Seneca Growth Capital VCT

1.5p dividend – apply by 7 December 2020 (5pm)

The board has announced a dividend of 1.5p per B share, expected to be paid on 24 December. The ex-dividend date is 10 December 2020. New investors in the current offer could qualify if they apply by 7 December 2020 (5pm, cleared funds) – not guaranteed.  

The Seneca Growth Capital VCT B share class was launched in May 2018. To date, the B share class has raised £7.2 million and invested £3.9 million into ten companies (August 2020). 

In May 2020, the VCT sold one of its AIM holdings realising a profit of £136k, a 2.1x return on investment. The current portfolio consists of nine investee companies, two of which are quoted on AIM. 

Despite being new, the Seneca Growth Capital VCT B Shares have paid a total of 4.5p in dividends since launch. The VCT currently has net assets of £6.6 million, with £3.3 million held in cash (June 2020). Past performance is not a guide to the future.

The current offer is raising up to £10 million with an additional £10 million overallotment facility.

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.

Read important documents and apply

Highlights

  • New VCT offering launched in 2018
  • Raised £7.2 million since launching in 2018 and invested £3.9 million to date across 10 qualifying investments (of which one fully exited) – August 2020
  • Seneca is an experienced growth capital investor, now managing more than £60 million of VCT and EIS growth capital
  • Management team has invested personally in the offer
  • Available this tax year (2020/21) and next (2021/22)
  • Minimum investment £3,000; you can apply online

The manager

The VCT is managed by Seneca Partners Limited. In 2018 it took over the management of Hygea vct plc, renamed it, and launched a new and separate B share class. 

Although relatively new to the VCT market, Seneca is an experienced growth capital investor. It has raised and deployed more than £60 million of EIS and VCT growth capital into 50+ SME companies through over 100 funding rounds since 2010 (August 2020).

The Seneca Growth Capital VCT is managed by the same team behind Seneca’s EIS funds, including shareholder directors Richard Manley, Ian Currie, and Tim Murphy. All three are SME specialists by background. Their previous experience includes KPMG, NM Rothschild, Cenkos Fund Managers, Altium, Apax, RBS, Deloitte and HBOS.

Directors of Seneca and key members of the management team in the wider group of Seneca branded companies have committed to invest over £80k in the current offer, taking their total investment in the VCT to more than £380k.

Watch an interview with investment manager John Davies of Seneca Partners:

Investment strategy

The VCT follows the same generalist investment strategy the manager has been applying to its EIS Portfolio Service. The VCT has benefitted and is expected to continue to benefit from the same deal flow, investment process and co-investment opportunities that come from Seneca's EIS activity. 

Seneca believes this allows the VCT to participate in a higher number of investments of a larger scale into more established businesses than otherwise possible for a VCT of its size.

Seneca seeks well managed businesses with strong leadership teams that can demonstrate established and proven concepts in addition to growth potential. Businesses may be unquoted or AIM quoted. The team targets a 2x return on all investments – not guaranteed. 

Exit track record

In the six months to June 2020, the VCT made one partial realisation and one full realisation, generating total proceeds of £515k and realised gains of £229k. 

There have been no failures yet (the B Share class is still relatively new). However, failures are to be expected when investing in younger, smaller companies. Please remember past performance is not a guide to the future. 

genedrive – Seneca Growth Capital VCTGenedrive plc

Genedrive plc is an AIM-quoted molecular diagnostics company developing and commercialising a low-cost, rapid, versatile, simple to use platform for the diagnosis of infectious diseases and pathogen detection and other indications.

In 2020 the business experienced rapid share price appreciation after announcing it would refocus its resources towards developing a Covid-19 test. In May 2020, the test kit received CE approval and became available for commercial sale across the European Union, including the UK. 

The VCT initially invested £126k into the business. However, following a period of heightened volatility within the AIM market, Seneca decided to fully exit its investment in May 2020, realising a profit of £136k for the VCT. Past performance is not a guide to the future.

Covid-19 impact

Following the outbreak of Covid-19, Seneca made a provision against the carrying value of three of its unquoted investments: SilkFred, Qudini, and Fabacus. 

SilkFred is an online women’s fashion retailer, due to the perceived hit to discretionary consumer spending, the holding value of the investment was marked down by £250k. However, following a material recovery in the company’s trading performance, the provision was reduced to £125k. 

Qudini is a SaaS business focused on providing software to the retail sector for appointment bookings, queue management and event management. The holding value has been marked down by 40%, or £200k. 

Fabacus, a supply chain data intelligence platform, has had its holding value reduced by £64k, erasing previous unrealised gains. 

The aggregate provision within the unquoted portfolio is £389k. The trust NAV was reduced by 12% to 79.5p and has since recovered to 90.4p (as at 30 September 2020) – please note, past performance is not a guide to the future. 

Seneca expects to see an increase in the number of businesses seeking investment to support their growth plans over the next 12–18 months as a result of Covid-19. As at 30 June 2020, the B shares portfolio held £3.3 million in cash, equivalent to 50% of net assets. Seneca believes the VCT is well placed to support its investee companies and take advantage of new growth capital opportunities.

Current portfolio overview

The Seneca Growth Capital B Shares has net assets of £6.6 million, of which £3.3 million is held in cash (June 2020). The investment portfolio consists of eight investee companies, two of which are AIM-quoted investments. A ninth investee company, ADC Biotechnology Limited, was added in August 2020, for a total consideration of £150k. 

Examples of portfolio companies

SkinBioTherapeutics – Seneca Growth Capital VCTSkinBioTherapeutics plc (AIM quoted, largest investment)

SkinBioTherapeutics is a life science company focused on skin health. The Company’s proprietary platform technology, SkinBiotix®, is based upon discoveries made by CEO Dr. Catherine O’Neill and Professor Andrew McBain at The University of Manchester.

SkinBioTherapeutics targets three specific skin healthcare sectors: cosmetics, infection control and eczema. The most commercially advanced programme is focused on the application of the SkinBiotix® platform in managing sensitive skin in the cosmetics industry.

Seneca initially invested in SkinBioTherapeutics when it was admitted to AIM in April 2017. The VCT first invested in February 2019. The position is currently valued at £878k, on an investment cost of £721k(September 2020). Past performance is not a guide to the future.

Ten80 – Seneca Capital Growth VCTTen80 Group Limited (recent investment) 

Ten80 Group is a remote working platform and marketplace which connects its clients to a pool of consultants / freelancers. 

The business was founded in 2019. By May 2020 it had a database of 150,000 customers and worked with corporates including Walmart, Limelight and OK!. 

The majority of Ten80’s services are within a core SaaS product, charging an up-front license fee, as well as a commission percentage to both parties (client and contractor) for the work performed through the Ten80 platform. Ten80 effectively acts as a contractor recruitment and problem-solving platform, with the focus being on outcomes rather than the traditional time-based billing methods, making it much more simple and efficient. There is now an enhanced use case for the product to allow the business to continue working during the Covid-19 crisis.

Seneca has invested a total £500k – of which £400k through the B Shares in March 2020. The investment has allowed the business to expand its team from two founders to eleven employees, with plans to increase headcount to 40 by the end of 2020. 

Performance and dividends

The VCT targets dividends of at least 3p per annum in relation to the B Shares with an ambition to increase this to c.5% per annum of the B Share NAV by 2023 (subject to B Share investment performance and an intention to maintain a relatively stable NAV per B Share). 

The VCT has existing distributable reserves which may be used to facilitate the payment of dividends on the B Share class in the early years. The VCT paid 3p per B Share in total in FY 2019. Please note, dividends are variable and not guaranteed. 

On 5 November 2020, the board announced a dividend of 1.5p per B Share, to be paid on 24 December, with an ex-dividend date of 10 December 2020. Investors in the current offer could qualify if they apply by 7 December (5pm, cleared funds) for allotment on or before Wednesday 9 December 2020. 

Please note, the portfolio is relatively small and, as the share class only launched in 2018, the track record is limited and so is diversification within the portfolio. As is to be expected with all growth capital businesses, investments can fail or be subject to sudden falls 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 2014 to 30 Sep 2020.

Source: Seneca. Dividends paid in calendar year. Dividends are not guaranteed and past performance is not a 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. 

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.

This is a relatively new VCT offering. Seneca’s expertise to date has largely been in EIS investments. 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.

There are two share classes: Ordinary (relating to the original Hygea VCT) and B ordinary shares. The interests of Ordinary and B Shareholders may not always be aligned.

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.

Full initial charge 5.5%
Early bird discount 1%
Wealth Club initial saving 3.5%
Existing shareholder discount 1%
Net initial charge through Wealth Club (new investors) 1%
Net initial charge through Wealth Club (existing shareholders) 0%
Annual management charge 2%
Annual administration charge See details
Performance fee 20%
Annual rebate from Wealth Club 0.20%

More detail on the charges

Deadlines

  • Early Investment Incentive: Investors whose applications are received and accepted by 5pm on 30 November will receive a discount of 1.0%
  • Loyalty investment incentive: Existing shareholders whose applications are received and accepted by 5pm on 30 November will receive a discount of 0.5%
  • Deadline for allotment before ex-dividend date (see “Performance and dividends”, above): 7 December 2020 (5pm, cleared funds)
  • Deadline for investment in tax year 2020/21: 30 March 2021 (noon)
  • Deadline for investment in tax year 2021/22: 26 May 2021 (noon)
  • Closing date of the offer: 28 May 2021 (5pm)

Share buybacks

The board intends to buy back shares at up to a 5% discount to the prevailing net asset value. This is subject to availability and board and shareholder approval. Please see the offer documents for details.

Dividend Reinvestment Scheme (DRIS)

There is currently no Dividend Reinvestment Scheme. The company is currently considering launching a dividend reinvestment scheme in due course.

Annual rebate when you invest through Wealth Club

The VCT offer 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 0.20% of the Net Asset Value of the Offer Shares issued to you when you invest. You will find the terms and conditions for annual rebates within our Terms of Business.

Our view

The VCT launched in 2018 and has since attracted £7.2 million from investors. The portfolio contains nine investee companies, two of which are AIM-quoted investments.

Since this is a recently launched share class within an existing VCT, its track record is limited. The VCT is still in the process of investing the proceeds of its original two fundraisings. As a result, the VCT has c.50% of its net assets in cash, which may put it in an advantageous position when making new investments. The VCT expects to use its cash, combined with the proceeds from this offer to support both its existing portfolio and to make new investments.

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
3p
Initial charge
5.5%
Initial saving via Wealth Club
4.5% (5.5% existing investors)
Net initial charge
1% (0% existing investors)
Annual rebate
0.20%
Funds raised / sought
£10.0 million sought
Deadline
30 Nov 2020 for early bird saving
Last updated: 13 October 2020

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