Shattering the myth of inflexible finance

Posted on 25 Jun 2019 by The Manufacturer

The fortunes of premium bottle manufacturer Allied Glass have taken off thanks to a flexible funding strategy underpinned by a deep mutual understanding.

Allied Glass is an independently-owned, high-end designer and maker of luxury glass packaging.

The business is a combination of two Yorkshire specialist spirits bottle makers with a proud history going back to the 1870s. It moved into the spirits sector in the 1970s when it built a global reputation as a manufacturer of difficult-to-do and complex bottles.

Allied Glass - Investec - Shattering the myth of inflexible finance -Case Study

Today, the business serves both iconic international brands and small craft producers of whisky gin. It has fostered an agile manufacturing capability which supports a bespoke service that offers a personal touch to new product development.

Five years ago, the award-winning, almost 150-year old Allied Glass stood on the cusp of significant change. In 2014, its main customers – roughly 60% – were in the whisky trade and tough conditions in the global market meant the business needed to diversify its customer base.

Not all its banks were prepared to back its long-term investment plans. “We needed a bank that supported us,” says CEO Alan Henderson. “We had the opposite: one bank in particular made it clear that it no longer liked manufacturing, even though it had loved it a couple of years before.”

Enter specialist banking provider Investec. The bank was one of the four already used by Allied Glass, and it was the only one to see beyond the short-term and seek to understand the business’s potential – and to be ready to increase its debt facility.

“It said to us: we love your business, we understand what’s happening, but we believe that your business can grow,” Henderson explains. “And then it put a proposal on the table to fund us in our entirety. That was a great opportunity for us.”

Freeing time and driving investment

Allied Glass 2 - Investec - Shattering the myth of inflexible finance -Case Study
Allied Glass 2 – Investec – Shattering the myth of inflexible finance -Case Study

The previous financing was a traditional senior loan, half repayment and half bullet, plus an overdraft and a revolving credit facility.

The Investec team suggested replacing this with a combination of an amortising six-year cash flow term loan; and an asset-based revolving facility, secured against the company’s stock and debtors.

This saw Allied Glass return to a single banking relationship, the immediate effect of which was a release of precious time, says Henderson.

“Our accounts team was able to concentrate on interacting with production, helping everyone stay on track with costs and work more efficiently – on proper business-related issues rather than churning out information for the banks.”

Then came the investment. In the first 18 months of the new facility being in place, Allied Glass’s capex grew from the previous average 5% of revenue to 6.5%. Projects have included a new plant for decoration, a furnace rebuild and increased spending on new moulds for existing customers.

The results? The business has achieved double-digit turnover growth, with strong bottom-line growth. Mostly this has come from new business, with a 50% expansion in its customer base.

Relationship building, not box-ticking

The debt facility’s real value is in its flexibility. “The asset-based revolvers support growth and can simultaneously flex with the business’ seasonality,” says Henderson. “We target new customers and new business; with that comes capex and perhaps extended payment terms. The top line is growing at the same time as debtors and stock, so the finance facility grows too.”

The CEO appreciates the Investec team’s personable and transparent approach. “With Investec, you get access to the people who will be part of the decision-making process. I like the way the team works: everyone has to say ‘yes’ to the financing. That means everyone is invested in you and everyone supports you.”

The relationship is crucial, as is the genuine interest that the Investec team takes in the business. On its quarterly visits, Henderson says it spends most of it time talking about the business and how it’s doing, rather than box-ticking, “The questions it asks are quite pointed and very good. But I don’t mind answering questions when you understand why they are being asked.”

He concludes, “Our relationship with Investec is strong and there’s a good level of trust. The financing structure works well for our kind of business. We think we will see more advantages as we move forward, as it will grow and flex with us the way it should.”

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