Growing literacy fund’s results are good reading for profit hunters
LAST year, about 200,000 children left primary school without being able to read or write. The problem was already pretty bad before the pandemic. Now it is much worse and is predicted to become even more acute over the next few years.
The issue has widespread ramifications. More than 7million adults in the UK can recognise only the most basic words and that number is likely to grow. Illiteracy limits job prospects, affects self-esteem and can even reduce life expectancy, with a total economic cost estimated at £81billion a year.
Sharon Pindar experienced all this personally. Her mother could not read or write and suffered emotional and physical harm for much of her life. So when Paul Pindar turned to his wife on a dreamy holiday five years ago and asked what she would like to do with the rest of her life, she said simply she would like to teach children to read.
Those few words spawned an idea – Literacy Capital, a fast-growing investment company with a twist. The shares are £3.89 and should gain ground, despite the choppy economic climate.
Driven and highly successful, Paul Pindar co-founded the consultancy Capita when he was still a young man, taking it from a £330,000 venture in 1987 to a FTSE 100 company valued at £8.5billion when he retired as chief executive in 2014.
Fast forward to 2017 and Pindar was working with his son Richard, a former accountant, on a number of private business ventures. The duo decided to combine their financial nous with Sharon Pindar’s charitable mission and Literacy Capital was born. The company invests in all kinds of small but promising UK firms and helps them to grow.
Investments are made for the long term, sectors such as gambling and low-cost alcohol are avoided and the group donates 0.9 per cent of the value of its assets every year to literacy charities.
This novel approach delivers financial and social results. Companies in the Literacy Capital portfolio are growing fast and the group’s shares have risen significantly since listing on the stock exchange in June 2021.
As the company has grown, so have its charitable donations. To date, more than more than £4million has been gifted to literacy charities, including Sharon Pindar’s own endeavour, Bookmark, which works with almost 200 schools, offering one-on-one reading sessions to struggling children.
The two enterprises are run separately but there is a symbiosis. Many of the businesses that Literacy Capital acquires are run by their original founders, who would rather sell their firms to a company with a philanthropic slant than one run entirely for financial gain.
As a result, Pindar senior and junior are approached dozens of times a week with offers of businesses for sale.
Most are rejected, however. The Pindars are looking for firms with genuine, long-term potential, through economic cycles. There are just 18 companies in the Literacy Capital portfolio and results to date are impressive.
Butternut Box was founded by a couple of investment bankers cooking healthy dog food in their families’ kitchens. Literacy Capital invested in the business in 2018, when the founders were still operating from home. They were feeding a thousand dogs and annual turnover was about £1million.
Today, Butternut Box feeds more than 150,000 pooches, turnover is close to £100million a year and the group operates from an eightacre site in Doncaster, one of the largest of its kind in Europe. Literacy Capital has a stake of almost 6 per cent in the firm and prospects are bright.
Many businesses in the portfolio are owned outright, including the two largest investments, Grayce and RCI.
Founded by a husband and wife, Grayce recruits, trains and employs graduates in IT and related fields. Literacy Capital acquired the business in 2018, when the founders were looking to reduce their involvement, but sell to a buyer that would look after and nurture the firm they had built. Literacy Capital has since invested time and money in the business and sales have risen fivefold.
RCI tells a similar story. The firm works with the police and the NHS, providing specialist support to victims of crime and assault. It was founded by four partners, who were looking for a buyer to help them build the business. Literacy Capital bought the group in 2018, strengthened the management, made four acquisitions and expanded into areas including data analytics to help NHS trusts reduce waiting times. Demand is strong and revenues are growing at pace.
An update on the portfolio’s performance is expected later this week and should show Literacy Capital continuing to deliver. The group does not pay dividends yet but that is likely to change within a couple of years.
Reassuringly, too, Paul and Sharon Pindar own 28 per cent of the business, Richard has a 10.7 per cent stake and several members of the team recently bought shares.