British Smaller Company- Since 2010, the two VCTs have followed the same investment strategy. Previously known for management buyouts, VCTs have only focused on growth capital investments since 2015. In September 2021, one of them, Matillion, became the sixth VCT-backed unicorn and is now the largest stake within both VCTs.
The two VCTs generated a total NAV return of 52.73 % (BSC) and 51.28 % (BSC2) over the five years to 30 June 2021 and paid total dividends per share of 45.25p (BSC) and 21.0p (BSC2) (BSC2). Past performance is no guarantee of future results, and divides are not guaranteed.
The VCTs provide investors with access to 39 companies. 36 of which are shared between the two VCTs – in a variety of industries, with a focus on technology (June 2021).
With a £20 million overallotment facility, the current offer aims to generate £40 million.
The VCTs for British Smaller Companies have long been popular. Previous bids have often attained capacity during the priority period for shareholders. From the start, the current offer is created and opens to both existing and new investors. If you’re interested, you should act quickly. According to the supervisor, there are no plans to present another comprehensive offer until the 2023/24 tax year.
Investing approach
The two VCTs have historically pursued separating investing strategies, resulting in distinct portfolios. BSC specialized in management buyouts and growth capital investments, whereas BSC2 specialized in very early-stage technological businesses.
Since 2010, the VCTs have been collaborating on investments. VCTs have followed the same growth capital investment strategy since the 2015 VCT regulation revisions, which restricted new management buyout investments.
The VCTs strive to invest in businesses that require capital to expand in the future. A company’s headquarters will usually be in the United Kingdom, with plans to expand abroad. Founders must have a clear strategy and plans for scaling the companies.
The VCTs would look to invest £2 to £6 million in businesses having a turnover of at least £1 million. Investee enterprises do not need to be profitable at the time of investing.
While the VCTs are open to investing in any industry, there is a significant preference for technology. Manufacturer, a popular industry in the traditional management buyout planned, has seen an important reduction in exposure. Four-fifths of new investments are made in technology
Overview of the Portfolio
The net assets of the BSC and BSC2 VCTs are £127.8 million and £89.0 million, respectively (June 2021).
Both VCTs’ portfolios are currently highly concentrated due to the performance of Matillion, their largest stake. The top ten holdings account for 53.7 % of BSC’s net assets and 58.5% of BSC2’s net assets, respectively. Matillion’s net assets range from 23.6 % to 30.4 %. The manager announced in June 2021 that it planned to sell 20% of each VCT’s ownership in Matillion in the Series E investment round in September 2021.
Data & analytics, software, business services, new media, and retail & brands are the five center industries in which VCTs invest. Data & analytics and software have become increasingly important, accounting for 51 % and 58.4 % of net assets in BSC and BSC2, respectively.
Portfolio corporations are an Example:
Matillion is the world’s largest holding Company
Matillion, one of the world’s top cloud data integration platforms, was founded in 2010 and has twin headquarters in Manchester and Denver, as well as other locations around the United States. Customers can collect data from a variety of sources, load it into cloud data warehouses, and transform it into meaningful, analytics-ready data using the company’s tools.
Cisco, Siemens, Novartis, Amazon, and Accenture are to be amongst the companies’ clients.
With 922% revenue growth over the last four years, Matillion is now one of the UK’s fastest-growing private technology businesses, which has been named to the Deloitte Fast 50.
Snowflake, a cloud-based data storage and analytics behemoth (and a top-ranked company in Forbes’ Cloud 100 2020) recognized Matillion data integration partner of the year in 2021. Matillion has also formed a solution relationship with Software AG, a global software pioneer with a sale of €800 million.
The British Smaller Companies VCTs originally invested £3.5 million in the Company in November 2016, following another £0.88 million in March 2017, as part of a larger investment round with several high-profile US technology investors (Battery Ventures, Sapphire Ventures, and Scale Venture Partners). Matillion has received multiple rounds of funding from the same US investors since then. Matillion, the sixth VCT-backed unicorn, completed its Series E investment round in September 2021, raising $150 million at a $1.5 billion valuation.
Within both VCTs, the firm is the largest holding, accounting for 23.6% (BSC) and 30.4 % (BSC2) of net assets, respectively (June 2021). The VCTs revealed in June that they plan to sell one-fifth of their ownership in the company in the Series E investment round.
Recent Investment in Vypr Validation Technologies
Vypr is a validation platform that helps product developers, marketers, manufacturers, and retailers save time and money while developing new products.
They may test each of the many variables into creating the final product, from early conceptions to product naming, branding packaging to marketing messages, using Vypr.
Vypr also includes a variety of other products, including an analytics tool for profiling many items inside a specific category or classification, a function that examines consumer value perception of products and models pricing elasticity, and a brand sentiment tracker. The company presently collaborates with The Co-op Food, Starbucks, and brands included Weetabix and Müller.
The Company is situated in Manchester and has a 15-person staff. In 2020, the plans to expand its consumer panel to France and Germany.
In January 2021, the VCTs invested £2.5 million (£1.5 million BSC, £1.0 million BSC2) at a pre-money valuation of £6.7 million. The money will increase the Company’s sell and marketing team as it seeks to expand internationally and build on its strong customer base of food manufacturers, retailers, and FMCG brands.
History should be ignored
The London Stock Exchange is where VCT shares are trading. The sharing prices are other investment trusts, can fluctuate and diverge from the VCT’s net asset value (NAV), which is the value of the VCT’s underlying investments. A discount is a gap between a VCT’s share price and its net asset value per share.
The charts depict the five-year discount to net asset value history of British Smaller Companies VCTs, calculated using the closing share price at the end of each month divided by the most recent net asset value at the time. Past performance is not indicative of future results. Investors selling VCT shares may be able to achieve a better price if they use the VCT’s share buyback facility, but this is not guaranteed.
Share rebuying
Each VCT currently has a policy of buying back shares at a 5% discount to the most recent disclosed NAV, subject to liquidity.
When you invest via Wealth Club, you will receive an annual.
For the first three years, Wealth Club investors will get an annual from the VCT.
These are a refund of our renewal commission, which should be 0.10% of the Net Asset Value of the Offer Shares you receive when you invest. The following terms and conditions apply.
Summary
The Companies is primary operation is to make long-term equity and credit investments, most in unquoted enterprises. The Company’s goal is to offer investors a long-term tax-free dividend return while also attempting to preserve the capital worth of their investment and the venture capital trust’s status. Software information technology and telecommunications, business services, manufacturing, industrial services, retail, brands, and healthcare are the best sectors in which the Companies invest.
Experienced VCT investors will be familiar with the two British Smaller Companies VCTs, which have built a loyal following over the last two decades.
Previously known for management buyouts, VCTs have only focused on growth capital investments since 2015. The two VCTs now provide investors with access to a concentrated portfolio of the most technology-based early-stage investments, one of which, Matillion, has had a significant beneficial impact on the value of both VCTs. Matillion currently accounts for a notable amount of the net assets of both VCTs, posing a concentration risk to investors.
Skills and well-resourced investment staff oversee the VCTs. As the value of the assets under management grows, YFM continues to invest in expanding the employees.
The payment of dividends has been boosted by realization from the historical portfolio while the trusts, the net asset value have been enhanced by fresh investments. VCT’s investments in data & analytics such as software appear to have helped the VCTs regain their net asset value during the pandemic. Nevertheless, remember that previous performance is no guarantee to future results, and experienced investors should establish their own opinion.