23 Nov 2007 15:35
CHELVERTON GROWTH TRUST PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
The Directors announce the unaudited statement of results for the year ended 31 August 2007 as follows:-
INCOME STATEMENT
For the year ended 31 August 2007
2007 2006 Revenue Capital Total Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains/(losses) on - 2,718 2,718 - (11) (11)investments at fair value Income 106 - 106 66 - 66 Investment management (27) (79) (106) (49) (146) (195)fee Other expenses (166) - (166) (209) - (209) Net return before finance costs and taxation (87) 2,639 2,552 (192) (157) (349) Interest payable (15) (45) (60) (14) (41) (55) Net return on ordinary activities before taxation (102) 2,594 2,492 (206) (198) (404) Taxation on ordinary - - - - - - activities Net return on ordinary activities after taxation (102) 2,594 2,492 (206) (198) (404) Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence Return per Ordinary (0.58) 14.65 14.07 (1.14) (1.09) (2.23)share*
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.
No operations were acquired or discontinued during the year.
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.
* The return per Ordinary share is based on 17,709,375 (2006:18,141,939) Ordinary shares, being the weighted average number of shares in issue during the year.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 August 2007
Called up Share Capital Capital Revenue Total premium reserve redemption reserve share account reserve capital ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Year ended 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 Year ended 31 August 2006 1 September 2005 (as 182 2,674 400 7 4,011 7,274 originally stated) Restatements - - (301) - - (301) 1 September 2005 182 2,674 99 7 4,011 6,973 (restated) Net return after - - (198) - (206) (404)taxation for the year 31 August 2006 182 2,674 (99) 7 3,805 6,569 BALANCE SHEETAs at 31 August 2007 2007 2006 ‚£'000 ‚£'000 Fixed assets Investments at fair value 8,542 7,946 Current assets Debtors 18 13 Cash at bank 382 24 400 37 Creditors - amounts falling due within one year Creditors 91 1,414 Net current assets / (liabilities) 309 (1,377) Net assets 8,851 6,569 Share capital and reserves Called up share capital 175 182 Share premium account 2,674 2,674 Capital reserve - realised 3,058 1,989 - unrealised (773) (2,088) - capital redemption reserve 14 7 Revenue reserve 3,703 3,805 Equity shareholders' funds 8,851 6,569 pence pence Net asset value per Ordinary share 50.58 36.21 Ordinary shares in issue 17,500,000 18,141,939STATEMENT OF CASH FLOWSFor the year ended 31 August 2007 2007 2006 ‚£'000 ‚£'000 Operating activities Investment income received 98 67 Deposit interest received 3 1 Investment management fees paid (114) (194) Secretarial fees paid (45) (44) Other cash payments (113) (165) Net cash outflow from operating activities (171) (335) Returns on investments and servicing of finance Interest paid (68) (38) Investing activities Purchases of investments (2,070) (2,167) Sales of investments 4,220 1,415 Net cash inflow / (outflow) from investing 2,150 (752)activities Financing Share repurchase (210) - Increase / (decrease) in cash 1,701 (1,125) NOTES
The above financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. This financial information has been prepared on the basis of the accounting policies stated in the statutory accounts for the year ended 31 August 2006. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The accounts for the year ended 31 August 2006 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 August 2007 have not yet been approved audited or filed and will be delivered to the Registrar of Companies following the Annual General Meeting.
CHAIRMAN'S STATEMENT
Following a very successful year, it is predictable that the events of recent months have had a negative impact on the asset value of our shares. As ever in times of uncertainty and economic turmoil we see a "flight to size" rather than a "flight to quality or value". It is interesting to note that much of this uncertainty was caused by the decline of Northern Rock - itself a FTSE 100 company.
Chelverton's net asset value per share has increased this year from 36.21p to 50.58p - an increase of 39.7%. In the same period the Company's benchmark index, the FTSE All-Share rose by 8.41%; the FTSE 100, which makes up over 90% of the All-Share Index rose 6.73%; and the AIM Index increased by 5.93%. However, since the year end the net asset value per share has declined to 48.96p, a drop of 3.2%.
Since the merger in August 2001 the net asset value per share has increased by 47.0% compared to a rise of 25.9% in the FTSE All-Share Index and 6.5% in the AIM Index.
This is obviously a pleasing result and confirms the value that the Manager believes to be latent within the portfolio and which is further evidenced by a growth in the number of portfolio companies paying dividends. The portfolio has contracted to 39 holdings and will be reduced further by number as funds are recycled to acquire additional shares in existing, perceived to be undervalued investments.
Shareholders will note the significant reduction in operating expenses which have been achieved by a major reduction in Directors' fees, a halving of the investment management fee and a number of other cost savings.
During the year, in an attempt to reduce the widening discount as the net asset value per share rose, the Company bought back a total of 607,770 shares for treasury at an average price of 32.1p per share, and those shares were duly cancelled on 31 August 2007. The Company also purchased 34,169 shares for cancellation at an average price of 42.4p per share.
In the light of the significant cash realisation from the takeover of Oasis Healthcare plc and the substantial uplift in the asset value of the shares, the Board and the Investment Manager now feel that the Company can take steps to further narrow the discount and provide liquidity in the Company's shares. A separate circular setting out the full details of the tender offer will accompany the Annual Report.
In the documents accompanying the Report shareholders will find details of a "Package of Proposals" to shareholders which includes an extension of the duration of the Company, an annual tender offer and details of the Company's discount management policy.
Tender Offer
The Board wishes to exercise its discretion to implement an annual tender offer, for up to 15 per cent. of the Company's issued share capital, and thereafter intends to implement further annual tender offers (at around the time of the Company's annual general meetings in subsequent years) of up to 10 per cent. of the then issued share capital of the Company.
The current tender offer will be structured by way of an on market offer by Ellis Stockbrokers Limited to acquire up the 15 per cent of the Company's issued shares at a price per share equal to 92.5 per cent. of the net asset value of the Company on the relevant calculation date divided by the number of ordinary shares of ‚£0.01 in issue as at such date, with such shares subsequently being bought back by the Company (pursuant to a repurchase agreement) from Ellis Stockbrokers Limited at the same price and cancelled.
Extension of Duration
The existing Articles of Association of the Company provide that the Directors shall convene an extraordinary general meeting of the Company on 30 November 2009, at which proposals for the voluntary liquidation of the Company shall be put to the members ("Winding-up Resolution") unless the Directors shall have been previously released from their obligation to do so by a special resolution of the Company duly passed at the annual general meeting of the Company to be held in 2008 resolving to continue to operate as an investment trust company. If the Directors are released from their obligation, they shall be obliged to convene an extraordinary general meeting to be held on 30 November 2014 and every fifth year thereafter (unless the Directors shall have been released from their obligation to do so by a special resolution of the Company duly passed at any annual general meeting of the Company held in the year preceding any such dates), proposing a similar Winding-up Resolution.
In recognition of the fact that certain of the investments held by the Company are illiquid and may, in the Manager's and Board's view, take longer than the period remaining until 30 November 2009 to fulfil their inherent value, the Directors propose to amend the Articles of Association (by way of a special resolution to be proposed at this year's annual general meeting) so that, in substitution of the procedure set out in the above paragraph, a special resolution will be put to Shareholders at the annual general meeting of the Company in 2011 in respect of the extension of the duration of the Company (``a Continuance Resolution'') for a three year period. In the event that a Continuance Resolution is passed, a further Continuance Resolution shall be put to Shareholders in general meeting by no later than the third anniversary of the previous Continuance Resolution. In the event that any Continuance Resolution is not passed at any general meeting at which it is proposed, the Directors shall then conduct the Company's affairs so as to effect an orderly wind-up of the Company, and shall present a Winding-up Resolution at a general meeting to be held not later than the third anniversary of the date on which the previous Continuance Resolution failed to pass.
It is with sadness that I report to shareholders the death of Pratt Thompson, the former Chairman of the Company. Pratt was involved in the Company from its inception and was an enthusiastic and committed member of the Board.
George StevensChairman23 November 2007
CHELVERTON GROWTH TRUST PLC