Social sector builds Momentum
Booming business is set to fuel a period of consolidation in the not-for-profit sector, reports Steven Vass
Momentum, the support organisation for disadvantaged people, has swallowed up two commercial services charities in the run-up to the Scottish Executive’s £18 million investment initiative which was announced last week.
The organisation, which offers 25 different training and support programmes across Scotland, has taken over Greenock-based Haven Products and the smaller May-Tag, which operates in south Ayrshire. No cash has changed hands in the takeover.
Momentum’s move also follows a call from Tom Hunter’s Hunter Foundation calling for more mergers within the social enterprise sector.
The two acquisitions greatly expand Momentum’s commercial wing, which previously consisted of RRS, a Glasgow-based operation that employs 24 staff for outsourced manufacturing work.
Haven, which has factories in Inverness, Greenock and Hillington, near Glasgow, comes with 110 staff, 95 of whom have a disability. The organisation offers manu facturing services for various sectors, including automotive, IT and whisky for companies such as Edrington Group and IBM. It produced a surplus of £85,000 on turnover of £1.3m in the financial year to March, 75% of which came from commercial revenues. The rest of Haven’s income is from the department for work and pensions and fundraising.
May-Tag trains and employs 15 disadvantaged people in Maybole in environmental work, mainly producing horticultural goods. Its turnover for the financial year to March was £286,000.
The acquisitions come at a time of rapid growth for Momentum. Earlier this year it took over PI Care, and won a major rehabilitation contract with the Scottish Prison Service for HMP Edinburgh. Last year, the organisation also changed its name from Rehab Scotland to reflect the wider breadth of its activities.
Ian Welsh, chief executive of Momentum, says: “The whole business of growing the social economy is a significant part of the Scottish Executive’s rhetoric, and that mirrors what’s been happening in Scotland. More and more not-for-profit organisations are considered to be potentially significant service partners.”
The new £18m fund, which is called Futurebuilders Scotland, is available to not-for-profit organisations that deliver goods and services in a commercial way. They can apply for aid to help them become self-sufficient, so that they become less dependent on public funding in future. The acquisitions of Haven and May-Tag are likely to put Momentum in a better position to get access to the fund to assist future growth.
Welsh adds: “Over the last couple of years, we have tried to reshape the organisation. We are now operating out of three divisions – the care division, the training and employment projects, which is the centre part of the organisation, and the factory-based social enterprise activities.
“RRS had metamorphosed into more of a training operation with a small commercial dimension to it [it was previously involved in recycling white goods], and we basically had two options: either close down that side of the business because it wasn’t a tidy fit or look to see if there were other companies in the same arena.”
David Whyte, managing director of Haven which used to be owned by the Red Cross before ownership passed to Haven Products Trust, says: “We wanted to be part of a big organisation again. We missed having some of the professional skills like fundraising, marketing and HR behind us.”
He said that although last financial year was the first time Haven had produced a surplus for a number of years, a restructuring in 2002 had put it back on an even keel before it started negotiating with Momentum, and the deal had not been motivated by financial trouble. Haven was in fact moving to larger premises in Hillington next month to cope with extra and anticipated demand.
Welsh said he was in “no hurry” to merge Haven and May-Tag with RRS, and that this would be looked at in the next year. “Expansion opportunities are much more high priority than folding these together. We hope to consolidate where the companies are and look for fresh business opportunities in packaging and other activities.
“[Haven] will be talking to a number of commercial partners in the public and private sectors in the next few months. Like any business, it’s about sustainable opportunities,” he says.
One difficulty with any full merger of Haven and RRS is that they work on different models. RRS only keeps its workers for a year at a time and then helps them to find other work (May-Tag operates in a similar way). Employees at Haven, on the other hand, can stay permanently with some having worked for the organisation for 30 years.
Welsh confirms that Momentum was thinking about gradually changing staff turnover at Haven to make it more like RRS. Whyte, however, says this would be difficult to achieve: “RRS has a different funding arrangement [with the government] from ours, which is that leaving Haven depends on the individual’s choice. That’s not the basis on which they are funded. RRS is required to have that turn-around of people over a period of time.”
Momentum is part of the Rehab Group, which carries out similar not-for-profit activities in England and Ireland. In 2003 Momentum turned over a total of £3m, a 4% rise on the year before. Unlike Haven, it receives most of its funding from public sources, particularly the European Social Fund, health boards, local authorities and fundraising.
Source: Sunday Herald