Southern Communications: A Good Call On Funding Allows Accelerated Expansion
Southern Communications got the breakthrough it needed to double its workforce ahead of schedule
- Turnover: £18 million
- Sector: Business services
- Independent telecoms provider Southern Communications has steadily increased its revenue since 2005 and twice earned itself a place on The Sunday Times Tech Track. However, CEO Paul Bradford knew the company could exceed its already impressive growth trajectory, given the right backing.
- On top of a loan of £3.75 million the management team sought, Santander provided £1 million from the Breakthrough programme’s Growth Capital fund, based on a thorough assessment of the business’s ability to achieve growth quickly.
- Southern Communications was able to revise its growth projections positively and scope out new regions for expansion.
- A recruitment drive has begun to increase its sales staff by 50%, which will bring its total number of employees to over 160.
Established in 1965 and based in Hampshire, Southern Communications is one of the UK’s oldest telecommunications companies, with a reputation built upon industry-best customer care, advice and transparency. The company is not only a leading independent B2B calls and line provider, but also sells equipment and data services, including fast internet connections, and the installation and maintenance of telecoms systems.
Southern Communications had steadily increased its revenue since 2005 and twice earned itself a place on The Sunday Times Tech Track, which lists the UK’s fastest growing technology companies. However, CEO Paul Bradford believed his company could exceed that already impressive growth trajectory given the right backing. Luckily, Southern Communications knew Santander Regional Director Cheryl Adams from her former role at another bank, and it was Cheryl who brought the business to the attention of Relationship Director Diane Fairbairn.
“Santander’s Breakthrough Growth Capital fund is unique. We rewrote our business plan because we knew we could use the growth fund to accelerate our model.” CEO Paul Bradford
Following a thorough assessment of the company’s growth potential, Santander introduced Southern Communications to its Breakthrough programme, a support and funding initiative designed to enable the UK’s fastest growing small and medium-sized enterprises to achieve their full potential. Southern Communications was awarded £1 million from Breakthrough’s Growth Capital fund, a form of mezzanine finance that enables qualifying businesses to avoid surrendering equity. This was on top of the £3.75 million loan initially sought by the management team in senior debt (a form of debt that is repaid in priority to the Growth Capital finance). Santander's total finance package came to £4.75 million.
This larger figure was made possible because, as Santander’s Director of Growth Capital Martyn Drake is keen to point out, the company had already demonstrated its potential to deliver on its growth plans. “Southern Communications knows what a good salesperson looks like and how to on-board high-potential people,” he says. “For us there is good visibility on what the revenue-generation is going to look like.”
Quicker than expected
Companies applying for Breakthrough Growth Capital are required to present their business forecasts. In outlining his projections, Paul Bradford was able to obtain funds and achieve growth at a much faster rate than previously predicted. “Santander’s Breakthrough Growth Capital fund is unique,” he says. “We rewrote our business plan because we knew we could use the growth fund to accelerate our model.” Santander Relationship Director Diane Fairbairn agrees. “It is great to see that Santander funding is allowing Southern Communications to do more and at a quicker pace,” she says.
Southern Communications used the funds for a recruitment drive and increased its telesales and field salespeople by 50% within the year, bringing its total number of employees to more than 160. The company is also taking steps towards establishing Southern Communications as a national business, having identified opportunities in the North West and the Midlands, where it plans to locate 12 new field salespeople.
An uncommon solution
Santander’s Martyn Drake points out that the bank has been able to float an uncommon solution. “This type of financing wouldn’t typically be available to this size of business,” he says. “Most banks would lend against assets, but this company lacks the type of tangible assets that traditional debt lenders are seeking to secure against. What makes Southern Communications such a perfect candidate for Growth Capital finance is that 90% of its revenue is contracted and received from thousands of customers via small Direct Debit payments. It’s a very bankable business but still doesn’t fit with mainstream lending. By securing this facility against future revenue, Santander is buying into Southern Communication’s future cashflow. That’s something bigger companies get access to all the time.”
The company’s newfound capacity for aggressive job-creation also meant it was a good match for the networking opportunities it could now access through the Breakthrough programme. Southern Communication’s executives have already attended a Breakthrough Masterclass hosted by McLaren on the topics of maintaining high performance and achieving diversification, which gave them the opportunity to learn how a first-class business is run. “This is practical support with a very entrepreneurial slant,” says Paul.
"It is mind-blowing that a bank would be that entrepreneurial and supportive. They are a breath of fresh air." CEO Paul Bradford
Paul says both Diane and Martyn from Santander make themselves readily available, even going so far as to take his calls at weekends. “They go out of their way to understand the business,” he says. “They accept that if you take on staff it will have a short-term negative effect on your numbers, but they take time to understand the underlying strength of your business. It is mind-blowing that a bank would be that entrepreneurial and supportive. They are a breath of fresh air.”
What is Breakthrough?
Breakthrough is a programme of funding, business support, events and consultancy to help high-performing small and medium-sized enterprises (SMEs) leap to the next level of sustainable growth. To find out more, or to register your interest, visit the Breakthrough website [www.santanderbreakthrough.co.uk].
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Relationship Director Comments
They don’t have to give away a share of the business or have a new non-executive director. They are getting funding and being left to run the business without intervention.