The hospitality sector has been severely disrupted due to the pandemic. Edition Capital believes this is an opportune time for well capitalised hospitality businesses to take advantage of market conditions and expand.
The Edition EIS fund pursues an investment strategy centred on the belief consumers increasingly prefer to spend disposable income on experiences in the leisure sector rather than on products. These are the kind of opportunities the Edition EIS will target.
The team at Edition Capital started out within the Live Entertainment division of media investment specialist Ingenious. Between them, they have managed and advised on more than £400 million of investments, of which £175 million was via EIS and VCT mandates.
Since launch in April 2017, the EIS fund has invested £50 million into 33 companies.
- Hospitality expansion tranche to invest in five businesses
- Focus on investing in companies that are already profitable or approaching profitability
- Investment team has hands-on experience of investing in the sector
- Target of £2 per £1 invested after 4-7 years (not guaranteed)
- Minimum investment: £25,000, you can apply online
The team at Edition Capital started out at media investment specialist Ingenious working within the Live Entertainment division. Between them, they have managed and advised on more than £400 million of investments, of which £175 million was via EIS and VCT mandates.
The team of ten is led by Paul Bedford who began his career as a Chartered Accountant. Subsequently, he has spent over 40 years in the media & leisure industry, including 14 years at Ingenious. At Edition, Paul is responsible for the Advisory and Consultancy division, working with a broad range of clients from Charitable Trusts, PE Funds and SMEs within the leisure and entertainment sectors. He chairs the firm’s Investment Committee and sits on the board of various investee companies including Little Lion Entertainment, The Wine Show and Project Power.
There are three other partners: Lisa Boden, Harry Heartfield and Adam Spence, supported by six individuals: an investment & advisory director, investment & advisory manager, two business development managers, a management accountant and executive assistant. Six members of the team have an equity stake in the business.
Supporting the team are three independent non-executive committee members.
David Heartfield held senior roles at IMG before leaving to form CSS Stellar and heading the entertainment division. The company went public in 2001. David set up Rewind Festival in 2008, growing it to become the largest 80s festival in the world before exiting to Impressario Festivals Plc.
Martin Goldschmidt is MD and founder of Cooking Vinyl Group, home to artists such as The Prodigy, Marilyn Manson, Richard Ashcroft and The Cranberries. Mr Goldschmidt has sold two businesses: one to Sony Red and one to Rob Challice/CODA.
Jonathan Jackson set up JBS Media in 2001 to provide media consulting services. Before this, Mr Jackson spent six years at DRG, one of the UK’s largest independent international Television distributors, first as COO and latterly as Group Managing Director.
Prior to the pandemic, the UK leisure sector accounted for 7.4% of GDP, equivalent to £117 billion. Within the sector, Edition has observed that consumers, particularly millennials, are increasingly spending their disposable income on experiences rather than products. Edition believes this change in consumer behaviour provides an opportunity for investors. Its EIS fund seeks to take advantage of this by investing in experience-led hospitality businesses.
Four key sectors are favoured:
- Live entertainment & Events
- Fitness and Well-being
- Content & IP
Post-pandemic, Edition believes the outlook is has improved. Edition sees three key drivers:
- Reduced competition: Businesses that have survived the pandemic are should be in a strong competitive position
- Pent up consumer demand: According to the Bank of England, UK consumers have saved or repaid debts worth £195 billion between March 2020 – April 2021
- Favourable terms from landlords: Landlords keen to attract tenants to vacant sites are offering turnover linked rent agreements and significant capital expenditure contributions.
Edition looks for companies that can demonstrate the potential to roll-out to multiple sites, have a proven business model, and an ability to adapt to consumer demand. Companies should have strong management teams with a track record of executing similar strategies in the industry. Where possible, Edition will also target businesses that have already reached profitability and require further capital to scale.
Edition will use its industry connections to source deals not typically available to the wider venture capital market. The team will offer hands-on operational and strategic support to investee companies with an emphasis on improving operational efficiencies and profit margins. If required, companies can also make use of Edition’s Advisory Team, although this will incur an additional fee.
The fund aims to return £2 per £1 invested amount over 4—7 years, not guaranteed.
Edition anticipates exit routes could be via a trade sale or management buyout, not guaranteed.
The fund has yet to achieve an exit (or have any failures), however, it only launched in 2017 so the majority of investee companies have yet to reach the minimum three-year holding period.
Since April 2017, the fund has invested £50 million into 33 companies.
Below are portfolio company examples from previous iterations of the fund. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor's portfolio.
WatchHouse is an upmarket chain of coffee shops. The business currently operates from seven locations across south and central London. Its core product combines artisanal coffee with high-quality breakfast, brunch and lunch. Its smaller sites offer a “grab and go” offering.
In the midst of the pandemic, WatchHouse launched its own roastery. The business also offers a coffee bean subscription service allowing customers to drink WatchHouse coffee at home.
The business now has ambitious expansion plans. WatchHouse has identified a further seven sites across London for which it has agreed or is in the process of agreeing the lease with landlords.
Launched in 2015, Incipio looks to create new social venues from unused or temporarily dormant sites. The businesses originated in Shepherd’s Bush Market after founder Charlie Gardiner converted a railway arch into a bar. The location expanded rapidly and led to the company developing its first major project ‘Pergola on the Roof’ in 2016. Inspired by childhood trips to France and Italy, Pergola aims to recreate the European alfresco dining experience.
The business revolves around keeping up with trends, so even if a site is permanent, Incipio will only grant short leases to restaurants – this means the venues can change frequently. Sites will be revamped and relaunched every few months. Since its first venture, the business has setup three more sites as well as its first permanent location, Pergola Olympia London. Over the last three years, Incipio venues have hosted over 1.6 million people through London and the company now has a portfolio of 10 locations.
Edition first encountered the business after looking into non-traditional food and beverage operators. In total the EIS fund has invested over £2 million into the company.
Example of previous exits and failures
To date, Edition EIS has not achieved any positive exits or had any failures, however, this is partly due to the fact the portfolio is relatively young.
As is to be expected with EIS, due to the high-risk nature of early-stage investing, some investments will not work out and failures tend to come before successes.
As at May 2021, Edition EIS fund had invested £50 million into 33 investee companies.
The chart below shows the average performance of the total subscribed into the funds each tax year, based on valuations as at 21 April 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.
Performance per £100 invested in each tax year.
Source: Edition Capital, as at 10 March 2022. Performance figures are supplied by Edition Capital and are net of all fees, based on Edition Capital's valuation methodology. Past performance is no guide to future performance. In the above figures, initial tax relief of up to 30% – remember tax rules can change and tax benefits depend on circumstances.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
EIS investments are high-risk and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.
There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an “exit” for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief.
To claim tax relief, you will need EIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.
Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
A summary of the main charges and savings is shown below. Some of these will be payable by the investor, whilst others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details
|Full initial charge||—|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||—||Annual management charge||—|
|Performance fee||20%||Investee company charges|
|Initial charge||5.5%||Annual management charge||2.15%|
More detail on the charges
Timing of the offer
The fund anticipates taking up to 6 - 12 months to fully deploy investor capital following the tranche close. However, it may take longer.
The Edition EIS fund pursues a focused investment strategy in an area in which the investment team has a high degree of experience.
Since launching the fund in 2017, Edition Capital has raised and deployed £50 million into 33 companies. There are no failures or positive exits yet.
Whilst challenges remain, Edition believes there has never there been a better time for well capitalised hospitality businesses to take advantage of market conditions and expand.
The investment strategy is differentiated from other EIS investment strategies and may offer diversification to a wider EIS portfolio.
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.
- Target return
- Funds raised / sought
- Minimum investment