18 Apr 2008 16:53
CHELVERTON GROWTH TRUST PLC
Half Yearly Report
for the six months ended 29 February 2008
Investment objective
The Company's objective is to provide capital growth through investment incompanies on the Official List and traded on the Alternative Investment Marketwith 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 investin unquoted investments where it is believed that there is a likelihood of theshares becoming listed or traded on the Alternative Investment Market or theinvestee company being sold. Its investment objective is to increase net assetvalue per share at a higher rate than other quoted smaller company trusts andthe FTSE All-Share Index.
It is the Company's policy not to invest in any listed investment companies (including listed investment trusts).
Interim management report
Results
This report covers the period over the past six months to 29 February 2008.During the period the Company's net asset value per share has decreased to40.56p as at 29 February 2008, representing a fall of 19.8% from the year endposition of 50.58p. This compares with a decline of 7.59% in the FTSE All-ShareIndex, the Company's benchmark index. For interest, over the same period theFTSE AIM Index fell 7.96%. The Company's share price as at 29 February 2008 was32.25p (31 August 2007: 39.50p).The recent decline in the Company's net asset value is disappointing but isperhaps to be expected. In times of uncertainty there is generally a flight tocompanies with a large market capitalisation and an expectation of greaterliquidity. In addition smaller company shares generally decline in line withthe larger companies but then do not respond to any increases in the largermarket until interim or final results are produced. Also in a "normal" marketwhen shares decline significantly it is often the case that trade buyers andcorporate investors start to acquire these businesses. However because of theshortage of banking liquidity these takeovers have not yet started tomaterialise.During the last six months BBI Holdings was taken over for 192p per share(Chelverton's average price was 54.56p per share). Holdings in BelgraviumTechnologies, Food & Drink Group, SPI Lasers, Tristel and Sanderson Group havebeen increased. Chelverton also participated in a placing in Gourmet Holdingsand a rights issue in Closed Loop London.
As at 29 February 2008 your Company held 38 investment positions, down from 39 at the year end.
Tender OfferAt the Annual General Meeting held on 20 December 2007, the resolution topurchase up to 15% of the issued Ordinary shares was approved. Subsequently, on21 December 2007 the Company announced the results of the Tender Offer. Thetender price was 42.15 p per Ordinary share being 92.5% of the net asset valueper Ordinary share at the close of business on 20 December 2007.
Following the completion of the Tender Offer, 2,624,973 Ordinary shares have been repurchased and cancelled. As a result of this transaction and share buybacks the number of shares in issue is 14,864,827.
Outlook
Whilst there is ongoing evidence that the UK domestic economy is slowing downat the macro level, the concerns as to the magnitude of the downturn continueto dampen market sentiment.We have recently seen a significant increase in both director and company sharepurchasing, a conventional indicator to highlighting value. In turn, oncecapital markets return to more normal trading, this may lead to a number oftakeovers as valuations are perceived to be low. It is of course difficult topredict the exact timing of these events and any potential market sentimentrecovery.
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 2008 has been prepared in accordance with the Statement on Half
Yearly Financial Reports issued by the UK Accounting Standards Board;
¢â‚¬¢ 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 2008 and the above responsibility statement was signed on its behalf by George Stevens, Chairman.
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 the Alternative Investment Market 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.
Portfolio review
as at 29 February 2008
The Company's portfolio as at 29 February 2008 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 269 4.0 Warrants 10 0.1
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 184 2.7
Distribution of electronic access controls products
LPA Group Electronic & Electrical 80 1.2 Equipment
Design, manufacture and marketing of industrial electrical accessories
Clipper Ventures Travel & Leisure 135 2.0
The running of round-the-world yacht races
AI Claims Solutions Travel & Leisure 572 8.4
The provision of non-fault accident management services
Food & Drink Group Travel & Leisure 170 2.5
Owner and operator of premium bars and restaurants in London
Hartest Holdings Industrial Engineering 177 2.6
Manufacture and sale of specialist healthcare equipment Pennant International Group Software & Computer 95
1.4 Services
Supplier of technology solutions to the defence and industrial sectors
Gourmet Holdings Travel & Leisure 111 1.6
Owner and operator of Richoux restaurants
Universe Group Support Services 36 0.5 Provision of credit card fraud prevention system, loyalty systems and retail systems Conder Environmental Industrial Engineering 83 1.2
Supply of products and services to protect the environment
Forest Support Services Plc Industrial Transportation 150 2.2
Supply of traffic management services
Belgravium Technologies Technology Hardware & 513 7.6 Equipment
Software systems for warehousing and distribution
Capcon Holdings General Financial 12 0.2 The provision of audit and stocktaking, and commercial investigation services IDOX Software & Computer 774 11.4 Services Software company specialising in the development of products for document and information management Alliance Pharma Pharmaceuticals & 97 1.4 Biotechnology
Acquisition of the manufacturing, sales and distribution rights to
pharmaceutical products Titan Europe Industrial Engineering 150 2.2 Manufacture of big wheels for construction, mining and agricultural vehicles Smallbone General Retailers 452 6.7
The design and manufacture of bespoke kitchens, bathrooms, bathroom furniture and suppliers of high quality flooring
Sanderson Group Software & Computer 105 1.5 Services
Provides software and IT services
Petards Group Support Services 68 1.0 Development, provision and maintenance of advanced security systems and relatedservices AXIS Intermodal Industrial 76 1.1 Transportation
Equipment rental business that services the transport and logistics industries in Germany, the UK and other European countries
Tristel Healthcare Equipment & 237 3.5 Services
Healthcare business specialising in infection control in hospitals
Chromogenex Healthcare Equipment & 69 1.0 Services
Design, manufacture and distribution of aesthetic and therapeutic laser and aesthetic light based technology devices
Datong Electronics Electronic & 202 3.0 Electrical Equipment
Develops, manages and supplies covert tracking and surveillance systems
Minorplanet Systems Electronic & 220 3.2 Electrical Equipment Vehicle informations system AssetCo Industrial Engineering 112 1.7
Provision of support services to the emergency services market
AT Communications Group Software & Computer 208 3.1 Services
Business to business systems integrator
PSG Solutions Support Services 116 1.7 Leading provider of Local Authority residential property searches; provision ofpackaging solutions MTI Wireless Edge Technology Hardware & 196 2.9 Equipment
Developer and manufacturer of sophisticated antennae and antenna systems
Northbridge Industrial Industrial Engineering 283 4.2 Services
Specialist industrial services
Satcom Group Mobile 141 2.1 Telecommunications
Provider of mobile satellite communications equipment and airtime
SPI Lasers Electronic & Electrical 84 1.2 Equipment Design, development and manufacture of optical fibre-based lasers for a range of markets and applications General Capital Group General Financial 88 1.3 Provision of finance EBTM General Retailers 92 1.4
Internet retail of music inspired fashion
Mount Engineering Industrial Engineering 97 1.4
Industrial engineering company
Unquoted Locker Group (in Industrial Engineering 51 0.8liquidation) Cash Shell Wineworld Travel & Leisure 21 0.3
Management of Vinopolis, a London-based venue encompassing wine tasting, retail stores, restaurants and corporate hospitality
Closed Loop London Support Services Loanstock 187 2.8 Ordinary B shares 62 0.9
Operation of a plastic recycling plant
Portfolio valuation 6,785 100.0
All the above investments are in ordinary shares and are traded on the Alternative Investment Market, except Locker, Wineworld and Closed Loop London, which are unquoted.
During this period the shareholdings in BBI Holdings were sold prior to takeover.
Portfolio breakdown by Sector and by Index
Percentage of Portfolio by Sector
Sector Percentage Technology Hardware & Equipment 10.5 Support Services 13.7 Software & Computer Services 17.4 Pharmaceuticals & Biotechnology 1.4 Travel & Leisure 14.8 Electronic & Electrical Equipment 8.6 General Financial 1.5 General Retailers 8.1 Healthcare Equipment & Services 4.5 Industrial Engineering 14.1 Industrial Transportation 3.3 Mobile Telecommunications 2.1
Percentage of Portfolio by Index
Index Percentage AIM 95.2 Unquoted 4.8Income statement (unaudited)
for the six months to 29 February 2008
Six months to Year to 29 February 2008 31 August 2007 Revenue Capital Total Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 (Losses)/gains on - (1,603) (1,603) - 2,718 2,718 investments Income 54 - 54 106 - 106 Investment management (10) (32) (42) (27) (79) (106)fee* Other expenses* (66) (42) (108) (166) - (166) Net return on (22) (1,677) (1,699) (87) 2,639 2,552 ordinary activities before finance costs and taxation Interest payable and (2) (4) (6) (15) (45) (60)similar charges* Return for the period (24) (1,681) (1,705) (102) 2,594 2,492 Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence Return per Ordinary (0.14) (10.00) (10.14) (0.58) 14.65 14.07 share# Notes
* 75% of the management fee and finance costs have been charged to capital reserve. 100% of Tender Offer costs have also been charged to capital reserve.
# The return per Ordinary share is based on 16,819,600 (31 August 2007: 17,709,375) 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.
Income statement (unaudited)for the six months to 29 February 2008 (continued) Six months to 28 February 2007 Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 Gains on investments - 1,316 1,316 Income 43 - 43 Investment management fee* (12) (38) (50) Other expenses (91) - (91) Net return on ordinary activities before (60) 1,278 1,218 finance costs and taxation
Interest payable and similar charges* (8) (25)
(33) Return for the period (68) 1,253 1,185 Revenue Capital Total pence pence pence Return per Ordinary share# (0.38) 7.02 6.64 Notes
* 75% of the management fee and finance costs have been charged to capital reserve.
# The return per Ordinary share is based on 17,863,403 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 2008
Share Capital Own Share premium Capital redemption shares Capital account reserve reserve held in Revenue Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 Treasury
‚£'000 ‚£'000 ‚£'000 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 - - (1,681) - - (24) (1,705)taxation for the period 29 February 2008 149 2,674 (512) 40 - 3,679 6,030 Year to 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 Six months to 28 February 2007 1 September 2006 182 2,674 (99) 7 - 3,805 6,569 Cost of shares - - - - (156) - (156)purchased for Treasury Net return after - - 1,253 - - (68) 1,185 taxation for the period 28 February 2007 182 2,674 1,154 7 (156) 3,737 7,598 Balance sheet (unaudited)as at 29 February 2008 As at As at As at 29 February 31 August 2007 28 February 2008 ‚£'000 2007 ‚£'000 ‚£'000 Fixed assets Investments at fair value 6,785 8,542 8,660 Current assets Debtors 19 18 20 Cash at bank 1 382 25 20 400 45
Creditors - amounts falling due
within one year Bank overdraft 714 - 999 Creditors 61 91 108 775 91 1,107 Net current (liabilities)/assets (755) 309 (1,062) Net assets 6,030 8,851 7,598 Share capital and reserves Share capital 149 175 182 Share premium account 2,674 2,674 2,674 Capital reserve (512) 2,285 1,154 Capital redemption reserve 40 14 7 Own shares held in Treasury - - (156)Revenue reserve 3,679 3,703 3,737 Equity shareholders' funds 6,030 8,851 7,598 Net Asset Value per Ordinary 40.56p 50.58p 43.09p share (note 1) Statement of cash flows (unaudited)for the six months to 29 February 2008 Six months to Year to Six months to 29 February 31 August 2007 28 February 2008 ‚£'000 2007 ‚£'000 ‚£'000 Operating activities Investment income received 45 98 33 Deposit interest received 5 3 1
Investment management fees paid (39) (114)
(57)Secretarial fees paid (23) (45) (22)Other cash payments (51) (113) (81) Net cash outflow from operating (63) (171) (126)activities (note 4) Returns on investments and servicing of finance Interest paid (9) (68) (20)
Net cash outflow from returns on investments and servicing of (9) (68)
(20)finance Investing activities Purchases of investments (342) (2,070) (758)Sales of investments 468 4,220 1,405
Net cash inflow from investing 126 2,150
647 activities
Net cash inflow before financing 54 1,911
501 Financing Share repurchase (1,116) (210) (156)Cost of Tender Offer (33) - - Net cash outflow from financing (1,149) (210) (156) (Decrease)/increase in cash (1,095) 1,701 345 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 2007, 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.
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 2007.
1. Net Asset Value
The basic net asset value per Ordinary share is based on net assets of ‚£6,030,000 (31 August 2007: ‚£8,851,000, 28 February 2007: ‚£7,598,000) and on14,864,827 Ordinary shares (31 August 2007: 17,500,000, 28 February 2007:17,634,169) being the number of Ordinary shares in issue at the period end(excluding nil Ordinary shares held in Treasury at 29 February 2008, nil at 31August 2007 and 507,770 at 28 February 2007).
2. Tender Offer
On 14 January 2008, following a Tender Offer, the Company purchased andcancelled 2,624,973 Ordinary shares for a total cost of ‚£1,112,000. The Companyalso purchased for cancellation 10,200 Ordinary shares for a cost of ‚£4,000.The number of Ordinary shares in issue at the period end was 14,864,827.
3. Taxation
The tax charge for the six months to 29 February 2008 is nil (year to 31 August 2007 and six months to 28 February 2007: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2008.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.
4. 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 31 August 2007 28 February 2008 ‚£'000 2007 ‚£'000 ‚£'000 Net return before finance costs (1,699) 2,552 1,218 and taxation Net capital return before finance 1,677 (2,639) (1,278)costs Expenses charged to capital (32) (79) (38)
Decrease in creditors and accruals (8) -
(21) Increase in prepayments and (1) (5) (7)accrued income Net cash outflow from operating (63) (171) (126)activities 5. 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. At 29 February 2008 there was ‚£11,000 (31 August 2007: ‚£8,000; 28February 2007: ‚£9,000) 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.
6. 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 ManagerChelverton Asset Management Limited11 George Street, Bath BA1 2EHTel: 01225 483030Secretary and Registered OfficeCapita Sinclair Henderson LimitedBeaufort House51 New North RoadExeter EX4 4EPTel: 01392 412122Registrar and Transfer OfficeEquiniti LimitedAspect HouseSpencer RoadLancingWest Sussex BN99 6DATel: 0870 600 3970BankersLloyds TSB Bank Plc25 Gresham StreetLondon EC2V 7HNAuditorsHazlewoods LLPWindsor HouseBarnett WayBarnwoodGloucester GL4 3RTCustodianHSBC Bank PlcMariner House, Pepys StreetLondon EC3N 4DASolicitorsMaclay Murray & SpensOne London WallLondon EC2Y 5AB
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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