ALERT: 18 January 2019
This offer has reached capacity. Any applications already submitted will be processed on a first come, first served basis.
The latest top-up offer for the Northern VCTs seeks to raise up to £20 million in aggregate across Northern Venture Trust plc (NVT), Northern 2 VCT plc (NV2) and Northern 3 VCT plc (NV3).
The Northern VCTs have one of the most loyal following of any VCT and, as a result, previous offers filled up fast. Last year, the Northern Venture Trust offer closed in just over three weeks. Smaller offers have filled within days.
Existing shareholders: the offer is only open to existing shareholders until 21 January 2019.
New investors: the offer will open to new investors at 8 am on 22 January 2019, unless fully subscribed. However, new investors could benefit from applying as soon as possible. Their applications will be held in a queue in order of receipt and start being processed from 22 January 2019. Payment will only be due if the application is successful.
- Longstanding and highly respected VCT manager
- Targets annual dividends of 4% to 5% of NAV, not guaranteed
- Good track record of dividends to date – past performance is not a guide to the future. As with all growth capital investments dividends are likely to be less predictable in future and are not guaranteed
- Combined net assets of £264 million and a diverse portfolio of 60 unquoted and quoted companies
- Around 60% of the portfolio is in mature investments, predominantly from management buy-outs, which could support dividend payments, with the remaining 40% in newer capital growth deals
- The management is required to invest personally in each VCT‐qualifying investment
- Minimum investment £6,000, you can apply online (bank transfers only)
- Early bird saving of 0.5% if you invest before 31 Jan 2019
- Annual rebate of 0.10% for three years
The three Northern VCTs are managed by NVM Private Equity, based in Newcastle-upon-Tyne. Established in 1988, NVM has over 30 years’ experience investing in unquoted companies and now manages more than £440 million of private equity funds.
Tim Levett is NVM’s chairman, Martin Green is its Chief Investment Officer. The investment team works closely with investee companies, often taking a seat on the board.
Over the past four years NVM’s VCT investment team has grown from 14 executives to 21, adding people with skills and expertise in new fast-emerging technology sectors, finance, corporate law and life sciences. The idea is to fuse this new expertise with NVM’s traditional investment discipline.
New recruits include Charlie Winward, previously a director with IP Group and since 2016 an NVM partner. Whilst at IP Group, Charlie was intensively involved from the earliest stages as investor and director with a number of companies that scaled up successfully, including Tracsis, Xeros Technology and Retroscreen.
NVM has also expanded its regional network – it now has investment teams based in Newcastle, Manchester, Birmingham, Reading and London.
Since 2006 NVM executives are required to invest personally alongside the Northern VCTs in each VCT‐qualifying investment on a predetermined basis. The directors hold in aggregate 2.6 million shares in the three VCTs.
Watch an exclusive video interview with Tim Levett, chairman of NVM:
This video was recorded in November 2018.
All three are generalist VCTs and have shared the same investment strategy since inception (1995 for NVT, 1999 for NV2 and 2001 for NV3). The vast majority of the investments is in common over all three portfolios, but NV3 has a marginally greater proportion in AIM-listed companies.
Over the last 23 years the Northern VCTs have invested over £425 million in more than 240 companies (unquoted and AIM listed), providing total returns since inception of between 180p and 235p per share in the three Northern VCTs (as at 30 September 2018). Please note past performance is not a guide to the future – see annual performance below.
Deals are typically sourced from NVM’s long-established regional network of accountants, lawyers and corporate finance houses.
For NVM, a good partnership is key to making an investment work. It’s not unusual for the management team to spend over a year getting to know how each company ticks before investing, in addition to extensive due diligence.
Above all else, NVM prioritises capable and successful management as well as the company’s track record, market potential and the quality of the product or service.
The company will look to invest in a mix of VCT-qualifying unquoted and AIM-quoted investments.
Prior to the 2015 VCT rule changes, NVM largely focused on management buyouts and has since had to adapt its investment strategy to focus on newer growth capital investing. Mr Levett is confident of the VCTs’ ability to do so given the significant recruitment efforts to broaden the team’s experience and the deals subsequently completed. Since the changes, NVM has invested £68.8 million in 24 qualifying companies.
Over the next few years Mr Levett expects the overall make-up of the VCTs portfolio to change as the older investments mature and the newer investments increase in number. This may lead to a less predictable pattern of growth and possibly more fluctuation in the VCTs’ dividend payments.
Exit track record
In the last four years the Northern VCTs have achieved 23 exits, five of which were in 2018 alone (an example is CloserStill Media).
The 23 exits generated total proceeds of £163.8 million over the investment lifetime – an average return multiple of 2.9x.
CloserStill Media runs business events and exhibitions in the healthcare and technology sectors.
NVM has been backing the management team behind CloserStill Media since 2005 when it supported the management buyout of its predecessor, Ithaca Business Media. That investment was profitably exited in 2007. In 2008 the Ithaca management team approached NVM again to help fund the launch of London-based CloserStill. NVM originally invested £4 million, of which £2.7 million through its VCTs and has participated in two subsequent management buyouts of the business, each time reinvesting a portion of the sales proceeds.
NVM’s continuing support helped CloserStill grow both organically and through a number of acquisitions at attractive EBITDA multiples. It now has events in London, Birmingham, Paris, Berlin, Frankfurt, Koln, New York, Hong Kong and Singapore – from Cloud Expo Asia (Singapore) to Wild West Vet (Nevada), Dentiste Expo (Paris) and The London Vet Show.
NVM fully exited the investment in December 2018. The final remaining holding was sold in a buy-out transaction to Providence Equity, delivering a return of 7.8x cost in aggregate over the entire lifetime of the investment. Past performance is not a guide to the future.
Not all investments go to plan. An example from the Northern VCTs portfolios is Britspace Group. NVM invested £2.2 million in 2010, after previously backing Britspace Holdings, the company’s predecessor, for eight years.
Founded in Yorkshire in 1972, Britspace specialised in off-site manufacturing by supplying modular buildings and bathroom pods to buildings such as schools, hotels and hospitals.
Despite recording a turnover of £42 million in its last set of accounts, the company went into administration in 2011 due to severe cashflow issues and was unable to fulfil all customer requirements.
Mr Levett admits the investment was disappointing because the company had received significant orders and they had been working together for over a decade. The investment was held by NV2 and NV3 and was written down to nil value in 2011. Again, past performance is not a guide to the future.
The current portfolio is split between new qualifying investments and legacy investments made prior to 2015. The 36 legacy investments are valued at £98.8 million (60% of the combined portfolio) and are predominantly management buyouts. The manager expects them to generate income yield and steady capital growth to fund future dividend payments, although there are no guarantees. The 24 venture investments are valued at £68.8 million.
The VCTs are broadly split across six sectors but NVM is open to opportunities in any area.
NVM is seeing a healthy flow of potential new investments in companies in sectors such as big data analysis, artificial intelligence, machine learning capability and blockchain, as well as companies that eploit the potential of social media as a way of communicating and sharing information, and as a marketing channel.
The existing sector breakdowns for the legacy and venture portfolios across the three VCTs are shown below.
The Climbing Hangar (new investment)
A leading indoor climbing business, The Climbing Hangar was founded in 2010 by Ged MacDomhnaill. While climbing has historically been an outdoor activity, indoor centres are becoming increasingly popular. Today, nearly 25 million people climb regularly and this is expected to soar with indoor climbing featuring for the first time at the Tokyo 2020 Olympics.
The Climbing Hangar has already managed to set itself apart by offering quality facilities in a social environment. Its strong community of climbing enthusiasts and novices alike has allowed it to expand out of Liverpool. A new centre in Plymouth opened in 2018 with a focus on World Cup style climbing and according to Red Bull “it might just be the country’s best yet”.
NVM invested £3 million in August 2018 to support the rollout of sites across the UK.
No1 Lounges (largest holding)
Founded in 2006, No1 Lounges is an independent airport lounge provider. The company’s founder, Phil Cameron, decided to use his experience as a frequent traveller to create a comfortable and convenient service.
The company has developed four brands: My Lounge (premium economy and leisure markets), No1 Lounges (business class), Clubrooms (first-class) and The House (first-class). It has also expanded its service offering to include spa treatments, airside bedrooms and chauffeur services.
No1 Lounges currently operates 11 lounges across Gatwick, Heathrow, Birmingham and Edinburgh airports. The company benefits from limited market competition which could encourage growth. Already the company has grown year-on-year and expects to serve 1.5 million customers in its lounges this year.
NVM invested £7 million in 2014. The capital will chiefly be used to drive the expansion of lounges across the UK with the aim to increase the available passenger market to over 50 million a year.
Medovate Ltd (healthcare investment)
Medovate Ltd is the first company dedicated to developing new medical technologies from within the NHS.
Launched by NHS Innovation Hub Health Enterprise East (HEE), Medovate will support innovative technology through clinical trials and approval processes with the goal of getting products available as quickly as possible.
As the company is integrated into the NHS, it could provide reinvestment and commercial returns directly to the investors, but also to NHS organisations.
NVM partnered with a private US investor to provide £9 million of investment capital in December 2017. Funds will be used to identify new opportunities and expand the existing portfolio.
Dividends and performance
NVT has paid an average annual dividend of 9.6p over the last five years to December 2018 while NV2 and NV3 have both paid an average of 9.5p to July 2018.
The target annual dividend for NVT and NV2 is 5% of NAV and for NV3 is 4% of NAV, not guaranteed.
Please remember, past performance is not a guide to future returns.
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.
Fees and charges
A summary of the fees and charges for the three VCTs is shown below. The net initial charge includes the Wealth Club initial saving and the early bird discount of 0.5% available until 31 January 2019.
|Full initial charge||4%|
|Wealth Club initial saving||2.75%|
|Net initial charge through Wealth Club||1.25%|
|Annual management charge||2.06%|
|Annual rebate (for three years)||0.10%|
More detail on the charges
Dividend Reinvestment Scheme (DRIS)
A dividend investment scheme is available if shareholders wish to reinvest dividend payments by way of subscription for new shares. 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.
NVM offers a share buy-back policy. Each company aims to buy back shares at a discount of 5% to the latest published NAV. Please note, any purchase is at the discretion of the board and the relevant company having both cash resources and distributable reserves available for the purpose.
Deadlines and early bird discounts
The offer will close on 5 April 2019 or when fully subscribed, if earlier.
Existing shareholders exclusivity period: There is an exclusivity period for existing shareholders until 21 January 2019. Applications will be processed on a first come, first served basis.
New investors: The offer will open to new investors at 8 am on 22 January 2019, unless fully subscribed by then. However, new investors could benefit from applying early. Applications will be held in a queue and start being processed in order of receipt. Payment is only due if and once investors receive confirmation their application has been successful.
The deadline for the early bird saving of 0.5% is 31 January 2019.
NVM is one of the best respected VCT managers. The team is hugely experienced and has a long track record of consistently delivering returns to investors.
Unusually in this industry, the three founding partners have been involved in the business since its inception in 1988 and still are. Tim Levett, NVM chief investment officer until 2008 and subsequently chairman, now leads the VCT’s re-focus on early-stage investment.
We believe NVM has tackled this challenge head on, with the appointment of a significant number of high-calibre people. The rate of new investment since 2015 suggests NVM doesn’t have problems in sourcing deals and the new extended team should have the experience and skills to help these young companies achieve their potential, although as ever there are no guarantees.
In our view, this is a strong VCT offer.
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. 04.01.19
- Target dividend
- Initial charge
- Initial saving via Wealth Club
- Net initial charge
- Annual rebate
- Funds raised / sought
£19.8 million /