Review: Albion VCTs
Albion has opened a joint share offer to raise up to £36 million across its six VCTs, with an over-allotment facility of £2 million in each. The VCTs, with their respective net asset values, are:
|VCT||Latest net asset value|
|Albion Development VCT||£60.8 million|
|Albion Enterprise VCT||£64.2 million|
|Albion Technology & General VCT||£78.7 million|
|Albion Venture Capital Trust||£67.2 million|
|Crown Place VCT||£55.4 million|
|Kings Arms Yard VCT||£69.5 million|
As at 30 June 2018, excluding Albion Enterprise VCT and Albion Venture Capital Trust which are at 30 September 2018
- 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)
- An investment in all six VCTs could generate dividend payments each month (dividends are variable and not guaranteed)
- Directors of the Albion VCTs and Albion Capital staff have to date invested over £4 million in the VCTs
- 0.5% early bird saving (1% for existing shareholders) if you invest before 28 Feb 2019, or the first £10 million if earlier
- Annual rebate of 0.10% for three years
- Minimum investment £6,000 (or £1,000 per VCT), you can apply online
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 then rebranded to form Albion Ventures in 2009 after a management buyout. Most recently it rebranded as Albion Capital. Currently, Albion has over £400 million in assets in its six VCTs. The wider Albion Group manages over £1 billion.
As well as the VCTs, Albion manages and administers the UCL Technology Fund (the University College London’s fund for commercialising the university’s research). Albion provides staff and resources to run Albion Community Power PLC, a renewable energy power generation company and manages Albion Care Communities, which develops luxury care homes. Albion also owns OLIM Investment Managers, a fund management business which specialises in UK quoted equities for charities, an investment trust and private clients.
The VCT investment team is led by Will Fraser-Allen, the group’s Deputy Managing Partner, due to become Managing Partner in April 2019. He has been working in corporate finance since 1996 and joined Albion Capital in 2001. Patrick Reeve, the current managing partner will move to the role of Chairman. The VCT investment management team comprises 14 executives, 12 of whom have been at Albion for approximately 14 years on average, plus two new recruits who joined in 2018.
Historically, the Albion VCTs have differed in their strategy. However, the six VCTs now typically invest in the same spread of companies, albeit with different weightings.
The team 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.
Whilst asset-based investments still form part of each VCT’s portfolio to varying degrees, recent and future investments are growth capital deals in sectors that in the manager’s opinion have exposure to 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 year ended 30 September 2018 the Albion VCTs exited five companies, receiving proceeds of approximately £39 million. The average total return across all six funds was 13.3% in the last 12 months. However, this return has been significantly bolstered by the sale of its holding in Grapeshot. Past performance is not a guide to the future.
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.
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.
There are approximately 70 unquoted companies between all six VCTs, most of which have some degree of co-investment. Albion has invested £31 million in the last 12 months backing 21 businesses.
Growth investments with revenues of £1 to £5 million make up 42% of the combined investment portfolio (excluding cash and liquid investments), early-stage companies with revenues of under £1 million make up 16%. In comparison, scale-up investments, with revenues over £5 million, account for 42% of the combined holdings.
However, the different historic focus of each VCT means there is significant variance in the portfolio makeup between the different funds, as the chart below 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.
The average sector breakdown for the combined portfolio is shown below. However, these percentages will vary between the individual funds.
Example portfolio companies
Radnor 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 listed property with 30 acres respectively.
Albion originally invested £8.7 million in 2010 to fund the school’s opening in Twickenham.
Since the initial investment, the school has developed an excellent reputation and delivered high results. The school also has ties with nearby St Mary’s University and the Thames Young Mariners Club which should offer students with unique 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 (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 has since made several follow-on investments, it now owns 50% of the company. As the drugs go through the European licensing boards, the business should be relatively unaffected by Brexit as it is unlikely the UK would veto European drug licensing.
KoruKids. (new investment)
KoruKids. is a platform linking parents with affordable afterschool care in London. Founded in 2016, the company looks to streamline the entire process of hiring a nanny, from finding the right person to taking care of the ongoing paperwork.
Traditional agencies often have excessive charges and contractual obligations – KoruKids. is designed to be the opposite. The company also works with its nannies, providing ongoing support and training using a community approach.
Since the company’s inception, over 2,500 nannies have been trained and 110,000 hours of childcare provided. The company was featured in the UK top 100 start-ups list and has appeared on London Live and Sky News.
Albion invested £1 million in early 2018 together with VCs Forward Partners, JamJar Investments and several high-profile angel investors. Mr Fraser-Allen states the company was particularly appealing as Albion is familiar with the education sector and the platform solved a significant problem.
Dividends and performance
There are six VCTs and each has the potential to pay half yearly dividends across a staggered dividend calendar. This means an investment in all six VCTs could generate dividends every month (dividends are variable and not guaranteed).
Over the last five years, the Albion VCTs have paid £86 million of dividends and delivered an average annual NAV return of 7.5%.
The VCTs do vary in their performance and this is largely due to their different backgrounds and sector focus. The VCT target dividends per share are shown below, please remember these are not guaranteed.
|VCT||Target dividend – not guaranteed|
|Albion Development VCT||4p per share|
|Albion Enterprise VCT||6p per share|
|Albion Technology & General VCT||4p per share|
|Albion Venture Capital Trust||5p per share|
|Crown Place VCT||2p per share|
|Kings Arms Yard VCT||1.2p per share|
Albion Development VCT annual performance
Albion Enterprise VCT annual performance
Albion Technology & General VCT annual performance
Albion Venture Capital Trust annual performance
Crown Place VCT annual performance
Kings Arms Yard VCT annual performance
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 and renewable energy investments, as well as scale-up investments in mature companies, are no longer permitted. This results in considerably higher risks.
Fees and charges
A summary of the fees and charges for each VCT is shown below. The net initial charge shown includes an early bird saving of 0.5% for new investors and 1% for existing shareholders investing before 28 February 2019 or the first £10 million raised if earlier.
|Albion Development VCT||Albion Enterprise VCT||Albion Technology & General VCT||Albion Venture Capital Trust||Crown Place VCT||Kings Arms Yard VCT|
|Full initial charge||2.5%|
|Net initial charge (new investors)||2%|
|Net initial charge (existing shareholders)||1.5%|
|Annual rebate (for three years)||0.10%|
|Annual management charge||2.25%||2.5%||2.5%||1.9%||1.75%||2%|
More detail on the charges
The VCTs operate a share buy-back facility at a discount of around 5% to net asset value. This is subject to availability and Board and shareholder approval. Please see the offer documents for details.
Dividend Reinvestment Scheme (DRIS)
There is a Dividend Investment Scheme which allows shareholders to reinvest future cash dividend payments in new shares, if desired. As these are new shares they should be eligible for tax relief (you will need to claim this on your tax return or directly with HMRC) and the shares will count towards the VCT annual subscription limit.
Unless the offer is fully subscribed before these dates, the following deadlines apply:
Deadline for early bird discount: 2 pm – 28 February 2019 (this is limited to the first £10 million of applications received.
Deadline for allotment in 2018/19 tax year: 2 pm – 5 April 2019
The Albion VCTs benefit from a strong and capable management team, which has been working together successfully for many years.
If investing across all six VCTs, investors could benefit from monthly dividend payments – not guaranteed – a feature many will find appealing.
This is the only current VCT offer which 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.
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.
Read more about this offer, including the risks; download all the documents and apply online in minutes.Go to offer page