing capability across a wide range of sectors. Numerous sectors are experiencing significant growth and for many, now is an ideal time to invest. TCT recognises this and will benefit from both a strengthened financial position and the operational focus that BGF brings. This combination will accelerate the adoption of Lean Techniques and a greater drive to eliminate waste, complementing the excellent service and quality that TCT provides. I am looking forward to supporting TCT on this journey of continuous improvement.”
To date, BGF has invested £5.5m of growth capital in VTL Group in total since our initial £4m investment in September 2013.
VTL is a leading UK developer and manufacturer of precision engineered transmission and turbo components for the commercial vehicle and passenger car markets. VTL supplies these components to major automotive manufacturers including Cummins, Toyota, Renault and Nissan and also provides a variety of additional services including product R&D and prototyping. It is one of the largest precision contract manufacturing businesses operating in the UK within its specific niche areas of turbo and transmission components and serves a large and growing international marketplace
Formed in 2001, VTL has developed from a single product, single site European focused business, to a global operation, manufacturing multiple products and employing over 400 people generating annual revenues of around £50m. It is headquartered in Huddersfield, where it also has four manufacturing facilities and an R&D centre. In addition VTL has a manufacturing facility in Charleston, USA, a manufacturing facility in Dharwad, India and a sales and technical presence in Yokohama, Japan. VTL serves customers across Europe, North America, India and Asia.
BGF’s initial and follow-on investment is helping drive organic growth through the development of new customers and expanding the product range. Specifically, the £1.5m follow-on investment in January 2015 will be used for a capital investment programme ahead of commencing an eight-year project to supply engine components through Ryobi UK to JLR for use in its new engine platform. Going forward, acquisitions will also form part of VTL’s growth strategy with further backing from BGF.
Alongside its initial equity investment, BGF introduced Michael Baunton as Non-Executive Chairman. Michael has an extensive background in the automotive sector and joins VTL from the Society of Motor Manufacturers and Traders (SMMT) where he was Interim Chief Executive. Prior to this, his roles included President and MD at Tenneco, President at Perkins Engines and Vice President at Caterpillar. He is also currently on the board of TT electronics plc and ACAL Energy. Michael was awarded a CBE in 2004 for services to the automotive and engineering industries in the UK.