Review: Albion VCTs

Albion has opened a joint share offer to raise up to £34 million across five of its six VCTs, with an over-allotment facility of £10 million (£2 million for each VCT). The VCTs, with their latest net asset values and fundraising targets under the current offer are:

VCT Latest net asset value Amount to be raised
Albion Development VCT £71.4 million Up to £8 million
Albion Enterprise VCT £67.4 million Up to £6 million
Albion Venture Capital Trust £67.5 million Up to £6 million
Crown Place VCT £66 million Up to £4 million
Kings Arms Yard VCT £75.6 million Up to £10 million
Net asset values as at 30 June 2019, excluding Albion Venture Capital Trust which is at 31 March 2019. Each VCT also has access to a £2 million overallotment facility.

Highlights

  • Existing, mature portfolio of around 70 unquoted businesses
  • Access to asset-based and renewable energy investments as well as growth deals
  • Experienced manager with a strong track record (past performance is not a guide to the future)
  • Directors of the Albion VCTs and Albion Capital staff hold over £5 million by value in the VCTs
  • Invest across the five VCTs or pick and choose
  • Annual rebate of 0.10% for three years 
  • Minimum investment £5,000 in the offer (at least £1,000 per VCT) – you can apply online

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.


The manager

Albion has been managing VCTs for over 20 years. The original Albion VCT launched in 1996, followed by Albion Development VCT, Albion Technology and General VCT and Albion Enterprise VCT. The Albion managers later acquired two additional VCTs, Crown Place and Kings Arms Yard in 2005 and 2011 respectively. 

Albion Capital originally started life as the venture capital arm of Close Brothers in 1996. The company rebranded to form Albion Ventures in 2009 after a management buyout. Most recently it rebranded as Albion Capital. Currently, the Albion team manages approximately £460 million in VCTs. The wider Albion Group has over £1 billion under investment management or administration. 

As well as the VCTs, Albion manages and administers a number of other funds, including the UCL Technology Fund (the University College London’s fund for commercialising the university’s research). 

The VCT investment team is led by Will Fraser-Allen, the managing partner of Albion Capital. He has been working in corporate finance since 1996 and joined Albion Capital in 2001. In total Albion Capital employs 40 staff. 

Investment strategy

Historically, the Albion VCTs have differed in their strategy. However, the five VCTs now typically invest in the same spread of companies, albeit with different weightings. 

Mr Fraser-Allen has traditionally deployed 50% of the capital into asset-based investments, such as schools and medical facilities, 30% per cent into technology companies, with the remainder held as cash for future investments. 

Asset-based investments still form part of each VCT’s portfolio to varying degrees, ranging from 28% of NAV in Albion Enterprise VCT to 71% of NAV in Albion Venture Capital Trust. 

However, following the introduction of a raft of new and more restrictive VCT rules, recent and future investments are growth capital deals in sectors the manager belives can benefit from long-term growth trends. Examples include healthcare in an ageing population and the developing use of information technology in an environment of universal information. 

This is not the only adjustment triggered by the regulatory change. For example, instead of investing larger initial sums, Albion is now looking to commit smaller amounts and provide follow-on funding once a business has met its initial targets. This should allow Albion to gather a broader base of companies and select those worthy of additional investment. 

Albion prioritises businesses with a strong understanding of their sector and market. Albion likes to invest in business-to-business companies although it will consider selected business-to-consumer firms.

Exit track record

In the period from 30 June 2018 to date the Albion VCTs received or contracted proceeds of over £45 million from exits, the most notable being the disposal of Process Systems Enterprise Limited to Siemens AG, for expected proceeds of approximately £21 million, resulting in a total return of approximately 10.4x cost. This follows the exit of Grapeshot Limited to Oracle Corporation in May 2018 which is expected to deliver total proceeds of approximately £28 million, a return of approximately 10x cost. Please note, past performance is not a guide to the future. 

Grapeshot – Albion VCTsGrapeshot

Grapeshot is the global leader in providing contextual intelligence solutions through the transformation of digital assets. Put simply, it helps companies more effectively customise their marketing and target relevant audiences. 

Over four years the company saw a 15x increase in revenue, from £2 million in 2014 to £30 million in March 2018. It opened offices in Chicago, Hong Kong, Los Angeles, New York, Palo Alto, Singapore and Toronto; its network expanded to over 5,000 of the world’s leading marketers and enhanced 38 billion ad impressions every month. 

Albion originally led the series-A investment in 2014 and subsequently invested in the series-B round, investing a total of £2.9 million. 

Grapeshot was acquired by Oracle in April 2018 for an undisclosed amount. The sale generated a return of c.10x on the original investment for the Albion VCTs. Past performance is not a guide to the future.

Lowcosttravelgroup

As with any VCT, there have been – and there will be – failures in the portfolio.

Lowcosttravelgroup was an online travel agent founded by Paul Evans in 2004. The company managed three brands targeting air travel, accommodation and holiday packages.

The company won a number of awards and was voted “Best Online Travel Agent” in 2013 by TravelMedia. At its peak, it had over 3 million annual customers and was operating in over 47 countries. 

Despite its popularity, the company collapsed and filed for administration in 2016. The firm had been in talks with a potential buyer but the deal eventually fell through. Mr Evans cited the difficult trading conditions and economic uncertainty as key reasons for the company’s issues. 

Albion originally invested in 2005 through four of the VCTs. While the company’s value dropped significantly, Albion was still able to recoup some of its costs and managed to deliver a small return for the Enterprise and Crown Place VCTs. 

Current portfolio overview

There are approximately 70 unquoted companies between all six VCTs, most of which have some degree of co-investment. In the period from 1 July 2018 to October 2019, the Albion VCTs invested over £40 million in around 25 new and existing investee companies in a range of sectors. The sector breakdown of the combined portfolio is shown below, however, these percentages will vary between the individual funds. 

Source: Albion Capital, to 30 June 2019.

The combined portfolio is also diversified across companies at different stages of maturity: 

  • 12% is in early-stage companies (turnover less than £1 million)
  • 41% is in growth companies (turnover between £1 million and £5 million)
  • 47% is in scale-up companies (turnover over £5 million)

However, the different historic focus of each VCT means there is significant variance in the portfolio makeup between the different funds, as the chart shows. That said, Albion expects the asset-based component of its holdings to reduce across all six VCTs in future due to recent changes to VCT legislation.

Examples of portfolio companies

Radnor House – Albion VCTsRadnor House (education investment, asset based)

Radnor House is the most established education investment in the Albion portfolio. It operates two independent co-education schools for students aged 7 to 18 – Radnor House Twickenham and Radnor House Sevenoaks. Both schools own the sites’ freehold: a valuable site on the Thames and a Grade 1 listed property with 30 acres respectively. 

Albion originally invested £8.7 million in 2010 to fund the school’s opening in Twickenham. 

The school has an excellent reputation and has delivered high results. The school has ties with nearby St Mary’s University and the Thames Young Mariners Club which offers students extracurricular opportunities. 

In 2015, Albion provided an additional £9.5 million to fund the acquisition of a second freehold property in Sevenoaks and expand the Radnor House model.

Proveca – Albion VCTsProveca (growth investment)

A pharmaceutical company, Proveca focuses on the re-engineering of existing generic medicines to make them appropriate for use by young people. It targets conditions with high unmet need: neurological, cardiovascular and immunological. As drug development is predominantly targeted towards adults, the majority are not licensed or designed in an age-appropriate format despite many medicines still be administered to children. 

The first drug it developed, Sialanar, was approved by the Paediatric Use Marketing Authorisation (PUMA) licence, which provides a drug with 10 years of market protection. Sialanar, now sold in five European countries, is used to treat severe chronic pathological drooling in children aged 3 years+ with neurological disabilities. There is a pipeline of five drugs under development with launch dates between 2021–2023. 

Albion initially invested £2.6 million in 2013 and provided follow-on investment in the last 12 months. 

Clear Review – Albion VCTsClear Review (new investment)

Clear Review was founded in 2016 by Stuart Hearn, former HR Director at Sony. He experienced first-hand how cumbersome and ineffective traditional methods of managing people (e.g. annual appraisals) can be.  He believed a framework of coaching-style questions, supported by regular feedback and agile goals, could deliver better results. This led to the creation of Clear Review, a performance management platform that promotes continuous employee feedback and conversation.

The company has grown rapidly, increasing revenue and headcount by 100% and attracting more than 200 customers, including household names such as CYBG/Virgin Money, Ricoh, HarperCollins, Kennedys and The Valuation Office Agency (VOA).

Albion led a £2.6 million Series A round in July 2019, investing £1.85 million with existing shareholders Mercia Technologies and angel investors. The funds will be used to accelerate product development, build a US presence, and consolidate Clear Review’s position as the UK leader in a new breed of performance management technology. 

Dividends and performance

There are five VCTs and each has the potential to pay half yearly dividends across a staggered dividend calendar. This means an investment in all five VCTs could generate dividends throughout the year (dividends are variable and not guaranteed).

Over the past five years the VCTs under Albion’s management have returned over £85 million in dividends and over £25 million in buy-backs to shareholders. Cumulatively, since inception of the VCTs or since Albion took over management, the Albion VCTs have returned over £230 million in dividends and over £80 million in buy-backs. Please remember past performance is not aguide to the future. 

The VCTs do vary in their performance and target dividends, largely due to their different backgrounds and previous sector focus. Investors who subscribe for shares in all of the companies could receive an approximate target dividend yield of around 5.5%. Each VCT's target dividend per share is shown below, please remember these are not guaranteed.

VCT Target dividend
Albion Development VCT 4.5p per share
Albion Enterprise VCT 6p per share
Albion Venture Capital Trust 5p per share
Crown Place VCT 2p per share
Kings Arms Yard VCT 1.2p per share
Source: Albion Capital. As at 31 March (AAVC & AAEV) and 30 June 2019 (CRWN, AADV & KAY (excluding 2018). Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid or declared in calendar year.

Risks: important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

VCTs are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

Tax rules can change and benefits depend on circumstances.

VCTs can now only invest new money in growth capital deals. Asset-based investments are no longer permitted. This results in considerably higher risks.

The articles provide that shareholders of Kings Arms Yard VCT and Crown Place VCT will vote at annual general meetings held in 2020 and 2021 respectively as to whether the companies are to continue as VCTs. Should they vote against, new shareholders may not be able to achieve the minimum five-year holding period and lose the tax reliefs. Please see the offer documents for details. 

Our view

This offer gives investors access to asset-based and renewable energy investments as well as growth deals. The manager has a long and robust experience in all three kinds of investment.

If investing across all five VCTs, investors could benefit from dividend payments throughout the year – not guaranteed.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.

Albion VCTs – apply online

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