BGF has reported record-breaking results and surging growth in its 2020 Annual Report and Accounts, published today.
Despite the Covid-19 pandemic, BGF actively maintained its risk appetite to keep supporting the economy and backed 61 companies in 2020, investing a total of £384 million during the year. This represented an 11% increase on the previous year, and in the first quarter of 2021 an increase of over 100% on the same quarter in 2020. In total for 2020, £262 million went into new companies across a range of sectors, including life sciences, e-commerce and IT services, while a further £122 million of follow-on funding was deployed to existing portfolio businesses. 2020 was also an equally good year for exits with BGF delivering 28 exits that generated returns of £228 million.
BGF demonstrated a robust and resilient performance with a substantial increase in net assets to £2.3 billion (2019 £1.8 billion). The Group made a year-end operating profit of £346 million reflecting ongoing growth in its underlying portfolio and realisations.
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Stephen Welton, executive chairman, said: “We’ve gone through what we hope will be a once in- a-generation event, and learned that with determination, focus and the right allocation of capital, we can achieve amazing things. BGF’s excellent performance during the pandemic demonstrates the strength of our diversified model, our strong regional approach and the resilience of the entrepreneurs we exist to support. We’re proud that our model stood up under pressure, allowing us to continue investing at an average pace of one new investment a week, despite the upheaval of lockdowns and other challenges. No other equity investor in the land can match that rate of activity. We have a unique investment platform and capability that we want to continue to leverage in full as the economy both recovers and powers ahead in key sectors.”
Andy Gregory, chief investment officer, said: “Because we take a long-term approach to investing, we were able to see past the short-term challenges affecting some of the sectors most impacted by Covid-19, which enabled BGF to continue to deploy capital at a time when it was most needed. All in all, our investment model has proved remarkably effective during the pandemic. I’m confident that our key metrics will only increase in the year ahead.”
2020 highlights include:
An industrious year that broke records
BGF reported record profits in 2020 of £346 million. Since its launch in 2011, BGF has now deployed over £2.5 billion worth of capital and backed more than 400 companies. In 2020, BGF invested in a wide range of companies including earlier-stage businesses, growth-stage businesses and quoted companies across multiple sectors and every region of the UK and Irish economies. E-commerce, technology, life sciences, health and education businesses were standout performers, with continued positive growth across the portfolio. BGF also saw a rise in successful exits across investee businesses due to the availability of private equity capital.
Supported the portfolio during a difficult time
BGF undertook numerous measures to support its portfolio during Covid-19. These included ensuring investment teams developed even closer ties with investee companies, helping them navigate the myriad of government policies and interventions, and focusing on practical support using the full resources of BGF. BGF’s Talent Network, contracted four finance directors with specific turnaround expertise to provide ad hoc support to the portfolio and to help protect value. It also conducted a portfolio management exercise to understand the long-term impacts of Brexit. BGF worked hard to keep investing despite the short-term headwinds, believing that good businesses should not be starved of funding when they need it most. As such, BGF was able to maintain again its position as the most active investor in UK and Irish growth economy companies.
Championing diversity
In 2020, BGF was named the most active equity investor in female-led businesses in the UK by the ScaleUp Institute and Beauhurst. BGF has invested £225m since 2011 in female-led businesses, almost £30m of which was invested in 2020. BGF’s Talent Network also helped to place 11 women on the boards of BGF-backed businesses. To help increase investment in female-run businesses, BGF and Coutts, the private banking arm of NatWest, announced The UK Enterprise Fund to bring additional funding and support to entrepreneurs across the UK, with specific initiatives and programmes for female-led businesses and promoting greater diversity in management teams in general. BGF also joined the Diversity Project, an initiative calling for a more inclusive culture in the investment and asset management industry.
ESG takes center stage
In 2020, BGF became a signatory to the Principles of Responsible Investment (PRI), an initiative backed by the United Nations that encourages investors to incorporate environmental, social and governance (ESG) factors into their decision-making. BGF has taken measures to embed environmental, social and governance factors in its investment process. BGF also proactively supported businesses and sectors that are helping to solve society-wide challenges such as climate change. BGF has a team of 12 investors across its ‘Green Growth’ network with existing investments including Aceleron, whose technology allows batteries to be reused and recycled, rather than replaced. Across the portfolio, BGF has invested in businesses that develop hydrogen fuel cells, maintain wind turbines, recycle organic waste, and apply energy efficient practices in building and construction. With over £225m already committed to Green Growth, a strong and embedded regional focus, and a mission led business model with support and active governance at the heart of it, BGF is leading the way for investors to support these critical initiatives.
The Talent Network breaks records
BGF’s Talent Network passed an important milestone in 2020, having surpassed 6,000 members and placed 300 board members within its portfolio. The seven-strong Talent Network team at BGF takes a patient approach to helping companies find talent. The team also launched an Expertise-On-Demand service offering access to expert guidance on a short-term or consultancy basis. Experts cover a range of specialisms, including finance, digital marketing, cashflow management, IT and more, helping portfolio businesses to maximise their growth.
Looking ahead:
More still to do
In 2021, BGF is looking to surpass the investments made in 2020 by backing even more high-potential, high-growth companies. PwC research, released in 2020, determined there are more than 21,400 small and mid-sized companies in the UK alone that are potential targets for BGF’s investment provision. These are businesses that have outgrown the kind of early-stage funding available for start-ups, but have not yet achieved the scale of large, listed businesses. They also include the thousands of companies who may be over-indebted as a result of the pandemic. BGF is committed to supporting scaling businesses and believes that equity funding must be part of the solution to meeting these companies’ needs.
Championing innovation
BGF is the one of the most active investors in the life sciences sector. To date, it has backed more than 30 life science businesses, with its current portfolio spanning diagnostics, medtech and digital health, as well as services, software and tools supporting therapeutic development. Life sciences and the focus on R&D in areas such as pathology, biotechnology and drug discovery, has come front and centre during the pandemic. The industry has proven it plays a major role in the delivery of healthcare, and in particular driving forward innovation that has defined the UK’s response to Covid-19. That experience has generated significant activity in the healthcare sector and in life sciences, in which BGF is now a leading sector specialist, and will continue to be a primary focus in 2021.
Green Growth
BGF aims to significantly boost its investments in the field of ‘green growth’, from fuel cells to energy-efficient buildings. It has already backed more than 20 companies in this arena and is now establishing a high-powered Advisory Board to ensure the key issues and steps to deliver net zero are core to BGF’s investment strategy. There is set to be a huge amount of investment and innovation in this area and BGF is committed to making a meaningful contribution.
Looking to a global future
BGF is committed to supporting the global ambitions of its portfolio. This is particularly important in the international environment the UK now operates in, creating change and new opportunities for all businesses to forge trading partnerships and markets across the world. BGF will be deploying the skills and know-how to think globally, by ensuring access to talent and trade, building international relationships and sharing knowledge. BGF has already played a key role in helping to establish similar investment models in Canada and Australia, as well as exploring other potential opportunities to be established in the future.
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