FINANCIAL MARKET
Page 37
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\WESTING \T GROWTH
tE we truly climbing out of the momic doldrums? Investors in lustry (3i), which claims to be the nid's largest source of venture capital, nks so. It reports that in the year to irch 31, 1985, investments rose 31 per it to £345m. This capital was vanced to almost 1,000 companies in 2ry sector of industry and commerce. 'he recovery from recession untamed momentum throughout the k, with Scotland, Wales and the 3rth of England all showing strong siness growth," says the organisation. In Scotland 31's investments leapt ma £8.1m in 1983-84 to 121.9m in the st financial year. Investments in igland were up from 111.2m to 120m d in Wales they rose from £2.6m to .2m "These figures clearly illustrate the stained spread of the revival in the itish economy. Last year we reported iprovements in the Midlands and the ,uth. This year it is much more tdespread", comments 3i's general anager David Marlow.
The fundamental objective of 31 is to ck British business — from the smaller vner-managed business to the larger ultinational.
"Our long experience with growing isiness, as well as our industrial .pertise, enables us to understand not tly the industries but also the .trepreneurs, the individuals with the .ility to start up, develop and run ccessful companies."
A total of 296 investments were made companies up to three year's old and ere made by the company whose !dared aim is to help enterpreneurs to .cceed. Of these 174 were companies :wly formed during 1984-85.
Eighty management buyouts were lanced during 19184-85, totalling l5. 1m; against 74 buyouts for £24.5 .illion in 1983-84. Further investments existing customer companies totalled 10 for 1984-85 against 343 in 1983-4. Investors in Industry reveals that it acked the management buyout of tshion carrier, Tibbett and Britten from )int shareholders Unilever and Van ;end and Loos.
John Harvey, formerly the chairman ad managing director of the SPD Group — itself recently sold by Unilever — headed the boyout team. Investors in Industry provided venture capital — by way of a minority shareholding in the company and medium-term loan finance.
Tibbett and Britten was founded in 1958 and has 13 depots throughout the United Kingdom. Its head offices are in Tottenham, North London and it is now believed to be Europe's largest clothing transporter, providing a collection, storage, transport delivery and import service for major manufacturers and leading retailers.
One of the company's biggest clients is Marks and Spencer, for whom a separate division, Transcarc Distribution, was established in 1982. It has six depots and its own fleet of vehicles servicing that group's stores throughout the UK.
Transcare's national and international division are responsible for the distribution of clothing to retail stores all over Britain and for handling imports and exports in Europe, North America, and the Far East.
When the buyout deal was announced two months ago commercial director Mike Stalbow, one of the five-man buyout team, explained: "Independence gives us the ideal opportunity to develop and expand the business in a way we never could as part of a larger group."
Although a company like 3i is doing a sterling job in providing finance for venture deals, there arc the equally obvious dangers of borrowing large sums of money. These are frequently highlighted in company reports.
I was reminded by this when looking through the results of ERF. Its interest payments on borrowing at one time were frighteningly high for a company of its size.
ERF is something of an enigma. Despite an increase of 20 per cent in group sales to 1.72.89m and an improved trading profit of £2.136m, the group sustained a net loss for the year ended March 30, 1985. After interest and an exchange loss of £1.182m, the net loss was £444,000, compared with a net profit of £421,000 in the previous year.
Total unit sales, in fact, increased by 35 per cent over the previous year, with substantial increases in exports, particularly to Africa and the Middle East, but the UK market, said Peter Foden, chairman and chief executive continued to be difficult.
Toser Kemsley and Milbourn is another company with problems which reached crisis point in 1982. It has among its subsidiaries companies responsible for the distribution, retailing and servicing of trucks, light commercial vehicles and cars, fleet hire, contract hire and leasing, manufacture of ambulances, buses and special vehicle bodies, port terminal handling facilities and the like in England, France, Canada, USA, Holland and Australia.
These include such names as Wadham Stringer, Scaking Holdings, TKM Automotive, and Victory Bodies. The Automotive Ft anchise Division includes Dihatsu (UK).
In trading terms TKM did well producing a trading profit of £10.58m on a turnover of £415.11m. This compared with a trading profit of 110.15m on a turnover of 1670m in 1983 and reflects a revival in the company which is linked to a policy of rationalisation and financial restructuring.
During 1984 several businesses were sold, either because they were lossmakers or did not contribute enough to justify the capital employed. A few profitable investments were sold because they did not fit the evolving policy objectives of the company.
This included the loss-making French transport businesses Transports Matto and its subsidiary Mitjavile, which were sold for a nominal consideration, and the fuel distribution business of Mitjavile Holdings, which was sold to The Scottish Lubricating Oil Company Ltd.
A clue to the company's future prosperity, however, surely lies with the deal struck with the Australian IEL group. This group, already Toser's largest shareholder, is to subscribe £.12.7m of new share capital.
In his review, the Toser chairman Sir Montague Prichard says: "The bold proposal of our major sharehold, the IEL group of Australia, to back the company with further investment funds, has enabled the company to negotiate a refinancing of the group's debt with its banker's and other lenders."
He hoped that with this initiative together with a restructuring of financial facilities, "the slimmed-down Tozer group will be able to resume profitable growth".
by George Malcolm