REFLECTIONS - LDC

ldc.co.uk

REFLECTIONS - LDC

R E F L E C T I O N S

W I N T E R 2 0 1 1

A FORCE FOR GROWTH | OUR 2011 VINTAGE | REALISING VALUE | MADE IN BRITAIN

GREEN PIONEERS | LDC ASIA | TOP TABLE COUNSEL | LDC IN THE COMMUNITY


A force for

GROWTH

Welcome to Reflections – a collection

of news and opinion from the LDC

team, portfolio and communities.

Darryl Eales

Chief Executive, LDC

We have produced this edition

against the backdrop of a perceptible

weakening in confidence, amidst

fears that the financial crisis is

entering a new stage of contagion

and concern that economic growth

will continue to prove elusive as

we move into 2012.

As ever, at LDC, we try to tell it like it is.

It is undoubtedly tough but I simply do not

recognise the blanket negativity which seems to

pervade across all media channels. Indeed, many

CEOs I speak to will say privately that business,

whilst challenging, is pretty good but feel that the

prevailing mood music encourages them to stay

silent and keep their head below the parapet. This

must change.

CONTENTS

3 A FORCE FOR GROWTH

5 OUR 2011 VINTAGE

7 REALISING VALUE

9 MADE IN BRITAIN

11 GREEN PIONEERS

12 LDC ASIA

13 TOP TABLE COUNSEL

15 LDC IN THE COMMUNITY

Business must stand up for itself and reinforce its

central role in both wealth creation and job creation

which are the two key foundation stones of a return

to growth. We must also lobby politicians and the

press to do more to support UK companies and

their massive contribution to national prosperity.

Most of all, this requires action not platitudes.

From my perspective, it really isn’t all doom and

gloom. I try to meet all the management teams

of prospective new deals and stay in touch on a

regular basis post investment. In many ways, this

is the best part of my job. I am always struck that

the characteristics that link most CEOs across our

portfolio is their grounded optimism and refusal to

be beaten. A telling statistic is that more than 60%

of our portfolio continues to trade ahead of prior

year. You do not see this reported in the media!

3 REFLECTIONS


INTRODUCTION

This performance does not happen by magic.

Our businesses are constantly reappraising

themselves and their performance. This

includes researching and accessing new

markets, redesigning operations to drive up

efficiency, strengthening resources and, with

our support, taking advantage of weakened

competition to make acquisitions to gain

scale and market share.

LDC, itself, has had to respond to these

challenges over the past few years, in

particular to our changing market place and,

especially, the challenge to the role of private

equity in wealth creation.

We have continued to invest in our

operational capabilities and our regional

network. We have developed our in-house

expertise by recruiting individuals who have

successfully operated, turned around and

grown businesses in a wide variety of sectors.

These skills have proved invaluable in the

current climate.

Our Value Enhancement Group is now

actively engaged in around half of our

portfolio companies, helping to design,

support and implement a range of strategies,

including capital reduction programmes,

improved sourcing, lean manufacturing and

sales management effectiveness.

We have also continued to develop our

operations in Asia. Our Hong Kong team

is helping an increasing number of portfolio

companies to access new markets with

reduced risk and faster pay back whilst also

accessing lower cost manufacturing and

more efficient sourcing.

Finally, we have focused on supporting

the growth ambitions of portfolio

companies and over the past three years,

more than one third of our portfolio have

made acquisitions which will enhance

exit prospects and drive a significant

additional value.

Most importantly though, throughout

this period of change and development,

I believe we have stayed true to the core

business principles which have served us

well over many years.

We have also delivered on our commitment

to invest throughout the economic and

business cycle. In 2010, we invested

£305m in 20 businesses, taking our five

year aggregate investment to more than

£1.3bn. In 2011, year to date, we have

invested £256m in 12 new businesses,

plus a further £40m into existing portfolio

businesses to support growth acquisitions.

We have also invested £65m in two

specialist funds.

Next we have maintained our position as

the leading regional investor in the private

equity market. This is not only a highly

profitable strategy, but also it enables us to

stay close to the communities in which we

operate and contribute to the growth of

SMEs across the UK.

Finally, we have stayed true to our

belief that private equity is ultimately about

supporting and liberating high quality

ambitious management teams. I firmly

believe this is the single biggest factor

that underpins LDC’s success.

I remain convinced private equity is a

force for good. Over the next five years,

we plan to invest around £2bn in around

80 businesses. We have recently launched

two significant new initiatives; a TMT focused

commitment based out of our London

office and a Specialist Engineering and

Manufacturing commitment based out of

our Birmingham office which is highlighted

in further detail on page 9.

We have also continued to expand our

network of non-executives who we believe

play a crucial role to board effectiveness and

driving value. On page13, a number of our

non-executives hold a fascinating round table

discussion on overcoming the challenges to

growth in the current environment.

Elsewhere, you can read more about

our broad commitment to wealth creation,

job creation and supporting the SME sector

(page 5) and about our amazing charitable

fundraising endeavours (page 15).

To conclude, I encourage everyone in the

business community to talk up the role of

business in leading the recovery and lobby

all elements of the media to report the

good, not the just the bad.

Best wishes,

WINTER 2011

4


TRANSACTIONS AND EXITS 2011

OUR 2011

VINTAGE

Our new investment teams across the UK have

continued their focus on building a balanced

portfolio of businesses throughout 2011,

diversified by size, sector and structure.

Small, disruptive technology-led businesses like musicMagpie.co.uk

and eConveyancer, international industrial groups looking to achieve

increased scale such as A-Gas, fast-growing consumer brand

owners like Original Additions, service providers operating in highly

fragmented, growing sectors, such as live events and marketing

group WRG, web hosting business UK2 and online learning

provider learndirect, to name a few.

Again, the same investment hallmarks are in evidence throughout –

ambitious management teams looking for LDC’s trademark mix of

added-value support and growth capital to realise their plans.

To this, we’ve also added some outstanding non-executive firepower

to their boardrooms – from retail veteran Allan Leighton’s appointment

as Chairman of musicMagpie.co.uk to former BBC Chairman Lord

Michael Grade’s non-executive role at WRG.

Building on our 2010 commitment, in the first 10 months of the year,

our new investment activity has seen our teams deploy £256m of

equity across 12 new businesses (see over).

Across these transactions, pricing has remained competitive and deal

structures conservative – two features of our market which we anticipate

becoming the norm for quality assets in a credit-restricted environment.

We’ve also supported the ‘buy and build’ strategies of our existing

portfolio companies with a further £40m of equity funding, enabling

them to accelerate their plans through strategic acquisition programmes.

This includes transformational mergers such as the combining of

document management group Sala International with EDM Group.

Looking ahead, we believe our expertise and appetite for ‘buy and

build’ will be a key thread of our value creation strategies.

Given the relevance of LDC’s model – our focus on operational

enhancement and driving organic and acquisitive growth –

we’re convinced this year’s vintage will be one of our finest.

With the same goal of diversification, we’ve also made further

commitments to two experienced funds specialising in niche sectors.

In July, we committed a further £50m of equity to Epi-V LLP – a fund

which focuses on backing breakthrough technologies in the upstream

oil and gas services sector – and £15m in October to a new fund

raised by Scottish Equity Partners – which focuses on venture capital.

5 REFLECTIONS


TRANSACTIONS AND EXITS 2011

JANUARY 2011

UNITED LEGAL SERVICES (Econveyancer)

Software developer whose products are used to deliver online legal services

such as conveyancing and legal searches for the residential market

FEBRUARY 2011

THE COMPLEAT FOOD GROUP

Leading supplier of high-end continental chilled and speciality

foods to the UK supermarket chains

KEE SAFETY

Supplies its innovative fall protection solutions to over 35 countries

from operations in the UK, US, Canada, Germany and France

musicMagpie.co.uk

Purchaser and multi-channel retailer of replay CDs, DVDs and games

with customers in 80 countries

APRIL 2011

A-GAS

Specialist blender, re-packer and distributor of speciality gases and

chemicals to the refrigeration and insulation foam industries, focused

on environmentally acceptable replacements for CFCs

UK2

Provider of domain name registration and web site hosting services

to customers around the world

JUNE 2011

DRIVER HIRE

Franchised provider of temporary and permanent personnel to the logistics

and distribution industries with over 100 offices throughout the UK

JULY 2011

ORIGINAL ADDITIONS

Beauty products supplier with a portfolio of market-leading false

eyelash brands - Eylure, Miss Wax and Elegant Touch

ANGEL SPRINGS

Supplies and services more than 45,000 bottled and mains-fed

water coolers on behalf of 24,000 customers across the UK

AUGUST 2011

WRG

Live events and marketing agency with ambitions for overseas growth

OCTOBER 2011

learndirect

Leading online learning provider with more than three

million adults receiving training since 2000

NOVEMBER 2011

Evander

Evander Group consists of one trading division – Evander Glazing

and Locks, a nationwide market leading emergency response

provider for glazing and locks

WINTER 2011

6


TRANSACTIONS AND EXITS 2011

REALISING VALUE

Building value in the

portfolio through

a proactive and

creative approach

has long been

the driver of our

investment success.

Never is this more crucial than during a time

of economic challenge, where only the highest

quality assets achieve the strategic premiums

that we strive to deliver.

The investment strategies we develop with

management teams seek to achieve truly

transformational change – in size, scale,

geographical reach, depth of proposition,

scope of services and more.

This approach typically results in an asset with

considerably larger market size, turnover, export

sales, profitability and employee count – hard

metrics on which the impact of private equity

investment on true economic growth can be judged.

“This is the brand of private equity which the UK

economy needs to secure a sustainable recovery,”

says Darryl Eales, Chief Executive of LDC.

“There remains a perception that private equity

generates returns through leverage, asset-stripping

and financial engineering – the ogre of the

economy and a destroyer of value.

“That’s why our industry needs to come out of the

shadows and demonstrate its credentials in value

creation, job creation and wealth creation. Private

equity needs to position itself as the gateway to

enterprise and a catalyst for growth for ambitious

management teams.”

Last year, we realised our investments in seven

companies - Card Factory, Kylmar, VSG, Omega

Red, CMG, Porterbrook and British Salt – all

businesses we had backed before, and supported

during, the downturn. Collectively, these transactions

produced capital gains in excess of £200m with

a realised IRR of 41 per cent.

In 2011, we’ve exited eight investments, realising

capital gains of more than £80m to date with an

IRR in excess of 38 per cent. “As well as building

strategic value, our expertise in exit timing and

exit route have once again helped us achieve

outstanding returns,” adds Darryl.

Read the highlights from some of our

investments below.

We backed the MBO of Aesica, a contract

manufacturer of active ingredients for the

pharmaceutical sector based in the North East,

from BASF in 2004.

With demand for outsourced manufacturing

capability increasing from major drug producers,

we helped to expand the business’ services,

international reach and manufacturing

capabilities through a programme of

operational improvement and acquisition.

A total of five acquisitions were made during

the seven year period, adding strengths in

potent compound and bulk manufacturing and

formulation development, while adding both UK

and international capacity with additional sites

in Germany and Italy.

At the time of our exit in September 2011,

Aesica was repositioned as a through the

cycle, added-value outsourced manufacturer,

with expertise in both primary stage

pharmaceuticals and secondary stage

manufacturing including the delivery of

finished product dosage to its customers.

During the investment period, turnover increased

seven fold from £25m to £180m, while profits

rose considerably during the same period.

This growth had a major positive impact on

headcount with the number of employees rising

from 150 in 2004, to 1,300 across six sites.

Under new ownership, the business is ideally

placed to further expand its presence outside

of Europe into the US and Asian markets.

7 REFLECTIONS


TRANSACTIONS AND EXITS 2011

LDC backed a £10m MBO of the business in

January 2005, acquiring the company from the

UK and French insurers British Aviation Insurance

Co and La Reunion Aerienne.

At the time, Airclaims employed 80 people at

its Heathrow base, with a further 60 across 10

worldwide offices.

In 2005, Airclaims was one of the world’s

leading providers of claims adjusting services to

the global aerospace industry, with customers

including airlines, airports, insurance brokers and

underwriters, the financial community, regulators

and manufacturers.

In addition, it also had a small information and

consultancy division which supplied aircraft data,

analytics and advisory services to the aviation

community. This division was well regarded by

its customers but, at the time of the MBO, the

operation was sub-scale and lacked investment.

One element of the investment strategy

involved spinning off Airclaims’ information and

consultancy arm into a separate company and

investing heavily in the business to create a global

aviation information provider.

Within months, a new management team was

identified and appointed – led by CEO Gehan

Talwatte - to deliver the strategy, and Ascend

Worldwide was formed in 2006.

The team quickly set about transforming the

business as a technology-enabled provider of

information based services.

LDC also supported the scaling up of the business,

with offices opened in New York, Hong Kong,

and Tokyo, assisted by a further £6m injection

of equity funding in April 2010.

Meanwhile at Airclaims, the original MBO

management team – led by CEO Mark Hunter

– similarly began expanding the business’

service offering and geographical reach. In the

subsequent five years, seven new offices were

opened in the fast-growing economies of India,

Brazil, Mexico and South Africa, as well as

the US and Australia, while new services were

developed to complement its core loss

adjusting services.

The introduction of a new operating structure,

aligning the business into major global territories

to enable a more integrated sell to its customer

base, also resulted in accelerated revenue growth.

In 2010, we identified Reed Elsevier’s RBI

(‘Business Information’) unit as a potential

strategic buyer of Ascend, given its interest in

developing its presence in the aerospace

market. The business was subsequently sold

to its Flightglobal division.

Earlier this year, we identified McLarens Young

International (MYI), one of the world’s largest and

most comprehensive suppliers of loss adjusting

services to the aviation industry, as a potential

acquiror of Airclaims, concluding the sale in

September.

From our investment to the point of exit, Airclaims’

fee income and profits had more than doubled,

while Ascend’s turnover tripled to over £12m

with profits growing from break even to £3m.

The businesses also employed 155 and 85

people respectively – a total increase of 100

net new roles since our original investment.

Davies Group is one of the UK’s leading

providers of claims management solutions to

the general insurance industry, managing over

125,000 claims each year on behalf of a

customer base which includes the majority

of the UK’s leading insurers.

LDC originally backed an MBO of the business in

February 2008, investing £8.6m.

During the last three years, LDC has supported

the management team in a significant programme

of operational development, driven by major

investment in new systems, processes and

technology to increase the speed and quality

of its claims management services for clients

and policyholders.

The strategy has helped the business to deliver

strong organic growth during the period while

operating profits increased from £3.5m to £8.4m.

Employee numbers also increased to over 600

with the creation of more than 200 jobs.

In September 2011, LDC exited its investment

through a £60m secondary buyout led by Electra

Partners, generating a gross capital gain of

£24.1m and an IRR of 45 per cent.

WINTER 2011

8


SECTOR FOCUS - MANUFACTURING

MADE IN BRITAIN

HOW UK SPECIALIST ENGINEERING

AND MANUFACTURING AND EXPORTS

ARE DRIVING ECONOMIC RECOVERY

9 REFLECTIONS


SECTOR FOCUS - MANUFACTURING

Throughout 2011, the

Government has consistently

pushed the message that

home grown manufacturing

and exporting is crucial to

the UK’s economic recovery.

While welcoming this, there was a response

in some quarters that the recognition was

long overdue: that manufacturing has always

been the practical foundation to economic

stability and recovery.

The Manufacturing Institute (TMI) itself

suggests that the sector attracts unfair criticism

partly because it has suffered from an image

problem, of being ‘dead-end, messy and

lacking creativity, with boring assembly

lines, poor pay and a lack of esteem for its

workers’.

And while the TMI has been addressing the

issue through various initiatives – not least

with schools - manufacturing has also been

proving itself.

We spoke to Lee Hopley, Chief Economist

for the EEF, the manufacturers’ organisation.

She said that despite only accounting for 13

per cent of the economy, manufacturing has

been responsible for one-third of the UK’s

economic recovery so far.

“We were saying how important

manufacturing was 18 months ago but it

has actually exceeded our expectations

in terms of the strength of the recovery so

far,” says Lee.

This is providing a platform on which to

continue to build long term economic

recovery through a dynamic, modern and

competitive manufacturing industry.

“It is clear that the consumer isn’t going to

contribute huge amounts to the economy

but a strong manufacturing sector can take

advantage of trade with economies which

are in growth.”

LDC Investment Director Steve Aston

who, along with Rob Schofield and

Richard Stewart, is leading our £200m

commitment to the specialist engineering

and manufacturing sector, is in agreement.

“There are great UK businesses in the UK

manufacturing and engineering sector at

the cutting edge of their industries, creating

products which appeal to global markets and

help to create jobs and stability in the UK.

“It’s easy to see how recovery can be driven

by this sector. If we, as a nation, are making

things that can be sold domestically and

exported then we are providing vital business

for associated suppliers and service industries

which help package, market and get the

product where it is going.”

Some of the traditionally strongest growth

areas, such as defence and aerospace, have

seen major cuts due to Government spending

but there is talent and a desire to innovate in

the UK which will see these skills absorbed

into the businesses which are driving growth.

“If there isn’t investment, this talent will be

lost,” adds Rob. “More young, skilled

workers are drifting away from a sector

which needs them more than ever as it

continues to prove itself.”

LDC invested in Kee Safety, a leading

global provider of safety solutions,

earlier this year.

The business has grown off the back of increasing

regulation and compliance in relation to safety

procedures throughout the world.

Managing Director Chris Milburn points out that the

business is a classic example of a UK company which has seen recessionary growth

and protected jobs in the UK by expanding its geographical footprint.

He said: “We always had some export business but this has increased to around

65 per cent in recent years. The key for us has been finding partners in the

right territories but also continuing to invest in the creation of our own overseas

infrastructure so that we have control over our products and can deliver high

standards in overseas markets.

“There is no doubt that this strategy, while creating jobs elsewhere in the world,

has also supported and protected around 130 jobs in the UK and allowed us to

continue to recruit, despite the challenging economic conditions.”

For more information on LDC’s £200m three year commitment go to www.ldc.co.uk/sectors/industrials

WINTER 2011

10


SUSTAINABILITY

GREEN

PIONEERS

As sustainability moves further up the corporate agenda due to rising

energy costs and increasing demand from stakeholders, we talk to

Sustainable Business editor Tom Idle and Vincent Neate, KPMG’s UK

Head of Sustainability, about why companies should be changing

processes to coincide with the green agenda.

Sustainability is no longer a buzz word in

business, but an important agenda point

that all companies, regardless of sector

and size, are having to embrace.

Compliance and regulatory pressures,

consumer and stakeholder demand and

rising energy costs are combining to convince

management teams to place greater

emphasis on sustainability.

But by improving processes, managing risk

and innovating strategy, companies are

seeing sustainability pay off in the short-term.

“Sustainability has gone mainstream - no

doubt about it,” says Tom Idle, editor of

Sustainable Business. “No longer is it just

about impact reduction and environmental

protection, although those issues are still

important. Today, more and more businesses

realise that if they take sustainability seriously,

and position themselves as responsible

companies, there is serious money to be

made.”

Vincent Neate, UK Head of Sustainability at

KPMG, agrees. He says that risk, along with

opportunity, are the key drivers for companies

taking steps to become more environmentally

friendly.

“For firms operating in the financial,

manufacturing and consumer retail sectors,

implementing green policies and products

presents obvious benefits. Fairtrade, for

example, continues to be popular with

consumers, despite the economic downturn.

“For the so-called ‘dirty’ industries, such as

oil and gas companies, failing to carefully

consider the green agenda is extremely risky

as legislation increases.”

Operating in an environmentally friendly

capacity delivers clear cost efficiencies and

can create new business opportunities. But

for firms looking to take action to become

greener, it can be an overwhelming task.

Vincent advises taking four steps when

considering the sustainability agenda:

“Firstly, firms need to identify who the

stakeholders are, and what they want. Then

the management team should assess the

legislation currently affecting their business

now and which direction this is likely to take

in the future.

“The business then needs to carefully think

about where it wants to be and put in place

the processes to get there.”

“Measure, manage and mitigate your

impact,” adds Tom, “Lots of companies

do not know the impact they have on the

environment, so that is the best place to

start, with a straightforward audit of

energy, carbon and waste usage.

“Transparent and honest communication is

also key. Regardless of how much work the

business has done, or how much work they’ve

still to do, companies with targets, visions

and aspirations to become sustainable will

be applauded - as long as they are open

and honest.”

11 REFLECTIONS


LDC ASIA

PARTNERSHIPS

FOR GROWTH

Our Hong Kong team is continuing

to leverage its expertise and network

across Asia to support the growth

ambitions of portfolio companies.

One key area of focus since we

established our presence in the

region has been exploring and

developing business partnerships

with locally-based organisations

that can support our added-value

approach.

With an area spanning 45 million square

kilometres and with 48 dependencies,

identifying the right partners in areas such

as manufacturing, sourcing, supply chain,

distribution and sales whilst also securing the

right advisory services can be a daunting task

for UK-based companies looking to develop

relationships in Asia and there are significant

risks attached.

Two years on, and we’ve already established

a network of quality partnerships that are

benefitting our portfolio companies. This

approach has helped luggage brand Antler

strengthen relationships with distributors in

the Far East’s fast-growing economies, where

sales are now accelerating faster than the

UK, and also helped Microlease – a leading

supplier of test and measurement

equipment establish a new operation in

China - giving them access to the world’s

largest manufacturing market.

We’ve now extended our partnerships

further in joining with the China-Britain

Business Council (CBBC) – the region’s

most established support organisation

which operates as part of UK Trade &

Investment (UKTI).

“ We’re excited about

the new commercial and

investment oppor tunities

that this will present

both for LDC and

our por tfolio.”

With nine UK offices and 11 offices across

key locations in China, Craig Wilkinson,

managing director of LDC Asia, says our

relationship with CBBC will not only provide

value for portfolio companies, but is also

a further demonstration of LDC’s own

commitment to becoming part of the local

business landscape.

“Joining CBBC will not only help us support

the businesses we back in the UK, providing

access to a whole new range of trusted

service partners across an important region

but will also help us identify other UK-based

companies with similar interests in the Far

East,” says Craig. “We’re excited about

the new commercial and investment

opportunities that this will present both

for LDC and our portfolio.”

“It also signals LDC’s commitment to doing

business in Asia, deepening our relationships

with the region’s business community and

helping to create opportunities for us and

our partners to build enduring and profitable

business relationships in the region.”

WINTER 2011

12


MEET THE NON-EXECS

Steve Broughton

Formerly Managing Director at Royal

& Sun Alliance, now Chairman of

the Sun Alliance Pension Fund and

the British Horseracing Pension Fund.

Currently Non-Executive Director

of Fortis Insurance UK and Non-

Executive Chairman of Ai Claims

Solutions and LDC-backed

insurance support services

provider Direct Group.

Lord Michael GradE

Formerly Chairman of BBC, CEO

of Channel 4 and Executive

Chairman of ITV plc. Currently holds

chairman roles at Ocado plc, James

Grant Group plc and Pinewood

Shepperton plc. Non-Executive

Director at LDC-backed live events

and marketing agency WRG.

Allan Leighton

Previously held CEO and nonexecutive

chairmanships at ASDA,

Royal Mail and Lastminute.com.

Currently Deputy Chairman of

Selfridges & Co., Chairman of

Pandora Jewellery and Non-

Executive Director of BSkyB. He is

Non-Executive Chairman of LDCbacked

musicMagpie.co.uk.

Robert Morgan

Former Executive Director of FTSE

100 services group Hays plc,

Chairman of local authority services

group Orbis plc and Non-Executive

Chairman of Pulse Staffing. Currently

Non-Executive Chairman of several

private equity backed companies

including oil and gas e-learning

provider Atlas, employee benefits

provider Enrich Reward Group and

LDC-backed social housing support

services business Forrest.

TOP TABLE:

COUNSEL

AND CREDIBILITY

With the economy still tempestuous, many management

teams are valuing the counsel of an experienced

non-executive chairman.

“These are the names with the boardroom track record,” says LDC Chief Executive

Darryl Eales. “They’ve got the scars earned in previous recessions and the conviction

to give strong advice to businesses debating the next move – this is critically important

when management teams are operating in a challenging economic climate.”

How do you view the current climate

AL: It’s typified by a lack of confidence which manifests itself in two ways; businesses

and institutions that have cash are more cautious about where they invest it and those

that need cash are finding it harder to get access to it.

There is money out there for investment. I read a report recently which suggested that

British firms are sitting on a £60bn pile of cash. They just don’t know where to invest it

because they want safety.

Bolstering their confidence to unlock that cash is key.

RM: There’s less ‘froth’ out there. Everyone’s a bit nervous about what to do next so

they are holding on and only actually investing when everything looks absolutely

solid. No-one is really taking risks and I see a lot of aborted processes.

All of this contributes to a wider inertia which feeds recessionary fears. Deals make

the market flow.

MG: This can’t go on forever. At my age (68) I’ve seen a number of recessions come

and go and this isn’t the worst. In the seventies the whole country ground to a halt.

The difference here is that the current climate doesn’t feel as cyclical. It’s not as

‘boom and bust’, it’s based on nerves. People are doubly nervous because they

see so much about the global economy these days and it’s harder to determine

how that will impact the UK.

SB: It’s all about risk management. It isn’t the best climate for some entrepreneurs –

the ones that fly by the seat of their pants – although there are opportunities out there.

Liquidity is a problem for SMEs looking for growth. There isn’t the flexibility or

availability for many to feel comfortable about investing in facilities, R&D, innovation,

new markets – all the things which will help to drive recovery.

What does a non-exec chairman offer in this climate

RM: Patience. It’s a time for experienced heads. As a non-exec you should be able

to take a step back and stop people running around doing things which aren’t going

to protect or take a business forward.

Economic uncertainty can create panic – people trying to exit deals too early – and

‘sheep investing’. Experience can help with the discipline businesses need to get

13 REFLECTIONS


COUNSEL AND CREDIBILITY

where you can grow value for investors. Don’t

go off looking for opportunities that aren’t

there. Focus on good cash conversion and

synergies which offer growth and value.

It’s about running your business well. Good

service delivery and being consciously aware

of your capitalisation and debt positions.

Your banks need to be kept up to speed with

your value creation journey. They tend to be

predictably unpredictable. At the moment,

they operate on formulae and the relationship

people who you dealt with on the way in, are

replaced by the risk managers - so be aware!

themselves in

shape for exit or

investment at the right time.

MG: Long term wisdom and judgement. The

younger people in business, by which I mean

anyone under 50, do still need those with

grey hairs sometime.

Someone once told me that the one question

non-execs should always ask is ‘why are we

doing well’ It doesn’t get asked enough. We

always look at what’s going wrong and try

to fix it but a non-exec chairman should also

ask what works and why. At times like this it’s

about focusing on what works.

AL: I think we bring context. It’s easy for

people who work in and for one business to

be a bit insular in their thinking. Experience

from outside the primary focus of a business

is important.

It isn’t all doom and gloom, certain

companies are doing well. As a non-exec

chairman we should be asking why. Are there

lessons to be learned from other sectors

SB: Experience in a business’ core sector or

relevant experience from another sector. I

actually think boards work best when there’s

a good mix. You need entrepreneurial

thinkers,

good financial

heads – who

can be from any sector – and,

increasingly, someone with a good

understanding of regulatory issues who

can ensure good corporate governance,

which is becoming more and more important

in every sector.

Giving advice as a non-exec chairman,

what should firms in our market space

currently be looking to do

MG: Look after their cash and cashflow.

Focus on what their customers want –

whether they are selling to businesses or

direct to consumers, when people are short

of money they want the essentials and they

want value.

For examples, areas like cinema attendance

are holding up and doing well because

consumers can adapt and make it a relatively

cheap night out by eating at home. It’s

looking at this downturn behaviour and

adapting to it which can help companies

focus on what matters.

AL: Every business has a DNA and now is not

the time to try and change it too much. Stick

to what you’re good at. What makes money.

If your core offering is broken, fix it. This will

take a lot less time, effort and money than

changing it.

RM: Stick to what makes you money and

What opportunities exist if firms want

to prepare for the upturn Are theRE

acquisitions to be had

RM: There are acquisition opportunities out

there and it could be a good time to revisit

those you identified before things became

tighter. The froth has gone in the market (and

debt) but you must be sure that you will add

more value and not destroy the positions

which you currently hold. Buy well and you

are half way there.

I think a lot of people are still overpaying for

acquisitions, even in the current market. The

old adage ‘buy well and you are half sold’

still applies.

MG: You could currently find a bargain

acquisition wise but I would advise that you

concentrate on well-founded businesses with

a solid balance sheet rather than something

that needs turning around.

SB: Boards and their non-execs need to

be good at raising capital and integrating

mergers and acquisition. Opportunities are

still out there for them to demonstrate this if

they can raise the capital to do so.

From my own experience of being involved

with an AIM listed business, the idea of AIM

as a place to raise capital is a fallacy, even

when you have record revenues and profits.

AL: I believe that this will be a consumer

led recovery but that for that to happen,

businesses have to continue to grow so that

they can employ people to earn money

which they can spend.

If that growth isn’t going to come from

existing businesses then we have to make

acquisitions to keep the market growing.

Good opportunities exist, I’d just say make

sure you have a very good business plan for

integrating them into your existing business.

WINTER 2011

14


LDC IN THE COMMUNITY

LDC LESS ORDINARY

The people that we meet through our charity support and sponsorship are

some of the most inspiring and over the last year, we have raised almost

£100,000 to support a wide range of good causes, taking total fund

raising over the last seven years to £1.4m.

Mark Beaumont

Read on to find out more about some of LDC’s ‘in the community’ activity.

Row to the Pole

On 26 August 2011, a team of six rowed to the 1996 magnetic North Pole and

became the first people in the world to travel these 500 miles by boat.

The brainchild of explorer Jock Wishart, the crew included LDC ambassador,

adventurer and film-maker Mark Beaumont and Billy Gammon, a director of a sports

marketing agency with a taste for adventure. In 2009, he led the ‘Prostate For

Cancer’ team in the inaugural Indian Ocean Rowing Race (from Perth to Mauritius).

“Being involved with the expedition was bitter sweet, going into the unknown and

being the first in the world to complete the journey by boat was an incredible feeling.

But at the same time, it drew attention to that part of the world which is changing

irreversibly,” said Billy.

There were times when weather conditions meant the crew had to stop rowing for

three or four days and this is what Billy found the most exasperating, “The stop

start nature of the journey was frustrating but when I needed motivation I would

think about the people back at home, supporting me. That willed me on.”

The expedition also taught Billy transferable skills which he will now bring to the

office. “Row to the Pole taught me to take the back seat at times and let the more

experienced mariners be in control. Previously, I didn’t like to ask for help, but

now I know it’s not a weakness, it’s just appreciating other’s strengths.”

The achievement was a true maritime first!

Billy Gammon

15 REFLECTIONS


Edward Parker

Meghan Beesley

Camp Mohawk 2011

Meghan Beesley

going for gold

LDC-sponsored athlete Meghan is currently in training,

which will hopefully see her compete for Great Britain

in the London 2012 Olympics. A Loughborough

University student, she juggles her studies with

representing England in the 400m hurdles and the

4 x 400m relay.

Most recently, Meghan competed at the

Commonwealth Games in Delhi where, with the relay

team, she earned a silver medal.

Now, it is the thought of competing on the

world’s greatest stage which is motivating Meghan:

“It’s great to run in the relay team as you can push

each other on, but ultimately, it’s down to me to

self-motivate and ensure I am ready to compete.

The 2012 games are always at the front of my

mind when I’m training.”

Walking with

the Wounded

In April this year, LDC supported another world first,

which saw eight people become the first team of

unsupported war-wounded amputees to reach the

Geographical North Pole.

Walking with the Wounded was set up by Ed Parker

and Simon Daglish to raise funds and awareness of

those in the Armed Forces who have returned from

service with serious injuries and disabilities, and are

still capable of leading fulfilling lives.

The team, who were joined by Prince Harry for

four days, reached the North Pole in 13 days,

covering 160 miles.

From preparing for the trek by dragging tyres around

the lanes of Norfolk, to battling with temperatures

of minus 38˚C, Ed Parker, said the “phenomenally

strong bond between the team” helped them

achieve their goal.

The charity aims to raise £2m to help re-train and

re-skill wounded servicemen and women from the

British Armed Forces. The founders are also

involved in the 2012 expedition to Everest with

four wounded servicemen.

Camp Mohawk

LDC has been a long-time supporter of Camp

Mohawk, a multi-functional day centre for children

with a variety of special needs in the Wargrave

countryside, near Reading.

Throughout the year, the centre provides a range of

activities, facilities and natural space to encourage

visitors to play, socialise and learn in a secure and

caring environment.

This year, our Reading team, accompanied by

members of the local financial and business

community, rolled up its sleeves for the fifth year

running to help spring clean the camp ready for

the busy summer months.

LDC also helped to fund the charity’s first open

day in two years, which was attended by over

100 locals.

Luke Jansen, Co-ordinator at Camp Mohawk,

said after the open day: “This funding from

LDC, along with their sustained support over the

past five years, has been crucial in helping us

constantly improve our facilities to help as

many families as possible.”

WINTER 2011

16


LOCATIONS

UNITED KINGDOM

MIDLANDS

Interchange Place,

Edmund Street,

BIRMINGHAM, B3 2TA

Phone: 0121 237 6500

Fax: 0121 236 5269

Butt Dyke House,

33 Park Row,

NOTTINGHAM, NG1 6EE

Phone: 0115 947 1280

Fax: 0115 947 1290

SOUTH

3 Temple Quay,

BRISTOL, BS1 6DZ

Phone: 0117 360 1970

Fax: 0117 360 1971

One Forbury Square,

READING, RG1 3BB

Phone: 0118 958 0274

Fax: 0118 956 8991

LONDON

One Vine Street,

LONDON W1J 0AH

Phone: 0207 758 3680

Fax: 0207 758 3681

NORTH WEST

Pall Mall House,

Mercury Court, Tithebarn Street,

LIVERPOOL, L2 2QU

Phone: 0151 227 5024

Fax: 0151 236 6773

No1 Marsden Street,

MANCHESTER, M2 1HW

Phone: 0161 831 1720

Fax: 0161 831 1730

YORKSHIRE & NORTH EAST

1 City Square,

LEEDS, LS1 2ES

Phone: 0113 300 2013

Fax: 0113 300 2601

PO Box 686,

Black Horse House,

91 Sandyford Road,

NEWCASTLE UPON TYNE,

NE99 1JW

Phone: 0191 459 9042

Fax: 0191 261 5934

SCOTLAND

Quay 2,

139 Fountainbridge,

EDINBURGH EH3 9QG

Phone: 0131 257 4500

Fax: 0131 257 4510

33 Queens Road,

ABERDEEN AB15 4ZN

Phone: 01224 261133

Fax: 01224 326023

WORLDWIDE

ASIA

26/F, 8 Queen's Road,

Central

HONG KONG

Phone: +852 3416 4400

Fax: +852 3416 4401

www.ldc.co.uk

Lloyds TSB Development Capital Ltd. Registered Office: One Vine Street, London W1J 0AH.

Registered in England and Wales no. 1107542. Authorised and regulated by the Financial

Services Authority. Part of the Lloyds Banking Group.

Printed on stock manufactured from 50% recycled

waste and wood from well managed forests.

LDC/RF1211

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