Seneca Growth Capital VCT

The Seneca Growth Capital VCT B share class was launched in May 2018. 

In the last twelve months, the VCT has achieved one full exit and three partial exits, generating over £1 million in realised proceeds at an average weighted return of 1.9x (December 2021). Past performance is not a guide to the future. 

Despite being relatively new, the Seneca Growth Capital VCT B Shares have paid a total of 9p in dividends since launch – dividends are variable and not guaranteed. 

The VCT currently has net assets of £14.6 million, of which £8.0 million is invested into a portfolio of 16 companies, including nine AIM-quoted investments (December 2021). The current offer seeks to raise up to £10 million with an additional £10 million overallotment facility.

  • The offer is seeking to raise £10 million with an additional £10 million overallotment facility. 
  • Targets a dividend of at least 3p per share – not guaranteed
  • 0.15% annual rebate for three years when you invest through Wealth Club
  • Minimum investment: £3,000; you can apply online

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 then apply

The manager

The VCT is managed by Seneca Partners Limited. In 2018 it took over the management of Hygea vc 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 £100 million of EIS and VCT growth capital into over 55 SME companies through over 100 funding rounds since 2010 (December2021).

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 continued to personally invest in the VCT, their current total investment stands at more than £973,000.

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. 

Current portfolio overview

The Seneca Growth Capital B Shares has net assets of £14.6 million, of which £8.0 million is invested in 16 investee companies, nine of which are AIM-quoted (December 2021).

Examples of portfolio companies

Poolbeg Pharma – Seneca Growth Capital VCT.jpgPoolbeg Pharma Plc (AIM quoted, recent investment)

Poolbeg Pharma Plc (“Poolbeg”) is a clinical stage pharmaceutical company focused on developing therapies to treat and prevent infection diseases.

The crux of its model is to generate early human efficacy data for new products (often within a time span of 12-18 months), allowing Poolbeg to secure partnerships and licensing deals with pharmaceutical/biotechnology companies. This approach helps the business remain capital light (due to limited trial expenditure) while achieving monetisation relatively early in the development process. 

Within its portfolio, the company is currently developing three new treatment therapies, mostly targeting severe respiratory infections. Alongside this, Poolbeg has continued to expand its range of platforms, which already includes a vaccine discovery platform, a viral biomarker platform, and a disease progression data bank. 

The business successfully raised £25 million through IPO in 2021, following its spin-out from Open Orphan PLC, a former Seneca EIS Portfolio company and world leader in human challenge clinical trials. The VCT invested £755,000 as part of the IPO fundraising round and the company is currently the fifth largest holding in the portfolio (December 2021).

SolasCure – Seneca Growth Capital VCTSolasCure (largest investment) 

A spinout from BRAIN AG, a German listed biotechnological company, SolasCure develops wound care products for the treatment and management of chronic wounds.

Chronic wounds (such as ulcers) are wounds that cannot close on their own, normally as a result of an underlying disease. These wounds are thought to affect approximately 100 million patients worldwide with numbers expected to rise due to aging populations and the increased prevalence of type 2 diabetes.

The first step in wound treatment is a process called debridement – where the area is cleaned and dead tissue removed. Historically, maggots were the most effective method of treatment but this practice is rarely used in modern medicine despite its efficacy. However, by using a ‘bio-mimicry’ approach, the team has isolated an enzyme (a catalyst for biological reactions) secreted by green bottle fly maggots which can dissolve dead tissue. This enzyme is applied to patients through a gel and should lead to faster wound cleaning, thereby promoting better patient outcomes and reducing healthcare costs. 

Currently, the company is in phase 2 of clinical trials with this product - Aurase - and is in preclinical development for another product. The VCT invested £0.5 million into the business in January 2021 and then participated in a £3.7 million top-up round in November 2021. SolasCure is now the VCT’s largest investment, representing 7.4% of net assets. 

Exit track record

Over the last 12 months, the VCT has achieved one full exit and three partial exits, generating over £1 million in realised proceeds at an average weighted return of 1.9x.

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.

There have been no failures within the portfolio yet (the B Share class is still relatively new). However, one company, Ten80, has provisionally had its carrying value reduced to zero following poor commercial traction and uncertainty over future fundraising efforts. Please note, failures are to be expected when investing in younger, smaller companies and past performance is not a guide to the future. 

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 FY 2021 and 9p in total since launch. Please note, dividends are variable and not guaranteed. 

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.

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 Dec 2016 to 31 March 2022.

Dividends paid per calendar year

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

Average dividend yield (% of NAV) history

Calendar year Dividend as % of NAV
2017
2018
2019 3.05%
2020 3.35%
2021 2.97%

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.

Dividend Reinvestment Scheme (DRIS)

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

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.

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 share class has less than a five year track record. Trading of the VCT's 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 share class 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.

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 4.5%
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 0.15%

More detail on the charges

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 expressed as a percentage of the Net Asset Value of the Offer Shares issued to you when you invest - as per the charges table. You will find the terms and conditions for annual rebates within our Terms of Business.

Deadlines

  • Deadline for investment in tax year 2022/23: 24 October 2022

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.

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.

Our view

The B share class launched in 2018 and has since attracted £14.5 million from investors. The VCT is managed by Seneca, an established regional manager, and coinvests in both unquoted and quoted investments alongside Seneca’s two EIS funds. Currently, the VCT’s portfolio contains 16 investee companies, nine of which are AIM-quoted investments. 

The VCT has recovered well following the negative impact of the pandemic, with the NAV rising to 100.1p per share in December 2021, up from 79.5p in March 2020. In addition, the VCT has paid 9p in dividends sinch the launch of the share class, funded in part by several realisations together with existing distributable reserves. Please note, past performance is not a guide to the future and dividends are variable and not guaranteed.

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 per share
Initial charge
5.5%
Initial saving via Wealth Club
4.5% (5.5% for existing shareholders)
Net initial charge
1% (0% for existing shareholders)
Annual rebate
0.15%
Funds raised / sought
£3.0 million / £10.0 million
Deadline
Apply now for 2022/23 allotment
Last updated: 27 April 2022

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