Baronsmead VCTs

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Baronsmead Venture Trust (“BVT”) and Baronsmead Second Venture Trust (“BSVT”) have launched a share offer for 2017/18 and 2018/19.

Together with the Northern VCTs, they are the oldest VCTs currently raising funds, with a history going back to 1995. Since launch, they’ve acquired a large base of loyal investors, many of whom invest time after time. 

The current offers aim to raise up to £45 million with a potential £15 million over-allotment. They are the first since 2014/15 to give new investors a chance to invest in the Baronsmead VCTs. 

The quickest way to apply is online – available exclusively through Wealth Club.

Highlights

  • Two of the largest and longest established VCTs (combined net asset value of approximately £345 million as at 31 August 2017)
  • Target dividend of 6.5p (BVT) and 4.5p (BSVT) – variable and not guaranteed
  • Robust track record – the VCTs have paid average annual dividends of 11.0p (BVT) and 11.9 p (BSVT) per share over the last five years. Past performance is not a guide to the future
  • Managed by Livingbridge, which has approximately £1.7 billion under management and a 48-strong investment team behind the VCTs
  • The directors are committed to invest £360,000 in the two offers, so their interests are aligned with those of investors
  • Low minimum investment of £3,000 per VCT
  • NEW: Apply online, exclusively through Wealth Club 

The manager

The Baronsmead VCTs are managed by Livingbridge, an independent specialist asset management firm whose senior team has been working together for twenty years.

It comprises 82 members and employees, 48 of whom are responsible for finding, investing in and managing investments on behalf of the Baronsmead VCTs and other institutional clients. As at 31 August 2017, the Livingbridge companies managed approximately £1.7 billion.

Livingbridge has invested in over 100 businesses since 2005 – from MORI to mortgage advice, network operators to noodle restaurants and fertility clinics to fashion chain Fat Face and biscuit maker Thomas J. Fudge’s.

It invests across business services, consumer markets, healthcare and education, and technology, media and communications, dedicating a team to each sector to help every business achieves its potential.

At the 2017 Private Equity Awards, Livingbridge won “UK House of the Year”.

Livingbridge directors and founding members are required to subscribe in aggregate for 12% of each investment in unquoted companies – they can’t pick and choose. Indeed, between them the directors are committed to investing £360,000 in the current offer. This means their interests are aligned with those of investors. 

The offers

The two VCTs aim to raise up to £60 million. This is made up of £45 million in aggregate (up to £21 million in BVT and up to £24 million in BSVT) with an over-allotment facility of £15 million (up to £7 million in BVT and up to £8 million in BSVT).

Since 1 January 2016 the two VCTs have invested approximately £21 million in new and follow-on growth investments. New investments will be in small, early stage, unquoted and AIM-traded companies, as prescribed by the new and more restrictive VCT rules. 

However, new investors will gain exposure to the established portfolio of larger, more established companies, both unquoted and AIM listed, which have fuelled the impressive historic dividend payments to date: note past performance is not a guide to the future. 

Strategy

Both VCTs invest primarily in a diverse portfolio of UK growth businesses, either unquoted or AIM listed. These businesses usually operate in the UK but some may also trade overseas.

The manager aims to find young companies that are on the cusp of change, run by entrepreneurs with the vision and attitude to take their business to the next stage. 

There is a focus on four sectors: business services, consumer markets, healthcare and education, technology media and telecommunication, and an overarching aim to diversify, i.e. not to be exposed too much to a single company or sector. 

When investing in unquoted businesses, deals are usually structured as a combination of ordinary shares and loan stocks – the former allows investors to benefit from any upside, the latter provides downside protection and cash flow to support dividends. Alternatively deals might be structured as preference shares, so in the case of an exit at a low valuation, the preferred stockholders have a level of protection whilst benefitting from the upside at a high valuation.

Performance and dividends

Since its launch in 1998, BVT has paid an average annual dividend of 7.4 pence per share – 11.0 pence per share over the last five years. Since its launch in 2001, BSVT has paid an average annual dividend of 7.4 pence per share – 11.9 pence per share over the last five years.

In the last two years the Baronsmead VCTs have realised seven investments, producing proceeds of £26.8 million and return multiples of up to 3.2x. 

Please note, dividends are not guaranteed and past performance is not a guide to the future. 

Source: Livingbridge VC LL. Past performance is not a guide to the future. Total return is the NAV plus dividends, which are variable and not guaranteed. For 2017 the data is for the year ending 30 June. For BVT all other data is for the year ending 30 September. For BSVT, data for 2007 to 2016 is for the year ending 30 September, and for the year ending 31 March for 2015 and before.
Source: Livingbridge VC LLP. Past performance is not a guide to the future. Dividends are variable and not guaranteed.
Source: Livingbridge VC LLP. Past performance is not a guide to the future. Dividends are variable and not guaranteed.

The portfolio

As at 29 September, the portfolio of the two VCTs is composed as follows:

  • BVT is invested in 20 unquoted investments and 54 quoted investments, with an aggregate valuation of approximately £171.2 million 
  • BSVT is invested in 20 unquoted investments and 52 quoted investments, with an aggregate valuation of approximately £144.2 million 


Three of the top holdings – BVT

Company Sector Date invested Book cost (£’000) Current valuation (£’000)
Staffline Recruitment Group Business services July 2000 174 7,813
Established in 1986 Staffline provides and manages workforces: from a network of more than 450 locations, it supplies over 55 million hours of temporary labour each year to more than 1,600 clients, including the major supermarket chains, food growers and manufacturers, logistics and distribution centres, customer service organisations and the care sector.
Crew Clothing Company
Consumer markets November 2006 2,907 4,952
Crew Clothing Co. is a British clothing brand with a wide range of active, outdoor and casual wear for men and women. Its heritage is in its south-coast roots, having been started in the back of a windsurfing school in Salcombe in 1993. Crew Clothing went from 34 retail outlets at the time of investment to 75 stores nationwide in 2016.
Netcall
Technology, media & telecommunications July 2010 1,738 4,754
Netcall is a leading provider of contact centre management software. Its solutions are used by over 700 organisations in the public, healthcare and private sectors.

Three of the top holdings – BSVT

Company Sector Date invested Book cost (£’000) Current valuation (£’000)
Netcall
Technology, media & telecommunications July 2010 1,738 4,754
Netcall is a leading provider of contact centre management software. Its solutions are used by over 700 organisations in the public, healthcare and private sectors.
Bioventix Healthcare & education June 2013 554 5,712
Bioventix manufactures and supplies high affinity sheep monoclonal antibodies (SMAs) for use in diagnostic applications such as clinical blood testing.
Inspired energy
Business services November 2011 862 5,337
Established in 2000, Inspired Energy has grown to become one of the largest energy consultants in the UK, with more than 10,400 clients – typically large private and public sector organisations – and over 21.25 billion kWh managed annually.

Recent investment – In The StyleBaronsmead VCTs – In The Style

Founded by chief executive Adam Frisby [pictured] in his bedroom in 2013, In The Style is a trend-led, fast growing fashion e-tailer. It is aimed at females aged 16-30 to fit with the ‘fast fashion’ craze.

As Adam puts it: “People are buying for the weekend, for nights out – they don’t want to wear the same thing twice”. In The Style focuses on getting new trends to the market as quickly and cheaply as possible. New styles are introduced multiple times in a single week.

Its popularity has been driven, in part, by royalty-based collaborations with celebrities and fashion influencers including E4’s Binky Felstead, MTV’s Charlotte Crosby and ITVBe’s Billie Faiers along with one of the UK’s leading fashion bloggers Sarah Ashcroft.

The Manchester-based business has a social-first marketing strategy that has seen it build strong brand awareness with over 1.4 million direct followers on social media, alongside a wider social media reach of almost 20 million via its celebrity collaborators. On Black Friday last November, In The Style sold £1 million worth of clothes over the weekend.

In 2016 sales more than doubled to £15 million; in 2017 Livingbridge invested £5 million to support the business in scaling up its operations. This will involve making significant upgrades in IT and infrastructure, growing the team with senior appointments in IT, finance and marketing, expanding its warehouse operations and moving into international markets in America and Australia. The group is targeting revenues in excess of £50 million within three years.

Risks

Please remember your capital is at risk. VCTs are high risk investments and are not suitable for everyone: they are long term and illiquid. Investors should not invest money they cannot afford to lose. 

Tax rules can change and tax benefits depend on individual circumstances.

Fees

There is an initial charge of 3% for both VCTs. The annual management fee is 2% for BVT and 2.5% for BSVT.

Both VCTs have a performance fee of 10% but with different hurdles. The amount of any performance fee will be capped at 5% of shareholders’ funds at the end of the relevant period.

  • BVT: the performance fee is only payable when the total return on shareholders’ funds exceeds an annual threshold of the higher of 4% or base rate plus 2% calculated on a compound basis
  • BSVT: the performance fee is only payable when the total return on net proceeds of the shares exceeds 8% per annum. 

Other fees also apply. For full details on fees, please see the Prospectus. 

Share buy-back policy

Each of the VCTs will seek to buy back its shares at a 5% discount to net asset value. There can be no guarantee the VCTs will be able to maintain their share buy-back policies and future share buy-backs, if any, will depend on market circumstances at the time.

Deadlines & how to invest

Previous share offers for the Baronsmead VCTs have tended to be oversubscribed, so applications will be processed in the order they are received. You can apply online – the quickest way, exclusive to Wealth Club – or by post.

Applications will be processed on a first come first served basis. Once you've read the documents and are happy with the risks you can apply online, exclusively though Wealth Club, following the link below. Alternatively, you can apply by post.

How to apply by post

  • Download the Prospectus and Application Form and read them carefully
  • Complete the Application Form and pin your cheque to it
  • Post these directly to Computershare (details are on the front of the Application Form)
  • Send a copy to Wealth Club (a photograph via email to [email protected] is fine) 

Summary

In our opinion, this is a strong VCT offer from some of the most experienced and longest established managers. The track record is robust and the prospects exciting. The new, more restrictive, VCT rules create a challenge, but the Livingbridge team has been making growth investments for twenty years, which provides some reassurance. 

Previous recent Baronsmead offers have sold out rapidly. Indeed, new investors have not been able to invest since the 2014/15 tax year. If you wish to invest, please consider acting quickly. 


Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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. 04.10.2017

The details

Type
Generalist
Target dividend
-
Initial charge
-
Initial saving via Wealth Club
-
Net initial charge
-
Annual rebate
 
Funds raised / sought
£43.7 million / £45 million
Deadline
CLOSED

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