Business Weekly - Cambridge, UK

The CREATE-managed £20m fund backed the management buy-out of Virgo Screens to the tune of £250k with Lloyds TSB Corporate and Lloyds TSB Commercial Finance providing debt financing.

A name change to Screens at Work will be instituted at the beginning of May.

The investment represents something of a departure from CREATE’s first, in which it backed NextGen Sciences, a developer of cutting-edge lab hardware for proteomics research.

This is no accident, according to CREATE’s chief executive, Boyd Mulvey, who stressed that the fund would continue to build a balanced risk profile, investing in fast growing, early-stage technology ventures, but also established, profitable businesses with a strong and proven management team.

He said: “We were greatly impressed by the MBO team, led by MD, Nick Turner. While they sit at the opposite end of the technology spectrum to NextGen Sciences, it is a very good, profitable business, with a good reputation and growth prospects and an identifiable exit. We will continue to build a balanced portfolio.”

Mulvey said that the debt financing provided by Lloyds TSB Corporate was important, leveraging CREATE’s equity investment.

He said: “We’re not in the business of throwing chips at the wind – we have teamed up with Lloyds to provide a well-structured deal and we will also get involved in the company’s future success, with CREATE’s Matt Pieterse taking up a place on the board.”

Mulvey said further funding of £250k could be made available to the company, but does not envisage at this stage that it will be required.

Virgo’s free-standing and desk-mounted screens are used to demarcate private work space within open-plan office environments. The company was established 11 years ago and manufactures screens in a host of different sizes, colours and materials to meet bespoke needs. Turner describes the manufacturing model as mass-customisation.

It has made around 120,000 in its history - enough to provide a screen around the M25, with enough spare to go around a second time. Customers include Walkers Crisps, Pepsi-Cola, major airlines, and a Formula One racing team.

The MBO team, which includes operations director, Patrick O’Sullivan; production manager, Russell Walker and Turner plan to consolidate the company’s position within the UK screens market – estimated to be worth around £200m a year – before addressing new geographical and product markets.

Turnover last year was £1.3m, an increase of 22 per cent over the previous year, but having launched a concerted sales and marketing drive, further growth is already being achieved.

Turner said: “Historically Virgo Screens has been a solid manufacturing company, but essentially a well-kept secret. We believe that by significantly cranking up the sales and marketing side of the business we can win a bigger share of the existing market.

“We’ve signed up 38 new distributors over recent months, taking the total to 113, and we are already seeing the benefit. Turnover is already 15 per cent up this financial year.”

The company will spend two years consolidating its position within existing markets, before branching out.

Turner believes that the ‘home-worker’ market hold significant potential and the company also plans to address the continental Europe market, through manufacturing license agreements.

CREATE is also in optimistic mood, following an exceptionally busy start to its tenure as fund manager of the East of England’s VC fund. The organisational hitches which delayed the launch of the fund have created particularly keen interest within the region’s business community. Mulvey said that only now, eight months since the fund opened for business, has the clamour subsided to a dull roar.

The deluge of interest from potential investees has taken up the majority of the CREATE team’s time, although the fund manager has now channelled some of its resources towards the fund-raising effort required to meet the second-closing target of £30m.

Mulvey said that early response had been positive but did not want to prejudice negotiations by commenting further.