TIDMCGW
RNS Number : 6811D
Chelverton Growth Trust PLC
29 October 2020
CHELVERTON GROWTH TRUST PLC
LEI: 213800I86P8BAE6UVI83
FINAL RESULTS FOR THE YEARED 31 AUGUST 2020
The full Annual Report and Accounts can be accessed via the
Company's website at www.chelvertonam.com or by contacting the
Company Secretary on 01392 487056.
Investment objective
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 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 MSCI 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 plc 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.
Company summary
Benchmark MSCI Small Cap UK Index
Investment Manager Chelverton Asset Management Limited
Total net assets GBP2,218,000 as at 31 August 2020
Market capitalisation GBP1,638,000 as at 31 August 2020
Capital structure 5,460,301 Ordinary 1p shares carrying one
vote each
Performance statistics
Year ended Year ended
31 August 31 August
2020 2019 % Change
Net assets GBP2,218,000 GBP2,446,000 (9.33)
Net asset value per share
(NAV) 40.61p 44.79p (9.33)
MSCI Small Cap UK Index 365.47 400.00 (8.63)
Share price 30.00p 40.50p (25.93)
Discount to net asset value (26.13)% (9.58)%
Revenue loss after taxation GBP(93,000) GBP(125,000)
Revenue loss per share (1.70)p (2.29)p
Capital loss per share (2.47)p (13.41)p
Strategic Report
The Strategic Report section of the Annual Report has been
prepared to help Shareholders understand the operations of the
Company and assess its performance.
Chairman's Statement
I have to report that much of what I wrote in last year's
statement remains apposite for today. Last year I highlighted that
a resolution of the Brexit deal could lead to a re-rating in UK
Equities, and in particular our smaller UK centric companies. No
sooner had the first phase of the Brexit issue been resolved,
namely leaving the EU, than the outbreak of Covid-19 caused the
World Economy to effectively enter its own "furlough".
The asset value of our investments unsurprising fell reflecting
the uncertainty and disruption that the pandemic brings to the
world, both socially and economically. The past year has seen a
decline in the Company's net asset value per share from 44.79p to
40.61p - a decrease of 9.33%. In the same period, the Company's
benchmark index, the MSCI Small Cap UK Index fell by 8.63%.
As a nation we are living through a very difficult and uncertain
time. Obviously, we all hope that in the next period (I hold back
from defining the length of this period), we will be able to
control Covid-19 or at least find a better balance between
protecting lives while enabling the economy and business to
prosper.
If the uncertainty of a global pandemic was not enough; over the
coming months we have to navigate the final stages of leaving the
European Union, and hopefully come to an agreement with our
European friends as to how our trading relationship will work going
forward.
The election process in the United States, while seemingly
remote, will also further exacerbate world uncertainty for the next
few weeks and possibly months.
The Manager's Report sets out in more detail the developments in
the portfolio over the past twelve months. I am pleased to say that
there have been some positive developments and I wish to recognise
the considerable efforts by everyone working in our investee
companies to achieve the best they can, given the exceptionally
challenging conditions.
During this difficult period, the Board has made every attempt
to minimise expenses. Significant savings have been made as
follows:
-- The Directors made the decision to waive a substantial part
of their remuneration at the time of the initial lockdown.
-- We are very grateful to the Trust administrator, ISCA
Administration Services who volunteered a significant reduction in
their fees from 1 May 2020 through to 31 January 2021.
-- Our Investment Manager, Chelverton Asset Management also
reduced its fees from 1% to 0.5% of gross assets from 1 November
2019 to 31 August 2020 and has agreed to waive its fees for the
period from 1 September 2020 to 28 February 2021 when the position
will be reviewed.
The combination of these actions have saved the Company
GBP21,350 in the financial year and serves to make the expense
ratio more appropriate to the level of investments held.
Tender Offer
The eighth, and last tender offer, took place in September 2017.
Since then the Board has taken the view that it was not
appropriate, with the depressed net asset value per share, to
repeat the process.
It is worth reminding Shareholders that the effect of the
multiple tender offers and the occasional buy-back of shares has
reduced the share capital from some 18.9 million shares to the
current 5.5 million, a reduction of 71%.
Whilst the Board remains committed to the tender process as a
means of offering Shareholders the ability to realise some of their
shareholding at a modest discount to the net asset value, it is not
prepared to sanction a tender offer at the current net asset value
per share, feeling that this valuation does not represent anything
like the real underlying value of the assets.
The Future
As reported last year, the Board has looked at the strategic
options available to the Company; the objective of this exercise is
to maximise returns and provide an effective exit to all
Shareholders. We have identified a number of promising avenues but
unfortunately, the impact of Covid-19 on the economy and markets
has caused us to put on hold, for the time being, the process of
formally implementing our strategy for maximising the value for
Shareholders from the remaining assets within the portfolio. We
believe that it would be value destructive to try and realise
assets at this time and will therefore defer doing so until the
market recovers and prices more accurately reflect underlying
value.
Under the Articles, Chelverton Growth Trust is required to put a
resolution to Shareholders for a continuation vote at the
forthcoming Annual General Meeting ("AGM"). The last such
resolution was approved in 2015 and a similar resolution for a
further five years will be proposed. The Board, however, very much
hope to be in a position to put to Shareholders a viable
realisation plan well within this period.
The Outlook
Over the course of the next twelve months it is hoped that much
of the current uncertainty will be resolved or, at the very least,
a clear path forward will emerge which provides the environment for
investment levels to return and economic growth to begin.
It is being consistently reported and routinely discussed in the
media that UK equities are cheaper than they have been for some 40
years. Improved certainty and clarity should therefore encourage
investors back to UK companies. In time, the Board believe this
should lead to a significant increase in the Company's net asset
value per share.
Most of the companies in the portfolio have shown great
resilience over the past 12 months and it will be this strength
that should enable them to survive and prosper, taking advantage of
the opportunities created where some of their less well managed
competitors fail to last the course.
Such an improved environment will allow us to move forward with
our plans to realise value for Shareholders.
Unfortunately, due to the current Covid-19 restrictions, it is
envisaged that the Shareholders will not be able to attend the
Annual General Meeting on 10 December 2020. Full details are given
on page 30 of the Annual Report.
Kevin Allen
Chairman
29 October 2020
Investment Manager's Overview
In the past year we have experienced several different investing
environments. In the first quarter of the Company's financial year,
there was considerable optimism following the re-election of the
Conservative Party on a manifesto of "Get Brexit Done" and a
commitment to "levelling-up" the UK economy. It was anticipated
that investors would be able to move on from the whole exhausting
"Brexit" process which had dominated all areas of the UK's
economic, political and social landscape.
However, from early March, we were faced with the Covid-19
pandemic. Initially there was investor panic and the stock market
collapsed such that its decline in a two-week period was equivalent
to the two-year bear market of the "Financial Crisis" in 2007 -
2009. This period I have now called "The Great Panic". The UK was
faced with a nationwide lockdown, something we have never
experienced before as a nation. Companies immediately went into
survival mode which meant taking advantage of all the Government
schemes possible, furloughing as many employees as was considered
sensible, cutting all discretionary expenditure and deferring all
capital expenditure.
However, after a little while, businesses began to work out new
ways of operating and showed high degrees of innovation in what
they did and how they did it. Whilst some of our investee companies
are dependent on people interacting and coming together, others
have definitely benefited from the restrictions of the
lockdown.
Across the companies within all Chelverton Asset Management's
funds it is fair to say that universally, businesses reported that
they were in a better position after four to six months of lockdown
than they had anticipated at the outset in March. Clearly of late,
businesses involved in the hospitality industry have, through the
recent tightening of regulations, unfortunately gone backwards.
Another feature that has become evident over the past six months
is that this period has been used by our investee companies to
adopt new business practices and to drive through efficiency
improvements that will make a difference now and particularly in
the future as demand picks up. The Furlough Scheme, and its
subsequent gradual unwinding, has highlighted the productivity, or
indeed lack of productivity of the marginal employee. It might well
be that the spike in unemployment that we expect to see in the next
few months will result from a reduction in demand and from improved
efficiency.
Hopefully, if we finally see a Trade Agreement with Europe in
the next few weeks or months, the Country and the companies we are
invested in, can finally get on with managing within an environment
of "known-knowns". The energy, time and resources spent on the
Brexit process should then be able to be applied much more
productively. There is a feeling that once a Trade Agreement is in
place there will be a release of pent-up demand that has been held
up waiting for the future trading environment to be resolved.
The portfolio is invested in small AIM traded or unquoted
companies whose business is largely conducted in the UK and
therefore the strength and growth of the UK economy is by far and
away the most important determinant of our underlying companies'
success.
It is a well-documented fact that UK and Overseas investors
remain very "underweight" in UK equities, as it has been all too
easy to sit on the side lines waiting for a resolution of the
Brexit Debate and then the Trade Agreement impasse. The trend we
highlighted last year of the large differential in the relative
ratings between "Growth" companies and "Value" companies has
continued to widen in the year. An example of this is the
extraordinary rise in the value of Apple in the past year. The
American technology company on its own is now worth more than the
aggregate value of the components of FTSE 100. Those of us who have
been working in, and observing, markets for some time know that
these extremes of valuation do not last forever.
Review of Individual Holdings
CEPS plc (AIM - 46.5% of portfolio)
CEPS is the largest holding and represents 46.5% in value of the
portfolio. The Company's performance is therefore very dependent
upon it. Significant work has been undertaken to restructure both
the operation and capital structure of CEPS. This over time should
allow for the underlying value of CEPS to be better reflected and
appreciated by the stock market. The arrival of Covid-19 and the
subsequent lockdown, means that this expectation has now been put
on hold until 2021.
However, in the past year and even in the lockdown period, the
subsidiary companies within CEPS have developed and innovated to be
more efficient and better businesses. Friedmans, a producer of
unique designs printed on lycra, acquired Milano International a
producer of gymnastic clothing in a negotiation that effectively
lasted for five years. The loss making and cash absorbing CEM
Press/Sampling International was removed. Hickton Consultants, the
supplier of clerk of works nearly doubled in size by acquiring
Cooke Brown a supplier of building regulations services. The
ownership and management of Aford Awards was changed as a new team
was brought in to replace the existing management with a clear
brief to drive a consolidation exercise which should be helped by
the severe impact of the lockdown on this sector.
Finally, the team at Davies Odell has reduced the workforce
significantly and has scaled back to make a demonstrably profitable
business. It appears that the difficulties faced have caused even
greater problems amongst competitors, some of whom will go out of
business.
Touchstar plc (AIM - 19.2% of portfolio)
Touchstar continued to develop its focused and streamlined
business. It reported an improving position in its recent interim
results and has built up strength in its balance sheet. In common
with the companies above, it is to be hoped that 2021 will be a
much better year and that 2022 will further show the strength and
quality of the revitalised business.
Chelverton Asset Management (Unquoted - 10.2 % of portfolio)
The holding in Chelverton Asset Management Holdings (CAM), the
holding company of the Investment Manager of this fund, was again
revalued upwards reflecting the continued success of its funds and
a further growth in funds under management. If, as we expect, the
CAM Employee Share Option Trust makes an offer for shares in CAM
via a tender, and at a value that we believe to be fair, it is
probable we will reduce the Company's holding in this company. CAM
has been a very successful investment for the Company over the
years producing both a steady dividend flow and significant capital
appreciation.
Pedalling Forth (Unquoted - 10.0% of portfolio)
Pedalling Forth (trading as Velovixen) is proof of the old
saying "it is an ill wind that blows nobody good". Positioned as an
internet retailer of ladies cycling clothes it has experienced a
significant and sustained increase in sales as the interest in
cycling has developed. The company sold out of its own branded
product on two occasions and it is to be hoped that the current
level of sales can be sustained and built on going forward.
Petards Group (AIM - 6.3% of portfolio)
Petards has spent the past year scaling its operation to the new
market expectations. Given that a large part of its business
operates in the railway supply side, this year has been very
difficult. The business has changed in nature and should be more
profitable and produce a better quality of earnings going
forward.
La Salle Education (Unquoted - 5.4% of portfolio)
La Salle Education has continued to show excellent progress and
is developing its business model on several fronts. The Covid-19
pandemic is accelerating the process of digitisation in education.
Whilst the sector has previously been slow to implement
digitisation, the need to learn and study online during lockdown
has accelerated the adoption of digital and online technologies. We
believe that these trends are here to stay, reinforced by the UK
Government's now mandatory requirement for schools to make
permanent provision for online learning.
Other Investments (less than 2.5% of portfolio)
The remaining 4 holdings in the portfolio represent less than
2.5% of the Company's portfolio. Universe, an AIM listed company,
produced robust results and we anticipate that as we return to more
normal operating conditions, we will see significant progress in
the business and the share price. The remaining investments,
Redecol, Zenith Energy and Touchpoint are held at negligible
value.
The investment in Main Dental was sold during the previous
period for a deferred consideration of GBP138,000 to SpaDental
Limited. This sum is shown in the accounts within debtors and is
subject to the legal judgement on a claim by James Main. A
judgement in favour of Main would result in a potential deduction
from any settlement payable by SpaDental Limited. Until settled,
interest is receivable at base rate plus 3.5% on the sum due to the
Company.
Outlook
In time, the macroeconomic outlook will become more settled and
consequently more favourable. We hope that the coming period will
see a clean and simple result in the election of the President of
the United States, the implementation of a Trade Agreement with the
European Union, and, over time, the control and management of the
Covid-19 virus.
The resolution of these three significant and uncertain issues
will happen. When it does, we believe that the real value of our
investee companies will begin to be evidenced by increases in their
share prices thus contributing to a welcome increase in the asset
value of the Company. We therefore anticipate being able to report
a much better performance in a year's time.
David Horner
Chelverton Asset Management Limited
29 October 2020
Portfolio Review
as at 31 August 2020
Valuation % of
Investment Sector GBP'000 total portfolio
----------------------------------------------- -------------------------- --------- ----------------
AIM Traded
CEPS Support Services 1,113 46.5
Trading holding company for a number of companies
supplying services and products
Petards Group Support Services 150 6.3
Development, provision and maintenance of advanced
security systems and related services
Technology Hardware and
Touchstar Equipment 459 19.2
Software systems for warehousing and distribution
Universe Group Support Services 34 1.4
Provision of credit fraud prevention, loyalty
and retail systems
Fully Listed
Zenith Energy Oil & Gas Producers 12 0.5
International energy production and exploration
company
Nasdaq Traded
Touchpoint Group Holdings Support Services - -
Provider of mobile satellite communications
equipment and airtime
--------- ----------------
1,768 73.9
Chelverton Asset Management
Holdings Support Services 245 10.2
Investment management, including providing
services to Chelverton Growth Trust Plc
La Salle Education Support Services 130 5.4
A UK based company dedicated to providing on-line
mathematics education
Pedalling Forth General Retailers 240 10.0
Internet retailer of cycling clothing for women
Healthcare, Equipment &
Redecol* Services 12 0.5
A medical device company focussed on the development
of asthma monitoring
Portfolio Valuation 2,395 100.0
--------- ----------------
* Shares received from the purchase of Anaxsys Technology by
Redecol Limited.
Portfolio Holdings
as at 31 August 2020
31 August 2020 31 August 2019
Valuation % of total Valuation % of total
Investment GBP'000 portfolio GBP'000 portfolio
---------------------------- --------- ---------- --------- ----------
CEPS 1,113 46.5 1,214 43.3
Touchstar 459 19.2 298 10.6
Chelverton Asset Management
Holdings 245 10.2 220 7.9
Pedalling Forth 240 10.0 200 7.1
Petards Group 150 6.3 380 13.5
La Salle Education 130 5.4 130 4.6
Universe Group 34 1.4 34 1.2
Zenith Energy 12 0.5 63 2.2
Redecol* 12 0.5 - -
Touchpoint Group Holdings - - - -
MTI Wireless Edge** - - 176 6.3
Plutus Powergen** - - 93 3.3
Total 2,395 100.0 2,808 100.0
--------- ---------- --------- ----------
* Shares received from the purchase of Anaxsys Technology by
Redecol Limited.
** Sold during the year.
Portfolio breakdown by sector and by index
Percentage of portfolio by sector
Support Services 69.8%
Technology Hardware & Equipment 19.2%
General Retailers 10.0%
Healthcare, Equipment & Services 0.5%
Oil & Gas Producers 0.5%
Percentage of portfolio by index
AIM 73.4%
Unquoted 26.1%
Fully Listed 0.5%
All investments are in companies based in the United
Kingdom.
Directors (all non-executive)
Kevin Allen (Chairman)
David Horner
Ian Martin
Independent
Extracts from the Strategic Report
As explained within the Report of the Directors, the Company
carries on business as an investment trust. Investment trusts are
collective closed-ended public limited companies.
Chelverton Growth Trust plc is a public limited company
incorporated in England and Wales (registration number 02989519)
with its registered office being Suite 8, Bridge House, Courtenay
Street, Newton Abbot TQ12 2QS.
The Company is an investment company under section 833 of the
Companies Act.
The Company's shares are listed on the London Stock Exchange
main market under the code CGW (sedol 0262134) and L.E.I.
213800I86P8BAE6UVI83.
Board
The Board of Directors is responsible for the overall
stewardship of the Company, including investment and dividend
policies, corporate and gearing strategy, corporate governance
procedures and risk management.
Investment Objective
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 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 MSCI Small Cap UK Index.
Investment Policy
The Company invests principally in securities of publicly quoted
UK companies, though it may invest in unquoted securities. The
performance of the Company's investments is compared to the MSCI
Small Cap UK Index.
The Company may 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.
At the Annual General Meeting held on 12 December 2019,
Shareholders voted to amend the Investment Policy to state that the
Company:
1. may participate in another CEPS plc placing (if it were to have one),
2. will liquidate its various other investments when it is felt appropriate to do so,
3. will repay the outstanding Jarvis Loan, and
4. will pay all outstanding liabilities.
To comply with Listing Rules the Company's investment policy is
detailed above and should be read in conjunction with the
subsequent sections entitled investment strategy and the
performance analysis.
It is intended from time to time, when deemed appropriate, that
the Company will borrow for investment purposes.
The Investment Objective and Policy stated are intended to
distinguish the Company from other investment vehicles which have
relatively narrow investment objectives and which are constrained
in their decision making and asset allocation. The Investment
Objective and Policy allow the Company to be constrained in its
investment selection only by valuation and to be pragmatic in
portfolio construction by only investing in securities which the
Investment Manager considers to be undervalued on an absolute
basis. Portfolio risk is managed by investing in a diversified
spread of investments.
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 independent investment manager focussing
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.
Note 16 gives details of the Directors' interests in the
Investment Manager.
The Chairman's Statement and the Investment Manager's Overview
give details of the Company's activities during the year under
review.
Investment of Assets
At each Board meeting, the Board considers compliance with the
Company's investment policy and other investment restrictions
during the reporting period. An analysis of the portfolio at 31
August 2020 can be found above.
Environment Emissions
All of the Company's activities are outsourced to third parties.
As such it does not have any physical assets, property, or
operations of its own and does not generate any greenhouse gas or
other emissions.
Review of Performance and Outlook
Reviews of the Company's returns during the financial year, the
position of the Company at the year end, and the outlook for the
coming year are contained in the Chairman's Statement and the
Investment Manager's Overview.
Principal risks and uncertainties and risk management
As stated within the Corporate Governance Statement on pages 20
to 27 of the Annual Report, the Board applies the principles
detailed in the internal control guidance issued by the Financial
Reporting Council, and has established a continuing process
designed to meet the particular needs of the Company in managing
the risks and uncertainties to which it is exposed.
The principal risks and uncertainties faced by the Company are
described below and in note 15 which provides detailed explanations
of the risks associated with the Company's financial
instruments.
Market risk
The Company is exposed to market risk due to fluctuations in the
market prices of its investments.
The Investment Manager actively monitors economic and company
performance and reports regularly to the Board on a formal and
informal basis. The Board formally meets with the Investment
Manager quarterly when portfolio transactions and performance are
reviewed. The Board acting as the Management Engagement Committee
meets as required to review the performance of the Investment
Manager.
The Company is substantially dependent on the services of the
Investment Manager's investment team for the implementation of its
Investment Policy.
The Company may hold a proportion of the portfolio in cash or
cash equivalent investments from time to time. Whilst during
positive stock market movements the portfolio may forego notional
gains, during negative market movements this may provide
protection.
Discount volatility
As with many investment trust companies, discounts can
significantly fluctuate.
The Board recognises that it is in the long-term interests of
Shareholders to reduce discount volatility and believes that the
prime driver of discounts over the longer term is performance. The
Board does not intend to adopt a precise discount target at which
shares will be bought back. However, Ordinary shares will not be
bought back for cancellation or into Treasury at a discount to NAV
of less than 7.5%.
Regulatory risks
Relevant legislation and regulations which apply to the Company
include the Companies Act 2006, the Corporation Tax Act 2010
("CTA"), the Alternative Investment Fund Manager's Directive
("AIFMD") and the Listing Rules of the Financial Conduct Authority
("FCA"). The Company has noted the recommendations of the UK
Corporate Governance Code and its statement of compliance appears
on pages 20 to 27 of the Annual Report. A breach of the CTA could
result in the Company losing its status as an investment company
and becoming subject to capital gains tax, whilst a breach of the
Listing Rules might result in censure by the FCA. At each Board
meeting the status of the Company is considered and discussed, so
as to ensure that all regulations are being adhered to by the
Company and its service providers.
The Board is not aware of any breaches of laws or regulations
during the period under review and up to the date of this
report.
Financial risk
The financial situation of the Company is reviewed in detail at
each Board meeting. The content of the Company's Annual Report and
financial statements is monitored and approved both by the Board
and the Audit Committee.
Inappropriate accounting policies or failure to comply with
current or new accounting standards may lead to a breach of
regulations.
Liquidity risk
The Board monitors the liquidity of the portfolio at each Board
meeting and regularly reviews the investments with the Investment
Manager.
A more detailed explanation of the investment management risks
facing the Company is given in note 15 to the financial
statements.
Financial instruments
As part of its normal operations, the Company holds financial
assets and financial liabilities. Full details of the role of
financial instruments in the Company's operations are set out in
note 15 to the financial statements.
The Board seeks to mitigate and manage these risks through
continual review, policy setting and enforcement of contractual
obligations. It also regularly monitors the investment environment
and the management of the Company's investment portfolio.
Investment risk is spread through holding a wide range of
securities in different industrial sectors.
Statement regarding annual report and accounts
Following a detailed review of the Annual Report and Accounts by
the Audit Committee, the Directors consider that taken as a whole
it is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company's
performance, business model and strategy.
Performance analysis using key performance indicators
At each Board meeting, the Directors consider a number of
performance measures to assess the Company's success in achieving
its objectives, for example: the NAV, the movement in the Company's
share price and the premium/discount of the share price in relation
to the NAV.
The Company's Income Statement is set out below.
The movement of the NAV is compared to the MSCI Small Cap UK
Index, the Company's benchmark. The NAV per Ordinary share at 31
August 2020 was 40.61p (2019: 44.79p), a decrease of 9.33%. By
comparison the benchmark fell by 8.63%.
The Company's share price at the year-end was 30.00p (2019:
40.50p).
Viability Statement
The Board reviews the performance and progress of the Company
over various time periods and uses these assessments, regular
investment performance updates from the Investment Manager and a
continuing programme of monitoring risk, to assess the future
viability of the Company. The Directors consider that a period of
two years is the most appropriate time horizon to consider the
Company's viability and after careful analysis and consideration of
the future prospects as discussed in the Chairman's statement
above, the Directors believe that the Company is viable over a
two-year period. The Directors are of the opinion that the Company
has sufficient liquidity in the portfolio in readily realisable
smaller capitalised AIM traded securities.
In order to maintain viability, the Company has a robust risk
control framework for the identification and mitigation of risk
which is reviewed regularly by the Board. The Directors also seek
reassurance from suppliers that their operations are well managed
and they are taking appropriate action to monitor and mitigate
risk. The Directors have a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as
they fall due over the period of assessment.
Current and future developments
A review of the main features of the year is contained in the
Chairman's Statement and the Investment Manager's Overview.
The marketing and promotion of the Company will continue to
involve the Board, led by the Investment Manager, with a proactive
communications programme either directly or through its website,
with existing and potential new Shareholders and other external
parties.
The Directors are seeking to renew the appropriate powers at the
next Annual General Meeting to enable the purchase of the Company's
own shares, when it is in the interests of Shareholders as a
whole.
Social, environmental and employee issues
The Company does not have any employees and the Board consists
entirely of non-executive directors. As the Company is an
investment trust, which invests in other companies, it has no
direct impact on the community or the environment, and as such has
no policies in this area.
Alternative Investment Fund Manager's Directive ("AIFMD")
The Board has registered itself as the AIFM with the FCA under
the Directive and confirm that all required returns have been
completed and filed.
By Order of the Board
Kevin Allen
Chairman
29 October 2020
Extract from the Report of the Directors
Status, objective and review
The principal activity of the Company is to carry on business as
an investment trust. The Company has been granted approval from HM
Revenue & Customs ('HMRC') as an authorised investment trust
under Section 1158 of the Corporation Tax Act 2010. The Company
will be treated as an investment trust company for each subsequent
accounting period, subject to there being no serious breaches of
the conditions. The Directors are of the opinion that the Company
has conducted its affairs for the year ended 31 August 2020 so as
to be able to continue to qualify as an authorised investment
trust. The Company is an investment company as defined in Section
833 of the Companies Act 2006.
Management and administration agreements
The Company's investments are managed by Chelverton Asset
Management Limited ("CAM") under an agreement dated 28 June 2001.
Mr Horner is a director of CAM.
The Company pays CAM, in respect of its services as Investment
Manager, an annual fee of 0.5% of gross assets, payable monthly in
arrears. Prior to 1 November 2019, the annual fee 1.0% per annum of
gross assets. With effect from 1 September 2020, the Investment
Manager has agreed to waive its rights to receive an investment
management fee until 28 February 2021 when the position will be
reviewed.
The amount payable to CAM for the year ending 31 August 2020 was
GBP18,000 (2019: GBP35,000). At the year-end GBP2,200 (2019:
GBP2,600) was outstanding to CAM.
The appointment of CAM as Investment Manager may be terminated
by either party giving to the other not less than twelve months'
notice of such termination. There are no specific provisions
contained within the Investment Management Agreement relating to
the compensation payable in the event of termination of the
agreement other than entitlement to fees, which would be payable
within any notice period.
Under an agreement dated 21 December 2015, company secretarial
services and the general administration of the Company are
undertaken by ISCA Administration Services Limited for an annual
fee of GBP40,000. For the period 1 May 2020 to 31 January 2021 ISCA
has agreed to reduce its fee to GBP30,000 per annum.
Appointment of CAM as the Investment Manager
The Board, excluding Mr Horner, continually reviews the
performance of the Investment Manager. In the opinion of the
independent Directors the continuing appointment of CAM, as
Investment Manager, on the terms outlined in the Investment
Management Agreement dated 28 June 2001 and amended on 1 December
2006, is in the best interests of the Shareholders as a whole.
Further, the Board is satisfied that CAM has the required skill and
expertise to continue to manage the Company's portfolio and charges
fees that are reasonable when compared with those of similar
investment trusts.
Going concern
In assessing the going concern basis of accounting, the
Directors have had regard to the guidance issued by the Financial
Reporting Council. They have considered the current cash position
of the Company, and forecast revenues for the current financial
year. The Directors have also taken into account the Company's
Investment Policy, which is subject to regular Board monitoring
processes, and is designed to ensure the Company holds sufficient
liquid securities to meet possible cash flow needs. The Board has
also considered the risk to the Company of the Covid-19 pandemic as
detailed on page 23 of the Annual Report.
The Company retains title to all assets held by its custodian.
Note 15 to the financial statements sets out the financial risk
profile of the Company and indicates the effect on its assets and
liabilities of falls and rises in the value of securities, market
rates of interest and changes in exchange rates.
The Directors believe, in the light of the controls and review
processes noted above and bearing in mind the nature of the
Company's business and assets, 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.
Covid-19 and Annual General Meeting
The Board is closely monitoring the impact of Covid-19 and it is
currently the intention of the Company to hold the Annual General
Meeting as planned on 10 December 2020. However, in light of the
guidance issued by the UK government and the everchanging
restrictions on travel and public gatherings, Shareholders will be
prohibited from attending the Annual General Meeting in person.
Instead, Shareholders are requested to return a proxy vote per the
form of proxy on page 65 as early as possible. If you appoint the
Chairman of the Meeting as your proxy, this will ensure your votes
are cast in accordance with your wishes and avoids the need for
another person to attend as a proxy in your place. If Shareholders
have any questions that they would like to raise at the Meeting,
these should be submitted in advance to the following email
address: cgw@iscaadmin.co.uk. In light of the potential for the
Covid-19 situation in the United Kingdom to change rapidly, you
should continue to monitor and act in accordance with guidance
issued by the UK government and relevant health authorities. You
should also continue to monitor the Company's website and
announcements for any updates in relation to the Meeting
arrangements that may need to be provided. If the Board believes
that it becomes necessary or appropriate to make alternative
arrangements for the holding of the Meeting due to Covid-19, we
will ensure that Shareholders are given as much notice as possible
through the Company's website
https://www.chelvertonam.com/fund/chelverton-growth-trustplc/shareholder-information
and where appropriate by RNS announcement.
On behalf of the Board
Kevin Allen
Chairman
29 October 2020
Statement of Directors' Responsibilities in respect of the
Financial Statements
The Directors are responsible for preparing the Annual Report
and the financial statements and have elected to prepare them in
accordance with applicable United Kingdom law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting
Practice). Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
its profit or loss for that period.
In preparing the financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy, at any time,
the financial position of the Company and to enable them to ensure
that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Report of the Directors, Directors
Remuneration Report and Corporate Governance Statement.
The Directors, to the best of their knowledge, state that:
-- the financial statements, prepared in accordance with UK
Generally Accepted Accounting Practice, give a true and fair view
of the assets, liabilities, financial position and net loss of the
Company; and
-- the Strategic Report incorporating the Chairman's Statement
and Investment Manager's Overview together with the Report of the
Directors include a fair review of the development and performance
of the business and the position of the Company together with a
description of the principal risks and uncertainties that it
faces.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information related to the Company
including on the website of the Investment Manager ww w
.chelvertonam.com.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
On behalf of the Board
Kevin Allen
Chairman
29 October 2020
NON- STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 August 2020 and
2019 but is derived from those accounts. Statutory accounts for
2019 have been delivered to the Registrar of Companies, and those
for 2020 will be delivered in due course. The auditors have
reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006. The text of the Auditor's report can be
found in the Company's full Annual Report and Accounts on the
Investment Manager's website: www.chelvertonam.com.
Income Statement
for the year ended 31 August 2020
2020 2019
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on investments
at fair value 7 - (102) (102) - (682) (682)
Income 2 39 - 39 22 - 22
Investment management
fee 3 (4) (14) (18) (9) (26) (35)
Other expenses 4 (128) (19) (147) (138) (24) (162)
Net loss on ordinary
activities before
taxation (93) (135) (228) (125) (732) (857)
Taxation on ordinary
activities 5 - - - - - -
Net loss on ordinary
activities after
taxation (93) (135) (228) (125) (732) (857)
Revenue Capital Total Revenue Capital Total
Loss per Ordinary
share 6 (1.70)p (2.47)p (4.17)p (2.29)p (13.41)p (15.70)p
------- ------- ------- ------- -------- --------
All revenue and capital items in the above statement derive from
continuing operations.
No operations were acquired or discontinued during the year.
The total column of this statement is the Statement of Total
Comprehensive Income of the Company prepared in accordance with
applicable Financial Reporting Standards ("FRS"). The supplementary
revenue return and capital return columns are prepared in
accordance with the Statement of Recommended Practice ("AIC SORP")
issued in October 2019 by the Association of Investment
Companies.
The notes form part of these accounts.
Statement of Changes in Equity
for the year ended 31 August 2020
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
Year ended
31 August 2020
1 September
2019 55 787 1,111 134 359 2,446
Net loss after
taxation for
the year - - (135) - (93) (228)
31 August 2020 55 787 976 134 266 2,218
--------- ---------- ---------- ----------- --------- -------
Year ended
31 August 2019
1 September
2018 55 787 1,843 134 484 3,303
Net loss after
taxation for
the year - - (732) - (125) (857)
31 August 2019 55 787 1,111 134 359 2,446
--------- ---------- ---------- ----------- --------- -------
* Distributable reserves. The Special Reserve and Revenue
Reserve may be used for the repurchase of the Company's own
shares.
** The Capital Reserve has not been analysed between those
amounts that are distributable and those that are not
distributable.
The notes form part of these accounts.
Statement of Financial Position
as at 31 August 2020
2020 2019
Notes GBP'000 GBP'000
Fixed assets
Investments at fair value 7 2,395 2,808
Current assets
Debtors 9 150 145
Cash and cash equivalents 39 125
189 270
Creditors - amounts falling
due within one year 10 (366) (632)
Net current liabilities (177) (362)
Net assets 2,218 2,446
------- -------
Share capital and reserves
Called up share capital 12 55 55
Special reserve 787 787
Capital reserve 976 1,111
Capital redemption reserve 134 134
Revenue reserve 266 359
Equity Shareholders' funds 2,218 2,446
Net asset value per Ordinary
share 13 40.61p 44.79p
These financial statements were approved and authorised for
issue by the Board of Directors on 29 October 2020 and signed on
their behalf by
Kevin Allen
Chairman
The notes form part of these accounts.
Statement of Cash Flows
For the year ended 31 August 2020
2020 2019
Note GBP'000 GBP'000
Cash flows used in operating
activities
Net loss on ordinary activities (228) (857)
Adjustment for:
Net capital loss 135 732
Expenses charged to capital (33) (50)
Interest paid 26 32
Increase in creditors 14 2
Increase in debtors (5) (136)
Cash used in operations (91) (277)
Cash flows from/(used in) investing
activities
Purchase of investments - (146)
Proceeds from sales of investments 311 141
Net cash from/(used in) investing
activities 311 (5)
------- -------
Cash flows used in financing
activities
Capital repayment of loan (280) -
Interest paid (26) (32)
Net cash used in financing activities (306) (32)
Net decrease in cash (86) (314)
Cash at the beginning of the
year 125 439
Cash at the end of the year 11 39 125
------- -------
The notes form part of these accounts.
1 ACCOUNTING POLICIES
Accounting convention
The financial statements are prepared in accordance with
applicable United Kingdom accounting standards, including Financial
Reporting Standard 102 ("FRS 102"), the Companies Act 2006 and with
the AIC Statement of Recommended Practice ("SORP"), Financial
Statements of Investment Trust Companies and Venture Capital Trusts
issued in October 2019. All the Company's activities are
continuing.
Income recognition
Dividends receivable on quoted equity shares are included as
revenue when the investments concerned are quoted 'ex-dividend'.
Dividends receivable on equity and non-equity shares where no
ex-dividend date is quoted are brought into account when the
Company's right to receive payment is established. All other income
is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis and charged
through the revenue account in the Income Statement except as
follows:
- expenses which are incidental to the acquisition or disposal
of an investment are treated as capital and separately identified
and disclosed (see note 7):
- management fees, bank interest and loan interest have been
allocated 75% to capital reserve and 25% to revenue reserve in the
Income Statement, being in line with the Board's expected long-term
split of returns, in the form of capital gains and income
respectively, from the investment portfolio of the Company.
Investments
All investments held by the Company are classified as 'fair
value through profit or loss'. Investments are initially recognised
at cost, being the fair value of the consideration given. After
initial recognition, investments are measured at fair value, with
changes in the fair value of investments and impairment of
investments recognised in the Income Statement and allocated to
capital. Realised gains and losses on investments sold are
calculated as the difference between sales proceeds and cost.
Investments are recognised and derecognised on the trade date
where a purchase or sale is under a contract whose terms require
delivery within the time-frame established by the market concerned
and are initially measured at fair value.
For investments actively traded in organised financial markets,
fair value is generally determined by reference to Stock Exchange
quoted market bid prices at the close of business on the balance
sheet date, without adjustment for transaction costs necessary to
realise the asset. For investments traded on other financial
markets such as the OTCQB, fair value is generally determined by
reference to the share price at close of business on the balance
sheet date, discounted to reflect the best estimate of the discount
that may need to be applied for the shares to be sold as a single
investment.
For investments that are not actively traded in organised
financial markets, fair value is determined as set out below under
the heading 'significant judgements and estimation
uncertainty'.
Cash and cash equivalents
Cash and cash equivalents includes funds held by the custodian
on behalf of the Company.
Current assets
All current assets, except for those held at fair value through
profit or loss, are subject to review for impairment at least at
each reporting date.
-- Current assets at amortised cost include debtors, prepayments
and cash.
-- Current assets held at fair value through profit or loss
include the deferred consideration from the SpaDental Share
Purchase Agreement and loan notes. Assets in this category are
measured at fair value, with gains or losses recognised in profit
or loss.
Current liabilities
All current liabilities, except for those held at fair value
through profit or loss, are subject to review for impairment at
least at each reporting date.
-- Current liabilities at amortised cost include accruals and
other creditors.
-- Current liabilities held at fair value through profit or loss
include short term loans. Liabilities in this category are measured
at fair value, being equivalent to par value.
Significant judgements and estimation uncertainty
Preparation of the financial statements requires the Directors
to make significant judgements. The items in the financial
statements where these judgements have been made are:
Investments that are not actively traded in organised financial
markets, are valued at the Directors' estimate of the investment's
net realisable value being their estimate of fair value. Generally,
fair value will be at the most recent transaction price. In the
case of direct investments in unquoted companies the initial
valuation is based on the transaction price. Where better
indications of fair value become available, such as through
subsequent issues of capital or dealings between third parties, net
asset value or funds under management, the valuation is adjusted to
reflect the new evidence. This represents the Directors' view of
the amount for which an asset could be exchanged between
knowledgeable willing parties in an arm's length transaction.
Capital reserve
The following are accounted for in this reserve:
-- gains and losses on the realisation of investments;
-- net movement arising from changes in the fair value of
investments that can be readily converted to cash without accepting
adverse terms;
-- realised exchange differences of a capital nature;
-- expenses, together with related taxation effect, charged to
this account in accordance with the above policies; and
-- net movement arising from the changes in the fair value of
investments that cannot be readily converted to cash without
accepting adverse terms, held at the year end.
Special reserve
The Special Reserve was created by the cancellation of the Share
Premium account by order of the High Court on 13 January 2016. It
can be used for the repurchase of the Company's own shares.
Taxation
The charge for taxation, where relevant, is based on the revenue
before taxation for the year. Tax deferred or accelerated can arise
due to timing differences between the treatment of certain items
for accounting and taxation purposes.
Full provision is made for deferred taxation under the liability
method, on all timing differences not reversed by the balance sheet
date, in accordance with FRS 102.
The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue on the
same basis as the particular item to which it relates, using the
Company's effective rate of tax for the accounting period.
Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business, being investment business.
2 INCOME
2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income from investments
UK net dividend
income 26 - 26 17 - 17
Loan stock interest 13 - 13 5 - 5
Total income 39 - 39 22 - 22
------- ------- ------- ------- ------- -------
3 INVESTMENT MANAGEMENT FEE
2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fee 4 14 18 9 26 35
------- ------- ------- ------- ------- -------
With effect from 1 November 2019, the investment management fee
is calculated at the rate of 0.04167% per month, equating to 0.5%
per annum, of the gross value of funds under management and is
payable monthly in arrears. At 31 August 2020 there was GBP2,200
outstanding (2019: GBP2,600). Prior to 1 November 2019, the
investment management fee was calculated at the rate of 1% per
annum of gross assets. With effect from 1 September 2020, the
Investment Manager has agreed to waive the entitlement to a fee for
a period of six months through to 28 February 2021 when the
position will be reviewed.
4 OTHER EXPENSES 2020 2019
GBP'000 GBP'000
Administrative and secretarial services 37 40
Directors' remuneration 28 34
Auditors' remuneration
* audit services 18 17
* non-audit services; tax compliance 2 2
Finance costs 26 32
Other expenses 36 37
147 162
------- -------
5 TAXATION 2020 2019
Revenue Capital Total Revenue Capital Total
Analysis of charge GBP'000 GBP'000 GBP'000 '000 GBP'000 GBP'000
in year
Current tax - - - - - -
------- ------- -------- ------- ------- --------
Factors affecting current tax charge for the year
The tax assessed for the year is lower than the standard rate of
corporation tax in the UK of 19%. The differences are explained
below:
2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Theoretical tax at
UK corporation tax
rate of 19% (2019:
19%)
Corporation tax (18) (25) (43) (24) (139) (163)
Investment income
not taxable (5) - (5) (3) - (3)
Non-taxable investment
losses - 19 19 - 130 130
Excess expenses for
the year 23 6 29 27 9 36
Current tax charge - - - - - -
for the year
------- ------- ------- ------- ------- -------
At 31 August 2020 the Company had surplus management expenses of
GBP4,682,000 (2019: GBP4,530,000) which have not been recognised as
a deferred tax asset. This is because the Company is not expected
to generate taxable income in a future period in excess of the
deductible expenses of that future period and, accordingly, it is
unlikely that the Company will be able to reduce future tax
liabilities through the use of existing surplus expenses. Due to
the Company's status as an investment trust and the intention to
continue meeting the conditions required to obtain approval as an
investment trust in the foreseeable future, the Company has not
provided for deferred tax on any gains and losses arising on the
revaluation or disposal of investments.
6 RETURN PER ORDINARY SHARE
2020 2019
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic (1.70) (2.47) (4.17) (2.29) (13.41) (15.70)
------- ------- ------ ------- ------- -------
Revenue return per Ordinary share is based on the net revenue
loss on ordinary activities after taxation attributable of
GBP93,000 (2019: GBP125,000) and on 5,460,301 (2019: 5,460,301)
Ordinary shares, being the weighted average number of Ordinary
shares in issue during the year.
Capital return per Ordinary share is based on the net capital
loss of GBP135,000 (2019: GBP732,000) and on 5,460,301 (2019:
5,460,301) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year.
Total return per Ordinary share is based on the total loss of
GBP228,000 (2019: GBP857,000) and on 5,460,301 (2019: 5,460,301)
Ordinary shares, being the weighted average number of Ordinary
shares in issue during the year.
INVESTMENTS 2020 2019
7
GBP'000 GBP'000
Fully Listed 12 63
Traded on AIM 1,756 2,195
Unquoted 627 550
NASDAQ - -
2,395 2,808
--------- ------- -------
Fully Traded
on
Listed AIM Unquoted* NASDAQ Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 118 4,236 773 166 5,293
Opening investment holding
losses (55) (2,041) (223) (166) (2,485)
63 2,195 550 - 2,808
Movements in the year:
Sales - proceeds - (311) - - (311)
- losses on sales - (229) - - (229)
Movement in investment
holding losses (51) 101 77 - 127
Closing valuation 12 1,756 627 - 2,395
Closing book cost 118 3,696 773 166 4,753
Closing investment holding
losses (106) (1,940) (146) (166) (2,358)
Closing valuation 12 1,756 627 - 2,395
------- ------- --------- ------- -------
2020 2019
GBP'000 GBP'000
Realised losses on sales (229) (184)
Movement in fair value of investments 127 (498)
Net losses on investments (102) (682)
All quoted investments are made up
of equity shares.
* Unquoted investments are valued at the Directors' estimate of
their net realisable value, being their estimate of fair value.
Transaction costs
During the year, the Company incurred transaction costs of
GBPnil (2019: GBPnil) and GBP163 (2019: GBPnil) on purchases and
sales of investments, respectively. These amounts are included in
'Losses on investments at fair value' as disclosed in the Income
Statement.
Analysis of movements in unquoted investments
Cost Cost Valuation Valuation
at 31 at 31 Movement at 31 at 31
August August Realised in unrealised August August
2019 Additions Disposals 2020 (loss)/gain gain/(loss) 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
Chelverton
Asset Management
Holdings 1 - - 1 - 25 245 220
La Salle
Education 180 - - 180 - - 130 130
Pedalling
Forth 300 - - 300 - 40 240 200
Redecol* 292 - - 292 - 12 12 -
773 - - 773 - 77 627 550
------- --------- --------- ------- ------------ -------------- --------- ---------
* Shares received from the purchase of Anaxsys Technology by
Redecol Limited.
Details of material holdings in unquoted investments
Cost Valuation Cost Valuation Equity Last
at 31 at 31 at 31 at 31 Held accounts Pre-tax
August August August August % period Net Turnover profit
2020 2020 2019 2019 end assets *** ***
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Chelverton
Asset Management
Holdings
* 1 245 1 220 1.0 31/03/20 5,710 8,782 3,482
La Salle
Education 180 130 180 130 7.0 31/12/18 414 - -
Pedalling
Forth 300 240 300 200 19.9 31/12/19 91 - -
Redecol** 292 12 292 - 1.0 31/01/20 343 - -
* Consolidated figures
** Shares received from the purchase of Anaxsys Technology by
Redecol Limited.
*** Where turnover and pre tax profit are not disclosed the
investee companies are eligible to file filleted accounts at
Companies House.
A full listing of portfolio holdings is included in the
portfolio review above.
8 SIGNIFICANT INTERESTS
At 31 August 2020, the Company had a holding of 3% or more of
the issued class of share that is material in the context of the
accounts in the following investments:
Percentage
Number of of issued share Issued share
Security shares capital capital
CEPS 5,060,000 29.76 17,000,000
Pedalling Forth 40,000 19.94 200,560
Touchstar 850,000 10.03 8,475,077
La Salle Education 260,000 7.02 3,705,186
Petards 2,000,000 3.48 57,528,229
9 DEBTORS 2020 2019
GBP'000 GBP'000
Amounts falling due within one year
Prepayments and other debtors 12 7
Amounts due from investment proceeds
* 138 138
150 145
* Represents the amount due from SpaDental Limited in
the form of deferred consideration from a Share Purchase
Agreement and an Assignment of Loan. From the date of
completion, interest accrues on the balance outstanding
of the purchase price at the rate of 3.5% above the base
rate of Lloyds Bank, payable six monthly in arrears.
10 CREDITORS - amounts falling due within
one year
2020 2019
GBP'000 GBP'000
Accruals and other creditors 46 32
Short term loan 320 600
366 632
-------- -------
On 4 June 2018, the Company entered in to a GBP600,000 loan
agreement with Jarvis Securities plc. Interest is payable monthly
in arrears at the rate of 4.5% plus the Bank of England base
rate.
The loan was drawn down on 4 June 2018 and on 11 May 2020
GBP280,000 was repaid. At the year end GBP320,000 was outstanding.
The loan is secured on the assets of the Company and is repayable
on demand.
11 ANALYSIS OF CHANGES IN NET DEBT
At 31
At 1 September Cash Non-cash August
2019 flows change 2020
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents
Cash 125 (86) - 39
125 (86) - 39
Borrowings
Debt due within one year (600) 280 - (320)
(600) 280 - (320)
-------------- ------- -------- -------
Total (475) 194 - (281)
-------------- ------- -------- -------
12 CALLED UP SHARE CAPITAL 2020 2019
GBP'000 GBP'000
Allotted, called up and fully paid:
5,460,301 (2019: 5,460,301) Ordinary shares
of 1p each 55 55
------- -------
Duration of Company
At the Annual General Meeting of the Company on 10 December 2020
and, if the Company has not then been liquidated, unitised or
reconstructed, at each fifth annual general meeting of the Company
convened by the Board thereafter, the Board shall propose an
ordinary resolution that the Company should continue as an
investment trust for a further five-year period.
13 NET ASSET VALUE PER ORDINARY SHARE
The basic net asset value per Ordinary share of 40.61p
(2019:44.79p) is based on net assets of GBP2,218,000 (2019:
GBP2,446,000) and on 5,460,301 (2019: 5,460,301) Ordinary shares,
being the number of shares in issue at the year end.
14 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At 31 August 2020, there were no capital commitments or
contingent liabilities (2019: GBPnil).
15 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
The Company's financial instruments comprise securities and
other investments, cash balances and debtors and creditors that
arise from its operations, for example, in respect of sales and
purchases awaiting settlement and debtors for accrued income.
The Company primarily invests in companies traded on AIM with a
market capitalisation at the time of investment of up to GBP50
million. The Company finances its operations through its issued
capital, existing reserves and the loan from Jarvis Securities plc
as detailed in note 10.
In following its investment objective, the Company is exposed to
a variety of risks that could result in a reduction in the
Company's net assets. These risks are market risk (comprising
exchange rate risk, interest rate risk and other price risk),
credit risk and liquidity risk. The Board reviews and agrees
policies for managing each of these risks and they are summarised
below:
i) Market risk - market price risk
Market price risk arises mainly from uncertainty about future
prices of financial investments used in the Company's business. It
represents the potential loss the Company might suffer through
holding market positions by way of price movements other than
movements in exchange rates and interest rates.
The Company's investment portfolio is exposed to market price
fluctuations which are monitored by the Investment Manager who
gives timely reports of relevant information to the Directors.
Investment performance is also reviewed at each Board meeting.
The Directors are conscious of the fact that the nature of AIM
investments is such that prices can be volatile. Investors should
be aware that the Company is exposed to a higher rate of risk than
exists within a company which holds traditional blue-chip
securities.
Adherence to the investment objectives and the internal control
limits on investments set by the Company mitigates the risk of
excessive exposure to any one particular type of security or
issuer.
The Company's exposure to other changes in market prices at 31
August 2020 on its investments is as follows:
2020 2019
GBP'000 GBP'000
Fair value through profit or loss investments 2,395 2,808
------- -------
A 20% decrease in the market value of investments at 31 August
2020 would have decreased net assets attributable to Shareholders
by 9 pence per share (2019: 10 pence per share). An increase of the
same percentage would have an equal but opposite effect on net
assets available to Shareholders.
(ii) Market risk - exchange rate risk
All of the Company's assets are in sterling and accordingly the
only currency exposure the Company has is through the trading
activities of its investee companies.
(iii) Market risk - interest rate risk
Changes in interest rates may cause fluctuations in the income
and expenses of the Company.
The majority of the Company's financial assets are non-interest
bearing. As a result, the Company's financial assets are not
subject to significant amounts of risk due to fluctuations in the
prevailing levels of market interest rates.
The possible effects on fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment decisions.
The exposure at 31 August of financial assets and financial
liabilities to interest rate risk is as follows:
2020 2019
GBP'000 GBP'000
Cash at bank and cash equivalents 39 125
Amounts due from investment proceeds 138 138
Short term loan (320) (600)
------- -------
The Company receives no interest on its bank balances but
receives interest from SpaDental Limited as stated in note 9 and
pays interest on its loan so the effect of an interest rate
increase of 1% would decrease net revenue before taxation on an
annualised basis by GBP933 (2019: GBP3,733). If there was a
decrease in interest rates of 0.1% (2019: 0.5%) net revenue before
taxation would increase by GBP93 (2019: GBP1,866). These
calculations are based on balances as at 31 August 2020 and may not
be representative of the year as a whole.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. Bankruptcy
or insolvency of the custodian may cause the Company's rights with
respect to securities held with the custodian to be delayed.
(v) Liquidity risk
Seventy-four percent of the Company's portfolio is fully listed
on the London Stock Exchange or AIM quoted securities which under
normal conditions can be sold to meet funding commitments if
necessary. These may however be difficult to realise in adverse
market conditions. The Company's unquoted investments, representing
the remaining twenty-six percent of the portfolio, could be more
difficult to realise as they are not tradable instruments.
(vi) Maturity analysis of financial liabilities
The Company's financial liabilities comprise of creditors as
disclosed in note 10. All items are due within one year.
(vii) Managing capital
The Company's capital management objectives are to increase net
asset value per share at a higher rate than other quoted smaller
company trusts and the MSCI Small Cap UK Index.
Primarily the Company finances its operations through its issued
capital and existing reserves. However, to help fund further
investment the Company borrowed on a short-term loan GBP600,000
from Jarvis Securities plc. At the year-end an amount of GBP320,000
remained outstanding. Further details are given in note 10.
(viii) Fair values of financial assets and financial
liabilities
All financial assets and liabilities of the Company are held at
amortised cost other than the loan from Jarvis and the SpaDental
Purchase Agreement which are held at fair value.
(ix) Financial instruments by category
The financial instruments of the Company fall into the following
categories:
Assets at
fair value
At amortised Loans and through
profit or
cost receivables loss Total
31 August 2020 GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the Statement
of Financial Position
Investments - - 2,395 2,395
Debtors - 150 - 150
Cash at bank and cash
equivalents 39 - - 39
Total 39 150 2,395 2,584
------------ ----------- ----------- -------
Liabilities as per the
Statement of Financial
Position
Creditors 46 320 - 366
Total 46 320 - 366
---------- ----------- ----------- -------
Assets at
At fair value
amortised Loans and through
profit or
cost receivables loss Total
31 August 2019 GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the Statement
of Financial Position
Investments - - 2,808 2,808
Debtors - 145 - 145
Cash at bank and cash
equivalents 125 - - 125
Total 125 145 2,808 3,078
---------- ----------- ----------- -------
Liabilities as per the
Statement of Financial
Position
Creditors 32 600 -632
Total 32 600 -632
--- ---
Fair value hierarchy
In accordance with FRS 102, the Company must disclose the fair
value hierarchy of financial instruments.
The fair value hierarchy consists of the following three
classifications:
Level 1 - Quoted prices in active markets for identical assets
or liabilities.
Quoted in an active market in this context means quoted prices
are readily and regularly available and those prices represent
actual and regularly occurring market transactions on an arm's
length basis.
Level 2 - The price of a recent transaction for an identical
asset, where quoted prices are unavailable.
The price of a recent transaction for an identical asset
provides evidence of fair value as long as there has not been a
significant change in economic circumstances or a significant lapse
of time since the transaction took place. If it can be demonstrated
that the last transaction price is not a good estimate of fair
value (e.g. because it reflects the amount that an entity would
receive or pay in a forced transaction, involuntary liquidation or
distress sale), that price is adjusted.
Level 3 - Inputs for the asset or liability that are based on
observable market 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.
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be investments actively traded in organised
financial markets, fair value is generally determined by reference
to Stock Exchange quoted market bid prices or last traded in
respect of SETS at the close of business on the balance sheet date,
without adjustment for transaction costs necessary to realise the
asset.
Investments, whose values are based on quoted market prices in
active markets, and therefore classified within Level 1, include
active listed equities. The Company does not adjust the quoted
price for these instruments.
Financial instruments that trade in markets that are not
considered to be active but are valued based on quoted market
prices, dealer quotations or alternative pricing sources supported
by observable inputs are classified as Level 2.
Investments classified within Level 3 have significant
unobservable inputs. Level 3 instruments include unquoted holdings.
As observable prices are not available for these securities, the
Company has used valuation techniques to derive the fair value. The
Company has no Level 2 investments, and Level 3 investments consist
only of unquoted holdings.
Financial assets at fair value through profit
or loss
Level 1 Level 2 Level 3 Total
At 31 August 2020 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 1,768 - 627 2,395
Total 1,768 - 627 2,395
---------- ---------- ------- -------
Level 1 Level 2 Level 3 Total
At 31 August 2019 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 2,258 - 550 2,808
Total 2,258 - 550 2,808
------- ------- ------- -------
The following table presents the movement in the Level 3
investments for the period ended 31 August 2020:
Investments
GBP'000
Opening balance 550
Purchases -
Sales at cost -
Total gains on investments in the Income Statement 77
Closing balance 627
------------
16 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. The fee arrangements for these services and
fees payable are set out in the Report of the Directors on page 29
of the Annual Report and in note 3 to the accounts. Mr Horner, a
Director of the Company, is also a director of Chelverton Asset
Management Limited a subsidiary of Chelverton Asset Management
Holdings, 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.
The three Directors also have individual holdings in Chelverton
Asset Management Holdings, a company which has Mr Horner as a
director and in which the Company also has a direct holding. The
Directors' holdings are detailed below:
Percentage Ordinary
of holding shares
in shares held
% GBP'000
K J Allen 1 1
D A Horner* 56 56
I P Martin 2 2
* Directors and connected persons
total holdings
17 CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company's capital management objectives are:
-- to ensure the Company's ability to continue as a going concern;
-- to provide an adequate return to Shareholders;
-- to support the Company's stability and growth;
-- to provide capital for the purpose of further investments.
The Company actively and regularly reviews and manages its
capital structure to ensure an optimal capital structure, taking
into consideration the future capital requirements of the Company
and capital efficiency, projected operating cash flows and
projected strategic investments opportunities. The management
regards capital as total equity and reserves, for capital
management purposes.
ANNUAL REPORT AND AGM
The foregoing represents extracts from the full text of the
Annual Report and Accounts for the year ended 31 August 2020. The
full Report will shortly be available for download from the
following website: www.chelvertonam.com
Copies will be posted to Shareholders shortly.
The AGM will be held at the offices of Chelverton Asset
Management Limited, 11 Laura Place, Bath, BA2 4BL at 12.00 p.m. on
Thursday 10 December 2020. Shareholders should refer to page 30 of
the Annual Report regarding the arrangements for the Meeting.
NATIONAL STORAGE MECHANISM
A copy of the Annual Report and Financial Statements will be
submitted shortly to the National Storage Mechanism ("NSM") and
will be available for inspection at the NSM, which is situated at:
www.hemscott.com/nsm.do.
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END
FR FELFWUESSEES
(END) Dow Jones Newswires
October 29, 2020 13:28 ET (17:28 GMT)
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