TIDMCGW
RNS Number : 5675S
Chelverton Growth Trust PLC
16 November 2021
CHELVERTON GROWTH TRUST PLC
LEI: 213800I86P8BAE6UVI83
FINAL RESULTS FOR THE YEARED 31 AUGUST 2021
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 GBP3,146,000 as at 31 August 2021
Market capitalisation GBP3,249,000 as at 31 August 2021
Capital structure 5,460,301 Ordinary 1p shares carrying one
vote each
Performance statistics
Year ended Year ended
31 August 31 August
2021 2020 % Change
Net assets GBP3,146,000 GBP2,218,000 41.88
Net asset value per share
(NAV) 57.62p 40.61p 41.88
MSCI Small Cap UK Index 502.41 365.47 37.47
Share price 59.50p 30.00p 98.33
Premium/(discount) to net
asset value 3.26% (26.13)%
Revenue loss after taxation GBP(106,000) GBP(93,000)
Revenue loss per share (1.94)p (1.70)p
Capital gain/(loss) per
share 18.95p (2.47)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
As noted in my statement last year, we entered the financial
year in a period of considerable uncertainty. Given this
background, I am pleased to report that we have experienced a good
portfolio recovery both in absolute return and relative to our
benchmark. It is also pleasing to report that at the year end the
shares were trading above the published Net Asset Value.
The past year has been very positive with an increase in the
Company's Net Asset Value ("NAV") per share from 40.61p to 57.62p -
an increase of 41.88% and an outperformance against the Company's
benchmark index, the MSCI Small Cap UK Index which rose by
37.47%.
This trend continues and we have seen a further significant
uplift in the NAV to 67.35p an increase since the year end of
16.89%.
The last two years have been an economic rollercoaster with
great uncertainty and huge challenges for businesses just to
survive. First there was the uncertainty surrounding Brexit and the
need for a trade deal; as soon as a resolution was found to this
issue, the world was hit by Covid-19, ensuing lockdowns and a
massive economic downturn. Thankfully we appear to be in a position
where the Country is learning to live with Covid-19 and the economy
is gradually returning to prior levels of activity.
With this increase in economic activity, further clouds are
appearing on the horizon in the form of inflationary and supply
chain issues. Inflation will inevitably rise as labour shortages
lead to higher salaries. Companies have begun to pass on the higher
costs of raw materials, shipping, and labour to customers. To
compound these pressures, the price of energy has risen
significantly, which will inevitably feed into this upward surge in
inflation and dampen consumers' ability to spend.
The trend over the past 30 years towards sourcing products from
overseas based suppliers and the micro-managing of logistics and
supply chains, in the chase for lower costs, has reduced
resilience. "Just in Time" works well if everything else does.
Buyers received a stark warning when the container vessel
Ever-Given became stuck in the Suez Canal causing severe delays and
additional costs. By running pipeline stocks to a minimum, UK
buyers have been ignoring the real cost of manufacture in the Far
East by failing to price-in the contingency expense of potential
delays and logistical issues.
On the employment side, it was only 18 months ago when there was
a real fear that the lockdown would lead to a massive rise in
unemployment, possibly reaching historically high levels of more
than three million people. The furlough scheme and the huge level
of taxpayer support for corporate UK has, thankfully, averted
this.
However, as the UK economy recovers, there are shortages of key
workers. Many immigrant workers, particularly from Eastern Europe,
returned home due to Covid-19. Post Brexit the ready supply of
cheap foreign skilled labour has dried up. This has served to
highlight the lack of investment in education and training by UK
businesses over many years. Greater investment, in people and
processes is going to be needed over a long period before the
backlog of underinvestment and reliance on cheap immigrant labour
is removed. More immediately, we now must navigate through the
world shortages of materials and products. This is expected to
persist over the next 12-24 months until production processes
throughout the World return to a fully operational state.
The Manager's Report sets out in more detail the developments in
the investment portfolio over the past twelve months. I am pleased
to say that there have been some very positive developments, and I
would like to put on record the Board's recognition of the
considerable efforts of our investee companies to achieve the best
they can, given the highly challenging conditions.
Costs
As the Company contracts in size, the Board has sought to
minimise the costs associated with running a quoted investment
trust. The Directors have decided to permanently reduce their fees,
following the temporary reduction made during the period of the
lockdowns. In addition, we are very grateful to our administrators
ISCA Administration Services who have volunteered a significant
reduction in their fees. They are joined by our Investment Manager,
Chelverton Asset Management which has now reduced its fees to
zero.
Outlook
Despite the current market conditions in the UK, we are
optimistic that if the economy can successfully navigate the next
12 months, we can look forward to a period of sustainable
growth.
Once the matters referred to above are resolved, we anticipate
that the improved certainty and clarity in the UK will encourage
further investment in UK businesses. In time the Board believes
this will lead to a further increase in the NAV per share.
Investee companies in the portfolio have shown great resilience
in facing the significant challenges posed over the past two years,
and it will be this strength that should enable them to prosper
going forward.
The Future of Chelverton Growth Trust
Over many years, the Board has used a process of Tender Offers
to return cash to those Shareholders wishing to realise value from
their holdings. The eighth, and last tender offer, took place in
September 2017. Since that time, the Board has taken the view that
it was not appropriate, with the recent depressed NAV per share, to
repeat the process.
It is worth reminding Shareholders that the effect of the
multiple tenders and the occasional buy-back of shares has reduced
the share capital from some 18.9 million shares to the current
5,460,301 a reduction of 71%.
The Company has now been reduced to a size that makes it
unviable in the longer term to continue with the current structure
and the Board is in the process of reviewing how to return funds to
Shareholders in the most effective way. Once this review is
concluded, it will formally outline the strategy for maximising
value for Shareholders from the remaining assets within the
portfolio. It is our intention to make an announcement to this
effect in the early part of 2022.
Kevin Allen
Chairman
16 November 2021
Investment Manager's Overview
In the past year we have seen the Country move into a new
lockdown, albeit less restrictive and therefore less damaging than
the first lockdown of 18 months ago. The arrival of effective
vaccines coupled with a successful programme of inoculation,
appears to have broken the link between infection and serious
illness. The Country appears to be learning to live with Covid-19
and, gradually, we are moving towards some form of normality.
The portfolio is invested in small AIM traded or unquoted
companies whose business is largely conducted in the UK. Therefore,
the strength of the UK economy is by far and away the most
important determinant of the success of our underlying
companies.
The massive Government support of business has enabled all our
investee companies to survive through this difficult period. The
challenge now is to ensure they develop and prosper within the
constraints of an inflationary environment and through the well
documented supply chain issues.
The UK economy is dynamic and should adapt to the challenges it
faces; there will always be opportunities for nimble businesses
operating in niche markets. It is worth recalling that only two
years ago the entire narrative surrounded the Brexit process and
the necessity to secure a Free Trade Agreement; it is safe to say
that this is no longer a subject of discussion.
Portfolio review
I am pleased to say that the recovery we expected in CEPS plc
was evidenced in its interim accounts for the six months ended June
2021. This period was, however, affected by lockdowns of varying
severity. It is expected that the second half will show further
improvement. The underlying strength of the CEPS business model is
now reflected in its accounts following three years of hard work,
streamlining and restructuring the company.
CEPS is the Company's largest holding, representing 57.1% of the
portfolio; it therefore has a material effect upon performance.
During the past year its largest and most successful subsidiary,
Hickton Group, acquired Millington Lord, a gas and electrical
safety consultancy. The purchase price was GBP1.1 million and it
was acquired from a parent company which was in administration. The
new management team at Aford Awards acquired three very small
businesses which will be relocated to Aford Awards' operation near
Maidstone. It is hoped that further acquisitions will be made in
the next year. Finally, following significant cost cutting, Davies
Odell was merged with Vale Brothers and both businesses were
acquired by a new holding company Vale Brothers Holdings. Having
owned 100% of a consistently loss-making company CEPS now owns 33%
of the larger business which has just declared a profit for the
first six months.
Since the Chelverton Growth Trust (CGT) year-end, CEPS has
announced substantial progress in strengthening its balance sheet.
Short-term debt of GBP2 million was refinanced, with the interest
rate on the loan being reduced from 10% to 7%. In addition, CEPS
successfully completed a placing of four million shares, increasing
its issued share capital to 21 million shares. CGT participated in
the placing and invested a further GBP160,132 by taking up 400,301
shares, and now has a 26% holding of the enlarged share capital.
The extra funding will be used to provide working capital and
funding for several small "bolt-on" acquisitions.
The market reacted very positively to the progress of the
business and the improved balance sheet. With the CEPS share price
now at 45p this holding is profitable. This positive movement in
the CEPS investment is primarily responsible for the uplift in
CGT's NAV per share since the period end.
A new team have been installed at Universe and appear to be
getting on top of the business. We expect to see significant
progress in the business and the share price.
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. It is
expected that the results for 2021 will show further progress and
that 2022 will really start to reflect the strength and quality of
the revitalised business.
Having last year incurred substantial restructuring costs,
Petards has enjoyed a much better year to date, with the interim
results showing a profit. Given that a large part of its business
operates in the railway supply side, the market remains very slow;
the order book, whilst healthy, is not as large as it has been in
the past. The business is changing in nature and should be more
profitable and produce better quality earnings going forward.
The holding of 1% in Chelverton Asset Management Holdings, the
holding company of the Investment Manager of this Company, was sold
following a tender offer by the Employee Share Option Trust to buy
7.25% of the company. The price received was GBP339 per share,
against a valuation this time last year of GBP250 per share, and
which compares to a cost price of GBP1 per share. Total proceeds
were therefore GBP339,000 and GBP220,000 of the sum received was
used to reduce CGT's loan from Jarvis to GBP100,000.
La Salle Education continued to make progress and is developing
its business model on several fronts. The Covid-19 pandemic has
accelerated 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
requirement for schools to make permanent provision for online
learning.
Spa Dental Partners continues to be deeply frustrating; the
result of the appeal by James Main against the employment ruling of
the previous year is still awaited. As a result of lockdowns there
is a significant backlog of cases in the judicial system, and it
may well be a further six months before the result of the appeal is
known.
Pedalling Forth (t/a Velovixen), like several internet
retailers, had a very good lockdown period but is now beginning to
experience more competition and tougher pricing.
Outlook
The economy is returning to pre-Covid levels and the current,
well documented problems in the supply chain will, it is believed,
gradually reduce as the world economy slowly returns to full
capacity and the spikes of pent-up demand reduce to a more even and
normal level.
The resolution of these issues is likely to take time, but once
this has happened, the performance of our investee companies should
reflect the underlying progress which they have made over the past
three years. This progress should then be reflected by increases in
their share prices.
David Horner
Chelverton Asset Management Limited
16 November 2021
Portfolio Review
as at 31 August 2021
% of
Valuation total
Investment Sector GBP'000 portfolio
----------------------------------------------------- -------------------------- --------- ----------
AIM Traded
CEPS Support Services 1,771 57.1
Trading holding company for a number of companies
supplying services and products
Petards Group Support Services 190 6.1
Development, provision and maintenance of advanced
security systems and related services
Technology Hardware and
Touchstar Equipment 637 20.6
Software systems for warehousing and distribution
Universe Group Support Services 33 1.1
Provision of credit fraud prevention, loyalty
and retail systems
Fully Listed
Zenith Energy Oil & Gas Producers 24 0.8
International energy production and exploration
company
Nasdaq Traded
Touchpoint Group Holdings Support Services - -
Provider of mobile satellite communications
equipment and airtime
--------- ----------
2,655 85.7
Unquoted
La Salle Education Support Services 182 5.9
A UK based company dedicated to providing on-line
mathematics education
Pedalling Forth General Retailers 240 7.7
Internet retailer of cycling clothing for women
Healthcare, Equipment &
Redecol Services 21 0.7
A medical device company focussed on the development
of asthma monitoring
Portfolio Valuation 3,098 100.0
--------- ----------
Portfolio Holdings
as at 31 August 2021
31 August 2021 31 August 2020
Valuation % of total Valuation % of total
Investment GBP'000 portfolio GBP'000 portfolio
---------------------------- --------- ---------- --------- ----------
CEPS 1,771 57.1 1,113 46.5
Touchstar 637 20.6 459 19.2
Pedalling Forth 240 7.7 240 10.0
Petards Group 190 6.1 150 6.3
La Salle Education 182 5.9 130 5.4
Universe Group 33 1.1 34 1.4
Zenith Energy 24 0.8 12 0.5
Redecol 21 0.7 12 0.5
Touchpoint Group Holdings - - - -
Chelverton Asset Management
Holdings * - - 245 10.2
Total 3,098 100.0 2,395 100.0
--------- ---------- --------- ----------
* Sold during the year.
Portfolio breakdown by sector and by index
Percentage of portfolio by sector
Support Services 70.2%
Technology Hardware & Equipment 20.6%
General Retailers 7.7%
Oil & Gas Producers 0.8%
Healthcare, Equipment & Services 0.7%
Percentage of portfolio by index
AIM 84.9%
Unquoted 14.3%
Fully Listed 0.8%
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, 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 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 2021 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 2021 was 57.62p (2020: 40.61p), an increase of 41.88%. By
comparison the benchmark rose by 37.47%.
The Company's share price at the year-end was 59.50p (2020:
30.00p).
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
16 November 2021
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 2021 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 previously paid CAM, in respect of its services as
Investment Manager, an annual fee of 0.5% of gross assets, payable
monthly in arrears. With effect from 1 September 2020, the
Investment Manager has agreed to waive its rights to receive an
investment management fee.
The amount payable to CAM for the year ending 31 August 2021 was
GBPnil (2020: GBP18,000). At the year-end GBPnil (2020: GBP2,200)
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
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 ongoing 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 continuing impact of
Covid-19 and it is currently the intention of the Company to hold
the Annual General Meeting as planned on 11 January 2022. However,
with the constant review of advice and restrictions due to Covid-19
it is not possible to predict what restrictions, if any, will be in
place when the Company holds its AGM on 11 January 2022. To ensure
that the voting on resolutions is put to the meeting the Board have
agreed that all resolutions will be decided by a poll based on the
proxy votes submitted. Shareholders are requested to return a proxy
vote per the form of proxy on page 65 of the Annual Report 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.
The Board hope that the meeting will be open for Shareholder
attendance, however, advice may change on this and 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-trust-plc/shareholder-information/
and, where appropriate, by RNS announcement.
On behalf of the Board
Kevin Allen
Chairman
16 November 2021
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 gain 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
16 November 2021
NON- STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 August 2021 and
2020 but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies, and those
for 2021 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 2021
2021 2020
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains/(losses)
on investments
at fair value 7 - 1,042 1,042 - (102) (102)
Income 2 10 - 10 39 - 39
Investment management
fee 3 - - - (4) (14) (18)
Other expenses 4 (117) (7) (124) (128) (19) (147)
Net (loss)/gain
on ordinary activities
before taxation (107) 1,035 928 (93) (135) (228)
Taxation on ordinary
activities 5 - - - - - -
Net (loss)/gain
on ordinary activities
after taxation (107) 1,035 928 (93) (135) (228)
Revenue Capital Total Revenue Capital Total
(Loss)/gain per
Ordinary share 6 (1.95)p 18.95p 17.00p (1.70)p (2.47)p (4.17)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 2021
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 2021
1 September
2020 55 787 976 134 266 2,218
Net profit/(loss)
after taxation
for the year - - 1,035 - (107) 928
31 August 2021 55 787 2,011 134 159 3,146
--------- ---------- ---------- ----------- --------- -------
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
--------- ---------- ---------- ----------- --------- -------
* 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 2021
2021 2020
Notes GBP'000 GBP'000
Fixed assets
Investments at fair value 7 3,098 2,395
Current assets
Debtors 9 146 150
Cash and cash equivalents 34 39
180 189
Creditors - amounts falling
due within one year 10 (132) (366)
Net current assets/(liabilities) 48 (177)
Net assets 3,146 2,218
------- -------
Share capital and reserves
Called up share capital 12 55 55
Special reserve 787 787
Capital reserve 2,011 976
Capital redemption reserve 134 134
Revenue reserve 159 266
Equity Shareholders' funds 3,146 2,218
Net asset value per Ordinary
share 13 57.62p 40.61p
These financial statements were approved and authorised for
issue by the Board of Directors on 16 November 2021 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 2021
2021 2020
Note GBP'000 GBP'000
Cash flows used in operating
activities
Net gain/(loss) on ordinary activities 928 (228)
Adjustment for:
Net capital (gain)/loss (1,035) 135
Expenses charged to capital (7) (33)
Interest paid 10 26
(Decrease)/increase in creditors (14) 14
Decrease/(increase) in debtors 4 (5)
Cash used in operations (114) (91)
------- -------
Cash flows from investing activities
Proceeds from sales of investments 339 311
Net cash from investing activities 339 311
------- -------
Cash flows used in financing
activities
Capital repayment of loan (220) (280)
Interest paid (10) (26)
Net cash used in financing activities (230) (306)
Net decrease in cash (5) (86)
Cash at the beginning of the
year 39 125
Cash at the end of the year 11 34 39
------- -------
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); and
- 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 NASDAQ, 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.
The recoverability of the Spa Dental debtor as shown in note 9
and the impairment of the interest has been considered by the
Directors who believe that the amounts are stated at fair
value.
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
2021 2020
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 14 - 14 26 - 26
Loan stock interest (4) - (4) 13 - 13
Total income 10 - 10 39 - 39
------- ------- ------- ------- ------- -------
3 INVESTMENT MANAGEMENT FEE
2021 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fee - - - 4 14 18
------- ------- ------- ------- ------- -------
With effect from 1 November 2019, the investment management fee
was calculated at the rate of 0.04167% per month, equating to 0.5%
per annum, of the gross value of funds under management and was
payable monthly in arrears. At 31 August 2021 there was nil
outstanding (2020: GBP2,200). 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.
4 OTHER EXPENSES 2021 2020
GBP'000 GBP'000
Administrative and secretarial services 36 37
Directors' remuneration 20 28
Auditors' remuneration
* audit services 18 18
* non-audit services; tax compliance - 2
Finance costs 10 26
Other expenses 40 36
124 147
------- -------
5 TAXATION 2021 2020
Revenue Capital Total Revenue Capital Total
Analysis of charge GBP'000 GBP'000 GBP'000 GBP'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:
2021 2020
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% (2020:
19%)
Corporation tax (20) 196 176 (18) (25) (43)
Investment income
not taxable (3) - (3) (5) - (5)
Non-taxable investment
(gains)/losses - (198) (198) - 19 19
Excess expenses for
the year 23 2 25 23 6 29
Current tax charge - - - - - -
for the year
------- ------- ------- ------- ------- -------
At 31 August 2021 the Company had surplus management expenses of
GBP4,813,000 (2020: GBP4,681,000) 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
2021 2020
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic (1.95) 18.95 17.00 (1.70) (2.47) (4.17)
------- ------- ----- ------- ------- ------
Revenue return per Ordinary share is based on the net revenue
loss on ordinary activities after taxation attributable of
GBP107,000 (2020: GBP93,000) and on 5,460,301 (2020: 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
gain of GBP1,035,000 (2020: loss of GBP135,000) and on 5,460,301
(2020: 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 gain of
GBP928,000 (2020: loss of GBP228,000) and on 5,460,301 (2020:
5,460,301) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year.
7 INVESTMENTS 2021 2020
GBP'000 GBP'000
Fully Listed 24 12
Traded on AIM 2,631 1,756
Unquoted 443 627
NASDAQ - -
3,098 2,395
--------- ------- -------
Fully Traded
on
Listed AIM Unquoted* NASDAQ Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 118 3,696 773 166 4,753
Opening investment holding
losses (106) (1,940) (146) (166) (2,358)
12 1,756 627 - 2,395
Movements in the year:
Sales - proceeds - - (339) - (339)
- gains on sales - - 338 - 338
Movement in investment
holding losses 12 875 (183) - 704
Closing valuation 24 2,631 443 - 3,098
Closing book cost 118 3,696 772 166 4,752
Closing investment holding
losses (94) (1,065) (329) (166) (1,654)
Closing valuation 24 2,631 443 - 3,098
------- -------- --------- ------- -------
2021 2020
GBP'000 GBP'000
Realised gains/(losses) on sales 338 (229)
Movement in fair value of investments 704 127
Net gains/(losses) on investments 1,042 (102)
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 (2020: GBPnil) and nil (2020: GBP163) on purchases and sales
of investments, respectively. These amounts are included in
'Gains/(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
2020 Additions Disposals 2021 gain (gain)/loss 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
Chelverton
Asset Management
Holdings 1 - (1) - 338 (244) - 245
La Salle
Education 180 - - 180 - 52 182 130
Pedalling
Forth 300 - - 300 - - 240 240
Redecol 292 - - 292 - 9 21 12
773 - (1) 772 338 (183) 443 627
------- --------- --------- ------- -------- -------------- --------- ---------
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
2021 2021 2020 2020 end assets * *
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
La Salle
Education 180 182 180 130 5.2 31/12/20 18 - -
Pedalling
Forth 300 240 300 240 19.9 31/12/20 88 - -
Redecol 292 21 292 12 1.0 31/01/21 279 - -
* 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 2021, 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 issued Issued
Security of shares share capital share 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 5.19 5,012,014
Petards 2,000,000 3.48 57,528,229
Subsequent to the year end, the Company participated in a
placing of 400,301 shares amounting to GBP160,132 in CEPS PLC. The
holding at the date of this report is 5,460,301 shares representing
26.00% of the issued share capital of 21,000,000 Ordinary
Shares.
9 DEBTORS 2021 2020
GBP'000 GBP'000
Amounts falling due within one year
Prepayments and other debtors 8 12
Amounts due from investment proceeds
* 138 138
146 150
* Represents the amount due from SpaDental 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. At 31 August 2021,
interest is past due and impaired and a total of GBP12,000
has been written off in the year under review.
10 CREDITORS - amounts falling due within
one year
2021 2020
GBP'000 GBP'000
Accruals and other creditors 32 46
Short term loan 100 320
132 366
-------- -------
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. Partial repayments were
made on 11 May 2020 of GBP280,000 and on 2 March 2021 of
GBP220,000. At the year-end GBP100,000 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
2020 flows change 2021
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents
Cash 39 (5) - 34
39 (5) - 34
Borrowings
Debt due within one year (320) 220 - (100)
(320) 220 - (100)
-------------- ------- -------- -------
Total (281) 215 - (66)
-------------- ------- -------- -------
12 CALLED UP SHARE CAPITAL 2021 2020
GBP'000 GBP'000
Allotted, called up and fully paid:
5,460,301 (2020: 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 57.62p
(2020:40.61p) is based on net assets of GBP3,146,000 (2020:
GBP2,218,000) and on 5,460,301 (2020: 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 2021, there was a capital commitment of GBP160,132
as discussed in note 8 to invest in CEPS (2020: GBPnil) outstanding
and no contingent liabilities (2020: 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 2021 on its investments is as follows:
2021 2020
GBP'000 GBP'000
Fair value through profit or loss investments 3,098 2,395
------- -------
A 20% decrease in the market value of investments at 31 August
2021 would have decreased net assets attributable to Shareholders
by 11 pence per share (2020: 9 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:
2021 2020
GBP'000 GBP'000
Cash at bank and cash equivalents 34 39
Amounts due from investment proceeds 138 138
------- -------
Short term loan (100) (320)
------- -------
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 GBP1,000 (2020: GBP933). If there was a
decrease in interest rates of 0.1% (2020: 0.1%) net revenue before
taxation would increase by GBP100 (2020: GBP93). These calculations
are based on balances as at 31 August 2021 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.
(iv) Liquidity risk
Eighty six 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 fourteen percent of the portfolio, could be more
difficult to realise as they are not tradable instruments.
v) Credit risk
The Company does not have any significant exposure to credit
risk arising from one individual party. Credit risk is spread
across a number of counterparties, each having an immaterial effect
on the Company's cash flows should a default happen. The Company
assesses its debtors from time to time to ensure they are neither
past due or impaired. During the year under review it has
identified the interest from SpaDental as being past due and
impaired as detailed in note 9.
(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 GBP100,000
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
fair value or amortised cost which equates to 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 2021 GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the Statement
of Financial Position
Investments - - 3,098 3,098
Debtors - 146 - 146
Cash at bank and cash
equivalents 34 - - 34
Total 34 146 3,098 3,278
------------ ----------- ----------- -------
Liabilities as per the
Statement of Financial
Position
Creditors 32 100 - 132
Total 32 100 - 132
----------- ----------- ------------ -------
Assets at
At fair value
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
--- ---
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 2021 GBP'000 GBP'000 GBP'000 GBP'000
Investments 2,655 - 443 3,098
Total 2,655 - 443 3,098
----------- ---------- ------- -------
Level 1 Level 2 Level
3 Total
At 31 August 2020 GBP'000 GBP'000 GBP'000 GBP'000
Investments 1,768 - 627 2,395
Total 1,768 - 627 2,395
------- ------- ------- -------
The following table presents the movement in the Level 3
investments for the year ended 31 August 2021:
Investments
GBP'000
Opening balance 627
Sale proceeds (339)
Total gains on investments in the Income Statement 155
Closing balance 443
------------
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 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.
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 had a direct holding until sold
on 26 February 2021. The Directors' holdings are detailed
below:
Percentage Ordinary
of holding shares
in shares held
% GBP'000
K J Allen 1 1
D A Horner* 55.25 55.25
I P Martin 2 2
* Directors and connected persons
total holdings
The Company sold its holding in Chelverton Asset Management
Holdings during the year for GBP339,000 realising a gain of
GBP338,000. As stated in notes 8 and 14, the Company made an
investment of GBP160,132 in CEPS PLC after the year end. These
transactions were conducted at arm's length.
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 2021. 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
Tuesday 11 January 2022. Shareholders should refer to page 30 of
the Annual Report regarding the arrangements for the Meeting.
NATIONAL STORAGE MECHANISM
A copy of the 2021 Annual Report will be submitted shortly to
the National Storage Mechanism ("NSM") and will be available for
inspection at the NSM, which is situated at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
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END
FR FFDFDMEFSELF
(END) Dow Jones Newswires
November 16, 2021 08:51 ET (13:51 GMT)
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