BGF-backed Springfield completes Seacroft Grange care village creating 100 jobs
Seacroft Grange care village in Leeds has been completed following a five year renovation project and a £1.9m investment from BGF.
The new care village will create 100 new jobs and transform a once dilapidated historic building overlooking an ancient village green into a new care complex.
The funding formed part of BGF’s overall £4.4m investment in Seacroft Grange owners Springfield Healthcare Group.
The care village offers services including day care, residential and nursing care, as well as private independent living apartments for a wide range of age groups.
The building dates back to 1627 and had been prominent within the local community for many years. For 30 years until the mid-1970s it operated as Seacroft primary school and many of the local residents who attended the school during those years still live locally and will benefit greatly from the services offered and have been great advocates of the project.
Chief executive Graeme Lee said: “Our model helps families make an informed choice earlier in the planning process and then moves with the needs of individuals or couples as their care needs progress, at the same time ensuring long-term consistency where the care team and quality of information are concerned. At the heart of our care village is a Grade II listed building which will be the basis for all our social and community activities and houses a cinema, therapy spa and gym, hair salon and coffee shop that wouldn’t look out of place on the high streets of York or Harrogate.
“As well as exceptional views over the village green, which is mentioned in the Domesday Book, people and families can be seen going about their daily business and, unusually, we have every single community amenity including medical centres, pharmacy, pub, library, church, post office, supermarket and bus station, all within 100 metres.”
Springfield Healthcare Group is the largest independent provider of domiciliary care in Yorkshire and Humberside. It provides care to nearly 2,000 clients each day and employs over 600 people locally.
Richard joined BGF in July 2012 and is based in Leeds. His main role is to identify and successfully execute investments for the fund. He also sits on the board of a number of our portfolio companies.
Richard has 16 years’ experience in small company investing with previous roles at YFM, Octopus Private Equity and Sovereign Capital. He began his career at Deloitte where he qualified as a Chartered Accountant following three years at York University where he studied Economics and Economic History.
He is married with three children and lives in Leeds. At weekends Richard runs a free taxi service for his children around which he fits in time to play, watch and coach the beautiful game that is football.
Latest investments/Board positions:
- Total Recycling Services (Board Observer)
- Altec Engineering
- Cussins (Board Director)
- J&B Recycling (Board Director)
- Moda in Pelle (Board Director)
- Springfield Healthcare Group (Board Director)
- York Mailing (Board Director)
- Xercise4Less (Board Director)
- VTL Group
Neil joined BGF in November 2011 as an Investor based in Manchester. In this role, Neil is involved in all aspects of the investment process from origination through to completion, and supports companies throughout the investment hold period.
Neil has gained private equity experience at ANZ Private Equity in Sydney and latterly with Infinity PE in the North West, where he was involved in executing and managing a number of investments across a range of sectors.
He began his career at PWC and worked in both the Manchester and Sydney offices in the Transaction Services division. Neil is a qualified Chartered Accountant and holds a BA (Hons) in Economics from the University of Sheffield.
Latest investments/Board positions:
- Grace Cole (Board Director)
- Hobs Reprographics (Board Director)
- Nationwide Window Cleaning (Board Director)
- Medicina (Board Observer)
- Barburrito (Board Observer)
- Springfield Healthcare Group
- Boost Juice Bars (Board Observer)
- Horbury Group (Board Director)
- Broadband Satellite Services
Regional Director – North, Scotland & Northern Ireland
Andy is a member of the BGF Investment Committee and leads our investment team in the North of England, Scotland and Northern Ireland, identifying and executing investments for the Fund. He sits on the board of some of BGF’s investee companies. Andy has significant experience of regional private equity, having worked as a director in the Manchester offices of ISIS Equity Partners, Bridgepoint, and Royal Bank Development Capital.
Most recently Andy was a key member of leading investment firm Key Capital Partners, based in Manchester. He is a chartered accountant with 17 years’ experience in private equity, acquisition finance and corporate finance.
He also has industry experience, having been group finance director of Pennine Retail Systems Limited, a leading UK retail software company which was successfully backed by private equity.
Andy is married with two young children and lives in Cheshire. In his limited leisure he tries, and generally fails, to impress his children by playing the piano and whilst on holiday loves to windsurf or snowboard depending on the time of year.
“I joined BGF to establish our business in the North, having been hugely excited by the prospect of helping to build a business from scratch and bring a new type funding solution to growing companies. I continue to gain huge satisfaction from working with ambitious entrepreneurs and helping them to accelerate the growth of their businesses.”
- Moda in Pelle
- Nationwide Window Cleaning
- Boost Juice Bars
- Springfield Healthcare Group
- Better Bathrooms
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.”
By James Hurley
“We haven’t got the ‘not invented here’ mindset,” says Richard North, founder of Midlands toy business Wow!Stuff. “Our attitude to innovation is ‘whoever, wherever’ – we don’t care who comes up with the idea, or where they are inthe world.”
Even on the side of a mountain in Vermont. This is no imaginary example – it’s the strange, isolated home of Jaimie Mantzel, an inventor that North is hoping will help him deliver a hit toy this Christmas.
Mantzel spent a decade flipping burgers, painstakingly saving up $22,000 to buy a remote piece of land that would be his escape from the rat race. Once he’d found a 20 acre plot on the side of a mountain, he designed and built an “off grid” three-storey dome structure from reclaimed materials to live in.
Deciding he wanted to build a workshop, he obtained a disused aircraft hanger and transported it up the mountain by foot, piece by piece and reassembled it. With a better way to carry materials to his new base clearly required, he started work on an off-road vehicle. Building a DIY 4×4 would be impressive enough, but Mantzel is a man who likes to put his imagination to work: he started creating a giant, 12 foot tall robotic spider from scrap aluminium that he could pilot.
Documenting his singular lifestyle and esoteric creations on a blog and, crucially, on YouTube brought Mantzel a global audience. The giant robot proved a particular source of fascination. One of those who followed Mantzel was a robot scientist working for Wow!Stuff and fascinated with the eccentric inventor, he told North.
As it turned out, Mantzel had already spotted the potential of toy versions of his giant arachnid – but had bad experiences with American toy giants. North and his team eventually convinced the reclusive creator that they could enjoy a fruitful relationship.
The result is Attacknid – a six-legged “battling machine” that North is convinced will be the number one boys’ toy this Christmas, with all of the UK’s major toy retailers having agreed to list it.
Wow!Stuff has a knack for coming up with toys that capture the imagination. Last Christmas, it sold 400,000 Air Swimmers, a giant inflatable radio controlled fish that ‘swims’ through the air. Another hit was My Keepon, an interactive robot that dances in time to music.
Its origin? YouTube again. Wow!Stuff workers spotted a video on the site starring a dancing robot designed by scientists to help therapists improve the social development of autistic children. When North watched the video, he saw the potential of the £20,000 device, which had been developed by US company BeatBots.
The lesson, North says, is that no amount of market research and analysis of trends can substitute simply recognising an inspired idea.
“You’ve got to back your hunches. Research won’t predict the next big thing. If you’re growing a business you can have a perception that all the ideas have to be generated internally. We’ve realised you have to look outside.”
The company – which has won a National Business Award for its approach to innovation – also uses the internet and social media to find new ideas and inventors, which North says can come from any industry and any location.
“You have to cast your net wide. The people we employ are people who share ideas freely and aren’t selfish – innovation has to be in everything we do, not just toys. There’s a world out there full of ideas, so it’s your job to capture that, not think, ‘we have all the ideas here’. It’s about being free and inclusive.”
If that makes the process of product development sound easy, North is at pains to point out that the pressure in his industry to innovate quickly and accurately can be “brutal”.
“When we started out I remember talking to people in the industry. Everyone had the same remark – it’s one of the hardest industries to do a start-up. Even the biggest toy companies, with millions to spend on development, research and focus groups say 50pc of their toys won’t work commercially. It’s like being a venture capitalist – you know a lot of what you do will fail. And the amount of start-up capital you have to invest upfront can kill you quickly if you get it wrong”.
With toys taking between two and three years to develop, the moment they’re presented to retailers is “nerve racking”, North says, with some understatement. He’s just back from toy fairs in the US and Hong Kong where he’s been doing just that. Unusually, all of the toys that Wow!Stuff presented received orders or interest.
“That never happens. It’s the best we’ve ever done. At the point of the first reveal, you’re hoping people get it. Sometimes you’ve just missed the trend, sometimes you’re too far ahead – predicting something that hasn’t arrived yet,” he says. “We saw a lot of companies doing toys that worked with mobile apps. They’re probably two years ahead of the consumer. Next year is when we think the timing will be right for that.”
When I tell North that the way he describes innovation makes his company sound like it is run by Tom Hanks’ character in the 1988 film Big, his response is telling: “I’ve never seen it but people keep saying that to me.”
In the film, a 12 year-old boy is granted his wish to be given an adult body. He gets a job in a toy firm and becomes an unwitting nemesis to an experienced product developer by rubbishing his ideas and coming up with much better ones of his own.
“The industry is like that – there are lots of clever people trying to justify their jobs by relying on research and numbers. The truth is, the answers are out there, not in you. The minute you start getting hierarchical is the time you lose your innovation. You need to think like a kid, be like a kid – before you were indoctrinated by life and educated in the supposed right and wrong ways of doing things.”
However there is no one single way to innovate; companies will invariably take different approaches to it as is evident within BGF’s own investment portfolio. The important common denominator is that innovation is high on the corporate agenda for them all.
At M Squared Lasers in Scotland, backed by BGF this year, thinking like a child is not on the agenda – they have to take a rather more structured approach to innovation. The company develops lasers for a huge array of industries, and for a wide range of applications – from advanced scientific research to sensing hydrocarbons in oil and gas production, sensing explosives and chemical warfare agents and computer chip manufacturing.
All of the industries that the company sells to demand both speed and accuracy – and constantly changing demands means M Squared needs to come up with new
products all the time.
“Our term is dependable innovation,” says the company’s chief executive, Dr Graeme Malcolm. “They’re novel processes but solving a real problem, so what we produce needs to be robust as well as quick. The customers don’t want flaky prototypes.”
In one sense, however, the approach M Squared takes to achieving that aim is strikingly similar to Richard North’s“whoever, wherever” philosophy. “We can sense chemical agents from hundreds of metres – that’s unique to us. What we’ve done to get that advantage is take a collaborative approach with supply chain partners and universities. Typically, our big publicly listed competitors take the ‘not invented here’ approach to life. We’re smaller and more agile, which gives us a bigger research and development group – because it’s not just us coming up with the ideas.”
Working with a multitude of partners is not a soft option, however. “You have to think harder about intellectual property this way,” Malcolm warns. Detailed agreements are made in advance so partners know where they stand on ownership if something commercially valuable is created. Working with academia as a small, fast growing company presents challenges of its own but Malcolm says it’s less of an issue than one might expect.
“We try to work with the most like-minded groups in universities – there are agile parts that are already working with industry. The rest, the more research-based academic parts, can be worked with for longer term projects,” he says. “We license a lot of technology from universities – that makes the relationship last longer because they’ll come back to you.”
For Malcolm, the hard part about innovation isn’t coming up with good ideas – it’s bringing them to market. “There’s often much more innovation involved in the process than in the original idea,” he says.
“Some of the things we’ve worked on have been groundbreaking. But 1,000 times more effort goes into rigorous engineering and developing a new market, and educating a new customer base. That’s the bit that’s underestimated – the light bulb moments can be obvious.”
To make sure innovative ideas quickly result in physical products, unlike many of its larger rivals, M Squared uses local manufacturing, via an advanced production facility in Glasgow. “The proximity between engineering and manufacturing is crucial when you’re doing it quickly. It’s an intimate process – and allows you to keep the skills you need to do the whole cycle from analysing a market to delivering a product. It’s difficult if you don’t have those close connections.”
Encouragingly, he thinks the principle could apply to less hi tech industries too – rising costs in emerging markets mean fashion companies increasingly see the speed and control benefits of coupling innovation with local manufacturing.
“I think that trend is something the UK is pulling through strongly on,” he says. “It makes the cycle of iteration much more rapid – so innovation can happen more rapidly. Many of the great innovations in recent years have had a number of iterations – the tighter the loop the better.”
But what about companies that aren’t involved in developing physical products? How do they approach innovation?
A care home isn’t something one immediately associates with innovation.
However, Graeme Lee, chairman of Springfield Healthcare Group, insists plenty of creativity has gone into turning a family business with sales of £400,000 into a £12m turnover company. He too is pioneering a new way of doing things in the domiciliary care market.
Unlike Wow!Stuff and M Squared Lasers, Lee’s innovation is focused on service and his business model rather than product design and production. Yet Lee’s emphasis of looking outside your own business for inspiration echoes the approaches of North and Malcolm.
In his role as chairman of a not for profit care association, he visited a multitude of care homes. A range of problems struck him – residents felt isolated in remote homes and frustrated by living on top of one another. “They wind each other up,” he says.
Worse, many have to cope with a change in circumstances – if a resident develops dementia, they’ll often have to move.
Lee’s solution is simple, but unconventional – a “care village” in the heart of a normal community just outside Leeds. Residents have separate units, and can move from complete independence to sophisticated care in one location. And they’re in the heart of real community life – the pub, the village shop, the post office.
“Say Mrs Smith comes in at 70 – we can deliver everything she needs for the next 25 years. Normally, if you’re in residential care and you get dementia you have to move. This is a home for life. And for us, we keep the patients longer so it’s a good business model, if we give people the right care at the right time.”
Echoing Malcolm’s point, for Lee, the hard part is in the delivery, not coming up with the original idea.
To bring the care village to life, Lee has had to convince both the NHS and local councils – hardly organisations known for embracing change – of the benefits of his approach. He’ll need their backing if he wants to expand the business, after all.
Just as North warns that bad timing can kill a good toy, Lee has picked a time of upheaval in the healthcare market to introduce a new model.
“GPs take control of healthcare budgets next year. They love what we are doing because they know that everything the patient needs is taken care of. For doctors, we’re ticking all the boxes.”
BGF liked the idea enough to invest and Lee is hoping to replicate it in other
When BGF backed North’s business, he says it focused the mind on what they were buying into – and ramped up the pressure to keep coming up with the bright ideas.
“As investors, their worry is, how do they know we’ve got the magic touch. You don’t know why it’s you that they’ve chosen; but then, why not us?”
The key to staying innovative for these growing companies is to keep looking outside their businesses for inspiration, hiring people who don’t care where the best ideas come from and remembering that being innovative doesn’t stop at simply coming up with neat product ideas. And of course, timing is everything.
WHAT IS INNOVATION?
If the Wall Street Journal is to be believed, innovation is the most overused word of 2012. It is often bandied about by consultants and PR executives, and companies can be just as guilty; heralding innovation when in truth what they have is simply a good product.
So what is real innovation? There are numerous definitions, and the experts can’t quite agree, but here are a few examples to consider:
- Inventing a product, technology or service that is genuinely new. Like the light bulb, wifi or Google.
- Revolutionising an existing product by changing the users’ behaviour while at the same time revolutionising the market. Apple’s iPhone anybody?
- Inventing a new process, delivery method or business model. Turning mainframe computers into personal ones or shifting video rental from stores, to post and then online.
- Creating a new market for a leftover or overlooked commodity, or extending a market for an existing product. Best Buy, the US electronics retailer is creating revenues from recycling so-called ‘e-waste’.
- One could always just go with the summary offered by the late Steve Jobs who knew a little about the subject: innovation is what “distinguishes between a leader and a follower”.