Review: Puma Alpha VCT

The Puma Alpha VCT plc is the fourteenth Puma VCT, raising up to £50 million (£30 million plus £20 million over allotment). 

Highlights

  • Targets an average dividend of 5p per annum from April 2023 (not guaranteed)
  • Puma’s fourteenth VCT, now with an evergreen focus 
  • Focus on scale-up opportunities: aims to invest in established, income-yielding growth capital companies 
  • New VCT with no legacy portfolio to manage
  • Managed by an experienced team within Puma’s private equity arm
  • 0.10% annual rebate for three years through Wealth Club
  • Minimum investment £5,000 – you can apply online

Investment strategy

The VCT seeks scale-up opportunities, rather than start-ups: well managed, established, unquoted companies which are expected to generate revenue (£3 million to £15 million) with limited external debt. The investment will primarily be in the form of ordinary equity and loan notes.

The Puma Alpha VCT has a similar investment mandate to the Puma Alpha EIS (launched in 2017) and will co-invest in many of the deals. This should mean capital can be swiftly deployed and allow the VCT to invest in opportunities a new VCT otherwise might not be able to access due to scale and ability to deploy cash quickly.

Puma has a strong pipeline of new deals, thanks to the difficulties SMEs continue to face raising money from traditional banks, alongside Puma’s established network of deal introducers.

Pending investment, the manager may invest funds in a range of non-qualifying investments, such as cash, money market funds and listed debt and listed equities. 

This is a new VCT so does not have an existing portfolio. However, new investments are likely to be into companies similar to those made by previous Puma VCTs and the Puma Alpha EIS.

Examples of portfolio companies the VCT may target

The following companies are examples of previous investments made by the Puma Private Equity team. Investments made by Puma Alpha VCT may be different.

Puma VCTs – Back to the Garden ChildcareBack to the Garden Childcare

Puma made a £2.2 million investment to fund the development and initial trading of a new 120 place children’s day nursery in Altrincham, South Manchester, which opened in September 2018.

It is a joint venture between experienced developer and contractor, the McGoff Group, and Stewart and Jeannie Pickering, previously founders of a successful chain of children’s nurseries, kidsunlimited. 

The company was founded in 1983 and sold to private equity group LDC in 2008. By that point, the Pickerings opened more than 50 nurseries and introduced the first on-site workplace nurseries in the North West for firms including HSBC.

Brewhouse & Kitchen – Puma VCT 13Brewhouse & Kitchen

Puma made a £3.1 million investment into a micro-brewery pub business to support the roll-out of the brand across the UK (in December 2012). The Brewhouse & Kitchen (B&K) business has continued to expand and is currently running the concept at 23 locations. All B&K branded pubs brew a significant volume of their own beer on site and have a quality food offering. The Puma VCTs exited the business successfully in October 2015. 

Pure Cremation – Puma Alpha VCTPure Cremation

Between 2017 and 2018, Puma invested £7.35 million of growth capital into Pure Cremation – the UK’s leading national provider of direct cremations. The company handles the practical aspects of physical care and cremation and returns the ashes to the families, leaving them free to create their own farewell ritual, when, where and how they want. The service is typically significantly cheaper than traditional funerals and much more flexible. 

Pure Cremation offers its low-cost service across England, Scotland and Wales. Direct cremations currently represent just 4% of all cremations in the UK, versus 35% in the US. In 2019, Pure Cremation will relocate to a new state-of-the-art crematorium which could help the company scale its business considerably.

Sweat Union Ltd

As is to be expected, not all investments work out. In November 2017, Puma invested £3.75 million into Sweat Union Limited, a budget gym operator. Sweat Union set out to offer dedicated spinning and aerobics studios pitched at a slight price premium to budget rivals. It also planned to open sites in Debenhams department stores.

Trading conditions proved more challenging than envisaged in the business plan. Sweat’s ambitious roll-out strategy coincided with the beginning of a steep decline in consumer confidence and turmoil on the high street, plus difficulties at Debenhams. At two of its six clubs, businesses in the immediate vicinity closed or moved, reducing the pool of people who would use the clubs. There was also a slow take up of membership at its newest unit. Ultimately the company could not sustain the level of cash losses. Sweat Union has now entered creditors’ voluntary liquidation. The Puma team does not expect to make any recovery from the liquidation.

Target returns

There is a target dividend of 5p per share, payable from April 2023, not guaranteed. 

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. Management buyouts, replacement capital deals and investments in mature companies are no longer permitted. This results in considerably higher risks.

The risks and investment objectives are different with each VCT, but with a significant proportion of the combined portfolios invested in property-owning businesses, investors are likely to be exposed to commercial property.

Charges and savings

A summary of the main charges and savings is shown below. The net initial charge shown includes the Wealth Club saving and any early bird discount. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details.

Full initial charge 4%
Early bird discount 2.5%
Wealth Club initial saving 1%
Existing shareholder discount
Net initial charge through Wealth Club (new investors) 0.5%
Net initial charge through Wealth Club (existing shareholders) 0.5%
Annual management charge 2%
Annual administration charge 0.35%
Performance fee 20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

How to invest

Please visit the offer page to download important documents and apply online.

Our view

The VCT is new and has no legacy portfolio so investors don’t know in advance to which companies they will have access. It also means there are unlikely to be any dividends in the early years – indeed, the first dividend payment is expected, but not guaranteed, in 2023. 

That said, Puma has a good track record in its previous 13 VCTs. Whilst it is applying a new investment style compared to the Limited Life VCTs it has run previously, it is already operating a similar investment mandate on the Puma Alpha EIS and the VCT is expected to co-invest in many of the same deals. For investors with an established VCT portfolio, this could make a good diversifier, giving access to later-stage companies than those targeted by many popular VCTs.

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.

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Puma Alpha VCT – How to invest

Download documents and apply online

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