New offer announced – register your interest
[24 Jun 2021] Pembroke VCT has announced its intention to fundraise, with the prospectus expected to be published in September 2021. Register your interest below to receive an alert as soon as the offer opens.
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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. The two share classes merged on 26 August 2020. The Ordinary Shares and B Ordinary Shares followed the same investment strategy and held many of the same holdings. On 26 August 2020 Ordinary Shares were converted to B Ordinary Shares.
The combined VCT has net assets of £113.3 million and a portfolio of 39 active companies (as at 30 September 2020).
Review of Pembroke VCT’s previous offer
Below is our review of the last Pembroke VCT share offer (Sep 2020). This page will be updated when the new offer opens.
- 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 £2.23 million in the VCT and intend to invest a further £100,000 in aggregate in the current offer
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 €3.0 billion under management.
Oakley Capital was founded in 2002 to support companies through investment, whether they are early-stage companies or established businesses. Pembroke was founded in 2013 to support the development of smaller, early-stage high-growth businesses.
The VCT is managed by a small but expanding team of nine, 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. As well as being a fund manager, Andrew has first-hand business experience.
Andrew has been cooperating with Peter Dubens since the early 1990s and has worked with a number of Oakley’s earlier-stage portfolio companies including KX and 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 sits on the board of a number of Pembroke’s current investments and helps the founders and management teams.
The VCT invests in a diversified portfolio of smaller, unquoted companies operating in sectors which 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 in which the VCT is focused:
- Food, beverage & hospitality
- Design (previously referred to as “apparel & accessories”)
- 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.
Exit track record
Pembroke VCT first launched in 2013. To date, it has achieved one profitable exit.
Pasta Evangelists – recent exit
Pasta Evangelists, which counts Great British Bake Off’s Prue Leith as a founding shareholder, delivers high-quality fresh pasta, sauces and garnishes direct to customers’ homes nationwide. Ingredients are sourced seasonally and sustainably from a network of small farmers and growers across Italy. The company is expanding its retail channel with concessions at Harrods and M&S. Its products are also available on Deliveroo, Ocado and Amazon.
The business saw a surge in demand following the changing consumer habits brought on by the Covid-19 outbreak, revenues exceeded £1 million per month, up tenfold from the previous year: past performance is not a guide to the future.
In January 2020, Pembroke VCT invested £2 million for a 13% stake in the business alongside the Guinness EIS fund as part of a £3.5 million funding round. Only a year later, the VCT sold its stake as part of a deal with Barilla (the world’s largest pasta producer ), representing a return of 2.3x. Following the exit, the VCT’s board announced an interim dividend of 4p per share (ex-dividend date: 28 January 2021). Please note, past performance is not a guide to the future.
Chilango – example of previous failure
Pembroke VCT has made some investments that didn't work out. One example is Chilango, an award-winning chain of quick-service Mexican restaurants. Pembroke initially invested £550k into the business in 2013 via its Ordinary shares and followed on with a further £85k investment via its Ordinary B 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 for the business, including a regional roll-out. The business entered into a CVA 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.
The manager of the VCT has assessed the impact of Covid-19 on all the companies in its portfolio and placed them into three camps.
1. “Strong performers”
These are businesses which continue to exceed expectations, generate revenue growth or attract funding from third parties. Importantly, any spike in demand as a result of Covid-19 has not been used to mark up the valuation of the business. The three largest holdings within Pembroke VCT (Plenish and Popsa) have been put in this category and together account for 15.95% of its net assets. Recent investments such as Stitch & Story and Pasta Evangelists (now exited) also fall into this category.
2. “Mothballed and ready”
These are businesses in the portfolio such as the gym operators (Boom Cycle, KX Gym, KXU) and restaurant operators (Five Guys, Sourced Market, Chucs Bar & Grill) that were forced to close sites during lockdown. Each has seen a reduction in its holding value. Together they account for 20.4% of the net assets of the VCT. These businesses have focused on minimising costs and preserving cash.
“Pivot-trading” businesses are those that have had to adjust the way they operate in response to the changing situation. This category includes companies such as women’s fashion retailer ME+EM, which closed its physical stores following lockdown and refocused on developing its online and catalogue business.
Overall, the impact of Covid-19 counteracted some of the growth within the portfolio. The net asset value per share fell from 115.12p per share in September 2019 to 110.29p per share as at 31 March 2020. Past performance is not a guide to the future. The net asset value has since recovered, ending the year at 113.2p, after paying out 3p in dividends. Following the exit of Pasta Evangelists, the board announced a further 4p dividend, paid on 2 March 2021.
Current portfolio overview
Pembroke VCT has made investments into 45 companies. 39 are currently active and are valued at £96.5 million. The VCT has net assets of £113.2 million (30 Sep 2020).
The VCT remains concentrated following the merger of the two share classes. The top 10 holdings account for 50% of the value of the VCT.
In the six months to September 2020, Pembroke VCT invested £1 million in one new investment and a further £7.2 million in 11 follow-on investments.
The portfolio has a skew towards food, beverage & hospitality, design, and media businesses. Within the sector breakdowns, a number of the underlying companies have been reliant on the high street to generate some of their sales. They have been impacted by lockdown. Where possible, these businesses have sought alternative distribution channels.
Source: Pembroke VCT plc, 30 September 2020. The sector breakdown includes audited valuations up to 30 September 2020, and investment activity following this date.
Examples of portfolio companies
Plenish (largest holding)
Plenish, founded in 2012, is one of the UK’s leading providers of nut milks. Plenish is now stocked in all but one of the major supermarkets in the UK. Its range includes five different milks as well as a ‘grab-and-go’ offering. Plenish also produces a range of cold‑pressed juices, which are 100% raw, organic and unpasteurised.
The business continues to grow strongly. Overall revenues to June 2020 were up 30% over the previous year. Pembroke expects revenues to continue to grow strongly as the business benefits from an increasingly health-conscious consumer, particularly in a post Covid-19 world.
Following the merger of the two share classes, and the continued strong performance of the business, Plenish is now the largest holding within the VCT. The holding is valued at £9.2 million, equivalent to 8.7% of net assets. Pembroke VCT owns a 39% stake in the business (September 2020).
Eave – recent investment
Dr David Greenberg, Eave’s founder, has seen first-hand the impact of hearing loss. While working as a Clinical and Research Audiologist for over 10 years, he saw numerous cases of patients suffering from preventable deafness. However, his reason for launching Eave was his grandmother, Audrey Greenberg, who lost her hearing working in a munition factory during the blitz in World War II.
Today, hearing loss is the most reported occupational disease in the EU and is one of the greatest modifiable risk factors in developing dementia. The most common hearing protection is in the form of ear defenders, however, Dr Greenberg says they work passively by simply ‘blindfolding’ the ears.
In contrast, Eave’s patented technology allows individuals to reduce the noise around them, while still being able to hear environmental sound and take part in conversations. In addition, each headset is linked to Peak, Eave’s noise and hearing management platform. Small microphones within the headsets monitor internal and external noise levels, transmitting this data wirelessly to Peak. This information can then be used to generate an interactive noise map of a workplace as well as determining an individual’s noise exposure allowance.
Pembroke had been following Eave since 2017 and invested £2 million into the business in October 2020. The company is already supplying some of the UK’s biggest construction companies (including Galliford Try Highways and the HS2 project). Pembroke’s funding will be used to accelerate growth, R&D, and international expansion in 2021.
Five Guys was founded in 1986 in the US. It’s a restaurant chain serving handmade burgers cooked on a grill, along with fresh-cut fries, served with unlimited toppings.
Pembroke became involved even before Five Guys had its first UK site and provided growth capital to fund the UK roll-out. Five Guys was also backed by Sir Charles Dunstone, founder of Carphone Warehouse and an investor in Pembroke.
The chain now has over 100 outlets in the UK as well as sites across Europe. Whilst lockdown forced the business to close its outlets to walk-in trade, many of the sites remained open to click-and-collect and takeaway orders. Five Guys has been a beneficiary of the growth in demand for delivery platforms such as Deliveroo. In fact, a cheeseburger from Five Guy’s Clapham store was London’s most popular dish ordered on the Deliveroo platform in 2019.
The business is in a strong cash position, and Pembroke expects the business to generate revenue growth this year despite Covid-19 disruption.
Pembroke originally invested in 2013 through its Ordinary share class and has invested over £2 million across both share classes. Because of the company’s size, Pembroke VCT is precluded from making any further investment. Following the merger of the VCT share classes, Five Guys is the fourth-largest holding within the VCT, accounting for 4.9% of net assets (September 2020).
Performance and dividends
The net asset value of Pembroke VCT was impacted by Covid-19 and has since recovered. Since launch the VCT has delivered modest NAV appreciation, combined with a consistent 3p dividend per annum.
In the six months to September 2020, the VCT saw its NAV increase to 113.1p, up from 110.29p on 31 March 2020, after paying a 3p dividend. Eleven portfolio companies experienced an uplift in value, whilst eight companies saw a reduction in value.
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 Dec 2015 – 31 Dec 2020.
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.
Source: Pembroke. Dividends paid in calendar year. Dividends are not guaranteed and past performance is not a guide to the future.
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. Management buyouts, replacement capital deals and investments in mature companies are no longer permitted. This results in considerably higher risks.
As this is a relatively new VCT with no legacy portfolio of investments made under the older rules, investors might have to wait longer for returns to be realised– note past performance is not a guide to the future.
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||5.5%|
|Early bird discount||—|
|Wealth Club initial saving||2.5%|
|Existing shareholder discount||–|
|Net initial charge through Wealth Club (new investors)||3%|
|Net initial charge through Wealth Club (existing shareholders)||3%|
|Annual management charge||2%|
|Annual administration charge||–|
|Annual rebate from Wealth Club (for three years)||0.15%|
More detail on the charges
Pembroke VCT offers a share buy-back policy. The company may repurchase shares which 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.
Dividend Investment Scheme (DIS)
There is a Dividend Investment Scheme which 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.
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.
Following the merger of the VCT’s two share classes and a number of successful years of fundraising, Pembroke VCT now has assets in excess of £100 million, and a portfolio of 39 underlying companies.
The increasing size of the VCT has enhanced its appeal, in our view. It is this growth which has enabled the VCT to diversify and mitigate what could otherwise have been a challenging year for the VCT. The portfolio includes a number of promising companies whose success during the six months to September 2020 has helped to offset some of the losses generated from the more mature investments within the portfolio. This remains a concentrated portfolio with over 50% of the VCT's assets held in its top ten investments.
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 in order 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. However, although, a number of companies in the portfolio are flourishing in the current environment, others are struggling. Investors should note key sectors in the portfolio are under considerable pressure at the current time.
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
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- Initial saving via Wealth Club
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- Annual rebate
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