HCT Group raises £10m of capital investment

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Sum more than doubles previous investment in 2010, which increased the group’s turnover by £20m

HCT Group (HCT) has raised £10m of investment from institutional investors and lenders.

The deal saw collaboration between a range of social and mainstream investors including Big Issue Invest, Triodos, FSE Group, Social and Sustainable Capital, City of London Corporation, Esmée Fairbairn Foundation, The Phone Co-op and HSBC, and facilitated by impact investment bank ClearlySo.

HCT uses its profits from its commercial work to provide community transport services, training, and community projects. Since its incorporation in 1982, HCT has grown to be a large scale social enterprise providing over 20 million passenger trips a year, with 1,000 employees, 10 depots spread across London, Yorkshire, the Southwest and the Channel Islands, a fleet of over 500 vehicles and a 2014/15 turnover of £45.4m.

HCT intends to use the capital to fund growth, to purchase new vehicles and depots, to improve their infrastructure and deliver greater impact for the communities that it serves and operates in. In addition, HCT said it will also be exploring private sector acquisitions and will continue to develop partnerships with local authorities.

The £10m funding package contains a range of financial instruments, including asset backed facilities, cash flow loans and a quasi-equity component.

ClearlySo, financial advisor to HCT throughout this deal, structured and facilitated the agreement of debt between investors. The deal terms include a social impact incentive feature, which provides for a reduction in the debt borrowing rate if HCT meets an agreed set of impact targets.

Clearlyso and HCT prepared to raise this capital with support from the Investment and Contract Readiness Fund (ICRF). The ICRF, managed by SIB Group and funded by the Cabinet Office, is the first programme of its kind to enable social ventures to build their capacity to be able to receive investment and bid for public service contracts.

This investment round echoes the success of the £4m that HCT raised in 2010, which enabled HCT to grow from a turnover of £26m to £46m. This initial investment was recently repaid in full and met both the investors’ target financial returns of 7% overall, and also the impact targets.

Dai Powell of HCT Group explained: “In times of financial constraint, HCT has proven that high-impact and high-quality service delivery is possible, and that working with social enterprises should be a key part of any local authority’s commissioning strategy.

“It has been a pleasure working with ClearlySo and all our investors as together we redefine what social investment can deliver.”