Guinness EIS

The Guinness EIS fund looks to offer scale-up capital to later-stage ventures. While any EIS investment is high-risk, Guinness targets more mature businesses with durable revenue streams as well as structuring deals and co-investing where possible.

The EIS fund is managed by an experienced team and is backed by an established parent company, Guinness Asset Management. Under its current strategy, the fund has deployed more than £60 million into growth capital investments and has already achieved a partial exit. Please remember past performance is not a guide to the future.

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.

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Highlights

  • Established EIS manager
  • Targeting a portfolio of diverse businesses
  • Evergreen offering
  • Focus on later-stage, revenue generating companies
  • Aims to give investors a minimum portfolio of six companies, not guaranteed
  • Target return of £1.25 per £1 invested after 4-5 years, not guaranteed
  • Quarterly closes
  • Minimum investment of £20,000, you can apply online

The manager

Guinness Asset Management Ltd (“Guinness”) is one of the largest EIS fund managers operating in the UK. The business has raised £175 million across its EIS funds since 2010.

An industry stalwart, Tim Guinness has over 35 years’ investment experience. He co-founded and ran Guinness Flight Global Asset Management until its acquisition by Investec in 1998. Following this, he led Investec’s Global Energy Fund before launching Guinness Asset Management in 2003.

Since then, the company has grown substantially and now has over £2.2 billion in assets under management. While much has changed, Mr Guinness is still involved in the business where he acts as Chief Investment Officer.

In total, Guinness Asset Management manages nine equity funds together with two EIS and two IHT funds. They are overseen by a venture team of 15. Established in 2010, the team is led by Shane Gallwey, a chartered financial analyst. Mr Gallwey is assisted by five fund managers as well as portfolio manager, Bridget Hallahane, who recently joined the team. Ms Hallahane’s role will centre on supporting founder development.

While there is no requirement for management to invest in the EIS, the team has committed over £1.8 million since the fund’s inception: this aligns interests with investors.

Watch an exclusive video interview with fund manager Shane Gallwey:

Investment strategy

Guinness has always been a generalist investor, however, it has had to adapt its strategy several times due to EIS rule changes. For its first six years, the fund invested solely in renewable assets. When these were no longer permitted for new EIS investments in 2016, the fund pivoted towards asset-backed investments. Most recently, the fund moved to a pure growth capital strategy in early 2018. Since then it has completed seven growth capital tranches – it aims to allocate investors’ capital quarterly.

Under the current strategy, the EIS investment team looks for companies requiring scale-up capital with proven technology or services. Companies should be generating revenue as a minimum criteria, preferably £1 million or above. Importantly, whilst Guinness targets young businesses with good growth potential, it seeks to manage risk by selecting businesses with strong balance sheets and cash flows.

Most investment opportunities will be sourced through the Guinness network of advisors alongside accountancy firms and AIM brokers. On average, the investment team expects to review close to 600 deals a year of which 2-3% will receive investment.

Due to the number of opportunities the team reviews, Guinness employs a quick filtering process, which ensures companies it believes to be the best receive attention. The investment team pitches new deals daily and will only progress the strongest candidates into the next stage of assessment. A company will receive funding if the investment committee is confident it meets the fund’s brief and sufficient due diligence measures have taken place.

If possible, Guinness aims to add deal structuring and syndication.

Target returns

The fund targets a return of £1.25 per £1 invested after 4-5 years. Please note neither returns not timeframes are guaranteed. 

Exit strategy

Guinness will consider potential exit routes and timeframes before committing to an investment. Since 2016, it has successfully completed three exits via trade sales but would also consider a management sale or IPO if either were appropriate. Exit options and timeframes are not guaranteed.

Portfolio

Since 2010, Guinness has raised over £100 million into its EIS fund alongside a further £75 million into renewable assets and AIM stocks. The fund has invested £60.5 million across 27 companies since switching to a growth capital strategy in 2018.

It is expected that investors should receive between 6 to 12 companies per portfolio, split over a range of sectors. The targeted hold period is four to five years, not guaranteed.

Source: Guinness Asset Management, as at December 2019.

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. 

Draper & Dash – Guinness EISDraper & Dash (recent growth capital investment)

Before launching Draper & Dash, founder Orlando Agrippa worked as a turnaround director in the NHS and in the healthcare sector. As the job title suggests, his role was to support underperforming hospitals by improving patient inflow and outcomes.

Using his experience, he launched Draper & Dash, an analytics platform that allows healthcare organisations to monitor performance in real-time. This data can be used to improve patient flow, evaluate readmission risk and increase efficiency. Furthermore, because these metrics are collated, individual organisations can compare themselves to a benchmark of hospitals across the UK and evaluate ongoing performance.

The software has already been deployed in public and private hospitals in the UK, US and Australia. The Guinness EIS fund invested £3 million in early 2019 to further develop the product offering as well as increasing sales and marketing resources.

Blu Wireless Technology – Calculus EISBlu Wireless (recent growth capital investment)

Blu Wireless is a firm leading the way in bringing ultra-fast millimetre wave (mmWave) wireless technology into homes and businesses through the roll-out of Wi-Gig® and 5G networks. Blu Wireless has many of the world’s leading semiconductor and consumer electronics companies among its customers. ARM Holdings, the microchip designer, is a significant shareholder in the business.

One new client is First Group, the leading UK transport operator. The deal will allow Blu Wireless Technology to introduce advanced wireless access across First Group services. It is anticipated this will increase data capacity available to train passengers by over 100x.

Guinness invested in 2019 as part of a £12.7 million funding round alongside existing investors ARM Holdings, Calculus Capital, Kendall and MGL. The investment is being used to accelerate the rollout of the Blu Wireless’s trackside infrastructure and enable seamless 5G internet on high-speed trains.

Gravity – Guinness EISGravity Trampoline Parks (previous asset-backed investment)

For most founders, a business starts with a problem — but not always. In fact, the inspiration for Gravity came after founder, Harvey Jenkinson, spotted a trampoline park during an episode of The Real Housewives of Orange County.

Mr Jenkinson contacted his friend, Michael Harrison, and within a year the pair had sold their cars, rented a unit at Xscape Yorkshire and effectively built the first site by themselves to save on costs. Today, Gravity operates 11 parks in the UK and has expanded to a franchise in Saudi Arabia.

During a period where a number of similar businesses have closed, Gravity has stayed aloft mainly, it believes, through its choice of locations. Rather than targeting industrial sites, where rent is cheaper, Gravity looks for spaces within busy commercial parks where recurrent footfall should be significantly higher.

Guinness has invested a total of £8 million into the business through 2017 and 2018. The funds have been used to launch a further six trampoline parks within the UK, turnover has increased significantly, and the business has moved to profitability. Past performance is not a guide to the future.

Jones Food Company – Guinness EISJones Food Company (example of previous exit)

Jones Food Company (‘JFC’) operates Europe’s largest vertical farm. A growing industry, vertical farming improves crop yields by providing consistent growing conditions throughout the year. Plants are typically arranged in a ‘stacked’ fashion which maximises available space and increases output.

JFC constructed its first site in North Lincolnshire, the location is more than 5,000 square metres and can produce around 500 tonnes of herbs and other plants in a year.

Guinness invested £4.9 million into the business in early 2018. However, following a bid from Ocado it completed a partial exit after just 15 months. The sale generated cash proceeds of £6.4 million as well as £1.4 million of Ocado shares. Please note, as the exit was made within the minimum 3-year EIS holding period the investment did not qualify for EIS tax relief.

Fishing Republic (example of previous failure)

As with any early-stage investment, not all will work out as planned. One example is Fishing Republic, a company held within the AIM EIS portfolio.

The company was, at one point, the largest fishing tackle retailer in the UK and listed on AIM in 2015. It grew to over 14 stores nationwide and ran its own distribution centre out of Rotherham to support online clients.

Despite this, the company suffered heavy losses in 2018 as a result of ‘strong competitive pressures’. The shares were suspended in October 2018 and the company entered administration two months later.

The AIM EIS fund had invested £130,000 into the business, this was written down to nil although investors were able to claim loss relief on the full investment amount (excluding initial tax relief).

Performance

Since 2015, Guinness has exited 45 companies although 39 of these were AIM stocks. Of the remaining six, five were renewable assets and only one has been a growth capital investment. The average exit multiple, excluding AIM investments, is 1.25x before tax reliefs. Please note past performance is not a guide to the future.

The chart below details the performance of the EIS fund through previous iterations. Please note, the Guinness EIS fund first began making growth capital investments in 2018. The chart below shows the valuation as at 31 December 2019, had you invested £100 in each tax year.

Source: Guinness Asset Management, as at December 2019. Figures are net of all fees. Past performance is no guide to future performance. These figures do not include any realised returns which would be available through loss relief. In the above examples, initial tax relief of up to 30% could also apply. So, for the tax year 2015/16, the total return including initial tax relief would be £117, 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 / SEIS investments 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.

This EIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio.

Future funding rounds may dilute existing investments. 

Charges

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. 

Investor charges
Full initial charge 3%
Wealth Club initial saving 0.5%
Net initial charge through Wealth Club 2.5%
Annual management charge
Administration charge
Performance fee 20%
Investee company charges
Arrangement fee 2%
Annual charge 2%
All fees and charges are stated exclusive of VAT, which may be applicable in some cases. Any fees and charges payable by the investee companies or the underlying businesses do not directly come out of your investment. However, they will effectively reduce the returns generated by investee companies and therefore impact your investment.

More detail on the charges

Timing of the offer

The fund anticipates taking up to 12 months to fully deploy investor capital following the closing dates. However, it may take longer.

Our view

The Guinness EIS fund aims to invest in scale-up opportunities in companies which have demonstrated an ability to generate revenues, have strong financials and sound business models.

The fund has a modest target return in line with its strategy: it tends not to pursue higher-risk opportunities and seeks a more prudent approach. However, as with all EIS investments capital is at risk.

The investment team is well resourced, and the fund has managed to raise and invest a sizeable amount in the two years since it first began making growth capital investments. Furthermore, investments have been made into a number of later-stage businesses in competitive funding rounds. Guinness Asset Management has shown an ability to attract deal flow and deploy investors capital into interesting investment opportunities: note past performance is not a guide to the future.

Guinness has a good reputation, particularly as an EIS provider. It intends to deploy subscriptions received by the 6 March 2020 this tax year, meaning investors should be able to carry back to 2018/19. Whilst timings can never be guaranteed, last year, Guinness successfully invested subscriptions to their intended timeframes, so this offer could be a consideration for experienced investors planning to carry back via an EIS fund. 

Read important documents and apply

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.

The details

Type
Fund
Sector
Various
Target return
1.25x
Funds raised / sought
-
Minimum investment
£20,000
Deadline
Discretionary
Last updated: 20 February 2020

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