Review: Maven Income and Growth VCTs

Maven Capital Partners has opened a joint offer of up to £40 million for the Maven Income and Growth VCT (“MIG”) and Maven Income and Growth VCT 5 (“MIG5”). Each VCT is raising £15 million, with an overallotment facility of £5 million. 

The Maven team is highly regarded and has a strong regional focus, allowing access to deals more London-centric VCTs might miss.

Highlights

  • Each VCT has a portfolio of around 40 dynamic small and medium businesses in a wide range of sectors
  • Broad selection of mature investments, which should support dividend payments, plus expanding portfolio of younger companies offering growth potential
  • Strong regional network – expanded further in 2017 and 2018
  • Highly regarded and well resourced team 
  • Maven has been one of the most active VCT managers since rules became more restrictive, with 19 new investments completed since April 2016
  • Investors can split their money across both VCTs or choose one, over this or next tax year
  • 0.10% annual rebate for three years when you invest through Wealth Club
  • Minimum investment £5,000. You can apply online

Watch a video interview with Bill Nixon, managing partner of Maven:

The manager

Seasoned VCT investors will be familiar with Maven Capital Partners. It is a specialist manager of venture capital, private equity and unquoted investments, headed by managing partner Bill Nixon. There are six Maven “Income and Growth” VCTs.

Maven began life as the private equity and VCT arm of Aberdeen Asset Management before Bill Nixon and the senior team led a management buyout in 2009. 

Maven tends to invest in the regions rather than London and the South East. It has nationwide coverage through its eleven offices in Aberdeen, Birmingham, Bristol, Durham, Edinburgh, Glasgow, London, Manchester, Newcastle, Preston and most recently, Nottingham, allowing it to see and take advantage of opportunities its peers might not come across. Maven also manages funds for the British Business Bank.

Following changes to legislation, VCTs now need to focus on growth capital investments into younger companies. Maven has been one of the more active VCT managers since the rules changed and completed 19 new investment since April 2016. 

Maven has a large, well resourced investment team of 40 – one of the largest of any VCT. In total it manages over £415 million across all its investments. Maven’s partners are expected to invest around £335,000 into this joint offer.

The offer 

MIG and MIG 5 were both launched in 2000. 

MIG was formerly the Murray VCT and the Aberdeen Income and Growth VCT. MIG5 was formerly known as Bluehone AiM VCT2 and incorporates Bluehone AiM VCT (formerly AiM VCT). 

This joint top-up offer is the first raise for both VCTs since 2015. Investors can expect a blended portfolio of existing investments, which should help support dividend payments, plus newer investments in younger and more dynamic companies.

Both VCTs have mature existing portfolios and co-invest in some of the same companies, but are “very different beasts”, in the words of Bill Nixon.

MIG is a traditional generalist VCT, with a mature base of private equity investments. Recent exits have enabled it to pay out a healthy dividend (see chart below, note past performance is not a guide to the future). MIG is now in need of replenishment to enable the VCT to expand and take advantage of new deal flow.

MIG5, on the other hand, is a hybrid AIM / private equity VCT. When the Maven team took over the VCT it was almost entirely invested in AIM. Over time Maven has increased the number of unquoted investments and reduced the AIM exposure whilst seeking to hold onto AIM investments that show promise (for example Ideagen, see below). 

Investors can choose one or both of the Maven VCTs in this offer, or split their investment between them.

Investment strategy 

Maven’s investment team applies the same broad investment strategy across all its VCTs. It targets established, entrepreneurial but often unglamorous businesses, led by proven management teams which Maven believes have robust growth prospects. It concentrates on companies available at attractive entry multiples, which can generate regular income and have the potential to achieve medium to long-term capital appreciation – although this is not guaranteed.

Maven’s UK-wide coverage and investment resources enable it to access a wide range of suitable private company opportunities. It is “all about the regions”. It generates introductions to approximately 800-1,000 new opportunities each year across the regions. These are then subject to filtering. Every transaction goes through a structured three-stage investment approval process, led by the relevant Maven regional deal executives and supported by the collective knowledge and expertise of Maven’s UK-wide team. Partner Bill Nixon, who leads the investment committee, has the final saying on any new investment.

Typically, Maven invests £2 million to £8 million per deal in total and benefits from non-VCT money to invest alongside. This enables larger deals and allows the VCTs to occasionally invest in more mature, but still VCT-qualifying, businesses. 

Co-investment can also help Maven spread the risks associated with the increased focus on smaller, less mature businesses resulting from the new VCT regulations, and complete a larger number of investments in order to diversify – although there are no guarantees.

Investors can expect the majority of the portfolio initially to be made up of management buyout, development capital, acquisition finance and replacement capital deals. Over time, the balance may shift more towards earlier-stage investments.

For both VCTs, many of the deals completed in the last five or so years have been development capital deals in areas such as anti-cancer therapies, software automation and 3D 360° visualisation.

Maven has been an active investor in this type of deal since the VCT rules were tightened up. So, the new VCT restrictions should have a lesser impact than on some other VCTs. The portfolio breakdown for both VCTs is shown below. 

Exit track record

Maven has a strong track record of exits. Since January 2014 it completed 15 profitable realisations, with an average multiple return of 3.3x, although past performance is not a guide to the future.

Maven Income & Growth VCT – Crawford ScientificCrawford Scientific – recent exit

Crawford Scientific is a leading supplier of chromatography products and analytical services to the laboratory research and testing sectors. It was sold to Limerston Capital Partners in October 2017. Both MIG and MIG5 invested in 2014. 

The sale realised a return for Maven clients of 4.7x the initial investment in just over three years, with an IRR of 70%. Please note: past performance is not a guide to the future. 

Crawford is a good example of the type of company Maven targets: established, entrepreneurial businesses, led by proven management teams which Maven believes have robust growth prospects. 

The fact Crawford is based in Lanarkshire is typical of Maven’s regional approach. 

Current portfolio overview

Mature deals represent a significant part of both VCTs’ portfolios: 66% of MIG and 49% of MIG5. The investments are spread across a number of sectors, with a bias towards support services and energy services (MIG) and software & computer services and support services (MIG5).

Portfolio company examples

Maven Income and Growth VCT – Just-TraysJust Trays (MIG and MIG5)

Just Trays (JT Holdings (UK) Ltd) was established in 1988 and has since grown to become the UK’s leading manufacturer of shower trays and related accessories. All design, development and production are undertaken at its main facility in Leeds.

Maven made a multi-million pound investment across all its VCTs (of which £522k through MIG and £696k through MIG5) to back the management team in a secondary MBO deal in 2014. Just Trays is currently one of the top ten holdings in MIG and the largest unlisted holding in MIG5.

Under the current management team, the business has demonstrated its resilience through different economic cycles, maintaining profits in a market hit by the UK recession.

In 2016, it was making one in five shower trays for the UK. Today it produces more than 6,000 trays a week for the UK and over 20 international markets. The most recent figures (2016) show sales of £13 million and EBITDA of £1.3 million.

Maven Income and Growth VCT – Martel InstrumentsMartel Instruments (MIG)

Founded in 1982, Martel Instruments manufactures and supplies custom-built compact thermal printers. These devices embed and connect to other products enabling them to print pretty much anything you can print on a roll, from shop receipts to fixed penalty notices, pharmacy labels, tickets and shop receipts. Each month it dispatches over 23,000 devices to 41 countries worldwide from its base in Stanley, County Durham.

In 2017 it launched a smart Internet of Things platform. This enables existing devices to connect, capture and communicate as well as print, opening up new opportunities. So, for instance, not only could a law enforcement officer print a fixed penalty notice in real time, the new “clever” machine could also automatically transmit the details of that notice to a central database, saving time and improving accuracy.

Maven invested £6.9 million in 2007 across the former Aberdeen VCTs (of which £1.2 million through MIG) to back the management team in an MBO deal. Martel Instruments is currently the largest holding in MIG. It is also a minor holding in MIG5 (0.5% of total assets).

The most recent figures (2016) show sales of £3.1 million and EBITDA of £744,000.

Maven Income and Growth VCT – IdeagenIdeagen (MIG5)

Ideagen is a Nottingham-headquartered technology company listed on AIM, with main operational premises spread throughout the UK, EU, US, Middle East and SE Asia.

It provides risk management software and services to organisations in highly regulated industries such as aviation, banking and finance and life science, healthcare and manufacturing 

Currently it has more than 3,700 clients worldwide, including seven of the top 10 UK accounting firms, all of the top aerospace and defence companies, 75% of the world's leading pharmaceutical firms and 180 hospitals across the UK and US.

MIG5 invested £219k in 2005. The company listed on AIM in 2012 and its growth in value has been such it is now the VCT’s largest listed holding, with a valuation of £3.8 million (May 2018). As always, past performance is not a guide to the future.

Recent investments

In the first seven months of 2018 the Maven VCTs have together completed six new investments: 

  1. January – £1.95 million investment in eSafe Global, which monitors online user behaviour and cyber bullying within a school or college digital environment. 
  2. January – £1.8 million investment in Curo Compensation, which has developed compensation management software to manage the annual staff compensation (salary, bonus & long-term incentive plans) review process. Clients include EY, London Stock Exchange and BUPA. 
  3. April – £1.1 million investment in WaterBear Education, a new private higher education college which, in partnership with the University of Chichester, provides a range of degree courses across the creative industries. 
  4. June – £1.6 million investment in BioAscent Discovery, an integrated drug discovery and compound management business.
  5. July – £2 million investment in Lending Works, a leading UK peer-to-peer (P2P) lender. 
  6. July – Maven led a £2.15 million investment in Bright Network, a rapidly growing media technology platform which enables blue-chip employers to reach, identify and recruit high-quality graduates and young professionals.

Dividends and performance

There is a progressive dividend policy on both VCTs rather than a specific pence per share target. The dividend track record is shown below (note this shows dividends paid in the calendar year, not per VCT year-end).

Over the past five years, MIG has achieved an average annual dividend of 7.9p. It has made significant distributions recently as a result of a number of exits in the portfolio.

Over the same period, MIG5 has achieved an average annual dividend of 3.2p. Past performance is not a guide to the future, dividends are variable and not guaranteed.

Source: Maven. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid or declared in calendar year, as at September 2018.
Source: Maven. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Chart shows net asset value and cumulative dividends paid per share for MIG as at 28 February in each year and MIG 5 as at 30 November in each year, except 2018 which is as at 31 May 2018.

Risks

Please remember your capital is at risk. VCTs are high-risk investments and are not suitable for everyone: they are long term and illiquid. Investors should not invest money they cannot afford to lose. 

Tax rules can change and tax benefits depend on individual circumstances.

Fees and charges

A summary of the fees and charges for each VCT is shown below. The net initial charge shown includes the Wealth Club discount plus any early bird saving.

MIG

Full initial charge 7%
Wealth Club initial saving 5.75%
Loyalty discount for existing shareholders 0.25%
Net initial charge through Wealth Club (new investors) 1.25%
Net initial charge through Wealth Club (existing shareholders) 1%
Annual charge see documents
Annual rebate (for three years) 0.10%
Performance fee 20%

MIG5

Full initial charge 7%
Wealth Club initial saving 5.75%
Loyalty discount for existing shareholders 0.25%
Net initial charge through Wealth Club (new investors) 1.25%
Net initial charge through Wealth Club (existing shareholders) 1%
Annual charge 1.6%
Annual rebate (for three years) 0.10%
Performance fee see documents

More detail on the charges

Share buybacks

The VCTs operate a share buy-back facility at a discount to net asset value. This is subject to availability and Board and shareholder approval. Please see the offer documents for details.

Dividend Investment Scheme (DIS)

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.

Deadlines

Unless the offer is fully subscribed before these dates, the following deadlines apply:

Deadline for early bird discount: 18 December 2018 (12 noon)

Deadline for shares allotted in the 2018/19 tax year: 5 April 2019

Annual rebate when you invest through Wealth Club

MIG and MIG5 include an annual rebate for Wealth Club investors, payable for the first three years. 

This is a rebate of our renewal commission and should be equivalent to 0.10% of the amount you invest. Terms and conditions apply.

Our view

There’s a lot to like about Maven and this offer, in our view. It has a strong, well resourced team managing a mature portfolio of diverse investments. We like the strong regional presence; it means deal flow is unlikely to be a problem. 

Maven does not aim to invest in the next Facebook or Google. Most of the portfolio is made up of companies with a decent offering and strong management, but often unglamorous. Indeed, Maven seems to have a knack for finding “great businesses you’ve never heard of” and has delivered an impressive number of exits with consistent dividends to date; however, please remember past performance is not a guide to the future and there are no guarantees. 

Whether you prefer MIG or MIG5 will largely depend on your attitude to AIM: both VCTs are worthy candidates for consideration, in our view. 

Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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. 

Maven Income and Growth VCTs

Offer now open

Read more and apply online