Offer fully subscribed (26 Feb 2021)
On 26 February, the Board of Kings Arms Yard VCT, the last remaining of the five VCTs originally in this offer, announced it was fully subscribed. The Offers which constitute separate offers have all now been fully subscribed and all have been closed to further applications.
Overseen by Albion Capital, the six Albion VCTs are well established trusts with assets of around £447 million, split across growth capital investments, a legacy portfolio of income-generating asset-based investments and renewable energy investments, as well as cash.
Albion has grown its assets under management in recent years and expanded its investment team – hiring three new investment managers, two associates, and a talent director – as it continues to reposition the portfolio towards growth and technology businesses.
Over the 10 years to December 2020, the Albion VCTs have produced NAV total returns of between 69.7% and 101.8%. Past performance is not a guide to the future.
The current offer seeks to raise up to £45 million across five VCTs with an overallotment facility of £3 million per VCT. Albion Venture Capital Trust (AAVC) is not included in the offer as its board considers it has sufficient cash.
The VCTs, with their most recent net asset values and fundraising targets under the current offer, are shown below.
|VCT||NAV1||Offer capacity2||Raised to date3|
|Albion Development VCT||£73.5m||£10m||FULL (11 Feb)|
|Albion Enterprise VCT||£74.3m||£9m||FULL (5 Feb)|
|Albion Technology & General VCT||£86.0m||£15.5m||FULL (24 Feb)|
|Crown Place VCT||£65.3m||£9m||FULL (10 Feb)|
|Kings Arms Yard VCT||£76.4m||£15m||FULL (26 Feb)|
- Existing, mature portfolio of around 70 unquoted businesses
- Technology and healthcare specialist
- 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)
- Target dividend of 5% of NAV – variable and not guaranteed
- Directors of the Albion VCTs and Albion Capital staff hold over £5 million by value in the VCTs
- Available for this tax year (2020/21) and next (2021/22)
- Minimum aggregate investment £5,000 – you can apply online
Albion Capital has been managing VCTs for over 20 years. The original Albion Venture Capital Trust launched in 1996, followed by Albion Development VCT, Albion Technology and General VCT and Albion Enterprise VCT. Albion later acquired two additional VCTs, Crown Place and Kings Arms Yard in 2005 and 2011 respectively.
Albion originally started life as the venture capital arm of Close Brothers in 1996, forming Albion Ventures in 2009 after a management buyout. More recently it rebranded as Albion Capital. Currently, the Albion team manages approximately £447 million in VCTs. The wider Albion Group has c.£735 million under investment management or administration (December 2020).
As well as the VCTs, Albion manages and administers a number of other funds, including the UCL Technology Fund (the University College London’s fund for commercialising the university’s research).
The VCT investment team of 14 is led by Will Fraser-Allen, the managing partner of Albion Capital. Will has been working in corporate finance since 1996 and joined Albion Capital in 2001.
Expansion of the team has been a significant focus for Albion over the last two years. Since 2018, Albion has recruited three new investment managers and two associates, who will concentrate on sourcing deal opportunities. Albion also recently hired Jane Reddin in 2020 as a Talent Director. Jane has over 25 years’ experience, most recently with Balderton Capital and EQT Ventures, and will be responsible for managing talent acquisition and developing management teams for Albion’s portfolio companies.
Historically, the Albion VCTs followed a broader investment strategy with a blend of growth and asset-based investments (such as schools and renewable energy assets). Following the VCT rule changes, the strategy has transitioned to focus purely on growth opportunities.
The investment team has been investing in technology and scale-up companies since 2001 and is well regarded and experienced in the sector. Albion has since expanded its team and established itself as a healthcare and technology specialist.
The team considers these sectors to have structural long-term growth potential, particularly as digital technology adoption continues to accelerate in both industries.
At a company level, the investment team looks for B2B businesses with a unique offering, operating in fast-growing markets. Specifically, the VCTs target companies that the manager believes have reached an inflection point and require additional funding to accelerate growth.
The VCTs will invest across a range of maturity stages, from seed to Series B funding rounds. Portfolio companies are broadly split into three stages, depending on turnover. It is expected that the majority of companies will have turnover greater than £1 million, with a small proportion of earlier-stage ventures. Albion believes that diversification across sectors, size, and maturity of the businesses helps build ‘all-weather portfolios’.
Exit track record
In the period from 1 January 2019 to 31 December 2020, the Albion VCTs received or contracted proceeds of over £98 million from exits, the most notable being the disposal of Process Systems Enterprise Limited to Siemens AG, for expected proceeds of approximately £21 million, resulting in a total return of approximately 10.4x cost. This follows the exit of Grapeshot Limited to Oracle Corporation in May 2018 for total proceeds of around £28 million, a return of approximately 10.0x cost. Other significant exits during the period include Radnor House (Twickenham) School, the Bravo Inns pub portfolio, ELE Advanced Technology and Clear Review. Please note, past performance is not a guide to the future.
Clear Review – exit example
Clear Review was founded in 2016 by Stuart Hearn, former HR Director at Sony. He experienced first-hand how cumbersome and ineffective traditional methods of managing people (e.g. annual appraisals) can be. He believed a framework of coaching-style questions, supported by regular feedback and agile goals, could deliver better results. This led to the creation of Clear Review, a performance management platform that promotes continuous employee feedback and conversation.
The company has grown rapidly, increasing revenue and headcount by 100% and attracting more than 200 customers, including CYBG/Virgin Money, Ricoh, HarperCollins, Kennedys and The Valuation Office Agency (VOA).
Albion led a £2.6 million Series A round in July 2019, investing £1.85 million with existing shareholders Mercia Technologies and angel investors. Just over a year later, the company was acquired by Advanced, a software and services business. The sale delivered a return of 2.1x to the VCTs. Past performance is not a guide to the future.
As with any VCT, there have been – and there will be – failures in the portfolio.
Lowcosttravelgroup was an online travel agent founded 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. The founder 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.
Albion revalued its portfolios in March 2020 to reflect the impact of Covid-19. While the portfolios are diversified, several companies and sectors were more exposed, resulting in a write-down.
As would be expected, companies within the leisure industry were some of the worst affected. Since 2019, Albion has been reducing its exposure to the sector (selling 45 pubs and one hotel) which now accounts for less than 2% of the aggregate portfolio (31 March 2020).
While there were certainly difficulties within the portfolio, companies within the health and technology sectors appear to have proved resilient, helping offset negative performance elsewhere. Overall, in the period to 30 September 2020, the VCTs saw an average decrease in NAV of 2.6%. Albion expects much of the portfolio to continue to recover, although there are no guarantees.
Current portfolio overview
There are approximately 70 unquoted companies between all six VCTs , most of which have some degree of co-investment. In 2020, the Albion VCTs invested c.£34 million in 6 new and 15 existing investee companies in a range of sectors. The sector breakdown of the combined portfolio is shown below; however, these percentages will vary between the individual trusts.
Source: Albion Capital, 30 Sep 2020
The combined portfolio is also diversified across companies at different stages of maturity:
- 12% is in early-stage companies (turnover less than £1 million)
- 37% is in growth companies (turnover between £1 million and £5 million)
- 51% is in scale-up companies (turnover over £5 million)
However, as the below table shows, the different historic focus of each VCT means there is significant variance in the portfolio makeup between the different funds. Albion expects the asset-based component of its holdings to reduce across all six VCTs in future.
|VCT||Unquoted asset-based companies (% of NAV)||Unquoted growth companies (% of NAV)||Cash / net current assets (% of NAV)|
|Albion Development VCT||21||57||22|
|Albion Enterprise VCT||16||59||25|
|Albion Technology & General VCT||25||50||25|
|Crown Place VCT||32||37||31|
|Kings Arms Yard VCT||34||49||17|
Examples of portfolio companies
Quantexa is a data and analytics software company. Its flagship product, a Contextual Decision Intelligence (CDI) platform gathers data across billions of external and internal systems, to present a single view and help businesses make better decisions from their data.
The platform has a number of applications but its main focus is tackling fraud, financial crime and money laundering. For instance, Quantexa can generate patterns by assessing client habits and behaviours, enabling it to determine accounts that are more likely to commit fraud before it happens. Current clients include HSBC, Standard Chartered Bank, and Danske Bank.
Quantexa reported revenues of £5 million in its first full year in 2017. It doubled this by FY 2019 and is forecasting revenues of over £32 million in 2020 – not guaranteed. Quantexa recently came 14th in The Sunday Times Sage Tech Track 100, which ranks the UK’s 100 fastest-growing private technology companies. This growth has attracted significant fundraising interest. In July 2020, Quantexa completed a Series C round, raising $64.7 million to accelerate its growth in North America, Europe and Asia. Albion has invested a total of £10.1 million across its six VCTs, other investors include HSBC, Evolution Equity Partners, Dawn Capital, and ABN AMRO Ventures.
Quantexa is the largest holding within Albion Development VCT at 9.6% of net assets (September 2020).
After requesting a refund, Aron Alexander was surprised when, rather than a digital gift certificate or similar, he received a £5 voucher in the post. He realised the digital rewards & incentive industry (valued at around $300 billion) was still stuck in the past, often relying on outdated systems.
So, he founded WeGift, a platform that intelligently automates the process of purchasing and distributing digital rewards. WeGift caters for most forms of ‘non-cash pay-outs’ – from rewards for customers to employee incentives or simply gifts. In just a few years, WeGift has managed to secure an impressive client list with names such as Amazon, Apple, Uber and Nike.
The company initially received seed funding from a number of angel investors, including Alex Chesterman (founder of Zoopla and Cazoo) and Fuel Ventures. In 2019, WeGift raised £4 million in a Series A round led by Stride.vc alongside SAP.iO Fund and Unilever Ventures. Albion participated in the company’s Series A extension round, which raised a total of £6.7 million. The funds will be used to continue WeGift’s investments in building its supply chain.
Performance and dividends
Over the last 10 years to 31 December 2020, the Albion VCTs have produced NAV total returns of between 69.7% and 101.8%, based on latest available data to 5 January 2021. Past performance is not a guide to the future
Over the last five years to 31 December 2020, the six Albion VCTs have paid total dividends per share of between 4.9p – 27.2p, equivalent to between 27.7% and 39.9% of the starting net asset value on 31 December 2015.
In 2020, the Boards of the VCTs approved a new dividend policy. Given the current economic uncertainty, the Boards considers it appropriate to move to a variable policy, targeting an annual dividend yield of around 5%. The boards believe this could help avoid unsustainably high dividends if the NAV falls.
The five VCTs currently raising funds aim to pay half-yearly dividends (calculated as 2.5% of the most recently announced NAV) twice a year, each in a different month. So an investment in all five VCTs could potentially generate an income stream throughout most of the year (dividends are variable and not guaranteed).
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 investments are no longer permitted. This results in considerably higher risks.
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.
Please note, capacity – for the offer or any early bird savings – can be reached early, and we may not be notified of this by the VCT in real time.
|Full initial charge||2.5%|
|Early bird discount||—|
|Wealth Club initial saving||—|
|Existing shareholder discount||—|
|Net initial charge through Wealth Club (new investors)||2.5%|
|Net initial charge through Wealth Club (existing shareholders)||2.5%|
|Annual management charge||1.75%-2.5%|
|Annual administration charge||See offer documents|
|Annual rebate from Wealth Club (for three years)||0.10%|
More detail on the charges
- Deadline for next allotment: 26 Feb 2021 (2pm)
- Final allotment in 2020/21 tax year: 1 April 2021 (2pm)
- First allotment 2021/22 tax year: 9 April 2021 (2pm)
- Offer closes 30 September 2021 (2pm)
Dividend Reinvestment Scheme (DRIS)
The companies have adopted a Dividend Reinvestment Scheme under which shareholders are given the opportunity to reinvest future dividend payments by way of subscription for new shares. Subject to a shareholder’s personal circumstances, shares subscribed for under the Dividend Reinvestment Scheme should benefit from VCT tax relief.
Share buy-back policy
The VCT intends to buy back shares at a discount in the region of 5% of net asset value. Buybacks are subject to the company having sufficient funds available and are at the discretion of the board.
Annual rebate when you invest through Wealth Club
The Albion VCTs 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 Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.
By investing across the Albion VCTs, investors gain access to a portfolio of complementary investments via a blend of asset-based, renewable and growth investment deals, from a manager with a strong track record of investing across all three disciplines. Past performance is not a guide to the future.
The team is experienced, with deep sector expertise, and has been bolstered by a number of recent additions. A number of the tech-focused companies have demonstrated encouraging progress, such as Quantexa, the UK’s 14th fastest-growing private technology business, although there are no guarantees of success.
Five of the six Albion VCTs are raising in this offer. The trusts aim to pay dividends on different months, so, if investing across all five VCTs, investors could potentially benefit from tax-free dividends throughout the year – not guaranteed.
In our view, the ability to access a growing portfolio of technology and healthcare businesses combined with the potential for a regular income stream supported by Albion’s asset-based investments makes this a compelling offer for consideration: experienced investors should form their own view.
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 dividend
- Initial charge
- Initial saving via Wealth Club
- Net initial charge
- Annual rebate
- Funds raised / sought
- £58.5 million / £58.5 million
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