Albion Development VCT AGM 2019

[Gostevie]

Albion Development VCT (AADV) AGM 2019

This year’s Albion Development AGM was held on Thursday 30th May 2019 at 12:00hrs at the City of London Club in Old Broad Street, conveniently located between Liverpool Street and Bank stations – the same venue as the previous week’s Kings Arms Yard VCT AGM and the following week’s Albion Technology & General VCT AGM. As timbo003 mentioned when reporting on the former, this will be the final year that these AGMs are held there due to redevelopment of the venue, with future ones due to be held at The Charterhouse, close to Albion’s new offices in Farringdon.

The meeting was opened by Director Ben Larkin, who paid a warm and sincere tribute to former Chairman Geoffrey Vero, who very sadly passed away earlier in the month. A brief period of silence and reflection in his memory was impeccably observed.

The Annual Report and Accounts for year ending 31st December 2018 can be found here:

https://www.albion.capital/sites/defaul ... VCTWEB.pdf

The Interim Management Statement to March 31st 2018, released on the morning of the AGM can be found here:

https://www.investegate.co.uk/albion-de ... 4148H5344/

Manager’s Presentation

Managing Partner Will Fraser-Allen gave the Manager’s presentation, which broadly summarised the highlights of the above two documents. The current portfolio contains 54 companies which employ around 1,800 staff. As a result of the new(ish) VCT rules, there is an increasing focus on the tech sector, particularly software and digital healthcare. 2018 was a strong year for exits, led predominately by the sale of Grapeshot to Oracle at a 10x multiple of its purchase cost. It was also a good year for valuation uplifts with fewer write-downs, hence the increase in dividend from 4.0p to 4.5p. New investments tend to be focused on business-to-business as opposed to business-to-consumer so as to avoid exposure to consumer-facing sectors. Albion Capital is proud to have been winners at the 2018 Investor Allstar awards and Growth Investor awards.

There was a section on the new manager’s performance incentive agreement, which has been introduced in the light of the change in investment strategy, the low interest rate environment, cash holdings and fund overheads. It was explained that the new scheme simplifies existing arrangements, assists recruitment and retention of the most talented staff, and aligns the interests of Albion and its shareholders. The Total Expenses Ratio (TER) is being reduced from 3.0% to 2.5%, which reduces the management fee by c.£83,000 p.a.

Q&A

(These are paraphrased from my scribbled notes, not a word-for-word account.)

Q. Is there a lot of competition for follow-up capital?
A. There are lots of companies seeking capital, as being an entrepreneur is currently seen as being “sexy”. Albion likes to support investee companies that need follow-up capital for “good reasons”.

Q. Is there a danger that the new performance incentive could lead to short-term thinking?
A. No. We are very much a long-term business.

Q. MyMeds&Me seems to have been a particularly unsuccessful investment, after further funds were invested in 2017. Why?
A. Small businesses don’t always “behave” as we would like them to but we still believe in the company.

Q. Is there a change of asset management strategy, such as maximum concentration risk?
A. Over coming years, the portfolio will become lass asset-backed due to the new VCT rules. The Company is not completely in control of concentration risk as it cannot always sell successful investee companies, which could lead to them becoming an increasing percentage of the portfolio.

Q. Are you under pressure to sell your asset-backed investments such as the schools?
A. No.

Q. Is there a danger that you will become diluted when investee companies get external funding from other investors?
A. Yes, but we try to invest pro-rata when this occurs to avoid this.

Q. Your new investments seem to be in the range of £100k to £400k. Is there any reason for this?
A. We don’t have specific targets in this regard. New investments are usually made across the Albion stable.

Q. You have an investment in something called Albion Investment Properties Limited. What is this?
A. (Will Fraser-Allen laughs wryly) It is a very historic investment from 2006 in a brewery in Bristol, for which I take responsibility, and which didn’t work out. It is now a row/block of flats.

Formal AGM / Special GM

All resolutions at the AGM were passed without dissent. A separate GM followed to approve the new management agreement. There were a few questions, asked and answered cordially, before the show of hands vote, and the resolution was passed comfortably.

Mirada Medical Limited

https://mirada-medical.com/

A presentation about this investee company was given by its charismatic Chief Executive Hugh Bettesworth. The company offers “faster and more accurate cancer treatment planning” and is “building software that helps doctors use images to treat cancer since 2009”. Bettesworth has been with Mirada since 2001, when it was a private company, but after a series of consolidations became a subsidiary of Siemens until he led an MBO in 2008, backed by Albion. Unlike some presentations by medical tech companies it was delivered in a way that a lay audience could largely understand but I didn’t take detailed notes.

Lunch

At around 1330hrs the meeting was brought to a close, when there was a buffet lunch with plentiful wine and soft drinks and the chance to chat with the Directors of the Company; partners and managers from Albion Capital; and Hugh Bettesworth and staff from Mirada. Unlike the previous week’s Kings Arms Yard VCT AGM we also had the use of the outside roof terrace, which was very pleasant on a sunny day. When I left at around 1500hrs a few of the diehards were still going strong.

[BusyBumbleBee]

Thanks, Steve - very good report.

When are you next going to an Albion event? Cos I will try to make it as well. Need to raise the issue of the asset backed green investee companies investing in more assets as Foresight Solar have done.

with kind regards - John

[Gostevie]

Hi John,

I am planning on going to the Albion Technology & General AGM at the same venue at 11am next Tuesday.

The next ones after that will probably be the AAEV and AAVC ones in August.

Steve

[BusyBumbleBee]

Ok, Steve - will try to make the AAVC one but have some grandchildren staying in August so might have to miss it. - kind regards - John