Funding and support helps chemicals manufacturer keep up with market demand
This chemicals manufacturer is now more adaptable thanks to funding and support from Santander.
- Company turnover: £2.5-£25 million
- Sector: Manufacturing
- Vickers Laboratories is a chemical manufacturer that serves businesses that include schools, contact lens manufacturers and the film and TV industry
- Vickers wanted to buy a new building and needed additional finance for equipment to respond to increased orders from its contact lens manufacturing customers
- Vickers met with Santander to discuss its business requirements and was visited personally by Santander experts and given a proposal within a week
- Santander provided Vickers with a commercial mortgage, asset funding and an invoice finance facility totalling £1 million. Having made a thorough assessment of the company’s business plan and commercial potential, Santander also built additional headroom into the package to allow for future expansion
- Vickers is expanding its marketing teams and has bought the new building. It has also moved its day-to-day banking to Santander.
Vickers Laboratories is a Yorkshire-based chemicals manufacturer and supplier that has outpaced the current lean economic climate with growth of 10% a year since 2010, and plans to continue on this growth path.
Until recently, the 45-year-old business was family owned but a 2010 management buyout (MBO) saw a new team of Steve Foster (Managing Director), Paul Bottomley (Commercial Director) and Phil Constantine (Operations Director) put in place. Since then the business has diversified its revenue streams, including providing chemicals to a contact lens manufacturer and water utilities for water purity testing. It also supplies school science labs and the TV and film industry. Vickers supplied one million litres of ‘brown gloop’ to create the chocolate river in the 2004 Tim Burton remake of Charlie and the Chocolate Factory, and has also supplied other products for movies, including ‘asses’ milk for Universal Pictures’ Snow White and the Huntsman.
Not all plain sailing
Like many fast-growth businesses, Vickers had to keep up with increasing demand, an issue that came to a head last year. The company was looking for a commercial mortgage to purchase a property adjacent to its site, and asset finance for new manufacturing equipment to meet increased demand from its clients.
“In the last few years we expanded quickly and the current building was operating at full capacity,” says Steve Foster. “We had the opportunity to acquire the premises adjacent to us, and at the same time one of our best customers increased their orders by 200%. We approached our bank for a mortgage, and also asked for funds to purchase additional manufacturing equipment and to pay for solar panels.” The offer from Vickers’ incumbent bank fell short of its requirements so the team began looking for other sources of funding.
Searching for funding
Their search brought them into contact with Santander Relationship Director Hardeep Thandi in May 2014. Hardeep brought Santander’s Asset Finance Director and Breakthrough Director to the first meeting – something that really impressed Steve. “Of the banks we talked to, one sent an email and the other [Santander], within days, sent three people who asked pertinent, intelligent questions,” he says. “That made me think these people understood what manufacturers do.”
The Santander team was also happy with the meeting, as Hardeep explains. “We were very impressed with the strong management team at Vickers. They had a capable financial controller and they invested the profits back into the business and also had a good growing turnover.”
It was this growing turnover and the impressive cashflow that meant Hardeep and the team was able to go above and beyond what they would normally offer. The final offer from Santander – which only took a week to set up – consisted of £750,000 of invoice finance (its existing limit was £350,000) plus £100,000 of asset finance and a £160,000 commercial mortgage.
“When we started we began with a figure of £500,000 for the Invoice Finance facility,” says Hardeep. “But we realised we could give them more to provide the added headroom if they needed it. This won’t cost more but it gives them the ability to grow into it”.
The extra money has allowed the business to grow without having to return to ask for more funds. “The invoice financing facility makes sense for a growing company in the current climate, particularly with interest rates so low,” says Steve. “It gives you the flexibility to do things quickly should you need to. For example, if we get an offer of a raw material that will make a significant difference to our gross profit, we can just purchase it without worrying about the overdraft limit”.
As part of the deal Hardeep and his team tried to make the mortgage and asset finance deal easier by working with businesses that Vickers already had a trusted relationship with; they used a local law firm whom Vickers had previously engaged along with the property valuer they had used for the commercial mortgage deal.
Following the successful completion of the deal, Vickers has made a further commitment to Santander by transferring its day-to-day banking. Steve was initially worried about the process, as Vickers has 300 to 400 suppliers and 400 customers but Santander’s hands-on staff and technical resources ensured the transition went smoothly. “Our financial controller was very pleased with the whole process and described the transfer as a smooth transition; she was especially pleased with the tools available,” says Steve. “It’s traditional banking with modern technology.”
As well as purchasing the new site, Vickers is using the funds to expand its marketing work. The company has taken on two extra staff and is planning to market and develop its film and TV special effects chemicals supply business.
As Steve explains, “We’re starting to push the two areas that we think we can specialise in, which is materials for contact lens manufacturers, and TV and film work. There’s an international market for materials for contact lens manufacturing that we haven’t yet gone for, and traditionally we have just sold to one-off films. The new money will enable us to market to the wider film and TV market.”
Reacting to the market
The future looks good for Vickers. The new funding has given it the capability to be able to react to sales requirements. “If a customer says they need 50% more in six months’ time then we can say ‘yes we can do that.’” Vickers is also looking to purchase its main site to further reduce its overheads, and is in talks with Santander about the next set of growth.
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Relationship Director Comments
We wanted to go back with a bit extra because it was such a strong business. This wouldn’t cost the company any more and would give them room to grow in the future.