Albion Venture VCT (AAVC) AGM 2018
Posted: 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.
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.