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

Chelverton Growth TrustAnnouncement

07/04/2017 14:05

RNS Number : 9632B
Chelverton Growth Trust PLC
07 April 2017
Chelverton Growth Trust PLC
Half Yearly Report
For the six months ended 28 February 2017
The Directors announce the unaudited Half Yearly Report for the period 1 September 2016 to 28 February 2017.
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 investment objective is to increase the net asset value per share at a higher rate than other quoted smaller company trusts and the MCSI Small Cap UK Index. 
It is the Company's policy not to invest in any listed investment companies (including listed investment trusts).
Investmentstrategy
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, an independent 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 made good progress in the first six months of the current year with the Net Asset Value per share rising from 62.53p to 74.89p, an increase of 19.8%, outperforming the benchmark indices.
Over the same period, the AIM All-share index rose by 14.6% whilst the Company's comparative index, the MSCI Small Cap UK index rose by 6.1%. The share price decreased from 82p to 75p in line with its historic relationship to Net Asset Value.
The half-year results were achieved against a background of economic and political uncertainty. The biggest issue in the world of politicians and commentators is the imminent negotiation of the United Kingdom's exit from the European Union on the best mutual terms for the United Kingdom and our fellow Europeans. The companies in which we are invested sell approximately 85% of their goods and services within the UK, with only 5% going to the European Union. Apart from the fluctuations in currency rates, they do not consider the eventual leaving of the EU a material day to day business concern. 
In the past six months, in line with our new direction, we have liquidated holdings in Alliance Pharma, LPA Group and Northbridge Industrial Services in their entirety. The holding in Petards was reduced following a sharp increase in its share price resulting from a good stream of contract wins. Petards, is a UK manufacturer supplying the rail industry, and has strong potential going forward. The portfolio is thus becoming concentrated in a smaller number of holdings. The investment in Anaxsys was reduced to nil as it has restructured its business and now licences the intellectual property it has created and owns. Until it receives a royalty payment it is considered prudent to reduce the value to nil. On the positive side, other unquoted holdings made good progress leading to increased valuations for Transflex Vehicle Rental and Chelverton Asset Management, the investment managers of this fund.
Your fund held a shareholding in Parmenion which was sold last year to Aberdeen Asset Management plc. An initial payment was received at completion, in addition we could be entitled to a further sum, subject to the performance of the business. The maximum amount of this further payment is capped at 673,652. Based upon its current expectation, the Board has put a value in these accounts of 350,000 additional consideration.
The fund took up its rights in a placing made by CEPS plc, an AIM trading holding company for a number of specialist niche businesses. The fund now owns 21.2% of this company. 
Whilst Shareholders are aware that it is the Board's ongoing intention to return funds to Shareholders by way of annual tenders these can only be carried out in a meaningful and cost effective manner when the fund has significant cash resources. At the moment the Company is largely fully invested and so the eighth tender offer will be delayed until significant sums have been realised from one or more investments. 
Looking through to the second half of the year, and onwards, the economic and political agenda is going to be dominated by the daily reporting of the negotiations to leave the European Union. For investors in this fund, the state of the UK economy is far more relevant. The sentiment of the so called "experts" is that the UK economy will continue to grow steadily into the future and, as the European Union itself starts to exhibit signs of increasing growth this will only serve to help. The Board therefore feels that the portfolio will continue to make good progress.
Kevin Allen
Chairman
7 April 2017
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 2016 on pages 11 and 12 and pages 48 to 50. These risks include, but are not limited to, market risk, discount volatility risk, regulatory risk, financial risk and liquidity risk.
Responsibilitystatement
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 28 February 2017, 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
this Half Yearly Report includes a fair review of the information required by;
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
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 do so.
ThisHalfYearlyReportwasapproved bytheBoard ofDirectorson 7 April2017 and the above responsibility statement was signed on its behalf by Kevin Allen, Chairman.
Portfolioreview
asat28February2017
TheCompany'sportfolioissetoutbelow.
Investment
Sector
Valuation
% of


'000
total



portfolio
AIM traded 







CEPS
Support Services
981
21.3
Trading holding company for a number of companies supplying services and products






Lombard Risk Management
Computer & Software Services
234
5.1
Lombard Risk is one of the world's leading providers of collateral management, liquidity analysis and regulatory compliance software to financial organisations






MTI Wireless Edge
Technology Hardware & Equipment
152
3.3
Developer and manufacturer of sophisticated antennas and antenna systems






Petards Group
Support Services
405
8.8
Development, provision and maintenance of advance security systems and related services






Plutus Powergen
Flexible Energy Supply
767
16.7
Providers of management infrastructure and expertise to operate power plants and provide flexible electricity generation






Touchstar*
Technology Hardware & Equipment
563
12.2
Software systems for warehousing and distribution






Universe Group
Support Services
53
1.2
Provision of credit fraud prevention, loyalty and retail systems






*Formerly Belgravium Technologies







Nasdaq Traded







One Horizon Group
Support Services
40
0.9
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
-
-
A medical device company for patient monitoring and screening





Chelverton Asset Management Holdings
Support Services
159
3.5
Investment management, including providing services to Chelverton Growth Trust Plc






La Salle Education
Support Services
-
-
A UK based company dedicated to improving mathematics education.






Main Dental
Support Services


Ordinary B Shares

138
3.0
Loan Stock

-
-
Operator of dental surgeries






Pedaling Forth
General Retailers
150
3.3
Internet retailer of cycling clothing for women





Security Research Group
Support Services
52
1.1
Leading provider of Local Authority residential property searches; provision of packaging solutions






Transflex Vehicle Rental
Support Services
902
19.6
Light commercial vehicle rental






Portfolio valuation

4,596
100.0
Portfolioholdings

28 February 2017
31 August 2016

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










CEPS
981
21.3
614
15.6
Transflex Vehicle Rental
902
19.6
902
23.0
Plutus Powergen
767
16.7
400
10.2
Touchstar*
563
12.2
406
10.4
Petards Group
405
8.8
335
8.5
Lombard Risk Management
234
5.1
201
5.1
Chelverton Asset Management Holdings
159
3.5
141
3.6
MTI Wireless Edge
152
3.3
165
4.2
Pedalling Forth
150
3.3
150
3.8
Main Dental
138
3.0
175
4.5
Universe Group
53
1.2
73
1.9
Security Research Group
52
1.1
52
1.3
One Horizon Group
40
0.9
84
2.1
Alliance Pharma **
-
-
49
1.3
LPA Group **
-
-
123
3.1
Northbridge Industrial Services **
-
-
32
0.8
Anaxsys Technology
-
-
23
0.6
Airways Engineering
-
-
-
-
La Salle Education
-
-
-
-





Total
4,596
100.0
3,925
100.0





* Formerly Belgravium Technologies




** Sold during the period
Portfoliobreakdownbysector andbyindex
Sector distribution
% of total
Support Services
59.4 
Flexible Energy Supply
16.7
Technology Hardware & Equipment
15.5
Software & Computer Services
5.1
General Retailers
3.3


Index distribution
% of total
AIM
68.6
Unquoted
30.5
Nasdaq 
0.9
Incomestatement(unaudited)forthesixmonthsto28February2017

Six months to
Year to
Six months to

28 February 2017
31 August 2016
29 February 2016

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)
-
630
630
-
565
565
-
292
292
Income (note 2)
1
250
251
27
100
127
18
-
18
Investment management fee
(6)
(18)
(24)
(12)
(35)
(47)
(7)
(19)
(26)
Other expenses
(64)
(4)
(68)
(155)
(7)
(162)
(67)
(6)
(73)
Netreturn on ordinary activities before taxation
(69)
858
789
(140)
623
483
(56)
267
211
Taxation on ordinary activities
-
-
-
-
-
-
-
-
-
Net return on ordinary activities after taxation
(69)
858
789
(140)
623
483
(56)
267
211











Revenue
Capital
Total
Revenue
Capital
Total
Revenue
Capital
Total

pence
pence
pence
pence
pence
pence
pence
pence
pence
Return per Ordinary share*
(1.08)
13.45
12.37
(1.86)
8.26
6.40
(0.65)
3.14
2.49
The total column of this statement is the profit and loss account 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").
All revenue and capital items in the above statement derive from continuing operations.
A separate Statement of Other Comprehensive Income has not been prepared as all such gains and losses are included in the Income Statement.
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 return per Ordinary share is based on 6,377,088 (31 August 2016: 7,538,051; 29 February 2016: 8,501,650) shares, being the weighted average number of shares in issue during the period.
Statement of changes in equity(unaudited)
forthesixmonthsto28February2017

Called up share capital
'000
Sharepremiumaccount
'000
Specialreserve*
'000
Capitalreserve
'000
Capitalredemptionreserve
'000
Revenuereserve
'000
Total
'000
Six months to28February 2017
1September 2016
64
-
1,506
1,536
125
756
3,987
Netreturn after taxationfor theperiod
-
-
-
858
-
(69)
789
28 February2017
64
-
1,506
2,394
125
687
4,776








Year to 31 August 2016







1September 2015
86
2,674
-
913
103
896
4,672
Costs of shares purchased for cancellation under tender offer
(22)
-
(1,149)
-
22
-
(1,149)
Cancellation of share premium account
-
(2,674)
2,674
-
-
-
-
Costs of cancelling
share premium account
-
-
(19)
-
-
-
(19)
Netreturn after taxationfor the year
-
-
-
623
-
(140)
483
31 August 2016
64
-
1,506
1,536
125
756
3,987








Six months to29February 2016







1September 2015
86
2,674
-
913
103
896
4,672
Cancellation of share premium account
-
(2,674)
2,674
-
-
-
-
Costs of cancelling
share premium account
-
-
(19)
-
-
-
(19)
Netreturn after taxationfor theperiod
-
-
-
267
-
(56)
211
29 February2016
86
-
2,655
1,180
103
840
4,864
*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)
asat 28February2017

As at28 February 2017
'000


As at31 August 2016
'000


As at29 February2016
'000
Fixedassets
Investments at fair value (note 4)
4,596


3,925


3,546
Currentassets
Debtors
353


6


13
Cash at bank
103


261


1,328

456


267


1,341
Creditors -amountsfallingduewithinone year
Creditors
(26)


(55)


(23)
Short-termloans (note 5)
(250)


(250)


-

(276)


(305)


(23)
Net current assets/(liabilities)
180


(38)


1,318
Debtors - amounts falling due after one year
-


100


-








Net assets
4,776


3,987


4,864
Sharecapital andreserves
Called up sharecapital
64


64


86
Special reserve
1,506


1.506


2,655
Capital reserve
2,394


1,536


1,180
Capital redemptionreserve
125


125


103
Revenuereserve
687


756


840
Equityshareholders'funds
4,776


3,987


4,864
Net asset valueper Ordinary share(note 6)
74.89p


62.53p


57.21p
Statementofcashflows(unaudited)
forthesixmonthsto28February2017

Six months to 28 February 2017

Year to 31 August 2016

Six months to29 February 2016

'000

'000

'000
Cash flows from operating activities






Net return on ordinary activities
789

483

211
Adjustment for:





Net capital return
(858)

(623)

(267)
Income credited to capital
250

100

-
Expenses charged to capital
(22)

(42)

(25)
Interest paid
5

11

9
(Decrease)/increase in creditors
(29)

27

(5)
Increase in debtors
(247)

(97)

(4)
Cash used in operations
(112)

(141)

(81)
Cash flows from investing activities
Purchaseof investments
(444)

(420)

(50)
Salesof investments
403

2,082

1,818
Net cash (used in)/frominvesting activities
(41)

1,662

1,768
Cash flows from financing activities
Costof sharespurchased for cancellationunder tender offer
-

(1,149)

-
Costs of cancelling share premium account
-

(19)

(19)
New loans advanced
-

300

50
Capital repayment of loans
-

(450)

(450)
Interest paid
(5)

(11)

(9)
Net cashused in financing activities
(5)

(1,329)

(428)






Net (decrease)/increase incash
(158)

192

1,259
Cash at the beginning of the period
261

69

69
Cash at the end of the period
103

261

1,328
1. ACCOUNTING POLICIES
Statement of compliance
The Company's Financial Statements fortheperiodended28February2017have 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 financial statements have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 August 2016.
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 28 February 2017 and 29 February 2016 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 2016 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.
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
28 February 2017
31 August 2016
29 February 2016
'000
'000
'000
Income from investments
Income from LLP investments
250
115
15
UK net dividend income
1
12
3



Total income
251
127
18
3 Taxation
The tax charge for the six months to 28 February 2017 is nil (year to 31 August 2016: nil;six months to 29 February 2016: nil).
The Company has an effective tax rate of 0% for the year ending 31 August 2017. 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
28 February
31 August
29 February
2017
2016
2016
AIM
Unquoted
NASDAQ
Total
Total
Total
'000
'000
'000
'000
'000
'000
Opening book cost
3,155
1,612
166
4,933
4,695
4,695
Opening investment holding (losses)/gains
(757)
(169)
(82)
(1,008)
327
327
2,398
1,443
84
3,925
5,022
5,022
Movements in the period:
Purchases at cost
444
-
-
444
420
50
Sales proceeds
(403)
-
-
(403)
(2,082)
(129)
Gains on sales
213
-
-
213
1,900
1,689
Movement in investment holding gains/(losses)
503
(42)
(44)
417
(1,335)
(3,086)
Closing valuation
3,155
1,401
40
4,596
3,925
3,546
Closing book cost
3,409
1,612
166
5,187
4,933
4,616
Closing investment holding (losses)/gains
(254)
(211)
(126)
(591)
(1,008)
(1,070)
Closing valuation
3,155
1,401
40
4,596
3,925
3,546
Analysis of capital gains and losses
Realised gains on sales
213
-
-
213
1,900
1,689
Movement in fair value of investments
503
(42)
(44)
417
(1,335)
(1,397)
716
(42)
(44)
630
565
292
 
Fair value hierarchy
In accordance with FRS 102 and FRS 104 the Company must disclose the fair value hierarchy of financial instruments.
The fairvaluehierarchyconsists of the following threeclassifications:
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 -Inputsfor the asset or liabilitythatarebased on observablemarket data and unobservable market data, to estimate what the transaction price would have been on the measurement data in an arm's length exchange motivated by 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. 
Financial assets at fair value through profit or loss;

Classification A
Classification B
Classification C
Total

'000
'000
'000
'000
At 28 February 2017




Equity investments
3,195
-
1,401
4,596
Total
3,195
-
1,401
4,596
At 31 August 2016




Equity investments
2,482
-
1,443
3,925
Total
2,482
-
1,443
3,925
At 29 February 2016




Equity investments
2,541
-
1,005
3,546
Total
2,541
-
1,005
3,546
5 Short term loans
On 17 June 2016 the Company entered in to a 250,000 loan agreement with Jarvis Investment Management Limited. Interest is payable monthly in arrears at the rate of 4.5% above the Bank of England base rate.
At the period end 250,000 is outstanding of which 125,000 was drawn down on 17 June 2016 and 125,000 on 8 August 2016. The loan is secured on the assets of the Company and is repayable on demand.
6 Netassetvalue
The basic net asset value per Ordinary share is based on net assets of 4,776,000 (31 August 2016: 3,987,000; 29 February 2016: 4,864,000) and on 6,377,088 Ordinary shares (31 August 2016: 6,377,088; 29 February 2016: 8,501,650) being the number of Ordinary shares in issue at the period end. No shares are held in Treasury.
7 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 chairman of CEPS PLC, in which the Company holds an investment as set out above.Mr Martin is the Chairman of Touchstar plc in which the Company holds an investment as set out above.
At 28 February 2017 there was 4,200 (31 August 2016: 3,500; 29 February 2016: 4,000) payable to the Investment Manager.
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 held
Percentage of 
loan stock held
Ordinary shares held
Percentage of ordinary shares held

'000
%
'000
%
K J Allen
-
-
1
1
D A Horner
615
96
56
56
I P 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
The Courtyard
Ian Martin
17 West Street

Farnham

Surrey GU9 7DR

Tel: 01252 821 390

www.shareregistrars.uk.com


Investment Manager
Auditors
Chelverton Asset Management Limited
Hazlewoods LLP
111 Laura Place
Windsor House
Bath BA2 4BL
Bayshill Road
Tel: 01225 483 030
Cheltenham GL50 3AT


Secretary and Registered Office
Custodian and Banker
ISCA Administration Limited
Jarvis Investment Management Limited
Suite 8, Bridge House
78 Mount Ephraim
Courtenay Street 
Royal Tunbridge Wells TN4 8BS
Newton Abbot
Tel: 01892 510 515
Devon TQ12 2QS

Tel: 01392 487 056

Email: cgw@iscaadmin.co.uk



Information about the Company can be obtained at the Investment Manager's website at www.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 incorporated into, or forms part of this announcement.
AninvestmentcompanyasdefinedunderSection833oftheCompaniesAct2006.
REGISTEREDINENGLANDNo 2989519


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