Edition VCT

Launched in May 2022, ‘Leisure Shares’ is a new share class of the Oxford Technology 2 VCT (soon to be renamed Edition VCT). 

The Leisure Shares will be managed by Edition Capital, an established investment house that specialises in leisure and entertainment investments. The VCT share class will be an extension of Edition’s existing EIS strategy and will target early-stage businesses operating across hospitality, live entertainment, digital & technology, lifestyle & wellbeing, and content creation sub-sectors.

Edition has c.£55 million in assets under management through its EIS funds and has deployed £30 million under its current strategy since 2018. 

• Seeking to raise £10 million with a £10 million overallotment facility
• Initial target dividend of 3p per share - not guaranteed 
• Available for this tax year (2022/23) and next tax year (2023/24) 
• Minimum investment £3,000 – you can apply online
• Next deadline: 3 April 2023 (5pm) for allotment in 2022/23 tax year

The manager

Oxford Technology Management (“OTM”) is the manager of the four Oxford Technology VCTs. They were launched between 1997 and 2004 and all are now in a phase of investment realisation. In May 2022, OTM proposed a merger to convert existing share classes and combine all four trusts into Oxford Technology 2 VCT. As part of the proposal, a new share class is to be issued (Leisure Shares) and Edition is to be appointed as the investment manager for the new share class. The proposal was approved by shareholders on 20 June 2022.

Edition is an investment and advisory group focused on the leisure industry. It was founded in 2015 by previous members of the Live Entertainment division at Ingenious, a media investment specialist. The business has c.£55 million in assets under management and currently operates two funds, Edition EIS and Edition Capital Projects. 

The team is led by Paul Bedford, a chartered accountant with over 40 years’ experience in the media and leisure industry. His career includes senior appointments at notable entertainment businesses such as 19 Entertainment (the maker of Pop Idol) and Impresario Festivals (the UK’s largest independent operator of music festivals until its sale). Paul also spent 14 years at Ingenious, where he managed a portfolio of media and entertainment-focused VCTs with total assets in excess of £120 million. 

Paul is joined by Senior Partner Harry Heartfield and Partners Lisa Boden Shah and Adam Spence. Together they oversee fund development, deal sourcing and execution, as well as fundraising. They are supported by a team of nine, including two investment directors and an investment manager. 

As part of the offer, the directors and senior management of Edition have committed to invest £60,000 in aggregate in the Leisure Shares under the same terms as investors.

Investment strategy

Over the last decade, consumers have been increasingly spending their disposable income on experiences rather than products. Edition believes this transition could provide valuable investment opportunities.

Edition looks for companies it believes to have the potential to roll out to multiple sites, a proven business model, and the ability to adapt to consumer sentiment. Companies should have strong management teams with a track record of executing similar strategies in the industry. Edition will also target businesses that have reached – or are soon likely to reach – profitability and require further capital to scale.

The portfolio will be split into two broad categories: expansion capital and growth capital. The former will focus on companies with significant revenue looking to open new venues, expand into new territories, or launch complementary products. Growth capital companies, on the other hand, are likely to either operate digitally or offer a product or service without a fixed physical presence. These types of investments will focus on providing working capital to support the next phase of growth. At both stages, the team will offer hands-on operational and strategic support.

Edition anticipates most new deals will be co-investments between the VCT and EIS fund. Furthermore, the current EIS portfolio is likely to act as a source for investments in the VCT’s early years.

Current portfolio overview

This is a new share class so does not have an existing portfolio. It will seek to invest in 6-10 companies in its first year across sub-sectors such as hospitality, live entertainment, digital & technology, lifestyle & wellbeing, and content creation.

Below are details of two investments made by Edition EIS, shown as examples of the kinds of companies this VCT is expected to target.

Incipio Group 

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 Charlie’s childhood trips to France and Italy, Pergola aims to recreate the European alfresco dining experience.

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 set up five more sites including its first two permanent locations, Pergola on the Wharf and Dear Grace. Over the last year, Incipio venues hosted almost 500,000 guests and the group recently announced trading is “well above” pre-Covid levels. 

Edition first encountered the business after looking into non-traditional food and beverage operators. In total, the EIS fund has invested c.£4.8 million into the company across two investment rounds in 2017 and 2019. Despite restricted trading due to Covid-19, Incipio has grown revenues from £8.0 million in 2018 to £15.1 million in 2021, generating an EBITDA profit of £1.9 million. Past performance is not a guide to the future. 

Whistle Punks UK Ltd

Whistle Punks founders, John Nimmons and Jools Whitehorn, have been operating in the leisure industry for almost a decade. Prior to Whistle Punks, the pair successfully ran two other competitive socialising businesses, Battle Bows and Bubble Football. However, after seeing the growing trend for axe throwing in Canada, they decided to open the UK’s first urban axe throwing venue.

Each site is organised like a bowling alley, with groups assigned to lanes. Players are given a short masterclass before being let loose with a hatchet and a target board. Groups are encouraged to compete, with the top scorer in each session dubbed the “axe king or queen”.

Whistle Punks currently operates four venues in London, Manchester, Leeds, and Bristol and hopes to roll the concept out across more of the UK. Edition first invested £1.5 million in the business in 2019 and has since provided a further £180,000 in follow-on funding in 2021.

Exit track record

As this is a new share class there is no track record.

Performance and dividends

The Leisure Shares aim to pay a dividend of 3p in the first full financial year. Over the long term, Edition has informed Wealth Club of its ambition to achieve a dividend yield of 4-5% per annum, although no formal target has been set. Dividends are variable and not guaranteed.

Dividend reinvestment scheme

There is no dividend reinvestment scheme.

Share buyback policy

On 20 June 2022, the company passed a resolution to adopt a buyback policy whereby, subject to adequate cash availability, it will consider repurchasing shares at the Board’s discretion at up to a 5% discount to the prevailing net asset value.

As with all new VCTs (or share classes), the board directors expect only limited demand for share buybacks from Shareholders within the five year minimum holding period. 

Discount history

VCT shares are traded on the London Stock Exchange. Similar to investment trusts, the share price can fluctuate and can be different from the VCT’s net asset value (NAV), i.e. the value of the VCT’s underlying investments. The difference between the share price of a VCT and its net asset value per share is called a discount.

Investors should note the VCT has less than a five year track record. Trading of the VCTs shares will be immaterial and any consideration of the share price movements in relation to the net asset value per share will be inconclusive. The discount history chart will be published once the VCT has a five year track record.

Investors looking to sell their VCT shares may get a better price using the VCT’s share buyback facility, although this is 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. 

To retain the tax benefits, VCTs should be held for at least five years. If you sell VCT shares and reinvest in new shares of the same VCT (including any mergers) within six months, tax relief can be restricted. Tax rules can change and benefits depend on circumstances.

This is a new VCT share class. If fundraising is slower than expected or does not reach its anticipated targets, there may be a delay in allotting shares and fewer investments will be made overall.

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, offer price and share allotment calculation methodology.

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.

Annual rebate when you invest through Wealth Club

There is no annual rebate for Wealth Club investors.

Deadlines 

• Final applications for allotment in 2022/23 tax year: 3 April 2023 (5pm)
  
• Final applications for allotment in 2023/24 tax year: 12 May 2023 (noon)

Our view

Edition Capital is a sector specialist with hands-on knowledge and investment experience in the leisure and entertainment industries. Edition aims to use this expertise to identify key consumer trends and target investee companies that can take advantage of what the team believes is a favourable environment for expanding leisure businesses.

To date, Edition has employed its investment strategy through its EIS fund, raising £30 million. It is now looking to expand its offering by launching a new share class within the existing Oxford Technology VCT. This means the new share class will have access to the VCT’s distributable reserves, potentially enabling it to make dividend payments for the first few years. Dividends are variable and not guaranteed.

The focus on the hospitality sector differentiates the Leisure Shares from the other VCT offers, which typically focus on technology-led businesses. The management team has experience in the sector. 

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.