Finance Birmingham completes second equity investment deal

Richard Toy, CEO, Auctus and Sam Miller, investment executive, Finance Birmingham

Finance Birmingham has completed its second equity investment with a £400,000 injection into Auctus Management Group (Auctus).

Tyseley-based Auctus, which supplies temporary and contract labour for the rail, utilities and civil engineering industries, will use the cash to finance a new headquarters and training centre, and to fund its expansion following the acquisition of Rail Safety Solutions (RSS). Auctus has also secured a seven-figure invoice discounting facility with Close Brothers.

Finance Birmingham provides equity and loan finance from a £25million fund backed by Birmingham City Council aimed at supporting small-medium-sized enterprises and stimulating job creation. Birmingham City Council will take a significant minority stake in the business.

Auctus, based in Tyseley, was founded earlier this year by a former management team from Carillion subsidiary SkyBlue, which supplies rail gangs for track renewals and rail projects, and temporary, contract and permanent staff for the civils and utilities sectors.

Richard Toy, chief executive officer at Auctus, was formerly operations director at SkyBlue. He is joined by directors Peter Thompson and Sean Harrison, both ex-SkyBlue. John Ellison also joins the management team, continuing in his role as managing director of RSS.

RSS is a leading supplier of automated track warning systems, lighting, fencing and safety solutions for the rail industry, with clients including Network Rail and contractors Amey Colas Rail, Balfour Beatty Rail and Babcock Rail. The Derby-based firm has a turnover of £1.4million and employs seven permanent staff and 20 contractors. It was acquired for £350,000 from parent Acorn plc, the recruitment and training company.

Richard Toy, who left SkyBlue with the intention of setting up his own business, said the acquisition of RSS has enabled him to fast-track his ambitions.

He said: “RSS was not a core activity for Acorn, and our previous experience meant the opportunity to buy the company and develop a clear safety differentiator, as well as the labour provision for the rail sector, met all of our aspirations.

“The clients RSS supplies with rail safety solutions are exactly the same as those Auctus targets with manpower solutions. The acquisition means we are able to supply them with an industry first one-stop-shop solution, which has already won us our first client for safety critical labour, Amey Colas, in the rail sector. We are also aiming to build on our experience in the rail sector by targeting the utilities and engineering industries.

“Investment in rail and utilities has been ring fenced from the public sector spending cuts. £220billion has been earmarked for maintenance spend on the utilities sector up to 2020, while in the rail sector the increase in freight traffic mean growth prospects for Auctus are bright.”

In addition to retaining RSS’s existing workforce, Auctus has created eight new jobs in Tyseley. The business is also in the process of acquiring space on Wharfdale Road for a new headquarters, depot and training centre with its own track, which will create a further 15-20 jobs in the next year. Around 140 contract positions are anticipated.

According to Mr Toy, his team entered into discussions with three potential backers, but opted for Finance Birmingham.

He added: “Finance Birmingham provided a greater level of support and unlike traditional venture capital houses, who primarily focus on commercial returns, their investment is not just in the business but in the local economy, which means they can add a different dimension. They have already signposted us to a number of grant opportunities. We were also won over by the personalities.”

Sue Summers, chief executive officer of Finance Birmingham, said: “The Auctus management team are highly regarded in their market and bring strong commercial and strategic experience to a business with real opportunity for growth. Sam Miller, the investment executive for this deal, will sit on the board as a non executive director, to provide further support.”

Birmingham City Council’s new leader, Sir Albert Bore, pledged to make jobs and enterprise the focal points of his administration when he took office on 22 May.

He said: “From a standing start Auctus has created eight jobs in the city. The RSS brand, plus the addition of a workforce solutions and training services business will generate more than 100 additional jobs, with many recruits expected to come from initiatives such as Job Centre Plus. These will be skilled jobs, with training provided, along with a career path for those with ambition.”

In addition to its equity investment activity, Finance Birmingham provides loans to growing businesses based in the city. To date it has provided loans of circa £8million, assisting in safeguarding and creating more than 1,000 jobs. It is the only local authority backed business investment body in the country.

The Auctus deal was introduced to Finance Birmingham by Tony Dunn and Faisal Arif of DNA Corporate Finance, acting on behalf of the management team.

Marketing Birmingham helped to identify suitable premises in Tyseley for Auctus.

Adrian Cutler and Mark Canning of Cobbetts provided legal advice to Finance Birmingham; Roy Farmer of Dains undertook the financial due diligence.