Half-yearly Report
CHELVERTON GROWTH TRUST PLC
Half Yearly Report
for the six months ended 29 February 2008
Investment objective
The Company's objective is to provide capital growth through investment in
companies on the Official List and traded on the Alternative Investment Market
with a market capitalisation at the time of investment of up to £50 million,
which are believed to be at a "point of change". The Company will also invest
in unquoted investments where it is believed that there is a likelihood of the
shares becoming listed or traded on the Alternative Investment Market or the
investee company being sold. Its investment objective is to increase net asset
value per share at a higher rate than other quoted smaller company trusts and
the FTSE All-Share Index.
It is the Company's policy not to invest in any listed investment companies
(including listed investment trusts).
Interim management report
Results
This report covers the period over the past six months to 29 February 2008.
During the period the Company's net asset value per share has decreased to
40.56p as at 29 February 2008, representing a fall of 19.8% from the year end
position of 50.58p. This compares with a decline of 7.59% in the FTSE All-Share
Index, the Company's benchmark index. For interest, over the same period the
FTSE AIM Index fell 7.96%. The Company's share price as at 29 February 2008 was
32.25p (31 August 2007: 39.50p).
The recent decline in the Company's net asset value is disappointing but is
perhaps to be expected. In times of uncertainty there is generally a flight to
companies with a large market capitalisation and an expectation of greater
liquidity. In addition smaller company shares generally decline in line with
the larger companies but then do not respond to any increases in the larger
market until interim or final results are produced. Also in a "normal" market
when shares decline significantly it is often the case that trade buyers and
corporate investors start to acquire these businesses. However because of the
shortage of banking liquidity these takeovers have not yet started to
materialise.
During the last six months BBI Holdings was taken over for 192p per share
(Chelverton's average price was 54.56p per share). Holdings in Belgravium
Technologies, Food & Drink Group, SPI Lasers, Tristel and Sanderson Group have
been increased. Chelverton also participated in a placing in Gourmet Holdings
and a rights issue in Closed Loop London.
As at 29 February 2008 your Company held 38 investment positions, down from 39
at the year end.
Tender Offer
At the Annual General Meeting held on 20 December 2007, the resolution to
purchase up to 15% of the issued Ordinary shares was approved. Subsequently, on
21 December 2007 the Company announced the results of the Tender Offer. The
tender price was 42.15 p per Ordinary share being 92.5% of the net asset value
per Ordinary share at the close of business on 20 December 2007.
Following the completion of the Tender Offer, 2,624,973 Ordinary shares have
been repurchased and cancelled. As a result of this transaction and share
buybacks the number of shares in issue is 14,864,827.
Outlook
Whilst there is ongoing evidence that the UK domestic economy is slowing down
at the macro level, the concerns as to the magnitude of the downturn continue
to dampen market sentiment.
We have recently seen a significant increase in both director and company share
purchasing, a conventional indicator to highlighting value. In turn, once
capital markets return to more normal trading, this may lead to a number of
takeovers as valuations are perceived to be low. It is of course difficult to
predict the exact timing of these events and any potential market sentiment
recovery.
Responsibility statement
The Directors confirm that to the best of their knowledge:
• the condensed set of financial statements for the six months to 29
February 2008 has been prepared in accordance with the Statement on Half
Yearly Financial Reports issued by the UK Accounting Standards Board;
• the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any
changes in the related party transactions described in the last annual
report that could do so.
This Half Yearly Report was approved by the Board of Directors on 17 April 2008
and the above responsibility statement was signed on its behalf by George
Stevens, Chairman.
Investment policy
The Company invests principally in securities of publicly quoted UK companies,
though it may invest in unquoted securities. The concentrated UK portfolio
comprises between 30 to 45 securities. The performance of the Company's
investments is compared to the FTSE All-Share Index.
The Company will also invest in unquoted investments where it is believed that
there is a likelihood of the shares becoming listed or traded on the
Alternative Investment Market or the investee company being sold.
It is the Company's policy not to invest in any listed investment companies or
listed investment trusts.
Investment strategy
Investments are selected for the portfolio only after extensive research which
the Investment Manager believes to be key. The whole process through which
equity must pass in order to be included in the portfolio is very rigorous.
Only a security where the Investment Manager believes that the price will be
significantly higher in the future will pass the selection process. The
Company's Investment Manager believes the key to successful stock selection is
to identify the long-term value of a company's shares and to have the patience
to hold the shares until that value is appreciated by other investors.
Identifying long term value involves detailed analysis of a company's earning
prospects over a five year time horizon.
The Company's Investment Manager is Chelverton Asset Management Limited, an
independent investment manager focusing exclusively on achieving returns for
investors based on UK investment analysis of the highest quality. The founders
and employee owners of Chelverton include experienced investment professionals
with strong investment performance records who believe rigorous fundamental
research allied to patience is the basis of long term investment success.
Portfolio review
as at 29 February 2008
The Company's portfolio as at 29 February 2008 is set out below in
chronological order by date of investment.
Investment Sector Valuation % of
£'000 total
AIM traded
CEPS PLC Support Services
Ordinary shares 269 4.0
Warrants 10 0.1
Production and supply of components for the footwear industry; personal
protection equipment; production of printed lycra fabric and services to the
direct mail industry
Newmark Security Support Services 184 2.7
Distribution of electronic access controls products
LPA Group Electronic & Electrical 80 1.2
Equipment
Design, manufacture and marketing of industrial electrical accessories
Clipper Ventures Travel & Leisure 135 2.0
The running of round-the-world yacht races
AI Claims Solutions Travel & Leisure 572 8.4
The provision of non-fault accident management services
Food & Drink Group Travel & Leisure 170 2.5
Owner and operator of premium bars and restaurants in London
Hartest Holdings Industrial Engineering 177 2.6
Manufacture and sale of specialist healthcare equipment
Pennant International Group Software & Computer 95 1.4
Services
Supplier of technology solutions to the defence and industrial sectors
Gourmet Holdings Travel & Leisure 111 1.6
Owner and operator of Richoux restaurants
Universe Group Support Services 36 0.5
Provision of credit card fraud prevention system, loyalty systems and retail
systems
Conder Environmental Industrial Engineering 83 1.2
Supply of products and services to protect the environment
Forest Support Services Plc Industrial Transportation 150 2.2
Supply of traffic management services
Belgravium Technologies Technology Hardware & 513 7.6
Equipment
Software systems for warehousing and distribution
Capcon Holdings General Financial 12 0.2
The provision of audit and stocktaking, and commercial investigation services
IDOX Software & Computer 774 11.4
Services
Software company specialising in the development of products for document and
information management
Alliance Pharma Pharmaceuticals & 97 1.4
Biotechnology
Acquisition of the manufacturing, sales and distribution rights to
pharmaceutical products
Titan Europe Industrial Engineering 150 2.2
Manufacture of big wheels for construction, mining and agricultural vehicles
Smallbone General Retailers 452 6.7
The design and manufacture of bespoke kitchens, bathrooms, bathroom furniture
and suppliers of high quality flooring
Sanderson Group Software & Computer 105 1.5
Services
Provides software and IT services
Petards Group Support Services 68 1.0
Development, provision and maintenance of advanced security systems and related
services
AXIS Intermodal Industrial 76 1.1
Transportation
Equipment rental business that services the transport and logistics industries
in Germany, the UK and other European countries
Tristel Healthcare Equipment & 237 3.5
Services
Healthcare business specialising in infection control in hospitals
Chromogenex Healthcare Equipment & 69 1.0
Services
Design, manufacture and distribution of aesthetic and therapeutic laser and
aesthetic light based technology devices
Datong Electronics Electronic & 202 3.0
Electrical Equipment
Develops, manages and supplies covert tracking and surveillance systems
Minorplanet Systems Electronic & 220 3.2
Electrical Equipment
Vehicle informations system
AssetCo Industrial Engineering 112 1.7
Provision of support services to the emergency services market
AT Communications Group Software & Computer 208 3.1
Services
Business to business systems integrator
PSG Solutions Support Services 116 1.7
Leading provider of Local Authority residential property searches; provision of
packaging solutions
MTI Wireless Edge Technology Hardware & 196 2.9
Equipment
Developer and manufacturer of sophisticated antennae and antenna systems
Northbridge Industrial Industrial Engineering 283 4.2
Services
Specialist industrial services
Satcom Group Mobile 141 2.1
Telecommunications
Provider of mobile satellite communications equipment and airtime
SPI Lasers Electronic & Electrical 84 1.2
Equipment
Design, development and manufacture of optical fibre-based lasers for a range
of markets and applications
General Capital Group General Financial 88 1.3
Provision of finance
EBTM General Retailers 92 1.4
Internet retail of music inspired fashion
Mount Engineering Industrial Engineering 97 1.4
Industrial engineering company
Unquoted
Locker Group (in Industrial Engineering 51 0.8
liquidation)
Cash Shell
Wineworld Travel & Leisure 21 0.3
Management of Vinopolis, a London-based venue encompassing wine tasting, retail
stores, restaurants and corporate hospitality
Closed Loop London Support Services
Loanstock 187 2.8
Ordinary B shares 62 0.9
Operation of a plastic recycling plant
Portfolio valuation 6,785 100.0
All the above investments are in ordinary shares and are traded on the
Alternative Investment Market, except Locker, Wineworld and Closed Loop London,
which are unquoted.
During this period the shareholdings in BBI Holdings were sold prior to
takeover.
Portfolio breakdown by Sector and by Index
Percentage of Portfolio by Sector
Sector Percentage
Technology Hardware & Equipment 10.5
Support Services 13.7
Software & Computer Services 17.4
Pharmaceuticals & Biotechnology 1.4
Travel & Leisure 14.8
Electronic & Electrical Equipment 8.6
General Financial 1.5
General Retailers 8.1
Healthcare Equipment & Services 4.5
Industrial Engineering 14.1
Industrial Transportation 3.3
Mobile Telecommunications 2.1
Percentage of Portfolio by Index
Index Percentage
AIM 95.2
Unquoted 4.8
Income statement (unaudited)
for the six months to 29 February 2008
Six months to Year to
29 February 2008 31 August 2007
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (1,603) (1,603) - 2,718 2,718
investments
Income 54 - 54 106 - 106
Investment management (10) (32) (42) (27) (79) (106)
fee*
Other expenses* (66) (42) (108) (166) - (166)
Net return on (22) (1,677) (1,699) (87) 2,639 2,552
ordinary activities
before finance costs
and taxation
Interest payable and (2) (4) (6) (15) (45) (60)
similar charges*
Return for the period (24) (1,681) (1,705) (102) 2,594 2,492
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Return per Ordinary (0.14) (10.00) (10.14) (0.58) 14.65 14.07
share#
Notes
* 75% of the management fee and finance costs have been charged to capital
reserve. 100% of Tender Offer costs have also been charged to capital reserve.
# The return per Ordinary share is based on 16,819,600 (31 August 2007:
17,709,375) shares, being the weighted average number of shares in issue during
the period.
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
A separate statement of total recognised gains and losses has not been prepared
as all such gains and losses are included in the income statement.
Income statement (unaudited)
for the six months to 29 February 2008 (continued)
Six months to
28 February 2007
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 1,316 1,316
Income 43 - 43
Investment management fee* (12) (38) (50)
Other expenses (91) - (91)
Net return on ordinary activities before (60) 1,278 1,218
finance costs and taxation
Interest payable and similar charges* (8) (25) (33)
Return for the period (68) 1,253 1,185
Revenue Capital Total
pence pence pence
Return per Ordinary share# (0.38) 7.02 6.64
Notes
* 75% of the management fee and finance costs have been charged to capital
reserve.
# The return per Ordinary share is based on 17,863,403 shares, being the
weighted average number of shares in issue during the period.
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
A separate statement of total recognised gains and losses has not been prepared
as all such gains and losses are included in the income statement.
Reconciliation of movements in shareholders' funds (unaudited)
for the six months to 29 February 2008
Share Capital Own
Share premium Capital redemption shares
Capital account reserve reserve held in Revenue Total
£'000 £'000 £'000 £'000 Treasury £'000 £'000
£'000
Six months to 29
February 2008
1 September 2007 175 2,674 2,285 14 - 3,703 8,851
Shares purchased for (26) - (1,116) 26 - - (1,116)
cancellation
Net return after - - (1,681) - - (24) (1,705)
taxation for the
period
29 February 2008 149 2,674 (512) 40 - 3,679 6,030
Year to 31 August
2007
1 September 2006 182 2,674 (99) 7 - 3,805 6,569
Cost of shares (7) - (210) 7 - - (210)
cancelled
Net return after - - 2,594 - - (102) 2,492
taxation for the year
31 August 2007 175 2,674 2,285 14 - 3,703 8,851
Six months to 28
February 2007
1 September 2006 182 2,674 (99) 7 - 3,805 6,569
Cost of shares - - - - (156) - (156)
purchased for
Treasury
Net return after - - 1,253 - - (68) 1,185
taxation for the
period
28 February 2007 182 2,674 1,154 7 (156) 3,737 7,598
Balance sheet (unaudited)
as at 29 February 2008
As at As at As at
29 February 31 August 2007 28 February
2008 £'000 2007
£'000 £'000
Fixed assets
Investments at fair value 6,785 8,542 8,660
Current assets
Debtors 19 18 20
Cash at bank 1 382 25
20 400 45
Creditors - amounts falling due
within one year
Bank overdraft 714 - 999
Creditors 61 91 108
775 91 1,107
Net current (liabilities)/assets (755) 309 (1,062)
Net assets 6,030 8,851 7,598
Share capital and reserves
Share capital 149 175 182
Share premium account 2,674 2,674 2,674
Capital reserve (512) 2,285 1,154
Capital redemption reserve 40 14 7
Own shares held in Treasury - - (156)
Revenue reserve 3,679 3,703 3,737
Equity shareholders' funds 6,030 8,851 7,598
Net Asset Value per Ordinary 40.56p 50.58p 43.09p
share (note 1)
Statement of cash flows (unaudited)
for the six months to 29 February 2008
Six months to Year to Six months to
29 February 31 August 2007 28 February
2008 £'000 2007
£'000 £'000
Operating activities
Investment income received 45 98 33
Deposit interest received 5 3 1
Investment management fees paid (39) (114) (57)
Secretarial fees paid (23) (45) (22)
Other cash payments (51) (113) (81)
Net cash outflow from operating (63) (171) (126)
activities (note 4)
Returns on investments and
servicing of finance
Interest paid (9) (68) (20)
Net cash outflow from returns on
investments and servicing of (9) (68) (20)
finance
Investing activities
Purchases of investments (342) (2,070) (758)
Sales of investments 468 4,220 1,405
Net cash inflow from investing 126 2,150 647
activities
Net cash inflow before financing 54 1,911 501
Financing
Share repurchase (1,116) (210) (156)
Cost of Tender Offer (33) - -
Net cash outflow from financing (1,149) (210) (156)
(Decrease)/increase in cash (1,095) 1,701 345
Notes
The unaudited interim financial information does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. The statutory
accounts for the year to 31 August 2007, which contained an unqualified
auditors' report, have been lodged with the Registrar of Companies and did not
contain a statement required under Section 237 (2) or (3) of the Companies Act
1985.
This information has been prepared on the basis of accounting policies set out
in the statutory accounts of the Company for the year to 31 August 2007.
1. Net Asset Value
The basic net asset value per Ordinary share is based on net assets of £
6,030,000 (31 August 2007: £8,851,000, 28 February 2007: £7,598,000) and on
14,864,827 Ordinary shares (31 August 2007: 17,500,000, 28 February 2007:
17,634,169) being the number of Ordinary shares in issue at the period end
(excluding nil Ordinary shares held in Treasury at 29 February 2008, nil at 31
August 2007 and 507,770 at 28 February 2007).
2. Tender Offer
On 14 January 2008, following a Tender Offer, the Company purchased and
cancelled 2,624,973 Ordinary shares for a total cost of £1,112,000. The Company
also purchased for cancellation 10,200 Ordinary shares for a cost of £4,000.
The number of Ordinary shares in issue at the period end was 14,864,827.
3. Taxation
The tax charge for the six months to 29 February 2008 is nil (year to 31 August
2007 and six months to 28 February 2007: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2008.
The estimated effective tax rate is 0% as investment gains are exempt from tax
owing to the Company's status as an Investment Trust and there is expected to
be an excess of management expenses over taxable income.
4. Reconciliation of net return before finance costs and taxation to net cash
outflow from operating activities
Six months to Year to Six months to
29 February 31 August 2007 28 February
2008 £'000 2007
£'000 £'000
Net return before finance costs (1,699) 2,552 1,218
and taxation
Net capital return before finance 1,677 (2,639) (1,278)
costs
Expenses charged to capital (32) (79) (38)
Decrease in creditors and accruals (8) - (21)
Increase in prepayments and (1) (5) (7)
accrued income
Net cash outflow from operating (63) (171) (126)
activities
5. Related party transactions
Chelverton Asset Management Limited acts as the Investment Manager. Mr Horner,
a Director of the Company, is also a director of Chelverton Asset Management
Limited. At 29 February 2008 there was £11,000 (31 August 2007: £8,000; 28
February 2007: £9,000) payable to the Investment Manager.
Mr Allen, a Director of the Company, is a director and employee of Forest
Support Services PLC in which the Company has an investment.
6. Status of Company
It is the intention of the Directors to conduct the affairs of the Company so
that they satisfy the conditions for approval as an investment trust company as
set out in Section 842 of the Income and Corporation Taxes Act 1988.
Directors and advisors
Directors
George Stevens (Chairman)
Kevin Allen
Bryan Lenygon
David Horner
Investment Manager
Chelverton Asset Management Limited
11 George Street, Bath BA1 2EH
Tel: 01225 483030
Secretary and Registered Office
Capita Sinclair Henderson Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 412122
Registrar and Transfer Office
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0870 600 3970
Bankers
Lloyds TSB Bank Plc
25 Gresham Street
London EC2V 7HN
Auditors
Hazlewoods LLP
Windsor House
Barnett Way
Barnwood
Gloucester GL4 3RT
Custodian
HSBC Bank Plc
Mariner House, Pepys Street
London EC3N 4DA
Solicitors
Maclay Murray & Spens
One London Wall
London EC2Y 5AB
The Company's shares are quoted daily in the Financial Times under `Investment
Companies'.
Information about the Company can be obtained at the Investment Manager's
website at www.chelvertonam.com
An investment company as defined under Section 833 of the Companies Act 2006
REGISTERED IN ENGLAND No. 2989519
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