BGF eyes strong Q3 after £177m investment in H1

BGF, whose current investments include 20 companies in Scotland, has backed 24 new UK firms in the first half of the year to the tune of nearly £130 million.

BGF's current investments in Scotland include Window Supply Company. Picture: Mike Wilkinson.

The organisation, which says it is the UK and Ireland’s most active investor in the growth economy, has revealed that total investment in the period amounted to £177m and includes £49m injected into existing portfolio companies.

BGF – formerly known as Business Growth Fund – has been backing one new company a week, including ceramics firm Emma Bridgewater in Stoke-on-Trent. Its current investments in Scotland include Livingston-based Window Supply Company; CareSourcer and Morph Costumes, which are both based in Edinburgh; and Glasgow-based, laser-focused M Squared.

Stirling-based firm The Paint Shed recently secured £2.7m from BGF. Picture: Simon Williams.

BGF’s executive chairman, Stephen Welton, said: “Covid-19 is already having a dramatic impact on the economy with growing unemployment and real concern about rising insolvencies as furlough ends and recessionary conditions hold sway. BGF as a business has maintained full employment and successfully operated remotely. That sadly will not be the case for much of the economy, which is why ongoing investment activity is so crucial.”

BGF said it delivered eight successful exits in the first half, with an average money multiple of 2.1 times and an aggregate internal rate of return of 41 per cent, “reflecting the underlying dynamism of the growth economy”. The average investment hold period for the first-half exits was 3.5 years and ranged from nine months to six-plus years.

These exits – which returned £135m from the £66m invested – included four technology services and software companies. BGF has fully written down investment in three companies during this period.

Many investments in the first half were in technology and digital companies, and included AND Digital, which has a major presence in Edinburgh. Recipe box subscription service Gousto secured its seventh round of funding from BGF, which stressed its strong regional focus.

Optimistic

Andy Gregory, head of investments – UK & Ireland at BGF, said: “BGF has experienced an impressive investment run rate, which has continued at pace throughout lockdown. We are anticipating a strong third quarter, with a number of new deals – including investments in life sciences and clean tech – progressing well.” He added that BGF’s regional and decentralised structure let it maintain pre-Covid levels of activity in the second quarter.

Welton said: “As the furlough scheme comes to an end and creditors begin to seek repayment, many companies will now face a triple whammy: a harsh trading environment, the need to raise working capital and strengthen balance sheets, alongside pressure to pay back the loans they needed to take during lockdown.

"We are calling for a £15 billion National Renewal Fund to ensure these businesses have the capital they deserve. Our discussions with a broad range of investors shows that with the right circumstances and approach, there is a willingness to invest.”

It was announced earlier this month that Stirling-based firm The Paint Shed had secured £2.7m from BGF.

SCOTSMAN.COM

A message from the Editor:

Thank you for reading this story on our website. While I have your attention, I also have an important request to make of you.

The dramatic events of 2020 are having a major impact on many of our advertisers - and consequently the revenue we receive. We are now more reliant than ever on you taking out a digital subscription to support our journalism.

Subscribe to scotsman.com and enjoy unlimited access to Scottish news and information online and on our app. Visit https://www.scotsman.com/subscriptions now to sign up. By supporting us, we are able to support you in providing trusted, fact-checked content for this website.

Joy Yates

Editorial Director