GLOBAL B U S I N E S S
APRIL EDITION NO. 06 • 2018
F I N A N C E
B U S I N E S S
S E C T O R
N E W S
I N S I G H T
Survival of the fittest: Adapting to complex markets
CEO of Unigestion
We have not seen such strong and synchronised macroeconomic growth momentum since before the global financial crisis.
NOMINATED AS THE NEW CEO OF LEETCHI.COM
EXPANDS PRESENCE IN IRELAND
lowest latency Cryptocurrency exchange platform.
ISSUE 06 | 1
ISSUE 06 | 2
ISSUE 06 | 3
09 12 22 30 34 44 81
concentration in modern times Concentration and open plan offices; a challenging combination.
salaries bouyant but hiring
Slowed by beast from the east.
uk bosses risking workforce stress burnout UK businesses are in danger of having their workforces experience burnout.
tech essence appoints mary keane-dawson as Chairperson of the board.
small business unfazed
by challenging economic conditions finds Vistage confidence index.
success of datafest18 Underlines Scotland’s strength in dynamic global data market.
106 120 147
acquires six Norwegian Hydropower Plants.
A P R IISSUEL
the hire of Cécile Frot-Coutaz of Youtube in Europe, Middle East and Africa.
dotlabel to launch a new social intranet platform for UK’s Smart PAYG energy supplier Utilita.
business durham appoints
Maven Capital Partners as fund manager for its £20M investment fund.
the hotelgift & flightgift card story
FOLLOW US @ GBUSINESSINSIGHT
Loes Daniels and Jorik Schröder, FlightGiftCard CoFounders.
Lowest Latency Cryptocurrency Exchange Platform.
yfm equity partners supports an investment into Eikon.
140 ISSUE 06 | 4
set to transform UK public safety with the launch of CommandCentral.
ISSUE 06 | 5
SURVIVAL OF THE FITTEST: ADAPTING TO COMPLEX MARKETS FIONA FRICK, CEO OF UNIGESTION
We have not seen such strong and synchronised macroeconomic growth momentum since before the global financial crisis. While we expect this to continue in the main, market stress events like the one we saw in February are likely to become more prevalent and investors will have to adapt to more challenging and complex financial markets ahead. As Charles Darwin said, ‘It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.’
Focus on real investment risk A true understanding of risk will be essential as we move into the next phase of the cycle. Quantitative easing (QE) has significantly modified the risk profile of the main traditional asset classes and we are likely to see another shift in risk expectations as QE is reversed. We believe volatility is an ineffective proxy for real investment risk, and yet is widely used in popular risk management models. There are hundreds of billions of dollars invested in computer-driven strategies using volatility to determine asset allocation and these models are likely to amplify market corrections. When constructing portfolios, we prefer to use a broader range of measures to assess risk, such as potential losses on capital, liquidity, skewness and tail risk. In addition, we expect correlation shocks to occur more often at this stage of the economic cycle, fuelled by tighter liquidity and rising anxiety about monetary policy. The correlation between equities and bonds will evolve as bond yields rise and become more attractive relative to stock ‘yields’.
Use dynamic asset allocation with intelligent diversification In our view, investors’ portfolios should be tilted towards assets that would profit from a growth environment, while taking into account rising inflation risk. However, with market stress events likely to occur more often, a diversified and dynamic approach will be imperative. Intelligent diversification means not just investing in a lot of different assets, but in assets that respond differently to common factors. Diversification into alternative risk premia with a low correlation to traditional assets, such as carry, equity long/short factors or trend-following strategies, can improve the overall risk-return profile of an asset portfolio, especially when traditional assets are looking expensive. It will be important to have the flexibility to lower portfolio beta as required, through opportunistic hedging in the currency and options markets when risk pricing in the market is not aligned with the true level of risk. It may also be beneficial to move from a ‘beta’ style to one more focused on ‘alpha’ generation by implementing relative value trades.
Invest in equities but manage your risk We believe investors should remain invested in equity but actively manage their risk exposure. Equities have historically performed well in periods of higher inflation and tighter monetary policy, but with valuations in some areas looking high, investors will need to be increasingly selective about the equity risk they want to take. In our view, a passive approach to equity allocation is a risky proposition as all risks inherent in the market, good and bad, are present in the benchmark. Strategies that track market-cap weighted indices are particularly at risk of exposure to overcrowded, overvalued positions.
These indices will be vulnerable to price collapse when investors start to exit these stocks. In contrast, an active equity strategy allows investors to potentially avoid such unrewarded risks and target intended, remunerated risk more precisely. Investing in equities is not immune to interest rate risk. With monetary tightening expected, investors will need to consider the sensitivity of their equity portfolio to sovereign bonds and protect it as far as possible through active stock selection and sector allocation.
Allocate to private equity but be selective We expect returns from private equity to remain attractive in the years to come, supported by continued economic growth and investors looking beyond traditional markets to boost returns. However, with valuations on the high side, finding good investment opportunities and maintaining price discipline will be the biggest challenges for private equity investors this year. It will therefore be important to invest in companies that can deliver the required base case return without relying solely on leverage and multiple arbitrage. Given the level of competition, we prefer strategies that allow sourcing deals outside of large auctions, such as small and mid-market buyouts, or those with a sector focus. Some caution will be needed as private equity shows some correlation with public equity and high yield bonds, both of which are looking expensive. Here again, investing selectively will be key. As Aldous Huxley said, ‘The charm of history and its enigmatic lesson consist in the fact that, from age to age, nothing changes and yet everything is completely different’. 2018 will offer the perfect scenario to judge how successfully asset managers can adapt their approach to a more complex market environment.
FIONA FRICK CEO OF UNIGESTION ISSUE 06 | 6
ISSUE 06 | 7
A CHANGING LABOUR MARKET AND DISPARITY BETWEEN TYPES OF EMPLOYMENT MAY BE AFFECTING JOB OPPORTUNITIES The UK’s changing labour market and the relationship between employer and employee is causing widespread confusion and may even be affecting people’s employment opportunities, says Lee Hamilton, a partner at leading accounting, tax and advisory practice Blick Rothenberg. Lee said: “The changing labour market, the way people wish to work, the current disparity between employment law and tax law and the complexity of these rules is causing confusion for both employers and employees. The differences between the tax rules and NIC rules add an extra dimension to the confusion.”
“It all makes for confusion and in many cases probably means that a potential employer will think twice about getting into a minefield about someone’s status and how to deal with it.” Lee warned that the situation is not getting any better because of the changing labour market which now included “gig” economy workers, platform workers, those who want to work on short term contracts, those who wished to work as self-employed, contractors and zero-hour contracts.
“The problem is that thousands of companies, and indeed potential employees, just don’t know how they stand in terms of their employment obligations and rights and the tax that they will have to pay on their earnings,” said Lee. There have been recent cases involving Uber drivers, CitySprint and Pimlico plumbers. Lee gave an example of Uber where, in late 2017, the Employment Appeal Tribunal upheld the view of an earlier tribunal that drivers should be considered as ‘workers’ giving them certain statutory rights such as the right to a minimum wage and holiday pay. However, the definition of ‘worker’ means that the drivers are neither employed or self-employed for employment law purposes and may or may not be self-employed for employment tax purposes (since the rules for tax are different and considered separately).
He said: “The fact of the matter is that all of this is not helping the general jobs market with commercial demands from employees who want flexible labour. Combine this with complex tax rules that demand a different tax treatment depending on whether an individual is engaged directly, via an agency, via their own personal services company (e.g. as in the recent BBC case) or a managed service company, and you have a recipe for chaos and confusion. “The government are looking at this and currently and have asked for comment on a consultative document (comments to be provided by 1 June 2018) which is likely to result in new legislation.” He added: “To provide clarity to both employers and employees, the government needs to better align the rules for employment law and employment tax and should make them much simpler. This is essential to maintaining a flexible and compliant labour market and avoiding many years of time consuming and costly litigation.”
Lee explained: “As the Uber case has demonstrated, the law is not clear when it comes to an individual’s employment status. Moreover, an individual’s status for employment law purposes – i.e. which is important for determining their employment rights – is determined independently from their status for tax purposes. “So, whilst ‘workers’ may appear to satisfy the criteria to be considered self-employed for tax purposes, this is not necessarily so and each case will need to be considered.”
ISSUE 06 | 8
ISSUE 06 | 9
CONCENTRATION IN MODERN TIMES
Concentration and open plan offices; a challenging combination You are no exception if you sometimes find it difficult to concentrate on your tasks at work. Many of us now work in shared open plan spaces with terrible acoustics and limited privacy. Deep concentration is soon disturbed in such spaces. The flow Yet people actually find deep concentration, or even a state of flow, pleasant. When we are engaged in a relatively demanding activity in which an optimal balance between the requirements of the task and individual skill level exists, then flow is possible. Flow is primarily associated with pleasure and the intrinsic motivation to complete a task and to enhance existing skills. You could say that the more we are in flow, the happier we feel. It is thus very much in the interests of both employee and employer to increase the chances of experiencing a state of flow. Flow is characterized by a subjective experience of effortless involvement in a task and a high level of focused attention and a feeling of control while suspending self-reflective thoughts. Personality-Based Working It can take 20 minutes or more to achieve a state of concentration, which in turn can lead to flow. Such a state can also be spoiled instantly; by being interrupted by loud music, a telephone call, or a noisy colleague, for example. How you react to a high volume of stimuli can depend on your personality, asserts Florijn Vriend (WELL Building Expert for Kernwaarde Groen) and she ponders; Is the fact that organisations seldom consider what criteria an environment needs to meet in order to align with different personalities a missed opportunity? Florijn: “For the time being, HR looks primarily at skills, competencies, experience, person-job fit, person-organisation fit, but not person-environment fit. The activities that take place in an organisation are considered from a design and facilities perspective, as is how to make the working environment as comfortable as possible, but not how personalities are split across the available space.” Wim Pullen, Director of the Center for People and Buildings, has this to say about it; “Personality-Based Working involves having a workspace that suits the personality. If you are an introvert, if you need isolation and quiet, you need a workspace that is not too hectic with people talking over one another and colleagues busy on the telephone. If you have a strong need for personal structure, it is not so bad to subscribe to that satirical office cliché of sitting opposite the same colleague day in and day out, having your coffee break at set times, and eating your sandwiches from the same plastic lunchbox you have used for years.” Is the fact that organisations seldom consider what criteria an environment needs to meet in order to align with different personalities a missed opportunity? Personality-based working can be a useful step towards better concentration for the individual. Employees need to be supported as much as possible to achieve a state of deep concentration. Offering separate, flexible spaces that you can use occasionally for a specific purpose (no distractions) could be a solution. The use of such spaces is a sign to colleagues that you do not want to be spoken to for the time being – a clear message. It is easier to find peace and quiet in such a space because acoustically, it is isolated from the open plan area. Do you find it difficult to tolerate being distracted by colleagues? Are you more of an introvert than an extrovert and do you need to isolate yourself to be able to concentrate? Then the MindPod might be something you could use at work. https://www.bakkerelkhuizen.co.uk/mindpod/
ISSUE 06 | 10
ISSUE 06 | 11
MARKETINVOICE PARTNERS WITH NATWEST TO FUND BRITISH BUSINESSES Business finance company MarketInvoice joins a select group of leading alternative finance firms on NatWest’s Capital Connections panel. Capital Connections helps SMEs to access alternative sources of capital after being unable to secure traditional financial backing. Business customers are signposted to the panel of innovative sources of finance including equity crowdfunding, marketplace lenders and now invoice financing. MarketInvoice helps businesses get paid faster by unlocking cash tied up in unpaid invoices. Businesses can choose to fund specific invoices or their whole ledger, based on funding needs. The range of invoice finance solutions help to improve cash flow, quickly and easily. It’s a simple way to get paid upfront, without having to wait out lengthy payment terms.
Anil Stocker, CEO and Co-founder of MarketInvoice commented: “Featuring on this panel will broaden our reach and help even more businesses achieve their goals. Companies across the UK are choosing to diversify funding sources with more than £4b advanced through alternative finance firms. Furthermore, the invoice finance [and asset-based lending] sector is providing more finance to UK businesses than ever before. Funding volumes are up 5% year on year and stand at just over £23b. This is the highest figure ever.” “As the first invoice finance provider on the panel, we will be able to showcase how invoice finance can help businesses of all sizes and work with them to find the right solution. Enhancing access to borrowing is essential for jobs and economic growth.” Alison Rose, CEO of Commercial and Private Banking at Natwest, said: “We’re excited to welcome our first invoice finance provider to Capital Connections. MarketInvoice has serviced a large number and wide variety of businesses. Their robust service, quick and easy to use solutions, provide another distinct choice for the many innovative businesses in the UK. As the biggest supporter of British business, we understand that traditional funding routes are not always the best option for fast growing start-ups. Through Capital Connections we’re able to signpost a broad choice of funding options through its impressive range of alternative lenders.” MarketInvoice is the ninth alternative finance provider to join Capital Connections, alongside Funding Circle, Assetz Capital, Start Up Loans, Seedrs, Together, iwoca, Esme Loans* and NatWest Social & Community Capital**. Each provider has been selected to cover the range of different funding products and include a mix of specialty finance and peer-to-peer lending. MARKETINVOICE BUSINESS HIGHLIGHTS (LAST 12 MONTHS): • Reached landmark milestone of funding invoices and business loans worth £2b to UK companies • Launched new brand and business loans solution • Secured credit insurance (Euler Hermes) and credit control (Veritas Commercial Services) partnerships • Selected in The Sunday Times Tech Track 100 and Global CB Insights Fintech250 2017 rankings • Appointed Giles Andrews OBE, the founding father of peer-to-peer lending, as Chairman • Partnered with European banks that are participating directly on the platform alongside the British Business Bank, UK local authorities, global family offices and sophisticated and HNW investors
MarketInvoice’s main strategic ambition is to broaden its reach to be able to support a wider range of businesses, from startups to larger businesses looking to scale up. The company aims to help even more companies with their working capital needs, so business owners can save time and focus on running their business.
Last month, MarketInvoice reached the milestone of funding £2b worth of invoices and business loans to UK companies. Launched in 2011, the company has provided business finance solutions to thousands of businesses across the UK who employ more than 19,000 people. During this time over 90,000 invoices have been funded to 93
ISSUE 06 | 12
ISSUE 06 | 13
SALARIES BOUYANT BUT HIRING
SLOWED BY BEAST FROM THE EAST
LONDON EMPLOYMENT MONITOR MARCH 2018: • 14% decrease in jobs available,month-on-month. • 37% decrease in jobs availalbe,year-on year. • 22% decrease in professionals seeking jobs, month-on-month. • 44% decrease in professionals seeking jobs, year-on-year. • 23% average salary change during the month
With its focus on ‘equivalence’ instead of ‘mutual recognition’, the deal all but ensures that the UK will face cumbersome oversight, slowing business transactions considerably. “The EU is effectively shooting itself in the foot by creating unnecessary barriers”, said Enver. The deal wasn’t all bad news, however as European job seekers have cause for optimism with the agreement demanding that the government treat all EU citizens who move to Britain during the 21 month transition period in the same manner as it treats those who moved here pre-Brexit. “It’s not a long term solution, but it keeps the door open to top European talent and buys time to work out a post-Brexit work visa system”, said Enver. The clarity that the deal sought to provide businesses with came too late for some: leading banks announced specific figures for how many positions they plan to relocate from London to elsewhere in Europe. “Clearly the doomsday scenario of tens of thousands leaving the City is not set to materialise, with the moves reflecting only a fraction of each institution’s London based workforce” said Enver.
NEW DATA SHEDS LIGHT ON WOMEN IN FINANCIAL SERVICES
Figures for the financial services sector released in March showed a glaring gender pay gap, with women in some cases earning as little as half of their male counterparts’ salaries, and only a fraction of their bonuses. “These figures are disappointing, perhaps even more so because they are not surprising”, said Enver. “The culture and hiring practices are keeping countless people from choosing careers in financial services, and that has to change”. Though that change appears to be slow, there are some signs of progress: a record number of women are currently serving on FTSE 100 boards, and companies are showing signs of taking diversity hiring strategies seriously. PwC is leading the pack with its Tech She Can Charter that seeks to attract more girls and women into studying technology. “These types of efforts feed directly into the fintech pipeline”, said Enver. In the Me Too era, industries across the board are facing pressure to create work environments that are more welcoming to women, and light is being shed on outdated and discriminatory hiring practices. “We’re witnessing a reshaping of what is considered acceptable workplace behaviour. The businesses that fail to keep up with that standard will continue to struggle to recruit the best talent”, concluded Enver.
March saw another month of low hiring and job seeking in the City. Jobs available were down 14% month-onmonth and 37% year-on-year. Job seekers were down 22% month-on-month and by 44% year-on-year. Though the figures continue to bear the stamp of Brexit, both seasonal and weather forces were also at play. “These numbers don’t reflect the enthusiasm we’re seeing on the ground. The unexpected Beast from the East and Easter took the wind out of March’s job-market sails”, said Hakan Enver, Managing Director, Morgan McKinley Financial Services. Salary outlook bright despite Beast from the East hiring freeze In happy news for job seekers, average salaries increased by 23% in March. “Irrespective of the sub-sector, we’re seeing wages go up”, said Enver. As businesses across Britain lament the shortage of skilled workers and a post-Brexit rise in staff turnover, those who are currently looking for their next professional opportunity are well positioned to receive considerably higher compensation than they would have a year ago. “A shortage in talent translates to better salary negotiating power for job seekers, making now a great time to move”, added Enver. Brexit transition deal worries Square Mile, but offers some good news for job seekers News of a Brexit transition deal—which has yet to be formalised—between the UK and the EU brought some long awaited clarity, but also delivered disappointing news for Britain’s financial services sector. Chancellor of the Exchequer Philip Hammond went as far as to call portions of the deal “wholly inadequate for the scale and complexity of the UK-EU financial services trade”
ISSUE 06 | 14
ISSUE 06 | 15
2. There is good value out there for selective investors
four reasons for confidence despite market woes
While the major stock markets have slipped this year, there are many areas of the market offering long-term opportunities for investors who have done their homework. Emerging market debt, for example, has benefited from improving emerging market economies and a weaker US dollar, and our holdings returned 3.4% over the first few months of 2018. In the meantime, investors, such as Coutts, who have used active stock selection in the technology sector means they have avoided the worst of the falls with lower exposure to the stocks most affected by the bad news flow. While the broad tech sector has fallen -0.3%, our tech holdings returned 1.2% over the first quarter of the year.
3. Economic fundamentals are still strong At Coutts, we continue to be guided by long-term economic fundamentals rather than day-to-day headlines, and those fundamentals tell a good story. For example, Purchasing Managers’ Indices (PMIs) – which reflect the economic health of a country’s manufacturing sector – are positive across the globe. PMIs track new orders, inventory levels, production, suppliers’ deliveries and employment, aggregating it into a single figure. PMIs from the US, UK, eurozone, Japan and China all indicate that the manufacturing sector is expanding.
Trade tantrums and tech troubles are spooking markets and putting pressure on stock prices. But we think fundamentals drive markets, not sentiment. A tit-for-tat trade tiff between the US and China is in full swing while the technology sector is under fierce scrutiny. Facebook CEO Mark Zuckerberg is testifying to a US committee this week about data use and President Trump has tweeted tax allegations about Amazon. All this has shaken market sentiment, with most major indices around the world falling last week. But in our view, it doesn’t paint the complete picture of the economic fundamentals that really drive longterm market returns. Here are four reasons why we think investing remains the best way to make the most of your wealth.
1. Companies are making money
Wages are increasing as well. Average hourly earnings in the US were up 2.6% year-on-year in February, according to the Bureau of Labor Statistics. And data from the UK’s Office for National Statistics shows wages in Britain shot up faster than they had in over two years in the three months to the end of January. Meanwhile, the International Monetary Fund has raised its growth forecast for the global economy to 3.9% in 2018 and 2019. Strong growth is unlikely to be thrown off course by the current tariff row. Tariffs, while news, are not new for markets. President Obama introduced them and Ronald Regan famously put them on Japanese motorbikes to protect the Harley Davidson, and global growth remained strong through those presidencies.
4. Investing beats inflation Inflation may be falling marginally – down from 3% to 2.7% in the UK in February – but it still poses a real problem when it comes to protecting the value of your wealth. Deposit rates for cash remain lower than inflation. Anyone holding substantial amounts in cash will find that the value of their wealth is being steadily eroded and their spending power diminished. While the value of investments can go down as well as up, over the long term investing can be an effective way to keep up with rising prices.
Earnings season for the first quarter of the year is just around the corner, when companies tell the world how they are faring financially. Expectations are for healthy profits across the board. According to the Institutional Brokers’ Estimate System – which gathers the estimates of stock analysts – corporate profits are expected to rise this year by 34% in Japan, nearly 19% in the US, 8% in the UK and 7% in Europe. While this growth is expected to slow over the following two years, profits growth will remain strong. Strong results will boost share prices, and profits are likely to find their way to shareholders in the shape of increased dividends.
ISSUE 06 | 16
ISSUE 06 | 17
HOW TO BRIDGE THE GENDER INVESTMENT DIVIDE?
OPEN BANKING TO BOOST UK ECONOMY BY 1BN
In the passing of international woman’s day and in the wake of #TimesUp and #MeToo movements the gender differences across almost every area of our lives is being pulled in to focus, shining a light on areas that if changed could make this world a fairer place. Within this movement, one area that remains opaque is why woman invest and in turn, benefit from investment less than men? With 17% of investors in property investment platform Brickowner being male, the company set out to review the data out there and establish the four main reasons that could be contributing to this issue:
1. Unequal Pay/Disposable income Women invest less than men in the UK The first and most apparent reason stopping woman from investing as much as men is the pay gap between genders. The BBC currently stats that the gender pay gap stands at 18.4% in favour of men equating to a difference of £5380pa on average UK salaries.
Last year a report by Money Farm stated that halfofthewomenwithoutfinancialinvestmentsinBritaincitealackoffundsas the most common barrier to investing The absence of disposable income at the end of the month makes it unlikely that woman can invest.
2. Unequal Pension pots
3. Many financial services firms miss the target when appealing to woman As women have entered the workplace and earn their own money many industries have stepped up to the challenge of selling to female consumers. It is hard to think of any consumer based products that do not now have gender-specific versions at a cater to this market except when it comes to the financial services industry. One of the biggest studies carried out in recent years by Kantar on over 30,000 woman found the perception of banks advertising fails to consistently communicate qualities including, ‘understanding’, ‘dependability’ and ‘accessibility’ to women when tested using facial recognition technology.
4. Women are less trusting of investment firms One area where the hangover from the 2008 financial crisis still lingers is in the level of trust that we can place in our financial institutions. All investments require the investee to weigh up the level of risk vs reward. Without a doubt, this is the crux of what investment is. Risk can be balanced by the amount of trust one places in the scheme and individuals that they are investing with. Traditional investments have, over the decades repeatedly failed to do this with woman. Women keep on average 71% of their savings in cash, according to a survey by BlackRock, which goes some way to highlights a general lack of trust when it comes to investment. With men, this figure drops to 60%. The higher the risk, the less woman invest shown to the most significantly in investments like Bitcoin where 96% of investors are male.
The natural follow-on effect of lower pay amongst woman is lower pension pots. Overall, the number of women contributing to a personal pension grew from 1.94m in 2011-12 to 3.65m in 2015-16, according to government statistics. During the same period, the number of men making payments into a personal pension rose from 3.37m to 5.31m. Over the course of a lifetime, taking in account that investment go up means that gender variations in total lifetime earnings remain substantial, with men earning - on average - 80% more than women. This in part might be attributed to women who have children but take no career break stillfacea motherhoodpay hit.ResearchforthePensionsPolicyInstitutefoundthat when compared to men, there is a gap of £7 a week, or £364 a year, for the average- earning woman with two children, even if she takes no break from full-time work. All of these factors result in average woman’s workplace pension having £53,000 in it, compared to £120,000 for men, according to research from Close Brothers Asset Management and the Pension and Life Savings Association.
ISSUE 06 | 18
Although progress feels slow on the first two issues, it is being made. None-the-less research from the Pensions Policy Institute found that 76% of women aged over 60 are single, widowed or divorced meaning they will have to support themselves and the fact that they will live longer than men only intensifies the need for woman to start investing now. Evidence suggests that woman would make great investors following a buy and hold approach based on loyalty. Also, it appears that woman are more prepared to consider at Alternative platforms when investing, possibly as a result of new ways in which they are being engaged giving some insight into addressing point 3 and 4? It also makes good business sense and creates a massive opportunity for the right companies to cater to a new potential market (potentially worth £130bn). In the past Tech has challenged convention, given changes happening within financial services there is no reason why technology cannot address the ‘investment gap’ opening doors, that in the past have been closed for no good reason.
ISSUE 06 | 19
THE ONLINE ART MARKET - OPPORTUNITY, TURMOIL, CHANGE - AS BUYERS DRIVE HUGE GROWTH “The online auction revolution caught the old fashioned conservative art auction world on the hop and many are struggling to understand it and catch up” Says Pontus Silfverstolpe, founder of Barnerbys the largest auction search engine in the world. The last few years have been quite traumatic for one of the most old-fashioned and conservative business sectors, the traditional art and collectables auction market as it gets to grips with online technology. The, so called, “online revolution” dropped like a bomb onto the largely complacent art world, where most players stood bewildered, paralyzed, hoping that the wind of change would soon blow over.But the storm has only increased, blowing away old certainties and old ways of doing business. Yet the news is not all bad.
The Hiscox Online Art Trade Report said last year that online art sales rose 15% to $3.75bn, despite the broader art market falling 11% to $56.6bn. The online sector was up 24%. The opportunity for digital online auction houses is clear but the path ahead is rocky and challenging.
Why sell your soul, your brand and your business, asks Pontus Silfverstolpe? “We have seen several examples with some of the most famous and most important brands of our industry inpanic jumping onto the first train to get out of the Online Auction Station. Amazingly some auction houses are still debating whether they should be online or not. I think that fear of the unknown - online and digital world - is so excessive that auction houses do not see the wood for the trees. The auction industry is no different from any other industry, apart from one significant thing - every item is unique and has its own history. That’s what makes the art and antique industry unique compared to all other industries, and that’s what makes the conditions so different. But that is also what creates enormous added value. Provided that you do it properly.
But there are dangers for traditional auction houses who sub-contract their online platform to online service companies. These online companies have experienced massive churn with some failing; this risks damage to your brand: and there is the risk of losing your clients to competitors. Better maybe to develop your own online facility and drive buyers to it with a company like Barnebys which is not an online auction house but an aggregator search engine.
Let me give you an outstanding example of online auction marketing. I think we all agree that thesale of “Salvator Mundi “by Leonardo da Vinci at Christie´s was one of the most successful marketing campaigns ever. How many other marketing campaigns, regardless of industry, hadsuch a long life span and succeeded in attracting so much media attention and tens of thousands of social media distributions for such a long time? From announcing that the company hadreceived the prestigious sales mission to selling the painting for the record price of $450. And it’s not over yet, the campaign and the ripples it created will last for a long time and continue to be extremely valuable for Christie’s. But this could never have happened if Christie’s did not understand the value of it´s own brand. The brand has never been more important in the past, as it is today. In an extremely competitive landscape where thoughts, ideas and execution are copied more quickly than ever, it is important to understand the basic conditions for survival, growth and creation of long-term values. It becomes only clearer and clearer how important the brand is.
Barnebys the world’s largest art auction search engine has been tracking this change from its privileged position of host to 3,000 auction houses globally from small local operations to all the giants of the industry. Each day it features some 1m items for sale on its website, directing buyersto the auction house websites. Barnebys has a distinct position in this world, it is not an auction house, not an online auction facilitator, not a screen between its clients auction houses and its viewers who go onto the site to search for specific items, to find where in the world they are being sold and by whom. Pontus Silfverstolpe, one of the two founders of Barnebys, the Stockholm based search engine, says: When nine out of ten people start their purchase behavior on the internet, that is where you have to be. That is where the action is, that is the future of auctioneering. Those who don’t understand that will go to the wall, and those whose online service is not transparent, easy to use and service orientated will fail.” He asks: “Is there any billionaire today that is not using the internet? Is there anyone below the age of 30 that has never used their credit card to confirm an account on Netflix or an apartment in Barcelona for the weekend trip with Airbnb? For millions of people, buying behavior begins online, so if you are not there you should not have particularly high expectations that you will reach the highest market prices.
ISSUE 06 | 20
But if you are there, and highly visible, however small or modest your business is, buyers will find you. An antique shop in deepest rural France with a piece of QianlongChinese ceramic to sell will be found by buyers in the depth of mainland China. It is how the world works today. Astonishingly most of the major auction houses are years behind the fastest growing auction houses, often small local houses, art dealers and new companies dealing in the second hand market. This is why we see the auction giants handing over part of their online selling operations to intermediaries like EBay or Auctionata. For some this works but for others it fails and given the churn within this ‘service sector’ of the art market it is a risky business handing over your precious brand for others to play with.
PONTUS SILFVERSTOLPE CO-FOUNDER OF BARNEBYS
Brand is everything. Until now, houses and dealers have leased out their inventory to different sales platforms, doing business on arbitrage. This has meant a growing distance between the houses and its customers.” Barnebys mission is to close this distance again and pass on the potential buyer transaction to the auction houses and dealers own sites, says Christopher BarnekowCEO and co founder of Barnebys. “The main focus should be: where will you be in the next five to ten years? I am completely speechless when I see major auction houses and dealers with strong brands using third party platforms. To give away their customers, their transactions and their brand is to in the long rundig their own grave. Maybe it may work in the short term, but what happens when you for some reason want to terminate the agreement or change the platform? The platform you have been using will have all the information and data about your clients, your SEO would have been erased by boosting the platform’s profile at the expense of your own profile. Or, at worst, the host platform starts to sell your data to your competitors.” “This threat is the key difference between Barnebys and the third party platforms that exist today. As one of the auction industry’s most relevant marketing channels we would never get into the transaction between buyer and seller other than passing on the contact and why we would never steal someone else’s brand. Without online presence and without taking care of your own brand you can’t control yourcorporate destiny. And you won’t be able to control the chain of supply or your future. So the message is clear, understand the online world, it is the future and choose your online partnerships with great care.”
ISSUE 06 | 21
new mission-led investment venture to support scotland’s social entrepreneurs A new mission-led investment venture aimed at stimulating social entrepreneurship in Scotland has been launched by leading responsible finance provider Social Investment Scotland. SIS Ventures plans to provide the tools and mission-aligned investment required to help early stage businesses and social enterprises grow and deliver social impact at scale. The company is in the process of seeking authorisation from the FCA, under a wholly owned subsidiary of SIS. Over the next three years, SIS Ventures hopes to set up funds to raise up to £5m of new funding – utilising both Social Investment Tax Relief and the Enterprise Investment Scheme. The plan is to provide debt and equity to entrepreneurs, particularly those early stage ventures that might struggle to access investment from existing sources and have a mission to deliver impact at scale. SIS Ventures plans to leverage the power of business to help address society’s greatest challenges and needs. Beneficiaries of this investment will include both traditional social enterprises and mission-led businesses, which create and sustain employment, improve health and fitness, support the homeless and those marginalised within our local communities. Veteran Scottish investor Bill Crossan will be appointed Chair of the new venture as part of an experienced Board comprising a mix of impact investors, traditional investment managers who understand the market opportunity, and individuals who are committed to drive positive impact.
robert bouchard takes over as ceo of econom group
BOARD MEMBERS WILL INCLUDE: • Susan Aktemel, Director, Homes for Good • Alastair Davis, Chief Executive Officer, Social Investment Scotland • Thomas Gillan, Chief Officer Finance & Strategy, Social Investment Scotland • Morag McNeill, Director, Social Investment Scotland • David Ovens, Chief Operating Officer, Archangels • Mike Wooderson, experienced investment professional • Amanda Young, Head of Global ESG Investment Research, Aberdeen Standard Investments All board appointments remain subject to regulatory approval. Bill founded Growth Capital Partners in 1999. He brings with him 30 years’ experience investing in growing mid-market companies, both from an equity perspective with 3i and Close Brothers and from a senior lender’s position with the Bank of Scotland.
Econocom, a European player specialising in the digital transformation of organisations, announced today Robert Bouchard’s appointment as Chief Executive Officer of the group. He succeeds Jean-Louis Bouchard, who founded the group and will continue as Chairman of the Board of Directors. In addition to running various entrepreneurial activities in the restaurant and digital infrastructure service businesses, Robert Bouchard joined the Econocom Board of Directors in 2009. He became Vice Chairman in 2015 and was appointed Chairman of the Group’s Audit Committee the same year, where he served for two years. In 2016 he took on an operational role and was appointed COO of Econocom in 2017. As head of all the Group’s operations, he successfully completed the “Mutation 20132017” strategic plan. Jean-Louis Bouchard, founder of Econocom Group, will stay on as Chairman of the Board of Directors. The handover between Jean-Louis Bouchard and Robert Bouchard was approved by the Board of Directors on 19th March 2018 and is effective immediately.
Thomas Gillan, Director of SIS Ventures said: “At Social Investment Scotland we believe that impactful enterprises, those that deliver profit and purpose, should be the bedrock of society; supported with the full power of the investor community. We know that many individuals today have a genuine desire to invest in activities that benefit society which is why we created SIS Ventures Limited.” Bill Crossan noted: “The investment world has come a long way in recent years. Where previously impact-first investment lacked both credibility and visibility among the investor community, we’re now beginning to see more investors come on board with the idea of backing businesses who can produce both a financial and social return. This is, in part, due to the increased value placed on social impact at board level, but also an increased desire among Scotland’s entrepreneur community to pursue a profit-with-purpose model. It’s a hugely exciting time to be working with such an ambitious team and I’m looking forward to helping SIS Ventures make its name within Scotland’s early stage investment space.” Nick Kuenssberg, chair of SIS, commented: “We are delighted to have been able to attract Bill to this important ground-breaking venture company. With him in the chair and a strong board, we are now in a great position to move forward to the next stage of rolling out our first fund.”
“This marks a new chapter in Econocom’s entrepreneurial and family history and I am proud of the trust my father and the Board have placed in me. I am fully aware of the responsibility I have to our 10,700 employees, our clients and our shareholders,” said Robert Bouchard, the new CEO of Econocom. “Having worked closely with Robert for over 20 years, I am confident that he has all the requisite qualities to take on these new responsibilities and lead the Group successfully into a new phase of growth and value creation. I would also like to stress that he shares and upholds the Group’s values and entrepreneurial spirit. Like me, he firmly believes in the value and effectiveness of our original development model,” added Jean-Louis Bouchard, founder and Chairman of the Board of Directors of Econocom.
ISSUE 06 | 22
ISSUE 06 | 23
UK BOSSES RISKING WORKFORCE STRESS BURNOUT
cmo & co-founder at perkbox
UK business are in danger of having their workforces experience burnout, as despite a huge number feeling stressed at work, few bosses are doing anything to help. For those British adults in employment, work is by far the most common cause of stress (59%). Yet almost one in two (45%) of British businesses do not offer anything to help alleviate this, according to a study of 3,000 UK workers carried out by Perkbox, the UK’s fastest growing employee benefits platform, as part of the 2018 UK Workplace Stress Report. This is despite the fact that 1 in 4 (25%) struggle to be as productive at work when stressed, and almost the same number find themselves disengaged with work as a result. Indeed, at least 1 in 10 (10%) of us will call in sick due to stress, while 7% will look for a new job. Businesses within the hospitality industry are the least likely to provide any kind of guidance or aid to help employees deal with stress, with as many as 64% of workers in this industry claiming that this is the case. This was closely followed by the leisure sector – where 63% of businesses are guilty of doing nothing to help. More than 1 in 2 (55%) bosses within transport – where employees experiencing high levels of stress and burn out can be particularly risky – leave employees to manage work stress with no guidance or assistance. The plumbing and construction (54%), healthcare and education industries (both 45% respectively) completed the list of the top five sectors which are least likely to see employees offered help or assistance with managing levels of work-related stress.
Chieu continues: “This can have hugely damaging effects on morale, productivity and sickness absence – all of which ultimately contribute to a company’s overall success and it is important for bosses to recognise the contribution that work makes to employee stress levels. “Introducing measures that help to reduce stress or encourage positive coping methods need not be particularly involved or expensive – even free things as simple as introducing flexible working, considering requests to work from home from time to time, or enforcing 1-2-1s with managers, to allow employees to discuss concerns and motivations, can go a long way to help. But ultimately, measures which tackle staff stress head-on work best – including gym membership or exercise classes, discounted or complimentary counselling and mental health services and even spa vouchers.”
Chieu Cao, CMO & Co-Founder at Perkbox, said: “It’s worrying to see how few businesses seem to be considering stress levels within their workforce their problem. And it is particularly ironic to see that almost 1 in 2 workers within the healthcare industry say their bosses do not do offer anything to help them alleviate stress levels.
ISSUE 06 | 24
ISSUE 06 | 25
OPTIMISM FOR A ‘SOFT BREXIT’ diminishing amongst financial sector leaders
Leaders of the UK’s leading FinTech and Prepaid financial services businesses are expecting a ‘hard’ Brexit that will diminish financial sector access to EU markets and adversely affect their businesses. The research by the Prepaid International Forum, the not-for-profit trade body representing the prepaid financial services sector, includes input from 60% of its UK members. Over half (58%) are now expecting a hard Brexit and the majority (66%) don’t believe that Theresa May will be able to hold on to the ‘financial passporting’ rights that allow UK approved businesses to provide financial services and products across the EU. Nearly all of these leaders expected Brexit to be bad for their business (81%) and three quarters admitted that they are already looking at moving at least part of their operations out of the UK in order to minimise its negative impact. Alastair Graham, spokesperson for PIF, says: “Immediately after the Brexit vote, there was a general belief that common sense would prevail, and the reciprocal access to financial services between the UK and EU would remain open to the mutual benefit of both sides. However, as the negotiations have continued, this optimism has faded considerably. To the extent that now most are expecting and planning for the worst possible outcome for financial businesses.” “Ireland looks to be the most likely beneficiary for jobs and income exiting the UK, with 30% of leaders surveyed saying this would be the most likely country where they will relocate all or some of their operations. Graham continues: “The UK is a significant market for FinTech and Prepaid financial services and is the home of much of the EU’s innovation and growth for this sector. However, growing businesses cannot afford to become isolated from the opportunities across the EU.” “The lack of clear signals from either side in the negotiation has seen optimism fade and companies are now actively preparing for the worst. Speaking to members for this research, it is clear that to maintain passporting rights most are planning to hold offices in both the UK and EU after Brexit, which for some will come at a significant cost. The destination of their main office is being determined by a range of factors, including access to expert staff, corporation tax, the cost of living and other expenditures. For these reasons, many are looking to relocate their main operations to countries where businesses can operate from a lower cost base than the UK. As well as Ireland, eastern Europe is emerging as a popular option, with Lithuania and Estonia mentioned, alongside options such as Ireland, Luxembourg and the Netherlands.”
ISSUE 06 | 26
ISSUE 06 | 27
BANKING AND START-UP
EXPERT ANNA HEJKA NAMED DASCOIN’S CHAIR OF THE BOARD DasCoin, the blockchain-based currency at the centre of an innovative digital asset system, has recruited a former investment and commercial banker to lead a powerhouse board of non-executive directors. Anna Hejka brings her experience as a founder of more than 20 companies, a Managing Partner of six Private Equity and Venture Capital funds, an investment and commercial banker, and a business angel to DasCoin, becoming its first female director and chair of the board. An entrepreneurial heavyweight, Hejka has launched five private equity and venture capital funds. She worked as a commercial banking officer at JP Morgan Chase and an investment banker at Solomon Brothers. She has garnered countless awards, including being named a Global Leader for Tomorrow by the World Economic Forum, a Business Angel of the Year by the European Business Angel Network, and she also starred in Dragon’s Den in her native Poland. Anna Hejka joins former White House adviser professor Augustine Ha Ton Vinh, former Volvo CE global executive vice president Eberhard Wedekind and Soon Hock Lim, former Vice President and Managing Director of Compaq Computer Asia Pacific, in supporting DasCoin as it prepares to list on public exchanges on April 27, 2018. Commenting on her appointment, Anna Hejka said: “I have decided to join the DasCoin board, because the company has attributes of becoming very successful. Its digitized, open and participative business model creates connected ecosystem of scalable communities of producers and consumers. It is a tribute to the amazing people at DasCoin who created this ecosystem which continues to grow with such momentum, and I’m thrilled to join at such an exciting time. DasCoin has the potential to be globally disruptive to the benefit of all consumers, so my aim is to make sure that these incredibly hard-working people get all the support they need to create something very special.” DasCoin founder Michael Mathias said: “Appointing someone of Anna’s caliber to lead our Board of Directors is testament to the growing strength of DasCoin. She brings a huge amount of experience to our top-class board and will provide strong leadership as we work to establish DasCoin as the international currency of trust. Anna Hejka’s appointment comes days after DasCoin unlocked its digital ecosystem for the first time, publishing the source code for its blockchain on GitHub.”
ISSUE 06 | 28
ISSUE 06 | 29
SUCCESS OF DATAFEST18 UNDERLINES SCOTLAND’S STRENGTH IN DYNAMIC GLOBAL DATA MARKET
DataFest18, billed as a celebration of data-driven innovation, was applauded for its focus on the potential positive power of the ethical use of data. From predicting pandemics and childhood obesity to enhancing B2B payments and earthquake response, various examples of how data can be used for good were showcased throughout the festival. This year saw in excess of 3,000 participants, with over 45 events taking place across seven towns and cities in Scotland. Data Talent saw 300 data science and engineering students mix with a number of Scotland’s leading employers including Royal Bank of Scotland, SAS and Merkle Aquila. Inspiring speakers included Lydia Nicholas, Futurologist and Senior Researcher at Nesta, Roger Halliday, Chief Statistician at the Scottish Government and Stephen Breslin, CEO of the Glasgow Science Centre.
“The data sector in Scotland is on the rise and the success of DataFest underlines this. It is essential that events like this shine a light on the prospective benefits and opportunities that can be achieved when data is used ethically.” Scottish Government Cabinet Secretary for Finance, Derek Mackay, who addressed Data Summit said: “I am delighted to give my support to DataFest18, which brings key figures from around the globe to Scotland and showcases our work in this area. Scotland already has impressive data infrastructure and skills, with world class research taking place in our universities and a thriving data business sector. We are now in a great position to seize the advantage of data driven innovation to help boost our economy and become the data capital of Europe.” Forty-four Fringe Events took place across Scotland including hackathons, networking and inspiring workshop sessions for school pupils stretching from Edinburgh and Glasgow to Inverness, Dundee and Aberdeen.
Data Summit, the two-day international conference held in Edinburgh, attracted over 450 attendees who saw headline speakers from far and wide including Dr. Hannah Fry who gave insights on the BBC Pandemic project she’s leading on, Alex Depledge MBE, founder of Resi.co.uk and former CEO of Hassle.com, Stefaan Verhulst, Cofounder and Chief Research and Development Officer of The Gov Lab in New York, and Kirk Borne, Principal Data Scientist at Booz Allen Hamilton, and ex- NASA PhD Astrophysicist. CEO of The Data Lab, Gillian Doherty, said: “DataFest took place at a time when data was top of the news agenda. What DataFest18 achieved was putting the potential positive power of data to the fore. A prominent theme throughout the week was the ethical use of data which has to remain a key focus for everyone in the industry.
The festival was organised by The Data Lab in partnership with Scottish Enterprise and the Scottish Government. It was sponsored by SAS, Merkle Aquila, Sainsbury’s Bank, Royal Bank of Scotland, Heineken and Barclays. UNICEF and Street Soccer Scotland were its charity partners. Kirk Borne, Principal Data Scientist, Booz Allen Hamilton, who spoke at Data Summit said: “DataFest 2018 was perhaps the most thoroughly comprehensive and exciting data extravaganza that I have ever experienced. An entire country got into the fun, with talks and hackathons and panels and social-good activities and so much more. The conversations surrounding the event, before, during, and after, with amazing data practitioners, were informative, insightful, inspirational, innovative, and igniting. There was something at DataFest for everyone who works with data. I look forward to participating again in the future.” Nick Finch, Co-founder and CTO at DataPA, attended Data Summit and added: “Data Summit was such a positive departure from the usual events we attend. We had some great discussions with both academics and businesses during the exhibition. The contacts we’ve made and insights we’ve gained from Data Summit have made a real impact on what we’re planning with our own projects. We look forward to taking part again next year.” DataFest18 in numbers: • Over 3,000 DataFest18 participants • 47 events • 7 towns and cities across Scotland • 479 Data Summit attendees • 38 Data Summit exhibitors
ISSUE 06 | 30
ISSUE ISSUE 06 | 31
TECH ESSENCE APPOINTS MARY KEANE-DAWSON AS CHAIRPERSON OF THE BOARD
Keane-Dawson is a one of the most well-known figures in the UK digital media scene and an experienced business leader. Having held senior roles with a diverse range of media companies including Redwood Publishing, SPAFAX (part of WPP), Steak (part of Dentsu), Reform, Collective London and Trade Doubler’s incubator The Zoo Project, and more recently as MD of Neo@Ogilvy. She is also a Global Ambassador for BIMA and Tech London Advocates. In 2017, £1.5 billion was spent on performance marketing in the UK alone, according to the IAB and PwC’s Online Performance Marketing study. Ken Leren, CEO and Founder, Tech Essence says “With GDPR looming we anticipate a sharp increase as companies are forced to shift budgets away from third party data-driven advertising and will invest in more robust, people-based marketing channels, like partner marketing. As the digital marketing industry evolves we will continue to add functionality to the platform that enables marketers to run the most efficient, effective performance marketing campaigns.” Keane-Dawson will advise strategically, working with Leren and Ricki Jones, Chief Commercial Officer, Tech Essence to ensure that the company continues to grow and expands into Europe. About Tech Essence Tech Essence is a SaaS-based marketing technology solution provider, specialising in helping marketing professionals make informed decisions on measuring and optimising their multi-channel marketing efforts. With the intention to revolutionise partner marketing, we have developed our own proprietary platform, Marketing Town, to take campaign management, tracking and analytics to the next level.
Tech Essence, the marketing platform revolutionising partner marketing, today announced Mary Keane-Dawson, CoFounder and CEO, TRUTH, as Chairperson of the board. Keane-Dawson has been an advisor to the company since its launch in 2013. The appointment reflects the growth of Tech Essence and its position as a serious contender to established players such as Performance Horizon, Cake and LolaGrove. Tech Essence is a SaaS-based marketing technology platform that enables marketing professionals to make informed decisions about measuring and optimising multi-channel marketing campaigns. The company’s flagship product, Marketing Town, is the next generation of campaign management, tracking and analytics technology, allowing marketing professionals track and monitor traffic, and measure the effectiveness of marketing campaigns in real-time. Within the platform, advertisers and publishers can track conversions, and, more importantly, determine performance levels and return on investment from each affiliate activity, based on post conversion metrics. In this new area of data regulations, the greater the transparency, visibility and trust, the more opportunities for marketing and sales. Keane-Dawson says “Tech Essence has been designed to meet the needs of modern-day marketers; the team have done an amazing job winning a host of awards that recognise not only the capability of the technology but the outstanding leadership of Ken Leren, CEO and Co-Founder. I’m delighted to have joined the company at this exciting stage and have no doubts that the company will continue to go from strength to strength and take a market-leading position in the next 2 years.”
ISSUE 06 | 32
ISSUE 06 | 33
brokers to help fund uk businesses at june’s commercial finance expo
The biggest commercial finance event of the year returns to the NEC on 20th June The National Association of Commercial Finance Brokers return for the ninth time to Birmingham’s NEC for the annual NACFB Commercial Finance Expo. The event takes place on Wednesday 20th June 2018 in Hall 3A at Birmingham’s NEC from 9:30am until 4:30pm, and you can register today via www.commercialfinanceexpo.co.uk
The free event is open to anyone with an interest in Commercial Finance and 2018’s event will host a wider spread of lender exhibitors than any ever before – with over 130 confirmed to exhibit on the day. Why attend? Now in its ninth year the Commercial Finance Expo has become the headline event on the commercial finance calendar. Exhibitors span the widest cross-section of the market, making this the largest finance show for intermediaries in the country. The event is about doing business, networking and education, but it is also an entertaining affair with a good-natured rapport present between all exhibitors and attendees. It remains one of few places that brokers can see all their lenders and funders in one place on one the same day. Graham Toy, NACFB CEO, said: “As a former lender myself, I am well aware of the value in attending the largest finance event of its kind. The quality of both the exhibitors and the variety of delegates ensured that the day was the first trade event we marked on our calendars each year.” Norman Chambers, NACFB Managing Director, added that: “For me, the NACFB Commercial Finance Expo is a place to do business – first and foremost. I have seen deals made between brokers and lenders of all sizes, and I’ve also seen connections forged that continued to be fruitful for years after.”
ISSUE 06 | 34
ISSUE 06 | 35
SMALL BUSINESS UNFAZED
BY CHALLEGING ECONOMIC CONDITIONS FINDS VISTAGE CONFIDENCE INDEX
Small business owners are shrugging off concerns over the wider economy with bullish predictions on revenues and hiring over the coming 12 months, new research by CEO peer advisory organisation Vistage has found.
A majority (83%) of respondents who expressed concerns over the economy blame ongoing political instability for weighing down wider economic performance, suggesting a level of frustration within the community.
According to the latest Vistage UK SME Confidence Index, three quarters (75%) of CEOs and business leaders within the UK’s small to medium enterprise community are predicting an increase in revenues over the coming year, while 60% say they plan to increase hiring to sustain growth. Overall confidence among small business owners hit a year high in Q1, rising 3.3 points since the last member survey in December 2017. The optimistic forecasts from Vistage members come despite ongoing concerns about the wider performance of the UK economy.
Just 12% of respondents say they believe their business will see a significant impact from the eventual outcomes of Brexit negotiations. Vistage found that a majority (60%) of small businesses have yet to consider any specific plans for Brexit, with most preferring to adopt a ‘wait and see’ approach.
A third of respondents believe overall economic conditions have worsened compared to a year ago, while a similar proportion (37%) predict a further deterioration over the coming year.
ISSUE 06 | 36
Such uncertainty can quickly derail optimism if left unchecked, so it is encouraging to see that our members are not letting these issues become a distraction from the job in hand. With strong leaders at the helm, small business owners are well-positioned to be nimble and adaptable in the face of changing market conditions.” Vistage is the world’s leading CEO peer advisory organisation with over 22,000 members in 20 countries worldwide, including more than 1,000 members in the UK. The results of the Q1 2018 UK SME Confidence Index are drawn from a survey of Vistage members based in the UK and Ireland.
Roger Martin-Fagg, economist in residence at Vistage UK, said: “The results of the latest Confidence Index suggest our members do not see Brexit as a major threat to future success and are eager to push ahead with growth plans as their confidence grows. “The continued lack of clarity over the path ahead remains both a frustration and concern however.’’
ISSUE 06 | 37
LAW FIRMS WASTING MILLIONS THANKS TO R&D TAX RELIEF BLIND SPOT Law firms are throwing away millions of pounds a year because nearly 9 in 10 companies could be eligible for tax relief on new services, specialist tax relief firm Catax revealed today. In total, a massive 87% of businesses in the legal sector have developed new products or business processes in the past two years, research shows. This means they are in line for valuable R&D tax relief that the government provides to encourage innovation. But despite 80% of firms knowing of R&D tax relief, only half (47%) report ever claiming it either because they don’t think they qualify or they incorrectly believe that it could cost them money, the Catax study shows. Incredibly, law firm executives underestimate the value of the average SME R&D tax relief claim by £29,167, according to the Censuswide survey. Executives believed the average value to be just £16,833 when the true figure is £46,000 for firms in all sectors nationwide. Law firms report spending £178,002 on R&D on average.R&D doesn’t even have to have been successful to qualify and claims can be backdated at least two years. Catax CEO, Mark Tighe, commented: “The number of law firms who report developing a new service is relatively high. The national average is around 78.5% of business so the legal sector is punching well above the mean with 87%. It just goes to show R&D is not all about lab coats and multi-national companies, and the R&D doesn’t even have to have been successful to qualify.This means nearly all law firms should be looking at what they can claim. Cost benefit doesn’t come into it because most good R&D tax relief firms will work on a commission basis.”
ISSUE 06 | 38
ISSUE 06 | 39
ADI GROUP’S CEO URGES BUSINESSES TO ENGAGE WITH
PRE-APPRENTICESHIP PROGRAMME Alan Lusty, Founder and CEO of £82 million turnover, multi-disciplinary engineering firm, adi Group, has a unique offer for UK businesses. Having established the country’s first Pre-Apprenticeship Programme in 2016 and watched it flourish with each subsequent intake, Alan is convinced of its value not only in inspiring youngsters but in benefiting businesses, the wider community and the UK economy.Alan is urging companies, both in the engineering sector and beyond, to replicate its success by making use of the proven adi concept – for free. Students age 14-16 from North Bromsgrove High School, already involved with the scheme, spend half a day a week over two years learning core hands on skills and getting a taste of how rewarding and diverse an engineering career can be.
Alan sees his approach to apprenticeships in terms of completing his own cycle of life. He didn’t take the academic route to engineering, a moment of teenage inspiration, watching a friend doing up their go-kart, led to an electrical apprenticeship that gave him the skills to fulfil his dreams. Since founding adi Group in 1990 with the help of a £15,000 loan, he has grown a self-delivering 34 discipline model that now turns over £82 million and employs a team of 630. For Alan, the important thing is to give something back to the apprenticeship ideal that got him started. Recognising the skills deficit, adi created a bespoke hands on engineering curriculum which is fully accredited by EAL They want other SMEs to follow their example in helping to address a UK skills gap that Semta believes can only be filled by an additional 1.8 million trained engineers before 2025. Alan said, “People and skills are central to what we do as a company. But they are also central to our whole sector and to the broader UK economy. So, we have a responsibility to society to ensure people are equipped with the skills they need to find quality employment and to deliver widespread prosperity. That starts with youngsters. Not everyone is cut out for university and not all of those thinking about career choices know how great engineering is. So, we try to inspire young minds and to open up new pathways into the profession. In our Pre-Apprenticeship Programme, we have proof of a wonderful concept that benefits us all – as individuals, as employers, as a community and as a country. We believe that, if other companies copy what we have created, we can help bring about a sea change, not just in the engineering sphere but in a number of key economic sectors. The theme for National Apprenticeship Week 2018 is ‘Apprenticeships Work’. I can tell you, from personal experience, that they really do. So, I’d urge any businesses looking to make a difference to get in touch.”
ISSUE 06 | 40
ISSUE 06 | 41
PHOENIX ASSET MANAGEMENT STRENGHTHENS ITS POSITIONING IN THE NPL AND UTP MARKET, THANKS TO THE SUPPORT OF FUNDS ADVISED BY ANACAP AND PIMCO.
Phoenix Asset Management – independent asset manager and special servicer focused on the management of secured and unsecured non-performing loans and unlikely to pay portfolios – announces the investment by funds managed by Pimco – as institutional investors. Following the deal, Steve Lennon - Founder & CIO of PAM - together with the other founding partners, will hold 40% of the corporate capital. AnaCap Financial Europe investment entities will continue to hold a 30% stake and Pimco investment entities will hold the remaining 30% stake. In continuation of the existing strategy, PAM will still operate as an independent platform of special servicing with the current management team confirmed. The Closing is expected by 13th April 2018, given that the European Commission has already authorized the operation. Further financial details of the transaction were not disclosed. The institutional investors will continue to support PAM in its development plan in the Italian market in relation to the management of secured and unsecured non-performing loans and UTP portfolios through tailor-made structured workout solutions, as well as through the implementation of important ancillary functions, such as the management and execution of Reoco strategies. In the context of a continuing ECB spotlight on Italian banks, coupled with progressive legislative and accounting reforms, PAM has developed a specialist workout proposition tailored to a diverse set of NPL and UTP portfolios addressed to banks and financial investors, in parallel building on consolidated partnerships with international investors. Thanks to the experience gained since 2011 by Phoenix Investment Partners in the advisory of opportunities on the Italian financial market on behalf of international investors, in 2014 Phoenix Asset Management was established as an independent platform for the management of secured and unsecured non-performing loans and unlikely to pay portfolios, with a focus on complex initiatives and value-add positions, often regarding real-estate backed projects. In addition, the Company provides due diligence services and advisory on portfolio acquisition and in the restructuring of securitization operations, along with identifying investment opportunities in specific real estate deals and corporate turnarounds. As a special servicer, PAM currently has circa €9bln aof GBV under management across 11 NPL/UTP portfolios. In addition, over the last two years the Company has conducted further diligence for NPL/UTP acquisitions in excess of €20bln of GBV on behalf of international investors. “The presence of our institutional partners will support PAM in the acceleration and optimization of our growth plan, and extending the panel of clients across banks and international investors. As an independent servicing specialist for NPL and UTP portfolios, working with significant alignment to our clients’ objectives we aim to unlock the embedded value in the portfolios and in the underlying collateral, thanks to the consolidated expertise in the implementation of diversified strategies, involving analysis, management, cure, deleveraging, or even additional capital to fuel restructuring plans or complex RE initiatives” commented Steve Lennon, founder & CIO of Phoenix Asset Management.
ISSUE 06 | 42
ISSUE 06 | 43
AQUILA CAPITAL ANNOUNCES NEW INVESTMENT STRATEGY FOR SOUTHER EUROPEAN LOGISTICS REAL ESTATE Aquila Capital, an investment company specialising in alternative investments, has announced a new investment strategy with a focus on logistics properties in Spain, Italy and Portugal. In total, between EUR 350 and 400 million are to be invested in long-term, fully-let core and core plus properties in selected, highly sought-after logistics locations. The company expects to generate returns of between 7% and 8% for its investors. “Our investment strategy aims to capitalise on the yield spread in the logistics sector between Southern and Central Europe. Spain, Italy and Portugal are in an earlier market cycle and have not yet experienced the same increases in property values and rents for logistics space that we have seen in Germany and the UK. In comparison, the Southern European e-commerce market has developed relatively slowly, which means that it still offers a host of attractive opportunities”, said Michael Husung, Head Client Advisory Real Estate at Aquila Capital. Focus on sought-after and expanding logistics markets Spain, Italy and Portugal are emerging logistics markets. Aquila Capital’s strategy focuses on national logistics centres in Madrid, Barcelona, Northern Italy, Lisbon and Porto. These logistics centres are in high demand, firmly established and already very well connected to regional and national infrastructure. In addition, these logistics markets have low vacancy rates and above-average rental growth potential.
CENTRAL TRADING OF OTC DERIVATIVES STABILIZES THE REAL ECONOMY
As Olaf Bruns, Head of Fund and Asset Management Real Estate at Aquila Capital explained: “We have consciously chosen not to adopt a pan-European strategy and are instead prioritising targeted diversification. Our logistics specialists and highly networked local investment team in Madrid have excellent market access and an attractive investment pipeline. In addition to already developed distribution centres, warehouse and transhipment properties, we are also interested in pre-let forward acquisitions, which already feature in our purchase pipeline.” As part of its new investment strategy, Aquila Capital will expand its real estate transaction volume to more than EUR 1 billion by the end of 2018. Aquila Capital is already one of the ten largest European investors in the logistics sector and one of the largest residential property developers in Spain.
MICHAEL HUSUNG HEAD CLIENT ADVISORY REAL ESTATE AT AQUILA
ISSUE 06 | 44
In order to improve market liquidity and financial stability, the G20 countries decided in 2009 that over-the-counter (OTC) products should be centrally traded on electronic platforms. The research results of Swiss Finance Institute Professor Harald Hau from the University of Geneva, Peter Hoffmann, and Sam Langfield from the European Central Bank, and Yannick Timmer from Trinity College Dublin confirm that such a move will reduce the costs of hedging currency risks for non-financial companies and therefore make an important contribution to risk reduction in the real economy. The decision of the G20 countries to trade all standardized OTC derivatives via central electronic platforms will in particular affect the foreign exchange market. With a worldwide daily turnover of USD 5.1 trillion, it is the world’s largest financial market. Under the current system, dealer banks are not obliged to publicly disclose quotes and prices. Correspondingly, low market transparency results in less sophisticated non-financial clients having to pay significantly higher prices for currency hedging. The trading of foreign exchange derivatives on electronic platforms, on which a large number of dealer banks are active, counteracts this state of affairs. As the research results show, less sophisticated non-financial clients can benefit from price competition among dealer banks. This makes the current markup disappear and results in uniform pricing across all clients. For SMEs in particular this simplifies access to the OTC market and makes it easier to hedge currency risks. This in turn makes an important contribution to the stability of the real economy. ISSUE 06 06 || 45 45 ISSUE
BUSINESS DURHAM APPOINTS MAVEN CAPITAL PARTNERS AS FUND MANAGER FOR ITS £20M INVESTMENT FUND
Business Durham, the economic development company for County Durham working on behalf of Durham County Council, announces that it has appointed Maven Capital Partners as Fund Manager for its Finance Durham LP (“FDLP”), the £20m investment fund set up to help businesses located in County Durham. FDLP will commence the investment process from May 2017 and intends to support up to 70 businesses with the explicit intention of helping these businesses grow and create thousands of jobs in the County. Business Durham has a successful track record of investing in businesses. It was an early stage investor in companies such as Atom Bank, Britain’s first digital bank, which recently raised £219m, and PolyPhotonix, the company that has produced an innovative eye mask to prevent sight loss and treat eye disease in diabetic sufferers. Highlights of Finance Durham LP include: Evergreen fund offering flexible finance options, Investments will range between £200,000 to £2m, 10% of the fund set aside to fund start-up companies: investments will be between £10,000 and £40,000, Businesses need to be based in, or relocating to, County Durham when the investment is made, Investments to be spread out across all sectors and sizes of business. Maven Capital Partners is one of the UK’s most active private equity managers in the lower mid-market, offering a range of flexible funding solutions for entrepreneurial SMEs at any stage of the business growth cycle. They work closely with business owners, corporate finance advisors and property developers to source a wide range of interesting investment opportunities, tailored for income-focused retail investors and Professional Clients. In February 2017, Maven was appointed to manage the £57.5m NPIF Maven Equity Finance fund, part of the Northern Powerhouse Investment Fund which will provide equity funding to high potential businesses, including SMEs, across the North of England.
EG CAPITAL ADVISORS LAUNCHES $75M
EMERGING MARKETS CORPORATE HIGH YIELD UCITS EG Capital Advisors, a London-based investment firm with a strong pedigree in emerging markets credit, has today launched its Emerging Markets Corporate High Yield UCITS. The UCITS is a sub-fund of EG Capital Advisors Irish Collective Asset-management Vehicle (ICAV) which is registered with the Bank of Ireland. It will provide investors with access to the EG Capital Advisors Emerging Markets Corporate High Yield strategy, which invests in US Dollar-denominated emerging markets high yield corporate bonds, a $800bn market which is growing at a compounded rate of 15% per yeari. The Fund has been structured to appeal to professional investors who are seeking to access this rapidly growing market. Commenting on the launch of the Fund, Chief Investment Officer, Fixed Income Dimitry Griko said: “We believe that Emerging Markets High Yield is gaining the recognition it deserves among serious investors, and is increasingly accepted as an important element of a balanced investment portfolio. Our approach recognises the potentially risky concentrations to certain countries and industries inherent in broader indices. We focus on detailed, bottom-up credit research, and have a prudent approach to issuer, industry and country concentration. The EG Emerging Markets Corporate High Yield Fund will give investors the confidence to access the good, risk-adjusted returns available in this market, sustainably and at an acceptable level of volatility.” Michael Kasumov, Chief Executive Officer added: “Our strategy is unusual in taking a bottom up approach to uncovering value and portfolio construction. From its beginnings, it has delivered consistently strong risk - adjusted returns to investors. With the launch of our $75m Emerging Markets High Yield UCITS, we can offer a broader global investor base the ability to invest in this strategy.” The EG Capital Advisors Emerging Markets High Yield Strategy was originally established in 2009 and has been operated as a separately constituted fund since 2014. With some US$500m currently invested in the Strategy globally, investors in the UCITS will be able to draw on the expertise of a stable research team and a proven investment process. Dmitry Griko is supported by a head of fixed income research and five credit research analysts. Dimitry has more than 16 years’ experience in asset management and credit analysis having worked previously at Everest Asset Management, Sanno Asset Management and Deutsche Bank New York. The fund is also able to draw on the unique insight of Simeon Djankov, who sits on the Advisory Board of EG Capital Advisors. Mr Djankov served as Deputy Prime Minister and Minister of Finance of Bulgaria, and former Chairman of the European Bank for Reconstruction and Development. He is currently a Visiting Professor at the London School of Economics and Executive Director of the LSE’s Financial Markets Group.
Bill Kennedy of Maven said: “Maven is delighted to have been selected to manage this new and innovative fund in County Durham. By working alongside the existing regional business support community, in particular Business Durham, we expect to raise awareness of the financial options available to dynamic, high-growth SMEs across the whole of the County. Alongside providing substantial financial support to suitable SMEs, Maven will work closely with supported businesses to drive value creation and improve operational performance throughout the life of an investment, without interfering on the day-to-day running of a business. We believe that by working in partnership with County Durham SMEs we can help achieve the long-term growth objectives of Durham County Council.” Councillor Simon Henig, leader of Durham County Council, said: “We’re seeing more and more firms locate, start up and grow here in County Durham. This £20m is testament to our commitment to help County Durham’s economy to grow. We are pleased to appoint Maven Capital Partners as the fund managers to Finance Durham LP as they have a tremendous track record in supporting businesses to scale up. The aim is for the investments to yield a return, so we expect to see the £20m grow to help even more businesses in the future. It’s very pioneering for a local authority to do this and we’re very proud to be able to offer support in such an innovative and direct way.” Simon Goon, managing director of Business Durham, said: “Business Durham has a successful track record in actively supporting businesses, be it through funding, advice, or using our extensive network for the benefit of the enterprises. “We have taken great pride in helping entrepreneurs turn bright ideas into successful businesses and I truly believe this commitment of £20m will be seen as a transformative move because access to finance has historically been a real issue for businesses in the North East. I have no doubt that it will go a long way to address this issue and help businesses create jobs and add to the economic prosperity to the County.” ISSUE 06 | 46
LEADER OF DURHAM COUNTY COUNCIL
ISSUE 06 | 47
MACQUARIE APPOINTS EUROPEAN HEAD OF EQUITY CAPITAL MARKETS AND CORPORATE BROKING IN LONDON
Macquarie Capital, the corporate advisory, capital markets and principal investment arm of Macquarie Group, today announces the appointment of Charles Lucas as a Managing Director and European Head of Equity Capital Markets and Corporate Broking - specialising in IPOs, follow-on offerings, private placements, and equity advice in Europe, Middle East and Africa. Charles joins Macquarie from Keefe, Bruyette & Woods, where he headed European Equity Capital Markets for six years focusing on origination. Charles led a team marketing and executing IPOs, rights issues and ABBs for European financials across the UK, Greece, Italy, Spain, the Netherlands, Ireland, Portugal and Austria. Prior to KBW, Charles led ABN AMRO’s multi-sector ECM Group based in London and Moscow, with extensive experience across the oil and gas, metals and mining, real estate, retail and power sectors. Charles will lead Macquarie Capital’s multi-sector ECM and corporate broking group building on Macquarie’s strengths and capabilities across Europe. The appointment follows that ofDaniel Kaye as Head of Cash Execution and Sales Europe within Macquarie’s Commodities and Global Markets group, further strengthening the broader equities platform and ECM client offering across the group. Jonny Allison, Head of Macquarie Capital Europe’s Financial Institutions Group said: “We are delighted to welcome Charles to the team here in London, bringing a particular knowledge of Financial Institutions and of building businesses in Europe, UK and Emerging Markets across a number of other industry sectors relevant to us.” About Macquarie Capital Macquarie Capital is the advisory, capital markets and principal investment arm of Macquarie Group. Macquarie Capital provides strategic M&A and capital raising advice as well as partnering with clients by investing capital into their projects and companies.
ISSUE 06 | 48
ISSUE 06 | 49
finance, banking, advisory and risk and capital solutions across debt, equity and commodities.
Macquarie Group Limited is a diversified financial group providing clients with asset management and
PRIVATE EQUITY INDUSTRY fears uk growth will lag behind g7 as brexit effect takes hold
Prospects for 2018 Firms across the private equity sector remain relatively upbeat about their own prospects for the coming year. More than a third (38%) expect revenues to increase this year, and most expect domestic headcount (69%) and business investment in the UK (46%) to remain stable. However, six in ten (61%) expect their cost base to rise. By far the biggest strategic priority for the sector, ranked as the number one aim for two thirds (64%) of all private equity firms interviewed, is organic growth, but other areas of focus for the year ahead include expansion within core markets (36%) and introducing new products and services (28%).
UK’s future as a financial services hub Despite clear worries about the risks of Brexit, the vast majority of private equity houses (82%) believe the UK will remain the most prominent hub for financial services in Europe once the UK leaves the EU. Most firms (57%) say they are not thinking about moving any of their operations, but just over a third (35%) are considering a move. Stephen Quinn added: “The headwinds of economic and geopolitical uncertainty mean choppier waters for the sector in the months ahead. But, despite a lack of clarity over the final Brexit deal, the private equity community is upbeat about its growth prospects and long-term future. Private Equity managers have, for some time, proven themselves highly adaptable in challenging external conditions and I expect them to continue to do so”.
The UK’s economic growth will be outpaced by all other G7 advanced nations this year - and Brexit remains the single biggest risk on the horizon - according to new research from Lloyds Bank Commercial Banking, which canvassed the views of leading financial sponsors. Speaking to financial sponsors as part of the bank’s annual Financial Institutions Sentiment Survey, the research found that more than half (57%) of private equity firms are worried that UK economic growth will be weaker this year than in any of the other G7 nations – a dramatic worsening of sentiment compared to 2017 when just a sixth (15%) of the PE industry held that view. Half of the financial sponsors surveyed say they expect UK growth to stay at 2017 levels, while around four in ten (43%) expect it to worsen and only 7% believe growth will improve. Stephen Quinn, Managing Director, Head of Financial Sponsors, Lloyds Bank Commercial Banking, said: “The UK’s private equity community is finely tuned to the impact of the nation’s economic prospects on their investments, so it’s telling that fears over the uncertainty caused by Brexit is topping their list of concerns as we edge closer to March 2019”. “Our findings suggest there is a real risk that our growth will be slower this year than in all other advanced nations; and that we will fall to the back of the G7 pack. It is, however, encouraging to see the majority private equity houses believe the UK economy will prove to be resilient and that it will come through the challenges relatively unscathed.”
Risks for the year ahead – the Brexit effect The risk weighing most heavily on the minds of UK based private equity houses is Brexit. Half of the firms surveyed say they are worried about the effects of leaving the EU. Two fifths (38%) are now less optimistic about Brexit than they were 12 months ago, while two thirds (62%) say their opinion has not changed.
Other risks respondents report concern over include: • Economic uncertainty (57%) • Geopolitical uncertainty (38%) • Regulatory implementation (21%) • Market volatility (14%) • Weaker demand (14%)
ISSUE 06 | 50
ISSUE 06 | 51
TRUSS EDGE LAUNCHES IN EUROPE TO SUPPORT HEDGE FUNDS AND EFTS WITH PORTFOLIO MANAGEMENT TASKS
PRESTIGE PARTNERS WITH GOJI TO LAUNCH UK DIRECT LENDING BOND Bond launched to provide wealth managers with access to returns from secured loans to renewable energy infrastructure projects. Prestige, the specialist direct lending investment management group, is partnering with Goji, a direct lending / investment platform in the UK, to launch an ISA-eligible Renewables Lending Bond. The Bond will be designed to help wealth managers to access the steady returns that can be achieved from renewable infrastructure projects in the UK. Prestige already owns companies that are active in helping to finance important renewable energy projects, like biogas plants, in the UK. These loans are typically secured against UK property and assets and are also supported by the UK government and long term revenue contracts.
The Goji Renewables Lending Bond will include: • An attractive target yield of between 5.5% and 6.5% pa over a three and five year investment term respectively; • Interest payments supported by government subsidies such as Feed-in-Tariffs; • Loans will be originated by Prestige’s credit team, which has a 15 year track record in renewable financing; • Diversification across approximately 40 renewables projects, across different sub-sectors (wind, solar, biomass) - this means repayments are being supported by a range of revenue generating sources.
Truss Edge, a technology company that has been founded to support the day to day portfolio management and reporting tasks of hedge funds and ETFs, is launching in Europe this week. Truss Edge combines a technology offering for fund managers who need a front to back portfolio management solution combined with a highly experienced team of fund professionals who understand vanilla and esoteric financial markets. Truss Edge was originally known in the US market as EDD Fund Services. Founded in 1998 by a global hedge fund to meet its own internal trade processing and posttrade requirements, EDD has grown its business over the years, serving hedge funds, CTAs and ETFs in the North American market and with a growing base of European clients. It is recognized for its expertise managing the processing and reporting needs of its clients. Truss Edge provides seamless straight through processing with connectivity to counterparties and market data providers and a single source, robust processing platform. It draws on the company’s proprietary Safari technology, an end to end modular platform that can be adapted to the needs of funds of all sizes and has been operational for over 17 years. Jay Duffy, CEO of Truss Edge, commented: “Fund managers around the world have been facing the prospect of increased reporting requirements for some time now, especially in the wake of the European MiFID II and EMIR directives. But beyond that, fund managers are also looking for trusted technology partners with the ability to scale up with them as they grow, who can deliver exceptional service and trade processing expertise on a day to day basis.”
“Our direct lending strategies already enjoy considerable support from a diverse range of international investors,” commented Craig Reeves, Founder of Prestige. “This bond is designed to allow UK investors to access a specific revenue stream from within those strategies, namely the yield generated by established renewable energy projects we already finance within the UK. These projects are also often secured against land, long term government contracts and other assets.” Support from the UK government for renewable energy is strong because the UK must honour its commitments to meet green energy and zero waste targets in 2020 and 2030 respectively. Additionally, given the recent increased uncertainty around many equity and bond markets it would also seem that alternative investment strategies are becoming more relevant now and there has never been a time in recent history to provide investors with a genuine alternative inflation hedge in an increasingly uncertain and volatile world. Jake Wombwell-Povey, CEO of Goji, added: “Renewables infrastructure and socially responsible investing are continuing to rise in prominence within the wealth management market. Goji’s Renewables Lending Bond offers practitioners in this market, and their clients, the opportunity to tap into the attractive returns that can be earned from these heavily secured projects - all without the exposure to market volatility that comes with traditional fixed income.” Goji is a leading investment manager and technology provider for the direct lending sector. It was founded to empower financial intermediaries, allowing them to access direct lending with the clarity and rigour they expect from traditional structures and products. In March 2017 Goji launched the UK’s first diversified peer-to-peer lending bond.
Truss Edge brings several sought after services to the fund management industry, including: • Comprehensive data management support for middle and back office operations • OTC reconciliations and reporting with connectivity to the major pricing services • Cost-effective, desktop order execution with low latency • Three-way portfolio reconciliation linking to trading counterparties, including administrators, prime brokers, clearers and custodians • A central portfolio data resource that can support the needs of other service providers – e.g. administrators, compliance consultants, investor reporting. Duffy added: “Truss Edge goes beyond being a technology solution for fund managers – part of our appeal is the depth of experience of our team of personnel. We work very closely with our clients to ensure that they get the maximum benefit from our services and our insights.”
ISSUE 06 | 52
ISSUE 06 | 53
ISSUE 06 | 54
ISSUE 06 | 55
PRESTIGE FUNDS’ UK SME DIRECT LENDING FUND
PASSES USD 100 MILLION IN ASSETS UNDER MANAGEMENT
Prestige Funds, one of the leaders in asset-based, direct lending strategies in the UK, has reported that its Luxembourg-domiciled direct lending fund, Commercial Finance Opportunities has passed USD100 million in assets under management. Constellation’s mission is to assist talented alternative investment managers in breaking through the challenges of initial fundraising, specifically by providing strategic and operational support and an aligned, substantial and long-term capital base. In return, Constellation’s unique structure is designed to generate consistent, long-term value for its members’ pensioners and citizens. The Fund draws on the expertise of a large commercial direct lending team composed of almost 100 personnel. They are part of Nucleus Commercial Finance, a specialist provider of finance which is based in London and focuses on secured lending to small and medium enterprises mainly in the UK. Nucleus, part-owned by Prestige, lends to SMEs all over the UK, including companies active in construction, manufacturing, engineering and specialist service-based industries such as recruitment and IT. Consequently, the Fund’s returns derive from short and medium-term asset-based invoice financing, cash flow finance and specialist commercial lending. CFO is diversified across multiple industrial and commercial sectors. Loan origination and ‘in life’ management is overseen by a highly experienced Investment Committee at Finance Arranger level and a separate Investment Committee at Investment Manager level.
“Demand for private lending strategies is picking up around the world, and the growth in CFO’s assets is testament to this,” said Craig Reeves, Founder of Prestige Funds. “Investors are looking for real assets strategies that are not correlated to public markets, many of which have increased in volatility over the past year. The growth of this Fund demonstrates the international appetite for commercial lending strategies which can be carried out and supervised by experienced teams.” Prestige is now more than 10 years old and has raised over USD 1.5 billion. The Nucleus commercial lending team has been expanding since 2011 into one of the leading such teams of SME lending professionals in the country and have now lent over GBP750 million to over 700 SMEs. Reeves added: “CFO is based on a direct lending approach that relies on a strong loan management and monitoring process, often including on site physical meetings. Businesses that pass our rigorous due diligence process are typically conservatively managed, asset rich, cash poor and underinvested. They are in need of modernisation and productivity gains.” The Fund operates with a diversified investment portfolio of approximately 200 underlying loans to 200 underlying loan customers and targets annual net returns of between 6-7% with annual volatility of approximately 1%. The Fund operates with no leverage and no derivatives exposure (other than forward contracts for FX hedging on currency share classes). The Fund has no performance fee and a 1.5% annual management fee.
FOUNDER OF PRESTIGE FUNDS
ISSUE 06 | 56
FINDINGS WILL DRIVE INDEPENDENT ADVICE MARKET IN AUSTRALIA, SAYS GLOBALDATA
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is poised to reveal widespread failure across the Australian financial planning sector, whose reputation has already been battered by recent miss-selling scandals and violations of Future of Financial Advice’s ‘best interest’ duty. The effects could be more than a fine, and a focus on vertical integration and the inherent conflicts means that the industry has to brace for significant changes ahead, says leading data and analytics company GlobalData. Peter Kell, the deputy chair of the Australian Securities and Investments Commission recently asked an independent expert to review the quality of financial advice that had been provided by 137 licensees to self-managed super funds and found that 90% of advisors failed to comply with the best interests of their clients. Earlier this year, when the ASIC examined whether advice to switch to inhouse products satisfied the best interest requirement, three-thirds of advisors failed to comply. Heike van den Hoevel, Wealth Management Analyst at GlobalData, says: “Customers are likely to think twice about the type of provider they opt for. This will drive growth of the independent advice market. Even demographics that are not typically drawn to independent financial advisors will find themselves more likely to opt for independent advice when they learn their trusted banking partner has been pushing products that are not in their best interests. “On the flipside, financial planners are likely to ditch the big four banks (Commonwealth Bank of Australia, Australia and New Zealand Banking Group, National Australia Bank and Westpac Banking) and AMP to set up their own businesses. In an industry plagued by a shortage of talent, that will be a big headache for Australia’s wealth giants.” GlobalData’s Global Wealth Managers Survey shows that 80% wealth managers already agree that it is increasingly difficult to hire new relationship managers or other front-line staff. Admittedly, there has been a 41% upsurge in the number of financial advisers in Australia from around 18,000 in late 2009 to more than 25,000 in 2017. However, the commission has learnt that only one-third of them (35%) hold a relevant university degree. To address the issue, new compulsory education requirements for both new and existing financial advisors will come into effect on 1 January 2019. Van den Hoevel comments: “Australia’s big incumbents engage in both the provision of personal advice and the manufacture and sale of financial products, such as superannuation and insurance. Transitioning away from the vertically integrated model into a conflict-free model seems increasingly likely. This will be the biggest change to the industry since the big four banks moved into the wealth space more than 15 years ago.” Already at the end of 2017, ANZ announced the sale of its OnePath Pensions and Investments business to IOOF, and CBA divested its insurance business CommInsure Life. Looking to the future there have also been rumors that NAB could spin off its wealth business. Van den Hoevel concludes: “As the Royal Commission is bound to reveal further failings, the wealth industry, which has previously been on a relentless path of horizontal and vertical consolidation, is about to get a strong push towards fragmentation and divestment.”
ISSUE 06 | 57 ISSUE
INSURERS RUSH TO CHOOSE IFRS 17 SOLUTIONS AND PLUG THE SKILLS GAP.
Aptitude Software, the global financial software specialist, launches industry roadshow to tackle the operational challenges of IFRS 17. Aptitude Software’s latest industry analysis reveals that 39% of insurers with live IFRS 17 projects expect to make a vendor decision in Q2 2018. It has also predicted a rush to close the skills gap as teams are facing large system gaps and resource shortages to address what is needed to reach IFRS 17 compliance, arguably the most significant change to insurance accounting that has ever taken place.Aptitude’s research has shown that 80% of insurers think that finding people to implement IFRS 17 will be a key challenge. The IFRS 17 Experts Forum roadshow will provide the insurance community with the opportunity to discuss these challenges and the many other operational accounting challenges they need to overcome to thrive in a post-IFRS 17 world. The roadshows will begin in Toronto (10th April), travel to New York (12th April), London (1st May), Sydney (24th May) and finish off in Amsterdam (31st May). Senior experts from Aptitude Software, including Jeremy Suddards, Chief Revenue Officer, and Martin Reddington, Chief Technology Officer, as well as resident IFRS 17 expert Linda Bembridge, Head of Finance Advisory will be in attendance. In addition, companies that are currently implementing IFRS 17 solutions and selecting vendors and representatives from the big 4 accounting firms will be attending to share their experiences and insights. Jeremy Suddards, Chief Revenue Officer, Aptitude Software commented: “IFRS 17 is a huge step-change in insurance accounting with significant impacts across the insurance landscape. We are seeing a rush to close the skills gap as companies wake up to the many operational accounting challenges they need to overcome to ensure they can generate the correct numbers for their financial statements and thrive in a post-IFRS 17 world.” Ross Chapman, Marketing Director, Aptitude Software added: “Although the deadline for IFRS 17 is not until 01 January 2021 early preparation is essential as implementation can take anything from 12 months to 30 months. Insurers need to be knowledgeable about the obstacles and challenges in the market to ensure they have the best solution in place. These events are a fantastic opportunity for CFOs and project leads to share insights and hear about others’ experiences, problems faced and lessons learnt.” IFRS 17 is a new global accounting reporting standard for insurance contracts that affects every insurance company that reports under IFRS. Its purpose is to align insurance company reporting across the globe.
ROSS CHAPMAN MARKETING DIRECTOR
ISSUE 06 | 58
ISSUE 06 | 59
YFM EQUITY PARTNERS SUPPORTS AN INVESTMENT INTO EIKON, A LEADING END-TO-END DIGITAL POST-PRODUCTION SERVICES PROVIDER
PETER WRIGHT CO-FOUNDER AND CEO OF EIKON
Funds advised and managed by YFM Equity Partners, the specialist private equity fund manager have backed an investment into Eikon Group Limited, a cutting edge, end-to-end, digital post-production services for the motion picture and broadcast industry. YFM’s investment comes from its two advised VCTs, British Smaller Companies VCT plc and British Smaller Companies VCT2 plc alongside the YFM Equity Partners 2015 Co-Investment LP. EIKON Group Ltd was founded in 2014 by Peter Wright (CEO), Richard Fish (Commercial Director), Rick Corne (Innovations Director), Jon Gardner (Operations Director) and Russell Wetherell (Creative Director). EIKON Group have cutting edge technology facilities in Soho, London and Burbank, Los Angeles, offering digital mastering and localisation to the film, broadcast and online media industry. Clients include Paramount Pictures, Twentieth Century Fox, Sony Pictures Entertainment, Warner Bros, Universal Pictures, CBS and Netflix. Now in their fifth year, EIKON have doubled revenues year on year and have grown from a staff of 6 to 100. Having recently finalised a lease on a new 20,000 square foot building in Los Angeles, growth is expected to continue at the same rate as the company develop current core business revenues and extend service offerings within the entertainment industry. EIKON have developed world leading systems and workflows across multiple entertainment service lines in the entertainment industry. They oversee the mastering and localisation of major studios worldwide feature film releases to cinema, trailer campaigns and original content releases in other media for worldwide audiences. EIKON CMS is a campaign management system to manage, localise, distribute and debut feature film trailers and marketing material for feature film marketing campaigns cross cinema, online and broadcast platforms. CMS allows for the worldwide debut of marketing content across all worldwide territories simultaneously on the world clock across platforms such as Facebook, YouTube and other platforms. EIKON META system manages and facilitates the translation and subtitle delivery of feature film and episodic content in order to provide localised content around the world. It has added functionality of viewing and approval mechanisms for localised graphics and censor edits in order to expedite the entire release of any given content simultaneously.
ISSUE 06 | 60
Recent EIKON work includes the worldwide localisation and mastering for titles “Peter Rabbit”, “Greatest Showman”, “Shape of Water”, “Three Billboards Outside Ebbing, Missouri”, “A Quiet Place”, ‘Red Sparrow”. YFM’s funds will be used to support the expansion into the US where a new state of the art studio will be built in Burbank, Los Angeles as well as continued investment in the development of technology to enhance the service delivery to customers. Colin Granger led the investment for YFM and will join the Board at completion. Colin Granger, Partner at YFM, commented: “We are delighted to be working with Eikon and the management team to support the future expansion into the US and the continued investment in underlying software development. Management have done a fantastic job in growing the business to where it is today and we look forward to supporting them in the next chapter of growth. Market drivers in the technology enabled media sector continue to be exceptionally strong with increasing levels of content being produced and content producers targeting more global audiences, two trends which we believe Eikon will benefit significantly from.” Peter Wright, Co-Founder and CEO of Eikon, added: “We are very excited about the future and growing the business alongside YFM. Their history of helping businesses grow to the next level attracted us to them as well as their straightforward approach.” YFM’s legal advice was provided by Simon Jones of Osborne Clarke, Commercial Due Diligence by Geoff Rampton of RPL and Financial Due Diligence by Rebecca Guerin and Maya Panova of RSM. Dane Phillips (NOR Capital) and Andy Coghlan and Daniel Jonas (both WK Corporate Finance) acted as financial advisers to Eikon with support from Robert Taylor at 360 Law Services. AIB (John Tobin and Matthew Jennings) provided the senior debt on the transaction.
ISSUE 06 | 61
RUSSIA’S SOVCOMBANK WILL USE
PSYCHOMETRIC SCORING FROM FICO AND EFL TO INCREASE CREDIT PORTFO-
Russia’s Sovcombank is using a new form of credit scoring to attract young people looking for their first credit card. The score, developed by Entrepreneurial Finance Lab and marketed by Silicon Valley analytics firm FICO, uses an interactive online assessment to evaluate an individual’s credit risk. Sovcombank, a universal bank with more than 2 million customers, is using the score to “gamify” the credit application process. “We are using the EFL score to give young people a new way to get their first credit card,” said Sergey Khotimskiy, deputy CEO at Sovcombank. “Moving forward, we intend to use the score to rate the risk of people who don’t have a FICO Score because they are new to credit, and so don’t have a credit history to score. This is an innovative way for us to grow our market.” Unlike the FICO® Score in Russia — which scores credit information from the National Bureau of Credit Histories, Russia’s leading credit bureau — the EFL Score gathers applicant-contributed data in an interactive online survey to assess a person’s attitudes toward credit and willingness to pay. EFL’s psychometric scoring and behavioural data analysis technology was born out of more than a decade of empirical research, initially at Harvard, and validated by over a billion dollars of lending across the world. “EFL uses a very different method from FICO, but the goal is the same — to instantly and reliably determine a person’s likelihood of repaying credit,” said Jim Wehmann, executive vice president of Scores at FICO. “It’s an incredibly useful tool to use when there isn’t sufficient data to calculate a FICO Score, and that’s the case for around 3 billion credit ‘invisibles’ around the world.” “Our score is perfect for a bank like Sovcombank, which wants to build its portfolio among young people who may not have traditional FICO Scores,” said Jared Miller, CEO at EFL. “Our technology can score anyone, it’s simple to use and can even be engaging for the applicant. As a first-mover in the Russian market, Sovcombank is pioneering an approach that will reshape the way people worldwide get into the credit mainstream.” FICO’s partnership with EFL Global is part of its FICO® Financial Inclusion Initiative, which aims to help lenders make affordable credit available to the estimated 3+ billion unbanked and underbanked adults worldwide. These “credit invisibles” benefit from credit scores that leverage multiple data sources to assess credit risk and assist responsible lending. FICO offers EFL’s psychometric scoring alongside its own credit scoring products in Russia, Turkey, and Mexico.
STATE STREET GLOBAL EXCHANGE
TODAY RELEASED THE RESULTS OF THE STATE STREET INVESTOR CONFIDENCE INDEX
The Global Investor Confidence Index increased to 114.5, up 3.0 points from March’s revised reading of 111.5. Investors across all regions expressed an appetite for risk, with the North American ICI increasing from 109.1 to 112.3, the European ICI rising from 102.0 to 110.9, and the Asian ICI from 109.6 to 112.7. The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business. It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors. “The April numbers came together with a general sense of cohesion amongst institutional investors and their confidence in risky assets. It appears that growing risk appetite echoes the strong start to the Q1 earnings season, even amid the recent challenges of heightened volatility and trade war fears,” said Kenneth Froot. “Despite the continued volatility in global equity markets it is interesting to see that institutional investor confidence continues to hold up across all regions,” commented Lee Ferridge, senior managing director and head of Multi-Asset Strategy, Americas at State Street Global Markets. “Given disappointing data more recently, it is particularly notable that confidence in Europe rose strongly in April. Should volatility remain elevated, we will continue to look to our Investor Confidence Index for any signs that this faith in asset markets is starting to falter.”
More than half of the top Russian banks use FICO® Scores delivered by NBKI. The FICO® Score is the most used credit score in the world, and the standard measure of U.S. consumer credit risk.
ISSUE 06 | 62
ISSUE 06 | 63
WEALTH MANAGERS NEED TO UP THEIR GAME TO REACH OUT TO AUSTRALIAN HNW EXPATS, SAYS GLOBALDATA.
With fierce competition for high net worth expat clients in Australia, wealth managers who are able to on-board clients in a foreign country and assist them during relocation will enjoy a competitive advantage, says leading data and analytics company GlobalData. Australian HNW expats are a lucrative target segment thanks to their more complex servicing requirements, which translates into higher fee income. GlobalData’s survey of the market, however, shows that only 16% of wealth managers target expats while they still reside in their home country. Heike Van Den Hoevel, Financial Analyst at GlobalData, says: “At least to some extent this can be attributed to the shrinking international footprint of Australian banks. This makes it even more important to find new avenues to reach out to expats while they still reside in their country of origin. Partnerships with relocation companies represent one such approach. In many cases, a migrant’s first point of contact is a relocation company, making them a natural referral partner choice. In fact, not only would such partnerships provide a cost-effective means to generate new business, but they would allow providers to set themselves apart from the competition.” GlobalData’s research reveals that only a very few providers have the in-house capabilities to provide specialty services that generally sit outside of a wealth manager’s core competencies anyway. For example, less than 10% of wealth managers offer property services, such as finding suitable permanent or temporary accommodation. However, in several cases a bank’s relationship with its affluent clients is not limited to the provision of financial services. Hoevel concludes: “Partnerships with companies that support expats in finding all the new services they need upon arrival– from a property, to a school for their children, to help with banking – is a logical move for wealth managers targeting expats.”
ISSUE 06 | 64
ISSUE 06 | 65
DRAPER ESPRIT TRADING UPDATE REFLECTS STRONG PERFORMANCE IN THE PORTFOLIO
Draper Esprit (AIM: GROW, ESM: GRW), a leading venture capital firm investing in high‐growth digital technology businesses, announces an update on trading ahead of its final results for the year ended 31 March 2018. The Company has had another active year and is seeing strong growth within the portfolio, predominantly driven from revenue growth and from financing rounds and exits at higher valuations being achieved. As a consequence of this growth and further realisations in the portfolio, the Directors anticipate that the gross primary portfolio* value will have increased to approximately £244m, up 50% from the £163m at 30 September 2017 and more than double the £113m at 31 March 2017. The increase in the value of the gross primary portfolio reflects investments made during the year of £71m (£27m during the six months ended September 2017) and a fair value increase of £51m in the six months ended 31 March 2018 in addition to the £24m increase reported in the six months ended 30 September 2017. In total the fair value growth in the FY2018 represents a 66% increase in the gross primary portfolio. In addition, the Company continues to achieve a number of successful exits with over £15m in cash realisations made during the period. Notable exits include the sale of Clavis Insight, Aveillant and Moviepilot.
• Alongside this the Company has continued to expand its fund of fund strategy with further commitments to a number of Europe’s top seed funds: Episode 1 (UK), Seedcamp Fund IV (UK), Join Capital (Germany), Icebreaker (Finland). Commitments have also been made to three other funds based in London, Cambridge and Ireland. • The Company continues to be well supported by its diverse investor base and has raised significant funds across all vehicles managed or controlled by the Group. Draper Esprit is executing on its strategy of scaling‐up and increasing its stakes in existing portfolio companies through later rounds. Group cash at the year-end was £56m with a further £50m available to deploy within EIS/VCT co-investment funds. Simon Cook, CEO Draper Esprit commented: “Our mission is to help ensure European entrepreneurs have access to significant long-term capital and the partnerships and networks needed to build global technology leaders. We set ourselves a financial benchmark of continuing our 10+ year track record of annualised returns of 20% a year and are consistently achieving and exceeding this. As we continue to grow portfolio value with clear market leaders, and generate meaningful cash returns for our investors we are demonstrating an ability to scale our model at an increased pace. “This year we have continued to deploy increased capital to add further impressive new portfolio companies to our holdings, such as Ledger, Evonetix and Transferwise and have a strong pipeline of further potential world leading technology companies. Our portfolio is growing and scaling with our hands-on help and global network and, as our results show, we are firmly on track to deliver continued and sustainable growth.”
The increase in fair value in the period has been driven by continued strong performance across the portfolio with notable uplifts in the value of Graphcore, Lyst, Perkbox, Podpoint and Transferwise (acquired as part of the Seedcamp Fund I and II acquisition in the period). During the second half of the year, the Company made several exciting new and follow-on investments, amounting to £44m, bringing the total investments for the full year to £71m. This investment in the period in high growth technology companies is approximately £90m when investments made by other funds controlled or managed by the wider Group** (EIS and VCT) are included. Some of the notable new investments made in financial year to 31 March 2018 include: • £18m into Ledger, the Paris headquartered cryptocurrency and blockchain security company • £18m to acquire Seedcamp Fund I and II, 2007 and 2010 vintage funds which include stakes in high profile growing technology companies including Transferwise (a leading international Fintech money transfer business), Codacy, Edited, Erply, Fishbrain, Codility, Winnow, Codeship and Try.com and which provides strong follow-on potential. • £12m into IESO Digital Health (online mental health platform), Verve (word-of-mouth sales software), Evonetix (DNA synthesis platform), Kaptivo (SaaS-based digital collaboration solutions for enterprise using computer vision), Droplet (software allowing unmodified applications to run on any device) and Premfina (insure-tech business providing premium finance).
The Company also made further investments to increase its holdings in: • Trustpilot, the global online review community. • Perkbox, digital employee engagement platform. • Podpoint, the UK’s leading provider of electric car charging solutions for home, workplace and public charging. • Resolver, the customer support and complaints resolution software business. • Realeyes, machine learning technology measuring emotions through facial recognition.
ISSUE 06 | 66
ISSUE 06 | 67
BANKING GIANTS HSBC RULES OUT FINANCING CONTROVERSIAL KEYSTONE XL PIPELINE
TECH MAHINDRA ANNOUNCES INVESTMENTS IN THE UK
BARCLAYS LEFT ISOLATED AMONG UK BANKS ON TAR SANDS PIPELINE FUNDING
THROUGH A NEW R&D CENTRE IN SUFFOLK AND NEW OFFICE IN SALFORD Tech Mahindra, a leading provider of digital transformation, consulting and business re-engineering services and solutions, today announced strategic investments in the UK . A research and development center ‘Makers Lab’ has been established to work in collaboration with its long-term client and partner, British Telecom, at the Adastral Park research campus near Ipswich, home of the world-renowned BT Labs. Makers Lab is also a part of the growing business incubation cluster Innovation Martlesham. Tech Mahindra is also setting up a brand new office in Salford to strengthen its presence across the UK while rolling out its apprentice program in 2018. The announcement comes on the sidelines of Prime Minster of India Narendra Modi and Prime Minister of UK Theresa May’s meeting in London. Makers Lab will focus its research on major technologies such as Artificial Intelligence, Machine Learning and quantum computing to make citizen services and experiences simpler and easier especially in the communications space. With the 5G roll-out in striking distance, co-innovating with industry partners and academia is the need of the hour. Through Makers Lab, its new office in Salford and its apprentice program, Tech Mahindra will engage more than 100 local people. Makers Lab is also connecting with University of Suffolk to onboard students as interns in the lab for various positions.
HSBC, Europe’s biggest bank, has today confirmed that it will no longer provide project finance for new tar sands projects including the construction of any tar sands pipelines. This policy would exclude HSBC from providing project financing for the Keystone XL and Line 3 Expansion pipelines.HSBC also stated that its overall exposure to tar sands will reduce over time. HSBC’s move, disclosed in its new Energy Policy, is the most recent in a series of decisions by international financiers to distance themselves from the controversial pipelines in North America. French banks BNP Paribas and Natixis, and insurance and investment giant Axa, as well as Dutch bank ING, and Sweden’s largest pension fund, AP7, all made similar announcements in 2017. Greenpeace is now calling on Barclays, the only other major UK-based bank providing loans for tar sands pipelines, to rule out financing new tar sands pipelines in North America. Oil from tar sands is one of the most carbon-intensive fuels on the planet because of the large amount of energy needed to extract it. The proposed pipelines are key to the expansion of the tar sands fields in Alberta, Canada. Estimates show Keystone XL alone could potentially add nearly a million barrels of oil per day to current capacity, as well as an estimated 175 million additional tonnes of CO2 per year.
Mr. CP Gurnani, CEO and MD of Tech Mahindra, said: “Innovation is the key to survival in the digital future. The UK-India Innovation partnership draws from the best learning and skills of both developed and developing economies in shaping the digital future. We at Tech Mahindra are taking the philosophy of disruption by design to our client ecosystem, academia and people through our research arm Makers Lab in UK.” These investments are part of Tech Mahindra’s TechMNxt Charter, its global program to explore emerging technologies like AI, Blockchain, Cybersecurity and AI-infused IoT solutions, designed to preempt and anticipate customer’s evolving and dynamic needs. The underlying priority is the application of the trending technology to solve real business problems of customers by collaborating and co-innovating with startups, academia and partners.
Commenting on the announcement, John Sauven, Executive Director of Greenpeace UK said: “This latest vote of no-confidence from a major financial institution shows that tar sands are becoming an increasingly toxic business proposition. It makes no sense to expand production of one of the most polluting fossil fuels if we are serious about dealing with climate change in a post-Paris world. HSBC has got the message. Now Barclays need to decide if it wants to be the only UK bank offering project finance to tar sands pipelines.” Annie Leonard, Executive Director of Greenpeace USA, said: “The world has changed dramatically since these controversial tar sands projects were first proposed. In the US, we’ve seen record floods, hurricanes and wildfires super-charged by climate change. We’ve also seen a powerful, diverse, and growing movement step up to stop new fossil fuel infrastructure like the Keystone XL pipeline. This move by HSBC is the most recent indication that the financial community has begun to see the increasing risk in funding pipelines. We now expect banks like the US giant JPMorgan Chase and Barclays, who have backed tar sands pipelines in the past, to cease their funding of these dirty projects.” HSBC has previously participated in revolving credit facilities for TransCanada (the company building KXL) and Enbridge the company building the Line 3 expansion. HSBC has also ruled out funding new coal fired power stations all around the world with the exception of three countries - Bangladesh, Indonesia and Vietnam where funding may continue until 2023. Hindun Mulaika of Greenpeace South East Asia said: “By ruling out new coal funding by the end of 2019 in many countries, HSBC has taken a step in the right direction. However, by singling out Indonesia, Vietnam and Bangladesh as exceptions to their coal policy, they are creating a loophole in the countries that are most aggressive in their coal power planning and condemning their citizens to a lifetime of air pollution impacts. HSBC must close this loophole as soon as possible and turn their financial support to accelerating a transition to clean energy.”
ISSUE 06 | 68
ISSUE 06 | 69
LIBERIS SECURES £57.5M IN FUNDING AND INVESTMENT TO SUPPORT AN ESTIMATED 100,000 JOBS BY 2020
96% OF UK MILLENNIALS
rule out building investment portfolio
Leading small business finance provider, Liberis, has secured £57.5m in combined funding from British Business Investments, Paragon Bank, BCI Finance, and Blenheim Chalcot. This new facility and equity investment will accelerate Liberis’ growth to help support an estimated 100,000 UK jobs by 2020, providing huge social and economic benefit to the UK economy. Building on its ongoing partnership with British Business Investments – the commercial arm of the British Business Bank – to fund small UK businesses, Liberis has entered new financing facilities with British Business Investments and Paragon Bank, as well as BCI Finance with whom they have extended terms on their mezzanine line. In addition, the London-based alternative finance provider has also received incremental equity fundingfrom the UK’s leading digital venture builder Blenheim Chalcot, which has nearly 20 years’ experience of building technology-based companies and a specialism in financial services. This investment will enable Liberis, the UK’s first provider of the innovative business cash advance, to expand its product offering both in the UK and internationally. Liberis provides funding from £1,000 to £500,000 to small businesses based on their future credit and debit card sales. The funding is paid back via a pre-agreed percentage of the business’ digital transactions, which means it’s especially suited to seasonal businesses as repayments are made in line with their daily income. Rob Straathof, CEO of Liberis, said: “Small businesses are the lifeblood of the UK economy yet many still struggle to get much needed financial support from traditional providers. At Liberis, we’re on a mission to fund small businesses to help them achieve their ambitions. We’re incredibly proud to support hardworking business owners such as your local bakery to invest in a new oven, help the neighbourhood pub expand with a beer garden, or enable incremental stock purchase for an online retailer. We’re here to help the British high street thrive and remain independent. Liberis provides a flexible lifeline to small businesses who find it increasingly difficult to draw on bank overdrafts. Our innovative product has proven particularly popular with retail and hospitality businesses where income fluctuates on a seasonal basis. New lending to small businesses by banks has been decreasing since Q4 16 and Liberis jumps into the void with our ‘pay as you earn’ funding solution. In Q4 17, for every ten retail and hospitality businesses who took out lending from a bank, Liberis lent to one additional business. We want to become the first choice for small business finance by offering a simple and responsible option.” To date Liberis has helped over 7,000 small businesses, advanced £210m in funding and supported over 35,000 jobs in the UK. Liberis has also entered a new venture with Newable Business Finance, a designated Responsible Finance Provider. Newable Business Finance provides business loans over two to five years to enable longer term capital for its customers. Moving forward, the company aims to further empower small businesses, broadening customer reach through strategic partnerships and international expansion. Catherine Lewis La Torre, CEO of British Business Investments, said: “A big part of our role is to increase the overall supply and diversity of finance – both product and provider – on offer to UK smaller businesses. We welcome Liberis’ innovative approach and look forward to more of our funding reaching companies through this alternative to traditional finance.” Adam Daniels, Managing Director of Structured Lending at Paragon Bank, said: “We are delighted to partner with Liberis on what is our first transaction for our newly established team. Small businesses are a key part of the UK economy and are vital to the country’s job creation and economic growth. We are thrilled to partner with Liberis, helping it achieve its mission to support UK small businesses.” Sam Kemp, Managing Director of BCI, said: “We have backed Liberis for a number of years and have been delighted to help them efficiently scale their lending book. We now look forward to continuing to support the business through this next chapter of growth, alongside the British Business Bank and Paragon, as they continue to make a real impact for SMEs seeking to access funding.” Mark Onyett, Managing Partner at Blenheim Chalcot, said: “We are very pleased to be helping Liberis accelerate its plans to provide much needed finance to small UK businesses, and look forward to seeing the business expand its footprint supporting small businesses across the UK and internationally.”
MARK ACKRED DABBL CO-FOUNDER AND CEO
New research by mobile investing app Dabbl has revealed a surprising lack of investment activity amongst millennials in the UK – threatening the future of innovative British business. A huge 96% of people aged 25-34 are failing to back businesses, citing the fact the process is too complicated (72%), and something reserved only for the financial elite (62%) as the key reasons why. The team at Dabbl are on a mission to make personal investing simple, accessible and affordable to everyone. A wealth divide is further backed when considering the socio-economic group of respondents. Of all those surveyed, a considerable 61% of those with an AB social grade have considered investing, compared to just 18%of those in the DE group. The poll did unveil an eagerness amongst millennials to invest funds in brands, rather than relying on smart banking methods to generate a profit. Half (53%) think this approach would generate a better return than say, for example, opening a cash ISA. Millennial adversity to placing trust in banks is the result of a feeling that brands are a safer investment (24%), bank interests are too low (24%) and their favourite brands are always innovating and evolving (20%). The sectors millennials are most likely to invest in are: 1. Technology brand (e.g. Apple) 2. Sports brand (e.g. Nike) 3. Drinks brand (e.g. Coca-Cola) 4. Food brand (e.g. Walkers) 5. Fashion brand (e.g. ASOS) 6. Fast food chain (e.g. KFC) 7. Social media platform (e.g. Instagram) 8. Beauty brand (e.g. MAC) 9. Football team 10. An app (e.g. Air b’n’b) However, interestingly, this is not an opinion shared by both genders. Millennial males are nearly twice as likely (69%) than women (35%) to consider investing in their favourite brands. In fact, of all adults surveyed – 54% of men have considered an investment portfolio of any kind, over double the amount of women (25%). Dabbl believe that investing in shares should be an option available to everyone, not just the financial elite. It doesn’t have to involve large sums of money, and it can be a genuine and stable means of additional income. Dabbl Co-Founder and CEO, Mark Ackred says: “The findings of this survey revealed the true extent of the lack of confidence, tools and know-how amongst young people in the UK when it comes to investing money. This is something that could have a real impact on the future of British businesses, who rely heavily on investment to grow and develop. The truth is, people with all ranges of income can begin building a portfolio – something that can hold them in good stead for the years to come. It doesn’t have to be a complicated, confusing process – and we are calling upon all people in the UK who have considered dipping their toe in the world of investment to give it a go.”
ISSUE 06 | 70
ISSUE 06 | 71
PRENETICS ACQUIRES UK-BASED DNAFIT A GLOBAL LEADER IN CONSUMER GENETIC TESTING Avi Lasarow, CEO of DNAFit said: “In joining forces with Prenetics, this takes us one step further in our mission to change the way individuals adapt their lifestyle behaviours by understanding how genetics plays an important role in personalised & preventive health. In just a short time, Prenetics has already empowered several hundred thousand individuals with valuable health information. Through this acquisition, we will work together to underpin the industry’s growth as consumers seek more help in their quest for healthier lifestyles.”
prenetics, a leading genetic
testing & digital health company, has acquired UK-based DNAFit, a leading direct to consumer genetic testing company with sales in over 40 countries.
DNAFit is a wellness genetics company which matches both ordinary individuals and elite sportspeople to the diet, nutrition and fitness plans that best suit their DNA. Since 2013, it has helped people globally make better informed decisions around their diet, nutrition and fitness goals. DNAFit will be expanding its reach into corporate wellness as well as growing its existing consumer business following the acquisition.
Prenetics adds a proven B2C channel via the acquisition of DNAFit, supplementing its current strength in B2B product partnership offerings through large insurers and corporates. This acquisition further sets Prenetics on track of achieving its goal of empowering millions of people globally with powerful and actionable genetic information.
Danny Yeung, CEO and co-founder of Prenetics said: “Our mission is to give everyone the power to be in control of their own health. DNAFit is a pioneer in direct to consumer genetic testing and has developed a strong reputation in the industry. We are extremely excited to have DNAFit as part of our international growth strategy to help people lead healthier, more active lives by empowering them with personalised, preventive, and actionable genetic information.”
ISSUE 06 | 72
Having already worked closely with a number of blue chip companies and brands, such as LinkedIN Global, Talk Talk, Channel 4, Disney Europe, PUMA, BNP Paribas and Alexander McQueen, DNAFit has already achieved initial success in embedding its products in HR programmes to improve employee benefits worldwide. Cindy Chow, Executive Director of Alibaba Hong Kong Entrepreneurs Fund said: “Part of our mission here at Alibaba is to help companies we invest in go global and to make a big impact. We have been highly impressed with what Prenetics and DNAFit have achieved in making health a choice for many. The consumer market globally for genetic health testing is growing at an incredible speed and we look forward to working closely with both companies in the field of genetics.”
ISSUE 06 | 73
LDC BACKS £22.5M MBO OF PRECISION MICRO
EUROPE’S MARKETING-LEADING PHOTO-CHEMICAL ETCHING FIRMSECURES INVESTMENT FROM LDC FORGLOBAL GROWTH DRIVE
ACQUISITION OF THE CAMBRIDGE BELFRY HOTEL, CAMBOURNE, CAMBRIDGE AND COMPLETION OF THE ACQUISITION OF THE Q-PARK CAR PARK, ROCKINGHAM STREET, SHEFFIELD The Board of LXi REIT plc is pleased to announce that the Company has acquired the Cambridge Belfry Hotel at Cambourne, Cambridge (the “Property”). The purchase price for the Property is £18.53 million, reflecting a net initial yield of 6.1% on the asset acquisition (net of acquisition costs to the Company). The Property is fully let to Marstons Hotels Limited and guaranteed by its parent, QHotels Holdings Limited (“QHotels”). QHotels is a four star hotelier, founded in 2003, that has since grown to 26 hotels with over 3,650 bedrooms across the UK and with net assets of £360 million.
Mid-market private equity investor LDC has backed the £22.5m management buyout of Precision Micro Limited, Europe’s market-leading photo-chemical etching company, from global aerospace, defence and energy group Meggitt PLC. As part of the deal, LDC, the private equity arm of Lloyds Banking Group, has invested £13m of equity for a significant stake in the company, supporting a management team led by current Managing Director Ian McMurray. Operating from its state-ofthe-art processing plant in Erdington, Birmingham, UK, Precision Micro manufactures more than 50 million high-precision metal components each year for major global manufacturing customers across multiple markets. Its pioneering photo-chemical etching process provides a cost-effective alternative to traditional sheet metalworking when machining precision parts from thin gauge metals. Working to micron accuracy, its components enable next-generation aircraft engines, zero-emission vehicle technology, surgical instruments, titanium implants, a wide range of consumer electronics, safety-critical vehicle ABS braking systems and premium interior trim for brands including Rolls-Royce, Mercedes, Jaguar and Bentley. With offices in Germany and The Netherlands, over 75% of its £15m sales come from overseas markets. Ian McMurray, Managing Director of Precision Micro, said the investment would enable the company to take full advantage of several positive, global trends in its core markets, including the increasing preference for complex, burr and stress-free components manufactured from high-performance metals, rising quality standards, the miniaturisation of electronics and increasing demand for clean and fuel-efficient vehicles. He said: “We see enormous opportunity across our markets as equipment manufacturers look for ever-more cost-effective, reliable, safe and high-performing components. Securing the backing of an experienced and supportive partner like LDC means we can invest further in the business, leveraging our unrivalled technical expertise and processing capabilities to further support our customers around the world with increasingly sophisticated requirements. This is an exciting time for our team as we invest in our future growth.” Chris Handy, Investment Director at LDC, said: “Precision Micro’s reputation for technical excellence, service and innovation is world-class. Our investment is all about helping Ian and his team unlock the business’ potential by facilitating further investment in its processing capabilities, manufacturing capacity and new product introduction (NPI), helping it stay ahead of its market.” Dave Johnson will join the business as Non-Executive Chairman. Mr Johnson has held several, senior positions at companies including Lucas, BTR and Dunlop Aerospace. Chris Handy will also join the board as Non-Executive Director. With roots dating back to the early 1900s when it was founded as a division of engravers V Siviter Smith, Precision Micro was established in Birmingham in 1962 and was acquired by Meggitt in 2012.
ISSUE 06 | 74
The lease has an unexpired term of over 22 years (expiring in May 2039), without a break, and is subject to five yearly upward only rent reviews index-linked to the Consumer Price Index (collared and capped at 1% p.a. and 4% p.a. compound). The next rent review is due in June 2019. Purpose-built in 2004 and recently refurbished, the Property comprises a modern, four star hotel with 120 bedrooms, along with extensive leisure and business facilities, including a bar, restaurant, eight conference and meeting rooms, indoor swimming pool, gym, sauna, steam room and treatment rooms. The Property occupies a large 8.3 acre freehold plot, with 250 car parking spaces.
Simon Lee, Partner of LXi REIT Advisors Limited, commented: “We are pleased to have acquired the Cambridge Belfry Hotel, which is our sixth acquisition since the Company’s Admission on 27 February 2017. In addition to benefitting from a long, indexlinked lease to a strong tenant covenant, the hotel trades strongly and is in a sought-after Cambridge location and, as a result, its vacant possession value is in excess of the purchase price.” “The net initial yield of 6.1% will be accretive to our portfolio running yield and the next five yearly index-linked rent review in June 2019 presents an opportunity for further enhancement to the future dividend yield of the Company.”
The hotel is well located in Cambourne, which is approximately eight miles directly west of Cambridge city centre. It is situated within the 750,000 sq ft Cambourne Business Park, home to numerous large corporates including Citrix, Global Graphics, Convergys, Regus and IP Access. The hotel attracts a good mix of both leisure and business guests, visiting Cambridge itself and the surrounding areas. The Board is pleased to announce that the Company has now also completed on the acquisition of the Q-Park car park at Rockingham Street, Sheffield, the exchange of which was announced on 10 March 2017. The acquisitions are being funded from equity resources, with senior debt finance expected to be introduced in the near term.
Progress to Date In the two months since Admission on 27 February 2017, the Company has now invested or contractually committed 50% of its net equity across six properties at a blended net initial yield of 5.65%, with a weighted average unexpired lease term to first break of over 23 years and diversified across a wide range of strong tenants, sub-sectors and locations. The Company is also at an advanced stage on the acquisition of a number of additional pre-let forward funding and built assets, which are expected to exchange shortly.
ISSUE 06 | 75
UK DIVIDENDS INCH AHEAD IN Q1
AS STRONGER STERLING MASKS GROWTH
First quarter dividends rose just 1.2% once one-offs were taken into account, according to the latest Dividend Monitor from Link Asset Services. The total £16.7bn, up 7.6% year-on-year, was distorted by a £1.0bn timing fillip from British American Tobacco (BAT), which switched to quarterly payouts as part of its absorption of US tobacco firm Reynolds. This effect, which gave an artificial boost to the total dividends paid out by UK plc, will reverse in Q2. Investors should not be worried. The stronger pound masked a solid performance from UK plc on a constant-currency basis, and Link still expects UK dividends to just beat their 2017 record this year. The modest rate of expansion was boosted by the long-promised pre-takeover special dividend from Sky, its first distribution since the tortuous acquisition story began to unfold in 2016. In underlying terms, which strip out special payments, dividends actually dipped 0.1% in Q1 once Link had also adjusted for the BAT switch, though this largely reflects the strength of the pound against the US dollar, in which more than two-fifths of Q1 dividends are declared. The pound was 12% stronger compared to Q1 2017, pushing down the sterling value of those US dollar payouts by £879m. On a constant-currency basis, growth in UK dividends was much more encouraging. The first quarter is dominated far more than at other times during the year by a handful of large payers, whose dividends are showing little or no growth. Moreover, on current trends, the negative exchange-rate effect was significantly larger in Q1 (relative to the total paid) than is likely later in the year. Almost a quarter of the Q1 total was paid by the oil majors, Shell and BP. Higher oil prices have not yet led to higher payouts from these companies, however. Both had maintained their dividends through the oil slump even in the face of plunging profits, so are not now increasing as the picture stabilizes. Even so, once the stronger pound was factored in, the sterling total from the oil sector was 15.3% lower year-on-year.
Link’s headline growth forecast, which factors in special dividends, is now £400m higher, most of which is thanks to Mondi, following its surprise announcement in March of a €1 per share special dividend, after warning on profits just a few months earlier. Link expects total headline UK dividends of £96.3bn, an increase of 1.8%, and a new record high. Justin Cooper, chief executive of Link Market Services, part of Link Asset Services said: “The stock market recently reminded investors that volatility is the norm for share prices, not the exception. When markets become this choppy, it’s well worth remembering that profits continue to be made, and dividends continue to be paid, and that, over the long term, dividends constitute the lion’s share of an investor’s returns. “Dividend growth in the first quarter was a bit disappointing when excluding one-offs. M&A activity has also proven to be a double-edged sword for dividends. While Sky paid its long-awaited special dividend ahead of its likely takeover agreement with 21st Century Fox, consolidation has depressed dividends by a number of mid-cap firms.” “Investors shouldn’t be worried, however. If you take exchange rates out of the picture, dividend growth will continue in 2018 only a little slower than last year. In sterling terms, of course, it’s going to feel much less exciting. As the dollar has steadily weakened, so all those dividends that will be paid this year will attract a much less favourable exchange rate. This year’s exchange rate roundabouts will be a lot less fun than last year’s swings. Even so, we still expect UK payouts to breach another new record.”
The pharmaceutical giants Astrazeneca and Glaxosmithkline are also major Q1 contributors. They held their declared per share dividends flat, but Astrazeneca’s US dollar accounting means the sterling payout was sharply lower year-on-year, pulling the contribution from the whole sector down 6%. Glaxo has ambitious plans to make acquisitions, while Astrazeneca is experiencing pressure from patent expirations and competition. That makes cash tight for both companies and has led to scrutiny of their progressive dividend policies. Elsewhere, the mining sector, which was responsible for driving 2017 to record dividend highs, continued its strong run of improvement, as the industry continued to benefit from a stronger world economy. The consumer goods and housebuilding sector also showed notable strength. Lower share prices mean the yield on shares has risen over the quarter. The prospective twelve-month yield on UK equities rose to 3.9% (excluding specials), up from 3.5% three months ago. The prolonged rebound in dividends from the mining sector, and a likely significantly higher contribution from the enlarged BAT over the course of the full year, have led Link to upgrade underlying growth on a constant-currency basis. Unfortunately, this improvement was entirely offset by the weakness of the dollar. The expected exchange-rate penalty in 2018 stands at £3.2bn, almost twice as large as Link’s initial forecast in January, as the pound has steadily gained against the greenback. Link’s underlying growth forecast in sterling (which excludes special dividends), is therefore unchanged at £90.4bn, an increase of 2.9% compared to 2017.
ISSUE 06 | 76
ISSUE ISSUE 06 06 || 77 77
SEMCON ACQUIRES GERMAN PRODUCT INFORMATION COMPANY
YFM EQUITY PARTNERS
Semcon has acquired the company HAASPublikationen GmbH. Through the acquisition, Semcon expands its presence within product information on the German market.
Matillion, the makers of cloud data integration tools Matillion ETL for Amazon Redshift, Matillion ETL for Snowflake and Matillion ETL for Google BigQuery, today announced it has closed a $20 million Series B round of funding led by Sapphire Ventures, existing investor Funds advised and managed by YFM Equity Partners , the specialist UK-based private equity fund manager and new investor Scale Venture Partners. The funding will accelerate the Company’s leadership in the cloud data integration category.
HAAS-Publikationen is based in Troisdorf, Dessau and Berlin and has more than 25 years of experience in technical documentation and product information primarily for the German railway industry. Presently, HAAS-Publikationen engages almost 50 employees. Turnover for 2017 totalled close to SEK 50 million. The acquisition is expected to have a positive effect on operating margin as well as earnings per share in 2018. “With the extended knowledge from multiple industries and a solid service offering, from both HAASPublikationen and Semcon operations globally, we will become an even stronger partner to both existing and future customers with this acquisition,” says Markus Granlund, President and CEO of Semcon. Semcon has been on the German market, providing customers with product information services, since 2012. With the acquisition of HAAS-Publikationen, Semcon also establishes an expanded physical presence with three new offices in addition to the current office in Munich. “We see this as an amazing opportunity for HAASPublikationen, both for our employees and for our customers. Semcon is a strong international player at the forefront of product information. We are looking forward to becoming a stronger partner for our customers in Central Europe,” says Stefan Moldenhauer, Managing Director HAAS-Publikationen and one of the sellers who will retain a managerial position. “Our ambition with this acquisition is to extend our ability to provide a competitive and advanced product information offering in Germany, always keeping the user’s needs in focus,” concludes Johan Ekener, President of Semcon Business Area Product Information.
ISSUE 06 | 78
BACKED CLOUD DATA SPECIALIST HELPS MATILLION RAISE £20M
The company, based in Altrincham, (Manchester, UK) and Manhattan (New York, US), was founded by Matthew Scullion in 2011, alongside Chief Technology Officer Ed Thompson and Commercial Director Peter McCord. Matillion has developed leading-edge software focused on allowing its customers to extract, load and transform data into and on cloud-based data warehouses, quickly and at scale. Having raised Series A funding from YFM in November 2016, in the last 12 months the Company has seen significant commercial traction with annual recurring revenue of growth over 260%. Matillion’s software is used by more than 250 customers across 30 countries, including global corporates, such as GE, Siemens, Citrix and Accenture, as well as high growth, data-centric companies like Vistaprint, Zapier, DocuSign and Upside Travel. Today’s funding will be used to expand sales, marketing, partnerships and research and development (R&D) to meet increasing demand and further accelerate development of the Matillion ETL product line. The round brings the Company’s total funding to over $26 million. In addition, Angela Warner, Portfolio Director at YFM, Andreas Weiskam, managing director, Sapphire Ventures and Andy Vitus, partner, Scale Ventures Partners, will join the Board of Directors.
ISSUE 06 | 79
THE HOTEL GIFT & FLIGHT GIFT CARD STORY LOES DANIELS AND JORIK SCHRÖDER, FLIGHTGIFTCARD CO-FOUNDERS
Loes Daniels on the Hotelgift journey
“Launching and running your own business is a rollercoaster” says Loes. “Work is non-stop. I am constantly thinking about new ideas and initiatives to improve the business and the customer offering. I make mistakes, fix them quickly and learn from them. One key learning is to always listen to customers. I might think something is a great idea, but it’s so important to test before implementing. If you have an idea, you must go for it. I held on to Hotelgift for a long time whilst building up the courage to actually get going. “I spent a lot of time speaking to family and friends, discussing the concept and what would be required to make it happen. After a lot of encouragement, I created the business case and developed the plan. This gave me the confidence to actually go for it. It took me over a year to build the hotel partner base to ensure I could provide a truly compelling and worldwide hotel offering - and launch the first website. It was important to find the best partners to help make the concept a reality. At the time I was juggling a full time role at Deloitte, and I can’t code myself, so I spent evenings and weekends on PowerPoint, creating the layout of the web pages, with the support of a great development company that helped to convert my vision into an actual website. “When we were live I automated all processes as much possible to minimise the time I had to spend on it during the working week. As the concept was born as a purely online business model, it was possible – albeit exhausting - to run and manage it in my spare time. After quadrupling revenues yet again in 2016, I decided to ditch the day job and focus wholly on growing Hotelgift and taking the business a step further... “The recent addition of Flightgiftcard to our portfolio makes our offering all the more exciting, and with Jorik also having quit his job to dedicate himself wholly to the Flight- and Hotelgift journey, we are confident that both brands will continue to prosper, with the ambition that we will become household names for the travel gifting market.”
The world’s first cross-airline flight gift card brand, Flightgiftcard, launched this February following a successful four years of impressive growth for sister company, Hotelgift. Founded by management consultant, Loes Daniels in 2014, turnover for Dutch travel gift brand, Hotelgift - a gift card providing access to over 110,000 hotels in 170 countries worldwide - quadrupled year on year, with a significant spike - 900% - in 2017, thanks to the brand’s launch in the UK and US markets. Hotelgift quickly became a million euro company and a leading global player in the hotel gift card market, with tens of thousands of gift cards currently sold annually. Identifying a distinct gap in the market, Flightgiftcard was the obvious next step. Daniels teamed up with investment manager friend, Jorik Schröder, to set up the airline gift brand, launched globally in February 2018. Flightgiftcard is the world’s first cross-airline gift card solution, allowing giftees the flexibility to choose and book flights with over 300 airlines to any of 980 destinations in 70 countries worldwide via the flightgiftcard website. Hotelgift and Fightgiftcard are currently operating in more than 20 markets worldwide, with the UK, US, Australia and The Netherlands, key markets for both brands.The Amsterdam based team will double in size in 2018 to support growth, working to broaden the airline and hotel partner network and enhance website features with the aim of improving the customer journey. ISSUE 06 | 80
LOES DANIELS CO-FOUNDER
ISSUE 06 | 81
PRICE BAILEY ADVISES NVM ON PRIMAL PANTRY DEAL
The Price Bailey Strategic Corporate Finance team have worked closely with clients NVM Private Equity to enable the company to complete a £3m investment deal in health-conscious snack specialists The Primal Pantry. Founded by Suzie Walker in 2014 at her kitchen table, Primal Bars are now sold in over 7,000 distribution points in the UK including Tesco, Sainsbury’s, Co-operative and WH Smith Travel. NVM’s investment will be targeted at growing retail distribution and in-store visibility along with driving brand awareness through consumer marketing channels. With The Primal Pantry’s vision to be the world’s most trusted real food brand, NVM’s backing will enable the company to continue to innovate and reach increasing numbers of consumers. Chartered accountants and business advisers Price Bailey completed financial and tax due diligence in to The Primal Pantry on behalf of NVM, as well as reviewing the financial model for the company going forward, to include commercial sensitivity analysis.
ISSUE 06 | 82
Price Bailey Partner Simon Blake, who led the Strategic Corporate Finance team’s work on the deal, said: “We’re very happy to have been able to play a key role in this deal, which should be an extremely good fit for both parties. NVM Private Equity has a history of backing innovative branded food businesses, and are very active in the market at the moment – this is their third growth capital investment of 2018. And The Primal Pantry is just the sort of award-winning, innovative challenger brand in which NVM’s investment can make a real difference.”
Charlie Pidgeon, Investment Manager of NVM Private Equity, said the company was “extremely excited” about backing The Primal Pantry: “In a short period of time the business has built a strong and recognisable brand and has accumulated an impressive roster of retailers stocking its products. Having been impressed with the team’s achievements to date, we believe the business has the potential to become a category leader in the rapidly growing healthy snacking sector.” The Primal Pantry founder Suzie Walker added: “We are incredibly delighted to be welcoming NVM on our journey to becoming a leading and trusted real food brand. With their backing we can take The Primal Pantry to the next level, ensuring more consumers have the opportunity to try our products and encouraging them to make better food choices.” As well as growing The Primal Pantry’s retail distribution and in-store visibility, NVM’s investment will also enable the company to target social media, PR and sampling channels to increase brand awareness.
SUZIE WALKER FOUNDER
ISSUE 06 | 83
THE 30-YEARL-OLD CEO
STEERING THREE INTERNATIONAL MOTORSPORT EVENT TO THE TOP As any business builder will agree, it’s tough to make it in the world of business. Even more so when you are young. Challenging this school of thought however, is Azam Rangoonwala who at just 30 years old has been appointed CEO at Powerboat P1. The global rights-holder for three international water-based events which includes the P1 SuperStock powerboat championship, P1 AquaX personal watercraft championship and the P1 Jetcross stand-up ski racing series, P1 are set to take these dynamic sports to a global audience. Becoming a CEO at just 30 is no mean feat and it looks like Azam’s spirit for business could be in his genes. His father, who invested in P1 some 15 years ago, is also a successful businessman and Azam credits his business skills and drive to succeed to what he learnt from his father.
which he ran for several years before finally taking his seat as CEO. Through his journey to the top, Azam has naturally built up quite the collection of contacts, with the help of his father who has an extensive business background. With these relationships in tow, Azam and the P1 team have successfully established, developed and maintained many high-profile partnerships, including with tourist boards Visit St Pete Clearwater. Visit Jacksonville and Experience Kissimmee – a relationship which is now moving into its third year. Azam has also successfully secured the P1 AquaX support from the industry’s top PWC manufacturers, Yamaha Motor Company, Seadoo, Kawasaki and Ford. An all hands-on-deck kind of guy, speaking of his appointment as CEO, Azam said: “I am hugely passionate about P1 and am thrilled to bring this exciting, adrenalin-fuelled sport to an even wider audience. My background in the sport, from racing to working at ground level where I set up race courses, makes me perfectly placed, with the support of the team around me, to take the sport to even greater heights.” Despite early days in his role as CEO, Azam has already made great strides towards expanding the P1 business including enlisting the help of a leading PR agency to get the P1 name heard in both the UK and the US. With a five-year plan in place, Azam’s sights are firmly set on the future as he explains: “As the brand continues to grow and garners more and more interest, there is increased opportunity to expand the events into other countries. We are already launching the SuperStock series in Malaysia and I am also in talks to take our events to East Asia.”
“My father is what I call a serial entrepreneur. With several successful businesses to his name he has always been extremely determined, and that level of ambition is contagious. I feel extremely lucky to have been brought up around that unwavering drive, and with the lessons he has taught me in building relationships and nurturing a business, I am confident P1 will thrive.” The US racing season kicks off in Miami in April and Azam is now responsible for organising all three series under the P1 umbrella – a challenge he relishes. Working his way up through the business, Azam went from working on manufacturing boats in North Carolina, to getting involved with the event-side of the championships and establishing a new office base in Orlando,
ISSUE 06 | 84
ISSUE 06 | 85
PIXID CONTINUES EUROPEAN EXPANSION WITH ACQUISITION OF DUTCH STAFFING CRM SUPPLIER CARERIX
European workforce management solutions provider PIXID, has acquired Carerix, a Dutch-based CRM and ATS supplier, to further strengthen its proposition and expand its operations. Adding a leading supplier for CRM and ATS systems to its ranks allows PIXID to reinforce its expertise, enhance its service offering and strengthen the value chain offered to the temporary employment sector. The purchase also means PIXID can now add a presence in Benelux to its existing offices in France, in the UK (since its acquisition of The Internet Corporation in 2017) and its operations in Germany. A complete online software solution for recruitment and staffing agencies, Carerix is currently helping more than 10,000 users every day. It has a presence in 17 countries due to high-profile relationships with major customers including Randstad, Adecco, Manpower, T-Groep and DPA. Carerix has a multi-level partnership programme and an ecosystem which allows for a tailored offering and broader promotion of its products among specific target groups. This tallies with PIXID’s approach to enable clients of all sizes to efficiently manage their temporary workers via a simple, scalable and cost-effective platform. PIXID’s proprietary technology is currently responsible for filling one in four temporary positions in France, where it has powered the temporary staff market. The acquisition of Carerix further establishes it as a well-known digital platform for the management of temporary workforces throughout Europe. The acquisition is consistent with PIXID’s strategy of utilising its scale to grow the core flexible workforce management business stream and adding other staffing and recruitment solutions into the overall portfolio. In 2017, PIXID generated solid revenue growth of 23% and Management is expecting to record revenues of around €25m in 2018. Pixid now covers more than 90% of the temporary employment market in France and has two million workers registered in its database. Etienne Colella, President of PIXID SAS, commented: “Since 2004 we’ve continued to grow to the point where we now represent a significant part of the temporary employment market in France. But our ambitions are much wider than that and we are now adding Benelux to our existing presence in France, the UK and Germany. Each country has its own idiosyncrasies and we were keen to choose the right partner with a strong market share and dynamic innovation strategy – qualities that Carerix perfectly embodies. The acquisition is the first phase of our introduction to this new region, known to be a mature and vibrant HR marketplace. We are confident that our combined solutions will make a significant contribution to helping those sourcing and placing temporary workers to reinvent their way of working and realise efficiencies.” Reinald Snik, CEO of Carerix, said: “As with PIXID, our objective is to transcend borders and we already have a presence in most European countries thanks to our relationships with key customers. Becoming part of the PIXID Group will give us greater scale to achieve these ambitions, while retaining our brand in our home market. The acquisition is a real innovation opportunity which will be mutually beneficial for both parties; our existing customers and to open up and expand other staffing markets throughout Europe.” Jean-Michel Beghin, Managing Partner at Keensight Capital, said: “We are delighted to support Etienne Colella in PIXID’s new development stage, further to last year’s successful integration of The Internet Corporation in the UK. We had identified Carerix as it complements PIXID’s service, for its solid growth profile based on SaaS model and led by a talented management team, as well as for its highly appreciated innovation capabilities. Its strong foothold in the Netherlands and throughout Benelux will clearly contribute to strengthen PIXID’s positioning as a leading European digital platform for the management of flexible workforce.” ISSUE 06 | 86
ISSUE 06 | 87
PAYSAFE TO ACQUIRE IPAYMENT
PERMIRA FUNDS TO ACQUIRE MAJORITY STAKE IN LEADING
Paysafe, a leading global payments provider, today announces that it has agreed to acquire iPayment Holdings, Inc. (“iPayment”), a U.S. based provider of payment and processing solutions for small and medium-sized businesses. The acquisition forms part of Paysafe’s previously stated investment strategy to expand its presence in North America in response to significant growth opportunities, particularly in the fast-growing SMB sector.
This latest U.S. based investment builds on Paysafe’s acquisition last August of SMB payments provider, Merchant Choice Payment Solutions (“MCPS”), as well as its high-profile sponsorship of North America’s IndyCar series, and will establish Paysafe as a top 5 non-bank payment processor in the U.S. With more than 137,000 merchant customers as well as annual processing volumes of over $28 billion in 2017, iPayment is an established leader in the U.S. based payment processing industry. The company operates both direct and indirect sales channels and is a well-respected provider and partner for hundreds of agents, sub-ISOs and software developers specialising in the SMB sector. iPayment employs over 450 employees across its four U.S. offices located in Boston, Massachusetts; Westlake Village and Camarillo, California; and Minden, Nevada. The integration of iPayment with Paysafe will bring merchants, partners, consumers and platforms more product choice via an integrated payments platform which includes point of sale (POS) solutions, order ahead purchases and payments, as well as online payment products such as Paysafe’s leading prepaid solution, paysafecard. Joel Leonoff, Paysafe’s President and CEO, commented: “This targeted acquisition is part of our long-term investment strategy to grow our business in North America and builds on our other successful acquisitions over the past couple of years.” Leonoff added: “iPayment is an excellent strategic fit with Paysafe in terms of its comprehensive product offering, customer-centric focus and overall strategic vision. By bringing our two organisations together, we will be able to further strengthen our wide-ranging payments processing suite and expose it to a broader audience of merchants and consumers. We are all looking forward to the multiple opportunities this combination brings to the market.” “This agreement marks a very exciting day for our organisation,” noted OB Rawls IV, CEO and President, iPayment, Inc. He added: “Since joining iPayment two years ago, we have delivered strong EBITDA growth and expanded our footprint into new key verticals. This acquisition will drive significant value for our collective customers and partners.” Todd Linden, CEO of Paysafe’s Payment Processing Division in North America, will lead the merged payment processing organisation at completion. Linden brings over 30 years of industry experience and was previously CEO of MCPS. Rawls, along with iPayment CFO, Robert Purcell, will both remain with the organisation at completion as key members of Paysafe’s payments leadership team. The acquisition is expected to complete in Q2, 2018, pending final regulatory approvals. Until then, the two groups will continue to operate as independent organisations. RBC Capital Markets, LLC is acting as lead financial adviser to Paysafe on the acquisition. Credit Suisse also provided financial advice and is leading the debt financing. Stikeman Elliott LLP and Paul Hastings LLP are serving as Paysafe’s legal counsel on the acquisition while Latham & Watkins LLP is acting as Paysafe’s legal counsel on the financing. For iPayment, J.P. Morgan Securities LLC is acting as exclusive financial advisor and Gibson, Dunn and Crutcher LLP is serving as legal counsel. ISSUE 06 | 88
cybersecurity and cloud distributor
CEO OF EXCLUSIVE GROUP
BENOIT VAUCHY PARTNER AT PERMIRA
PARTNER IN THE TECHNOLOGY TEAM AT PERMIRA
Permira, the global private equity firm, today announced that a company backed by the Permira funds has agreed to acquire a majority stake in Exclusive Group, the leading global specialist value-added services and technologies for cybersecurity and cloud migration, for an undisclosed value. Selling equity holders include former majority owner Cobepa and Andera Partners (formerly Edmond de Rothschild Investment Partners). The investment secures substantial new funding to fuel the next stage of the Company’s development. The Exclusive management team led by CEO Olivier Breittmayer will maintain a significant equity stake in the firm and continue to lead the company in their current roles. Established in 2003 and headquartered in France, Exclusive Group is the largest and fastest growing specialist value added distributor of cybersecurity and cloud migration solutions in the world with 62 offices across five continents and presence in over 100 countries. The Company originally developed its activities by enabling US vendors of innovative and disruptive solutions to gain rapid access to the fragmented EMEA market. Since then, it has shown its ability to successfully detect and partner with innovative IT security solutions providers and strongly support their growth by providing a large panel of services ranging from basic distribution to higher value added services such as marketing support, customer evangelisation and leasing solutions. Olivier Breittmayer, CEO of Exclusive Group, commented: “We are delighted to welcome the Permira funds as our new majority shareholder as we continue on our strong growth trajectory. With almost 40% year-on-year growth in 2017, and a track record of doubling revenues every two years, we have become the natural privileged partner for new IT cloud and cybersecurity companies wishing to expand globally, and we continue to outperform the market. We look forward to working with the highly-regarded Permira technology team with its deep presence in Silicon Valley and global reach to further invest in services and scale to consolidate our position as the global specialist in cybersecurity and cloud transformation.” Benoit Vauchy, Partner at Permira, commented: “The Permira Funds have been backing the growth of disruptive global technology leaders for over 30 years and we are delighted to partner with Exclusive and its highly successful management team led by Olivier Breittmayer today. The group combines scale and geographic reach with a specialised solution portfolio and high-levels of expertise and is ideally placed to continue to consolidate its position as preferred distributor for both channel partners and vendors. We look forward to working with the team on supporting further organic growth and strategic acquisitions in the years ahead.” Michail Zekkos, Partner in the technology team at Permira, added: “The escalating threat landscape and the increasing complexity of underlying infrastructures continues to position cybersecurity as one of the fastest growing and resilient segments of global IT spent. In a market that is characterised by structurally high product velocity, we believe that the role of value-added services and technologies, occupied by Exclusive at the centre of the demand generation channel, will become ever more critical in years ahead. We have been following the success of Exclusive for many years and look forward to support them as they consolidate their unique position in the market.”
ISSUE 06 | 89
OVER 30% OF BRITS WOULD let brands sponsor their photos on social media
Brand engagement with consumers has significantly evolved over time. The rapid rise of the internet and social media has facilitated companies with a growing variety of platforms to create more personalised interactions with their brand. This in turn has enabled brands to harvest loyal consumers who follow their every action and become early adopters of any new products/services they offer. Interested in the relationship between brands and consumers, Online British Marketplace OnBuy.com analysed findings from YouGov, who surveyed more than 2,000 Brits to better understand how they would let a brand they like sponsor them should the opportunity arise. OnBuy.com interestingly found that just under a half of Brits (42%) would let a desired brand put their logo and the words “sponsored by” in the bottom corner of profile photo on all social media channels they have a presence on. Similarly, 36% would be happy to allow a brand to do the same for each photo they post on social media. Thereafter, 39% of Brits would be most willing to appear in a brands television advertisement. Further on, 37% of Brits would be prepared to wear a shirt or top with a large picture of the brands logo on it every day for a month whilst 19% would astonishingly do so for the whole year. On the other end of the scale, Brits (3%) would be least willing to change their own first name to a brands name. After this, just 5% of Brits would get a brand’s logo as a tattoo somewhere on their body to symbolise the impact a respective company has had on them. Moreover, 6% would replace or add a brand’s name to their own middle name – this type of dedication exhibited by Nathan Yorkshire Tea Garner who ditched his original middle name in favour for his favourite brand of tea. Natalie a Fashion Blogger and ‘Brand Champion’ from London said: “I have been a fashion blogger for just over a decade now. During the first few years I was reviewing a lot of different lifestyle brands. As the quantity and quality of my content improved, I managed to gather a large following. This is when a well-established brand proposed to me some sponsorship possibilities. Since I admired their design and innovation, I decided I would be happy to regularly wear their clothing and then, visually post it on my blog and social media channels to promote the brand. So far, it’s been very fruitful for both parties. I think these sorts of arrangements work best when a company collaborates with influencers who are the most relevant to their industry/market – as that’s when it really feels mutual and authentic”. Cas Paton, Managing Director of OnBuy.com commented: “In the digital age, the connection between companies and consumers has become more intertwined. As a result, companies have been better able to gain an insight into those who truly represent as well as support them. Consequently, this has allowed them to identify and approach certain consumers to become ambassadors/advocates for the brand. What this research highlights is that there are certain sponsorship avenues which British consumers would be less inclined to accept and entertain when displaying their affection and endorsement for a brand”.
ISSUE 06 | 90
ISSUE 06 | 91
OFFSHORE DEAL VOLUME IN 2017 OUTPACES PREVIOUS YEAR The number and value of offshore M&A deals rose in 2017, making it one of the busiest years recorded for the region, according to a report released today by offshore law firm Appleby. The latest edition of Offshore-i, an Appleby report that provides data and insight on merger and acquisition activity in the major offshore financial centres, focuses on transactions announced over the course of 2017. In addition to the rise in deal activity, it also found that 2017 was the busiest year on record for offshore IPOs. “In the face of the substantial geopolitical uncertainty which overshadowed 2017, the offshore region’s positive performance is all the more remarkable,” said Cameron Adderley, Partner and Global Head of Corporate at Appleby. “These deals were led prominently by acquisitions, although a number of companies also chose to add additional financing firepower by issuing new stocks and bonds to eager investors.” The report points to a number of factors that could impact M&A in the coming months, including U.S. tax reforms and regulatory scrutiny, the Chinese government’s concern over outbound deals and the deployment of private equity, among others.
The M&A Environment Across Jurisdictions
In total, there were 2,771 deals targeting offshore companies in 2017, representing a total value of USD227bn, the report found. This marked an increase over 2016, which saw 2,735 deals recorded at a value of USD219bn. Each deal in the offshore top 10 in 2017 was worth well over USD2bn, with the largest offshore deal being the USD6.8bn purchase of all the issued shares of Belle International, a Cayman Islands-incorporated footwear manufacturer listed on the Hong Kong Stock Exchange. Over the course of the year, the offshore region saw three megadeals – those valued at USD5bn or more. The Cayman Islands remained the busiest jurisdiction for offshore transactions in 2017, recording more than 800 deals. It was followed by Hong Kong (592 deals), the British Virgin Islands (505 deals) and Bermuda (402 deals).
Key Findings of 2017: • The total value and volume of offshore M&A deals rose when compared to 2016. The year saw 2,771 deals worth a total of USD227bn. • The top 10 deals were each worth well over USD2bn, with the largest offshore deal being the USD6.8bn purchase of all the issued shares of Belle International, a Cayman Islands-incorporated footwear manufacturer listed on the Hong Kong Stock Exchange. • The finance and insurance sector dominated the offshore landscape in terms of deal value. • Acquisitions in the real estate sector make up the main theme of this year’s highest value deals. Software development also continues to attract significant acquisitions, as companies compete to build market-share in this rapidly evolving sector. • Cayman remained home to the largest number of deals, followed by Hong Kong, the BVI and Bermuda. • The offshore region saw well over 300 IPOs reported, making it by far the busiest year on record. •Despite the new regulatory restrictions, China continued to be the prominent acquirer of Offshore targets, with the UK, Taiwan and the U.S. also highly placed. • 128 deals targeting Offshore-incorporated companies were financed via private equity and venture capital, for a total value of $40bn. After a relatively quiet 2016, this marks a considerable uptick in offshore activity. • There were 3,313 outbound deals coming out from the Offshore region, worth a combined USD 347bn. The top outbound deals, the highest value offshore-related deals over the year, show a healthy spread of sectors, including logistics, manufacturing and banking institutions.
Offshore IPOs Experience Bumper Year
Well over 300 IPOs were reported across the offshore region in 2017, making it by far the busiest year on record. The top sector for announced IPOs is technical and engineering consultancy, for fundraising to assist with project finance and the acquisition of additional equipment. “In 2016, companies delayed IPOs amid heightened volatility in the financial markets,” Adderley said. “This pent-up demand was released in 2017 and IPO announcements by offshore-incorporated companies are at an all-time high.” The offshore region also experienced a busy year with completed IPOs, seeing 179 companies successfully complete their listing. Hong Kong exchanges are the most popular for offshore companies, followed by U.S. and London exchanges.
Acquirer Deals Involving Offshore Buyers Continue to Rise
Though the primary focus of Offshore-i is on transactions in which offshore targets are purchased by investors, the report also examines deals in which the acquirer is based offshore. Up until 2014, there was parity between the levels of activity inbound and outbound from the offshore region. Since that time, however, offshore companies on the acquire-side have come to dominate, and the report found that figures from 2017 continue to reflect this. The year 2017 recorded 3,313 such deals worth a cumulative USD347bn. China, the U.S., India and the UK make up the bulk of the locations targeted but there were also many large deals conducted elsewhere, such as the $1bn institutional buy-out of Portugal’s Novo Banco by Bermuda-registered private equity firm, Lone Star.
ISSUE 06 | 92
ISSUE 06 | 93
MASTERCARD EXPANDS PRESENCE IN IRELAND, HIRING 175 NEW STAFF TO DRIVE PAYMENTS INNOVATION Mastercard has announced it will expand its presence in Ireland, hiring 175 new employees in Dublin focused on driving innovation and creating the future of payments around the world. Roles include software engineers, blockchain specialists, data scientists, project managers, analysts, product designers, cloud infrastructure specialists and information security experts. The new jobs represent Mastercard’s commitment to driving innovation in payments and beyond, designing ground-breaking security solutions, and striving for a world beyond cash. Welcoming the announcement, the Minister for Business, Enterprise and Innovation, Ms. Heather Humphreys T.D., said “Mastercard’s decision to expand here is an important landmark and I warmly welcome the new jobs that are coming with the announcement. The Government has been working hard to ensure that we have the right conditions in place to attract the knowledge-based sectors to Ireland, in particular a skilled workforce that can fill the needs of companies like Mastercard. Ireland is now a very attractive location for international FinTech and payment companies from all over the world and announcements like this one today illustrate that our policies are continuing to deliver tangible results.” Ken Moore, executive vice president and head of Mastercard Labs added: “Ireland is the heart of our global innovation efforts – throughout Mastercard, Dublin is admired as a key technology hub - we’re looking to replicate the innovation culture we’ve fostered here in our offices around the world. The vibrant culture we have here makes it the perfect place to recruit for these highly-skilled roles. We need great minds who can look outside of Mastercard’s traditional payments expertise and create solutions to benefit our customers around the world, and I’m excited to grow our business here.”
Mastercard’s Leopardstown office currently houses 380 staff. It is the global headquarters of Mastercard Labs, the company’s research and development arm, which is dedicated to bringing innovative payment solutions to market at speed. Innovations created by Mastercard Labs are pushing the boundaries of what’s possible in payments and beyond. Virtual and augmented reality experiences that will transform the way we shop and bring stores into the living room, while chatbots enabled with payments technology will allow consumers to book flights or order a takeway without leaving a messaging app. Teams in Dublin are exploring a range of blockchain solutions, as well as using Artificial Intelligence to help secure payments. QR payment solutions that could transform payments in the developing world have been created in Dublin, as well as innovations in solar power that will bring electricity to millions who live without it. The office is also the hub of Mastercard’s business in Ireland, working with banks and credit card issuers to deliver convenient, safe and secure payment services to consumers and businesses across Ireland.
ISSUE 06 | 94
CEO of IDA Ireland Martin Shanahan said: “Mastercard Ireland’s decision to locate 175 highly skilled jobs here underlines the continuing success of its Irish operation and the innovative approach and expertise of its team. Today’s announcement also emphasizes Ireland’s continuing attractiveness for payment and fintech companies. With the global brand awareness of Mastercard providing Ireland with an excellent reference in the sector we have a growing and strong cluster of both indigenous and FDI payment companies in Ireland.” Sonya Geelon, country manager, Mastercard Ireland added: “We’re really proud to be investing further in our Irish presence. At our Dublin office, we’re working on innovations that will shape the future of payments not just in Ireland, but all around the world. We’re driving projects that promote financial inclusion at home and abroad, and are working to provide consumers, businesses and governments with the most innovative, safe and secure ways to pay.”
MARTIN SHANAHAN CEO OF IDA IRELAND
The creation of these new jobs follows Mastercard’s recent announcement that it would bring its digital and physical payment teams under one organisation. The newly-formed Products and Innovation team will bring core products, digital payments, Mastercard Labs and processing activities together. Mastercard has taken on more space at its Mountainview headquarters in Leopardstown and has signed a lease until 2026, to accommodate growing numbers of staff. Since the opening of its Irish office in 2008, the number of people employed by Mastercard in Dublin has increased by 880%.
ISSUE 06 | 95
Lucketts Group acquires 35-coach North Hampshire firm Lucketts Group has accelerated its expansion plans, with its second acquisition in just four months. The coach company acquired North Hampshire-based Mortons Travel Limited yesterday, just a few months after adding Solent Coaches to its growing portfolio. The move brings Lucketts’ total number of vehicles to around 175 and widens its reach in the north of the county and beyond into Berkshire. As part of the acquisition all 60 staff of Mortons Travel will be retained by the company and managing director Tony Lawman said the plan is to grow the fellow family business. “There were a lot of synergies between Lucketts and Mortons, not least the fact that it’s a family owned company with our same core values of safety, reliability, quality and attention to detail,” he said. Mortons Travel will retain its name, coaches and extensive client portfolio. Should, however, it need to call on extra resources it now has the operational backing of Lucketts Group – which incorporates Lucketts Travel, Coliseum Coaches, Solent Coaches and Worthing Coaches. The former shareholders of Mortons Travel, Adrian and Joanne Morton, say they wanted to pass the thriving company on to a fellow family business and now look forward to spending more time with their young children. Mortons Travel is synonymous in the industry for its smartly-presented fleet, most notably its 100-seat high-capacity tri-axle double deckers. It has built itself a formidable reputation across all areas of coach travel. Adrian Morton said: “Having grown the company over a period of 14 years it felt like the right time to pass the business on to someone who could develop it long into the future. Lucketts has an enviable reputation in the business and we felt our loyal customers and staff would be in safe hands.” Lucketts currently employs more than 300 people and provides popular day trips, European holidays and coach hire services. It runs more than 100 journeys each day for National Express.
LDC WRAPS UP £13M INVESTMENT IN GIFTING SPECIALIST PALADONE
Paladone, the UK’s market-leading designer, innovator and supplier of gifting products, has secured a £13m minority investment from mid-market private equity investor LDC, to accelerate its international growth. Headquartered in Brighton, Paladone specialises in the design, development and wholesale supply of licensed and own brand gifting products. Paladone has established strategic license partnerships with leading global brands including Walt Disney, Warner Brothers, Star Wars and Nintendo. Its own-label brands such as Purple Donkey and Scott & Lawson currently account for 30 per cent of revenue. With a catalogue of more than 800 products, and offices in Los Angeles and Hong Kong, Paladone generated revenues of more than £30million in its latest financial year, with 60 per cent of its sales being international. LDC’s investment will fuel the business’ global expansion, as it looks to continue its strong growth in the US market, following demand for its products from large retail giants Kohl’s and Target. It is also eyeing growth opportunities in Australia, Asia and Europe, as well as investing in its online ecosystem to help increase revenues generated from its website. Paladone will continue to be led by Managing Director Graeme Carr and Commercial Director Yann Le Bouedec, supported by Finance Director Steve Fleming. As part of the deal, private equity veteran James Barbour-Smith joins as Non-Executive Chairman. The deal was led for LDC by Christian Bruning, Rob Apollo and Aylesh Patel with Patel and Bruning joining the Paladone board as Non-Executive Directors. Graeme Carr, Managing Director of Paladone, said: “We started out as a small novelty gift company almost 25 years’ ago, and the commitment and hard work of our team has helped us grow to become an international firm, holding longstanding relationships with some of the world’s best-known brands. Over the years we have significantly invested in the quality and design of our products, which is why we’re now in a market leading position. For us, the time is right to bring an investment partner on board. In LDC we have found a team who understands our long-term ambitions and can provide us with the strategic expertise to help take the business to the next level.” Aylesh Patel at LDC, said: “Paladone’s reputation both in the home market and overseas has seen the business go from strength-tostrength. Partnering with us will give Graeme, Yann and the team additional funding and support to elevate the business’ position on the international stage, explore opportunities to grow both organically and through a buy and build strategy, and enhance the business’ online platform, making it more visible and accessible to customers worldwide.” ISSUE 06 | 96
ISSUE 06 | 97
SEEDRS ROUND TO NEW INVESTOR
GP BULLHOUND ADVISES SOLITA Group on its sale to Apax Digital
Specialist mortgage marketplace lender Landbay today announces it is opening its latest equity funding round to new investors through the Seedrs platform. The capital raised in this fundraising round will allow further investment in Landbay’s technology platform and distribution capability, helping it to further modernise its mortgage funding in what is now a more innovative and exciting financial space than ever. The round, which has already funded its target of £1.25m from existing and new investors, comes on the back of Landbay recently surpassing lending volumes of £100m, with over 25% of these having originated in the last three months. In March 2018 Landbay had its record month for both mortgage completions and applications, and thanks to this significant growth in revenue and gross profit the company expects to hit profitability in Q4 2018. Landbay direct-matches retail and institutional funds into buy to let mortgages via its peer-to-peer investment technology. For borrowers, advanced, modular technology and a tailored approach to underwriting allows Landbay to provide the fastest turnaround and best service of any specialist buy to let lender, whilst its platform gives retail and institutional investors access to the burgeoning buy to let mortgage market. Retail investors are offered the chance to lend via an Innovative Finance ISA or classic peer-to-peer investment. John Goodall, CEO and founder of Landbay said: “It is only natural and right to open this equity round up to retail investors, inspiring people to see the possibilities in property investment. Over the past 18 months the business has matured significantly and we now have the mortgage funding, intermediary partners, technology and capacity in place to support the continued expansion of the company. Our sights are now set on becoming a publicly listed company in the future. “Seedrs is a pioneer in regulated equity investment, and the benefits it brings to retail investors through fast growth companies like Landbay is vast. We have had a long relationship with the company and value the shareholder protections it gives to retail investors via its nominee structure.”
ISSUE 06 | 98
JARI NISKA CEO OF SOLITA GROUP
GP Bullhound acted as exclusive financial advisor to digital transformation agency Solita Group on its sale to Apax Digital, a high growth tech focused minority and buyout fund advised by global private equity firm Apax Partners. Solita Group is a leading provider of data-driven digital transformation services to premier Nordic and European private and public clients, with headquarters in Tampere and offices in Helsinki, Oulu, Stockholm and Tallinn. The Company offers an end-to-end digital transformation service with a focus on using data to underpin the digital transformation process. Jari Niska, CEO of Solita Group commented: “We are pleased to team up with Apax Digital for the next phase of our exciting journey. Apax’s superior sector expertise will be pivotal in growing Solita both internationally and domestically. The highly professional team from GP Bullhound, coupled with their global presence, was instrumental in making this process a success.” Sven Raeymaekers, Partner at GP Bullhound, commented: “With data, machine learning and artificial intelligence impacting digital agendas across public and private organisations, we see significant international potential for agencies such as Solita. We are delighted to have advised Solita Group and Vaaka Partners on this transaction to help them find the right partner for the next phase of growth.” This is GP Bullhound’s second transaction in Finland, following the €64m sale of Rightware to Thundersoft, and further underlines GP Bullhound’s expertise in advising category leaders in the Digital Services sector, with 27 transactions completed in the last 24 months for clients including In2Media (sold to KMD), Ansira (acquired by Advent International) and Karmarama (sold to Accenture), among many others.
ISSUE 06 | 99
AI START-UP COGNISM SET FOR GLOBAL EXPANSION
NEXT-GENERATION CARRIER MANAGEMENT COMPANY GFS ANNOUNCES TWO ACQUISITIONS
THANKS TO FUNDING BOOST FROM NEWABLE PRIVATE INVESTING
AND LAUNCH OF GFS LOGISTICS
Cognism, a London-based start-up which uses artificial intelligence to generate sales leads has closed a £2m funding round with the help of Newable Private Investing and the London Co-Investment Fund. The funds will be used to open new offices in the United States, alongside its base in Macedonia, and to accelerate plans to double the company’s headcount at its UK HQ over the next year. The company, founded by entrepreneur James Isilay and Stjepan Buljat, helps companies accelerate sales and recruitment leads using big data. Since its founding in 2016, Cognism has grown to over 80 paying customers in Europe and America and extended its technology to become native in Salesforce and Microsoft Dynamics, becoming a leading name in European Sales Intelligence. Investing £400K, Newable Private Investing partnered with the London CoInvestment Fund – which is backed by the Mayor Sadiq Khan, and supports early-stage tech, science and digital start-ups in the UK’s capital. The round was led by South Central Ventures and supported by Startup Funding Club. James Isilay, CEO, Cognism – a graduate of Imperial College and former UBS trader – said: “This funding is a testament to the team’s hard work and passion. This latest round is central to our strategy of providing the best technology in sales intelligence to improve prospecting performance and to meet a new quality standard in GDPR compliant contact data. We couldn’t have achieved this without the support of Newable Private Investing and the London Co-Investment Fund.” Newable Private Investing is one of the UK’s leading private investment groups, providing support to cutting-edge start-ups. Anthony Clarke, Managing Director, Newable Private Investing added: “Generating and converting leads is crucial for all businesses and Cognism’s use of cutting edge AI technology is generating big gains for their clients. For many start-ups access to finance can be the biggest blocker to future growth and we’re delighted that Newable Private Investing has been able to help this innovative business to continue to grow.”
Global Freight Solutions (GFS) – the company that defined the industry term. ‘Enterprise Carrier Management’ – today announces the launch of GFS Logistics as a result of the recent acquisition and transformation of two fulfilment facilities: Intermail, based in Newbury and The Fulfilling Station, based in Bristol. The acquisitions have added around 50 extra warehouse & fulfilment staff, 100,000 sq. ft. of warehouse space and its own fleet of GFS collection vehicles. The addition of GFS Logistics to GFS Parcels and GFS Technology completes the trio of core components needed to fulfil the company’s ECM vision and establish itself as the go-to delivery expert for fast-growing B2C retailers and B2B businesses. In parallel to this, GFS has also bolstered its leadership team with two key board-level appointments: Dave Field, Operations Director, bringing with him three decades of logistics and carrier management experience, including establishing Ireland’s leading independent delivery firm, Nightline; and Bobbie Ttooulis, Group Marketing Director, previously from Experian with over 20 years’ experience in driving revenue growth and brand awareness. This is in addition to a 60 per cent increase in new sales appointments, to triple the size of its direct sales workforce.
The independent eCommerce champion With the Office of National Statistics still reporting uncertainty around UK retail sales, pressure is mounting on independent retailers to cater to increasingly unique customer delivery needs while planning for sustainable growth. A large portion of the UK’s fastest growing eCommerce brands rely on GFS to provide customers with an accurate and broad array of choice when it comes to delivery. GFS customer Richard Spychalski, Group Operations Director at Mamas and Papas, explains the efficiency improvements that partnering with GFS has had: “GFS help us to achieve our goal to consistently deliver to every customer, every time, from checkout to doorstep. With the introduction of “Checkout” online, customer delivery options vastly improved, cart abandonment rates dramatically reduced and we’ve already seen a 15% improvement in speed of dispatch.” Neil Cotty, CEO of GFS explains where the company is headed next: “There’s a lot of talk in the industry about the impact Brexit might have on European trade and delivery. We’ve devised a pragmatic four-point action plan to help eCommerce businesses mitigate the risk of Brexit and tap into the opportunity for growth outside of the EU, with guidance on how to implement a delivery strategy that supports that. Our motivation is to nurture the independent to facilitate international growth without unnecessary cost and complexity, so they can be prepared and avoid getting swallowed up by the behemoths because their delivery strategy doesn’t match up to their growth ambitions.”
A unique company Richard Daw, Managing Partner, Phoenix Equity Partners, which made significant investment in GFS last year said: “We recognised that GFS were and are, in a category of their own. Their vision, expertise and approach to delivery comes at a time when delivery approaches in eCommerce need to evolve into something far more agile and consumer-centric. GFS makes it possible for smaller businesses to match the Amazon-like experience customers have come to expect and demand, without adding unnecessary cost and complexity to their business.” ISSUE 06 | 100
ISSUE 06 | 101
CLEARWATER INTERNATIONAL UK HAS ADVISED LEADING GLOBAL DRINKS INFORMATION BUSINESS IWSR, ON ITS MANAGEMENT BUYOUT, SUPPORTED BY PRIVATE EQUITY FIRM FPE CAPITAL LLP IWSR is headquartered in London and has a US office in New York. Over the last 40 years the company has built up the world’s largest database on the alcoholic beverage market, providing its clients with access to category and brand performance in 157 countries across the world using local market input. IWSR produces the most trusted alcoholic beverage analysis and with the industry increasingly moving towards premiumisation of its products, IWSR is the only source that measures this by brand and by price/quality segments. FPE will work closely with IWSR’s management team which is led by CEO Mark Meek. Mark has over 20 years’ experience in the business information sector, and was formerly CEO of Datamonitor and Progressive Digital Media. As part of the investment a new Chairman, Neil Smith, is joining the business. Neil was formerly Group COO of Wilmington plc and has over 25 years’ experience as a founder, director, advisor and investor in information businesses. The Clearwater International team was led by Partner Gareth Iley, with support from Director Emma Rodgers, Associate Director Dan Rossington and Associates Dan Shrimpton and Kirsten Handley. David Barbour, Managing Partner, FPE commented: “We are delighted to be backing Mark Meek and his team in the management buyout of IWSR. Mark has driven significant growth at IWSR since becoming CEO four years ago and we look forward to partnering with him and the team for their next phase of growth. We will build on the excellent reputation of the business and its unique market leading data to ensure this remains a leading global supplier to the drinks industry and grows to service the new markets and products in this sector. We are delighted that the founding Smith family will continue to be represented within the business by Alastair Smith who continues in his role as Director, and will have a shareholding in the business.”
CMA PUBLISHES NEW ADVICE FOR JOINT VENTURES
The CMA is today publishing advice for businesses thinking of, or already operating, joint ventures to help them comply with competition law. This follows a recent case where two businesses in a joint venture were fined £1.7 million by the CMA for agreeing to share the market under the cover of a joint venture agreement. The CMA’s short guide on Joint Ventures and Competition Law: do’s and don’ts is for businesses that are already in, or are considering entering into, joint ventures, alliances or other forms of collaboration with another business. The CMA’s advice urges competing businesses to make sure they collaborate legally, check they are compliant with competition law from the outset of agreements and to keep arrangements under regular review to help ensure they remain compliant. In addition to publishing the advice, the CMA is also writing directly to over one thousand regional commercial law firms to ask them to share the advice with their clients. Ann Pope, CMA Senior Director, Antitrust, said: “At the CMA we support collaboration between competitors that leads to innovation and directly benefits customers but there can be a fine line between collaborating and colluding. Certain forms of collaboration between competitors are illegal under competition law and businesses can face large fines if they break the law. Competing businesses setting up a joint venture should be clear about how collaborating will directly benefit customers, and that the benefit of joining forces couldn’t equally be achieved by acting alone but in competition with each other.” “Labelling a collaboration as a ‘joint venture’ will not protect businesses from the scrutiny of competition law. Our new advice provides pointers on what is and isn’t allowed when operating a new or existing joint venture - I urge businesses and legal advisors alike to read and share it.”
Mark Meek, CEO, IWSR commented: “We are very pleased to be in partnership with FPE who have for some time shown a great understanding of our business model and enthusiasm to assist us in growing the business. FPE’s significant experience of growing specialist media and data companies will help realise our growth potential.” Gareth Iley, Partner, Clearwater International commented: “Mark and the IWSR team have built an excellent business and become a leader in the market providing proprietary data. This investment offers a great opportunity to capitalise on the significant growth in the B2B information market, and we look forward to working with FPE and IWSR as the business continues to grow.”
ISSUE 06 | 102
ISSUE 06 | 103
BEECHBROOK BACKS LEADING EXECUTIVE SEARCH AND BUSINESS INTELLIGENCE SPECIALIST LEATHWAITE
Beechbrook Capital is supporting further expansion at Leathwaite, the global human capital specialist. The new investment by Beechbrook’s UK SME Credit fund will enable Leathwaite to accelerate its worldwide expansion, launch new business streams and invest in proprietary technology, while also providing equity to develop and attract talent. Formed in 1999 by its current four partners: Andrew Wallace, Martin Phillips, Neil Ejje and James Rust, Leathwaite has offices in London, New York, Hong Kong and Zurich. Its team of more than 100 professionals has successfully delivered projects across Africa, the Americas, Asia, Europe, the Middle East and Oceania. Over the past 19 years, Leathwaite has established itself as the firm of choice for many of the world’s most innovative and ambitious companies. With a world-class reputation in executive search, executive interim, managed project delivery and market intelligence solutions, the business is expanding rapidly as top talent becomes increasingly mobile. Jon Herbert, managing director of Beechbrook’s UK SME Credit fund, said: “We are delighted to have closed our investment into Leathwaite. We are very impressed with the calibre of the management team and look forward to supporting their growth initiatives which build on the company’s existing strong market position. This investment is another example of Beechbrook’s strategy of backing high quality entrepreneurial management teams in growing businesses.” Leathwaite’s Martin Phillips added: “Beechbrook’s backing will help Leathwaite to achieve further momentum across a number of exciting initiatives, in particular as we launch new tech businesses like The Pay Index, our free crowd-sourced compensation tool for senior executives. The injection of growth capital demonstrates how committed Leathwaite are to expanding the business in the UK and internationally.” Beechbrook was advised on the transaction by Gateley Plc. Leathwaite was advised on the transaction by Livingstone Partners and Simons Muirhead & Burton.
ISSUE 06 | 104
ISSUE 06 | 105
AQUILA CAPITAL ACQUIRES SIX NORWEGIAN HYDROPOWER PLANTS
Wenche Teigland, CEO at BKK Production, added: “Through Småkraft AS Aquila Capital already has a significant presence in the local area. We have every confidence that these hydropower assets will be managed to the highest possible standard going forward. All agreements and commitments with landowners will continue in their existing form.” Roman Rosslenbroich, CEO and Co-Founder of Aquila Capital, said: “Run-of-river plants have among the best conversion efficiencies of all energy sources, with an efficiency factor exceeding 90 percent. They use proven, mature technology that, if well maintained, can produce energy for many decades. The long-term stable cash flows produced by hydropower are uncoupled from volatile carbon energy types as well as other traditional asset classes such as equities and bonds, providing investors with strong diversification benefits. By integrating the newly acquired plants into the portfolio managed by Småkraft, we can also ensure very low operating costs,” continued Rosslenbroich.
Alternative Investment Company Aquila Capital has acquired six run-of-river hydro power plants from the Norwegian energy company BKK AS. The power plants, located near Bergen, produce approximately 70 gigawatt hours (GWh) of electricity per year, equivalent to the average consumption of about 3,500 households. The assets will be operated and managed by Småkraft AS, which is 100% financed by investment vehicles managed by Aquila Capital. Småkraft AS specialises in the operation and development of smaller run-of-river power plants in Norway. The purchase price has not been disclosed. The Nordic region is a highly attractive market for hydropower investments with a large number of existing run-of-river power plants, a mature renewable energy sector and a stable legal framework. There are a growing number of opportunities for professional investors to increase their exposure to this market as local energy suppliers are divesting assets in order to develop increasingly specialized strategies. The sale of BKK AS to Aquila Capital underlines this trend as it is reflects the former’s long-term repositioning towards owning larger power plants. Tor Syverud, Head of Hydropower at Aquila Capital, said: “We are delighted to have acquired this portfolio of high quality hydro power plants. We have been active in Scandinavia for several years now during which time we have established an extensive local network and a strong pipeline of target investments.”
ISSUE 06 | 106
ISSUE 06 | 107
AGGREKO ANNOUNCES INVESTMENT IN ORIGAMI ENERGY LTD. Aggreko is pleased to announce it has acquired a 14% share in Origami Energy, an intelligent software platform developer that optimises revenue earning capacity of grid connected generation and storage assets. Founded in 2013, Origami Energy uses cutting edge, smart technology to tackle some of the key issues facing the energy industry today resulting from the shift towards decentralisation, decarbonisation, and digitalisation. Origami Energy’s intelligent solutions help utilities, traders, network operators, energy providers and consumers to realise the full potential of their energy assets. Origami Energy’s technology enables greater use of renewables and increases profitability for energy market participants by optimising the balance between grid demand and supply. The investment will also help Aggreko’s strategy to lower the total cost of energy for its customers while maintaining reliable power supply. Aggreko has worked with Origami Energy for over a year, and this latest deal reflects its approach of investing in strategic partnerships that broaden its range of specialist services which will benefit its customers, particularly as opportunities emerge through changing energy markets. This investment adds capabilities which are complementary to those brought into the Group through the acquisition of Younicos in 2017 and ensures that the evolving needs of grid connected customers are well served. Dan Ibbetson, Managing Director of Aggreko’s Global Solutions said: “This investment provides excellent new opportunities to both Aggreko and our customers. Energy markets are changing and investments like this make sure we are well-positioned to take advantage of these changes, now and in the future. Our global reach and diverse customer base, matched with the innovative capability of Origami Energy, will provide both businesses with significant growth opportunities.” “We are excited to have Aggreko as a new investor. The global scale and additional funding provided by Aggreko will help accelerate the growth of Origami Energy, in the UK and internationally,” said Peter Bance, Chief Executive of Origami Energy. “Furthermore, our recent partnership announcements with SmartestEnergy and Good Energy demonstrate that innovative energy market players realise the value in using our intelligent technology to improve profitability across energy markets.”
MANAGING DIRECTOR OF AGGREKO’S GLOBAL SOLUTIONS
ISSUE 06 | 108
ISSUE 06 | 109
SECTOR WATCH: TECHNOLOGY
THE EVOLUTION OF TECHNOLOGY in the supply chain
ERP systems built on the success of MRP systems, but extended functionality to integrate the multiple disconnected databases that existed in almost every business. Despite some significant struggles with the initial installation and configuration of these systems, the result of ERP adoption was a massive increase in the availability and accuracy of data for planning. As a perhaps unforeseen consequence of having access to a greater volume of more accurate data, the adoption of ERP systems also served to further increase recognition of the need for better integration and thus, better planning, among various logistics components. From this, a new generation of Advanced Planning and Scheduling software was born. Globalisation has had perhaps the most drastic impact of all. Spurred by the growth of offshore manufacturing, particularly the boom in China during the early-to-mid ‘90s, globalisation highlighted the need for logistics strategies that were able to encompass complex and widely distributed networks that spanned across multiple countries and involved numerous partnerships. The wide recognition of the term “Supply Chain” as we know it today also stemmed from the rising tide of globalisation. It was at this time that the term “Supply Chain Management” was increasingly used to refer to strategic issues, while “Logistics” referred to tactical and operational issues. As a reflection of the increased association between supply chain management and strategy, in 2005 the Council of Logistics Management changed its name to the Council of Supply Chain Management Professionals. They make the following distinction: “Logistics is that part of the supply chain process that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption, in order to meet customers’ requirements. Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”
The 1960s and ‘70s saw a fundamental change in the way that we manage information, with the shift from manual recordkeeping and transaction processing to using computerised systems to store data. For the logistics industry, this provided the means and the opportunity to put previously theoretical operational models into practice, setting the stage for improved planning and optimisation. However, the technology of the time was of course limited in what it could achieve, creating difficulties in the transition from theory to practice. Various models were developed during this period, including the Toyota Manufacturing Program. It was in direct response to this that the principles of Material Requirements Planning were defined by Joseph Orlicky. His book, Material Requirements Planning: The New Way of Life in Production and Inventory Management, was published in 1975. At the time, MRP had been implemented in CEO OF HONCHO roughly 700 companies, but by 1981 this had grown to over 8,000, demonstrating the success and rapid adoption of this methodology.
It wasn’t until the 1980s however, with the introduction of personal computers and a subsequent deluge of new technologies, that the MRP model truly took off. Suddenly, planners had access to far greater amounts of information with significantly better visual presentation, thanks to solutions like flexible spreadsheets and map-based interfaces. In 1983, Oliver Wight expanded on Orlicky’s work and developed Manufacturing Resource Planning, bringing concepts such as master scheduling, rough-cut capacity planning and sales & operations planning into the classical MRP practices. This enabled vast improvements in logistics planning and execution and helped to raise executive awareness of the potential for logistics optimisation. With the right investments in trained professionals and innovative technology, there was clearly an opportunity to drastically improve company profitability (a fact that still hasn’t changed today). This shift in perception is reflected in the fact that by 1989, approximately one-third of the entire software industry at the time was MRP II solutions sold to American industry ($1.2 billion of software). Moving into the 1990s, this decade was characterised by two major changes – the introduction of Enterprise Resource Planning systems and the rapid globalisation of the supply chain (particularly due to the growth of offshore manufacturing).
ISSUE 06 | 110
As we entered the new millennium, the 2000’s and beyond became an era of heightened connectivity. The explosion of the internet and a dramatic reduction in the cost of transferring information opened the door for new technologies, platforms and services to further revolutionise supply chains. One prominent example from this period was the catalysation of Radio-Frequency Identification technology. Just prior to the turn of the century in 1999, MIT launched their Auto-ID Centre to further the development of low-cost RFID tags and applications and in 2002, completed the first successful move of an RFIDtagged pallet from a Unilever to a Walmart distribution centre. The rising tide of ecommerce also had a particularly dramatic effect, largely for its influence on customer shopping habits and service expectations. Consumers became accustomed to greater choice and availability, to faster delivery times and cheaper delivery costs. This drastic change in the way that consumers purchase goods put heavy competitive pressure on traditional brickand-mortar retailers and their supply chains, forcing them to adapt their business models and seek out new strategies to facilitate this changing customer behaviour. Businesses realised that they needed to offer a seamless, consistent experience across multiple channels to remain successful, leading to the birth of omnichannel – essentially, the concept of “buy it anywhere, get it anywhere, return it anywhere”. Enabling the omnichannel experience of course poses many challenges, leaving companies searching for new ways to enable more efficient supply chains and fulfilment solutions. Many of the optimisation methods that have been and remain focus areas for supply chains, such as demand forecasting, inventory management, warehousing strategies and distribution practices, all aim to support the shift from supply-driven to demand-driven orientation. To create these modern, agile supply chains, organisations are investing heavily in a range of digital technology solutions that enable them to optimise processes and operations across the entire supply chain network. In our forthcoming whitepaper, we’ll be exploring the major technology solutions at play and exactly how and why organisations are using them.
ISSUE 06 | 111
SECTOR WATCH: TECHNOLOGY
£660K FUNDING WILL HELP FIRM CREATING COATING FOR NEXT GENERATION CHIPS
A materials technology company which is developing the next generation of microchips has raised a further £200,000 of funding from Mercia Fund Managers and a syndicate of US angels. The investment in Irresistible Materials follows the company’s recent success in winning a £460,000 grant from Innovate UK to develop its new photo-resist material which will allow the creation of smaller and lighter devices. Photo-resist is used to coat silicon chips before the features are etched on to them using ultraviolet light – a process known as lithography which creates the modern equivalent of wires. Currently ultraviolet light with a wavelength of 193 nanometres is used but in 2019 that will be reduced to 13.5 nanometres with the introduction of a new industry standard, known as extreme ultraviolet lithography, which will enable smaller microchip features. Irresistible Materials is in the final stages of testing a new photo-resist coating which will enable chip manufacturers to meet the standard. There is currently no other solution available on the market. Founded in 2010 as a spinout from the University of Birmingham, Irresistible Materials first received backing from Mercia in 2013. This latest funding will support the ongoing development and commercialisation of photo-resist and its carbon hard mask material, another solution for semiconductor manufacturing. Mark Volanthen, Head of Electronics, Materials, Manufacturing & Engineering at Mercia, said: “As consumers demand ever smaller and faster devices, the semiconductor industry is constantly seeking ways to reduce microchip sizes. Irresistible Materials’ products which consist of patented small molecules help chip manufacturers to meet these demands. With this latest investment and grant funding, the company is on target to bring new products to the market in time for the introduction of next-generation chips in 2019.” David Ure, Founder and Executive Director of Irresistible Materials, said: “The next 18 months will be an exciting and critical window for Irresistible Materials as we reorient our focus from R&D towards product development, and prepare our material for entry into the microchip production process. The Innovate UK grant, supported by our investment partners, provides the foundation for the company to execute its development roadmap through 2018, and positions us for further expansion later this year.”
MARK VOLANTHEN ISSUE 06 | 112
ISSUE 06 | 113
SECTOR WATCH: TECHNOLOGY
Significant cost savings and synergies identified
PROPOSED ACQUISITION OF PEOPLEFLUENT FOR £107 MILLION
• Review and integration process to be completed within the first 100 days. • LTG track record of successfully integrating acquisitions, cost management and margin improvement. • Focus on increasing sales productivity, more efficient application of R&D investment and monitoring of chargeable time and utilisation to achieve comparable levels to LTG. • Revenues are expected to reduce in the near term; however, management are confident of their ability to materially improve EBIT margin. • Target EBIT margin of at least 20% for PeopleFluent in FY 2019. • Total non-recurring costs of up to $3.0 million will be incurred in order to deliver these synergies and make important investments related to the PeopleFluent Business. • Acquisition will be immediately and significantly earnings enhancing in 2018. • Potential for cross-selling will help to underpin further opportunities for growth. Completion of the Acquisition is conditional upon, among other things, completion of the Placing, the incremental debt financing being available at completion of the Acquisition, all applicable waiting periods (and extensions thereof) under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or otherwise been terminated by the parties, and the Merger Agreement not being terminated, in each case, in accordance with the terms of the Merger Agreement. Subject to the fulfilment of the above conditions, the Acquisition is expected to complete shortly after the satisfaction of the U.S. anti-trust condition which is expected to take approximately two weeks if the U.S. anti-trust authorities grant early termination of the statutory waiting period, and 30 days or more if early termination is not granted. Completion of the Acquisition is therefore expected to occur in May 2018. Details of the conditions to the Acquisition are also set out in this announcement below.
Learning Technologies Group plc, the integrated e-learning services and technologies provider, is pleased to announce that it has entered into a conditional agreement to acquire the entire issued and outstanding shares of capital stock of PeopleFluent Holdings Corp.The leading independent provider of cloud based integrated recruiting, talent management, and compensation management solutions, from Bedford Funding I, L.P. and Bedford HCM Holdings GP, LLC by way of a reverse subsidiary merger for a cash consideration of £107 million (on a cash free, debt free basis), plus transaction costs. The consideration and transaction costs for the Acquisition are intended to be funded by a placing of new ordinary shares raising approximately £80 million, which is conducted outside the United States, and up to c.£35 million in incremental debt financing. The Board believes that the Acquisition has a compelling strategic and financial rationale:
Complementary fit to LTG • Strong strategic fit and operational benefits • Capability, geography and verticals aligned with LTG’s strategy, servicing approximately 50% of the Fortune 100
Commenting on the proposed Acquisition, Jonathan Satchell, Chief Executive of LTG, said: “I am delighted to announce the proposed acquisition of PeopleFluent, a leading talent management platform that will be transformative for our US presence and brings us new and complementary capabilities. Learning and talent are closely aligned and integrated talent and learning solutions will become vital as the pressure increases on corporates to attract, develop and retain people. This acquisition is fully aligned with our stated strategy from a capabilities, sector, geographic and financial profile perspective. PeopleFluent brings a large installed base of customers and significantly expands our international footprint with its US presence. We believe the financial effects of the acquisition are highly compelling.” Commenting on the proposed Acquisition, Andrew Brode, Non-Executive Chairman of LTG, said: “I am excited by the potential of an enlarged LTG, incorporating PeopleFluent – we will now be a business with estimated £135m revenue and a strong platform for future growth. This is a transformational moment for LTG. The team from PeopleFluent are joining an exciting journey as we look to consolidate the growing yet fragmented corporate learning and talent management industry.”
Attractive market opportunity • Large and growing addressable market • Positive industry tailwinds fuelling market opportunity • Increasing importance of talent productivity solutions
PeopleFluent well positioned to capitalise • Industry leader with scale • Multiple avenues of growth with significant opportunity within existing client base
PeopleFluent well positioned to capitalise • PeopleFluent will be a significant addition to LTG – 2017: c.£82.8m revenue (of which ~86% recurring) and c.£9.2m • Would take LTG to c.£135m revenue business, with Platforms expected to represent 77% of revenues • LTG recurring revenue increases to c.68%, from c.39% • LTG Adjusted EBIT increases to c.£23.3m • Strong sustained cash flow generation
ISSUE 06 | 114
ISSUE 06 | 115
SECTOR WATCH: TECHNOLOGY
HIRANDER MISRA CEO OF GMEX GROUP AND CHAIRMAN GMEX TECHNOLOGIES
As one of a new breed of cryptocurrency derivatives exchanges, BBOD is looking to attract multiple diverse participants and provide market-leading liquidity by providing a venue where futures and swaps on Ether and Ethereum-based tokens can be traded. BBOD is partnering with GMEX to deliver a technology solution aimed to attract both retail investors and deliver the scale and functionality to meet the needs of the institutional marketplace. This is a significantly differentiated offering compared to the current crypto trading ecosystems who traditionally suffer from fundamental issues including the lack of basic controls and redundancy, which leads to frequent flash crashes and system downtime. GMEX Fusion was chosen as the preferred trading platform by BBOD following extensive stress and performance testing and has been proven to support significantly higher volumes and matching speeds than other market solutions in addition to advanced crypto asset support.
DELIVERING WORLD’S LOWEST LATENCY CRYPTOCURRENCY EXCHANGE PLATFORM GMEX Technologies, a wholly owned subsidiary of GMEX Group and a provider of multi-asset exchange trading and post trade technology delivered through a partnership driven approach, is delighted to announce that the Blockchain Board of Derivatives will be the latest Exchange to implement GMEX Fusion, a unique integrated centralised and distributed exchange platform solution.
ISSUE 06 | 116
Hubert Olszewski, Director of Business Development & Communications at BBOD commented, “We have been working with GMEX to create the world’s fastest crypto order matching engine for cryptocurrency traders, empowering them to hedge their positions against price volatility.” He added, “Having a partner who has previously implemented trading solutions and services, and delivers support for both traditional and crypto exchanges, ensures that the project is well on track for launch in June.” GMEX Fusion, launched in January, has been specifically designed to support the latest technology and business challenges impacting crypto exchanges, traditional exchanges and emerging markets. In collaboration with clients, GMEX Fusion was built for professional traders in an industry where standards exist and need to be integrated with including FIX protocol. Catering for colocation, market surveillance, redundancy and increasingly, where uptime is critical, addressing the need for centralised and distributed technology to be implemented together. The project to implement Fusion at BBOD includes integration with Mobile Trading Partner’s GUI, APIs and post trade application. BBOD introduces the world’s only non-custodial smart contract wallet system for leverage trading allowing traders’ funds to remain under their personal control on the blockchain. As a result, the trader’s crypto-funds never leaves their pocket. Hirander Misra, CEO of GMEX Group and Chairman GMEX Technologies commented, “We are delivering an advanced exchange trading platform to BBOD with full crypto asset support and blockchain integration to trade Ethereum derivatives with a combination of ultra-fast order matching and security of funds.” He added, “We are looking forward to working with them to support this new unique cryptocurrency derivatives Exchange.”
ISSUE 06 | 121
ISSUE 06 | 117
SECTOR WATCH: TECHNOLOGY
OPEN BANKING TO BOOST UK ECONOMY BY 1BN GP GLOBAL COMPLETES ACQUISITION OF MAG LUBE LLC IN THE MIDDLE EAST
GP Global (Formerly Gulf Petrochem Group) today announced that it has completed its acquisition of MAG Lube LLC in the United Arab Emirates. MAG Lube LLC is a leading manufacturer of lubricants in the Middle East, distributing its full range of lubricants in more than 40 countries across the Middle East, Africa and Asia. GP Global has acquired a majority stake of MAG Lube LLC, a company valued at close to $75m, in a global lubricants market said to reach $166.23bn by 2025 according to Grand View Research, expanding at a 3.8% CAGR during the forecast period. The current CEO, Mahmoud Al Theraawi, will remain in his position and continue to lead the business in the UAE with the GP Global Lubricant team in UAE integrating into the overall MAG Lube LLC structure. Establised in 2013, MAG Lube LLC is one of the fastest growing companies in the country that witnessed 100% growth year on year, with 30,000 sqm state-of-the art blending facility situated in National Industrial Park, Jebel Ali. Its factory has the latest fully-automated blending system technologies designed in France and has a fully equipped, ultra modern laboratory focusing on research and development. MAG Lubes LLC currently employs over 100 employees across the Middle East and Africa, who will continue to service customers with the same level of care following the acquisition. As a result of the acquisition, GP Global’s lubricant manufacturing business is expected to achieve regional sales of over 60,000 kiloliter (KL) in 2018, up from 12,000 KL prior to the acquisition. The renewed output will move GP Global into the one of the top lubricant manufacturers in the UAE and get closer to GP Global’s strategic vision of producing 250,000 KL of lubricants globally by 2022 through organic and inorganic growth. Speaking about the acquisition, Sudhir Goyel – Managing Director at GP Global, said, ”Our lubricants business has witnessed steady growth over recent years both organically and in-organically. The acquisition of MAG Lube LLC, a regional leader in lubricants, compliments our growth plans for the group and brings us a step closer to our group’s strategic vision of producing 250,000 KL of lubricants by 2022 through organic and in-organic growth.”
ISSUE 06 | 118
He went on to add, “Through our majority stake in MAG Lube LLC, we will be able to realise the kind of scale that would allow us to enjoy the benfits of the entire value chain in line with our presence in other components of the chain. The group’s combined output will now stand at 140,000 KL per annum which includes GP Global’s operations in India.” GP Global will hope to witness the same integration and growth achieved through its acquisition of GP Petroleums, an Indian listed lubricant company in India, owners of the IPOL brand. The acquisition will further bolster GP Global’s offering across its business units – refining, storage terminals, trading & bunkering, bitumen, lubricants and grease manufacturing, shipping and logistics.
ISSUE 06 | 119
SECTOR WATCH: TECHNOLOGY
THE HIRE OF Cécile Frot-Coutaz as head of YOUTUBE IN EUROPE, MIDDLE EAST AND AFRICA
YouTube today announced the hire of Cécile Frot-Coutaz as Head of YouTube in Europe, Middle East and Africa (EMEA). Cécile will be responsible for running YouTube’s business in EMEA and will report to YouTube’s Chief Business Officer, Robert Kyncl. As YouTube’s most senior executive in EMEA, Cécile will be charged with growing content supply and further strengthening YouTube’s relationships across all stakeholders in EMEA. Commenting on the hire, Robert Kyncl, Chief Business Officer for YouTube, said, “Cécile comes with incredible experience in the media industry. Her leadership, guidance, strong network and deep industry understanding will be invaluable as we continue to strengthen our partnerships and grow our creator base throughout Europe, the Middle East and Africa.” Cécile Frot-Coutaz said, “YouTube is the voice of a generation and has become an integral part of the world’s cultural conversation. The opportunity to be part of that conversation and to work with Robert, his team and the wider Google community was too good to turn down. I will miss FremantleMedia enormously – it’s a global creative powerhouse at the top of its game, and I will continue to watch with pride as a devoted fan.” Cecile will be joining YouTube from FremantleMedia, where she serves as CEO. FremantleMedia has been a YouTube partner since 2008 and has established a strong and still growing presence on YouTube - and is the platform’s largest television production partner globally. Under Cecile’s leadership, Fremantle has grown their presence supporting on-air brands, like Got Talent and Idol, and has also built a leading position with strategic investments in a range of endemic partners. Born and raised in France, Cécile Frot-Coutaz earned her MBA from the Insead business school in 1994. When Pearson purchased the assets of Grundy Television, Frot-Coutaz was named Corporate Strategy Executive for the newly created Pearson TV. She then spearheaded the subsequent acquisition and integration of All-American Fremantle into the Pearson Television Group. After a short stint in San Francisco creating online and interactive strategies for Pearson Television, FrotCoutaz joined the North American headquarters of the newly rebranded FremantleMedia in Los Angeles, where she served as Executive Vice President, Commercial and Operations until her promotion to COO of Production in 2002, and CEO in 2005. In 2012, she was appointed CEO of FremantleMedia, based in London. YouTube has over 1.5 billion monthly logged in users and every day people watch over a billion hours of video and generate billions of views. European partners alone received around a quarter of YouTube’s global watch time.
ISSUE 06 | 120
ISSUE 06 | 121
SECTOR WATCH: TECHNOLOGY
ATOS IN UK & IRELAND SETS OUT IMPACT OF DIGITALLY TRANSFORMED FINANCIAL SERVICES INDUSTRY ON SOCIETY
Atos, a global leader in digital transformation, together with Worldline, European leader in the payments and transactional services industry, highlights in the new Digital Vision for Financial Services opinion paper how a revolution in digital payments and transactions will dramatically change our relationship with money and all traditional financial organisations and new entrants into the market. The shift from physical money to digital transactions when combined with new regulation and emerging technologies is creating an environment of radical change across the sector. Further profound implications are expected for traditional insurance structures for example, as Internet of Things and data utilisation methods lead to traditional policies disappearing to be replaced by ones based on real-time and personalised data. From more agility and innovation by incumbent operators to innovating at scale by smaller FinTechs, experts argue the full spectrum of Financial Services organisations must fully embrace the challenges, but also the opportunities of Open Banking, General Data Protection Regulation and emerging technologies. Speaking following a roundtable event held at the new offices of Atos UK and Ireland for the paper’s launch, Adrian Gregory CEO, Atos UK&I said: “Banking and insurance services are evolving at an unprecedented pace. A changing regulatory framework together with rapid advances in technologies are spawning a new era for the financial services industry. As consumers we have potentially more choice, more information and more control than ever before.” Presented by some of the leading subject matter experts within Atos and Worldline and across the sector including Salesforce, Microsoft and Dell EMC, Digital Vision for Financial Services positions the current age of digital transformation as arguably the most critical period in Financial Services history. Rob Price, Chief Operating Officer, Worldline, UK and Ireland: “Digitising payments should help to increase users’ physical safety as well as improving transaction speeds. Yet this will only become a reality when there is the incentive, not only for the consumer – but also the merchant and the bank. This is where the Second Payment Services Directive will help, improving security and driving innovation so that transactions can be executed more widely.” Peter Roe, Research Director, Financial Services, TechMarketView LLP, said: ”As Financial Services providers look at the vast array of new technologies at their disposal, they need to consider carefully how they and their suppliers can realise the potential benefits of digital as they modernise their business processes.” “This requires that each party fully understands the specific business processes, the risks inherent in change and the wider implications for organisational culture and behaviours,” added Peter. This is the seventh paper in the Digital Vision programme and comes after Atos recently announced a multi-year contract with Aviva to deliver data services as part of its digital transformation programme.
ROB PRICE CEO OF WORLDLINE
ISSUE 06 | 122
ISSUE 06 | 123
ISSUE 06 | 124
ISSUE 06 | 125
SECTOR WATCH: TECHNOLOGY
ALIX POULET NOMINATED AS THE NEW CEO OF LEETCHI.COM THE FINTECH STARTUP SUCCESS STORY
leetchi.com’s ceo Leetchi.com, the leading group gifting and personal fundraising platform in Europe, appoints Alix Poulet as the new CEO. Founder Céline Lazorthes remains as the Chairman of the Leetchi Group Executive Board. Alix Poulet, who joined Leetchi.com in February 2017 as the Chief Operating Officer, becomes the new CEO of the online money pot service founded by Céline Lazorthes in November 2009. Together with the Paris based team, she’ll lead company’s development in France and internationally. Her appointment marks a new milestone in the company’s history, after its acquisition in September 2015 by a French bank, Crédit Mutuel Arkéa. Founder, Céline Lazorthes, will now chair the Leetchi Group Executive Board as well as keep her CEO title of MANGOPAY, the B2B payment solution that is a part of the Leetchi Group. Before joining Leetchi.com, Alix Poulet headed e-Citizen, a marketplace for eco-friendly products, which she co-founded in June 2009 with her childhood friend Thomas Lang. She holds a Master’s degree in Business Law & Entrepreneurship from HEC, one of France’s ivy league universities. In 2005, she embarked on a world tour, visiting twenty countries, from South America through Asia to Eastern Europe. Goal? Deepen her interest in social entrepreneurship by meeting with people from diverse backgrounds, who all share a common desire - to change the world. Following her studies, Alix Poulet joined the HEC incubator to work on her business projects, where she met Céline Lazorthes.
ISSUE 06 | 126
Alix Poulet, Leetchi.com’s CEO: “I have seen Leetchi.com’s astonishing evolution from its initial phase, when it was just a business idea, to becoming the European market leader in online money collection. Today, it is with a great pride and joy that I accept the nomination as the CEO. It is an exhilarating experience to be leading this company through the next stage of development and new challenges, especially around the technical and regulatory constraints currently present in the fintech sector. I truly admire Celine, who successfully overcame all the challenges of the entrepreneurial journey. She managed to surround herself with passionate and competent people, who together define the company’s DNA, built on the idea of ‘givingy’ which is now shared by over 10 million service users.” Céline Lazorthes, Founder & Chairman of the Leetchi Group Executive Board: “Alix joined us a year ago as the COO and it is with a great ease that I hand Leetchi.com over to her, and entrust her with its future. Her entrepreneurial experience, international profile as well as knowledge of social entrepreneurship are great assets to support Leetchi.com in the new stage of growth and development. Having known and worked with Alix, it was only natural that she now takes on the role of CEO. I am confident that her appointment will only further strengthen the company!”
ISSUE 06 | 127
SECTOR WATCH: TECHNOLOGY
ASSET MANAGER TRUE POTENTIAL PIONEERS BLOCKCHAIN AS PROFIT SOARS
TECHNOLOGY USED BY A FIFTH OF BRITAIN’S FINANCIAL ADVISERS IS TO INCORPORATE Blockchain technology in 2018 – in a UK first for asset management. Fintech services group True Potential is set to become the first UK fintech in asset management to successfully incorporate Blockchain technology into its in-house trading platform. The firm has made the announcement as it publishes its latest annual results, showing annual turnover climbed to £99m in the year ended 31 December 2017, up from £69m in 2016 and £56.7m in 2015. The company’s profits also rose by 61 per cent from £15m to £24m during the year. Twenty per cent of UK financial advisers use True Potential’s technology, with over two million clients in total. 2017 saw assets on the firm’s in-house investment platform increase by 40%, now standing at almost £7bn. Across all channels, True Potential has over £52bn of client assets under its administration. The firm, which employs over 250 people, is incorporating Blockchain technology as an additional ledger into its in-house trading platform, currently being rebuilt, to record transactions. Managing partner David Harrison said: “During 2018 we will replace our current Investment Platform with a brand-new version, built totally in-house and incorporating Blockchain technology. This will give us total control over trading, technology, reporting and of course costs. We will also be the first Investment Platform in the UK to be using Blockchain at its heart, at first to audit our own systems, but increasingly to interact with others to produce greater clarity and certainty in both the supply chain and our own customer value chain.” On the company’s ongoing growth, David Harrison added: “Last year turned out to be a remarkable one for True Potential. When we published our last set of results, I said that the future looks particularly bright. That proved to be something of an understatement.” Ian McKenna, director of the Finance & Technology Research Centre, said: “Blockchain technology is beginning to come of age so it is really good to see all it can offer being embraced by a forward thinking financial advice firm who have a long track record of delivering technology enhancements ahead of the rest of the market. Driving out cost is a key element in platforms remaining competitive, so embracing Blockchain and the benefits it can bring is a logical step.” True Potential says its growth in 2017 was underpinned by the firm’s technology and its own range of globally diversified, multi-asset investment portfolios. • This firm’s unique impulseSave® technology enables savers to add as little as £1 to their investments from smartdevices. It was used by savers to top up their pensions and ISAs with a total of over £100m impulse saved. • Meanwhile, the True Potential Portfolios have more than £4bn invested in them with growth returns in the aggressive portfolio of over 41% since they were launched in October 2015. The firm’s investment partners include UBS, Allianz Global Investors, Goldman Sachs Asset Management, Schroders, SEI, 7IM, Columbia Threadneedle and Close Brothers. In May 2017 True Potential was named Business of the Year at the European Business Awards final in Dubrovnik. Over 33,000 businesses from 34 countries entered the competition and True Potential was named overall winner in the €26m-€150m turnover category.
ISSUE 06 | 128
ISSUE 06 | 129
SECTOR WATCH: TECHNOLOGY
HOW AR/VR HAVE SHAKEN THEIR
‘GIMMICK LABELS’ AND SET TO BE MAINSTREAM
Take auto insurance for example. AI will create a smoother boarding process by removing burdensome steps for the customer and the insurance provider, through customized solutions based on real-life driving behaviour, automated credit scoring, and chat-bots to interact with customers in a faster and more effective way, while IoT will ensure that the customer only gets charged for the time and miles driven in the car. Disruption wise, Blockchain is expected to have a major impact, as its core capabilities can be applied across a variety of functionalities and industries. For instance, its ability to record transactions in a verifiable and permanent way will help protect realtime transactions in banking as well as being able to digitize manufacturing supply chain workflows. It’s now clear that any long-held scepticism towards these Frontier Technologies is fading. In fact, our report finds the US is no longer the sole drive of Tech investments. China is now a key contender and an emerging AI and VR powerhouse, as it can be seen in latest industry moves. E-commerce behemoth Alibaba invested $600 billion in AI-based visual recognition start-up SenseTime, while Internet Giant Baidu created a $200 million fund centred around AI. China has the potential to match, or even surpass the US in terms of tech investments. Facebook CEO Mark Zuckerberg alluded to this during a congressional hearing this week when discussing his company’s competitiveness in the view of greater regulation versus other economies.
Artificial Intelligence (AI), once the stuff of science fiction and fantasy, is now setting new records. US AI start-ups raised $1.9 billion in venture capital in the first quarter of this year – the most on record – according to a recent MoneyTree Report. And what’s more, last month’s Mobile World Congress – the world’s largest tech conference - was awash with innovations across AI and other “Frontier Technologies” like Augment and Virtual Reality (AR and VR), Robotics, Internet of Things (IoT) and Blockchain. Typically, these technologies conjure up images of humanoid robots and other quirks of science fiction, but their potential is now being realised. Just look at Amazon Alexa or Tesla self-driving cars. In fact, our 2017 State of Tech Investment report shows that Frontier Tech accounted for 20% of Global VC funding in 2017 – or $30 billion - and is forecast to grow strongly. This is even after venture capital funding grew 76% last year.
Beyond China, Asia is becoming a driving force for Frontier Technology investments, with Japan’s Softbank forming a $100 billion “Vision Fund” being the best example. Last year, Softbank invested hundreds of million dollars in Frontier Technology-enabled companies like Petuum, Lemonade and Nauto, among others. Europe lags at this stage, despite the emergence of sophisticated tech hubs such as the Paris-London-Berlin triangle. Yet it’s just a matter of time before they begin to catch up. There’s little doubt the technology industry is evolving at a pace and becoming ever more global. Emerging innovations such as Robotics, Blockchain, AI, IoT and VR continue to be watchwords of progress and will create a host of experiences for customers, simplify company processes and bring new opportunities for society at large. Sooner than expected these Frontier Technologies will ensure that science fiction becomes the norm.
This boom in investment is also sustained by solid revenue growth, with Frontier Technologies generating more than $300 billion last year, largely driven by IoT, the most established of these Technologies. Other Frontier Technologies are certain to catch-up rapidly. AR and VR, for example, seems to have passed through the period of scepticism and is now expected to begin to go mainstream as the year ends, driving a new area of mixed reality where we will have the ability to experience with some of our senses – and one day with all five senses – something that is not real, but fundamentally feels real. This is underscored by the fact that AR gaming pioneer Magic Leap, which is hardly household name like Uber or Google, raised almost $1 billion in a recent mega investment round. To believe the hype around Frontier Technologies, it is essential to understand that these developments aren’t just about Immersive video and gaming experiences or using voice recognition to order a pizza or play your favourite song. It’s about disruption.
ISSUE 06 | 130
ISSUE 06 | 131
ISSUE 06 | 131
SECTOR WATCH: TECHNOLOGY
Ray Bingham, founding partner at Canyon Bridge Capital Partners Inc. and Executive Chairman, Imagination said: “Andrew has done a great job as CEO of Imagination through a challenging period. He is leaving the company with a strong roadmap and sales pipeline and with excellent partnerships around the world, especially in Asia We thank him for his invaluable contribution over the last two years. “With his extensive experience in both the global semiconductor industry and China, Leo will lead Imagination on the next phase of its journey as a worldleading independent IP supplier. He will deliver leadership for its graphics and connectivity customers, continued growth and our new vision in AI technologies. This appointment demonstrates our commitment to hire the best talent, invest in new technology and acquire and serve customers globally.”
imagination technologies group ltd. announces ceo succession Imagination Technologies (‘Imagination’) a leading supplier of semiconductor intellectual property (IP), announces today that Dr. Leo Li is to become Chief Executive Officer. Dr. Li is Chairman of the Global Semiconductor Alliance and a well-known and respected figure in the semiconductor industry. He has over 30 years of semiconductor experience most recently as chairman, CEO and president of Spreadtrum Communications and chairman of RDA before becoming Co-President at Tsinghua Unigroup. During his nine-year tenure at Spreadtrum, Leo drove a focus on continuous innovation, quality control, and customer relationship management— helping grow revenue from $100 million to $2 billion at Spreadtrum, and increased the company’s market value from $35 million to $7.5 billion.
Dr. Leo Li, Chief Executive Officer, Imagination Technologies said: “I have paid close attention to Imagination over the years. We have a strong strategy today to evolve the company to the next level of success by capitalising on the opportunities in other markets, particularly China, one of the largest semiconductor markets in the world. We will have a renewed focus on technology innovation through strengthening our R&D capabilities, making Imagination a clear global technology leader again, and bringing value to our customers. With the equity and strategic capital provided by Canyon Bridge, Imagination can reach its full potential as world leading independent IP supplier.” Dr Jon Peddie, president of Jon Peddie Research said: “Imagination is a pioneer in graphics: one of the first to accelerate 3D in PCs and consoles; the first to deliver high performance mobile phone GPU IP; one of the first to enable GPU compute; and a key player in diverse markets, from the pocket to the car. My understanding of the company culture is that it is restlessly innovative and with Leo Li, a proven heavy weight in the semiconductor industry, Imagination has found a leader who can harness that innovation for Imagination’s next big ‘first’.” Linley Gwennap, editor of Microprocessor Report, said: “Leo Li has a strong track record of leading successful semiconductor businesses. His deep engineering expertise helps him anticipate technology trends and develop products to meet market needs. As CEO of Imagination, he can draw on his experience in leading SoC design teams to understand what his customers want from an IP supplier.”
With extensive experience of working in both the US and in China, two of Imagination’s major markets, the appointment of Dr Li supports the company’s strategy of expanding into China and bridging the gap between US, Europe and Asia. Imagination Technologies is already capitalising on the opportunities in China, one of the largest semiconductor markets in the world through new licence deals and design-ins. The company is focused on creating and licensing a broad range of silicon intellectual property. Dr. Li replaces Andrew Heath, who has led Imagination since February 2016 and was responsible for first returning the company to profitability and then brokering the sale of the company to US based private equity firm Canyon Bridge, securing the company’s continuity as a world-leading independent IP supplier.
ISSUE 06 | 132
ISSUE 06 | 133
ISSUE 06 | 133
SECTOR WATCH: TECHNOLOGY
ZENMATE APPOINTS KASPERSKY LAB EXECUTIVE ANDREI MOCHOLA AS ITS CEO
“I’m extremely happy to join ZenMate - an agile team of success-driven professionals who are passionate about the privacy and security of our digital lives. I strongly believe that the brand and privacy service that ZenMate provides will guarantee its success in the industry, as well as the support of its trusting customers. I share the brand’s core values and stand behind the company’s solid principles. With the combination of passion and dedication of the team, nothing is impossible,” says Andrei Mochola, ZenMate’s new CEO. Andrei Mochola, PhD, brings over fifteen years of corporate experience in the consumer business to the company. He is an expert on business strategies and development, consumer marketing and e-commerce. In his previous role as the VP of Consumer Business at Kaspersky Lab, together with his team he successfully introduced Kaspersky Free Antivirus and the first Adaptive Security solution for consumers to the market. Prior to this he held various digital business roles at AVG Technologies and Creative Labs. After five years with ZenMate, Co-founder Simon Specka steps down as Managing Director and CEO. He will remain on the board of directors as a major shareholder and continue to support company in strategic matters as an active advisor. Specka founded the company together with Markus Hänel in 2013 and played a leading role in its development and technical orientation. Together with the team, he successfully established a well-organized infrastructure and pushed the development of several security and privacy products now used by over 45 million people worldwide. “After five intense and rewarding years building up the company, it’s time for me to start something new. As a serial entrepreneur and company builder at heart, there are many exciting business opportunities that I’d like to realize and scale. Unfortunately, they have little to do with ZenMate’ s core business. After a long and careful search, I am now confident to have found the perfect leadership team with Andrei and Jörn, who will lead the company to new heights as CEO and CTO in conjunction with the rest of the executive team and the help of our entire, exceptional team.”
Mochola will lead the execution of the company business strategy, specifically focusing on revenue and user base growth, expansion of the product portfolio for both consumer and business clients, as well as increasing the number of countries where ZenMate is the market leader. Together with Jörn Stampehl, he will orchestrate the company’s smooth transition from a VPN service provider to a comprehensive privacy company with a wide range of products and services that ensure a safe, free, democratic web for people all over the world. This is the moral core which has shaped the company since the very beginning. With Mochola’s expertise, the ambition to break down barriers for every internet user will be fortified.
ISSUE 06 | 134
ISSUE 06 | 135
SECTOR WATCH: TECHNOLOGY
The central point of a sharper decision-making process
S-AWARE® creates a powerful platform for achieving effectivity and responsiveness that are well beyond traditional video surveillance systems. It makes it possible to collect, analyse and aggregate situational information from multiple, separate sources within the security and operational systems for display on a single graphical user interface. It also allows operators to apply several intelligent features and functionalities for incident management and can be used for reporting, training and development purposes. With its pre-defined and configurable workflows, the solution can aid operators and operating personnel in decisionmaking during routine operations and also when unwanted incidents occur. As making the best decisions requires that you are fully aware of what is going on in each situation, S-AWARE® ensures that the right information is always available and delivered to the right people at the right time. The advanced reporting, debriefing and training tools ensure that you can also utilise the solution for training purposes and for projecting future events.
A new layer of capabilities for your existing security and operational systems
teleste introduces s-aware®,
S-AWARE® is available as a standalone product, or you can utilize it to bring an additional layer to Teleste’s S-VMX video surveillance and information management solution. The S-AWARE® and S-VMX systems work seamlessly together and can be integrated in the same graphical user interface. The S-AWARE® platform also offers a large base of compatible integrations for security operators and other operators whose current video surveillance system is something other than the S-VMX. The platform continues to be developed for the changing needs of versatile, mission-critical security systems within vertical segments, e.g. the public sector, public transport and other selected vertical segments.
a smart platform for situational awareness and incident management that goes beyond traditional video surveillance systems
Teleste’s new S-AWARE® platform adds an advanced layer of intelligence and data analysis capabilities to existing security and operations control systems. Increasing awareness of your surroundings and helping control events and incidents, the solution provides operating personnel with an invaluable tool for sharper decision-making. Teleste Corporation will launch a new solution for situational awareness and incident management at Securex 2018 in Poland. The solution, called S-AWARE®, has been designed to expand the scope of traditional security and operations control systems by harnessing them with a new layer of data analytics and intelligence. The solution provides operating personnel with a powerful tool to sharpen their decision-making process by taking advantage of versatile types of data from a variety of sources. “Security and operations control systems, such as video surveillance systems, are getting increasingly complex and they produce more and more data. This can become increasingly laborious and costly to manage and, in addition, operating personnel is faced by the challenge of how the collected data can be filtrated and turned into useful information, sharp insights and correct actions”, explained Esa Harju, Head of Teleste’s Video Security and Information business unit. He continues to say: “The S-AWARE® solution has been created to help operators control all the data in their operational systems in order to achieve a holistic view on their surroundings and quickly assess a correct resolution to each incident. The development work follows our strategy of providing solutions for the security operators and operating personnel for the overall management of situations, not merely monitoring them.”
ISSUE 06 | 136
ISSUE 06 | 137
SECTOR WATCH: TECHNOLOGY
RELIANCE ON PAPER IS LEAVING IT SECTOR OPEN TO COMPLIANCY DISASTERS One in ten organisations in the IT sector are putting themselves at risk of huge compliance and legal issues by over relying on paperbased processes, new research has found. A survey of 1,000 workers, conducted by WorkMobile, found that 12% of employees in the IT sector have seen extremely important documents lost or misplaced, which has resulted in legal disputes or compliancy issues. This includes confidential documents being left lying around rather than stored safely, and also copies of signed contracts being lost. Across businesses in the UK, a fifth of employees have also witnessed vital documents and information incorrectly filed, which has led to major losses within the company. Relying on paper isn’t making the job of working efficiently and compliantly any easier for staff, with over half (53%) finding it hard to store and keep paper files organised. 43% also think that it takes too long to properly fill in paper forms, and almost a third (30%) feel they are spending too much time sending documents to the correct recipients. But an over-reliance on paper is also putting employees at an increased risk of injury while at work. One in 20 workers have spotted an accident happen because their company was too reliant on paper, and this resulted in an employee injury. A common example of this is through employee handbooks being lost and a member of staff being injured due to correct procedures not being followed. Colin Yates, chief support officer at WorkMobile, said: “With technology now so readily available for businesses to adopt and modernise their working practices, it is surprising to see that so many are still relying on paper.” “Ultimately, it is putting businesses at serious risk of financial losses, and also possible legal action, but more worryingly, it is also putting employees in danger. The issue with paper documents is that they can be easily damaged, but they can also be lost, meaning that confidential documents could end up in the wrong hands. If sensitive information is compromised, this could leave clients and the business open to scams or being hacked.” “Implementing technology, such as mobile devices and the cloud, can help to eliminate the need for physical paperwork, meaning that these vital pieces of information can be stored securely online and can be accessed in a few clicks. In the search for greater compliancy,
ISSUE 06 | 138
ISSUE 06 | 139
SECTOR WATCH: TECHNOLOGY
“Leveraging AWS’s new UK Region means customers now have access to our portfolio on the platform of their choice, whether in the cloud or on-premises, enabling public safety organisations to host their data where they see fit. CommandCentral Vault makes digital evidence management easy and affordable removing the need to worry about complex integration, aging infrastructure or increasing IT overheads. Workflows can be streamlined, new features added and critical support services scaled up and down instantly to meet new requirements and unforeseen incidents,” said Phil Jefferson, MSSSI vice president, sales & service UK&I at Motorola Solutions.
SET TO TRANSFORM UK PUBLIC SAFETY WITH THE LAUNCH OF COMMANDCENTRAL VAULT ON AMAZON WEB SERVICES
“CommandCentral Vault takes big data and makes it smart data which can then be used to deliver the transparency and accountability the public expects. While time intensive editing processes such as image redaction and chain of custody requests can now be expedited, resources can be moved from the back office to the frontline, providing a better level of service to the public,” concluded Jefferson. “With CommandCentral Vault running in the new AWS UK Region, Motorola Solutions is able meet data localisation requirements and deliver digital evidence in a much more flexible and cost-effective way, helping public safety customers to succeed in their missions,” said Max Peterson, Head of Public Sector EMEA, Amazon Web Services. “AWS is committed to securely enabling innovation through our services, features, and broad eco-system of AWS Partner Network partners, and we are delighted to work with Motorola Solutions to adopt the AWS cloud.”
Motorola Solutions, Inc. today announced the launch of its innovative digital evidence management service on Amazon Web Services cloud infrastructure in the UK. CommandCentral Vault will provide UK public safety organisations with a secure platform that helps streamline digital evidence management processes. When used in conjunction with body-worn video camera solutions, such as Motorola Solutions’ Si500, CommandCentral Vault creates a complete solution for digital evidence management. It automates the process of uploading, editing, and tagging video content while supporting the automatic correlation of meta-data saving time and resources. The use of body-worn video technology in the police has seen a 36% drop in assault-on-police cases after one year and an 88% reduction in the number of citizen complaints. Rich data (such as video) captured by devices like the Si500 and stored in CommandCentral Vault can integrate with record management systems, making it easier to correlate incidents to multimedia content. The launch of the new UK-based cloud service comes at a critical time with UK police, fire and health services all under pressure to cut budgets and refine working practices to improve the level of service provided to the public. This in turn has driven an adoption of cloud services across the UK public safety sector, with the majority of organisations (82%) looking to embrace cloud services, up 20% from a year ago. Motorola Solutions’ CommandCentral Vault meets this growing requirement and offers an end-to-end evidence management solution. Using CommandCentral Vault on AWS, UK public safety agencies will benefit from a seamless cloud-based digital evidence management experience for ever increasing amounts of multimedia content, specifically body-worn camera video. This means public safety organisations can store, edit, manage, and share video evidence by providing enhanced chain-ofcustody controls for end-to-end security and content integrity. From the second data is created or collected by a device and uploaded to AWS, to themoment it’s shared, it is cryptographically secured in compliance with the toughest of government security standards.
ISSUE 06 | 140
ISSUE 06 | 141
SECTOR WATCH: TECHNOLOGY
ALTIA-ABM EXPANDS CANADIAN OPERATION
In Canada, federal law enforcement and other government agencies already use the company’s financial investigation software and there is substantial interest across the country in all the software products the group provides. The Altia-ABM group has been providing software to investigators for over 15 years and has its development offices in Glasgow, Scotland and Nottingham, England. The initial Canadian team to drive the launch and growth of the firm in Canada are - Beverly Golchuk, a highly experienced national sales and business development executive, who has been appointed as National Sales Manager and George Harrison, Business Development Director, who is a retired police officer widely recognized for his continuing involvement in the training of police officers across Canada in intelligence management. Ian Watson, CEO of Altia-ABM, said: “I am delighted to announce a very significant milestone for us in Canada where there is a clear and growing demand for the most advanced tools to combat crime. The Canadian team of Beverly and George are joining us at this crucial time in our development and bring the expertise and experience that we need to attract new customers in Canada and to provide professional support to our existing customers. The group has grown significantly in the past 12 months with our wide range of tools being used by professional investigators across the world. ” Beverly Golchuk says: “The UK and Canada have the same issues in terms of increasingly complex crime, terrorism, gangrelated activity and threats from highly active international criminal networks. The Canadian law enforcement agencies are also expected to make cost savings and today fewer law enforcement officers are tasked with having to solve more crimes. They need to achieve a higher standard of analytics in a shorter time-frame – this is exactly what Altia-ABM offers.”
The Altia-ABM group, a global leader in specialist software for use in the fight against crime, today announces a significant expansion of its operations in Canada. The company has opened a new office in Toronto and created a special business development team to meet the growing demand for its software and services. The Altia-ABM group develops and provides specialist software and services to empower individuals and organisations in their fight against crime. Their software significantly helps investigators with financial and criminal investigations and the management of covert and intelligence operations and is used by every police force in the UK and many forces across the world.Altia-ABM’s clients also include federal and provincial governments, enforcement agencies, tax authorities, the intelligence communities, healthcare providers and commercial financial investigators.
ISSUE 06 | 142
She added: “Altia-ABM’s tried and trusted products offer significant benefits to law enforcement professionals by enabling safe information sharing and by shifting the focus from labour-intensive, time-consuming tasks to achieving faster and better data capture and analytics. This is a game changer in the detection and successful prosecution of criminals in the UK and across the world, and I am looking forward to offering that specialist expertise to customers in Canada.” Beverly has more than 20 years’ experience working for major telecoms and IT companies in Canada, including Bell, Telus Corporation and Unisys, developing their IT strategy and helping them to reduce their costs through the use of improved network infrastructure technologies, cloud and security technologies and partnerships George was a police officer for 25 years and, since retirement, has remained closely involved in the training of officers across Canada in intelligence management.
ISSUE 06 | 143
SECTOR WATCH: ENERGY
4TH OFFSHORE LICENSING ROUND OFFERS SIERRA LEONE OPPORTUNITY TO EXPAND ITS UPSTREAM SECTOR, SAYS GLOBALDATA
With the Atlantic Margin of Africa firmly positioned on a steeply rising limb of the creaming curve, Sierra Leone’s 4th Offshore Licensing Round offers explorers the opportunity to enter into an emerging petroleum province at a favorable time, though changes to Sierra Leone’s fiscal terms make the nation less competitive than it used to be, which may put the round at risk, according to GlobalData, a leading data and analytics company. Currently, only African Petroleum and European Hydrocarbons Limited hold licensed blocks in Sierra Leone. These blocks, SL-4A-10 and SL-03, have recently entered into their second extension period, expiring in November 2018, or in September 2019 if the operator commits to drill one well in each by the end of 2019. As such, the 4th Offshore Licensing Round offers Sierra Leone the opportunity to expand its upstream sector. Discounted state take (percentage) for Sierra Leone, old and new terms, has been modelled for hypothesized fields of different sizes and compared with the fiscal regimes of neighboring countries: Mauritania, Senegal, The Gambia, GuineaBissau, Guinea, Cote d’Ivoire, and Ghana. Sierra Leone ranks 4th compared to the neighboring countries, with discounted state takes of between 70 percent and 71 percent. This compares to state takes of 58 percent to 90 percent for the selected peer group of countries. Terms offered under the 4th Offshore Licensing Round have increased Sierra Leone’s discounted state take by 3-4 percent relative to previous rounds, reducing Sierra Leone’s competitive edge within the Atlantic Margin region. To date, the mean recoverable reserves for fields across the entire west coast of Africa stands at 197 million barrels of oil equivalent (mmboe), with the region displaying a typical field size distribution. Against this backdrop, Sierra Leone and its immediate neighbors are underexplored, leaving a reasonable possibility that considerable volumes of yet-to-find hydrocarbons remain. Considerable subsurface data already exists over much of the Sierra Leone offshore, including well, 2D and 3D seismic reflection data, and gravity-magnetic data. The minimum work terms defined by the Petroleum Directorate of Sierra Leone have been set so that data acquired as a result of future licensing compliments and enhances the national data repository. Strict timescales must be adhered to by operators, with exploration license extensions conditional on agreed exploration works being completed in a timely manner.
ISSUE 06 | 144
ISSUE 06 | 145
SECTOR WATCH: ENERGY
ANCALA PARTNERS AND ANESCO ACHIEVE FIRST
PORTFOLIO SCALE BATTERY DEPLOYMENT CO-LOCATED ON SOLAR PARKS IN THE UK
DOTLABEL TO LAUNCH A NEW SOCIAL INTRANET PLATFORM FOR UK’S SMART PAYG ENERGY SUPPLIER UTILITA
Utilita, UK’s leading supplier of prepayment gas and electricity has commissioned DotLabel to reinvent their internal communications tool, to enable online staff collaboration, communication and knowledge sharing. The energy supplier focuses on the needs of the PAYG energy market and has been installing Pay As You Go smart meters for over 10 years, providing their customers with the latest smart metering technology and offering them control of their energy bills. UX & digital agency DotLabel, experts in generating user-focused and results-driven digital experiences, will redesign Utilita’s intranet to drive proactive engagement among its 1,500 employees, located across 11 sites from The Solent to Scotland, as well as the hundreds of field-based employees across the UK. DotLabel’s work will involve detailed research of staff needs and expectations to ensure that features, functionalities and online user journeys will meet the demands of Utilita’s fast growing workforce. By streamlining internal communication, providing collaboration tools and providing real-time newsfeeds, the new hub will aim to drive effectiveness and efficiency throughout the company.
Ancala Partners LLP, the independent mid-market infrastructure investment manager, and Anesco, the UK’s leading energy storage provider, have completed the first portfolio-scale deployment of batteries co-located on solar parks in the UK. The batteries, located at 10 of Ancala’s existing solar PV sites across England, will provide balancing and frequency response services to the National Grid. Renewable electricity generators such as solar parks are intermittent producers of electricity. The rapid growth of renewable installations in recent years has created challenges in balancing the supply and demand of electricity in the UK. Batteries offer a unique solution to the challenges of intermittent generation by storing and deploying electricity into the National Grid at the times it is required most.
Matt Oxley, co-founder and Director of DotLabel says “This is a very exciting project with a lot of factors to consider. Taking a user experience-driven approach, we will carry out workshops and focus groups to understand the needs of the business and the users. This UX insight will help us develop personas and scenarios, to ensure that user journeys are optimised and the social intranet will meet users’ needs. I am very confident that the end result will meet and hopefully surpass Utilita’s expectations.” The appointment paves the way into yet a new business sector for the award-winning agency, which was recently announced among UK’s Top 10 UX & Creative Design Agencies in the Clutch Awards 2018. Nic Rhodes, Marketing Manager of Utilita comments “DotLabel really understood our requirements and presented us with an exciting and relevant digital solution, tailored to meet our specific needs. They have a solid track record of delivering impactful results and brought fresh ideas to the table. We are confident that the outcome of their work will support our wider business strategy”.
Batteries can also provide other services to the National Grid, such as frequency response, due to the speed with which they can charge and discharge electricity. The battery portfolio located on Ancala’s solar parks provides the ability to store 12MWh of electricity. Lee Mellor, Director, Ancala, commented: “To realise this initiative we have worked closely with all stakeholders and in partnership with Anesco. It is a great example of how we can add value for our investors through proactive management of assets.” Steve Shine, Executive Chairman, Anesco, commented: “We are delighted to be partnering in this initiative with Ancala, which has the foresight and appetite to join us in undertaking innovative renewable energy projects. It’s an exciting time for the sector and we are proud to be playing a leading role in the deployment of energy storage technology in the UK.”
ISSUE 06 | 146
ISSUE 06 | 147
SECTOR WATCH: ENERGY
CLEAN ELECTRICITY GENERATION: PARTNERSHIP MAKES BIOFUEL ACCESSIBLE TO EVERYONE
LIONTRUST’S NEIL BROWN: ENDING PLASTIC POLLUTION - AN OCEAN OF OPPORTUNITY
At several locations around the world, a partnership of international companies will start construction of facilities, where biocoal will be produced on a commercial scale. This biocoal can be used as sustainable fuel in power plants and heating installations all over the world, giving a boost to reducing climate change. Of all resources used for global energy consumption, 19.3 percent is renewable energy, of which almost three-quarters is generated from biomass, according to the Renewable Energy Network. For the production of biocoal, at present woody waste residues are mainly used, among others from the wood-processing industry, sustainable forestry and green maintenance. The use of biocoal reduces fossil carbon emissions significantly and increases the use of biomass, which plays a major part in the necessary energy transition. By using biocoal it is even possible to make existing coal-fired powerplants sustainable without any major adjustments. The partnership is initiated by Clean Electricity Generation and Stork. Stork, a Fluor Company, will build and maintain the new production facilities. The building of the first new production plant for biocoal is scheduled in Estonia. CEG and Stork are currently working on a front end engineering and design of the installation. Construction starts at the third quarter of this year. Parallel to that, they will continue working on installations in Finland and outside of Europe with a main focus on North America. Energy innovation company CEG will supply the patented technology. The company has succeeded in developing a production facility for biocoal on a commercial scale making biocoal a viable and sustainable alternative to fossil coal. CEG already has a production facility in Derby, United Kingdom, where high-quality biocoal is produced. In comparison, the new factory in Estonia will be five times bigger. Other participating companies within the partnership include among others Carrier, which will supply essential parts for the production facilities, and investment company Momentum Capital, majority shareholder of CEG. In addition, several large international energy companies have indicated that they want to join the partnership. The sustainable residual flows of biomass are converted into biofuel through so-called torrefaction technology. With this technology the biomass is converted into sustainable coal via a thermal refining process. This creates a relatively cheap biofuel with a high energy density. The biocoal in the form of pellets can be used in traditional coal-fired plants, but also for industrial heating processes, buildings or city district heating projects. Compared to coal combustion, per tonne of biocoal, 2.5 tons of CO2 is saved. Moreover, the energy value is higher and less storage and transport is needed than traditional sustainable alternatives. During the production of biocoal, the installation also produces green electricity and heat. The International Energy Agency names torrefaction a promising technology, although a few years ago it concluded the investments were too high and the development was too slow. Now, the IEA names torrefied biomass the cheapest, lowest risk biomass for storage, transport and processing, and also the best form of biomass as a global commodity. The partnership is now accelerating this technology. Erik Huis, CEO of CEG said: “We are the only party who is controlling this technology on a commercially applicable scale and who owns the intellectual property of it. Now, together with all partners, we take the final hurdle to raise biocoal to a worldwide standard. It will pave the way to make biocoal a sustainable bulk product, so that it becomes accessible to everyone. That is our ultimate goal. The energy giants of this world follow every step we take closely and find alignment with our process, because it is a sustainable alternative for their entire chain of fossil processes.” Erik Huis further adds: “The current orders and the orders ahead require a total investment of €350 million.” Martijn van Rheenen, CEO of Momentum Capital, the investment company of CEG is also pleased. “With this partnership we have a unique combination to contribute to both the energy transition based on proven technology and the creation of value for our investors. The production facilities in our Industrial Assets portfolio are therefore both purchased by the industry and by professional institutional parties for investing value and long-term cash flow,” he commented.
Neil Brown, investment manager on the Liontrust Sustainable Investment team looks at global efforts to address plastic pollution and highlights companies driving innovation in packaging, sustainable plastics and recycling. “From poisoning and injuring marine life, to the ubiquitous presence of plastics in our food, to causing major life-threatening diseases, the growth of plastics is threatening our planet’s survival.” - Earth Day Network This year’s Earth Day on 22 April is focused on the global drive to end plastic pollution. There is an estimated 150 million tonnes of plastic in oceans today and, at current rates, we are on track to have one tonne for every three tonnes of fish by 2025 and more plastic than fish in our waters by weight by 2050 (according to World Economic Forum figures). We need a global effort to eliminate single-use plastics and significantly reduce use, and improve recovery, of the rest. The damage caused by our current use and disposal of plastics makes the system unsustainable and we support the global drive for solutions. As investors, we see the financial value, the environmental and social impacts and, therefore, the benefit to our clients in supporting those companies that can deliver this transition. No single action is likely to provide a complete solution in our view so we are focused on the full range of meaningful changes that need to be made, which include: • Readily biodegradable packaging • Plastics derived from natural sources • Improved recycling rates. • Changes to food production and packaging to deliver safe food with reduced wastage without reliance on plastic packaging Ultimately, however, it is the development of closed-loop ‘circular economy’ models that we believe will be critical. One of our key investment themes is Increasing Waste Treatment and Recycling. Only 14% of plastic packaging is currently collected for recycling and just 5% is retained for subsequent use, highlighting the opportunity for companies working to improve this. Across our portfolios, we own Suez, Pennon and China Everbright, which continue to revolutionise the waste recycling space. Recent measures announced by the UK government are positive steps in this sphere: the proposed deposit return scheme for drink containers mirrors similar enterprises in Norway, Germany and some US states, which boosted recycling rates to above 90%. Another key theme across our portfolios is Making Food Production Sustainable, where we look for companies offering sustainable alternatives to current food production and packaging. Dutch company Corbion is a new holding for our funds. The company uses natural ingredients to produce lactic acid, which is used as a food preservative. This is already a great theme for us and Corbion is now moving a step further in converting its lactic acid into polylactic acid, a bioplastic. Bioplastics have a role to play in making our system more sustainable but it is critical to understand they are not a solution on their own to marine littering. Even those that are biodegradable typically require industrial conditions, which are very different to those found at the bottom of the ocean. Smurfit Kappa, Europe’s largest paper packaging producer, is another core name for the funds. Paper and packaging companies are caught at the centre of the waste debate and we see strong financial and environmental opportunities in those that can do it sustainably. Three-quarters of the fibres that Smurfit Kappa uses are from recycled sources and the remaining 25% come directly from its own plantations and third-party suppliers. We see value in Smurfit’s responsible resource management, operational efficiency and products that help to reduce waste and resource use as well as increasing recyclability, reusability and degradability. While we continue to invest in solutions providers, very few of us can say we are not part of the plastics problem. Plastic is a priority engagement issue for us in 2018 and we are working with our investee companies to drive change. Progress is under way but too slow. Unilever, for example, has already cut packaging waste per consumer by 28% since 2010 and has targeted at least 25% recycled plastic content in its packaging by 2025. Sachets are a particular issue for the company and it is investing heavily in technology called CreaSolv, a chemical process that breaks down the polymers in sachets so the plastic can be reused. This, and other aspects of the company’s Sustainable Living Plan, puts Unilever at the forefront of global companies in our view but even this progress is unlikely to drive the fundamental change our oceans need. Earth Day’s focus on this important issue is critical. The Ellen MacArthur Foundation recently announced at the World Economic Forum Event in Davos that several leading consumer brands are working towards 100% reusable, recyclable or compostable packaging by 2025 and we also note various supportive government statements and initiatives in 2018.
ISSUE 06 | 148
ISSUE 06 | 149
SECTOR WATCH: ENERGY
RSK ACQUIRES CENTRAL ALLIANCE PRE CONSTRUCTION SERVICES LTD
Leading environmental and engineering services company RSK Group Ltd today announced that it has acquired Central Alliance Pre Construction Services Ltd “Central Alliance”, a pre-construction services company headquartered in Wakefield, West Yorkshire, UK. Central Alliance provides ground investigation, geo-construction, training, technology and survey services to the UK construction, defence, rail, utilities and transport sectors. Through its in-house experts and up-to-the minute technology such as satellite imagery, aerial drones and muon tomography, Central Alliance has been helping high-profile clients, including Highways England and Network Rail, to deliver major infrastructure projects. The company’s projects include the Transpennine East and West rail schemes; A1 road widening schemes; saturated ground analysis for the M1 motorway; ground investigation on the A47; mobile mapping of the Sheffield Innovation Corridor; 3D laser scanning of UK canal locks and of National Grid electrical substations; and utility surveys for Sainsbury’s supermarket car park projects nationwide. This is the latest in a series of acquisitions by RSK, which is based in Helsby, Cheshire. It follows the acquisition of CJ Associates and Up and Under Group, and the merger with RSKW in January,
Dr Alan Ryder, chief executive officer, RSK, said: “I am delighted that RSK has been able to acquire Central Alliance. It is a great business with great people and great clients. Our plan is to invest in the company and to help it grow. RSK now has over 100 drilling rigs with an equal number of trained crews, in-house laboratories and more site investigation capability than its rivals do. Whether it is a simple investigation for a single house, working on railway embankments using specialist slope-crawler rigs or investigating ground conditions for a new nuclear power station, RSK brings in top-quality people, with top-quality equipment, using innovative techniques. I am delighted to welcome the 80 staff at Central Alliance and look forward to supporting their clients on all manner of interesting projects.” Craig White, joint managing director of Central Alliance, said: “I am really excited about working with RSK and see great synergies between our companies in ground investigation and surveying. RSK is also a very professional organisation and we think Central Alliance will fit very well into the RSK group.” Richard Pidcock, joint managing director of Central Alliance, added: “I am looking forward to the opportunities we can unlock as part of the RSK group. They will ensure that Central Alliance can build on its great reputation for delivery and develop its innovations such as industry-leading satellite-based technology. We have a great team at Central Alliance and we all look forward to being part of the RSK family.” Jason Marbeck, commercial director of Central Alliance, said: “This is a fantastic move all round. Central Alliance is well established in the rail industry and has a reputation for high quality that will fit in well with RSK’s professionalism. We are pleased that RSK is keen to support our growth and our innovative technologies such as satellite-based saturated ground investigations and will help us to expand our services internationally.”
and the acquisition of acoustics, noise and vibration consultancy Cole Jarman and site investigation services firm Ian Farmer Associates in November 2017, all of which add to RSK’s growing portfolio. Permira Debt Managers has backed RSK in making the acquisitions and the merger as part of a £140-million funding package agreed in 2017 that will include about 10 acquisitions for the group. The acquisition of Central Alliance brings RSK’s headcount to over 2100 in 83 offices worldwide. The Central Alliance business will continue to operate under its existing brand. Richard Pidcock and Craig White will be the joint managing directors, and Jason Marbeck will join the board as the commercial director. According to the 2017 UK industry Market Trends report, RSK ranked as the eighth overall environmental consultancy, top for contaminated land/remediation and environmental/sustainability policy and strategy. Other top five places included third for regulated industries; third for environmental liabilities, risks and hazards; fourth for environmental management and compliance; and fifth for working infrastructure and development clients. These latest acquisitions will likely see RSK’s profile grow in the industry’s important rankings. RSK has acquired 18 environmental and analysis firms across Europe and the Middle East in the past decade and has seen impressive growth during that time that has helped to create a £150-million-turnover business.
ISSUE 06 | 150
ISSUE 06 | 151
SECTOR WATCH: CONSTRUCTION
ADJUDICATION ENFORCEMENT: PLUGGING THE CAP OR OPENING THE FLOODGATES? Background In the 20 years since the Housing Grants Construction and Regeneration Act 1996 came into force, the cases which have emerged from the Courts have established a number of firm principles when it comes to enforcement of an Adjudicator’s decision. The Technology and Construction Court has established a “fast track” procedure under which a party with the benefit of an Adjudicator’s decision can quickly obtain summary judgment and will support the enforcement of Adjudicators’ decisions, even if the decision is wrong (see Macob Civil Engineering Ltd v Morrison Construction Ltd  EWHC and Carillion Construction Ltd v Devonport Royal Dockyard Ltd  EWCA Civ 1358. Only if the decision was obtained without jurisdiction or in breach of natural justice will enforcement be refused. However, under the Civil Procedure Rules (CPR Rule 83.7) the Court will stay enforcement where it finds there to be “special circumstances” which render it inexpedient to enforce the judgment or order. In the context of Adjudication, it has been established for around 13 years, when the relevant principles were laid down in the judgment of Mr Justice Coulson in Wimbledon v Vago  EWHC 1086 (TCC) that if, on the evidence before the court, it is likely that the “winning” party in the adjudication will be unable to repay the sums awarded by the Adjudicator (either because it is insolvent or its present financial position suggests that it would be unable to repay the sums awarded) a stay should be ordered. So, if you are successful in your adjudication, you may feel confident that, unless the paying party could bring itself under any of the Wimbledon v Vago principles, an enforceable judgment is not too far away.
Recent developments However, in two recent decisions of the Technology and Construction Court, the court has indicated its willingness to widen the circumstances under which a stay of enforcement will be allowed. In Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd  EWHC 177 (TCC), Mr Justice Coulson made it clear that the principles set down in Wimbledon v Vago were not to be considered “set in stone”. He said that the principles “do not for example deal with the position where allegations of fraud are made, particularly in circumstances where those might affect the financial standing of the Referring Party (who is almost always the party opposing the stay)”. This thread has now been picked up in Gosvenor London Limited v Aygun Aluminium UK Limited  EWHC 227 (TCC) by Mr Justice Fraser. That case started off (in the court’s words) with “an entirely conventional narrative for adjudication enforcement proceedings” but the twist came when it was alleged in evidence (including a draft Defence) served by Aygun in opposition to the enforcement proceedings that a substantial proportion of Gosvenor’s adjudication award was based on fraudulently invoiced sums. The extent to which allegations of fraud can be used to defeat enforcement proceedings has been considered in a handful of cases. It had been thought, at least until the judgment in Gosvenor, that the court had set down a comprehensive set of principles that governed the circumstances in which fraud could be raised in the context of Adjudication enforcement. In Speymill Contracts Ltd v Baskind  EWCA Civ 120, the Court of Appeal approved and applied the principles set out in SG South Ltd v King’s Head Cirencester LLP and another  EWHC 2645 (TCC) that, in essence, it was only allegations of fraud that (i) were not or could not reasonably have been raised in the adjudication and that went to the subject matter of the adjudication, that should be raised at the enforcement stage. The reasoning underlying those principles was captured by the Court in SG South when it said (para 34) “Fraud is a very serious charge to make in civil proceedings of any sort and, whilst of course it is established in a (relatively) few cases, the Court always demands that the allegations are spelt out and are at least on their face supportable by credible evidence. This applies equally if not more in adjudication enforcement proceedings when it would be very easy to “bandy about” fraud allegations to seek to avoid enforcement.” Returning to the thread picked up in Gosvenor, Mr Justice Fraser considered the draft Defence and supporting evidence which had been served by Aygun and came to the conclusion that none of what Aygun had put forward was sufficient to surmount the basic hurdle that that material should have been deployed in the adjudication.
ISSUE 06 | 152
The new law on stay applications That was not however the end of the matter because Aygun also applied for a stay of execution in the event that judgment was entered and it was in relation to the stay application that the significance of the Court’s decision arises. The Court acknowledged that none of the matters raised by Aygun (including their allegations of fraud) fell squarely within the Wimbledon v Vago principles but nevertheless considered the facts in the Gosvenor case justified the grant of a stay of execution and, because of that fact, a further principle should be added to those already set out in Wimbledon v Vago. That additional limb is to be expressed as follows: “If the evidence demonstrates that there is a real risk that any judgment would be unsatisfied by reason of the Claimant organising its financial affairs with the purpose of dissipating or disposing of the adjudication sum so that it would not be available to be repaid, then this would also justify the grant of a stay”. The Court was clear to emphasise that the additional limb was “only likely to arise in a very small number of cases and in exceptional factual circumstances”. Recourse to the new principle “will be extremely rare” and the standard for the party applying for the stay to meet is “broadly the same as the level of evidence necessary to justify the grant of a Freezing Order (what used to be called Mareva relief)”.
Some thoughts Whilst the extent of the practical impact remains to be seen, there are a number of potential issues with the new test. The following are a few initial thoughts and questions: 1. The court in Gosvenor decided that it was entitled to take into account allegations of fraud that were based on material that was before the Adjudicator and was taken into account by him when coming to his decision. There is a risk that this invites a party on the wrong end of an Adjudicator’s decision to resurrect issues that were before the Adjudicator, essentially allowing the court to make a collateral attack on matters already decided by the Adjudicator. This was precisely the issue warned against in the line of authorities culminating in Speymill. 2. The introduction of the notion of a “risk of dissipation” also risks the disgruntled party introducing significant amounts of evidence relating to the subjective intentions of the parties, as well as a far more detailed analysis of the financial affairs of the successful party, than would be expected under Wimbledon v Vago, where the question for the court as to whether there are grounds for a stay is more clear cut. The worry could be that a paying party will simply raise as much “dirt” as it can, in order meet the low bar that there is a “risk” of dissipation, without taking into account any of the other checks and balances that would arise under a ‘standard’ application for a Freezing Order. Is this really suited to the overriding aims of the 1996 Act? 3. Will the test (linked as it seems to be to the standard of a Freezing Order) actually work? For example, one vital aspect of the Freezing Order is that the Applicant must put forward evidence that is has a “good arguable case” in respect of the claim it intends to bring against the Respondent. Applying that to the current context, that would mean the paying party having to show that they had a prospect of demonstrating that they had at least some entitlement (that was more than merely theoretical) to recover any of the Adjudicator’s award on a final determination. However, the generally held view on adjudication enforcement is that the Court will not look at the merits of the Adjudicator’s decision so it is difficult to see how the prospects of “overturning” an Adjudicator’s decision (to meet this part of the Freezing Order test) will be dealt with. It is also difficult to see why the court would need to add this (effectively less stringent) test into enforcement proceedings, where it would at all times be possible for a paying party to obtain a Freezing Order.
Conclusion We will wait to see whether Defendants to Adjudication enforcement proceedings seek to take advantage of the new limb in Wimbeldon v Vago and, indeed, whether it remains in place in its current form for any appreciable time. David Skelton, Partner in Construction & Engineering at Womble Bond Dickinson
david skelton ISSUE 06 | 153
SECTOR WATCH: CONSTRUCTION
BIRMINGHAM ENGINEERING FIRM doubles office space after 10 years in the city
BUILDING Services Design has had a presence in Birmingham for more than a decade and has recently announced its expansion to new premises at Fort Dunlop to accommodate its growing team of engineers.The mechanical and electrical engineering consultancy has seen an increase in staff over the last six months – with the team growing from 15 to 21 – to handle an increase in work in the West Midlands. “This move to a larger office space – almost double the size, in fact – really demonstrates our commitment to Birmingham and the West Midlands region,” said Jo Jones, associate director at BSD. “We had outgrown our previous office so when the opportunity arose to secure a 2,000 sq ft space in Fort Dunlop we jumped at the chance. The office has two meeting rooms and we can now make use of a more creative breakout area. The space now encourages more interaction between staff, encouraging a more social atmosphere and room for collaborative working. We also hold monthly ‘cluster’ events where we have themed lunchtimes and we all sit and eat together which I know the staff really enjoy.” “There’s certainly a lot going on in the West Midlands; with the 2022 Commonwealth Games having been announced as being hosted here there’s a real buzz in the city – and across the region. “It’s an exciting time and there’s a lot going into planning in anticipation of an influx of tourists and visitors. There is additional accommodation, hotels and office space being proposed to prepare for what looks set to be a fantastic event – one to rival London 2012, I’m sure. We’ve seen work increase across a number of sectors, including: private rental schemes, standalone bespoke residential properties, leisure facilities, retail facilities and change of use schemes, which are often converting office spaces into residential opportunities.” “The property market is still performing well in the West Midlands and there’s certainly a need for more homes in the region to sustain demand. Obviously this is something that has also been recognised by the government with a significant, new housing deal being announced at the Spring Statement specifically for the West Midlands. Birmingham has also got a thriving student population so our experience in student residential work – as well as the delivery of university buildings – is also extensive.” BSD’s most recent new starters – Riki Lindup, mechanical engineer, and Femi Adeleye, electrical engineer – bring nine years’ combined experience to the team. Jo added: “Riki has an interesting story – he’s returned to us after a three year absence, having initially taken a job closer to home, and we’re delighted to welcome him back. I’d like to wish Riki and Femi the best of luck in their new roles – I’m sure they will do incredibly well here at BSD and will help support further growth as we move into our second decade in Birmingham.”
ISSUE 06 | 154
ISSUE 06 | 155
SECTOR WATCH: HEALTHCARE
MPS AND PEERS URGED TO SUPPORT REFORMS TO CURB RISING COSTS OF NHS CLINICAL NEGLIGENCE CLAIMS A coalition of organisations which represent the NHS and health professionals is calling for urgent action to reduce the £1.7 billion paid last year alone on clinical negligence in England. The value of claims in the pipeline is estimated to be a staggering £65 billion. On Tuesday (24 April) the House of Lords will debate proposals to change the way compensation is calculated, as part of the Civil Liability Bill. The NHS Confederation, which represents organisations across the healthcare system, has coordinated a statement ahead of the debate, calling on parliamentarians to support the Bill.
Signed by Niall Dickson, Chief Executive NHS Confederation, Simon Kayll, Chief Executive Medical Protection Society, Dr Peter Swinyard, National Chairman Family Doctor Association, Dr Christine Tomkins, Chief Executive Medical Defence Union, Chris Kenny, Chief Executive and Secretary Medical and Dental Defence Union of Scotland, Professor Carrie MacEwen, Chair Academy of Medical Royal Colleges, and Dr Chaand Nagpaul, Chair British Medical Association. Niall Dickson, chief executive of the NHS Confederation, said: “The rising cost of clinical negligence is unsustainable and means vast resources that could be used by the NHS are being diverted elsewhere. We fully accept there must be reasonable compensation for patients harmed through clinical negligence, but this needs to be balanced against society’s ability to pay. Money used for this purpose cannot be spent on frontline care.” “The time for action is now. That is why the NHS Confederation has joined forces with a range of interested organisations to urge MPs and peers to act. While we welcome changes to the way the discount rate is set, a wider programme of reforms is needed and we urge the Government to be bold in introducing a strategic approach to control legal costs, ensure fair compensation payments are based more closely on the needs of claimants and to reduce incidents of harm from happening in the first place.”
As well as the Confederation, the statement has been signed by the Academy of Medical Royal Colleges, British Medical Association, Family Doctor Association, Medical Protection Society, Medical Defence Union and Medical and Dental Defence Union of Scotland.
Statement: Healthcare organisations support for reforming how the discount rate is set As organisations which represent the National Health Service and the health professionals who provide care and treatment to patients in England and Wales, we urge MPs and Peers to support the clauses within the Civil Liability Bill that reform how the discount rate is set. The rising cost of clinical negligence is unsustainable and means vast amounts of resource which could be used more effectively have to be diverted elsewhere. Last year the NHS in England spent £1.7bn on clinical negligence claims. That represents 1.5% of spending on front line health services. This annual cost has almost doubled since 2010/11, with an average 11.5% increase every year. The estimated total liabilities of the scheme in England were £65bn for the financial year 2016/7 and this is expected to rise again this year. This staggering sum is to pay for clinical negligence costs both this year and in future, which relate to claims arising from incidents that have already happened. The financial impact on the NHS was greatly exacerbated by the change to the discount rate from plus 2.5% to minus 0.75% made in March 2017 by the then Lord Chancellor. This has had a significant impact on compensation payments in personal injury cases where there is an element of future care costs and earnings. In his Budget speech on 8 March 2017, the Chancellor said the Government had set aside £5.9 billion, just for the three years up to 2020, to ‘protect the NHS from the effects of the changed personal injury discount rate.’ We fully accept there must be reasonable compensation for patients harmed through clinical negligence, but this needs to be balanced against society’s ability to pay. This is money that could be spent on frontline care. Given the wider pressures on the healthcare system, the rising cost of clinical negligence is already having an impact on what the NHS can provide. The reforms to how the discount rate is set included within this Bill would help to ensure the rate more accurately reflects the way in which most claimants choose to invest their compensation payments. It would help to create a fairer system for all concerned. Reforming the discount rate in this way is an important step. It would however only moderate the impact of the recent change to the discount rate and it would not address the ongoing trend in the rising cost of clinical negligence. A wider programme of reforms is needed and we urge the Government to be bold in introducing a strategic approach that would control legal costs, ensure fair compensation payments are based more closely on the needs of claimants as well as help to reduce incidents of harm from happening in the first place.
ISSUE 06 | 156
ISSUE 06 | 157
SECTOR WATCH: AEROSPACE
FIRST EU B2B MEETING SPACE AT FIDAE “PROVES IMPORTANCE GIVEN BY THE EU TO THE AEROSPACE INDUSTRY”, SAYS EU AMBASSADOR The Head of the EU Delegation to the Republic of Chile, H.E. Ambassador Stella Zervoudaki, praised the EU-funded ‘Business Beyond Borders’ initiative as marking “the first time the EU has a united B2B meeting space, proving the importance the EU gives to the aerospace industry” at FIDAE, during the EU-Chile International Conference which took place yesterday at FIDAE 2018 – The International Air and Space Fair (3-8 April, Santiago, Chile). In her opening remarks, Ambassador Zervoudaki highlighted the importance of international trade fairs in the internationalisation of small and medium enterprises: “There is an ecosystem of small and medium enterprises that thrive alongside the big-scale manufacturers and have a global mindset when interacting with their bigger counterparts. SMEs are the companies investing the most in skills, technology and contribute to supply chains – and that’s why the EU has developed instruments to contribute to their internationalisation, and research and development activities.” The BBB-organised event, under the topic “The New Space Policy of the European Union: the enterprises’ role”, brought together many EU high-level personalities, policy experts, and companies operating in the aerospace and defence sector. Topics and initiatives discussed included the EU space programmes Copernicus and Galileo; earth observation; geoinformation and satellite imagery; and space electronics. Registered companies at FIDAE will now take part in B2B matchmaking sessions at the EU Pavilion-Business Beyond Borders stand (Hall 2, A53) until the end of the week. The BBB initiative will facilitate around 500 business meetings between 240 aerospace and defence companies from 30 worldwide countries during its presence at FIDAE. Since the start of the programme in 2017, the EC-funded Business Beyond Borders seeks to help small and medium enterprises and clusters internationalise their business activities. Previous BBB events acted as accelerators for business deals and partnerships between companies, with participants stating that they had found “the right international business partner for their company’s current needs” through the services provided by this initiative.
ISSUE 06 | 158
ISSUE 06 | 159
SECTOR WATCH: LEISURE & CONSUMER
BIHIMA FINAL QUARTER RESULTS SHOW ENCOURAGING
GROWTH IN NHS HEARING CARE MARKET
CLUTTONS LAUNCHES HOSPITALITY SERVICE LINE
AS THE SECTOR WITNESSES ROBUST GROWTH ACROSS THE REGION Leading international real estate consultancy, Cluttons has announced a new hospitality service line targeted to individual investors, developers, operators and owners in the Middle East. The service offered is a one-stop-shop, where the hospitality team provides clients with strategic advice at every stage of the asset lifecycle, including acquisitions advisory, project appraisal and realization, operational excellence and asset management, as well as, asset disposal advisory.
The British and Irish Hearing Instrument Manufacturers Association regularly monitors the trends in the UK and Irish market and has released the combined Q4 2017/2018 results showing the unit sales of its member companies. The results show that the NHS market in the UK is up from 337,228 in Q3, to 388,754 units sold in Q4. The growth for the full year was 3.7% for 2017 compared to 2016. Meanwhile, the private market in the UK has recently slowed slightly from 79,627 in Q3 to 79,110 in Q4, but the growth for 2017 as a whole still holds strong at 4%. The Irish market also declined slightly in the final quarter, down from 14,539 units distributed in Q3 to 13,637 in Q4. BIHIMA also tracks the trends in the types of technology being selected by patients in the private sector. The Q4 results demonstrate the continued decline of BTE (behind the ear) technology, down at 4.2% of the market share, compared to the RITE (receiver in the ear) style which now accounts for 68.4% of units sold privately.
Commenting on the new service, Richard Paul, Head of Professional Services & Consultancy, Middle East, said: “At Cluttons, we continue to build our capabilities across multiple service lines in the Middle East region. We have always been involved in the hospitality sector and are now in a position to build out our team and offer clients a full complement of hospitality services. The sector continues to be one of the top performing in the region’s real estate landscape, and we are keen to offer our clients related services based on the opportunities that exist due to this growth.” Across the region, Cluttons has noted buoyancy in the sector as Middle East economies embark on a path of diversification. Occupancy levels have been improving across the GCC, according to Cluttons, despite growth in the number of rooms. Elsewhere in the region, Saudi Arabia dominates the hotel room pipeline, with almost 71,000 keys under development, followed by 202 properties, followed by the UAE with nearly 55,000 rooms under construction. In Dubai, the hospitality sector is the one segment that stands out due to its robust expansion and positive outlook. According to Cluttons’ latest Dubai Spring 2018 Property Market Outlook report, during 2017, the city saw ten new hotel properties added, taking the total number of rooms up by 4,854 to a total of 82,733. Overall occupancy levels have also improved, reaching an average of 78% last year; up from 76% in 2016.Faisal Durrani, Head of Research at Cluttons, said: “The emirate appears well on track to meeting its vision of hosting 20 million tourists by 2020, with the Department of Tourism and Commerce Marketing reporting a 6.2% increase in the number of visitors last year, pushing the total to 15.8 million. In order to accommodate the projected influx, it is not surprising to see the hotel development pipeline continuing to swell, with Downtown Dubai, Business Bay and the Palm Jumeirah remaining key locations for new hotel properties.” “We do expect that occupancy levels will be sustained as the city continues its aggressive drive to deliver enhanced tourism infrastructure, which is materialising in the form of new theme parks, world class hotel resorts and iconic attractions, such as the recently announced QE2 hotel,” Durrani added.
“In order to be a mouthpiece for the hearing technology industry, BIHIMA monitors the market very closely to spot important developments and keep the hearing sector well informed,” said the BIHIMA chairman, Paul Surridge. “We are pleased to report that the hearing technology market has ended 2017/18 in a strong position and we expect to see continued growth in the new fiscal year ahead.”
ISSUE 06 | 160
ISSUE 06 | 161
SECTOR WATCH: LEISURE & CONSUMER
OPEN BANKING TO BOOST UK ECONOMY BY 1BN DUBAI RESIDENTIAL RENTS STABILISE FOR THE FIRST TIME IN OVER TWO YEARS
Faisal Durrani, Head of Research at Cluttons, said, “Affordability aside, one of the key factors that has likely contributed to the stability in values in Dubai’s more affordable residential areas is the distinct lack of new supply in these markets. We expect demand to remain firmly centred on new homes priced under AED 800 psf as affordabilitytakes centre stage in the market”. Of the 134,000 units we expect to hit the market by the end of 2020, just over a third are expected to be priced under AED 800 psf, underscoring the burgeoning affordability issues that the city is storing up for the future. Even if you factor in some slippage in deliveries of circa 20% to 30%, as has been the case historically, supply will still exceed the projected demand resulting from the organic growth in population, which will see 77,500 households created. While one may argue that supply and demand appear to be well balanced, it’s worth remembering that not all new households will purchase a home; many will opt to rent, in keeping with the transient nature of the UAE’s residents. Developers appear to be ignoring this critical issue at present; however, the new proposed law around the restriction of off-plan sales until schemes are 50% complete may well be a blessing in disguise.”
Residential rents across Dubai registered no change during the first quarter of 2018, helping improve the annual rate of change to -3.1%, from -7.7% at the end of last year, according to leading international real estate consultancy, Cluttons. This marks the first stable quarter for rents in the emirate in over two years. Cluttons’ Dubai Spring 2018 Property Market Outlook reports that while the rental market has shown signs of stabilising, the growing volume of off-plan investment stock, destined to be made available for rent after handover, is likely to pose challenges in the future. The ability of the rental market to absorb a high volume of new stock will likely be tested over the next three years, it adds. Murray Strang, Head of Cluttons Dubai said: “We expect newly completed rental properties to command the attention of tenants, while older and more secondary property will register rent falls. This flight to quality phenomenon will likely result in the creation of a very distinctive two-tiered market. In the short-term, we expect rents to slip by up to 5-7% over the remainder of 2018.” In the sales market, the first three months of 2018 have shown a decline in average residential values across Dubai, falling by 2.5%. However, more affordable areas such as International City, and Discovery Gardens stood out as bastions of stability in the face of continuing headwinds for the market.
ISSUE 06 | 162
Cluttons expects the new proposed law to curtail off plan sales activity, which has remained surprisingly resilient, despite a cooling in demand levels for secondary market property over the last three years. “At the end of the day, such rules are designed to protect buyers and preserve, and enhance the city’s reputation as an investment hub, especially as new international markets are increasingly being targeted by developers,” commented Strang. Durrani added, “Developers, both large and small will be forced into rethinking their growth strategies and development pipelines are undoubtedly going to be reviewed. We may at last see an abandonment of the ‘build it and they will come mentality’, with the city seeing more measure, modest and appropriate homes brought to the market that actually matches the underlying demand.” The report highlights the law may move developers to contain construction costs by cutting corners, which would ultimately impact investors’ confidence in off plan developments. “While this may clearly be an issue, it does present the government with an opportunity to introduce more substantive building regulations around the quality of construction, with a view to raising the warranty offered on newly completed homes, which currently stands at just one year, compared to other international markets, where it is much higher,” added Strang. Overall, Cluttons expects values to slip by up to 5% or 7% this year and adds that it is quite likely this trend will persist well into 2019, catalysed by the buoyancy of the supply pipeline, before there is the potential for stability in 2020, once the supply pipeline starts to diminish.
ISSUE 06 | 163
SECTOR WATCH: LEISURE & CONSUMER “However, in some parts of Business Bay, where transportation and pedestrian infrastructure is still playing catch up, the advantages of relocation may be negated by traffic issues as well as the lack of gravitas associated with a more established central business district. The latter of course comes with the added benefit of extensive street level retail and food and beverage outlets, which give rise to a vibrant and desirable place to work. This may well change with the opening of Marassi Business Bay and once the area reaches a certain level of office occupancy.The decision to relocate for cost savings is both complex and challenging. Often, regearing existing leases, making more efficient use of existing office space, with flexible break options, may be more beneficial in the long run,” commented Walshe.
OPEN BANKING TO BOOST UK ECONOMY BY 1BN
“Overall, flat conditions will likely linger through 2018, with any rent falls likely to be contained between AED 5 psf to AED 20 psf. Free zone areas will continue to buck the trend as their position as the most desirable submarkets for most new occupiers remains unchanged and unchallenged. That said, new supply in locations such as the Innovation Hub in Dubai Internet City, Silicon Park in Dubai Silicon Oasis and Brookfield Place in the DIFC will undoubtedly test rental stability in these locations.” Durrani added.
Like the residential rental market, office rents across the 24 submarkets tracked by Cluttons have remained largely unchanged during Q1, with just eight submarkets registering falls in upper limit rents of between AED 5 psf to AED 20 psf. On an annual basis, Bur Dubai (-21%) registered the steepest correction in upper limit rents, leaving them at AED 110 psf, or AED 30 psf lower than this time last year. “We continue to record a range of activity across the board, from companies expanding to some who are consolidating operations - while there are a wide range of new market entrants, some are attempting to regear existing leases. This depth of activity is characteristic of a normal market where rents are neither rising, nor falling rapidly and is indicative of a market that is healthy and mature,” commented Paula Walshe, head of International Corporate Services at Cluttons. “Despite this apparent stability, the city’s global nature means it is, more than ever before, influenced by geopolitical events and tensions. Although we are 4,000 miles away from the UK, Brexit is having quite a unique impact here, with some British occupiers looking to make cost savings at lease renewals. On he other hand, US firms, buoyed by positive economic news at ‘home’ are far more positive in their outlook, with a stream of new entrants from the States being complimented by expansionary activity among many US firms based in the city”, Durrani explained.
The report shows Dubai industrial rents have continued to drift, following on from a challenging 2017, which saw the market being hampered by an excess amount of speculatively developed supply. This overhang of warehouse stock still remains across all submarkets monitored by Cluttons and is likely to put rents under more pressure as the year progresses. As highlighted in the report, the market is currently going through a period of normalisation, with occupiers being drawn to more modern, newly completed stock. “Once we work our way through to the end of this upgrade cycle, rents for older stock are likely to continue slipping, which will probably catalyse redevelopment of historic warehousing. Until we get to that stage, rents are likely to slip by up to 5% this year, with any declines contained between AED 3 psf and AED 5 psf,” commented James Lynch, Industrial Agency.
According to Cluttons, the somewhat static conditions mean that landlords are keen to demonstrate flexibility for the right occupier, with contributions to fit out costs. The report finds that an increasing number of occupiers are being motivated to relocate purely on the basis of cost, as well as the perception of getting better value for money. Business bay, for instance, has been the recipient of many occupiers departing from Deira and Bur Dubai over the last 18-24 months who have been drawn to this submarket by the attraction of letting relatively more modern and recently completed space.
ISSUE 06 | 164
Hospitality market As part of its expanded hospitality sector services, Cluttons has, for the first time, included an outlook on the emirate’s hospitality sector. The report cites data from Dubai Statistics Centre, highlighting that 10 new hotel properties were added to Dubai’s in 2017, taking the total number of rooms up by 4,854 to a total of 82,733 keys. Overall occupancy levels have also improved, reaching an average of 78% last year; up from 76% in 2016. Cluttons points out that although the hospitality sector remains a bright spot in the emirate’s property landscape, the rising number of hotel and hotel apartment properties, combined with the rise of Air BnB, is likely to sustain downward pressure on revenue per available room (RevPAR), which has continued to decline in recent months. “We do expect that occupancy levels will be sustained as the city continues its aggressive drive to deliver enhanced tourism infrastructure, which is materialising in the form of new theme parks, world class hotel resorts and iconic attractions, such as the recently announced QE2 hotel”, said Vikram Malhotra, Head of Hospitality Advisory for Middle East.
ISSUE 06 | 165
ISSUE 06 | 166
This months snapshot into the world of business.