TIDMCGW
RNS Number : 1416X
Chelverton Growth Trust PLC
24 April 2023
Chelverton Growth Trust PLC
LEI: 213800I86P8BAE6UVI83
Half Yearly Report
For the six months ended 28 February 2023
The Directors announce the unaudited Half Yearly Report for the
period 1 September 2022 to 28 February 2023.
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 GBP50 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).
At the Annual General Meeting held on 12 December 2019,
Shareholders voted to amend the Company's Investment Policy to
state that the Company:
-- may participate in a CEPS placing (if it were to have one);
-- will liquidate its various other investments when it is felt appropriate to do so;
-- will repay the outstanding Jarvis Loan; and
-- will pay all outstanding liabilities.
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 ("CAM"), an investment manager focusing exclusively on
achieving returns for investors based on UK investment analysis of
the highest quality. The founder and employee owners of CAM 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
At the beginning of the current period the net asset value per
share was 54.24p. Over the first six months of the current year
which ended on 28 February 2023 the net asset value per share had
declined by 3.39% to 52.40p.
Over the same period, the AIM All-share index has declined by
2.7% and the share price has decreased from 31p to 29p. The shares
were therefore trading at a discount of some 44.7% at the period
end.
In the light of the market turmoil following the Autumn "Mini
Budget" and the more recent volatility caused by the collapse of
the Silicon Valley Bank and the distressed emergency takeover of
Credit Suisse, we consider this to be a relatively robust
performance.
In the UK, we are living with inflation of some 10% and interest
rates at multi-year highs, having risen 11 times since December
2021 from 0.1% to the current 4.25%. The Bank of England has been
forecasting for some time that the UK economy would move into
recession, which we are pleased to see has not yet occurred. Very
recently the IMF has forecast that the UK will be the worst
performing economy in the G20, with a small decline in GDP during
the next twelve months. However, it should also be noted that of
the last 26 forecasts by the IMF, only two have turned out to be
accurate.
We are experiencing an economy that is stagnating, with
increased levels of industrial action and a shortage of labour. In
addition, there have been significant rises in energy prices and
industry wide increases in input prices and supply chain issues.
However there has been recent evidence that as time passes and the
economies of the world transition away from the Covid period, these
issues are beginning to ease.
Future Strategy
The Board has reviewed several options on how to achieve a
return of value to Shareholders, given that the current structure
and small size of the fund make it increasingly difficult to
provide adequate returns.
We have, where possible, sought to minimise costs. The Company
continues to benefit from a zero-management charge from Chelverton
Asset Management, the Investment Manager of the Company, who is
waiving its management fee in its entirety. In addition, Ian Martin
and I have also waived part of our fees. The collective effect of
these actions means that the expense ratio, whilst still high, a
consequence of a very small sized Company, is much smaller than it
could have been.
Notwithstanding the current level of market uncertainty, we feel
that the time is right to formulate proposals to present to
Shareholders. Our objective is to structure an efficient
transaction which ensures that the embedded value in the Company
can be maximised. It is the Board's intention to work towards
completion of these proposals in 2023.
Investments
Over the last six months your Company saw a small decline in the
net asset value per share. Whilst in general, underlying investee
performances have been encouraging, wider market sentiment towards
UK publicly quoted equites, in particular small and micro-cap value
companies, has been negative.
CEPS remains the largest investment in the Company. To remind
Shareholders, this is a diversified AIM traded holding company that
owns majority shareholdings in three subsidiaries and a significant
minority in a fourth business. The company is being developed by
both organic growth of the underlying companies and strategic
"bolt-on" acquisitions.
As highlighted a year ago, an immense amount of work had gone
into restructuring, developing, and improving the Aford Awards
business. It is pleasing to be able to report that evidence of this
progress is now being shown via improved financial performance.
Hickton Group, the fast-growing property services group,
continues to expand. However, in common with many companies, in
several sectors, it has experienced significant wage inflation and
struggled to recruit and retain staff within a highly competitive
employment environment. Of late, the company has improved and
developed its procedures and processes and its results have
advanced.
As expected, Friedmans and Milano have both produced improved
performances with the opening-up, post Covid, of the UK
economy.
Vale Brothers, in common with Hickton, has experienced a
shortage of labour and rapidly rising costs from bought in products
and components sourced in Asia.
Touchstar, the second largest investment, has made excellent
progress in the past six months with a very positive trading
statement at the end of January. The company now has a very strong
balance sheet with some 40% of its market value represented by
cash.
Petards is also expected to shortly announce its 2022 results
showing an increase in profitability and an improvement in the
quality of earnings.
The employment appeal at Main Dental Partners has now been heard
and we are waiting for the judgement to be published in the next
few months.
La Salle Education ("La Salle"), a business involved in
supplying schools with the modern mathematics syllabus via the
internet has been involved in providing services to many schools.
The company is aware that there are considerable opportunities
available. However, to take full advantage of the market, it is
expected there will need to be a further fundraising.
Outlook
As mentioned in my introduction, things are very uncertain
across the UK and Europe. Sadly, the war in the Ukraine continues
and currently there appears to be no end in sight. European
countries have rebalanced their economies and have achieved major
savings in energy which it is to be hoped will become embedded.
With the impact of the draconian lockdown in China and with the
"Ever Given" container vessel blocking the Suez Canal it became
clear to European buyers that they had been under-pricing the risk
of sourcing so many key products from China. Coupled with the
population issues in China, we believe there will be a rebalancing
of production, bringing it much closer to home.
The UK economy is expected to flat-line in 2023 but to "bounce
back" to near long term trend growth in 2024. Inflation is expected
to decline sharply by the end of the year and it might well be that
interest rates have already peaked. As the countries of Europe and
the World return to "normal" there will be steady growth in the UK
economy.
It is the Board's intention to offer Shareholders the return of
funds in the simplest, most cost effective, tax efficient timely
manner possible. Once finalised, the details and recommendation
will be sent for Shareholder consideration and approval. As I
indicated earlier, we plan to do this soon with a view to
completion in 2023.
Kevin Allen
Chairman
21 April 2023
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 2022 on pages 14 and 15 and pages 54 and 55. 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 28 February 2023, has been prepared in accordance with FRS 104
"Interim Financial Reporting", gives a fair view of the assets,
liabilities, financial position and loss of the Company; and
-- this Half Yearly Report includes a fair review of the information required by;
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 do
so.
This Half Yearly Report was approved by the Board of Directors
on 21 April 2023 and the above Responsibility Statement was signed
on its behalf by:
Kevin Allen
Chairman
Portfolio R eview
as at 28 February 2023
The Company's portfolio is set out below.
Investment Sector Valuation % of
GBP'000 total
portfolio
AIM Traded
CEPS Support Services 1,911 64.7
Trading holding company for a number of
companies supplying services and products
Petards Group Support Services 142 4.8
Development, provision and maintenance
of advance security systems and related
services
Technology Hardware &
Touchstar Equipment 680 23.0
Software systems for warehousing and distribution
Nasdaq Traded
Touchpoint Group Support Services
Holdings - -
Provider of mobile satellite communications
equipment and airtime
Unquoted
La Salle Education Support Services 221 7.5
A UK based company dedicated to providing
online mathematics education
Redecol Healthcare Equipment
& Services - -
A medical device company focused on the
development of asthma monitoring
Portfolio Valuation 2,954 100.0
---------- ----------
Portfolio Holdings
as at 28 February 2023
28 February 31 August 2022
2023
% of % of
Valuation total Valuation total
Investment GBP'000 portfolio GBP'000 portfolio
CEPS 1,911 64.7 2,075 68.0
Touchstar 680 23.0 595 19.5
La Salle Education 221 7.5 182 5.9
Petards Group 142 4.8 180 5.9
Redecol - - 21 0.7
Touchpoint Group Holdings - - - -
Total 2,954 100.0 3,053 100.0
------------ ---------- ------------ ----------
Portfolio breakdown by sector and by index
as at 28 February 2023
Sector distribution % of total
Support Services 77.0
Technology Hardware & Equipment 23.0
Index distribution % of total
AIM 92.5
Unquoted 7.5
Income Statement (unaudited)
for the six months to 28 February 2023
Six months to Year to Six months to
28 February 2023 31 August 2022 28 February 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains
on investments
at fair value
(note 4) - (38) (38) - (72) (72) - 80 80
Income (note
2) 6 - 6 9 - 9 4 - 4
Investment - - - - - - - - -
management
fee*
Other expenses (68) - (68) (120) (2) (122) (61) (1) (62)
--------- --------- --------- --------- --------- --------- --------- -------- --------
Net (loss)/
return on
ordinary
activities
before taxation (62) (38) (100) (111) (74) (185) (57) 79 22
Taxation
on ordinary
activities - - - - - - - - -
--------- --------- --------- --------- --------- --------- --------- -------- --------
Net (loss)/return
on ordinary
activities
after taxation (62) (38) (100) (111) (74) (185) (57) 79 22
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
(Loss)/return
per Ordinary
share** (1.13) (0.70) (1.83) (2.04) (1.35) (3.39) (1.04) 1.44 0.40
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 July 2022 by the
Association of Investment Companies ("AIC SORP").
All revenue and capital items in the above statement derive from
continuing operations.
The revenue column of the Income Statement includes all income
and expenses. The capital column includes the realised and
unrealised profit or loss on investments and 75% of the management
fee and finance costs charged to capital.
* With effect from 1 September 2020, the Investment Manager
agreed to waive the entitlement to a fee.
** The return per Ordinary share is based on 5,460,301 (31
August 2022: 5,460,301; 28 February 2022: 5,460,301) shares, being
the weighted average number of shares in issue during the
period.
Statement of Changes in Equity (unaudited)
for the six months to 28 February 2023
Called Capital
up share Special Capital redemption Revenue
capital reserve* reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Six months to 28 February 2023
1 September 2022 55 787 1,937 134 48 2,961
Net loss after taxation
for the period - - (38) - (62) (100)
---------- ----------- ---------- ------------ ---------- ------------
28 February 2023 55 787 1,899 134 (14) 2,861
---------- ----------- ---------- ------------ ---------- ------------
Year to 31 August 2022
1 September 2021 55 787 2,011 134 159 3,146
Net loss after taxation
for the year - - (74) - (111) (185)
---------- ----------- ---------- ------------ ---------- ------------
31 August 2022 55 787 1,937 134 48 2,961
---------- ----------- ---------- ------------ ---------- ------------
Six months to 28 February 2022
1 September 2021 55 787 2,011 134 159 3,146
Net return/( loss)
after taxation for
the period - - 79 - (57) 22
---------- ----------- ---------- ------------ ---------- ------------
28 February 2022 55 787 2,090 134 102 3,168
---------- ----------- ---------- ------------ ---------- ------------
*The Special reserve was created by the cancellation of the
share premium account by order of the High Court on 20 January
2016.
Distributable reserves: The Special reserve and Revenue reserve
can be used for the purchase of the Company ' s Ordinary shares.
Statement of Financial Position (unaudited)
as at 28 February 2023
As at 28 As at 31 As at 28
February August February
2023 2022 2022
GBP'000 GBP'000 GBP'000
Fixed assets
Investments at fair
value
(note 4) 2,954 3,053 3,232
Current assets
Debtors 145 146 149
Cash and cash
equivalents 13 10 22
-------------------------- -------------------------- -------------------------
158 156 171
-------------------------- -------------------------- -------------------------
Creditors - amounts falling due within one year
Creditors (36) (33) (20)
Short-term loans (note
5) (215) (215) (215)
-------------------------- -------------------------- -------------------------
(251) (248) (235)
-------------------------- -------------------------- -------------------------
Net current liabilities (93) (92) (64)
-------------------------- -------------------------- -------------------------
Net assets 2,861 2,961 3,168
-------------------------- -------------------------- -------------------------
Share capital and reserves
Called up share capital 55 55 55
Special reserve 787 787 787
Capital reserve 1,899 1,937 2,090
Capital redemption
reserve 134 134 134
Revenue reserve (14) 48 102
-------------------------- -------------------------- -------------------------
Equity S hareholders'
funds 2,861 2,961 3,168
-------------------------- -------------------------- -------------------------
Net asset value per
Ordinary
share (note 6) 52.40p 54.24p 58.02p
-------------------------- -------------------------- -------------------------
Statement of Cash Flows (unaudited)
for the six months to 28 February 2023
Six months Six months
to Year to to
28 February 31 August 28 February
2023 2022 2022
GBP' 000 GBP' 000 GBP' 000
Cash flows used in operating activities
Net (loss)/gain on ordinary
activities (100) (185) 22
Adjustment for:
Net capital loss/(gain) 38 74 (79)
Expenses charged to capital - (2) (1)
Interest paid - 3 1
Change in creditors 3 1 (12)
Change in debtors 7 - (3)
Cash used in operations (52) (109) (72)
--------------- ---------------- ---------------
Cash flows from/(used in) investing activities
Purchase of investments - (160) (160)
Proceeds from sale of investments 55 133 106
--------------- ---------------- ---------------
Net cash from/( used in)
investing activities 55 (27) (54)
--------------- ---------------- ---------------
Cash flows from financing activities
Loan advanced - 215 165
Capital repayment of loan - (100) (50)
Interest paid - (3) (1)
--------------- ---------------- ---------------
Net cash from financing
activities - 112 114
--------------- ---------------- ---------------
Net increase/(decrease)
in cash 3 (24) (12)
--------------- ---------------- ---------------
Cash at the beginning of
the period 10 34 34
--------------- ---------------- ---------------
Cash at the end of the
period 13 10 22
--------------- ---------------- ---------------
1 Accounting Policies
a) Statement of compliance
The Company's Financial Statements for the period ended 28
February 2023 have been prepared under UK Generally Accepted
Accounting Practice (UK GAAP) and the Statement of Recommended
Practice, 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts' issued in July 2022 ('the SORP') by the
Association of Investment 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 2022.
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
28 February 2023 and 28 February 2022 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 2022 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. In assessing the Company's
ability to continue as a going concern, the Board has fully
considered the current economic environment and impact of the war
in Ukraine.
2 Income
Six months Year to Six months
to to
28 February 31 August 28 February
2023 2022 2022
GBP'000 GBP'000 GBP'000
Income from investments
Loan stock interest 6 9 4
Total income 6 9 4
------------ --------------- -----------------
3 Taxation
The tax charge for the six months to 28 February 2023 is nil
(year to 31 August 2022: nil; six months to 28 February 2022:
nil).
The Company has an effective tax rate of 0% for the year ending
31 August 2023. 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 28 February
Traded 2023 2022 2022
on
AIM Unquoted NASDAQ Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book
cost 3,642 472 166 4,280 4,752 4,752
Opening
investment
holding
losses (792) (269) (166) (1,227) (1,654) (1,654)
------------ -------------- ------------ ----------------- --------------- -----------------
2,850 203 - 3,053 3,098 3,098
Movements in
the period:
Purchases at
cost - - - - 160 160
Sales
proceeds (61) - - (61) (133) (106)
Losses on
sales (61) - - (61) (499) (226)
Movement in
investment
holding
losses 5 18 - 23 427 306
------------ -------------- ------------ ----------------- ---------------
Closing
valuation 2,733 221 - 2,954 3,053 3,232
------------ -------------- ------------ ----------------- --------------- -----------------
Closing book
cost 3,520 472 166 4,158 4,280 4,580
Closing
investment
holding
losses (787) (251) (166) (1,204) (1,227) (1,348)
-----------------
Closing
valuation 2,733 221 - 2,954 3,053 3,232
-----------------
Analysis of capital gains and (losses)
Realised
losses
on sales (61) - - (61) (499) (226)
Movement in
fair value
of
investments 5 18 - 23 427 306
------------ -------------- ------------ ----------------- --------------- -----------------
(56) 18 - (38) (72) 80
------------ -------------- ------------ ----------------- --------------- -----------------
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:
Level 1 - Valued using quoted prices in active markets for
identical assets or liabilities. This is usually the bid price.
Level 2 - Valued by reference to valuation techniques using
observable inputs other than quoted prices included within Level
1.
Level 3 - Valued by reference to valuation techniques using
inputs that are not based on observable market data.
Details of the Company's financial instruments are shown in the
Portfolio Review including financial instruments which fall into
Level 3 shown under the section heading "Unquoted". A summary
reconciliation of the fair value movements of Level 3 investments
is shown in the table above.
Financial assets at fair value through profit or loss;
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
At 28 February
2023
Equity investments 2,733 - 221 2,954
-------- -------- -------- --------
Total 2,733 - 221 2,954
-------- -------- -------- --------
At 31 August 2022
Equity investments 2,850 - 203 3,053
-------- -------- -------- --------
Total 2,850 - 203 3,053
-------- -------- -------- --------
At 28 February
2022
Equity investments 2,989 - 243 3,232
-------- -------- -------- --------
Total 2,989 - 243 3,232
-------- -------- -------- --------
5 Short term loans
On 16 September 2021, the Company entered into an interest free
loan agreement with Mr Horner. Drawdowns were made of GBP165,000 on
16 September 2021, GBP25,000 on 30 May 2022 and GBP25,000 on 31 May
2022. At the period end, GBP215,000 was outstanding. The loan is
unsecured, interest free and can be repaid by the Company at any
time or on 18 months notice from Mr Horner.
6 Net asset value
The basic net asset value per Ordinary share is based on net
assets of GBP2,861,000 (31 August 2022: GBP2,961,000; 28 February
2022: GBP3,168,000) and on 5,460,301 Ordinary shares (31 August
2022: 5,460,301; 28 February 2022: 5,460,301) being the number of
Ordinary shares in issue at the period end. No shares are held in
Treasury.
7 Related party transactions
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, a subsidiary of
Chelverton Asset Management Holdings Limited, and chairman of CEPS
PLC, in which the Company has a significant investment.
Mr Martin is the chairman of Touchstar plc, in which the Company
holds an investment as set out above.
As stated in note 5, on 16 September 2021, the Company entered
into an interest free loan agreement with Mr Horner. At the period
end a balance of GBP215,000 was outstanding.
The three Directors also have individual holdings in Chelverton
Asset Management Holdings, a company which has Mr Horner as a
director. The Directors' holdings are detailed below.
Percentage
Ordinary shares of Ordinary
held shares held
GBP' 000 %
K J Allen 1 1
D A Horner* 55.25 55.25
I P Martin 2 2
* Director and connected persons
total holdings.
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.
An investment company as defined under Section 833 of the
Companies Act 2006.
REGISTERED IN ENGLAND No 02989519
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