17 Apr 2009 17:20
CHELVERTON GROWTH TRUST PLC
Half Yearly Report
for the six months ended 28 February 2009
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 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 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 decreased in the last six monthsfrom 33.18p to 16.87p, a decrease of 49.16%. In the same period the Company'sbenchmark index, the FTSE All-Share, decreased by 32.73%. Since the half yearend the net asset value per share has decreased to 16.33p as at 31 March 2009.The first half of our financial year was dominated by increasing turmoil inglobal financial markets and dramatic falls in economic activity and stockmarkets. At the heart of the problem was the rapid escalation of the crisis inthe banking sector and the resolution of these problems still appears to besomeway off despite a co-ordinated effort by monetary authorities globally toget the banks lending again. The knock on effect of the lack of liquidity forthe corporate sector has severely exaggerated the magnitude of the cyclicaldownturn, particularly at the smaller end of the market.Historically, as the economic cycle turned down smaller companies would trendback to a level where takeover activity by larger corporates, venturecapitalists or management teams would help to put a floor under valuations.Unfortunately, as we indicated in our last statement, the lack of availablecapital has undermined this support for the foreseeable future. An improvementin the domestic liquidity environment remains the key to attracting investorsback into our investment sector.As an asset class, small caps were particularly badly affected by the rapidlydeteriorating macro environment and September and October were two of thepoorest months on record for small cap performance. Throughout the last periodthere were earnings downgrades across our portfolio and prices fellaccordingly. We sold our holdings in AssetCo and Clipper Ventures and realisedfunds from IDOX, Mount Engineering and Tristel. Unfortunately, after a poorChristmas trading performance EBTM was put into administration, as wasSmallbone who were unable to agree a re-financing after a recent acquisition.On the plus side we have recently had reassuring numbers from Tristel, AlliancePharma and Northbridge.One unfortunate consequence of the sell off in small caps has been a dramaticpick up in companies looking to de-list from AIM as they believe thatincreasingly the costs now outweigh the benefits of a listing. We haveexperienced this through Axis, which was sold in the period, and Chromogenexwhich delisted on 1 April 2009. We believe that this will continue to be anissue for small cap investors whilst valuations remain at current levels.As we move into our second half domestic interest rates have fallen to theirlowest ever levels highlighting the magnitude of the current economic problems.Companies of all sizes across the whole spectrum of sectors are highlighting anunprecedented uncertainty with regard to their trading outlook. We believe thatthis uncertainty will continue to depress smaller company valuations for theremainder of our financial year.
Chelverton Asset Management Limited
17 April 2009
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
• the condensed set of financial statements for the six months to 28
February 2009 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 2009 and the above responsibility statement was signed on its behalf by George Stevens, Chairman.
PORTFOLIO REVIEWas at 28 February 2009
The Company's portfolio as at 28 February 2009 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 100 3.4 Warrants - -
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 115 3.9
Distribution of electronic access controls products
LPA Group Electronic & Electrical 78 2.7 Equipment
Design, manufacture and marketing of industrial electrical accessories
AI Claims Solutions Travel & Leisure 319 10.9
The provision of non-fault accident management services
Hartest Holdings Industrial Engineering 51 1.7
Manufacture and sale of specialist healthcare equipment
Pennant International Software & Computer 46 1.6Group Services
Supplier of technology solutions to the defence and industrial sectors Richoux Group (previously Travel & Leisure 46
1.6Gourmet Holdings)
Owner and operator of Richoux restaurants
Universe Group Support Services 14 0.5 Provision of credit card fraud prevention system, loyalty systems and retail systems
Forest Support Services Industrial Transportation 107
3.7
Supply of traffic management services
Belgravium Technologies Technology Hardware & 87 3.0 Equipment
Software systems for warehousing and distribution
Capcon Holdings General Financial 16 0.5 The provision of audit and stocktaking, and commercial investigation services IDOX Software & Computer 437 14.9 Services Software company specialising in the development of products for document and information management Alliance Pharma Pharmaceuticals & 42 1.4 Biotechnology
Acquisition of the manufacturing, sales and distribution rights to
pharmaceutical products Titan Europe Industrial 18 0.6 Engineering Manufacture of big wheels for construction, mining and agricultural vehicles Smallbone* General Retailers 72 2.5
The design and manufacture of bespoke kitchens, bathrooms, bathroom furniture and suppliers of high quality flooring
Sanderson Group Software & Computer 39 1.3 Services
Provides software and IT services
Petards Group Support Services 75 2.6 Development, provision and maintenance of advanced security systems and relatedservices Tristel Healthcare Equipment 176 6.0 & Services
Healthcare business specialising in infection control in hospitals
Chromogenex** Healthcare Equipment 2 0.1 & Services
Design, manufacture and distribution of aesthetic and therapeutic laser and aesthetic light based technology devices
Datong Electronics Electronic & 74 2.5 Electrical Equipment
Develops, manages and supplies covert tracking and surveillance systems
Minorplanet Systems Electronic & 65 2.2 Electrical Equipment Vehicle informations system AT Communications Group Software & Computer 88 3.0 Services
Business to business systems integrator
PSG Solutions Support Services 20 0.7 Leading provider of Local Authority residential property searches; provision ofpackaging solutions MTI Wireless Edge Technology Hardware & 74 2.5 Equipment
Developer and manufacturer of sophisticated antennae and antenna systems
Northbridge Industrial Industrial 140 4.8Services Engineering
Specialist industrial services
Satcom Group Mobile 42 1.4 Telecommunications
Provider of mobile satellite communications equipment and airtime
SPI Lasers Electronic & Electrical - - Equipment Design, development and manufacture of optical fibre-based lasers for a range of markets and applications General Capital Group General Financial 1 - Provision of finance EBTM*** General Retailers 3 0.1
Internet retail of music inspired fashion
Mount Engineering Industrial Engineering 35 1.2
Industrial engineering company
DELISTED FROM AIM Food & Drink Group (in Travel & Leisure - -administration)
Owner and operator of premium bars and restaurants in London
Conder Enviromental Industrial Engineering 27 0.9
Supply of industrial pollution control equipment, and provision of glass reinforced plastic oil/water separators
UNQUOTED Locker Group (in Industrial Engineering 51 1.7liquidation) Cash Shell Wineworld Travel & Leisure 14 0.5
Management of Vinopolis, a London-based venue encompassing wine tasting, retail stores, restaurants and corporate hospitality
Closed Loop Recycling Support Services (previously Closed Loop London) Loanstock 252 8.6 Ordinary B shares 105 3.6
Operation of a plastic recycling plant
Parmenion Capital Support Services 100 3.4Partners LLP
Provides fund based discretionary fund management services to Independent
Financial Advisors PORTFOLIO VALUATION 2,931 100.0
* Smallbone PLC's shares were delisted from AIM on 3 March 2009 and the company went into administration on 19 March 2009.
** Chromogenex PLC's shares were delisted from AIM on 1 April 2009.
***EBTM PLC's shares were delisted from AIM on 1 April 2009 and the company went into administration on 12 March 2009.
PORTFOLIO BREAKDOWN BY SECTOR AND BY INDEX
Percentage of Portfolio by Sector
Sector Percentage Support Services 26.7Software & Computer Services 20.8Travel & Leisure 13.0 Industrial Engineering 10.9 Electronic & Electrical Equipment 7.4 Healthcare Equipment & Services 6.1 Technology Hardware & Equipment 5.5Industrial Transportation 3.7Household Goods 2.5 Pharmaceuticals & Biotechnology 1.4 Mobile Telecommunications 1.4General Financial 0.5General Retailers 0.1
PERCENTAGE OF PORTFOLIO BY INDEX
Index Percentage AIM 81.3 Unquoted 17.8 Delisted 0.9INCOME STATEMENT (UNAUDITED)
for the six months to 28 February 2009
Six months to Year to 28 February 2009 31 August 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 (Losses) on - (2,359) (2,359) - (2,641) (2,641)investments Income 37 - 37 129 - 129 Investment management fee* (5) (14) (19) (19) (56) (75) Other expenses* (74) - (74) (139) - (139) Net return on (42) (2,373) (2,415) (29) (2,697) (2,726)ordinary activities before finance costs and taxation Interest payable and (3) (10) (13) (8) (25) (33)similar charges* Net return on (45) (2,383) (2,428) (37) (2,722) (2,759)ordinary activities before taxation Taxation on ordinary - - - (1) - (1)activities Net return on (45) (2,383) (2,428) (38) (2,722) (2,760)ordinary activities after taxation Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence Return per Ordinary (0.30) (16.03) (16.33) (0.25) (17.18) (17.43)share# INCOME STATEMENT (UNAUDITED)
for the six months to 28 February 2009 (continued)
Six months to 29 February 2008 Revenue Capital Total £'000 £'000 £'000 Lossess on investments - (1,603) (1,603) Income 54 - 54 Investment management fee* (10) (32) (42) Other expenses * (66) (42) (108) Net return on ordinary activities before (22) (1,677) (1,699)finance costs and taxation
Interest payable and similar charges* (2) (4)
(6)
Net return on ordinary activity before (24) (1,681) (1,705)taxation
Taxation on ordinary activities - -
-
Net return on ordinary activities after (24) (1,681) (1,705)taxation Revenue Capital Total pence pence pence Return per Ordinary share# (0.14) (10.00) (10.14) Notes
* 75% of the management fee and finance costs have been charg ed to capital reserve. 100% of Tender Offer costs have also been charged to capital reserve.
# The return per Ordinary share is based on 14,864,827 (31 August 2008: 15,836,872, 29 February 2008: 16,819,600) 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 s tatement 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 2009
Share Share Capital Capital Revenue Total capital reserve reserve premium redemption account reserve £'000 £'000 £'000 £'000 £'000 £'000 Six months to 28 February 2009 1 September 2008 149 2,674 (1,595) 40 3,665 4,933 Cost of shares cancelled - - 3 - - 3 Net return after taxation - - (2,383) - (45) (2,428)for the period 28 February 2009 149 2,674 (3,975) 40 3,620 2,508 Year to 31 August 2008 1 September 2007 175 2,674 2,285 14 3,703 8,851 Cost of shares cancelled (26) - (1,158) 26 - (1,158) Net return after taxation - - (2,722) - (38) (2,760)for the year 31 August 2008 149 2,674 (1,595) 40 3,665 4,933 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 taxation - - (1,681) - (24) (1,705)for the period 29 February 2008 149 2,674 (512) 40 3,679 6,030 BALANCE SHEET (UNAUDITED)as at 28 February 2009 As at As at As at 28 February 31 August 2008 29 February 2009 2008 £'000 £'000 £'000 Fixed assets 2,931 5,900 6,785 Investments at fair value Current assets 79 29 19 Debtors 25 - 1 Cash at bank 104 29 20
Creditors - amounts falling due
within one year Bank overdraft 481 937 714 Creditors 46 59 61 527 996 775 Net current (liabilities) (423) (967) (755) Net assets 2,508 4,933 6,030 Share capital and reserves 149 149 149 Share capital 2,674 2,674 2,674 Share premium account (3,975) (1,595) (512) Capital reserve 40 40 40 Capital redemption reserve 3,620 3,665 3,679 Revenue reserve Equity shareholders' funds 2,508 4,933 6,030 Net Asset Value per Ordinary 16.87p 33.18p 40.56p share (note 1)
STATEMENT OF CASH FLOWS (UNAUDITED)
for the six months to 28 February 2009
Six months to Year to Six months to 28 February 31 August 2008 29 February 2008 2009 Operating activities £'000 £000 £'000 Investment income received 52 118 45 Deposit interest received - 6 5
Investment management fees paid (21) (78)
(39) Secretarial fees paid (18) (46) (23) Other cash payments (61) (100) (51)
Net cash outflow from operating (48) (100)
(63)activities (note 3) Servicing of finance Interest paid (20) (28) (9) Investing activities - 528 (342) Purchases of investments 545 493 468 Sales of investments
Net cash inflow/(outflow) from 545 (35)
126 investing activities
Net cash inflow/(outflow) before 477 (163)
54 financing Financing Share repurchase - (1,118) (1,116) Cost of Tender Offer 4 (38) (33) Net cash inflow/(outflow) from 4 (1,156) (1,149)financing Increase/(decrease) in cash 481 (1,319) (1,095)NOTESThe unaudited interim financial information does not constitute statutoryaccounts as defined in Section 240 of the Companies Act 1985. The statutoryaccounts for the year to 31 August 2008, which contained an unqualifiedauditors' report, have been lodged with the Registrar of Companies and did notcontain a statement required under Section 237 (2) or (3) of the Companies Act1985. The financial information for the period ended 28 February 2009 and 29February 2008 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 2008.
1. Net Asset Value
The basic net asset value per Ordinary share is based on net assets of £ 2,508,000 (31 August 2008: £4,933,000, 29 February 2008: £6,030,000) and on 14,864,827 Ordinary shares (31 August 2008: 14,864,827, 29 February 2008: 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 2009 is nil (year to 31 August 2008 and six months to 29 February 2008: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2009.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 from operating activities
Six months to Year to Six months to 28 February 31 August 2008 29 February 2009 2008 £'000 £'000 £'000 Net return before finance costs (2,415) (2,726) (1,699)and taxation Net capital return before finance 2,373 2,697 1,677 costs Expenses charged to capital (14) (56) (32)
Decrease in creditors and accruals (7) (11)
(8)
(Decrease)/increase in prepayments 15 (4)
(1)and accrued income
Net cash outflow from operating (48) (100)
(63)activities 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 2009 there was £3,000 (31 August 2008: £5,000; 29February 2008: £11,000) 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 ADVISORS
Directors
George Stevens (Chairman)
Kevin AllenBryan LenygonDavid HornerInvestment Manager
Chelverton Asset Management Limited
11 George Street, Bath BA1 2EH
Tel: 01225 483030
Secretary and Registered Office
Capita Sinclair Henderson Limited
Beaufort House51 New North RoadExeter EX4 4EPTel: 01392 412122Registrar and Transfer OfficeShare Registrars LimitedSuite EFirst Floor9 Lion and Lamb YardFarnhamSurrey GU9 7LLTel: 01252 821 390www.shareregistrars.uk.comBankersLloyds TSB Bank Plc25 Gresham StreetLondon EC2V 7HNAuditorsHazlewoods LLPWindsor HouseBarnett WayBarnwoodGloucester GL4 3RTCustodianHSBC Global Services8 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
vendor