REG - Chelverton Grwth Tst - Half-year Report <Origin Href="QuoteRef">CHLV.L</Origin> - Part 1

Chelverton Growth TrustAnnouncement

27/04/2016 12:40

RNS Number : 5324W
Chelverton Growth Trust PLC
27 April 2016
Chelverton Growth Trust PLC
Half Yearly Report 
for the six months ended 29 February 2016
The Directors announce the unaudited Half Yearly Report for the period from 1 September 2015 to 29 February 2016. 
Investment objective and policy
The Company's objective is to provide capital growth through investment in companies listed 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 the Manager believes to be at a "point of change". The Company will 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 objective is to increase the net asset value per share at a higher rate than other quoted smaller company trusts and the MSCI Small Cap Index. 
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 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 earnings prospects over a five year time horizon.
The Company's Investment Manager is Chelverton Asset Management Limited, a specialist investment manager focusing exclusively on achieving returns for investors based on UK investment analysis of the highest quality. The founder 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.
Chairman's Report
Your Company has continued to make good progress in the first six months of the current year with the Net Asset Value ("NAV") per share rising by 4.1% from 54.95p to 57.21p. This compares favourably to our benchmark indices, the AIM All-share index and the MSCI Small Cap UK, which declined by 5.1% and 2.7% respectively. It is also pleasing to report that the share price increased by over 16% during the period from 42.5p to 49.5p.
Since the period end we have been able to increase the value of two of our unquoted investments, Transflex Vehicle Rental and Anaxsys Technology, rise substantially. Consequently, the NAV per share has increased further to 61.73p at the end of March 2016. In response, the share price has increased to 62p very close to the underlying NAV.
Although there is, as ever, political and economic uncertainty around the world, we remain in a low growth, low interest rate and low inflation environment. Corporate balance sheets and cash flows appear strong but real growth is increasingly difficult to achieve and maintain.
In the UK, the referendum on membership of the European Union will lead to increased uncertainty and consequent inaction by companies as they "sit on their hands" and await the outcome which is too close to call. If the electorate chooses to leave Europe it will potentially result in considerable short-term upheaval. However, in the main, the Board feels that the companies in which the Company is invested should produce improved trading performances in the short to medium term.
As stated previously, the Company is entering a phase of maturity and Shareholders should expect to see it become increasingly concentrated on a smaller number of investments. It is the Board's intention to continue with the annual tender offer and cancellation of shares, which may, in the short-term, result in a higher level of volatility in the NAV of the Company. In the longer term, we have faith in the businesses in which we are invested and expect long-term performance to be solid.
In line with the above policy, during the past six months further reductions have been made in the holding of IDOX and after the period end this investment was sold in its entirety. LPA was also reduced after a very strong share price performance. The holdings in Belgravium Technologies and La Salle Education were both increased in the period.
Following further growth of funds under management at Chelverton Asset Management, the Investment Managers of this fund, the valuation of this shareholding was increased again to reflect the company's underlying performance. Excellent progress at Transflex Vehicle Rental led to an increase in the valuation by 50% which is in line with the price placed on shares by the Board of the Company.
A new investment of 150,000 was made in Pedalling Forth Limited, trading as VeloVixen. The investment was part of a 500,000 development fundraising by the company. VeloVixen is a three-year old business which supplies women's cycling clothing and accessories via the internet. The funds will be used to raise the profile of the business and to provide working capital.
The proceeds received following the sale of the fund's largest investment Parmenion enabled us to eliminate borrowings and apply the cash to an offer for 24.99% of the outstanding shares in Chelverton Growth Trust.
This was the seventh tender offer. Valid applications were received from eligible Shareholders in respect of a total of 3,173,391 ordinary shares (representing approximately 37.33% of the Company's issued ordinary share capital at the record date). It successfully completed in March 2016 with the purchase by the Company of 24.99% of the issued share capital being 2,124,562 shares at 52.92p each. The tender price was calculated as being equal to 92.5% of the NAV per share on 29 February 2016.
These shares have subsequently been cancelled leaving a reduced share capital of 6,377,088 shares in issue. In the absence of any unexpected events, it is the Board's intention to repeat the process at the same time next year based on the net asset value per share calculated at 28 February 2017. It is interesting to note that following the seventh tender offer the number of shares acquired and cancelled is now 12,505,957 being a 66.2% reduction in the Company's original share capital. 
Shareholders voted at the Annual General Meeting in December 2015 to flex the Investment Approach and to permit a reduction in the number of holdings. This change in policy recognises that future tender offers will make it likely that each year the number of investments will gradually reduce until at some point the Board will need to consider how to effect a final transfer of value to Shareholders. 
Looking forward to the remainder of the financial year, the economic environment is going to be dominated by the EU Referendum in Britain. However, notwithstanding the uncertainty this will cause, the Board believes that the investment portfolio will continue to make good progress.
Kevin Allen
Chairman
27 April 2016
Interim management report
The important events that have occurred during the period under review and the key factors influencing the financial statements are set out in the Chairman's Report. The Board considers that the principal risks and uncertainties facing the Company remain the same as those disclosed in the Annual Report for the year ended 31 August 2015 on pages 12 and 13 and pages 49 to 51. These risks include, but are not limited to, market risk, discount volatility risk, regulatory risk, financial risk and liquidity risk.
Responsibility statement
The Directors are responsible for preparing the unaudited Half Yearly Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
The condensed set of financial statements for the six months to 29 February 2016, has been prepared in accordance with FRS 104 "Interim Financial Reporting", gives a fair view of the assets, liabilities, financial position and profit of the Company; and
ThisHalfYearlyReportincludeafairreviewoftheinformationrequiredby;
a) rule 4.2.7R of the Disclosure and Transparency Rules being an indication of important events that have occurred during the first six 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) rule 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 doso.
ThisHalfYearlyReportwasapproved bytheBoard ofDirectorson 27April2016 and the above responsibility statement was signed on its behalf by Kevin Allen, Chairman.
Portfolioreview
asat29February2016
TheCompany'sportfolioissetoutbelow.
Investment
Sector
Valuation
% of


'000
total
AIM traded 







Alliance Pharma
Pharmaceuticals & Biotechnology
48
1.3
Acquisition of the manufacturing, sales and distribution rights to pharmaceutical products






Belgravium Technologies
Technology Hardware & Equipment
329
9.3
Software systems for warehousing and distribution






CEPS
Support Services
798
22.5
Production and supply of components for the footwear industry; personal protection equipment; production of printed lycra fabric; services to the direct mail industry and provision of "Clerk of Works"






IDOX
Software & Computer Services
204
5.7
Software company specialising in the development of products for document information management






Lombard Risk Management
Software & Computer Services
141
4.0
Lombard Risk is one of the world's leading providers of collateral management, liquidity analysis and regulatory compliance software to financial organisations






LPA Group
Electronic & Electrical Equipment
149
4.2
Design, manufacture and marketing of industrial electrical accessories






MTI Wireless Edge
Technology Hardware & Equipment
154
4.3
Developer and manufacturer of sophisticated antennas and antenna systems






Northbridge Industrial Services
Industrial Engineering
32
0.9
Provider of specialist industrial services






Petards Group
Support Services
184
5.2
Development, provision and maintenance of advance security systems and related services






Plutus Powergen
Flexible Energy Supply
350
9.9
Providers of management infrastructure and expertise to operate power plants and provide flexible electricity generation






Universe Group
Support Services
54
1.5
Provision of credit fraud prevention systems, loyalty systems and retail systems






Nasdaq Traded







One Horizon Group
Support Services
98
2.8
Provider of mobile satellite communications equipment and airtime






Unquoted







Airways Engineering
Support Services


Ordinary B Shares

-
-
Loan Stock

-
-
Commercial aviation maintenance






Anaxsys Technology
Healthcare Equipment & Services
13
0.4
A medical device company for patient monitoring and screening





Chelverton Asset Management Holdings
Support Services
130
3.7
Investment management, including providing services to Chelverton Growth Trust Plc






Closed Loop Recycling*
Support Services


Ordinary B Shares

-
-
Loan Stock

-
-
Operation of a plastic (PET and HDPE) recycling plant






La Salle Education Limited
Support Services
80
2.3
A UK based company dedicated to improving mathematics education.






Main Dental
Support Services


Ordinary B Shares

175
4.9
Loan Stock

-
-
Operator of dental surgeries






Security Research Group
Support Services
52
1.5
Leading provider of Local Authority residential property searches; provision of packaging solutions and technical surveillance countermeasure components






Transflex Vehicle Rental
Support Services
555
15.6
Light commercial vehicle rental






Portfolio valuation

3,546
100.0




* in administration







Portfolio holdings

29 February 2016
31 August 2015

Valuation
% of 
Valuation
% of
Investment
'000
total
'000
total





CEPS
798
22.5
610
12.1
Transflex Vehicle Rental
555
15.6
555
11.0
Plutus Powergen
350
9.9
290
5.8
Belgravium Technologies
329
9.3
337
6.7
IDOX
204
5.7
164
3.3
Petards Group
184
5.2
169
3.4
Main Dental
175
4.9
175
3.5
MTI Wireless Edge
154
4.3
86
1.7
LPA Group
149
4.2
118
2.3
Lombard Risk Management
141
4.0
144
2.9
Chelverton Asset Management Holdings
130
3.7
120
2.4
One Horizon Group
98
2.8
134
2.7
La Salle Education Limited
80
2.3
25
0.5
Universe Group
54
1.5
65
1.3
Security Research Group
52
1.5
62
1.2
Alliance Pharma
48
1.3
56
1.1
Northbridge Industrial Services
32
0.9
60
1.2
Anaxsys Technology
13
0.4
13
0.3
Airways Engineering
-
-
-
-
Closed Loop Recycling Limited *
-
-
-
-
Parmenion Capital Partners LLP**
-
-
1,839
36.6





Total
3,546
100.0
5,022
100.0





* In Administration




** The Company retains an interest in a possible future bonus payment from Parmenion Capital Partners but at the date of this report the amount is not quantifiable.
Portfoliobreakdownbysector andbyindex
Sector distribution

% of total
Support Services
60.0 
Technology Hardware & Equipment
13.6 
Flexible Energy Supply
9.9 
Software & Computer Services
9.7 
Electronic & Electrical Equipment
4.2 
Pharmaceuticals & Biotechnology
1.3 
Industrial Engineering
0.9 
Healthcare Equipment & Services
0.4 
Index distribution

% of total
AIM
68.8
Unquoted
28.4
Nasdaq OTC
2.8
Incomestatement(unaudited)forthesixmonthsto29February2016

Six months to
Year to
Six months to

29 February 2016
31 August 2015
28 February 2015

Revenue
Capital
Total
Revenue
Capital
Total
Revenue
Capital
Total

'000
'000
'000
'000
'000
'000
'000
'000
'000
Gains on investments at fair value (note 4)
-
292
292
-
406
406
-
19
19
Income (note 2)
18
-
18
60
-
60
35
-
35
Investment management fee
(7)
(19)
(26)
(12)
(37)
(49)
(6)
(19)
(25)
Other expenses
(67)
(6)
(73)
(116)
(12)
(128)
(59)
(4)
(63)
Netreturn on ordinary activities before taxation
(56)
267
211
(68)
357
289
(30)
(4)
 (34)
Taxation on ordinary activities
-
-
-
-
-
-
-
-
-
Net return on ordinary activities
(56)
267
211
(68)
357
289
(30)
(4)
 (34)











Revenue
Capital
Total
Revenue
Capital
Total
Revenue
Capital
Total

pence
pence
pence
pence
pence
pence
pence
pence
pence
Return per Ordinary share*
(0.65)
3.14
2.49
(0.75)
3.96
3.21
(0.32)
(0.04)
(0.36)
All items in the above statement derive from continuing operations. 
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the realised and unrealised profit or loss on investments and 75% of the management fee and finance costs charged to capital. 
The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").
*The return per Ordinary share is based on 8,501,650 (31 August 2015: 9,019,251; 28 February 2015: 9,446,274) shares, being the weighted average number of shares in issue during the period.
Statement of changes in equity (unaudited) for the six months to 29 February 2016


Share


Capital



Share
premium
Special
Capital
redemption
Revenue


capital
account
reserve*
reserve
reserve
reserve
Total

'000
'000
'000
'000
'000
'000
'000
Six months to29February 2016
1September 2015
86
2,674
-
913
103
896
4,672
Cancellation of share premium account
-
(2,674)
2,674
-
-
-
-
Costs relating to cancellation of share premium account
-
-
(19)
-
-
-
(19)
Netreturn after taxationfor theperiod
-
-
-
267
-
(56)
211
29 February2016
86
-
2,655
1,180
103
840
4,864
Yearto 31August 2015
1September 2014
96
2,674
-
556
93
1,435
4,854
Costof sharespurchased for cancellationunder tender offer
(10)
-
-
-
10
(446)
(446)
Netreturn after taxationfor theperiod
-
-
-
357
-
(93)
264
31 August 2015
86
2,674
-
913
103
896
4,672
Six months to28February 2015
1September 2014
96
2,674
-
556
93
1,435
4,854
Netreturn after taxationfor theperiod
-
-
-
(4)
-
(30)
(34)
28 February2015
96
2,674
-
552
93
1,405
4,820








*The special reserve was created by the cancellation of the share premium account by order of the High Court on 20 January 2016. The special reserve can be used for the purchase of the Company's Ordinary shares.
Statement of financial position (unaudited) as at 29 February 2016

As at29 February 2016
'000
As at31 August 2015
'000
As at28 February2015
'000
Investments at fair value (note 4)
3,546
5,022
4,804
Debtors
13
9
2
Cash at bank
1,328
69
454

1,341
78
456
Creditors
(23)
(28)
(40)
Short-termloan (note 5)
-
(400)
(400)

(23)
(428)
(440)
Net current assets/(liabilities) 
1,318
(350)
16
Net assets
4,864
4,672
4,820




Share capital and reserves



Sharecapital
86
86
96
Sharepremiumaccount
-
2,674
2,674
Special reserve
2,655
-
-
Capital reserve
1,180
913
552
Capital redemptionreserve
103
103
93
Revenuereserve
840
896
1,405
Equityshareholders'funds
4,864
4,672
4,820
Net asset valueper Ordinary share
(note 6)
57.21p
54.95p
51.03p
Statementofcashflows(unaudited)
forthesixmonthsto29February2016

Six months to
Year to
Six months to

29 February
31 August
28 February

2016
2015
2015

'000
'000
'000
Cash flows from operating activities 



Net return
211
289
(34)
Adjustment for:



Net capital return
(267)
(357)
4
Expenses charged to capital
(25)
(48)
(23)
Interest paid
9
15
-
(Decrease)/increase in creditors
(5)
7
19
(Increase)/decrease in prepayments and accrued income
(4)
1
6
Other 
-
(2)
-
Cash used in operations
(81)
(95)
(28)




Cash flows from investing activities



Purchaseof investments
(50)
(549)
(75)
Salesof investments
1,818
960
317
Net cashinflow frominvesting activities
1,768
411
242
Cash flows from financing activities



Costof sharespurchased for cancellationunder tender offer
-
(472)
-
Cost of cancellation of share premium account
(19)
-
-
New loan advanced
50
200
200
Capital repayment of loan
(450)
-
-
Interest paid
(9)
(15)
-
Net cash (used in)/fromfinancing activities
(428)
(287)
200




Net increase incash
1,259
29
414
Cash at the beginning of the period
69
40
40
Cash at the end of the period
1,328
69
454
Notes to the financial statements
1 Accounting policies
a) Statement of compliance
The Company's Financial Statements for the period ended 29 February 2016 have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and the 2014 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') issued by the Association of Investment Trust Companies.
The Company has also adopted FRS 104, which applies to interim periods commencing on or after 1 January 2015. The transition to FRS 104 has had no impact on the previous reported financial position and financial performance. With the exception of this, the financial statements have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 August 2015.
b) Financial information
The financial information contained in this report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the period ended 29 February 2016 and 28 February 2015 have not been audited or reviewed by the Company's Auditor pursuant to the Auditing Practices Board guidance on such reviews. The information for the year to 31 August 2015 has been extracted from the latest published Annual Report and Financial Statements, which have been lodged with the Registrar of Companies, contained an unqualified auditors' report and did not contain a statement required under Section 498 (2) or (3) of the Companies Act 2006.
c) Going concern
The Company's assets consist mainly of equity shares in companies which, in most circumstances are realisable within a short timescale. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the accounts.
2 Income
Six months to
Year to
Six months to
29 February 2016
31 August 2015
28 February 2015
'000
'000
'000
Income from investments
Income from LLP investments
15
35
22
UK net dividend income
3
21
9
Income from loan interest
-
4
4



Total income
18
60
35
3 Taxation
The tax charge for the six months to 29 February 2016 is nil (year to 31 August 2015: nil; six months to 28 February 2015: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2016. 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.
4 Investments
29 February
31 August
28 February
2016
2015
2015
AIM
Unquoted
NASDAQ
Total
Total
Total
'000
'000
'000
'000
'000
'000
Opening book cost
2,990
1,539
166
4,695
4,595
4,595
Opening investment holding (losses)/gains
(891)
1,250
(32)
327
432
432
2,099
2,789
134
5,022
5,027
5,027
Movements in the period:
Purchases at cost
20
30
-
50
549
75
Sales at cost
(14)
(115)
-
(129)
(449)
(181)
Gains on sales
22
1,667
-
1,689
511
136
Movement in investment holding (losses)/gains
316
(3,366)
(36)
(3,086)
(616)
(253)
Closing valuation
2,443
1,005
98
3,546
5,022
4,804
Closing book cost
2,996
1,454
166
4,616
4,695
4,489
Closing investment holding (losses)/gains
(553)
(449)
(68)
(1,070)
327 
315
Closing valuation
2,443
1,005
98
3,546
5,022
4,804
Analysis of capital gains and losses
Realised gains on sales
22
1,667
-
1,689
511
136
Movement in fair value of investments
338
(1,699)
(36)
(1,397)
(105)
(117)
360
(32)
(36)
292
406
19
 
Fair value hierarchy
In accordance with FRS 102 and FRS 104 the Company must disclose the fair value hierarchy of financial instruments.
The fair value hierarchy consists of the following three classifications:
Classification A - Quoted prices in active markets for identical assets or liabilities.
Classification B - The price of a recent transaction for an identical asset, where quoted prices are unavailable.
Classification C Inputs for the asset or liability that are based on observable marketdata and unobservablemarket data, to estimate what the transaction price would have been on the measurement data in an arm's length exchange motivatedby normal business considerations.
Details of the Company's financial instruments are shown in the Portfolio Review including financial instruments which fall into level C shown under the section heading "Unquoted". A summary reconciliation of the fair value movements of level C investments is shown in the table above. The realised gains on sales of 1,667,000 relates to the sale of Parmenion Capital Partners LLP on 12 January 2016.
Financial assets at fair value through profit or loss;

Classification A
Classification B
Classification C
Total

'000
'000
'000
'000
At 29 February 2016




Equity investments
2,541
-
1,005
3,546
Total
2,541
-
1,005
3,546





At 31 August 2015




Equity investments
2,233
-
2,789
5,022
Total
2,233
-
2,789
5,022





At 28 February 2015




Equity investments
2,477
-
2,327
4,804
Total
2,477
-
2,327
4,804
5 Short term loans
In November 2015 the Company borrowed 50,000 from Chelverton Asset Management Limited. The loans of 400,000 from Jarvis Investment Management Limited and 50,000 from Chelverton Asset Management Limited were repaid in full in January 2016.
6 Netassetvalue
The basic net asset value per Ordinary share is based on net assets of 4,864,000 (31 August 2015: 4,672,000; 28 February 2015: 4,820,000) and on 8,501,650 Ordinary shares (31 August 2015: 8,501,650; 28 February 2015: 9,446,274) being the number of Ordinary shares in issue at the period end. 
7 Post balance sheet events
On 18 March 2016, pursuant to the Tender Offer, 2,124,562 Ordinary shares were repurchased for cancellation resulting in there being 6,377,088 Ordinary shares of 1p in issue.
8 Relatedpartytransactions
Under the terms of the agreement dated 28 June 2001, the Company has appointed Chelverton Asset Management Limited to be the Investment Manager. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited and CEPS PLC, in which the Company holds an investment as set out above.
At 29 February 2016 there was 4,000 (31 August 2015: 4,000; 28 February 2015: 4,200) payable to the Investment Manager.
Mr Martin was appointed is the Chairman of Belgravium Technologies plc in which the Company holds an investment as set out above. 
The three Directors also have individual holdings in Chelverton Asset Management Holdings, a company which has Mr Horner as a director and which the Company also has a direct holding. The Directors' holdings are detailed below.

Loan stock
Percentage of
Ordinaryshares
Percentage of

held
Loan stock
held
Ordinaryshares


held

held

'000
%
'000
%
Mr K Allen
-
-
1
1
Mr D Horner
925
86
56
56
Mr I Martin
-
-
2
2
The Company holds 2,000 shares in Chelverton Asset Management Limited representing 2% of the voting rights.
 Directors and advisers
Directors
Registrars and Transfer Office
Kevin Allen (Chairman)
Share Registrars Limited
David Horner
Suite E, First Floor
Ian Martin
9 Lion and Lamb Yard

Farnham

Surrey GU9 7LL

Tel: 01252 821 390


Investment Manager
Auditors
Chelverton Asset Management Limited
Hazlewoods LLP
12B George Street
Windsor House
Bath BA1 2EH
Bayshill Road
Tel: 01225 483 030
Cheltenham GL50 3AT


Secretary and Registered Office
Custodian and Banker
ISCA Administration Limited
Jarvis Investment Management Limited
(appointed 21 December 2015)
78 Mount Ephraim
Suite 8, Bridge House
Royal Tunbridge Wells TN4 8BS
Courtenay Street 
Tel: 01892 510 515
Newton Abbot

Devon TQ12 2QS

Tel: 01392 487 056

Email: cgw@iscaadmin.co.uk



Informationaboutthe CompanycanbeobtainedattheInvestmentManager'swebsiteatwww.chelvertonam.com.
Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of this announcement
AninvestmentcompanyasdefinedunderSection833oftheCompaniesAct2006.
REGISTEREDINENGLANDNo.298951

This information is provided by RNS
The company news service from the London Stock Exchange
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