20 Apr 2010 17:57
CHELVERTON GROWTH TRUST PLC
Half Yearly Report
for the six months ended 28 February 2010
Investment objective
The Company's objective is to provide capital growth through investment incompanies on the Official List and traded on the Alternative Investment Market("AIM") with a market capitalisation at the time of investment of up to £50million, which are believed to be at a "point of change". The Company will alsoinvest in unquoted investments where it is believed that there is a likelihoodof the shares becoming listed or traded on AIM or the investee company beingsold. Its investment objective is to increase net asset value per share at ahigher rate than other quoted smaller company trusts and the FTSE All-ShareIndex.
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 whichthe Investment Manager believes to be key. The whole process through whichequity 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 besignificantly higher in the future will pass the selection process. TheCompany's Investment Manager believes the key to successful stock selection isto identify the long term value of a company's shares and to have the patienceto hold the shares until that value is appreciated by other investors.Identifying long term value involves detailed analysis of a company's earningprospects over a five year time horizon.The Company's Investment Manager is Chelverton Asset Management Limited, anindependent investment manager focusing exclusively on achieving returns forinvestors based on UK investment analysis of the highest quality. The foundersand employee owners of Chelverton include experienced investment professionalswith strong investment performance records who believe rigorous fundamentalresearch 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 monthsfrom 19.47p to 22.70p, an increase of 16.6%. In the same period the Company'sbenchmark index, the FTSE All-Share, increased by 8.6%.The positive return in the past six months is a reflection of increasinginvestor confidence being driven by a combination of the effects ofquantitative easing and improving corporate cash flows. In the UK marketoverseas earners have been in demand as our domestic economy has become thepoor relation compared to most other major economies and Sterling has continuedto be relatively weak. With our concentration on smallcaps we will remain moregeared to the UK economy than the market as a whole, but we feel that thepremium attributable to overseas earnings at this point in the cycle is nowmore than fully incorporated into relative valuations.Despite the worsening outlook for the UK economy, there now appears to be thefirst signs of a tangible divergence between the short term macro outlook and'bottom up' anecdotal evidence from investee Companies. Throughout the lastperiod, UK plc has continued to generate cash at rates in excess of forecastsand trading has held up relatively well across a broad range of sectors. Thereare obviously areas of the economy that will decline in 2010, and if we takeconstruction and contracting as an example, market expectations and valuationsarguably already reflect this. We are cautious with respect to consumerspending as the real affects of recent tax rises are yet to be felt.In the last period the fund has benefitted from a significant uplift in thevaluation of a number of our holdings. Alliance Pharma performed particularlywell after a series of strong trading statements and the acquisition ofCambridge Laboratories which was partially funded by a placing of new stock.Hartest was the subject of a potential offer at 69p per share, which whilst itdid not complete did serve to highlight the investment attractions of thestock. AI Claims traded well as new clients were integrated and Sandersonshares were strong as the chairman made a substantial purchase of shares takinghis holding to 29.9% of the company. We increased the valuation of one of ourunquoted
holdings, Parmenion Capital Partners LLP, as a result of a third party investment into the company.
We have highlighted the issue of companies de-listing from AIM before, and Satcom announced that they received approval to de-list from the beginning of April. In this instance we will retain our holding as an unlisted investment.
As we move into our second half the general election is imminent. The extent ofcutbacks in public sector spending will only become clear towards the end ofour financial year, whichever party is returned to power. This creates anuncertainty which, coupled with the prospect of a hung parliament will probablyrestrain progress in the domestic stockmarket. Whilst we believe that thevaluations of our Companies are currently attractive on a medium term view,they remain vulnerable in the short term to any adverse shift in risk andsentiment associated with the election.
Chelverton Asset Management Limited
20 April 2010Responsibility statement
The Directors confirm that to the best of their knowledge:
â— the condensed set of financial statements for the six months to 28 February2010 has been prepared in accordance with the Statement on Half YearlyFinancial Reports issued by the UK Accounting Standards Board, give a true andfair view of the assets, liabilities, financial position and net return of theCompany; 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 ofimportant events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remainingsix 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 2010 and the above responsibility statement was signed on its behalf by George Stevens, Chairman.
Portfolio reviewas at 28 February 2010
The Company's portfolio as at 28 February 2010 is set out below.
Investment Sector Valuation £'000 % of totalAIM tradedAI Claims Solutions Travel & Leisure 413 12.2The provision of non-fault accident management servicesAlliance Pharma Pharmaceuticals & Biotechnology 273 8.1
Acquisition of the manufacturing, sales and distribution rights to pharmaceutical products Belgravium Technologies
Technology Hardware & Equipment 137 4.1Software systems for warehousing and distributionCEPS Support ServicesOrdinary shares 138 4.1Warrants 0 0.0Production and supply of components for the footwear industry; personalprotection equipment; production of printed lycra fabric; and services to thedirect mail industryDatong Electronics Electronic & Electrical Equipment 98 2.9
Develops, manages and supplies covert tracking and surveillance systems Forest Support Services
Industrial Transportation 139 4.1Supply of traffic management servicesHartest Holdings Industrial Engineering 160 4.7Manufacture and sale of specialist healthcare equipment and supplies to usersof electron microscopesIDOX Software & Computer Services 530 15.7Software company specialising in the development of products for document andinformation managementLPA Group Electronic & Electrical Equipment 68 2.0
Design, manufacture and marketing of industrial electrical accessories Minorplanet Systems
Electronic & Electrical Equipment 7 0.2Vehicle informations systemMTI Wireless Edge Technology Hardware & Equipment 77 2.3
Developer and manufacturer of sophisticated antennas and antenna systems Northbridge Industrial Services Industrial Engineering
69 2.0
Consolidation vehicle for specialist industrial services in the UK Pennant International Group
Software & Computer Services 65 1.9
Supplier of technology solutions to the defence and industrial sectors Petards Group
Support Services 130 3.9
Development, provision and maintenance of advanced security systems and related services PSG Solutions
Support Services 46 1.4Leading provider of Local Authority residential property searches; provisionof packaging solutionsRichoux Group Travel & Leisure 33 1.0Owner and operator of Richoux RestaurantsSanderson Group Software & Computer Services 60 1.8Provides software and IT servicesSatcom Group* Mobile Telecommunications 68 2.0
Provider of mobile satellite communications equipment and airtime Titan Europe
Industrial Engineering 22 0.6
Manufacture of big wheels for construction, mining and agricultural vehicles Tristel
Health Care Equipment & Services 192 5.7
Healthcare business specialising in infection control in hospitals Universe Group
Support Services 22 0.7Provision of credit card fraud prevention system, loyalty systems and retailsystemsDelisted from AIMAT Communications Group Software & Computer Services 0 0.0Business to business systems intergratorChromogenex Health Care Equipment & Services 0 0.0
Design, manufacture and distribution of aesthetic and therapeutic laser and aesthetic light based technology devices Conder Environmental (in liquidation) Industrial Engineering
0 0.0
Supply of industrial pollution control equipment and provision of glass reinforced plastic oil/ water separators EBTM (in administration)
General Retailers 0 0.0Internet retail of music inspired fashionFood & Drink Group (in administration) Travel & Leisure 0 0.0
Owner and operator of premium bars and restaurants in London General Capital Group
General Financial 0 0.0Provision of financeSmallbone (in administration) Household Goods 0 0.0The design and manufacture of bespoke kitchens, bathrooms, bathroom furnitureand suppliers of high quality flooringUnquotedClosed Loop Recycling Support ServicesLoanstock 252 7.5Ordinary B shares 84 2.5Operation of a plastic recycling plantLocker Group (in liquidation) Industrial Engineering 0 0.0Cash ShellParmenion Capital Partners LLP Support Services 291 8.6
Provides fund-based discretionary fund management services to Independent Financial Advisors Portfolio valuation
3,374 100.0
* On 24 March 2010 Satcom Group announced that its ordinary shares would cease to trade on AIM at the close of business on 31 March 2010
and that the company would be delisted with effect from 1 April 2010.
Top Twenty Investments 28 February 2010 31 August 2009 Valuation % of Valuation % of Investment £'000 total £'000 total IDOX 530 15.7 530 18.2 AI Claims Solutions 413 12.2 294 10.1 Closed Loop Recycling 336 10.0 357 12.3
ParmenionCapital Partners LLP 291 8.6 115
4.0 AlliancePharma 273 8.1 157 5.4 Tristel 192 5.7 216 7.4 HartestHoldings 160 4.7 71 2.4 ForestSupport Services 139 4.1 139 4.8 CEPS 138 4.1 106 3.6 BelgraviumTechnologies 137 4.1 137 4.7 Petards Group 130 3.9 125 4.3 DatongElectronics 98 2.9 64 2.2 MTI Wireless Edge 77 2.3 115 4.0
Northbridge Industrial Services 69 2.0 61
2.1 LPA Group 68 2.0 83 2.9 SatcomGroup 68 2.0 47 1.6 Pennant International Group 65 1.9 46 1.6 Sanderson Group 60 1.8 45 1.5 PSG Solutions 46 1.4 38 1.3 RichouxGroup 33 1.0 50 1.7 Total 3,323 98.5 2,796 96.1
Portfolio breakdown by Sector and by Index
Percentage of Portfolio by Sector
Sector Percentage Support Services 28.7 Software & Computer Services 19.4 Travel & Leisure 13.2
Pharmaceuticals & Biotechnology 8.1
Industrial Engineering 7.3
Technology Hardware & Equipment 6.4
Heath Care Equipment & Services 5.7
Electronic & Electrical Equipment 5.1
Industrial Transportation 4.1 Mobile Telecommunications 2.0
Percentage of Portfolio by Index
Index Percentage AIM 81.4 Unquoted 18.6 Income statement (unaudited)
for the six months to 28 February 2010
Six months to Year to Six months to 28 February 2010 31 August 2009 28 February 2009 Revenue Capital Total Revenue Capital Total
Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Gains/(losses) oninvestments at fair value - 516 516 - (2,043) (2,043) - (2,359) (2,359)Income 54 - 54 65 - 65 37 - 37Investmentmanagement fee* (4) (13) (17) (8) (26) (34) (5) (14) (19)Refund of VAT oninvestmentmanagement fee - - - 33 99 132 - - -Other expenses* (74) - (74) (144) - (144) (74) - (74)Net return onordinary activitiesbefore financecosts and taxation (24) 503 479 (54) (1,970) (2,024) (42) (2,373) (2,415)Interest payableand similar charges* - - - (4) (12) (16) (3) (10) (13)Net return onordinary activitiesbefore taxation (24) 503 479 (58) (1,982) (2,040) (45) (2,383) (2,428)Taxation onordinary activities - - - (1) - (1) - - -Net return onordinary activitiesafter taxation (24) 503 479 (59) (1,982) (2,041) (45) (2,383) (2,428) Revenue Capital Total Revenue Capital Total
Revenue Capital Total
pence pence pence pence pence pence pence pence penceReturn perOrdinary share# (0.16) 3.38 3.22 (0.40) (13.33) (13.73) (0.30) (16.03) (16.33) Notes
* 75% of the management fee and finance costs have been charged to capital reserve.
# The return per Ordinary share is based on 14,864,827 (31 August 2009: 14,864,827, 28 February 2009: 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 2010
Share Capital Share premium Capital redemption Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000
Six months to 28 February 2010
1 September 2009 149 2,674 (3,574) 40 3,606 2,895
Net return after taxation for the period - - 503
- (24) 479
28 February 2010 149 2,674 (3,071)
40 3,582 3,374
Year to 31 August 2009 1 September 2008 149 2,674 (1,595)
40 3,665 4,933
Adjustment to provision for tender offer expenses - - 3
- - 3
Net return after taxation for the year - - (1,982)
- (59) (2,041) 31 August 2009 149 2,674 (3,574) 40 3,606 2,895
Six months to 28 February 2009
1 September 2008 149 2,674 (1,595) 40 3,665 4,933
Adjustment to provision for tender offer expenses - - 3
- - 3
Net return after taxation for the period - - (2,383)
- (45) (2,428) 28 February 2009 149 2,674 (3,975) 40 3,620 2,508 Balance sheet (unaudited)as at 28 February 2010 As at As at As at 28 February 2010 31 August 2009 28 February 2009 £'000 £'000 £'000 Fixed assets
Investments at fair value 3,374
2,908 2,931 Current assets Debtors 14 6 79 Cash at bank 21 44 25 35 50 104
Creditors - amounts falling due within one year
Bank overdraft - - 481 Creditors 35 63 46 35 63 527 Net current liabilities - (13) (423) Net assets 3,374 2,895 2,508 Share capital and reserves Share capital 149 149 149 Share premium account 2,674 2,674 2,674 Capital reserve (3,071) (3,574) (3,975) Capital redemption reserve 40 40 40 Revenue reserve 3,582 3,606 3,620 Equity shareholders' funds 3,374 2,895 2,508 Net Asset Value per Ordinary share (note 1) 22.70p 19.47p 16.87p
Statement of cash flows (unaudited)
for the six months to 28 February 2010
Six months to Year to Six months to 28 February
2010 31 August 2009 28 February 2009
£'000 £'000 £'000 Operating activities Investment income received 25 79 52 Interest received on VAT refund 19 - - Investment management fees paid (17) (37) (21) VAT refund on investment management fee
- 132 - Secretarial fees paid (26) (39) (18) Other cash payments (74) (83) (61) Net cash (outflow)/inflow from operating activities (note 3) (73) 52 (48) Returns on investment and servicing of finance
Interest paid - (28) (20) Investing activities Purchases of investments - (71) - Sales of investments 50 1,028 545 Net cash inflow from investing activities 50 957 545 Financing Cost of Tender Offer - - 4
Net cash inflow from financing
- - 4 (Decrease)/increase in cash (23) 981 481
Notes to the half yearly report
The unaudited interim financial information does not constitute statutoryaccounts as defined in Section 434 of the Companies Act 2006. The statutoryaccounts for the year to 31 August 2009, which contained an unqualifiedauditors' report, have been lodged with the Registrar of Companies and did notcontain a statement required under Section 498 (2) or (3) of the Companies Act2006. The financial information for the period ended 28 February 2010 and 28February 2009 have not been audited or reviewed by the Company's Auditorpursuant 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 2009.
1 Net Asset Value
The basic net asset value per Ordinary share is based on net assets of £ 3,374,000 (31 August 2009: £2,895,000, 28 February 2009: £2,508,000) and on 14,864,827 Ordinary shares (31 August 2009: 14,864,827, 28 February 2009: 14,864,827) being the number of Ordinary shares in issue at the period end.
2 Taxation
The tax charge for the six months to 28 February 2010 is nil (year to 31 August 2009: £1,000, six months to 28 February 2009: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2010.The estimated effective tax rate is 0% as investment gains are exempt from taxowing to the Company's status as an Investment Trust and there is expected tobe an excess of management expenses over taxable income.
3 Reconciliation of net return before finance costs and taxation to net cash (outflow)/inflow from operating activities
Six months to Year to Six months to 28 February
2010 31 August 2009 28 February 2009
£'000 £'000 £'000 Net return before finance costs and taxation
479 (2,024) (2,415)
Net capital return before finance costs (503) 1,970 2,373 Expenses charged to capital (13) (26) (14)
VAT refund on investment management fees allocated to capital - 99 - (Decrease)/increase in creditors and accruals (28) 19 (7) (Increase)/decrease in prepayments and
accrued income (8) 14 15 Net cash (outflow)/inflow from operating activities (73) 52 (48) 4 Related party transactionsChelverton Asset Management Limited acts as the Investment Manager. Mr Horner,a Director of the Company, is also a director of Chelverton Asset ManagementLimited. He is also a director of CEPS PLC, in which the Company has aninvestment. At 28 February 2010 there was £3,000 (31 August 2009: £2,000, 28February 2009: £3,000) 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.
5 Status of Company
It is the intention of the Directors to conduct the affairs of the Company sothat they satisfy the conditions for approval as an investment trust company asset out in Section 842 of the Income and Corporation Taxes Act 1988. Directors and advisorsDirectors
George Stevens (Chairman)
Kevin AllenBryan LenygonDavid HornerInvestment Manager
Chelverton Asset Management Limited
11 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 House51 New North RoadExeter EX4 4EPTel: 01392 412 122
Registrar and Transfer Office
Share Registrars LimitedSuite EFirst Floor9 Lion and Lamb YardFarnhamSurreyGU9 7LLTel: 01252 821 390www.shareregistrars.uk.comBankersLloyds TSB Bank Plc25 Gresham StreetLondonEC2V 7HNAuditorsHazlewoodsLLPWindsorHouseBarnett WayBarnwoodGloucester GL4 3RTCustodianHSBC Investment Bank plcLevel 298 Canada SquareLondon EC14 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
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