An EDINBURGH childcare provider is looking to accelerate its expansion plans by raising up to £3 million from customers and investors through a bond issue.
Bertram Nursery Group, which is the eight-largest in the UK with more than 630 staff, has already secured £3.5m in debt finance from well-heeled investors and is now looking to add to its financial firepower by selling “Bertram Bonds” on the Crowdcube crowdfunding platform.
The firm operates 37 nurseries in Scotland and the north-west of England and is eyeing a number of acquisition opportunities over the next year as well as investing in its existing sites.
Bertram has already grown through a string of takeovers in recent years and the company said it sees potential for further consolidation in the fragmented day nursery market where 80 per cent of nurseries are owned by independent single-site operators.
The bond issue, which is being initially offered to parents and grandparents of children attending Bertram nurseries, offers investors the opportunity to invest from £500 or more for a four-year minimum term.
The unsecured bonds will pay out a fixed rate of return of 8 per cent a year, with a 5 per cent minimum discount off all childcare fees at any Bertram nursery for the eldest child or grandchild of any bondholder.
Graeme Scott, founder and chief executive of the company, said he believed Bertram’s business model would appeal to investors. Each nursery is run as a semi-autonomous business with its own local management team and bank account.
When nurseries join Bertram they are not re-branded and retain the existing name, staff and facilities.
“A lot of the bigger private equity-backed nursery groups are run to a clearly defined formula and the nurseries are a homogenised brand,” said Scott.
“Owners have trusted Bertram knowing that when they sell to us we will preserve all the good things about the nursery they have built up and keep the staff – all we will do is provide further enhancement to create an even better environment which combines education and social development for the children in our care.”
Bertram, which now has an annual turnover of more than £14m, has grown from a single nursery in Edinburgh to a company which offers nearly 3,000 places for children across Scotland and in Manchester and Liverpool.
In 2008, the acquisition of the nine-site Holyrood Nursery Group nurseries provided expansion into the north of England and last year the firm acquired the four-strong Oranges & Lemons group in Dundee.
The £3.5m debt financing was provided via private equity firm Rockpool Investments following an offer to its high net worth investors last year.
The company bond is a growing phenomenon – in April, Edinburgh-based craft beer company Innis & Gunn unveiled plans to build its own brewery, funded by the issue of £3m in bonds offering cash returns of 7.25 per cent gross a year with a minimum investment of £500.