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Crown Place AGM (2016)

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timbo003
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Crown Place AGM (2016)

#6667

Postby timbo003 » November 19th, 2016, 7:16 am

I recently attended the Crown Place VCT AGM which was held on Thursday November 17th commencing at 11.00 at the City of London Club, 19 Old Broad Street, London EC2N 1DS.

Unfortunately this forum will not allow me to post the report in its current form despite numerous attempts, so I have just posted it on the ShareSoc AGM forum for now. I'm away this weekend, but I will look for a work around when I get back, meanwhile if anyone wants to have a go at copying and pasting it (unabridged) over here, please do so.

http://sharesoc.ning.com/forum/topics/the-agm-forum?commentId=6389471%3AComment%3A41388&xg_source=msg_com_forum

scotia
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Re: Crown Place AGM (2016)

#6727

Postby scotia » November 19th, 2016, 12:33 pm

Here is my attempt at pasting Timbo's report
The maximum no of URLs allowed is 3
So Imodified some urls - using a dash instead of a dot, and put "my" in front - but that did not work
So I have removed them and left a note as to what the URLs pointed to

Crown Place VCT AGM report (CRWN)


I recently attended the Crown Place VCT AGM which was held on Thursday November 17th commencing at 11.00 at the City of London Club, 19 Old Broad Street, London EC2N 1DS.

The link to the annual report for year ending June 30th 2016 can be found here:

URL to Albion Site

The IMS for the three months ending September 30th was released just before the AGM, it reported a NAV of 30.70 pence per share, an increase of 1.76 pence per share (6.1 per cent) since 30th June 2016 (after taking into account the payment of dividends).

URL to Interim Management Statement

For this year’s AGM there were around 25 - 30 ordinary shareholders in attendance. The meeting began with a portfolio review given by Emil Gigov (Albion partner and investment manager), this was followed by the formal AGM and then a presentation from David Gudgen (Albion partner and investment manager) concerning Albion’s Renewable Energy (RE) investments. We finished off with lunch which consisted of a selection of sandwiches with a choice of red or white wine and soft drinks.


Portfolio Review:


Emil began with a brief history of the VCT and its performance over the years: Crown Place started life as three poorly performing VCTs managed by Murray Johnstone. Albion took over management in 2005 and merged the three Murray VCTs into one and renamed it Crown Place. The VCT performance has been much improved under Albion’s management but for the last five years the (large dividend) has not been covered by profits and this has inevitably lead to a slow decline in NAV/share (and concomitant reduction in share price). The BOD have now therefore taken the decision to reduce the dividend by 20% which they now consider should be sustainable for the foreseeable future. At the current share price the revised dividend still corresponds to a yield of around 7.5% (tax free).

When reviewing the portfolio Emil focused on the portfolio components contributing towards the 6% upward revision in NAV reported earlier in the day:

◾Care homes (up circa 18%)


◾Schools (up 16%)


◾Hydroelectric (up circa 5%)


All three Care Homes at Oxford, Reading and Hillingdon (London) opened up earlier this year (hence the revaluation). The Reading facility is unusual in that unlike all the other Care Homes that Albion have developed, it was an Office conversion rather than a new build and as a result the build costs were significantly lower than normal. The cost for staying at the Care Homes is around £60 - 65K per year and the accommodation is all inclusive (i.e. it includes a free bar, live entertainment every other night and no charge for entertaining visiting family). There has been extremely positive feedback from relatives and residents since the care homes opened, as evidenced by the reviews on the Care Home industry’s leading Website URL to Care Home Industry Website

See links to the reviews below which also give easy access to each individual Care Home web site:

URL Links to individual Care Homes

On schools ,the Twickenham school is now full, but the Seven Oaks facility continues to expand pupil numbers and it is largely responsible for the upward revaluation in schools this year.

Two companies in the growth portfolio received a name check for excellent progress: Exo Intouch (Mobile patient data solutions) has enjoyed CAGR of 60% over the last 3 years and Proveca (Developing paediatric dosage forms for established drugs) has just had its first regulatory approval.

Regarding the outlook for the portfolio, Albion now envisage a period of slow economic growth, therefore the intention is to reduce focus on consumer facing businesses and to concentrate on Healthcare, Education and fast growing companies.


Q&As:


Q: Do the current NAVs for the other Albion VCTs reflect the increases reported today for Care Homes, Schools and Hydro?

A: Only three out of the six Albion VCTs invest in Care Homes and Schools, the other two are Albion Venture (AAVC) where the current NAV does not take into account the revaluations and Kings Arms Yard (KAY) where the NAV reflects the revaluation of some of the assets.


Q: At the Albion investment seminar last week Lord Flight told us that following Brexit the chancellor was sympathetic to reversing or modifying some of the new rules imposed on the us by the EU, which of these new rules would be top of your wish list for repeal:

A: Getting cash out to founders of businesses (i.e. MBOs) and the 7 year rule.


Q: We heard about Albion’s acquisition of Olim (a small fund manager which invests in quoted shares and other assets) at the Albion shareholder seminar last week.

URL to News on Albion Site

Does this mean that we will see more exits from the Growth portfolio via an IPO route?

A: Probably not, Olim isn’t an AIM fund manager, the shares in its portfolios are mainly fully listed. In general trade sales are our preferred exit route .


Q: You have four quoted companies in the Growth portfolio, why don’t you sell them?

A: We have been selling Avanti (a legacy investment from the Murray Johnstone days) over the last few years and the sales have generally been well timed. Two of the four companies were originally in the unquoted portfolio and subsequently listed on AIM, now is probably not the right time to sell, besides which for Mi-Pay (the largest of the four) the Albion VCTs hold a substantial (and hence illiquid) stake.


Q: Will the new Prime Minister’s enthusiasm for building new grammar schools affect our schools in any way and in particular there is a new grammar school opening up in Seven Oaks, will that effect Albion’s new School in that town?

A: The new grammar school in Seven Oaks is in fact an annex to an existing grammar school, we don’t anticipate it will affect our school achieving target numbers. One area where we think we exceed the state sector is in Pastoral care, which is seen as increasingly important by parents and teachers.


Q: Do you envisage any problem filling the new Care Homes?

A: No. The homes opened between April and July and they are filling up nicely. The cost of £1,250 - £1,300 per week is affordable in the areas where we operate (not least due to high house prices). The Homes are in desirable locations close to towns and each Care Home has a large catchment area within a 20 - 25 minute drive.


Formal AGM:


The Chairman (Richard Huntingford) asked if there were any questions on the report and accounts before rattling through the resolutions. The only question asked was when would Penny Freer (who was appointed to the BOD in Oct 2014) make her maiden purchase in the company’s shares? Penny replied that she had just missed out on last year’s share offer as it filled up faster than anticipated, but she would be purchasing shares in this year’s offer when it opens later this year.

I was somewhat surprised that there was only one question on the report and accounts given that there was a continuation vote in this year’s resolutions and the directors had hiked their remuneration from £75K - £81K . Having said that, regarding the remuneration increase, an aggregate of £81K is probably slightly below the VCT industry average and the last increase in aggregate remuneration was in 2012.


Renewable Energy portfolio:


David’s presentation began with a brief summary on the case for renewables, this included a few memorable factoids, some of which I have listed below:

◾2016 is set to become the warmest year on record (globally)


◾The previous warmest year was in 2015


◾The next warmest year was 2014


When FITs were introduced in 2010 the UK’s RE generation capacity was 10,000 MW, in 2015 it had increased to around 30,000 MW with 25% of the UK’s generation coming from renewables (note: I suspect this includes burning renewables in coal fired power stations).

Albion has installed solar panels on 1,500 roof tops in the UK (all in the South and South East). The Albion Windfarms are located in South Wales (on industrial sites with electricity output sold locally), the Hydro projects are located in the Scottish Highlands/Welsh mountains and the Biogas project is located in Perth (Southern Scotland). The largest portion of the VCT’s RE investment has been in Hydro (approximately 50%) followed by Biogas then Solar and finally Wind. The total investment in RE by the VCT has been £5.5M and the value now is around £7.0M (circa 18% of the portfolio). Under new VCT rules, VCTs can no longer invest in renewables so these investments are likely to be held for the long term, especially given that the FITs component of their revenue stream is linked to RPI.


Q&As


Q: Was the recent change in VCT rules for renewables another EU enforced change?

A: No.


Q: Can any of the exsisting RE investee companies within the VCT portfolios invest in new renewable projects?

A: No.


Q: Have you received a definitive answer on the last question from an Industry expert such as Philip Hare or HMRC?

A: We would (or could) get into in big trouble if we invested through the existing investee companies (question not really answered)


Q: Would the RE projects be cash flow positive without the subsidies?

A: Yes.


Q: How long do the subsidies last?

A: They have a duration of 20 or 25 years, the government has stated that it will phase out awarding all new subsidies to all forms of renewable energy by 2019.


Q: How are the projects allocated between the VCTs?

A: The VCTs all co-invest with one another, each VCT has 20% of their portfolio as RE. Crown Place account for 15% of the total Albion VCTs RE investments.



Lunch:


Over lunch I talked to a number of the Albion managers on a variety of topics, details as follows:

I commented that the Crown Place AGM was always held very close to the Albion VCT investor seminar. In most years the two events are held in the same week. Why don’t they shift one of the meetingsby a week or two, this suggestion seemed to go down well with other shareholders who were in earshot and the managers generally seemed receptive to the idea.

I spoke to Emil about the prosibility of developing more Care Homes: Emil expressed the view that Albion would definitely consider more Care Home developments should good opportunities arise as demand outstrips supply. The total number of Care Home beds is either static or in decline despite numerous new Care Home openings in the private sector, furthermore the longer term outlook is good for further Care Home developments. A generation of asset rich baby boomers are now living longer and looking to grow old in comfort in the coming years. There are potential obstacles: suitable sites are in short supply and Albion’s current partner for Care Home developments (Seamus Halton) may wish to go it alone for future projects.

I also asked Emil about the mystery new class of asset backed investment which has been mentioned at least a couple of times during recent Albion meetings (most recently at the Albion investor seminar earlier in the week). Emil was reluctant to give any details (presumably Albion would want first mover advantage), but I managed to ascertain that it wasn’t residential housing development (which Albion have been involved with in the past) but it would involve freehold property. I took a wild guess at Hydroponics, as this was mentioned by Roger Blears (VCT legal guru) as a permitted asset backed investment class at the Foresight VCT investor seminar on November 9th. Emil responded by telling me that they hadn’t considered that one, so it looks like shareholders will have to keep guessing (for now).

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Re: Crown Place AGM (2016)

#7089

Postby timbo003 » November 20th, 2016, 5:37 pm

Here is my attempt at pasting Timbo's report
The maximum no of URLs allowed is 3
So Imodified some urls - using a dash instead of a dot, and put "my" in front - but that did not work
So I have removed them and left a note as to what the URLs pointed to


Many thanks for that scotia

There seems to be no obvious way to circumvent the 3 URL rule, but alas many meeting reports contain more than 3 URLs, so there has to be another solution. I will continue to post my own AGM reports on the ShareSoc AGM forum which does not provide open access. The best open access solution I can come up with for now, is to convert the report into a PDF file and load it onto a google drive with free access. Voila!

https://drive.google.com/drive/folders/ ... 0NudDh3SEk

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Re: Crown Place AGM (2016)

#7104

Postby UncleEbenezer » November 20th, 2016, 6:12 pm

The three URLs rule is presumably under the control of the site's administrators. They are very receptive to sensible suggestions. So, it can probably be worked around.

scotia
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Re: Crown Place AGM (2016)

#7196

Postby scotia » November 20th, 2016, 10:56 pm

Timbo - many thanks for the comprehensive report
Albion are one of the few mainstream VCT providers that I have so far avoided (along with Foresight!)
I'm troubled by their substantial reliance on Schools and Care Homes which you covered in your report. I think this is true of all (or most?) of the Albion VCTs.
I can't say that I have much understanding of the school element - up here in Scotland our state run comprehensive, co-educational schools seem to fit the bill without the need for VCT support.
On the Care Homes, I have personal experience with parents in Scotland, and am conversant with my in-laws experience in the South East (of England). In both areas there seems to be a considerable reliance on foreign (mainly from the Philippines) carers. Most of these do an excellent job, but I fear for their future in a UK which seems to find immigration a significant problem. I'm also aware that these care workers are poorly paid, even in establishments with fees well above the £1000 per week mark. Add that to the proposed continuing hikes in the minimum wage, and it may prove more difficult in the future to recruit and hold carers at anything like the current rate. I'm also aware (particularly in the SE) that there has been an increasing provision of Care Homes which has introduced a level of competition - you may now find that they will accept a contract with an annual increase based on inflation - rather than the arbitrary rises that they formerly used to charge.
So I think I'll continue to give Albion VCTs a miss.

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Re: Crown Place AGM (2016)

#7401

Postby BusyBumbleBee » November 21st, 2016, 2:20 pm

Well, Scotia, Timbo said that the uplift in NAV came from Schools and Care Homes. Have a look at this URL to get a full list of investments.

https://www.albion-ventures.co.uk/sites ... tments.pdf

For over 20 years this group has done me well so you might care to have another look.

AAVC which reports next week, is almost entirely in asset backed investments - CRWN is less so. The yield has been consistent and comparatively high. And the manager constantly seeks new themes - and is fully prepared to back out when he sees a decline in that sector coming.

scotia
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Re: Crown Place AGM (2016)

#7431

Postby scotia » November 21st, 2016, 3:38 pm

Thanks for the input BusyBumbleBee
I suppose I'm chiefly uneasy about the large positions of Albion VCTs in areas which I have no knowledge of, or am fearful of possible strong headwinds. They seem to be of a substantially different flavour from my current VCTs. Maybe if I can't pick up the VCTs which I favour (due to over-demand), I may dip my toes into Albion - provided they too haven't been snapped up. I have started this year's collection with Amati, while my wife has gone for Proven Growth & Income. I would like to get more Northern - but that may prove difficult.

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Re: Crown Place AGM (2016)

#7479

Postby Kidman » November 21st, 2016, 5:34 pm

AAVC which reports next week, is almost entirely in asset backed investments - CRWN is less so.


BBB, do you favour asset -backed investments, and if so, why?
I feel that groups like Octopus have shown excellent results from investments with few tangible assets and I recall my own experiences, BES investments in hotel companies that went bust. On the other hand I do recognise that Albion have stuck to their knitting and plodded along quite nicely.

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Re: Crown Place AGM (2016)

#7509

Postby timbo003 » November 21st, 2016, 7:34 pm

The Albion Venture (AAVC) interims (6 months to September 2016) are now out:
http://www.investegate.co.uk/albion-ven ... 2000H8257/

NAV up from 69.8p/share to 72.9p in the last 3 months taking into account dividend payments. I had hoped that the NAV rise might have been a bit higher, but it seems that Nicola Sturgeon is to blame (see links and abstract from the report below)

http://www.heraldscotland.com/news/1420 ... enerators/
http://www.british-hydro.org/downloads/ ... te2016.pdf

Our renewable energy portfolio experienced lighter than forecast wind and solar performance over the 6 month period, while hydro in general was better than forecast, though negatively affected by the introduction in Scotland of business rates. Meanwhile, Earnside Energy's AD plant continued to perform well and it is intended to expand significantly in 2017.

I do not recall this issue getting a mention at the Crown Place AGM.

Needless to say, this is likely to have implications for other VCTs investing in renewable energy (not least Ventus).

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Re: Crown Place AGM (2016)

#7608

Postby BusyBumbleBee » November 22nd, 2016, 8:46 am

BBB, do you favour asset -backed investments, and if so, why?


It provides a bit of diversity and resilience across my VCT portfolio. Asset backed investments are never going to produce stellar performance but the fact that this VCT (AAVC) has produced 142.30 pence worth of tax free dividends over its life of 20 years is pretty remarkable and speaks for itself.

AAVC and to a lesser extent CRWN have a deal of 'old money' which can be invested in areas that have been prohibited since: Thus they can invest in Schools, Care Homes and the like.

Albion VCTs are also remarkably little affected by the VCT rule changes.

So to summarise : my asset backed VCT investments have provided a consistent income over a long time. The advantage of 'old money' makes them even more valuable and they provide diversity. I would go so far as to say that they have over the time I have invested in VCTs been the most consistent performers.

Albion seem very able in the sphere. and AAVC is their flagship VCT

kind regards - BBB

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Re: Crown Place AGM (2016)

#7625

Postby Karellan » November 22nd, 2016, 9:31 am

I too bought (more) them for the diversity and that they would not need to change their strategies in light of the recent MBO regulatory changes. I have always had some in the past but the new ones were poor performers but from the secondary market were better. When I started Albion (or Close Bros as it was then) was actually pretty good with some solid dividends paid out but things changed after 06/07.

I feel that they are a steady and reliable (honest) performer , I recall that some of the directors actually have substantial holdings in some of them and Albion is their show. I am happy to hold and watch.

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Re: Crown Place AGM (2016)

#7671

Postby Gostevie » November 22nd, 2016, 11:20 am

AAVC and to a lesser extent CRWN have a deal of 'old money' which can be invested in areas that have been prohibited since: Thus they can invest in Schools, Care Homes and the like.

Albion VCTs are also remarkably little affected by the VCT rule changes.


That pretty neatly sums up why I have just taken my first nibble at AAVC. (The recent buys of 672 and 1,341 shares are mine.)

Gostevie

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Re: Crown Place AGM (2016)

#7804

Postby BusyBumbleBee » November 22nd, 2016, 3:50 pm

while hydro in general was better than forecast, though negatively affected by the introduction in Scotland of business rates.


I did a little research on this this morning - but can't find any 'before' and 'after' figures so don't know what has been affected - or by how much, We all knew that rateable values were updated recently but this alone should not affect the 'rates' on renewables.

scotia
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Re: Crown Place AGM (2016)

#7829

Postby scotia » November 22nd, 2016, 4:54 pm

We all knew that rateable values were updated recently but this alone should not affect the 'rates' on renewables.
I think that the previous exemption from business rates has now been removed by the Scottish Government.
Hence the calls of hyprocrisy in the Scottish Parliament - see Timbo's link to the (Glasgow) Herald

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Re: Crown Place AGM (2016)

#7896

Postby SpinDoctor » November 22nd, 2016, 7:47 pm

The change in Scots business rates relief for green energy businesses was well flagged (Dec 15) and was introduced on 1/4/16:
https://www.nqa.com/en-gb/resources/leg ... f-scotland

So one would expect that to be manifest by now in quoted NAVs. No mention in the recent Ventus VCTs reports, but they are hardly heavy on detail on the specific (cf generic) factors impacting NAV.

SD

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Re: Crown Place AGM (2016)

#94468

Postby marben100 » November 9th, 2017, 5:09 pm

There are some comments on the Crown Place 2017 AGM here: https://www.sharesoc.org/blog/company-n ... nk-loopup/

Best,
Mark B

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Re: Crown Place AGM (2016)

#95592

Postby timbo003 » November 14th, 2017, 2:05 pm

I recently attended the Crown Place VCT AGM, which was held on Wednesday November 8th 2017 commencing at 11.00 at the City of London Club, 19 Old Broad Street, London EC2N 1DS.
The link to the annual report for year ending June 30th 2017 can be found here:
https://www.albion-ventures.co.uk/funds/CRWN

The IMS for the three months ending September 30th 2017 was released just before the AGM; it reported a NAV of 31.71 pence per share, an increase of 0.73 pence per share (2.4 per cent) since 30th June 2017 (after taking into account the payment of dividends).
https://tinyurl.com/y8awgp66

For this year’s AGM there were around 20 ordinary shareholders in attendance. The meeting began with a portfolio review given by Emil Gigov (Albion partner and investment manager) which also included a short Q&A session. We then had a presentation (with Q&As) by Jamie Ward, CEO and co-founder of one of the Albion investee companies, PayasUgym, this was followed by the formal AGM and then lunch, which consisted of a selection of sandwiches with a choice of red or white wine and soft drinks.

Manager’s presentation and portfolio review:

Emil began with a brief review of the year’s performance where the total return was 4p/share (2p/share paid as dividends and a 2p/share increase in NAV). Most of the gains (circa 80%) came from the asset-backed portfolio. There were four exits during the year returning £1.6m, but the two of the most notable exits (i.e. the largest) were post year-end: (Hilson Moran and the Crown Hotel) with exit multiples of 1X and 3X respectively.

Given the possible VCT rule changes, which may favour growth investments over asset-based investments, Emil opted to concentrate on the growth portfolio in the review, where there have been seven new investments. The growth portfolio now comprises 30 different investments (22% of NAV), with digital marketing and cyber-security both cited as key sectors. Albion now have four companies in the Times Tech Track 100 (which ranks the top hundred fast growing UK tech companies) and Albion are the only VC with four or more entries:
http://www.fasttrack.co.uk/league-table ... gue-table/

There were name checks for Proveca (specialists in developing pediatric versions of generic medicines), Grapeshot (targeted online advertising), Egress (cybersecurity solutions including encrypted retractable email) and Black Swan (data analytics for marketing), all of whom had demonstrated strong growth during the year.

Following the VCT portfolio review, we were given a brief overview of the ongoing Patient Capital Review and how it may affect the Albion VCTs in the forthcoming budget. The Patient Capital Review consultation document contains comparative data that supports the premise that the UK is relatively good at nurturing start-ups, but not so good at growing start-ups in to large billion pound companies. Given this situation, HM Treasury wish to determine whether they can improve the way they allocate taxpayer funds in order to stimulate investment that will help create more billion-pound companies.

There were over 1,000 written responses to the Patient Capital Review consultation and the resulting government proposals are likely to be detailed in the budget on November 22nd. Albion believes that the proposed changes could include a restriction on future investment in asset-backed investments such as Schools, Care Homes and Hotels. Should this be the outcome, then Crown Place and the other Albion VCTs would seek shareholder consent for a change in investment policy, whereby going forward, all new investments would be focused on providing development capital for growth companies in areas where Albion already have expertise (for example, tech and med-tech).

Q&As:

Q: If there are changes in the budget to prevent investment in asset backed, income generating investments such as Care Homes and Schools, are we likely to hang on to those sorts of investments for a longer in order to underpin the VCT dividends?
A: Quite possibly, but we need to wait for the budget.

Q: There were many changes to VCT rules two years ago, why are there more changes now?
A: It is probably inevitable that governments will want to tinker, given the generous tax breaks.

Q: How long did we hold Hilson Moran? Did we get rid of it too early?
A: We held for 5 years, timing of a disposal of this type is critical and we think we got that right.

Q: Are we seeing a lot of competition when investing in these growth opportunities and are we paying too much?
A: We are seeing quite a bit of competition, especially for the earlier opportunities.

Q: What is our preferred exit for companies in the growth portfolio?
A: Most entrepreneurs do not want an exit via an IPO, often they would like to expand geographically (especially the USA) which might involve a Private Equity partner and then sell after the expansion plan has been executed.

Q: The last legacy investment (from the Murray Johnstone days) and our fifth largest holding in the portfolio is ELE. A few years ago we managed to extract a decent chunk of money out of them and we were told that we had just missed out selling the business, we haven’t heard much about them since. or received any further payments, is there anything to report?
A: Trading at ELE is satisfactory. We will sell the company when the time is right, the trouble has been that the company contains two main divisions and they have not been synchronized with one another in terms of their business cycles, ideally we would like to sell when both divisions are close to their peaks.

Formal AGM

There were no questions of any significance regarding the resolutions and they were all passed with large majorities (>95%), although the number of shares voted for each resolution was disappointingly low (circa 6.2m, which corresponds to just under 4% of the total)

PayasUgym

Website: https://www.payasugym.com/
Recent Press article: https://tinyurl.com/y8fgc8cx

PayasUgym was set up in 2010 by Jamie Ward and Neil Harmsworth, both of whom had become frustrated by the lack of easy gym access when away from home. They both disliked the general requirement for annual gym memberships, the arduous induction process and the hard selling techniques employed by the gyms to increase membership numbers.
PayasUgym provides a means of accessing various gyms all around the UK without having to endure a hard sell, or having to sign up for an annual membership at each gym. Customers sign up online (using a PC or mobile App.) for a single visit to one specific gym, or for a one month pass which allows free access to similar gyms within the PayasUgym network.

The App will identify all participating gyms within a specified area and each gym listed has user ratings. There is no hard sell, no contract, no additional fees, no induction and no need to cancel membership if the gym does not meet expectations, or is only required for a short period.

Customer satisfaction with the standard process of accessing gyms through membership is low, with a Net Promoter Score (NPS) of <30, whereas PayasUgym has scored 72 in a recent NPS survey.

PayasUgym is also gaining popularity among many gym operators, for example they have recently signed up Nuffield gyms (>100 gyms throughout the UK) and produced a report and recommendations based on customer feedback for Nuffield. Following implementation of the recommendations, Nuffield have increased the rate of new members signing up by 50% (at the expense of competitors).

PayasUgym were the first company offering this online service and they are always at the top of Google searches for gym search. The gym market in the UK has annual sales of £5Bn, of which PayasUgym have £5m, they currently have 40% of the UK gyms signed up, including several chains (for example Soho, Bannatyne and Nuffield). In the last 12 months, there have been 50m gym searches through PayasUgym, 1.7m gym visits and 400K individual customers have used the portal.

PayasUgym will continue expanding their network of gyms and ramp up advertising which will include Ch4 (2017) and Sky (2018). In addition, other growth opportunities will be explored which include:

* Monetizing big data collected from customers, this could result in B2B opportunities, rather than B2C.
* Nutritional supplements (B2B).
* Sports apparel (B2B).
Albion invested in PayasUgym 2014 (£250K seed capital) and the Albion VCTs now hold just 5.5% of the equity.
We were told by the manager that this is a relatively small investment by Albion standards, but it provides a good example of how seed funding can be deployed as growth capital. Should the budget include changes to prevent future asset backed VCT investments, there are likely to be more investments of this type in the future across all of the Albion VCTs.


Q&As

Q: Is it the type of market outside of the UK? Could you expand internationally?
A: Most international markets are very fragmented, although there may be opportunities in Germany and the US

Q: Can you describe your cash flow model?
A: Consumers pay us directly and we front load the commission.

Q: You mentioned that the gyms receive feedback scores from the visitors who booked through PayasUgym. What incentives are there for customers to leave feedback?
A: The customers receive five credits for every five completed feedback forms submitted. Each credit is worth £1, which may be redeemed through money off future gym bookings made through PayasUgym

Q: What is your profit margin?
A: When we started out our gross margin was around 20%, it is now 55%, but we expect this to be squeezed as we continue with the growth strategy.

Q: You said you had most of the major gym chains already signed up. Which large chains are still to sign up?
A: We do not have David Lloyd (that one will be difficult), and we do not have Fitness First.

Q: Who are your biggest competitors?
A: Our two biggest competitors are GymPass ( https://www.gympass.com/uk ) and GymClass ( https://gym-class.co.uk/ )
Gympass is more of a B2B business that we are concentrating on corporate membership, GymClass targets females for gym classes, so our target markets are somewhat different.


Q: Where does the 55% margin come from?
A: If a customer pays us £50 for one month access, we do not pay the gym for the first two visits, thereafter we pay the gym for each visit, but there is a cap.

Q: When do you expect to reach profitability?
A: We currently have sales of £400k/month, but are burning cash at £30K a month, we forecast to make a small profit next year and we will not require any further new investment capital from 2019. Exit is most likely to be through a Private Equity sale from 2019 (onwards).

Lunch:

Over lunch, I talked to a number of the Albion managers on a variety of topics, but mainly on the Patient Capital Review.
The consensus was that there is likely to be a cut in up front tax relief for VCT investments, with tax relief possibly being reduced to 20%. Whilst this would be considered highly unwelcome, it would not be anything like as bad as HMG tinkering with the tax-free status of VCTs dividends, which could be disastrous for the sector and for SMEs seeking growth capital investment.

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Re: Crown Place AGM (2016)

#95808

Postby onslow » November 15th, 2017, 7:16 am

Timbo - thank you for posting such a comprehensive write up. Appreciated.

Reducing the tax relief to 20% - and the management you spoke to being relatively sure it would happen - is a surprise. It hasnt been well flagged or even rumoured, unlike the talk about asset backed investments being removed.

Given Britain is "open for business" im surprised the government seriously considered this, however if they are confident investment will continue at similar levels then their is no reason not to.

Lessening relief for vct and EIS investments is hardly going to register as a national issue, so i can see this potentially being an "easy win" for the government.

I remain firmly convinced the days of generous tax releifs will come to an end sooner rather than later given the unsustainable nature of government finances. I include pensions in this. One reason why ive invested in quite a few offerings this year

(And yes they need to be good investments themselves and not just good tax breaks - i think the risk reward favours investments in vcts this year, those who have a good track record and existing assets providing cashflow)

(IMO its unfair new investors like me and can come in and take advantage of existing well performing investments where risk is mostly reduced - different issue though!)

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Re: Crown Place AGM (2016)

#95878

Postby Retiringat51 » November 15th, 2017, 11:24 am

onslow wrote:Reducing the tax relief to 20% - and the management you spoke to being relatively sure it would happen - is a surprise. It hasnt been well flagged or even rumoured, unlike the talk about asset backed investments being removed.


Rumour has been circulating for a while - unsubstantiated, and hopefully unfounded.

viewtopic.php?f=25&t=7562

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Re: Crown Place AGM (2016)

#96133

Postby timbo003 » November 16th, 2017, 9:53 am

Rumour has been circulating for a while - unsubstantiated, and hopefully unfounded.


This article in yesterday's Telegraph assigns a 60% chance that the Chancellor will reduce the tax breaks for VCTs:
http://www.telegraph.co.uk/money/consum ... hases-tax/


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