MIDAS SHARE TIPS: Literacy Capital creates good reading for profit hunters

Last year, about 200,000 children left primary school without being able to read and write. The problem was quite serious even before the pandemic. It’s much worse now, and it’s predicted to get even worse in the next few years.

The problem has far-reaching implications. More than 7 million adults in the UK can only recognize the simplest words, and this figure is likely to rise. Illiteracy limits employment prospects, affects self-esteem and can even shorten life expectancy, with a total economic cost estimated at £81 billion a year.

Sheran Pindar experienced all this on herself. Her mother could not read or write and suffered from emotional and physical disabilities for most of her life. So when Paul Pindar approached his wife on a dreamy vacation five years ago and asked what she wanted to do with the rest of her life, she simply said she wanted to teach her children to read.

Those few words gave birth to an idea – Literacy Capital, a fast-growing investment company with a difference. The shares are priced at £3.89 and should rise despite the volatile economic climate.

Enterprising and highly successful, Paul Pindar co-founded consultancy Capita when he was still a young man, taking it from a £330,000 business in 1987 to a FTSE 100 company valued at £8.5bn when he stepped down executive director in 2014.

Fast forward to 2017 and Pindar has been working with his son Richard, a former accountant, on a number of private ventures. The duo decided to combine their financial efforts with Sharon Pindar’s philanthropic mission, and Literacy Capital was born. The company invests in all kinds of small but promising UK firms and helps them grow.

Investments are made for the long term, avoiding sectors such as gambling and low-cost alcohol, and each year the group donates 0.9 percent of its asset value to literacy charities.

This new approach delivers financial and social results. Literacy Capital’s portfolio companies are growing rapidly and the group’s shares have risen significantly since going public in June 2021.

As the company grew, so did its charitable giving. To date, more than £4 million has been donated to literacy charities, including Sharon Pindar’s own initiative, Bookmark, which works with nearly 200 schools to offer one-to-one reading lessons to struggling children.

The two businesses are run separately, but there is a symbiosis. Many of the businesses Literacy Capital acquires are run by their original founders, who would rather sell their firms to companies with a philanthropic focus than operate solely for financial gain.

As a result, Pindar Sr. and Jr. are approached dozens of times a week with offers to sell businesses.

However, most are denied. The Pindar family looks for firms with real long-term potential depending on economic cycles. Literacy Capital has a total of 18 companies in its portfolio, and the results to date have been impressive.

Butternut Box was founded by a couple of investment bankers who cook healthy dog ​​food in their families’ kitchens. Literacy Capital invested in the business in 2018, when the founders were still working from home. They fed a thousand dogs, and the annual turnover was about a million pounds.

Today, Butternut Box feeds more than 150,000 dogs, has a turnover approaching £100m a year and the group operates from an eight-acre site in Doncaster, one of the largest of its kind in Europe. Literacy Capital owns nearly 6 percent of the firm, and the outlook is bright.

Many of the businesses in the portfolio are wholly owned, including the two largest investments, Grayce and RCI.

Founded by husband and wife, Grayce recruits, trains and places graduates in IT and related fields. Literacy Capital acquired the business in 2018 as the founders sought to reduce their stake but sell to a buyer who would look after and grow the firm they had built. Since then, Literacy Capital has invested time and money into the business, and sales have increased 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 their business. Literacy Capital bought the group in 2018, strengthening management, making four acquisitions and expanding into areas such as data analytics to help NHS trusts reduce waiting times. Demand is high and incomes are growing rapidly.

An update on the portfolio’s results is expected later this week, which should show that Literacy Capital continues to perform. The group does not yet pay a dividend, but that is likely to change within a few years.

Encouragingly, 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 have recently bought shares.

The Midas Verdict: Literacy Capital offers shareholders the opportunity to invest in a fast-growing, well-performing business. At £3.89, the shares are a buy, with the Pindar family looking to triple the size of the firm to £1 billion. Bookmark is also looking for volunteers, offering various rewards.

Bidding for: The main market Ticker: BOOK Contacts: literacycapital.com or 020 3960 0280