Half-yearly Report
CHELVERTON GROWTH TRUST PLC
Half Yearly Report
for the six months ended 28 February 2011
Investment objective
The Company's objective is to provide capital growth through investment in
companies listed on the Official List and traded on the Alternative Investment
Market ("AIM") 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 AIM 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.
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 20 to 35 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 AIM 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.
Interim management report
The Company's net asset value per share has increased in the last six months
from 24.66p to 29.95p, an increase of 21.5%. In the same period the Company's
benchmark index, the FTSE All-Share, increased by some 15.2 %.
The improving market sentiment through the latter part of last year has been
undermined recently by the growing number of headwinds that appear to be facing
the domestic economy. The recent increases in VAT, rising inflation and lower
than expected GDP growth have all served to undermine investor confidence. At
the same time the troubles in North Africa and the Middle East and the rising
oil price have contributed to a heightened sense of caution towards equity
markets generally.
Against such a downbeat background it is reassuring to note that the recent
results season proved that Corporate UK is continuing to perform well. On
balance companies met or exceeded expectations and outlook statements remained
cautiously optimistic. We believe that this is broadly supportive of equity
valuations at current levels despite the global uncertainty.
In the portfolio there was a notable positive contribution from the largest
holding, IDOX, after results exceeded market expectations. IDOX also made two
accretive acquisitions and announced a substantial share buyback programme.
Additions were made to the holding in AI Claims, which also produced a good set
of results and has recently bought shares into treasury. Another positive
contributor was Belgravium which has started to recover from an oversold
position. An acceptable cash offer was made for the operating business of
Forest Support Services leading to this company being wound up and cash
returned to its shareholders. The progress of Parmenion over the past year has
been excellent and as announced at the end of January a review of the carrying
value was undertaken and has been revalued upwards.
The earnings forecasts for the UK equity market remain positive and,
interestingly, UK small companies are the only subset of the market forecast to
grow earnings faster in 2012 than 2011. This is unsurprising given that small
companies are more geared to the domestic economy than the market as a whole
and we will hopefully soon be able to look forward to the UK economy providing
a positive reason to support these small companies, when domestic growth is in
excess of the long-term average. In the meantime the positive earnings momentum
of the underlying companies remains the key to relative performance.
It is with regret that I must advise Shareholders that Mr Bryan Lenygon, a
Director of the Company since its launch in 1998, passed away on 25 November
2010. Bryan is sadly missed by all and we were fortunate to benefit from his
experience for so many years.
Chelverton Asset Management Limited
13 April 2011
Principal risks and uncertainties
The Board considers that the principal risks and uncertainties facing the
Company for the remaining six months of the financial year remain the same as
those disclosed in the Report of the Directors in the Annual Report for the
year ended 31 August 2010. These risks include market risk, discount
volatility, credit risk, regulatory risks, financial risk and liquidity risks.
Responsibility statement
The Directors confirm that to the best of their knowledge:
â— the condensed set of financial statements for the six months to 28 February
2011, prepared in accordance with the Statement on Half Yearly Financial
Reports issued by the UK Accounting Standards Board, give a true and fair view
of the assets, liabilities, financial position and net return of the Company;
and
â— the interim management report together with the notes to the Half Yearly
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 six 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 Company 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 13 April 2011
and the above responsibility statement was signed on its behalf by George
Stevens, Chairman.
Going Concern
The Directors believe, bearing in mind the nature of the Company's business and
assets, that the Company has adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue to adopt
the going concern basis in preparing the accounts.
Portfolio review
as at 28 February 2011
The Company's portfolio as at 28 February 2011 is set out below.
Investment Sector Valuation £ % of
'000 total
AIM traded
AI Claims Solutions Travel & Leisure 585 15.0
The provision of non-fault
accident management services
Alliance Pharma Pharmaceuticals & 294 7.5
Biotechnology
Acquisition of the manufacturing,
sales and distribution rights to
pharmaceutical products
Belgravium Technologies Technology Hardware & 225 5.8
Equipment
Software systems for warehousing
and distribution
CEPS Support Services 100 2.6
Production and supply of components
for the footwear industry; personal
protection equipment; production of
printed lycra fabric; and services to
the direct mail industry
Datong Electronics Electronic & 124 3.2
Electrical
Equipment
Develops, manages and supplies
covert tracking and surveillance systems
IDOX Software & 928 23.8
Computer Services
Software company specialising in the
development of products for document
and information management
LPA Group Electronic & 73 1.9
Electrical
Equipment
Design, manufacture and marketing of
industrial electrical accessories
MTI Wireless Edge Technology Hardware & 84 2.2
Equipment
Developer and manufacturer of
sophisticated antennas and
antenna systems
Northbridge Industrial Services Industrial Engineering 97 2.5
Consolidation vehicle for specialist
industrial services in the UK
Pennant International Group Software & 95 2.4
Computer Services
Supplier of technology solutions to the
defence and industrial sectors
Petards Group Support Services 30 0.8
Development, provision and maintenance of
advanced security systems and
related services
PSG Solutions Support Services 36 0.9
Leading provider of Local Authority
residential property searches; provision
of packaging solutions
Richoux Group Travel & Leisure 83 2.1
Owner and operator of Richoux Restaurants
Sanderson Group Software & 84 2.1
Computer Services
Provides software and IT services
Titan Europe Industrial Engineering 80 2.1
Manufacture of big wheels and
undercarriage components for construction,
mining and agricultural vehicles
Tristel Health Care Equipment 232 5.9
& Services
Healthcare business specialising in
infection control in hospitals
Universe Group Support Services 17 0.4
Provision of credit card fraud
prevention system, loyalty systems
and retail systems
Delisted
Bakabo (previously Forest Industrial 11 0.3
Support Services) Transportation
Supply of traffic management services
One Horizon (previously Satcom Mobile 32 0.8
Group) Telecommunications
Provider of mobile satellite communications
equipments and airtime
Unquoted
Closed Loop Recycling Support Services
Loanstock 252 6.5
Ordinary B shares 0 0.0
Operation of a plastic recycling plant
Parmenion Capital Partners LLP Support Services 436 11.2
Provides fund-based discretionary fund
management services to Independent
Financial Advisors
Portfolio valuation 3,898 100.0
Top twenty investments
28 February 31 August 2010
2011
Valuation % of Valuation % of
Investment £'000 total £'000 total
IDOX 928 23.8 596 16.6
AI Claims Solutions 585 15.0 479 13.3
Parmenion Capital 436 11.2 291 8.1
Partners LLP
Alliance Pharma 294 7.5 345 9.6
Closed Loop 252 6.5 252 7.0
Recycling
Tristel 232 5.9 188 5.3
Belgravium 225 5.8 113 3.2
Technologies
Datong Electronics 124 3.2 76 2.1
CEPS 100 2.6 175 4.9
Northbridge 97 2.5 85 2.4
Industrial
Services
Pennant 95 2.4 59 1.7
International
Group
MTI Wireless Edge 84 2.2 84 2.4
Sanderson Group 84 2.1 66 1.8
Richoux Group 83 2.1 33 0.9
Titan Europe 80 2.1 68 1.9
LPA Group 73 1.9 73 2.0
PSG Solutions 36 0.9 44 1.2
One Horizon Group 32 0.8 31 0.9
Petards Group 30 0.8 27 0.8
Universe Group 17 0.4 17 0.5
Total 3,887 99.7 3,102 86.6
Portfolio breakdown by sector and by index
Percentage of portfolio by sector
Sector Percentage
Software & Computer 28.3
Services
Support Services 22.4
Travel & Leisure 17.1
Technology Hardware & 8.0
Equipment
Pharmaceuticals & 7.5
Biotechnology
Heath Care Equipment & 5.9
Services
Electronic & Electrical 5.1
Equipment
Industrial Engineering 4.6
Mobile Telecommunications 0.8
Industrial Transportation 0.3
Percentage of portfolio by index
Index Percentage
AIM 82.3
Unquoted 17.7
Income statement (unaudited)
for the six months to 28 February 2011
Six months to Year to Six months to
28 February 2011 31 August 2010 28 February 2010
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £ £'000 £'000 £ £'000 £'000 £
'000 '000 '000
Gains on - 798 798 - 862 862 - 516 516
investments at
fair value
Income 20 - 20 79 - 79 54 - 54
Investment (5) (15) (20) (9) (27) (36) (4) (13) (17)
management fee*
Other expenses (71) - (71) (145) - (145) (74) - (74)
Net return on (56) 783 727 (75) 835 760 (24) 503 479
ordinary
activities before
finance
costs and
taxation
Interest payable - - - - - - - - -
and similar
charges*
Net return on (56) 783 727 (75) 835 760 (24) 503 479
ordinary
activities
before taxation
Taxation on - - - - - - - - -
ordinary
activities
Net return on (56) 783 727 (75) 835 760 (24) 503 479
ordinary
activities
after taxation
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Return per (0.39) 5.46 5.07 (0.50) 5.62 5.12 (0.16) 3.38 3.22
Ordinary share#
Notes
* 75% of the management fee and finance costs have been charged to capital
reserve.
# The return per Ordinary share is based on 14,325,621 (31 August 2010:
14,843,882; 28 February 2010: 14,864,827) 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 28 February 2011
Share Share Capital Capital Revenue Total
Capital Premium reserve Redemption Reserve £'000
£'000 account £'000 reserve £'000
£'000 £'000
Six months to
28 February
2011
1 September 149 2,674 (2,739) 40 3,506 3,630
2010
Tender offer (15) - - 15 (394) (394)
of shares
Net return - - 783 - (56) 727
after taxation
for the period
28 February 134 2,674 (1,956) 55 3,056 3,963
2011
Year to 31
August 2010
1 September 149 2,674 (3,574) 40 3,606 2,895
2009
Cost of shares - - - - (25) (25)
purchased
for Treasury
Net return - - 835 - (75) 760
after taxation
for the year
31 August 2010 149 2,674 (2,739) 40 3,506 3,630
Six months to
28 February
2010
1 September 149 2,674 (3,574) 40 3,606 2,895
2009
Net return - - 503 - (24) 479
after taxation
for the period
28 February 149 2,674 (3,071) 40 3,582 3,374
2010
Balance sheet (unaudited)
as at 28 February 2011
As at As at As at
28 February 31 August 28 February
2011 2010 2010
£'000 £'000 £'000
Fixed assets
Investments at fair value 3,898 3,583 3,374
Current assets
Debtors 5 6 14
Cash at bank 94 86 21
99 92 35
Creditors - amounts falling due
within one year
Creditors 34 45 35
34 45 35
Net current assets 65 47 -
Net assets 3,963 3,630 3,374
Share capital and reserves
Share capital 134 149 149
Share premium account 2,674 2,674 2,674
Capital reserve (1,956) (2,739) (3,071)
Capital redemption reserve 40 40 40
Revenue reserve 3,056 3,506 3,582
Equity shareholders' funds 3,963 3,630 3,374
Net asset value per Ordinary share 29.95p 24.66p 22.70p
(note 1)
Statement of cash flows (unaudited)
for the six months to 28 February 2011
Six months to Year to Six months
28 February 31 August to
2011 2010 28 February
2011 2010
£'000 £'000 £'000
Operating activities
Investment income received 20 60 25
Interest received on VAT refund - 19 19
Investment management fees paid (20) (35) (17)
Secretarial fees paid (23) (49) (26)
Other cash payments (58) (115) (74)
Net cash outflow from operating (81) (120) (73)
activities (note 3)
Investing activities
Purchases of investments (21) - -
Sales of investments 504 187 50
Net cash inflow from investing 483 187 50
activities
Financing
Cost of shares purchased for Treasury - (25) -
Cost of tender offer (394) - -
Net cash outflow from financing (394) (25) -
Increase/(decrease) in cash 8 42 (23)
Notes to the half yearly report
The unaudited interim financial information does not constitute statutory
accounts as defined in Section 434 of the Companies Act 2006. The statutory
accounts for the year to 31 August 2010, which contained an unqualified
auditors' report, have been lodged with the Registrar of Companies and did not
contain a statement required under Section 498 (2) or (3) of the Companies Act
2006. The financial information for the period ended 28 February 2011 and 28
February 2010 has not been audited or reviewed by the Company's Auditor
pursuant to the Auditing Practices Board guidance on such reviews.
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 2010.
1 Net asset value
The basic net asset value per Ordinary share is based on net assets of £
3,963,000 (31 August 2010: £3,630,000; 28 February 2010: £3,374,000) and on
13,233,344 Ordinary shares (31 August 2010: 14,719,827; 28 February 2010:
14,864,827) being the number of Ordinary shares in issue at the period end
(excluding shares held in Treasury).
2 Taxation
The tax charge for the six months to 28 February 2011 is nil (year to 31 August
2010: nil; six months to 28 February 2010: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2011.
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.
3 Reconciliation of net return before finance costs and taxation to net cash
outflow from operating activities
Six months Year to Six months
to 31 August to
28 February 2010 28 February
2011 2010
£'000 £'000 £'000
Net return before finance costs and 727 760 479
taxation
Net capital return before finance costs (783) (835) (503)
Expenses charged to capital (15) (27) (13)
Decrease in creditors and accruals (11) (18) (28)
Decrease/(increase) in prepayments and 1 - (8)
accrued income
Net cash outflow from operating (81) (120) (73)
activities
4 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. He is also a director of CEPS PLC, in which the Company has an
investment. At 28 February 2011 there was £3,000 (31 August 2010: £3,000, 28
February 2010: £3,000) payable to the Investment Manager.
Mr Allen, a Director of the Company, was a director and employee of Bakabo
(formerly Forest Support Services PLC) in which the Company has an investment.
5 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 Sections 1158/1159 of the Corporation Tax Act 2010.
Directors and advisors
Directors
George Stevens (Chairman)
Kevin Allen
Bryan Lenygon (deceased 25 November 2010)
David Horner
Investment Manager
Chelverton Asset Management Limited
12b George Street,
Bath BA1 2EH
Tel: 01225 483 030
Secretary and Registered Office
Capita Sinclair Henderson Limited
(trading as Capita Financial Group -
Specialist Fund Services)
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 412 122
Registrar and Transfer Office
Share Registrars Limited
Suite E
First Floor
9 Lion and Lamb Yard
Farnham
Surrey GU9 7LL
Tel: 01252 821 390
www.shareregistrars.uk.com
Bankers
Lloyds TSB Bank Plc
25 Gresham Street
London EC2V 7HN
Auditors
Hazlewoods LLP
Windsor House
Bayshill Road
Cheltenham GL50 3AT
Custodian
HSBC Investment Bank plc
Level 29
8 Canada Square
London E14 5HQ
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
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
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