Half-yearly Report
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 in
companies 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 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 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 decreased in the last six months
from 33.18p to 16.87p, a decrease of 49.16%. In the same period the Company's
benchmark index, the FTSE All-Share, decreased by 32.73%. Since the half year
end 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 in
global financial markets and dramatic falls in economic activity and stock
markets. At the heart of the problem was the rapid escalation of the crisis in
the banking sector and the resolution of these problems still appears to be
someway off despite a co-ordinated effort by monetary authorities globally to
get the banks lending again. The knock on effect of the lack of liquidity for
the corporate sector has severely exaggerated the magnitude of the cyclical
downturn, particularly at the smaller end of the market.
Historically, as the economic cycle turned down smaller companies would trend
back to a level where takeover activity by larger corporates, venture
capitalists or management teams would help to put a floor under valuations.
Unfortunately, as we indicated in our last statement, the lack of available
capital has undermined this support for the foreseeable future. An improvement
in the domestic liquidity environment remains the key to attracting investors
back into our investment sector.
As an asset class, small caps were particularly badly affected by the rapidly
deteriorating macro environment and September and October were two of the
poorest months on record for small cap performance. Throughout the last period
there were earnings downgrades across our portfolio and prices fell
accordingly. We sold our holdings in AssetCo and Clipper Ventures and realised
funds from IDOX, Mount Engineering and Tristel. Unfortunately, after a poor
Christmas trading performance EBTM was put into administration, as was
Smallbone who were unable to agree a re-financing after a recent acquisition.
On the plus side we have recently had reassuring numbers from Tristel, Alliance
Pharma and Northbridge.
One unfortunate consequence of the sell off in small caps has been a dramatic
pick up in companies looking to de-list from AIM as they believe that
increasingly the costs now outweigh the benefits of a listing. We have
experienced this through Axis, which was sold in the period, and Chromogenex
which delisted on 1 April 2009. We believe that this will continue to be an
issue for small cap investors whilst valuations remain at current levels.
As we move into our second half domestic interest rates have fallen to their
lowest ever levels highlighting the magnitude of the current economic problems.
Companies of all sizes across the whole spectrum of sectors are highlighting an
unprecedented uncertainty with regard to their trading outlook. We believe that
this uncertainty will continue to depress smaller company valuations for the
remainder 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 REVIEW
as 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 1.6
Group Services
Supplier of technology solutions to the defence and industrial sectors
Richoux Group (previously Travel & Leisure 46 1.6
Gourmet 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 related
services
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 of
packaging solutions
MTI Wireless Edge Technology Hardware & 74 2.5
Equipment
Developer and manufacturer of sophisticated antennae and antenna systems
Northbridge Industrial Industrial 140 4.8
Services 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 1.7
liquidation)
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 3.4
Partners 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 26.7
Software & Computer Services 20.8
Travel & Leisure 13.0
Industrial Engineering 10.9
Electronic & Electrical Equipment 7.4
Healthcare Equipment & Services 6.1
Technology Hardware & Equipment 5.5
Industrial Transportation 3.7
Household Goods 2.5
Pharmaceuticals & Biotechnology 1.4
Mobile Telecommunications 1.4
General Financial 0.5
General Retailers 0.1
PERCENTAGE OF PORTFOLIO BY INDEX
Index Percentage
AIM 81.3
Unquoted 17.8
Delisted 0.9
INCOME 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)
NOTES
The unaudited interim financial information does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. The statutory
accounts for the year to 31 August 2008, which contained an unqualified
auditors' report, have been lodged with the Registrar of Companies and did not
contain a statement required under Section 237 (2) or (3) of the Companies Act
1985. The financial information for the period ended 28 February 2009 and 29
February 2008 have 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 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 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
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 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 28 February 2009 there was £3,000 (31 August 2008: £5,000; 29
February 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 so
that they satisfy the conditions for approval as an investment trust company as
set out in Section 842 of the Income and Corporation Taxes Act 1988.
DIRECTORS AND ADVISORS
Directors
George Stevens (Chairman)
Kevin Allen
Bryan Lenygon
David Horner
Investment Manager
Chelverton Asset Management Limited
11 George Street, Bath BA1 2EH
Tel: 01225 483030
Secretary and Registered Office
Capita Sinclair Henderson Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 412122
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
Bankers
Lloyds TSB Bank Plc
25 Gresham Street
London EC2V 7HN
Auditors
Hazlewoods LLP
Windsor House
Barnett Way
Barnwood
Gloucester GL4 3RT
Custodian
HSBC Global Services
8 Canada Square
London 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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