BVG Airflo Group, a multi-channel retailer based in Wales, received a £10m investment from BGF in July 2015.
Established in 1991 by Chief Executive Iain Burgess, the business has grown rapidly from a single person operation to a highly profitable non-high street multi-channel retailer generating turnover in the region of £70m in its current financial year. BVG has increased revenues by over 70% and profits by nearly 300% in the last five years through a combination of organic growth and acquisitions.
The business has a substantial online focus, specialising in the sale and distribution of footwear and clothing, home and garden products, fishing tackle & equipment and sports nutrition products. BVG has a number of routes to market for its products including a highly successful e-commerce function, mail order to its database of over 1m customers and a number of high profile B2B customers.
BVG controls almost every aspect of the business in-house from artwork production and website development through to product design, sourcing, buying, fulfilment, call centre and returns. The Group’s head office is in Brecon, South Wales, and it also operates and owns a 230,000 square foot distribution centre in Skelmersdale, near Liverpool, employing over 325 staff across both sites.
This represents BGF’s second investment in Wales having backed specialist industrial scaffolding business SHS Integrated Services in September 2012. A number of BGF portfolio companies from across the UK are also establishing a presence in Wales including fast-casual Mexican restaurant chain Barburrito which recently opened a site in Cardiff and Better Bathrooms, one of the UK’s leading bathroom retailers which also opened a store in the city.
SHS extends breadth of industrial services with £2m acquisition
– Acquisition follows £5.4m investment of growth capital by BGF in September 2012 –
BGF portfolio company SHS Integrated Services, a specialist provider of high specification industrial scaffolding and associated services, has acquired Dixon Pentland Scaffolding Company Limited, a leading provider of scaffolding services to the energy and heavy industrial sectors. The opportunity was introduced to SHS by Grant Thornton Corporate Finance in Cardiff, who also advised on the transaction. The value of the transaction was approximately £2m.
The acquisition will provide Barry-based SHS with a national platform for expansion into a highly specialised and regulated market.
Based in Doncaster, Dixon Pentland specialises in work in the critical services sector, for example providing scaffolding services to the power line and transmission industry. The company’s specialist work for customers such as National Grid is complementary to SHS’s own activities on petrochemical and utilities sites.
With an annual turnover of £5m, key customers of Dixon Pentland include AMEC, Babcock and Balfour Beatty and the company employs 65 people.
Founded in 1998 by Paul Smith, SHS erects and dismantles large scale, technically demanding scaffolding structures for clients in the petrochemical, oil and power generation sectors. It also provides complementary insulation services. SHS’s services are often required by site owners, operators and contractors for essential maintenance and refurbishment work of industrial plants. Offering the highest safety and operational standards, SHS has secured long term contracts with multinationals such as Dow Corning, Murco and Alstom.
SHS financed the acquisition following investment totalling £5.4 million made in September 2012 by BGF.
Dixon Pentland represents the first acquisition that SHS has made using BGF capital.
Finance director, Gavin Payne, who led the deal on behalf of SHS, commented:
“This is an important step for SHS. Dixon Pentland’s reputation and customer base is a great fit with SHS, opening up new markets and enabling us to provide an even more complete service to our customers. We shall be continuing to work with Grant Thornton and BGF to identify potential further acquisitions to complement and extend our offering in what is a highly-specialised market.”
Paul Oldham, BGF’s regional director for South Wales and the South West of England, commented:
“SHS was the first company in Wales that BGF has backed and our investment was made in order to strengthen the company’s core capabilities, develop a broader range of services and expand into new sectors and geographies. Dixon Pentland is a highly complementary acquisition given its reputation in the industry as a well-established, high quality operator and will add considerably to the range of services that SHS is able to offer its clients.”
Regional Director – South
Paul joined BGF in May 2011 and heads up our South West and South Wales region, covering the South West of England, Berkshire, Hampshire, Oxfordshire and South Wales from offices in Bristol and Reading. As well as working on new investment opportunities in the region, he currently sits on the board of four BGF investee companies and is a member of the BGF national Investment and Executive Committees.
Prior to BGF, Paul worked as a private equity investor for 16 years with 3i and LDC and also led Grant Thornton’s South West Corporate Finance advisory team as Partner for six years. He qualified as a Chartered Accountant with KPMG in Manchester and holds a First Class Degree in Economics and Accounting from The University of Sheffield.
“I joined BGF on the day we launched – the opportunity to create a new and unique investment business focused on helping SMEs to grow was both exciting and challenging. It is great to see that our supportive, long-term approach to funding and supporting ambitious management teams is in demand. We are achieving two of our key objectives – helping exciting private companies to grow, and increasing the size of the equity growth capital market in the UK. We will continue to invest in our regional team to enable us to work with many more ambitious companies.”
CAPEX TO BUILD GROWTH
Aberdeen-based STATS Group and South Wales’s SHS Infrastructure Services (SHS) may be hundreds of miles apart but the two businesses have much in common. Both specialise in largescale project management and engineering services for demanding clients; both have exciting growth plans that are dependent on capital expenditure; and both have turned to Business Growth Fund for help.
Without external investment to fund that expenditure, both companies would probably still be struggling to fulfil their potential. With the money, however, the two businesses are building reputations as leaders in their fields: STATS provides maintenance, repair and modification of oil and gas installations and pipelines, onshore and offshore, while SHS erects and dismantles large-scale scaffolding constructions on technically demanding projects. “When I arrived in 2011, SHS was operating with a significant overdraft and was having to turn down opportunities to bid for new work,” recalls Gavin Payne, the company’s finance director. “We did have a finance line with the bank that was facilitating some growth, but cash was massively constrained and we were never going to be able to move to the next level – we turned away £6m of business in the first two months I was here simply because we didn’t have the capital to commit.”
SHS’s difficulties started with the pressing need for capital spending, Payne explains, because the projects where the company specialises, working at refineries in the petrochemicals industry, require so much equipment.
“We needed to spend sizeable sums on the basics of our business – on tubing, boards and other scaffolding kit,” says Payne. “And we wanted to think longer-term – for example, we’d always bought wooden boards, even though steel boards last much longer, because our cash was so short we needed the cheapest option even when it turned out to be a false economy.”
Another issue was cashflow, adds Payne. “Payment terms in this sector are generally 60 or 120 days, which makes life very difficult for under-capitalised businesses.”
It is a story that Pete Duguid, the chief executive and founder of STATS Group, recognises very well. Duguid first launched STATS in 1998 and spent most of the next ten years battling with the company’s constrained finances. “I vividly remember my bank manager telling me I couldn’t build a business on enthusiasm alone and in truth, while there was always growth, we were constantly fighting working capital,” he says. “That was fine in 2007 when the banks were offering very easy access to credit but then the financial crisis came along and the oil market collapsed.”
In the years following the crisis, STATS faced a challenge simply to survive – not because of any flaw in its business model or products and services, but because it did not have the capital buffer needed to ride out a difficult trading period comfortably.
Fortunately, the business made it through, but Duguid realised he needed help to take STATS on to the next level. He could see clearly how the company could expand its range of products and services, and had plans for international expansion. But STATS still lacked the resources for the capital expenditure required to turn that vision into a reality.
“By the end of 2010 we’d stabilised but banking support had disappeared,” Duguid says. “I had to make a call – we knew we had to do something different and that’s when I began looking foroutside investment.”
The search ended in March 2012 when BGF invested £7.8m in STATS, in what was then only the fund’s fourth investment. Six months and 11 other investments later, BGF and SHS agreed a £5.4m injection of growth capital in the scaffolding business.
“What’s clear in both these cases is that the companies had no chance of any significant growth without taking on additional capital,” says Paul Oldham, a BGF regional director based in the Bristol office. “They could have opted to go for much slower growth, but they were ambitious, which is one of the things we look for in a company when we’re considering whether to invest.”
Oldham believes growth capital of this type – as opposed to debt – is ideal for companies with large capital expenditure requirements. You’re not going to be able to arrange debt for a period of longer than five years, which isn’t a great basis for long-term capital investment,” he argues. “Even as you’re investing, you’re already worrying about when you’ll have to roll over the borrowing.”
In contrast, Oldham says, with a slug of capital to fall back on, businesses can concentrate on worrying about growth rather than financing. “What our money has done in both these cases is take away the constraints from these companies and level the playing field with their larger competitors,” he argues. “That’s what BGF does – we invest in smaller companies whose skills are just as good, or better, as those of larger companies, and whose products and services are of equally high quality, or higher, so that they’re no longer at a disadvantage just because of their balance sheet.”
SHS’s Gavin Payne shares that analysis of the value of growth capital, but says he had particular reasons for choosing BGF.
“We spoke to a number of potential sources of funding, and while BGF’s terms were competitive, more important in the end was our impression that there was a greater willingness to work with us,” he says. “It didn’t feel like a traditional private equity involvement – they’ve only taken a minority stake and while we welcome their support and advice, it’s still us running the business.”
At STATS, Pete Duguid had similar anxieties. “My concerns were all about whether I was working for a new master and about how the decision making process would work,” he says. The fact the fund was happy with a minority stake in the company helped allay those fears. BGF also introduced Duguid to oil industry veteran Graeme Coutts, who subsequently became chairman of STATS and now plays a crucial role in helping the company realise its plans for international expansion.
In the end, says Paul Oldham, this is the type of edge that BGF needs to communicate to companies looking for investment.
“If all we were offering was money I think we would have done a lot fewer deals than we have done – our network of contacts is often an important part of businesses’ decision to go with us.”
Trunki was the first Bristol based company to secure investment from BGF.
Trunki designs, distributes and manufactures branded, multifunctional travel products for children. The company started trading in 2006 when Rob Law launched its original ride-on suitcase product. Turned down by Dragons’ Den, the company has sold two million units of its suitcase worldwide and its travel products are stocked in over 2,500 stores across the UK, as well as 97 countries overseas.
Trunki has won a number of awards including the 2012 SME of the Year at the National Business Awards. Rob received an MBE for services to business in 2011.
Since the launch of its original suitcase, Trunki has steadily expanded its portfolio of unique products, with the introduction of BoostApak (car seat/back pack), PaddlePak (water resistant character back pack), Travel ToyBox (ride on toy box), SnooziHedz (travel pillow and blanket) and a range of accessories. The company currently holds license agreements for Hello Kitty, Gruffalo, Moshi Monsters and Lotus.
The company is increasingly manufacturing its products in-house following the purchase of its own factory (Magma Moulding) in Plymouth in December 2012.
The company is based in Bristol where it employs 30 employees, with a further 44 employed at the factory in Plymouth.
Trunki is a market leader in the UK and significant growth opportunities for increased product sales exist overseas, particularly in China, Japan, Germany, France and the Middle East.
BGF’s £3.92m investment has helped fund the development of new products, grow the international sales and support development of the Trunki brand through above the line marketing.
Stuart Rose, the former Chairman of toy group Hamleys and ex-Managing Director of The Body Shop, joined the Trunki board as non-executive Chairman. This introduction was made by BGF through its Talent Network.
Trunki plans to triple the size of its addressable market by developing products for a wider age range.
Reading based Bullitt Group Ltd provides complete go-to-market solutions for global brands who are looking to extend into mobile or audio products.
Following initial success with JCB, Bullitt is now the worldwide licensee of Caterpillar Inc. producing rugged, android based, mobile phones, as well as audio devices for Ted Baker and the recently launched Ministry of Sound range.
In December 2012, BGF invested £3.5m of growth capital in the company to enable Bullitt to accelerate its portfolio of products and brands, as well as supporting the company’s expansion into more international markets. BGF holds a minority stake in the business.
Bullitt owns a commanding position in a rapidly expanding ‘rugged’ device category and is quickly emerging as a market leader in the design and manufacture of high quality, high durability mobile phones for both the consumer and industrial sectors. An example of Bullitt’s collaboration with Cat® can be seen in the following video for the Cat® B15 Smartphone, with the updated S40 and S50 handsets launched in 2015.
Bullitt operates a fully integrated model for the brands it works with, from product conception, through to distribution and marketing of the products. Its channel partners and customers include the world’s leading cellular distributors and telecoms carriers, who in turn sell Bullitt’s products to end users in 50 countries. Bullitt outsources manufacture to a highly regarded Tier 1 supply chain that includes the largest electronic design manufacturers in the industry, such as Compal in Taiwan, a Fortune 2000 company.
Bullitt has been able to pair with significant global brands, such as Cat®, is the 58th most valued brand in the world (according to Interbrand), and Ministry of Sound, the winner of IDMA ‘World’s Best Sound System’ award four years in a row, where Bullitt now produce their headphones and Bluetooth speakers.
This is testament to the unique approach and benefit Bullitt offers to extending brands into the mobile sector.
Bullitt was founded in 2009 by David Floyd, Colin Batt (both previously held senior positions in Motorola); and Richard Wharton, an experienced sales and marketing executive with a background in media and consumer electronics. Operating globally and now employing 72 people, Bullitt has recently opened larger offices in Reading, as well as presence in Shenzhen in China, and the US.