CENTRAL VIEW NOVEMBER 2016

Transcription

1 CENTRAL VIEW NOVEMBER 2016

2 WELCOME Welcome to the first edition of Central View, our new update from LDC in the Midlands. In this issue, leading business figures talk about what they see as key growth drivers in the region, we explore private equity as a catalyst for growth and share some of our recent successes. MARTIN DRAPER CHIEF EXECUTIVE As someone who runs a national business from my base in the Midlands, I know that our strong regional economy is one of the most resilient in the country. The diversity and heritage of the Midlands business landscape continues to make it an attractive prospect for investors, even against the backdrop of uncertainty following the EU Referendum vote. At LDC, we see first-hand just how much the region has to offer a wealth of businesses with a drive and determination to lead, innovate, grow and export, and ambitious management teams that when partnered with the right backers can have a transformational impact on the regional economy. We ve backed more than 150 such management teams from the Midlands, providing more than 1.2billion of capital to help them realise their potential. Our award-winning Midlands team has generated more than 300million in exit proceeds since was a record year for LDC in the region, and 2016 is proving to be another busy year, with a number of exciting investments, successful exits and growing portfolio companies. We kick-started the year by supporting the 175million secondary buyout of same day distribution firm CitySprint, and followed this by backing the management buyouts of two-man next day home delivery provider Panther Logistics and TXM Plant, the UK s largest supplier of specialist operated plant to the rail sector. Following a three-year partnership, British premium lifestyle brand Joules announced its 140million IPO on AIM earlier in the year, following which we reinvested in the business for a 7% holding. We have also completed three sales to international trade buyers; the exit of premium aircraft interiors manufacturer Aim Aviation to Chinese aerospace manufacturer AVIC, Original Additions to a US trade buyer and Midlands commercial radio group Orion Media to Bauer Media Group. And, most recently, we exited our investment in IT solutions provider Node4 in a sale to Bowmark Capital. While each of these portfolio companies chose a different route for the next step of their journey, they all grew and thrived under LDC s stewardship and we wish them all the best! It is an exciting time in the region, where a diverse and fast-growing economy is being boosted by a sustained period of inward investment, such as the New Street Station redevelopment, the introduction of HS2 and the launch of the 200million integrated leisure and entertainment complex Resorts World at the NEC. To build on this position of real strength and confirm our commitment to the region, we have expanded both our Birmingham and Nottingham offices. As LDC celebrates its 35th year of backing business ambition we continue to look for new relationships with quality, forward-thinking Midlands companies that want to accelerate growth and together build the game-changing businesses of the next 35 years. We ve backed more than 150 management teams from the Midlands, providing them with more than 1.2billion of capital and supporting 20,000 jobs.

3 GROWING THE NEC The NEC Group recently filed its first set of financial results under private-sector ownership. With a 5% increase in revenues and a 15% increase in EBITDA year on year, it has been a busy time since the management buyout in April 2015, and we spoke to the business Chief Executive Paul Thandi to learn more. WHY DID YOU CHOOSE PRIVATE EQUITY AND WHY DID YOU SELECT LDC? HOW DID LDC S VALUE ENHANCEMENT GROUP WORK WITH YOU? We wanted to change our business and realise our business plan. We wanted investment to build new businesses, organically grow our business, invest in our teams and complete some acquisitions to grow our portfolio. We had a choice of a few people to go with, and what I liked the most about LDC was their approach. First and foremost, it wasn t the business, it was the management team that they were interested in. With this management team and the right backer in LDC there is no reason why we cannot grow our business exponentially in the next three to five years. The Value Enhancement Group are a great asset for the NEC, and for LDC. What we worked on specifically with the group was sales-effectiveness. I fundamentally recommend that the moment a CEO does a MBO with LDC, that they deploy that tactic because it s fantastic. The rewards we ve got through that one exercise have been enormous. We ve changed the way fundamentally the business is structured around sales, we ve changed the ways in which we engage with our markets and you can see the return growing. DO YOU FEEL THAT SMES CAN BENEFIT FROM PRIVATE EQUITY INVESTMENT? SINCE THE DEAL, WHAT IMPACT HAS LDC HAD ON THE NEC GROUP? PAUL THANDI CHIEF EXECUTIVE, NEC GROUP Any size company can benefit from private equity investment. Whether you re an SME, a mid-market player or even a large organisation, I would absolutely recommend you to secure investment from a private equity company because you will get the return you re looking for and you will absolutely improve your game with your company. You ll improve the way you engage with your market place, you ll improve your focus on your market place, your customers first and foremost, and also your staff. That speed of focus, speed of decision making has been fantastic for us. We have launched a business called NEC Live Productions, we have invested in other products and services and got three international projects we are looking at. We have a great growth plan and there is no reason why we cannot achieve that together. LDC has been the catalyst for all of that. They ve brought an energy. Private equity for me, my team and my business is a fantastic place to be. WATCH A VIDEO INTERVIEW WITH PAUL THANDI AT

4 MAN ON THE STREET Andy Street CBE has spent more than 30 years at John Lewis, most recently as Managing Director. He has recently been selected as the Conservative candidate to run as mayor for the West Midlands. We caught up with him earlier this year as he spoke to the region s leading professionals at our Future Partners event in Birmingham about John Lewis, the Midlands region and private equity. He shared the journey of John Lewis from a drapers shop on Oxford Street in 1864 to the employee-owned high street giant it is today. It wasn t until 2001 that Andy says the business took a step that would catapult it to the status it enjoys today. In 2001 the dotcom bubble burst, and that s when we decided to invest in johnlewis.com. We lost tens of millions of pounds in those early years, but fast forward to 2008 and I think that s where the modern day story of John Lewis really starts. During a time of global recession, Andy says the business stuck by its customers. John Lewis refused to compromise on service, product quality or its pricing commitment. Instead it let its profit take the strain and focused on future areas of success. That meant aligning around online and particularly multi-channel retailing. Since then, 40% of our business is taken online, and that is far greater than any of our traditional competitors. This country is leading the e-commerce retail revolution, and we are at the cutting edge. The business recognised that customers want to be inspired by its stores, but also have access to the convenience and simplicity of online shopping. This approach has seen the make-up of a John Lewis store evolve, and nowhere is this more obvious than in its new Birmingham site. We knew the redevelopment of New Street station was the right opportunity, quite simply because it was to be the focal point of the city, and I think we ve achieved that. By coming here other retailers will come too, sort of like a magnet, and from that magnet redevelopment can stretch out. In a time where e-commerce is the driving force of retail growth, John Lewis was ahead of the game. It has become a figurehead for inward investment in Birmingham. For different companies, different funding solutions will be right, so its fantastic news the private equity market is strengthening here. The future of the Midlands economy is dependent on the big companies yes, but even more importantly on small businesses and those that have not even been founded yet. The strength of the economy comes from diversification, and what s really positive about what s happened here in recent years is we re much less dependent than we were on individual sectors. We re more resilient, and we know it s the smaller companies that will grow the fastest. Andy believes manufacturing remains critical to the region, whilst the professional services sector will continue to create jobs and there will be considerable growth in the digital industry. There is much more choice of funding sources for business. Whether it be mutual ownership, a conventional plc or a private sector model, there needs to be diversity. For different companies, different funding solutions will be right, so its fantastic news the private equity market is strengthening here. ANDY STREET CBE FORMER MANAGING DIRECTOR JOHN LEWIS WATCH A VIDEO INTERVIEW WITH ANDY STREET AT

5 ACQUISITIONS DRIVE GROWTH A successful private equity partnership is often centred on the delivery of a targeted buy and build strategy or an organic growth plan; adding long-term, sustainable value for a business and equipping it with the capabilities to develop new services and capitalise on an evolving consumer landscape. A recent study into the social value of private equity showed LDC portfolio companies grew three times faster than the national average for all SMEs, with aggregate employment in our portfolio companies increasing by 27%, and turnover by 20%, during our stewardship. Here we look at the significant growth of three of our portfolio companies from the Midlands; Away Resorts, Prism Medical and Node4. LDC supported the secondary buyout of holiday park owner and operator Away Resorts in April The business acquired Cosways Holiday Park in Mersea Island in January 2016, and an extensive programme is now underway to improve and expand the facilities at the park, which has been renamed Mersea Island Holiday Park. This acquisition marks the first step of the business strategy to identify high quality additions and grow its share of the UK market. Away Resorts has also implemented an 8million improvement plan at Tattershall Lakes in Lincolnshire, whilst a 4million modernisation and expansion is also underway at Whitecliff Bay in the Isle of Wight. Prism Medical, a manufacturer and provider of specialist mobility and handling equipment, is accelerating its buy and build strategy, with its fourth acquisition since LDC supported the 30million management buyout of the business in April In August 2015, the business purchased Smirthwaite, a manufacturer and supplier of specialist equipment for children and young people with special needs. This follows the purchase of The Mobility Equipment Company earlier in the year, and two other acquisitions in The acquisitive and organic growth during LDC s tenure to date has seen an increase in Prism Medical s staff numbers by 130 people, with the business now employing 430 staff. LDC backed the management buyout of IT solutions provider Node4 in May During the subsequent three years, Node4 activated a strategic buy and build strategy that saw it complete the acquisitions of LETN Solutions, Reconnix and Premier IT Networks, as it capitalised on the growing trend for customers to outsource IT services and favour integrated providers. The management team generated impressive growth in the business; increasing revenues from 13million to 28million (March 2016) and more than tripling staff numbers, with the business now employing 184 people. LDC exited its investment in October 2016, generating a money multiple of 2.8x. FOR MORE INFORMATION ON THE GROWTH OF THESE BUSINESSES VISIT

6 PORTFOLIO FOCUS The diversity of the Midlands business landscape makes it an attractive prospect for investors. An impressive mix of ambitious smaller firms and competitive mid-sized businesses are investing in the latest technology, recruiting highly skilled talent and introducing new services. Our Midlands team backs a 25 strong portfolio of forward-thinking businesses across a range of sectors, and here we look at some of the ways we are helping to support their long-term growth. 1.2bn 25 Years in the Midlands 150 Management teams supported Investment deployed 2.2bn 20,000 Total revenues of our current portfolio Jobs supported 300m Exit proceeds since 2014

7 DISTRIBUTION The logistics industry is booming, and it is in no small part down to the incredible acceleration of the UK s e-commerce industry, which is the fastest growing retail market in Europe. Britons spent an estimated 80billion shopping online in the year to the end of August 2016, largely thanks to the advances in digital and mobile technology enabling time-poor consumers to embrace the convenience that online shopping provides. Consumer spending power has created an unprecedented same-day and next-day delivery culture that is also emerging across industry, from healthcare and automotive to freight distribution, and forward thinking logistics firms are quickly capitalising on the evolving market. We have made two significant investments in the sector in Earlier this year, we backed the 175million secondary buyout of CitySprint, the UK s leading technology-driven same day distribution company. The investment cements CitySprint s first mover advantage in the 1.7billion same day market, where it is the UK market leader, and enables the company to fast-track the development of its innovative final mile delivery offering through its newly-created accelerator division, LastMileLink Technologies. Since the transaction, the business has already completed five acquisitions including The Courier Co-operative in Birmingham and ASAP International and Peps Couriers, both located in London. In April we backed the 17million management buyout of Panther Logistics, the UK s largest independent two-man next day home delivery provider. Panther specialises in two-man and one-man assisted delivery services for major brands and retailers, and provides customers with next day deliveries and UK-wide coverage via a network of eight regional hubs. Following the investment, Panther plans to continue to invest in its operations and develop new service innovations to support its customers. We also supported a re-financing of The Pallet Network (TPN) alongside the current management team. LDC originally invested in TPN, one of the UK s leading palletised freight distribution networks, in 2007, and has since supported an acquisition and the opening of a purpose built operational hub, which helped more than double turnover to 72million. TECHNOLOGY The turnover of digital technology businesses in the UK is growing 32% faster than the national average, and the sector now accounts for 1.56million jobs across the nation. It s therefore no surprise that businesses wanting to build a competitive edge are investing in new technology platforms. We recognise the escalating opportunities for growth in this sector. To date, LDC has invested over 850million into more than100 technology, media and telecommunication (TMT) firms, and our current TMT sector portfolio collectively employs over 3,800 people across the UK. In 2015, we took a significant minority stake to support the development of IT services and software provider Centiq Group. The business specialises in the design, configuration and implementation of SAP HANA, a rapidly growing in-memory platform. With a highly experienced team at the helm, we continue to offer strategic support to help enhance the business core offering. Portfolio company ATCORE, a provider of reservation and e-commerce solutions for travel companies, has acquired Tiger Bay. Tiger Bay provides dynamic and flexible tour operating platforms that deliver end-to-end systems or integration into existing websites. The acquisition strengthens the ATCORE travel suite, increasing the breadth of its products and services whilst enabling expansion into specialist market sectors. This is just one step the business has taken to achieve greater scale and success since LDC backed the 45million management buyout of the business in November LDC recently exited Node4, the regional data centre and managed IT and communications specialist, but not before a period of impressive growth. Indeed, Node4 s management team were recognised by the British Private Equity & Venture Capital Association (BVCA) as the top Mid-Market Team at the 2016 Midlands Management Team Awards. In addition to our current thriving TMT portfolio businesses, companies in other sectors are embarking on the journey of digitalisation as the benefits of this are increasingly clear. Under our stewardship, same-day distribution company CitySprint will now accelerate the on-going roll out of its Onthe-dot retail and consumer brand, which is a delivery service that allows shoppers to choose a one hour delivery window.

8 CONSUMER Household spending in the UK increased to 291.1billion in Q2 2016, the highest volume spending since the start of the series research. LDC is committed to backing a range of diverse small and medium-sized businesses in the consumer space to help them gain a larger share of this market. LDC originally invested 22million in premium lifestyle brand Joules in November 2013 to support the company s expansion. Between FY2013 and FY2015, Joules increased revenue 50% to 116.4million, driven primarily by its store roll-out (from 61 to 98), increased sales within its wholesale accounts and expansion of its e-commerce business. In the same period, international revenues grew circa 200% to 10.6million, underpinned by significant investments in the group s infrastructure, including supply chain, IT, international sales support offices and people. Joules 140million IPO on AIM earlier this year saw LDC generate gross proceeds of 53million on its investment, representing a money multiple of 2.4x. Following the IPO, LDC has reinvested for a 7% holding. In September 2015, we backed the management buyout of Aqualisa, a premium shower brand, through a significant equity investment. The business designs and manufactures a range of market-leading digital, mixer and electric showers and accessories, and launched the first digital shower in Its commitment to technology and research & development has propelled Aqualisa to the forefront of its market, and recent accolades include the Queens Award for Enterprise and Corgi Product of the Year awards. We continue to work closely with the management team to unlock the huge potential of the brand through continued development to achieve even greater scale in the years ahead. LDC also backs the 2016 BVCA Social Responsibility Team of the Year winner Forest Holidays, a specialist rural accommodation provider, and Away Resorts, a leading operator of British holiday parks. Both businesses are developing new sites, to keep up with UK customer demand for staycations. INDUSTRIALS Traditional industries like manufacturing, aerospace and rail are the heartbeat of the Midlands, with a reputation for innovation and resilience that drives substantial economic growth. We have a proud history of backing some of the most promising and forward-thinking businesses in these sectors, including two leading aviation firms. As an LDC portfolio company, premium aircraft interiors manufacturer AIM Aviation grew its turnover by 67% and more than doubled its order book. We exited the business in 2016, delivering a 3.5x money return for LDC. MB Aerospace provides engineering services for aero-engines and industrial gas turbines. Under LDC s stewardship, the business grew its turnover from $28million to $81million, following a growth strategy that ultimately delivered a 2.8x money multiple. Outside of aerospace, there is significant Government investment into rail infrastructure projects across the UK. These include major electrification schemes such as Great Western, Thameslink, HS2 and Crossrail, which is Europe s biggest construction project. Aspin Group is a business that is well positioned to capitalise on Network Rail s investment in electrification. The company, which joined our portfolio in 2015, specialises in the design and construction of piled foundations for the rail sector. With our backing, the business impressive management team continues to target organic and acquisitive growth to complement is pan-regional network. Earlier this year, we backed the management buyout of TXM Plant, the UK s largest supplier of specialist operated plant to the rail sector. Following the transaction, TXM Plant intends to accelerate its growth by investing heavily in its fleet and expanding its range of value-added services. Additional LDC Midlands portfolio companies continuing to grow include: Kee Safety, a global provider of safety solutions for contractors and the building industry, A-Gas International, the leading independent distributor of speciality gases and chemicals and Eley, manufacturer of high quality sporting ammunition. The region enjoys a rich heritage and a desire for innovation. Our focus is to build on that tradition and support more ambitious management teams. Together we ll add value and build industry leading businesses that deliver impressive growth.

9 LATEST NEWS LDC exited its investment in IT solutions provider, Node4, generating a money multiple of 2.8x. Node4 has grown impressively since LDC backed the MBO in May 2013, increasing revenues from 13million to 28million (March 2016) and more than tripling staff numbers, with the business now employing 184 people. Joules, a premium British lifestyle brand, announced a 140million IPO on AIM. LDC generated gross proceeds of 53million on its investment, representing a money multiple of 2.4x. Following the IPO, LDC has reinvested for a 7% holding. LDC originally invested 22million in November 2013 to support the company s expansion. VICTORIA MARCER Joined LDC s Nottingham team in September 2015 as Investment Director, bringing over 19 years of experience. LDC completed the sale of premium aircraft interiors manufacturer AIM Aviation to Chinese aerospace manufacturer AVIC, in a deal that values the business at 210million. Since the MBO in 2010, the business has grown its turnover by 67% and more than doubled its order book. LDC backed the MBO of TXM Plant, the UK s largest supplier of specialist operated plant to the rail sector. Following the transaction, TXM Plant intends to accelerate its growth by investing heavily in its fleet and expanding its range of valueadded services. DAVID BAINS Joined LDC s Birmingham team in February 2016 as Investment Director, bringing over nine years of experience. LDC completed the sale of the market-leading Midlands based commercial radio group Orion Media to international trade buyer, The Bauer Media Group. The sale price represents a money multiple of 2.3x for LDC. LDC backed the 17million MBO of Panther Logistics, the UK s largest independent next day home delivery provider. Following the investment Panther plans to continue developing new service innovations to support its customers. NATALIE MORGAN Moved to the Deal Origination team in September 2015 as an Origination Manager for the Midlands. LDC completed the sale of branded consumer beauty goods business Original Additions to US-based beauty and personal care company PDC Brands. LDC backed the SBO of the business in 2011 and supported its international expansion. LDC backed the 175million SBO of CitySprint, the UK s leading same day distribution company. The deal supports the firm s acquisition plans and continued investment in technology. FOR MORE LATEST NEWS VISIT

10 CEO S VIEW Andrew Lane, CEO of Eley, explains what it s like to go through a management buyout process supported by LDC and talks about what life has been like with private equity support over the last two years. ANDREW LANE CEO, ELEY The management buyout process presented us with the opportunity to secure new investment and support, enabling us to strengthen our market leading position. Some of our management team had been with the business for 40 years; so it was critical to get the right partner on board to work alongside this highly experienced team and accelerate our future growth potential. This was the first time I d led a management buyout, and quite simply we wanted a backer with the sector knowledge and enthusiasm to help us deliver! On meeting LDC it was immediately clear that the LDC team, led by Andy Lyndon, was the right fit for our business. There was a great chemistry in the boardroom, and LDC s in-depth industry experience was an attractive proposition for a firm manufacturing premium quality goods. LDC understood the dynamics of our business and in October 2014 supported our 42million management buyout from parent company IMI plc, a global engineering business. From the outset we felt the benefits of this partnership. We needed to establish the governance, controls and systems of being a standalone business rather than an arm of a plc, and this successful transition period was in no small part due to the significant support we received from LDC. That being said, LDC respect that we are the experts. They trust that we know our business inside out and which direction it should move in, and this collaborative approach has allowed us to focus on delivering growth and innovating our product range. It s been a match made in the Midlands, and I d certainly encourage management teams to explore private equity backers when looking for new investment. MBO >100 < 30m 15m - 30m October 2014 Deal type Number of employees Turnover Equity Investment date Sector FOR MORE INFORMATION ABOUT OUR PARTNERSHIP WITH ELEY VISIT

11 MAKING A DIFFERENCE LDC s annual charity quiz is always a night to remember and this year s event was no exception as it saw us hit the 1million mark for money raised for good causes since Our 11th annual quiz took place on 12th October 2016 and saw 169 teams compete to be crowned 2016 champion. They gathered at venues near our offices in London, Birmingham, Manchester, Leeds, Aberdeen, Nottingham and Reading, with Cardiff hosting an event for the first time since the office opened. BIRCHFIELD HARRIERS JUNIOR DEVELOPMENT PROGRAMME ANDY PAUL, CHAIRMAN For the fifth year, we are delighted to have LDC on board as the sponsor of our Junior Development Programme. This continued support for our young athletes is a vital factor in their development. This year 16 athletes received funding, which is more than ever before. They are already smashing personal bests and winning competitions, with an eye on the Tokyo Olympics in After an evening of fierce competition, the winner emerged in Birmingham, as Orbis Partners claimed bragging rights for the next 12 months. GCA Altium in Manchester took second place, while it was back to Birmingham for third spot, which was taken by BDO. More than 150,000 was raised on the night, thanks to generous team donations and raffle and auction prizes. This helped us pass the landmark million-pound mark, with 1,000,565 having now been raised since we started the quiz 11 years ago. All funds gathered on the night will be distributed to our local LDC charity partners - Birmingham Children s Hospital, Camp Mohawk, Children In Need, Francis House, London Air Ambulance, Maggie s (Yorkshire), Special Nursery and When You Wish Upon A Star. We d like to thank everyone who over the years has helped us raise an outstanding amount for such deserving causes. All eyes are already on next year s event, when we ll be looking to raise even more money to fund the great work that these organisations do.

12 LDC MIDLANDS TEAM MARTIN DRAPER CHIEF EXECUTIVE ANDY GROVE DIRECTOR ANDY LYNDON DIRECTOR STEVE ASTON DIRECTOR CHRIS HANDY DAVID BAINS JAMES ROBINSON JOHN GREEN MATT NEWBOLD RICHARD WHITWELL ROB SCHOFIELD VICTORIA MARCER CRAIG HINDE ORIGINATION MANAGER NATALIE MORGAN ORIGINATION MANGER LDC (Managers) Ltd. Registered Office: One Vine Street London W1J 0AH. Registered in England and Wales no Authorised and regulated by the Financial Conduct Authority no Part of Lloyds Banking Group. Further information can be found at LDC BIRMINGHAM Interchange Place Edmund Street Birmingham B3 2TA T: +44 (0) LDC NOTTINGHAM Butt Dyke House 33 Park Row Nottingham NG1 6EE T: +44 (0)