Problem

The scale and impact of mental health on society is increasing and mental health service providers often struggle with the demand placed on services.

Gofal is a leading Welsh mental health and wellbeing charity supporting over 3000 people each year. It generates a substantial proportion of its income through public sector contracts and relationships.  Such sources of revenue have become pressurised in recent years.

Solution

Gofal established its wholly owned trading arm, Gofal Enterprises (GEL) to diversify its revenue for the long term. In 2010 it began delivering cleaning services. Whilst a hugely positive step, it proved challenging to achieve the scale of operation to generate significant profits for the parent charity.

To meet the challenge of generating scale, GEL looked to acquire commercial trading companies and increase its portfolio of businesses.

Having completed market scoping, GEL entered into negotiations with a commercial cleaning company, APP UK, to acquire 100% of the share capital. They also set about launching PS Properties & Interiors - a commercial fit out and renovation business.

Revenue Model

GEL received unsecured loans from Development Bank Wales and Social Investment Cymru together with investment from the parent charity to purchase the share capital of APP UK.

The funding also enabled it to establish and launch PS Properties & Interiors. Repayment of the loans over 5 year and 15 years respectively will be achieved from existing revenue and growth intention of their acquired businesses.

Impact

The relaunch of PS Properties and Interiors helped increase revenue and allow more money to be generated for Gofal to develop and deliver mental health services for people in Wales.

Buying a commercial trading property makes a big statement for the social enterprise sector, showing what it can achieve. In a stroke, a social enterprise became a major player in the local market and showed that social enterprises can become a meaningful bidder on sizeable contracts.

With the help of social investment, GEL is in a position to compete for commercial contracts on equal terms with the private sector, allowing them to continue supporting the parent charity.

Investor

Development Bank of Wales was established to help Welsh Businesses get the finance they need to start up, strengthen and grow. Social Investment Cymru is part of Wales Council for Voluntary Action (WCVA) and provides a range of repayable finance to social enterprises in Wales.

Securing the investments from Development Bank of Wales and Social Investment Cymru was a challenging process but it has provided us with funds to enable our acquisition strategy to begin.  This approach enables us operate at greater scale over coming years which will result in greater profits generated for Gofal

Matthew Cole – Managing Director, Gofal

The investment was made for many reasons, two being: Ambition – buying a commercial trading company makes a big statement for the sector about what it can achieve and offers one way in which it can achieve it. This is the first such acquisition of any size in Wales to our knowledge. Scale – at a stroke, a social enterprise becomes a significant player in the local market. It not only raises the profile of the sector but by being a meaningful bidder on sizeable contracts makes the 3rd sector generally more credible in supply chains.

Alun Jones Social Investment Cymru – Fund Manager