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Albion Venture VCT (AAVC) AGM 2018

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timbo003
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Albion Venture VCT (AAVC) AGM 2018

#160180

Postby timbo003 » August 16th, 2018, 5:10 pm

This year’s Albion Venture VCT AGM was held on Monday (August 13th 2018) starting at 11.00. The venue was the same as the previous eight AGMs: The City of London Club, 19 Broad Street, London, EC2N 1DS.

Notes from last year’s Albion VCT AGM can be found here:
viewtopic.php?p=75279#p75279

The Annual Report for year ending March 31st 2018 report can be found here:
https://www.albion.capital/sites/defaul ... AVCWEB.pdf

The IMS (April 1st to June 30th 2018) was also released on Monday, this reported NAV at 76.5p/share (on June 30th), which was an increase of 0.8p/share from June the previous year.
https://www.investegate.co.uk/albion-ve ... 3928H5439/

For this year’s AGM there were around 25 ordinary shareholders in attendance. The meeting began with a portfolio review including Q&As with the Manager; we then had the formal AGM followed by a presentation by Robert Henderson (Albion) on behalf of one of the investee companies (Bravo Inns) before breaking for lunch.


Manager’s presentation:

For year ending March 2018, the total returns (5.5p/share) exceeded the dividend payment (5.0p/share) by 0.5p/share, with revenue contributing 1.8p/share and capital 3.7p/share.

The capital increase was mostly down to an increase in value of the three care homes, two of which are >90% full and the third is now up to 61% capacity. There were also increases in the valuations for Schools, Renewables and Infrastructure (fibre broadband).

During the year both the Harrogate Hotel and the Weybridge Health Club were sold. Neither of these two investments could be made to work as intended and in such circumstances it is often best to move them on.

The two main acquisitions were a Woman’s Health Clinic in Harley Street (London West one) and a Wedding venue (Beddlestead Farm Ltd ), where Albion have teamed up with an experienced operator to acquire and convert Syrencot House (near Salisbury) into a bespoke wedding venue with new ceremony and reception buildings within the grounds. The total spend by the VCTs on this investment will be around £6m.
http://ubu-design.co.uk/syrencot-house/

In the year ahead the VCT will begin the transition of its portfolio from asset backed investments to growth investments, which is necessary to comply with new VCT legislation resulting from the Patient Capital Review. Albion anticipate that the process will be gradual and some assets (Renewables and Pubs) may be held for longer than others (Hotels and Care Homes).

There is likely to be an increase in value the Care Homes, one of the schools and the broadband infrastructure investments in the coming months. The NAV per share currently stands at around 76p and it is anticipate this will rise towards 100p/share over the next few years whilst maintaining the current 5p dividend and transitioning the portfolio. If and when the NAV per share reaches around 85p – 90p then the dividend may be increased.

The care homes are currently valued at around £25m and valuations may be approaching the top of a cycle, therefore Albion will look to sell these in the coming year if they can achieve a satisfactory exit price. Should a sale take place, it is likely the VCT will be awash with cash and thus it would probably not participate in any joint fund raise with the other Albion VCTs later in the tax year.

There is currently a good pipeline in new investment opportunities, with healthcare, healthcare IT, big data and fibre-optic broadband among the preferred investment themes going forward. Five of the most advanced pipeline opportunities (all revenue generating) are listed below:

Healios
https://www.healios.org.uk/
Provider of an online platform delivering family centric psychological care

uMotif
https://www.umotif.com/
Patient engagement and data capture platform for use in real world and observational research

Arecor
http://arecor.com/
Proprietary products for diabetes care and reformulation services to pharma industry

Raremark
https://raremark.com/
Web site and online community for patients with rare diseases

Phrasee
https://phrasee.co/
Using AI to optimize language used in digital marketing

Brief details concerning the VCT’s initial investments in Healios and uMotif were given in the RNS released just before the AGM (see link above)
Albion is also looking to invest in another fibre optic broadband opportunity for a new build homes development (outside of London).


Manager Q&As

Q: VCTs have raised record amounts of cash in the last couple of years and the sector seems to be awash with cash. Are you now seeing higher asking prices for assets you are looking to acquire and if so, how are you insulating yourselves from over paying?
A: Prices for companies are relatively high compared to past levels. We are now investing at an earlier stage in sectors that we know well and we believe that this strategy avoids over paying, however, it does mean that we are likely to hold on to investments for longer than before, in order to maximize return. In addition, unlike some other VCTs, we avoid B2C as we are nervous about this at this stage in the economic cycle.

Q: You were recently poised to sell Albions’s 50% stake in the Stanstead Hotel, but the sale did not take place, what happened there?
A: The operator and co-owner, Kew Green, were recently taken over by the Chinese. The purchaser overpaid, they don’t want to admit it and they will not sell for a loss. We have now taken cash out of the company via redemption of loan stock. We are locked in with the investment for now, but we are prepared wait it out.

Q: You stated in the review that Care Homes have peaked, yet we constantly hear in the news about a shortage of Care Homes, furthermore the baby boomers have yet to reach an age when they require places, so are you sure they have peaked?
A: The value of Care Homes has increased significantly recently and we think that the values of the homes are near a peak (even though the number of people needing places in care homes has not peaked). There is still significant demand for places in care homes, but new care homes are now taking longer to fill.

Q: Are you planning to merge any of the VCTs?
A: Good question, we do keep this under review, although it is worth noting that as the Albion VCTs grow in size (as measured by total net asset value) the potential savings from mergers decreases.

Q: Could you tell us how Albion’s new investment Raremark will derive its revenue?
A: Raremark will generate valuable insights from patient groups which drug companies are prepared to pay for (with the patients consent).

Q: You mentioned you a poised to invest in Arecor, the Oxford Tech VCTs are already invested here. Will you be the main VCT investor if the deal completes?
A: Yes.

Q: At the YFM Investor seminar earlier this year, the manager stated that HMRC were trying to do away with Advance Assurance. What is happening there?
A: HMRC are now encouraging VCTs to obtain outside expert advice on VCT/EIS qualification of investments rather than give advance assurance themselves. If they do this and it turns out that the investment does not qualify then there will be no onerous penalties, providing remedial action is taken. Albion has been following this procedure for most investments, but will still refer to HMRC for advance assurance in difficult to assess cases.

Q: The turnaround time for VCT/EIS qualification questions addressed to HMRC had been taking up to 24 weeks up until fairly recently, what sort of turnaround times are you now experiencing?
A: Probably around 6-7 weeks.

Q: You said in the presentation that the Wedding Venues investment (Beddlestead) would require a total of £6m. How will you provide extra investment now the new rules prevent new asset backed investments and the same question for other investments such as the Harley Street Women’s Health Clinic?
A: All of the £6m went into Beddlestead before the introduction of the new rules on asset based investments. The Harley Street Clinic is a leasehold property (15 years remaining with a renewal option) and as such does not count as asset backed.


Formal AGM

For this year’s AGM we had a new Chairman, Richard Glover, who replaced the outgoing Chairman David Watkins who had served for the last 22 years and since the VCTs inception.

The new Chairman got straight down to business and rattled through ordinary resolutions 1-8 (approval of accounts and remuneration report, re-election of directors and the Auditor) and these were all passed with large majorities (>95%).

Resolution 9 (change in investment policy to comply with new regulations) was passed with 99.5% votes in favour.

Resolutions 10 - 13 (allotment of shares, disapplication of pre-emption rights, buybacks and sale of treasury shares) were all comfortably passed, with disapplication of pre-emption rights attracting the most opposition (only 92.8% in favour).

There were no questions asked on any of the resolutions and the number of votes cast in each case was around 5.4m which represented just 6.2% of the total shares in circulation.


Bravo Inns

https://www.bravoinns.com/find-a-pub/
https://www.bravoinns-corporate.com/

Bravo Inns is a pub chain consisting of 42, wet lead, community pubs based in NW England. The pubs are managed rather than tenanted and couples are preferred over single operators. All Bravo pubs show televised sport and participate in traditional pub activities such as darts leagues, with live music and/or karaoke offered on most weekends.

Trading over the summer has been excellent (30% up on last year) helped by the World Cup and the exceptional weather. Gross margins are around 60% (most of which is through the sale of drinks) and EBITDA is typically £50K per pub per year. There are currently 3-4 pubs in the portfolio which are underperforming and the intention is to dispose of these.

There is around £1m available for acquisitions and the plan is to add three new pubs/year. The typical ROI is around 20% per pub and one important factor when considering a new acquisition is the potential for optimizing the pub’s outside areas.

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Re: Albion Venture VCT (AAVC) AGM 2018

#160218

Postby Gostevie » August 16th, 2018, 8:40 pm

An excellent write-up as always Tim - many thanks for sharing. I'm sorry I missed this one but my AAVC shares are now in a nominee account.

It's a shame that they have to sell the asset-backed investments but "rules is rules" I suppose, and I don't doubt that Patrick and his team have the necessary skills to make the transition to more growth-style companies a smooth one.

Still one of the best VCTs in my opinion.

Steve

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Re: Albion Venture VCT (AAVC) AGM 2018

#160320

Postby BusyBumbleBee » August 17th, 2018, 2:32 pm

Thanks,Tim - as comprehensive and thought provoking as always - sorry I couldn't get there.

Some really interesting statements - not least this one
There is likely to be an increase in value the Care Homes, one of the schools and the broadband infrastructure investments in the coming months. The NAV per share currently stands at around 76p and it is anticipated this will rise towards 100p/share over the next few years whilst maintaining the current 5p dividend and transitioning the portfolio. If and when the NAV per share reaches around 85p – 90p then the dividend may be increased.

No other VCT house would dare make such a statement but with Albion's track record I will believe them.

Bravo Inns seems to be bucking the trends set by Greene King and Marston - do you see any reason why they should?

Just to calm Stevie's worries - it's no that they have to sell any assets - its just that when they do, they cannot replace like with like. Some of the wind turbine and solar based VCTS would be seriously embarrassed if they had to sell assets.

Kind regards - BBB

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Re: Albion Venture VCT (AAVC) AGM 2018

#160435

Postby scotia » August 18th, 2018, 11:11 am

Thanks Tim. I was interested in the quote
There is likely to be an increase in value (in) the Care Homes

I have been wondering about this sector. It is possible that the care homes currently in the portfolio are at the very top end, and may have found a comfortable niche, with no pressure on the care costs. However, from the bombardment of advertisements concerning equity release on one's home, it looks like its jam today, and no thought for the morrow - when care home funding may be required. And local authorities will certainly not wish to fund the care bill.

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Re: Albion Venture VCT (AAVC) AGM 2018

#160622

Postby timbo003 » August 19th, 2018, 5:02 pm

It's a shame that they have to sell the asset-backed investments


I theory they don’t have to sell anything, but it would probably raise a few eyebrows at the Treasury if they kept the portfolio as it is, but the slower they sell it off the better as far as I am concerned and I would be quite happy if they hung on to the whole portfolio as it is. It would mean a reduced divi in the first instance (maybe 2p/year), but the dividend should be able to increase steadily thereafter, the net asset value per share would be expected to grow at a reasonable rate too.


Bravo Inns seems to be bucking the trends set by Greene King and Marston - do you see any reason why they should?


Indeed BBB, Bravo Inns do seem to be performing exceptionally well, they produce a tremendous ROI and it was good that they were not mentioned among the Albion assets which could be sold in the near future. The 30% year on year increase over the summer seems like a remarkable result compared to the big pub cos (bellwether Wetherspoons could only manage just over 5% for the 10 weeks to 8 July 2018).

One thing which does set Bravo Inns apart is that they are both wet led and managed. All the big pub cos are focusing more and more on food and those which do have a sizable wet led estate, lease them out to tenants rather than keep them in house as managed pubs, so they have to share any benefit from an uplift in trade with the tenant.

I suspect the sport and good weather has led to an increase in drink sales without a corresponding increase in food sales, if so, this will not help the foody pubs, especially those that do not have televised sport or a reasonable outside area, but it should be very beneficial to wet lead pubs, especially those with a decent outside space


I have been wondering about this sector. It is possible that the care homes currently in the portfolio are at the very top end, and may have found a comfortable niche, with no pressure on the care costs. However, from the bombardment of advertisements concerning equity release on one's home, it looks like its jam today, and no thought for the morrow - when care home funding may be required. And local authorities will certainly not wish to fund the care bill.


Yes Scotia, I think they are at the top end and I recall Seamus Halton (CEO Berkley Care Group) telling shareholders a few years ago (2012) that incoming Residents had to have sufficient resources to pay for four years at the Chingford Care home, thereafter the Council would pick up the bill if they run out of cash, the resources could include equity within the residents main home and the Care home could take charge on their property to pay the fees. I don’t know whether Seamus managed to negotiate similar deals with other councils at the more recently built Care homes, but the deal at Chingford does seem incredibly generous, so I doubt it.

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Re: Albion Venture VCT (AAVC) AGM 2018

#160626

Postby scotia » August 19th, 2018, 5:53 pm

I don’t know whether Seamus managed to negotiate similar deals with other councils at the more recently built Care homes, but the deal at Chingford does seem incredibly generous, so I doubt it.

Astonishingly generous! Unless the agreement was a payment by the council which was substantially less than the standard rate for fully paying residents. We were aware that our parents were substantially subsidising council funded inmates (in Scotland).

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Re: Albion Venture VCT (AAVC) AGM 2018

#160692

Postby DrBunsenHoneydew » August 20th, 2018, 8:22 am

The median average duration of stay in a care home is under 30 months, so if the Council has got someone else to pay for 4 years they are probably OK with that plan.

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Re: Albion Venture VCT (AAVC) AGM 2018

#161004

Postby scotia » August 21st, 2018, 12:04 pm

DrBunsenHoneydew wrote:The median average duration of stay in a care home is under 30 months, so if the Council has got someone else to pay for 4 years they are probably OK with that plan.

That's not the point! Local authorities do not fund care home costs until you have exhausted your savings down to a certain limit - no matter how many years you have paid for care home costs. And they will look back over a number of years to ensure that you have not offloaded wealth (e.g. a home to a family member). Also they (I believe) have a fixed amount which they are willing to pay, which many care homes state is less than their costs - so they rely on subsidies from self funding inmates.
I wonder if the "deal" struck by the VCT care homes is simply an agreement from the local authorities to pay the standard local authority rate for inmates who have exhausted their savings (down to the stated limit), without the local authorities complaining that the previous, considerably higher amount, ran down the inmates savings at an unacceptably accelerated rate. I really cannot see a local authority paying an enhanced rate to a particular care home - all of the other care homes would be up in arms.
Just in case you southerners think that this problem does not exist in Scotland where we have "free personal care", I should explain that this is only a slightly higher amount than the attendance allowance available south of the border, which covers a small fraction of a care home cost - and getting it is like drawing teeth. We had long wrangles over which local authority should pay.


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