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AAVC sells Care Homes

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
BusyBumbleBee
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AAVC sells Care Homes

#392368

Postby BusyBumbleBee » March 4th, 2021, 4:46 pm

Albion Venture Capital Trust Plc: Interim Management Statement was released this afternoon. It states, inter alia, that after the period end it has sold all the care homes which made up 40% of its NAV.

This has radically changed the shape of the VCT and puts it in the same boat as all the others. I shall be cancelling my DRIS.

But at least they mention a special dividend cos they will otherwise be awash with cash.

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Re: AAVC sells Care Homes

#392387

Postby barchid » March 4th, 2021, 5:20 pm

BBB
If you are uncomfortable with them selling recurringly profitable assets, as I am, then you most certainly would prefer to take their Danegeld in cash rather than more stock.
Totally agree.

londoninvestor
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Re: AAVC sells Care Homes

#392429

Postby londoninvestor » March 4th, 2021, 6:33 pm

Personally, if I hadn't wanted exposure to such assets, I would simply have invested in a different VCT!

The latest iteration of the VCT rules obviously prevents any new investment in such assets, but did it require them to be divested on any particular timescale?

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Re: AAVC sells Care Homes

#392451

Postby barchid » March 4th, 2021, 7:27 pm

Not by my understanding of the rules, no, seems like they are falling in to the current Albion formula, which may or may not, end well.

james188
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Re: AAVC sells Care Homes

#392460

Postby james188 » March 4th, 2021, 7:47 pm

Presumably we can expect to hear very shortly (tomorrow?) that Crown Place and KAY have also disposed of their interests in these assets.

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Re: AAVC sells Care Homes

#392462

Postby Gostevie » March 4th, 2021, 7:52 pm

I have mixed feelings about this. My heart tells me that these disposals feel a bit like the end of an era. These care homes were something that helped to differentiate Albion from the other VCT stables, so I’m a bit sad to see them go.

On the other hand, the main point of VCTs is to invest in young businesses, then sell those investments when they are able to do so at a good price, so this makes sense in that context. I wonder if Radnor House School will be gone before too long too.

I have enough trust in the Albion management to believe they are doing the right thing in the interests of the shareholders.

Gostevie

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Re: AAVC sells Care Homes

#392509

Postby dspp » March 4th, 2021, 10:25 pm

Gostevie wrote:I have mixed feelings about this. My heart tells me that these disposals feel a bit like the end of an era. These care homes were something that helped to differentiate Albion from the other VCT stables, so I’m a bit sad to see them go.

On the other hand, the main point of VCTs is to invest in young businesses, then sell those investments when they are able to do so at a good price, so this makes sense in that context. I wonder if Radnor House School will be gone before too long too.

I have enough trust in the Albion management to believe they are doing the right thing in the interests of the shareholders.

Gostevie


If they are doing the right thing, what does that suggest about the profitability of care homes in the coming years, and why might that be ?

regards, dspp

UncleEbenezer
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Re: AAVC sells Care Homes

#392543

Postby UncleEbenezer » March 5th, 2021, 12:14 am

dspp wrote:If they are doing the right thing, what does that suggest about the profitability of care homes in the coming years, and why might that be ?

regards, dspp

Care homes have long been an easy business to lose money in. Many - right up to Southern Cross - have gone bust.

Albion's care homes appear to make it work (and it was genuinely heartening to read the Good News story posted here about how one of them dealt with covid). I expect that'll be reflected in the sale price.

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Re: AAVC sells Care Homes

#392575

Postby IJ49 » March 5th, 2021, 8:22 am

Interesting development by AAVC. CRWN and KAY are both investors in the care homes, so these will have also been sold, but we will have to wait for their next official reports for confirmation.

Shame about the sales as these three VCTs were the only ones that were old enough to hold asset based investments, which generally seem to be income providers.

Ij

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Re: AAVC sells Care Homes

#392599

Postby BusyBumbleBee » March 5th, 2021, 9:16 am

Certainly CRWN has (had) substantial holdings in the three care homes so one can expect an RNS (why has this not been done already as it is a substantial uplift to NAV).

Don't think they have issued the shares for the recently completed fund raise yet which leads on to two further questions :
1.Shouldn't the special dividend be paid to existing shareholders only? That way we get more of our money 'returned'. i.e. it is paid before the new shares are issued.
2. If it is not paid out this way, at what price are the new shares to be issued and will they be entitled to this special dividend?

londoninvestor
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Re: AAVC sells Care Homes

#392607

Postby londoninvestor » March 5th, 2021, 9:34 am

BusyBumbleBee wrote:Certainly CRWN has (had) substantial holdings in the three care homes so one can expect an RNS (why has this not been done already as it is a substantial uplift to NAV).

Don't think they have issued the shares for the recently completed fund raise yet which leads on to two further questions :
1.Shouldn't the special dividend be paid to existing shareholders only? That way we get more of our money 'returned'. i.e. it is paid before the new shares are issued.
2. If it is not paid out this way, at what price are the new shares to be issued and will they be entitled to this special dividend?


It looks like CRWN issued £8.4m worth of shares on 26th Feb at 32p (minus a discount for some investors):

https://www.londonstockexchange.com/new ... l/14882610

32p is more or less what you'd expect if nothing had materially changed since 31st Dec (31.13p published NAV plus the 2.5% offer costs). [One thing that isn't clear by the way from the AAVC statement is exactly when the disposal took place. It's described as happening after the period end (so after 31st Dec 20). Also, no disposal was mentioned in the CRWN half-yearly report on 15th Feb.]

I think those shareholders would have to get any special dividend. Setting an XD date in the past couldn't really work, as it would unfairly disadvantage anyone who had bought in the secondary market after that date (and, indeed, the new holders, who'd be getting zero for an asset that they'd paid for, albeit at its previous NAV rather than the value it was sold for).

The RNS describes that as the "first allotment", but given that Albion announced on 10th Feb that the offer was full up, it's not clear whether there's any subsequent allotment to come.

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Re: AAVC sells Care Homes

#392621

Postby dspp » March 5th, 2021, 10:15 am

UncleEbenezer wrote:
dspp wrote:If they are doing the right thing, what does that suggest about the profitability of care homes in the coming years, and why might that be ?

regards, dspp

Care homes have long been an easy business to lose money in. Many - right up to Southern Cross - have gone bust.

Albion's care homes appear to make it work (and it was genuinely heartening to read the Good News story posted here about how one of them dealt with covid). I expect that'll be reflected in the sale price.


UE - Thanks. I was wondering what might have changed that caused the owners to think that now was the right moment to cash in ? The two obvious big events washing through at the moment are Covid and Brexit, and so I was wondering if it was either/both of those creating the headwinds they have in mind, or something else. regards, dspp

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Re: AAVC sells Care Homes

#392698

Postby onslow » March 5th, 2021, 12:22 pm

londoninvestor wrote:
BusyBumbleBee wrote:
It looks like CRWN issued £8.4m worth of shares on 26th Feb at 32p (minus a discount for some investors):



As a holder of CRWN I'd be extremely disappointed if shares issued on 26th Feb are eligible for any proceeds from the sale of the care homes.

The discussions/negotiations would have already been known at this time, this is a material event and if any board members took part in the recent raising it could be construed as insider trading.

One thing that hasnt been mentioned yet is the actual price which the care homes sold for - we have the valuation from AAVC but I dont think an actual sale price was given(?). I assume it would be more than the 31 Dec valuation!

UncleEbenezer
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Re: AAVC sells Care Homes

#392723

Postby UncleEbenezer » March 5th, 2021, 1:13 pm

onslow wrote:One thing that hasnt been mentioned yet is the actual price which the care homes sold for - we have the valuation from AAVC but I dont think an actual sale price was given(?). I assume it would be more than the 31 Dec valuation!


Why the assumption? Might not that valuation have been informed by the prospective sale? Or even just accurate!

If it was materially different, that would obviously feed into the issue price for new shares.

(I hold AAVC, CRWN and KAY from the Albion stable).

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Re: AAVC sells Care Homes

#392745

Postby BusyBumbleBee » March 5th, 2021, 1:54 pm

First, sorry LondonInvestor, some of your excellent comments - with which I wholeheartedly concur, seem to have been attributed to me by mistake.

This is from the same RNS that announced the sale
The Company's unaudited net asset value (NAV) as at 31 December 2020 was
GBP73.7 million or 73.48 pence per share (excluding treasury shares), an
increase of 3.89 pence per share (5.6 per cent.) since 30 September
2020. The uplift in NAV is predominantly a result of the sale of the
Company's care home investments after the period end, which are
reflected in the 31 December 2020 NAV,

As was said, a sale of this magnitude and for at least 3 separate VCTs merited a special RNS -- not least because it marks a significant change in direction. As it was, it moved the market price by 4.5 pence in AAVC's case. What will it do to prices for CRWN and KAY ?

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Re: AAVC sells Care Homes

#393826

Postby shootingstar » March 9th, 2021, 10:43 am

selling the crown jewels imho, though admittedly AAVC's high asset-backed mix was a reason I went for it over other Albion VCTs a few years ago (with the hope that some of those assets would be sold and special dividends forthcoming).

It sounds like they may have achieved a relatively decent price at least. any thoughts on the potential size of the special divi? maybe 4p?

I'd also be intrigued as to whether this may trigger the performance fee or not, following the changes they made

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Re: AAVC sells Care Homes

#394268

Postby Mainwaring » March 10th, 2021, 1:07 pm

Not easy to calculate these things as different dates, we can’t calculate any performance fees and we don’t know how much they plan to invest. Add in VCT rules and distributable reserves and I’d not have a clue. But in round numbers 100,000,000 shares £30m from the share of Care Homes is 30p so no wonder they said they had significant cash. Back of my envelope.....Bearing in mind a 2.4x return, 20% off the top, the return of gain is around £15m. I’d be disappointed with anything less than a 10p special. Transformative impact on the portfolio but I’m not sure if that is for the best.

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Re: AAVC sells Care Homes

#394281

Postby oxmatt » March 10th, 2021, 1:50 pm

Agree it will hopefully be north of 10p. If you look at the size of the fundraise for all of the other Albion stable (ranging from £6m for CRWN/Enterprise up to £14m for Tech & General plus up to £3m per VCT over allotment) this should give an idea of their estimate of their deal pipeline for the next 12 months or so. That would imply to me that Albion VCT is not likely to be planning to reinvest c.£30-40m over a similar timeframe.

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Re: AAVC sells Care Homes

#395259

Postby londoninvestor » March 13th, 2021, 3:17 pm

BusyBumbleBee wrote:First, sorry LondonInvestor, some of your excellent comments - with which I wholeheartedly concur, seem to have been attributed to me by mistake.

This is from the same RNS that announced the sale
The Company's unaudited net asset value (NAV) as at 31 December 2020 was
GBP73.7 million or 73.48 pence per share (excluding treasury shares), an
increase of 3.89 pence per share (5.6 per cent.) since 30 September
2020. The uplift in NAV is predominantly a result of the sale of the
Company's care home investments after the period end, which are
reflected in the 31 December 2020 NAV,

As was said, a sale of this magnitude and for at least 3 separate VCTs merited a special RNS -- not least because it marks a significant change in direction. As it was, it moved the market price by 4.5 pence in AAVC's case. What will it do to prices for CRWN and KAY ?


We can have a stab at the NAV impact based on the figures in the AAVC statement, and in CRWN and KAY's previous reports.

The AAVC management statement states that "the uplift in NAV is predominantly a result of the sale of the Company’s care home investments after the period end, which are reflected in the 31 December 2020 NAV", and so I'm assuming that the "carrying values as at 31 Dec 2020" for the care homes - which are significantly above their valuation in the 30 Sep 2020 report – are in fact the price they were sold for.

That implies the total gain from selling the care homes, relative to 30 Sep 2020, was £3.655m, or 3.64p per share. That's consistent with the Interim Management Statement's report of a 3.89p per share uplift in NAV, "predominantly a result of the sale of the Company's care home investments".

That would mean that the gain on Shinfield Lodge (relative to its 30 Sep 2020 valuation) was 11.2%, for Active Lives 14.1% and for Ryefield Court 18.7%.

If you apply those percentages to KAY and CRWN's stakes in the care homes as of 30 Sep 2020, you get a total gain for KAY of £2.022m (0.46p per share), and for CRWN of £1.211m (0.54p per share).

Nice to have, but not as dramatic as for AAVC!


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