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Radicle exit for Australian tax schemes

• FROM: June 2006 |
• TAGS: radicle projects, general financial |
• COMMENTS: Add yours

• Radicle exit for Australian tax schemes
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Radicle Projects has been set up to acquire the assets of Australian Managed Investment Schemes when they mature and the original investors can sell without losing their tax breaks.

The schemes are investments in large-scale agricultural projects growing vineyards, almonds, walnuts and timber. Investors have to hold for four or five years after which they can sell. Projects have lives of between 10 and 25 years and by that time it will be clear whether a project is successful or not. Radicle represents one of the few ways the investors can cash in.

The schemes became more highly regulated at the turn of the century and after a period when investment was scarce they are increasing in popularity again. In the year to June 2005 A$1bn was invested and a total of A$5.6bn has been invested
since 1998. The average size of project is around A$60m.

As well as buying existing assets Radicle underwrites new projects and takes a stake at discount to the issue price. At the end of 2005 net assets were £10.3m. Founder and chief executive Tim Bennett is an expert in agribusiness investment and has developed projects. He is also a partner in Radicle Research which researches all the Managed Investment Schemes in Australia. Radicle Projects has a 16.6% stake in the research house and pays it a fee based on funds under management in return for its expertise in identifying suitable investments.

One of the reasons that Radicle Projects is a UK company rather than an Australian one is that it makes it eligible for IHT relief. Radicle only really got going when it floated last August so it has a limited track record. At the time of the flotation
management stated that they intended to offer a yield of 8% at the placing price of 75p which would be twice covered. That
equates to 3p a share dividend for the second half of this current financial year to June 2006. When earnings grow there will
be scope to increase the dividend. Even now the yield is still 7.6% on the current share price of 79p.

One of the drawbacks of Radicle is that the shares are relatively tightly held. As it grows and needs more cash to invest the shares should become more liquid. If investors can get hold of the shares it would be worthwhile for the yield alone.
Given the management’s expertise in the sector it should be able to use its skills in this area to make profitable purchases.

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