This feature focuses on four UK SME print and packaging companies that have successfully raised finance recently, and put that money to very good use, investing it in all sorts of ways to grow their business.
W&M Watson
On Cunningham Road, Rutherglen, is the headquarters of W&M Watson, one of Scotland’s most successful and fastest growing packaging companies.
The firm was incorporated in 2008, but is now part of a much larger group, the United Packaging and Box Group (UPAC), which was used, following a series of canny acquisitions, to create a single-source organisation for packaging requirements across Scotland and beyond.
Naturally, these acquisitions have resulted in rapid growth, for which the ability to raise the right finance has been absolutely key.
Managing director Chris Kelly outlines the group’s humble beginnings: “I started the company in October 2008, the same day that Lehman Brothers went down. So what caused the worldwide financial crash, the Lehman debacle or the start of UPAC? I guess we will never know!
“When we first started we were a very simple box merchant, buying and selling brown boxes. But now we design and manufacture cartons and labels, dealing with everyone from high-end retailers to the sweet shop next door.”
UPAC is very much the family firm of the Kellys, and in terms of finance, it was this that enabled its creation.
“In the early days,” says Kelly, “our business was initially financed by private investment from family. And we also had good support from Lloyds Bank, in the shape of an excellent account manager, who took both the time an interest to understand our business and the ambitions of the directors.”
Once the company was off the ground it underwent a period of consolidation that put the ground work in place for its more recent expansion: “We have had various phases of financing both to facilitate acquisitions and to accelerate growth. This finance has come in the form of bank loans, a further round of private investment from directors and asset finance.”
After the turn of the decade, things started moving quickly. UPAC bought Peter Bryson Packaging (Scotland), Merlin Healthcare and an insolvent business called Central Box, which was renamed The Colour Carton Company.
“Central Box ran into financial difficulties and went into administration. The speed with which we had to move meant we did not have time to seek outside funding,” explains Kelly. “We bought the trade and assets within a week of being notified they had become available.”
In the past 18 months it has spent more than £1m on acquiring The Colour Carton Company and Lothian Labels & Packaging
“In respect to Lothian Labels we managed to buy this company from under the nose of a competitor with whom a deal was in the process of being finalised,” says Kelly.
“Because again we had to move quickly, we did not have time to seek outside funding and paid for the company straight from our own cash reserves.
“However, since then, both Lothian and the Colour Carton Company have seen significant investment in new machinery. This has been funded through mixture of external financing, for which Lombard has been particularly helpful and proactive in supporting us – as has First Independent Finance.”
“From Lombard and First Independent we borrowed about £1.5m. Both companies really understood our needs.
“Lombard asset finance was prepared to offer us a fixed rate loan deal at only 3.7%. We liked the quick turnaround, and their expert understanding of the machinery we bought and its true value. Although all loans from Lombard and First Independent were secured against the machinery we bought, there was no requirement for PGs.”
With reserves of £2.5m UPAC could purchase some very fine new equipment for the two businesses and Kelly is rightly proud of the fact: “We bought the Mark Andy LP3000 press and an Arpeco Slitting machine now in use at Lothian Labels. Furthermore, we were able to expand the size of Lothian taking the unit next door and effectively doubling the company’s floor space from 650m2 to 1,300m2.”
But the machines and floor-space is not all that has exponentially increased at UPAC. The manpower has too. According to Kelly: “The company had 12 employees in 2009. We currently have 82 and expect to take that up to 100 in the next 12 to 18 months.
“And from a turnover of £1.4m in 2009, it’s now approaching £10m. That’s nae bad going if I say so myself!”
Rethink CMYK
Rethink CMYK is an innovative printing and cross-media marketing company based in Barnsley, South Yorkshire.
The company is owned and run by managing director Amanda Dickinson and her partner Joel Dickinson, who is business development director.
It was launched just last year when the Dickinsons bought Garnett Dickinson’s former digital operation GD Digital. Joel Dickinson explains how the deal was done: “The early finance requirement for Rethink was reasonably complex, for the following reasons: the initial digital printing and finishing aspect of our business was purchased out of the former Garnett Dickinson Holdings, during the sale of their group of companies.
“This meant we had to use a combination of lease and finance solutions for existing equipment – HP and Xerox being our two key press suppliers. Both companies demonstrated a fantastic flexibility and willingness to support Amanda and myself.
“Our Xerox iGen4 was transferred into our new business with a limited amount of red tape, whilst the existing HP Indigo press was upgraded for the latest HP7800 machine, to be installed at new premises pending our relocation.
“In terms of due diligence, both HP and Xerox had thorough requirements. Fortunately for us the printing industry is ‘real-people dominant’ – ie populated by people who want to help. Suffice to say we got the machines we needed on the right finance terms, and in a matter of only four to six weeks.”
In addition to the presses, Rethink needed specialist finishing machinery that required a combination of existing finance or alternative funding.
“It was a number of these smaller items that we struggled with most in the early stages of the business purchase,” says Dickinson. “The root of the problem was that various incumbent finance companies could not see beyond our recent business re-formation, even though we had purchased an already successful business, one that now had a very bright future.”
The Dickinsons were fortunate enough to make contact with Mark Johnson of Johnson Reed – Equipment Finance. Johnson brought a human touch and approachability. Joel recalls that “Mark was very quick to get under the skin of our financial requirements and our business proposition”.
“Because of this Johnson Reed were able to secure for us fast, affordable funding of £60,000 for a number of key bits of manufacturing equipment. Plus a further injection of £70,000 to help with the purchase of vehicles and a lot of IT equipment. And all in a lead time of just one or two weeks.”
Rethink CMYK concurrently secured banking facilities with Royal Bank of Scotland, where they were offered an invoice finance facility. This facility was reflective of Rethink’s strong trading position and the support it was already receiving from suppliers and customers.
The most significant expense came in the form of Rethink’s business relocation and site preparation costs of £140,000. This included building a high-spec enclosure for the company’s digital presses and the purchase of a perfect-binding machine. This was partly paid for by director loans of around £100,000.
The decision was made to locate to a site in Hoyland, Barnsley, South Yorkshire – a place that’s well positioned by the M1, between Leeds and Sheffield. And there was one further major win: “An added benefit to our re-location was falling within the Sheffield City Region Enterprise Zone, which benefits the qualifying business with rate-free periods of five years. The lead-time for our business rate relief application was approximately two weeks and represents a benefit to the business of around £80,000 over five years.”
Further local fruits were to fall their way. Rethink was successful in a grant application to the Leeds City Region Enterprise Partnership (LEP), thus accessing government money to the tune of £10,000 per new employee. Dickinson enthuses that “the idea of obtaining real world business support from a local authority development arm like Enterprising Barnsley or game-changing grants from LEP was a huge bonus”.
When it comes to loan rates, Rethink has “quite a spread of rates” from between 6% and 16% fixed. As for terms and conditions again the picture is pretty varied. “Some of our finance has included PGs and pre-payments, whereas others have not had either stipulation. The duration for our finance seems to be pretty consistent at three years. Rarely has anyone offered less or more. I imagine this is the sweet spot for a lot of finance companies, and is down to return versus risk.”
In the past few months Rethink has recruited in the areas of finance and accounts, and these key personnel have been instructed to carry out financial monitoring and analysis, specific to the company’s investments and directed at the ambitions for the company. Dickinson adds: “We aim to grow by 30% in year one, 60% in year two, and 100% in year three.”
MPC Print Solutions
From little acorns is a turn of phrase that could so aptly be applied to the next company under the finance microscope: MPC Print Solutions.
This fast-growing north London print business has recently celebrated its 25th anniversary year. Managing partner Tony Crook outlines its origins: “I started the company out of a little high-street print shop in Barnet with a black-and-white Xerox copier and a Rotaprint R30/90, with a bank loan that was guaranteed by my parents.”
With judicious use of finance, mainly in the form of overdrafts and loans, MPC was able, in the early days, to markedly grow its order book, its range of equipment and its workforce.
Crook says: “We have always had an open-door policy allowing finance companies to come in and get to know me and the business. So over the years I’ve been able to take advantage of finance companies’ borrowing policies and criteria, and I try to adjust our finances to meet these criteria, and any competitive loans on offer.”
Growth has always been the name of the MPC game. Crook recalls with evident pride how “we have grown every year since our beginning 25 years ago. Even during the bleak years of 2008 after the credit crunch, we still managed to grow. We now employ around 70 people over a 24/7 week.”
Today the company has an annual turnover of £6m, a purpose-built 3,000m2 factory in Enfield and services the wider print community. The company operates both offset and digital presses and a web-to-print site. With its mixture of trade customers and end-users Crook takes pride in MPC’s ability to produce 95% of all work that it takes on in-house. As he says “there isn’t much that we can’t do now.”
Crook is clearly a man who likes to get value for money. “Clever decisions to offset finance against reduced costs was essential in purchasing our first Speedmaster XL press,” he says.
This recent investment was brought about with the help of Close Brothers and involved swapping out two older Heidelberg Speedmaster SM 74s for a brand new XL 75.
“The XL 75 more than covered the work load of the two presses. And the cost and space savings involved with this acquisition more than covered the finance costs and also gave us increased capacity. It was a no-brainer,” he enthuses.
With the new press in place, MPC has not only been able to offer a higher quality product to clients, but also significantly reduced its overheads and waste levels. Crook loves the fact that “our new machine saves our company an estimated £13,000 a month, meaning that it is almost self-funding. And it has freed up floor space in our factory that can now be used to expand our other operations.”
As for the future Crook says that he will almost certainly favour fixed rate HP finance, and continue to work with Close Brothers. “They have become more than just a finance provider to us. The help and suggestions we have received from their team and our account manager have benefitted our business greatly. So much so that I think we could double our turnover in the next 10 years!”
And for his final word Crook is emphatic: “Finance is an integral part of running a business, especially a manufacturing business. Print is all about producing work in the quickest, most efficient way possible. Investment in machinery that makes you more efficient, and maintains quality, is essential.”
Barclay’s Print
Barclay’s Print, headed up by managing director David Amos, is based in Leyton, London. Amos recalls how the business was originally based in Clifton Street in the City of London and was a letterpress stationery printer.
“How times have changed. We now run B3, B2 and B1 litho presses, digital presses and offer large-format display graphics. We specialise in direct mail with around 60% of everything we print being personalised in some way and landing on the doormat.”
In the early days, the business was privately funded by the Amos family as directors of the business. And there were just four staff members as opposed to the current staff tally of 27, including two BPIF apprentices.
Over the past three or four years, Barclay’s Print sought finance on good terms for renewed investment purposes. Amos says: “All of our presses have recently been replaced, the finishing facilities have been upgraded, a digital press installed and then replaced with another new and updated press.”
With the help of Compass Business Finance, Barclay’s got an asset-based HP agreement to buy its very latest bit of kit. Amos explains: “We wanted to buy an additional good secondhand printing press, but it needed to have all the upgraded technology a new machine would possess. Our rationale for this was that we wanted to retain our existing press, but could not afford a new machine as well. We are doing well, but we have to watch the bottom line.
“Through Compass’ knowledge of print finance and its contacts with Heidelberg, they worked with the manufacturer to propose a deal that would meet our requirements.
“Firstly, they outlined the benefits that a new machine would bring, including a three-year warranty that would fix the overheads in the business. They financed the new machine over a seven-year period, whilst at the same time refinancing our existing press that was on finance with a competitor. This provided two benefits: a reduced monthly commitment that could be managed and the ability to break this agreement and sell the machine, if the monthly repayments became too much, or the new machine could produce all of the work required.
“The terms and conditions were reasonable, and the deal moved ahead without difficulty. And we at Barclay’s are very happy with the results, and are on course to grow by at least 10% over the next three years.”
So there you have it. Four companies that have shown tenacity and enterprise in seeking out finance from a range of sources as well as digging into their own pockets, borrowing from different types of lenders, and also taking advantage of government help in the form of grants and business advice.
When it comes to finance, it’s worth taking the time to consider all the options, on the route to a solution that best benefits your business.
