Objective

Manage taxpayer
money efficiently

When we manage our programmes efficiently, we deliver value for money. All UK taxpayers benefit from our ability to deliver the most positive outcome with the least amount of Government resources.

Objective

Manage taxpayer
money efficiently

When we manage our programmes efficiently, we deliver value for money. All UK taxpayers benefit from our ability to deliver the most positive outcome with the least amount of Government resources.

All our programmes, with the exception of the grant funding and operating costs element for Start Up Loans, count towards our financial return target. The Bank targets achieving a return on capital at least equivalent to the Government’s medium-term cost of capital. We have a target for the end of March 2019 of 2.525%.

Adjusted return on capital employed

The British Business Bank achieved a 3.6% adjusted return on capital employed in 2018/19, which was higher than our target for the year. However, it is lower than the return achieved in the previous year. This has been caused by three key drivers: (a) lower returns in the year from legacy VC funds of £7.2m (2017/18 £22.8m), (b) write down in the value of assets distributed by a single Enterprise Capital Fund (£17.1m), and (c) increased operating costs as the Bank has continued to invest in order to deliver on the new objectives it was set last year. The Bank has also continued to invest in systems, controls and processes. While not material for the results, the Bank has seen an increase in credit losses in several of its debt programmes and continues to monitor this area closely.

Average capital employed has increased from £1,530m to £1,829m, an increase of £299m as the Bank continues to invest in UK smaller businesses.

Adoption of IFRS 9

The group adopted the International Financial Reporting Standard IFRS 9 for the first time in 2018/19. The return for the 2017/18 financial year has been adjusted to account for the impact of the transition to the new basis of accounting for the Group’s financial instruments. This transition adjustment has resulted in a £2.8m reduction in the reported return for 2017/18. As indicated in the 2017/18 Annual Report, the Bank has restated all of its historic return calculations to take into account the impact of IFRS 9. This means that historic changes in fair value that impacted Other Comprehensive Income (both the assets on the Bank’s balance sheet and assets on the BEIS balance sheet that are managed by the Bank) have now been included in the historic Adjusted Return on Capital Employed as set out later in this section.

case study

Grapeshot

Maps Cambridge

Programme: Enterprise Capital Fund

Started in Cambridge, Grapeshot is a brand safety platform that helps marketers, publishers and media organisations target customers more accurately in any language and in real time, globally.

It required funding to continue development of its products and services, and grow key teams within the business. It received initial investment from the Bank’s Enterprise Capital Fund delivery partner IQ Capital in 2009, and several rounds of additional funding, with the last round in 2017.

In 2018, Grapeshot was acquired by Oracle for $325m, providing a significant return multiple to investors.

case study

Case study

Photonic Solutions

Maps Edinburgh

Programme: Enterprise Capital Fund

Originally established in 1999, Edinburgh-based Photonic Solutions distributes, installs and provides technical support of high powered, complex laser systems to the UK scientific and industrial market.

Delivered by a team of highly qualified scientists, Photonic Solutions provides testing, modification, user training and servicing of equipment to its customers.

In order to fund a management buyout and purchase the company from the retiring founders of the business, the existing employees sought debt and equity funding, and were introduced by a Non-Executive Director of the business to British Business Bank partner, Panoramic.

Photonic are targeting 10% growth per year over the next 3 years with the ultimate aim of full ownership within that time frame.

Case study

At a glance

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