Half-yearly Report
CHELVERTON GROWTH TRUST PLC
Half Yearly Report
for the six months ended 29 February 2012
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.
It is intended from time to time, when deemed appropriate, that the Company
will borrow for investment purposes. The Company, however, does not currently
have any borrowing facilities.
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 30.60p to 33.53p, an increase of 9.6%. In the same period the Company's
benchmark index, the FTSE All-Share, increased by some 8.7 %.
In the last few months of 2011 UK investors took an increasingly risk averse
attitude which was reflected in the strong relative performance of the
"Mega-Capitalised" defensive companies and the consequent underperformance of
smaller companies. At the macro level this was driven by the continued
problems within the Eurozone and was not helped at home by the Chancellor's
downbeat Autumn Statement. At the same time, the earnings forecasts for
companies were being reduced as the combined effects of an economic slowdown
and overly optimistic market expectations took their toll.
The start of 2012 however, saw a reversal of this trend as small and middle
sized companies outperformed when investors switched into a 'risk on' mode
against a background of improving data from the US and hopes of a soft landing
in China, although the Eurozone remained a cause of concern.
The busy corporate reporting season has helped to underpin current valuations
across the market and many companies have continued to generate cash and pay
dividends in excess of forecasts. In our Company we have recently seen
positive contract announcements from IDOX and Belgravium, and a good set of
results from Titan Europe. PSG Solutions has also performed particularly well
as the re-rating continued in the wake of its interim results.
Elsewhere in the fund, the shares in Sanderson responded strongly to the
announcement that it was to sell its subsidiary that provides EPOS solutions to
high street retailers, representing 40% of the business, for £11.5m cash, the
equivalent of the market capitalisation at the time. Quindell Portfolio
acquired a 29.9% stake in AI Claims after a share swap with a number of major
shareholders and has now made a cash offer for the balance.
We have made a new investment in a start up company, Transflex, a van leasing
business with a highly experienced management team, while Parmenion, another
unquoted investment, continued to trade well. We raised funds in the period
from the sale of part of our holdings in Alliance Pharma and IDOX and by the
sale of all of the shareholding in Pennant International. In part, these monies
were used to finance the successful tender offer.
Looking through to the second half of the year the global macro outlook is
improving, led by the US, and there is a growing feeling that we may be past
the worst in respect of the domestic public finances. This has however already
been reflected in an upturn in investor sentiment, but we need to see
increasing corporate profitability to move the market forward. Realistically we
are still looking to 2013 for an improvement in the domestic sectors such as
contracting and retailing.
Encouragingly, the ratio of company upgrades to downgrades has turned positive
and we look to this to provide underlying momentum to share prices. Our short
term fear is that this recent improvement translates into unrealistic
expectations and it is hoped that realism will hold back some of the more
bullish estimates.
As a footnote, we are delighted to announce that your Company received the best
performing fund award for 2011 at the recent PLC awards.
Chelverton Asset Management Limited
20 April 2012
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 Interim management report above and also on pages 11 and
12 of the Report of the Directors in the Annual Report for the year ended 31
August 2011. These risks include market risk, discount volatility, 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 29 February
2012, prepared in accordance with the Statement on Half Yearly Financial
Reports issued by the UK Accounting Standards Board, gives 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 include 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 20 April 2012
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 29 February 2012
The Company's portfolio as at 29 February 2012 is set out below.
Valuation % of
Investment Sector £'000 total
AIM traded
AI Claims Solutions Non Life Insurance 475 11.9
The provision of non-fault accident management services
Alliance Pharma Pharmaceuticals & Biotechnology 259 6.5
Acquisition of the manufacturing, sales and distribution rights to
pharmaceutical
products
Belgravium Technologies Technology Hardware & Equipment 375 9.4
Software systems for warehousing and distribution
CEPS Support Services 200 5.0
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 & Electrical Equipment 52 1.3
Develops, manages and supplies covert tracking and surveillance systems
IDOX Software & Computer Services 1,174 29.4
Software company specialising in the development of products for document and
information management
LPA Group Electronic & Electrical Equipment 112 2.8
Design, manufacture and marketing of industrial electrical accessories
MTI Wireless Edge Technology Hardware & Equipment 63 1.6
Developer and manufacturer of sophisticated antennas and antenna systems
Northbridge Industrial Services Industrial Engineering 128 3.2
Consolidation vehicle for specialist industrial services in the UK
Pennant International Group Support Services 13 0.3
Development, provision and maintenance of advanced security systems and
related services
PSG Solutions Support Services 144 3.6
Leading provider of Local Authority residential property searches; provision of
packaging solutions and technical surveillance countermeasures components
Richoux Group Travel & Leisure 39 1.0
Owner and operator of Richoux Restaurants
Sanderson Group Software & Computer Services 111 2.8
Provides software and IT services
Titan Europe Industrial Engineering 138 3.4
Manufacture of big wheels for construction, mining and agricultural vehicles
Tristel Health Care Equipment & Services 144 3.6
Healthcare business specialising in infection control in hospitals
Universe Group Support Services 10 0.2
Provision of credit card fraud prevention system, loyalty systems and retail
systems
Delisted
One Horizon Group
(formerly Satcom Group) Mobile Telecommunications 59 1.5
Provider of mobile satellite communications equipment and airtime
Unquoted
Closed Loop Recycling Support Services
Loanstock 0 0.0
Ordinary B shares 0 0.0
Operation of a plastic recycling plant
Parmenion Capital Partners LLP Support Services 398 10.0
Provides fund-based discretionary fund management services to Independent
Financial Advisors
Transflex Vehicle Rental Limited Support Services 100 2.5
Light commercial vehicle rental business
Portfolio valuation 3,994 100.0
Portfolio of investments
29 February 2012 31 August 2011
Valuation % of Valuation % of
Investment £'000 total £'000 total
IDOX 1,174 29.4 1,153 28.4
AI Claims Solutions 475 11.9 570 14.1
Parmenion Capital Partners LLP 398 10.0 436 10.8
Belgravium Technologies 375 9.4 312 7.7
Alliance Pharma 259 6.5 264 6.5
CEPS 200 5.0 260 6.4
PSG Solutions 144 3.6 114 2.8
Tristel 144 3.6 160 3.9
Titan Europe 138 3.4 124 3.1
Northbridge Industrial Services 128 3.2 132 3.3
LPA Group 112 2.8 78 1.9
Sanderson Group 111 2.8 99 2.4
Transflex Vehicle Rental Limited 100 2.5 - -
MTI Wireless Edge 63 1.6 60 1.5
One Horizon Group 59 1.5 32 0.8
Datong Electronics 52 1.3 62 1.5
Richoux Group 39 1.0 49 1.2
Pennant International Group 13 0.3 11 0.3
Universe Group 10 0.2 10 0.2
Total 3,994 100.0 3,926 96.8
The investment in Closed Loop Recycling shown within the portfolio review has
not been shown above as it has no value.
Portfolio breakdown by sector and by index
as at 29 February 2012
Percentage of portfolio by sector
Sector Percentage
Software & Computer Services 32.2
Support Services 21.6
Non Life Insurance 11.9
Technology Hardware & Equipment 11.0
Industrial Engineering 6.6
Pharmaceuticals & Biotechnology 6.5
Electronic & Electrical Equipment 4.1
Health Care Equipment & Services 3.6
Mobile Telecommunications 1.5
Travel & Leisure 1.0
Percentage of portfolio by index
Index Percentage
AIM 86.0
Unquoted 12.5
Delisted 1.5
Income statement (unaudited)
for the six months to 29 February 2012
Six months to Year to Six months to
29 February 2012 31 August 2011 28 February 2011
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on
investments at
fair value - 352 352 - 913 913 - 798 798
Income 38 - 38 77 - 77 20 - 20
Investment
management
fee* (5) (15) (20) (10) (31) (41) (5) (15) (20)
Other expenses (28) - (28) (136) - (136) (71) - (71)
Net return on
ordinary
activities before
taxation 5 337 342 (69) 882 813 (56) 783 727
Taxation on
ordinary activities - - - - - - - - -
Net return on
ordinary
activities after
taxation 5 337 342 (69) 882 813 (56) 783 727
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Return per Ordinary share# 0.04 2.60 2.64 (0.50) 6.42 5.92 (0.39) 5.46 5.07
Notes
* 75% of the management fee and finance costs have been charged to capital
reserve.
# The return per Ordinary share is based on 12,951,672 (31 August 2011:
13,742,414; 28 February 2011: 14,325,621) 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 2012
Share Capital
Share premium Capital redemption Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months to 29 February 2012
1 September 2011 132 2,674 (1,857) 57 3,043 4,049
Cost of shares purchased for
cancellation under the tender offer
and buyback offer (13) - - 13 (406) (406)
Net return after taxation for the
period - - 337 - 5 342
29 February 2012 119 2,674 (1,520) 70 2,642 3,985
Year to 31 August 2011
1 September 2010 149 2,674 (2,739) 40 3,506 3,630
Cost of shares purchased for
cancellation under tender offer (15) - - 15 (394) (394)
Shares cancelled from Treasury (2) - - 2 - -
Net return after taxation for the year - - 882 - (69) 813
31 August 2011 132 2,674 (1,857) 57 3,043 4,049
Six months to 28 February 2011
1 September 2010 149 2,674 (2,739) 40 3,506 3,630
Cost of shares purchased for
cancellation under tender offer (15) - - 15 (394) (394)
Net return after taxation for the
period - - 783 - (56) 727
28 February 2011 134 2,674 (1,956) 55 3,056 3,963
Balance sheet(unaudited)
as at 29 February 2012
As at As at As at
29 February 2012 31 August 2011 28 February 2011
£'000 £'000 £'000
Fixed assets
Investments at fair value 3,994 4,055 3,898
Current assets
Debtors 7 9 5
Cash at bank 32 30 94
39 39 99
Creditors - amounts falling due within one year
Creditors 48 45 34
48 45 34
Net current (liabilities)/ assets (9) (6) 65
Net assets 3,985 4,049 3,963
Share capital and reserves
Share capital 119 132 134
Share premium account 2,674 2,674 2,674
Capital reserve (1,520) (1,857) (1,956)
Capital redemption reserve 70 57 55
Revenue reserve 2,642 3,043 3,056
Equity shareholders' funds 3,985 4,049 3,963
Net asset value per Ordinary share (note 1) 33.53p 30.60p 29.95p
Statement of cash flows(unaudited)
for the six months to 29 February 2012
Six months to Year to Six months to
29 February 2012 31 August 2011 28 February 2011
£'000 £'000 £'000
Operating activities
Investment income received 32 76 20
Interest income received 6 - -
Investment management fees paid (20) (41) (20)
Secretarial fees paid (20) (46) (23)
Other cash payments (14) (92) (58)
Net cash outflow from operating
activities (note 3) (16) (103) (81)
Investing activities
Purchases of investments (100) (156) (21)
Sales of investments 513 597 504
Net cash inflow from investing activities 413 441 483
Financing
Cost of shares purchased for cancellation
under tender offer and buyback offer (395) (394) (394)
Net cash outflow from financing activities (395) (394) (394)
Increase/(decrease) in cash 2 (56) 8
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 2011, 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 29 February 2012 and 28
February 2011 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 2011.
1 Net asset value
The basic net asset value per Ordinary share is based on net assets of £
3,985,000 (31 August 2011: £4,049,000; 28 February 2011: £3,963,000) and on
11,884,283 Ordinary shares (31 August 2011: 13,233,344; 28 February 2011:
13,233,344) being the number of Ordinary shares in issue at the period end.
2 Taxation
The tax charge for the six months to 29 February 2012 is nil (year to 31 August
2011: nil; six months to 28 February 2011: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2012.
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 to Year to Six months to
29 February 2012 31 August 2011 28 February 2011
£'000 £'000 £'000
Net return before finance costs and
taxation 342 813 727
Net capital return before finance
costs (337) (882) (783)
Expenses charged to capital (15) (31) (15)
Decrease in creditors and accruals (8) - (11)
Decrease/(increase) in prepayments
and accrued income 2 (3) 1
Net cash outflow from operating
activities (16) (103) (81)
4 Called up share capital
Pursuant to the Tender Offer, 1,323,334 Ordinary shares and to the buyback
offer, 25,727 Ordinary shares were repurchased for cancellation on 23 January
2012. Following the Tender Offer and buyback offer there are 11,884,283
Ordinary shares in issue (31 August 2011:13,233,344: 28 February 2011:
13,233,344).
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. He is also a director of CEPS PLC, in which the Company has an
investment. At 29 February 2012 there was £3,000 (31 August 2011: £3,000, 28
February 2011: £3,000) payable to the Investment Manager.
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 Sections 1158/1159 of the Corporation Tax Act 2010.
Directors and advisers
Directors
George Stevens (Chairman)
Kevin Allen
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
Auditors
Hazlewoods LLP
Windsor House
Bayshill Road
Cheltenham GL50 3AT
Custodian and Banker
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
END
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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