Pembroke VCT

Update (6 May 2022): Offer Closed

Please note, this offer is now closed. Any applications already submitted will be processed on a first come, first served basis.

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Pembroke VCT is focused on growth investing, typically backing consumer brands with premium pricing potential. It invests mainly in six sectors: wellness; food, beverage & hospitality; education; design (previously “apparel & accessories”); media; and digital services. 

The original Pembroke VCT Ordinary Shares launched in 2013 and the B Ordinary Shares launched in 2014 – both followed the same investment strategy and held many of the same holdings. The two share classes merged on 26 August 2020 when Ordinary Shares were converted to B Ordinary Shares.

The combined VCT has net assets of £159.8 million and a portfolio of 42 investee companies (as at 30 Sept 2021).

The current offer is seeking to raise up to £40 million, with a £20 million overallotment facility. 

Past and current directors and members of the investment team have so far invested £2.5 million in the VCT and intend to invest up to further £350,000 in aggregate in the current offer. 

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.


Highlights

  • Strong emphasis on capital growth
  • Focus on six sectors: wellness; food, beverage & hospitality; education; design; media; and digital services
  • Past and current directors have so far invested £2.5 million in the VCT and intend to invest up to a further £350,000 in aggregate in the current offer
  • Annual rebate of 0.15% for three years
  • Available for the 2022/23 tax year
  • Minimum investment of £5,000

The manager

Pembroke VCT plc (“Pembroke”) is managed by Pembroke Investment Managers LLP (formerly Oakley Investment Managers LLP), part of the Oakley group, a privately owned asset management and advisory group founded by serial entrepreneur Peter Dubens. The group comprises private equity, venture capital and corporate finance operations, and has €4.8 billion under management.

Oakley Capital was founded in 2002 to support companies through investment, from early-stage to established businesses. Pembroke was founded in 2013 to support the development of smaller, early-stage high-growth businesses.

The VCT is managed by a team of ten, which can benefit from the support of the wider Oakley group. Chief Investment Officer Andrew Wolfson heads up the team. Andrew is responsible for selecting, monitoring investments and advising portfolio companies. 

Meet the manager: watch a video interview with Andrew Wolfson, CEO and CIO of Pembroke Investment Managers:

 

As well as being a fund manager, Andrew has first-hand business experience. Andrew has been working with Peter Dubens since the early 1990s and with several of Oakley’s earlier-stage portfolio companies including luxury gyms KX and premium fashion brand James Perse. Before joining Oakley, Andrew ran a number of businesses in sectors ranging from hospitality to manufacturing and telecoms. His experience in this could be beneficial to the VCT's portfolio companies. Andrew currently sits on the board of a number of Pembroke’s current investments and provides support to founders and management teams.

The team continues to expand with three new hires in 2021, including Stefania Ponzo as Portfolio Director. Stefania has 14 years’ venture capital experience. Prior to joining Pembroke, Stefania held roles at Downing Ventures and Coutts. The team has also hired a Portfolio Senior Manager and Investment Associate and expects to make three further hires into the investment and portfolio teams in early 2022.

Investment strategy

The VCT invests in a diversified portfolio of smaller, mainly unquoted companies operating in sectors the team knows well, and where it can use its experience to add value.

The VCT seeks to back companies run by ambitious entrepreneurs who are developing consumer brands with premium pricing potential.

There are six sectors on which the VCT is focused:

  • Wellness
  • Food, beverage & hospitality
  • Education
  • Design (previously referred to as “apparel & accessories”)
  • Media
  • Digital services

The VCT seeks to take a significant stake in each company, so as to be able to influence its strategy and maximise value. 

The VCT will primarily invest in unquoted companies, although it may also consider investments in NEX or AIM-quoted companies.

Two-thirds of funds raised during this new offer are expected to be follow-on investments to support the growth of the existing portfolio.

Exit track record

Pembroke VCT first launched in 2013. To date, it has achieved two profitable exits, both in 2021: Plenish, the plant-based drinks brand, and Pasta Evangelists, the high-end pasta delivery business. Both exits achieved a realised return of 2.3x. Past performance is not a guide to the future. Five investments have been written off. 

Plenish – Pembroke VCT 2021Plenish – recent exit

Plenish was founded in 2012 by Kara Rosen, who after moving to the UK from the US, saw a gap in the market for cold-pressed juices with no added sugar. Over time the business expanded to include a range of nut-based milks. Its products are now widely sold across major supermarkets in the UK. 

Pembroke first backed the business in 2013 and has participated in several funding rounds since, investing a total of £3.9 million. In May 2021, the business was sold to Britvic plc, the global soft drink business, generating proceeds of £8.9 million for the VCT, a 2.3x realised return. Past performance is not a guide to the future. 

Proceeds from the exit have been used to fund a 4p special dividend, paid in June 2021, and the annual final dividend.

Chilango – example of previous failure

As can be expected, not all investments worked out. One example is Chilango, an award-winning chain of quick-service Mexican restaurants. Pembroke initially invested £550k in 2013 via its Ordinary shares and followed on with a further £85k investment via its B Ordinary shares in the year to March 2016. At the time of the initial investment, the business operated six outlets in London. The management team subsequently decided to pursue an aggressive expansion plan, including a regional rollout. The business entered into a CVA (Company Voluntary Arrangement) in 2019, at which point the holding value was written down to zero. Chilango was subsequently sold via a pre-pack administration process in the summer of 2020.

Covid-19 impact

Early in 2020 the manager assessed the impact of Covid-19 on all the companies in its portfolio, placing these into one of three groups: 

1. “Strong performers” 

Businesses that saw an acceleration in demand for products and services, such as Pasta Evangelist (now exited). 

2. “Mothballed & ready” 

Businesses that were forced to close during lockdown, such as the VCT’s investments in gyms and restaurants. 

3. “Pivot trading” 

Businesses that were forced to “pivot” their business model. An example is ME+EM, the women’s fashion brand, which closed its physical stores and refocused the business on e-commerce.

Initially, the net asset value per share fell from 115.12p in September 2019 to 110.29p in March 2020, after paying a 3p dividend. However, by 31 March 2021, the net asset value had recovered to 116.1p, after paying out 7p in dividends. By 30 September 2021, the net asset value had risen further to 124.2p, after paying a further 4p special dividend. 

The VCT’s portfolio of wellness businesses have made a significant contribution to performance over the period, with valuation uplifts from wellness company LYMA Life and Thriva, the home blood test business. Several design businesses that successfully pivoted towards e-commerce have also seen a material recovery in their valuations, including Heist Studios, the women’s underwear business, and fashion brand ME+EM. 

Current portfolio overview

Pembroke VCT has net assets of £159.8 million and contains a portfolio of 42 growth companies (Sept 2021). 

The VCT is concentrated, with the top 10 holdings accounting for 52.8% of the portfolio. 

In the 18 months to September 2021, Pembroke VCT has invested £12.5 million in nine new investments and a further £21 million in 30 follow-on investments (Sept 2021).  

The portfolio has a bias towards design, wellness, and media businesses. Within the sector breakdowns, several of the underlying companies have been reliant on the high street to generate some of their sales and have therefore been impacted by lockdown. Where possible, these businesses have sought to expand alternative distribution channels.

Source: Pembroke VCT plc, 30 September 2021.

Examples of portfolio companies

Popsa – Pembroke VCTPopsa (largest holding)

Popsa is a photobook app that helps users create photobooks in just a few taps. Using proprietary machine learning algorithms Popsa has reduced the time it takes to produce photobooks from 2 hours to an average of just 6 minutes. 

Since launching in 2016, the business now operates in over 50 countries and has grown revenues 47-fold over the previous four years. In 2021, Deloitte named Popsa as one of the UK’s fastest-growing technology companies, placing it 9th overall in the UK Fast 50.

The Pembroke VCT has invested £4.4 million into the business alongside the Guinness EIS service. The holding is now valued at £13.3 million, equivalent to 8.3% of net assets, making it the VCT’s largest holding. Pembroke VCT owns a 19% stake in the business (Sept 2021). Past performance is not a guide to the future. 

COAT – Pembroke VCTCOAT – recent investment

Set up in September 2020, high-grade, sustainable paint company COAT aims to address the negative aspects associated with the $90 billion legacy paint industry. 

COAT’s purely online service offers a curated range of water-based, low-toxin and solvent-free paints in trendy colours, meeting the needs of a more contemporary consumer by focusing on quality, sustainability and customer experience.

The company was founded by two entrepreneurs with a complementary set of skills and experiences: Rob Green previously worked for Sherwin-Williams, the USA’s largest coatings manufacturer and third-largest worldwide, where he was marketing manager for leading brands Ronseal & Valspar; Rob Abrahams is an experienced growth marketing expert who previously worked at Carwow and BMW. 

Pembroke VCT invested £1 million into the business in June 2021.

Performance and dividends

Pembroke VCT performed strongly through the pandemic. Its net asset value rose from 110.29p in March 2020 to 113.2 as at 31 December 2020, after paying a 3p dividend. In the nine months to September 2021, two exits and several valuation uplifts within the portfolio helped to lift the net asset value to 124.2p and fund a further 8p in dividends. A further 3p was paid in November 2021. Past performance is not a guide to the future.  

NAV and cumulative dividends per share over five years (p)

Source: Morningstar. Past performance is no guide to the future. Dividends are variable and not guaranteed. The bar chart shows net asset value and cumulative dividends per share for the period 31 Mar 2016 – 31 Mar 2022.

The VCT targets an annual dividend of 3 pence per share. There is also the potential for special dividends where realisations occur from the sale of the portfolio assets. Please remember, returns are not guaranteed.

Dividends paid per calendar year

Source: Morningstar. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid per calendar year to 31 Mar 2022.

Average dividend yield (% of NAV) history

Calendar year Dividend as % of NAV
2017 2.89%
2018 2.79%
2019 2.68%
2020 2.72%
2021 9.35%

Source: Morningstar. Average dividend yields are based on the dividends paid over the period divided by the monthly average NAV of the VCT over the same period. Past performance is no guide to the future.

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.

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.

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.

Full initial charge 5.5%
Early bird discount
Wealth Club initial saving 2.5%
Existing shareholder discount
Net initial charge through Wealth Club (new investors) 3.0%
Net initial charge through Wealth Club (existing shareholders) 3.0%
Annual management charge 2%
Annual administration charge
Performance fee 20%
Annual rebate from Wealth Club (for three years) 0.15%

More detail on the charges

Deadlines

This offer is now closed.

Dividend Reinvestment Scheme (DRIS)

There is a Dividend Reinvestment Scheme that allows shareholders to reinvest future cash dividend payments in new shares if desired. As these are new shares they should be eligible for tax relief (you will need to claim this on your tax return or directly with HMRC) and the shares will count towards the VCT annual subscription limit. Pembroke also offers a flexible DRIS whereby investors can elect how much of each dividend to take as cash or to re-invest.

Share buyback policy

Pembroke offers a share buy-back policy. The company may repurchase shares shareholders wish to sell, at a discount of no more than 5% to net asset value per share, less transaction costs payable to market makers and stockbrokers. Please note, any purchase is at the discretion of the board and is subject to the company having the necessary cash resources and distributable reserves available for the purchase. 

Pembroke VCT bought back £9.7 million of shares in April 2021 at a 5% discount to net asset value. 

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.

The chart shows the five-year discount to net asset value history of Pembroke VCT based on the closing share price at the end of each month, divided by the latest net asset value at the time. Past performance is not a guide to the future. Investors looking to sell their VCT shares may get a better price using the VCT’s share buyback facility, although this is not guaranteed.

5 year discount to NAV history

Source: Morningstar, 31 March 2022. Discount is the closing share price at the end of each month, divided by the latest net asset value at the time. Rolling 12 month average is this figure averaged over the year.

Annual rebate when you invest through Wealth Club

The VCT includes 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 0.15% of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.

Our view

Following the merger of the VCT’s two share classes and several successful years of fundraising, Pembroke VCT now has assets in excess of £150 million, and a portfolio of 42 underlying growth capital companies. 

The increasing size of the VCT has enhanced its appeal, in our view. It has enabled the VCT to diversify its portfolio and provide continued financial support to its companies. 

The portfolio contains a mix of more mature investments, as well as smaller positions within recent investments. Several companies are promising in our view, as they appear to be benefitting from changing consumer habits, whilst some, such as hospitality investments, continue to find conditions challenging.

Overall, this remains a concentrated portfolio with 52.8% of the VCT's assets held in its top ten investments. 

The VCT has started to distribute capital to shareholders following its first two profitable exits in 2021. 

Pembroke’s investment strategy, to back passionate entrepreneurs building premium consumer brands, is differentiated from the wider cohort of VCTs. Andrew Wolfson and the team’s experience means they know first-hand what it takes to build a successful business. As a result, they tend to take a much more active role in their investee companies than some other VCT managers. Pembroke will often take a significant stake in its investee companies to help shape the strategic direction of the business. 

Andrew Wolfson is an experienced entrepreneur and fund manager and benefits from the wider resources and presence of Oakley Capital. The close-knit team at Pembroke and the wider resources of Oakley Capital could be a good blend. The sectors in which Pembroke VCT invests tend to be overlooked by most other VCTs, and so Pembroke could be a good diversifier with a VCT 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.

The details

Type
Generalist
Target dividend
-
Initial charge
-
Initial saving via Wealth Club
-
Net initial charge
-
Annual rebate
-
Funds raised / sought
£45.0 million / £50.0 million
Deadline
CLOSED
Last updated: 6 May 2022

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