REG - Chelverton UK DivTst - SDV Update

Chelverton UK Dividend TrustAnnouncement

09/05/2025 07:00

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RNS Number : 9610H  Chelverton UK Dividend Trust PLC  09 May 2025

Chelverton UK Dividend Trust PLC ("SDV" or the "Company")

LEI: 213800DAF47EJ2HT4P78

 

SDV Update

 

Further to the announcement on 24 April, the 2025 ZDPs have now been repaid in
full, and the Company currently has no borrowings or gearing.  The Company
has net assets of £ 30.85 m, as at 7 May 2025, across a diversified portfolio
of small and midcap companies.

The Manager believes that there are compelling opportunities within the mid-
and smaller UK companies universe and that the application of a rigorous
investment discipline, combined with patience and a long-term outlook, can
produce outstanding returns for investors. The changing macroeconomic
environment, notably lower inflation and the beginning of interest rate cuts
in the UK provide an accommodating backdrop for mid- and smaller UK companies.

Dividend for year ending 30 April 2025

Further to the announcement of 5 March 2025, it continues to be the Board's
intention to pay the fourth interim dividend of 3.25p, which when added to the
preceding three quarterly dividends would bring the total to 13.00p, for the
year ending 30 April 2025.

Dividend Policy

As the Company is now ungeared, post the repayment of the final capital
entitlement of the 2025 ZDPs, the underlying income from the restructured
portfolio will lead to reduced dividend payments to ordinary shareholders.
However, the Company has significant revenue reserves (£2.8m as at 31 October
2024, the last reported date), which can be used to supplement the underlying
income.

 

Consequently, the Board announces its intention to pay 2.5p per ordinary share
on a quarterly basis being a total of 10.00p per ordinary share per annum for
the next three years ending 30 April 2028 (subject inter alia to market
conditions at the time), effective from the first interim dividend in respect
of the year to April 2026. The shares will therefore provide a yield of 7.6%
(based on the closing share price as at 8 May 2025). This dividend target
takes into account the Company's revenue reserves and assumes no change in the
underlying portfolio income.

 

The Board believes this represents a compelling combination of an attractive
dividend yield and the potential for capital upside from any recovery in the
UK small and midcap market.

 

Outlook

The Board and the Manager are confident in both the Company's prospects and in
the current portfolio's potential for growth.

As market circumstances develop, the Company will seek opportunities to
reintroduce gearing into the Company's structure. The Company continues to
actively consider alternative financing options and will provide a further
update as required.

Director Investment Trusts at Chelverton Asset Management, the Investment
Manager of the Company, David Horner, commented:

"It is interesting to observe that over the past, more than 50 years, there
have only been two occasions when UK Smaller Cap companies have underperformed
Large Caps for three years in a row.  The first occasion was in the early
1980's and the second occasion, the present day.  Most market observers
consider that the UK equity markets, of all market capitalisations, are in
Global terms relatively and absolutely cheap and within that the Small and
Mid-Cap segments of the market are even more lowly rated.  Evidence of this
is the daily and extensive purchases by companies of their own shares.  In
the past when the rerating occurs in the Small Companies sector there was
generally a very strong recovery, which has historically made up for the
period of underperformance.  The "shortage" of loose equity should,
logically, mean that any recovery in share prices could well be swift and
significant.

On a macro view despite the 0.25% reduction in the Bank of England Base Rate
announced yesterday, the current rate of 4.25% remains almost double the
European Central Bank rate, which is currently 2.25%. Market expectations are
for further UK Base Rate cuts over the next 12-18 months, with some
commentators suggesting there could be up to a further five reductions, down
to 3.0%. Historically, lower interest rates are generally a catalyst for
greater market activity and share price appreciation.   As interest rates
decline and confidence in the economy returns the future release of these cash
reserves would be a major boost to GDP.

Our confidence in the current portfolio's potential for growth remains as high
as it's ever been."

The person responsible for arranging the release of this announcement is
Suzanna Waterhouse of Apex Fund Administration Services (UK) Limited, Company
Secretary.

 

For further information contact

Chelverton Asset Management Limited (Investment Manager)

David Horner/Oliver
Knott
Tel:   +44 (0) 20 7222 8989

 

Shore Capital (Corporate Broker)   

Anita Ghanekar / Harry Davies-Ball (Corporate Advisory)    Tel: +44 (0) 20
7408 4090

Henry Willcocks (Corporate Broking)

 

Company Secretary

Apex Fund Administration Services (UK) Limited
                 Tel: 01245 398950

Suzanna Waterhouse

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