TIDMCGW
RNS Number : 7451F
Chelverton Growth Trust PLC
09 November 2022
CHELVERTON GROWTH TRUST PLC
LEI: 213800I86P8BAE6UVI83
FINAL RESULTS FOR THE YEARED 31 AUGUST 2022
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 GBP2,961,000 as at 31 August 2022
Market capitalisation GBP1,693,000 as at 31 August 2022
Capital structure 5,460,301 Ordinary 1p shares carrying one
vote each
Performance statistics
Year ended Year ended
31 August 31 August
2022 2021 % Change
Net assets GBP2,961,000 GBP3,146,000 (5.88)
Net asset value per share
(NAV) 54.24p 57.62p (5.87)
MSCI Small Cap UK Index 370.37 502.41 (26.28)
Share price 31.00p 59.50p (47.90)
(Discount)/premium to net
asset value (42.85)% 3.26%
Revenue loss after taxation GBP(111,000) GBP(107,000)
Revenue loss per share (2.04)p (1.95)p
Capital (loss)/gain per
share (1.35)p 18.95p
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 am not intending within this report to discuss in detail the
litany of well documented issues and problems currently facing the
economies of the United Kingdom and Europe. Through the almost
daily turmoil seen in Government, our politicians have managed to
cause further angst and uncertainty. The world looks a very
different place today from that when I reported to you a year ago,
and certainly not for the better as had been hoped.
Notwithstanding this economic climate, I am pleased to report
that the Company's value has held up well on a relative value
basis. Most of the portfolio companies have made progress in the
past year at an operating level. However, in these febrile, risk
averse times, the prices of the AIM traded shares have not advanced
to reflect these improvements.
As a result, the past year has been one of consolidation with a
decrease in the Company's net asset value per share from 57.62p to
54.24p - a reduction of 5.87%. In the same period the Company's
benchmark index, the MSCI Small Cap UK Index decreased by
26.28%.
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 has been some continued positive progress, and I wish to
recognise the considerable efforts by everyone working in our
investee companies to achieve the best they can within highly
challenging conditions.
The Future
The Board is aware that the current structure of the Company is
not appropriate for enabling our objective of achieving the best
long-term outcomes for Shareholders.
To date the Company's strategy has been to return cash to
Shareholders via regular tender offers. Over a number of years
GBP5.4 million has been returned and 71% of the equity retired.
This has been a successful strategy and has been well received.
The Board feels that the reduced size of the Company and the
small number of investments, dictates that a further tender offer
is inappropriate at this stage. Consequently, we are now
investigating other options to maximise the return of funds to
Shareholders. Nothing has been concluded at this time, but as soon
as this process is complete, the Board will formally report its
intended strategy to Shareholders. It is hoped that such a report
will be published within the next six months.
Recognising the need to minimise the ongoing cost base of the
Company, Board members have continued to provide their services at
reduced salaries. In addition, our Investment Manager, Chelverton
Asset Management, has cut its fees to zero.
The Board considers that there remains significant unrecognised
value in the portfolio and wishes to only sell investments once an
appropriate value is reflected.
To provide adequate liquidity for such a strategy to be pursued,
we have put in place a loan facility with David Horner who has
provided a GBP215,000 loan to the Company. The loan is interest
free and unsecured and can be repaid by the Company at any time or
on 18 months notice from Mr Horner.
The Outlook
Despite the current market conditions in the UK, it is hoped
that over the next twelve months we will start to see a return to
more stable conditions which support a period of steady and
sustainable growth. The market dislocation caused by Covid-19 and
associated lockdowns should begin to reduce and the political and
social fallout from the Ukrainian war will hopefully abate.
If the matters referred to above are resolved, then the improved
certainty and clarity in the UK should encourage international
investors back to invest in UK companies.
The companies in the portfolio have shown great resilience over
the past three years, and it will be this strength that should
enable them to prosper going forward.
Kevin Allen
Chairman
8 November 2022
Investment Manager's Overview
Having emerged from the pandemic and associated lockdowns it had
been hoped that the UK economy would bounce back and recover to be
ahead of its 2019 levels.
Unfortunately, the impact of the lockdowns and the furlough
scheme have proved to be far more disruptive than was ever
considered likely. Supply chains have not yet recovered to their
pre-Covid levels of consistency or speed of delivery. The increases
in world demand, which have not been matched by production and
supply, have resulted in the high levels of price inflation which
we are now experiencing.
The portfolio is invested in small AIM traded or unquoted
companies whose business is largely conducted in the UK. Therefore,
the strength and growth of the UK economy is by far and away the
most important determinant of our underlying companies'
success.
The UK economy is dynamic and will adapt to the challenges it
faces. There will always be opportunities for nimble businesses
operating in niche markets and the issues our companies are facing
are evolving almost on a weekly basis. The main problems currently
faced are ones of supply of labour and input materials. In
addition, the price and perhaps availability of energy, both gas
and electricity, could be problematic over the winter period.
However, successful businesses will always find solutions; a
longer-term answer to these problems is to use less labour and
energy by adopting new processes and procedures, thereby becoming
competitive within the changing environment.
Those of us of a certain age will recall previous periods, not
unlike the one we are now experiencing. We should take comfort that
the UK economy came through those times in a stronger and more
efficient state. I do believe that we will find a way through what
now seems like an impenetrable fog of uncertainty.
Portfolio review
I am pleased to say that the recovery that we talked about last
year in CEPS plc, the Company's largest holding (68.0% of the
Company's portfolio), was demonstrated in the CEPS results for the
year ended 2021.This positive trend continues with another solid
performance reported in the latest interim accounts for the six
months ended June 2022. The full year accounts will enjoy the
benefits from a complete year's trading of several incremental
acquisitions made during the prior year by CEPS businesses. Thus,
we remain positive.
The Hickton Group, a subsidiary of CEPS plc, has deliberately
increased its cost base by putting in additional controls to manage
its rapid growth over the past two years and to provide the base to
facilitate future growth.
The management team at Aford Awards acquired a large
internet-based business to expand the range of its offering. The
integration of this business into the Aford Awards operation near
Maidstone is ongoing. It is hoped that further acquisitions will be
made in the next year.
Friedmans has seen a very welcome return to sales and profits
growth. The ongoing issues of the supply of lycra and currency
volatility have however been problematical. Milano International,
Friedmans subsidiary, manufacturing gymnastic sportswear, has
struggled with a shortage of skilled labour. However, the
management team are working hard to improve efficiency and
therefore performance.
A cash offer was received for Universe at 12p per share which
was a good price and accelerated the returns from the new
management team mentioned last year. We stated at that time that we
were expecting "to see significant progress in the business and the
share price".
Touchstar, as expected and heralded last year, has continued to
improve its performance. This was evidenced in its latest interim
results with increases in sales, gross margins, order book,
profits, and consequently cash reserves. It will be important for
Touchstar to utilise its hard created balance sheet strength to
create value.
Petards has transformed its business to manage the reduction in
sales in the railway supply side. It has significantly increased
gross margins which has helped to manage the decline in its sales.
Its objective two years ago was to move to a higher value-added
service with stronger recurring revenue. It is well on the way to
achieving this objective. As a measure of its undervalue, some 50%
of market capitalisation is represented by cash reserves.
La Salle Education continued to make progress and is developing
its business model on several fronts. We believe that the hard work
of the past five years will begin to be demonstrated in the next
set of results.
SpaDental/Main Dental Partners (MDP) continues to be
problematical. Having lost an appeal to a negative judgement
against it, MDP is waiting for the legal process to conclude. I am
reticent to put any timetable on when this will be resolved and to
the exact level of cash the Company could finally receive.
Redecol had received an offer to invest significant sums into
the company however, the principal investor, tragically died in an
accident and matters are consequently now on hold.
Pedalling Forth (t/a Velovixen), like most internet retailers,
struggled once the lockdown environment ended. Sales were
significantly lower and eventually we decided to accept a modest
cash offer for our shares, there being no better alternative.
Outlook
The economic environment, at the time of writing, is looking
very uncertain and problematical. Things will improve, however, at
this stage, it is impossible to say when. The anticipated decline
in inflation over the course of 2023 should be a big help as will
the normalisation of the energy supply side. Gradually, the
imbalance between demand and supply will disappear, not least
because the UK and Europe are forecast to enter a period of
recession.
The resolution of these issues will happen slowly, and the
financial performance of our investee companies should begin to
reflect the underlying progress that they have made over the past
three years. This progress will, in the end, be evidenced by
increases in their value.
David Horner
Chelverton Asset Management Limited
8 November 2022
Portfolio Review
as at 31 August 2022
Valuation % of
Investment Sector GBP'000 total portfolio
----------------------------- ----------------------------- ----------- ------------------
AIM Traded
CEPS Support Services 2,075 68.0
Trading holding company for a number of companies
supplying services and products
Petards Group Support Services 180 5.9
Development, provision and maintenance of advanced
security systems and related services
Technology Hardware and
Touchstar Equipment 595 19.5
Software systems for warehousing and distribution
Nasdaq Traded
Touchpoint Group Holdings Support Services - -
Provider of mobile satellite communications
equipment and airtime
Unquoted
La Salle Education Support Services 182 5.9
A UK based company dedicated to providing on-line
mathematics education
Healthcare, Equipment &
Redecol Services 21 0.7
A medical device company focussed on the development
of asthma monitoring
Portfolio Valuation 3,053 100.0
----------- ------------------
Portfolio Holdings
as at 31 August 2022
31 August 2022 31 August 2021
Valuation % of total Valuation % of total
Investment GBP'000 portfolio GBP'000 portfolio
-------------------------- --------- ---------- --------- ----------
CEPS 2,075 68.0 1,771 57.1
Touchstar 595 19.5 637 20.6
La Salle Education 182 5.9 182 5.9
Petards Group 180 5.9 190 6.1
Redecol 21 0.7 21 0.7
Touchpoint Group Holdings - - - -
Pedalling Forth * - - 240 7.7
Universe Group* - - 33 1.1
Zenith Energy * - - 24 0.8
Total 3,053 100.0 3,098 100.0
--------- ---------- --------- ----------
* Sold during the year.
Portfolio breakdown by sector and by index
Percentage of portfolio by sector
Support Services 79.8%
Technology Hardware & Equipment 19.5%
Healthcare, Equipment & Services 0.7%
Percentage of portfolio by index
AIM 93.4%
Unquoted 6.6%
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. Although the Company's investment in CEPS
represents 68.0% of the portfolio, it should be noted that CEPS is
diversified across a number of underlying businesses.
Investment Strategy
Investments are selected for the portfolio only after extensive
research which the Investment Manager believes to be key. The whole
process through which equity must pass in order to be included in
the portfolio is very rigorous. Only a security where the
Investment Manager believes that the price will be significantly
higher in the future will pass the selection process. The
Investment Manager believes the key to successful stock selection
is to identify the long-term value of a company's shares and to
have the patience to hold the shares until that value is
appreciated by other investors. Identifying long-term value
involves detailed analysis of a company's earnings prospects over a
five-year time horizon.
The Company's Investment Manager is Chelverton Asset Management
Limited ("CAM"), an investment manager focusing exclusively on
achieving returns for investors based on UK investment analysis of
the highest quality. The founder and employee owners of CAM include
experienced investment professionals with strong investment
performance records who believe rigorous fundamental research
allied to patience is the basis of long-term investment
success.
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 2022 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 19
to 26 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. Further details regarding the Company's Committees and
their duties are given on pages 21 to 23 of the Corporate
Governance Statement in the Annual Report.
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 fluctuate
significantly.
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 19 to 26 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 2022 was 54.24p (2021: 57.62p), an increase of 5.87%. By
comparison the benchmark fell by 26.28%.
The Company's share price at the year-end was 31.00p (2021:
59.50p).
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
8 November 2022
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 2022 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. As a result, the amount payable to CAM
for the year ending 31 August 2022 was GBPnil (2021: GBPnil). At
the year-end GBPnil (2021: GBPnil) 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.
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.
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. T he Board has
also considered the risk to the Company of the ongoing Covid-19
pandemic and the conflict in Ukraine.
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.
On behalf of the Board
Kevin Allen
Chairman
8 November 2022
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 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
8 November 2022
NON- STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 August 2022 and
2021 but is derived from those accounts. Statutory accounts for
2021 have been delivered to the Registrar of Companies, and those
for 2022 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 2022
2022 2021
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains
on investments
at fair value 7 - (72) (72) - 1,042 1,042
Income 2 9 - 9 10 - 10
Investment management
fee 3 - - - - - -
Other expenses 4 (120) (2) (122) (117) (7) (124)
Net (loss)/gain
on ordinary activities
before taxation (111) (74) (185) (107) 1,035 928
Taxation on ordinary
activities 5 - - - - - -
Net (loss)/gain
on ordinary activities
after taxation (111) (74) (185) (107) 1,035 928
Revenue Capital Total Revenue Capital Total
(Loss)/gain per
Ordinary share 6 (2.04)p (1.35)p (3.39)p (1.95)p 18.95p 17.00p
--------- --------- ------- --------- --------- -------
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 July 2022 by the Association of Investment Companies.
The notes form part of these accounts.
Statement of Changes in Equity
for the year ended 31 August 2022
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 2022
1 September
2021 55 787 2,011 134 159 3,146
Net loss after
taxation for
the year - - (74) - (111) (185)
31 August 2022 55 787 1,937 134 48 2,961
--------- ---------- ---------- ----------- --------- -------
Year ended
31 August 2021
1 September
2020 55 787 976 134 266 2,218
Net gain/(loss)
after taxation
for the year - - 1,035 - (107) 928
31 August 2021 55 787 2,011 134 159 3,146
--------- ---------- ---------- ----------- --------- -------
* 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 2022
2022 2021
Notes GBP'000 GBP'000
Fixed assets
Investments at fair value 7 3,053 3,098
Current assets
Debtors 9 146 146
Cash and cash equivalents 10 34
156 180
Creditors - amounts falling
due within one year 10 (248) (132)
Net current (liabilities)/assets (92) 48
Net assets 2,961 3,146
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Share capital and reserves
Called up share capital 12 55 55
Special reserve 787 787
Capital reserve 1,937 2,011
Capital redemption reserve 134 134
Revenue reserve 48 159
Equity Shareholders'
funds 2,961 3,146
Net asset value per Ordinary
share 13 54.24p 57.62p
These financial statements were approved and authorised for
issue by the Board of Directors on 8 November 2022 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 2022
2022 2021
Note GBP'000 GBP'000
Cash flows used in operating
activities
Net (loss)/gain on ordinary activities (185) 928
Adjustment for:
Net capital loss/(gain) 74 (1,035)
Expenses charged to capital (2) (7)
Interest paid 3 10
Change in creditors 1 (14)
Change in debtors - 4
Cash used in operations (109) (114)
------- -------
Cash flows (used in)/from investing
activities
Purchases of investments (160) -
Proceeds from sales of investments 133 339
Net cash (used in)/from investing
activities (27) 339
------- -------
Cash flows from/(used in) financing
activities
Loan advanced 215 -
Capital repayment of loan (100) (220)
Interest paid (3) (10)
Net cash from/(used in) financing
activities 112 (230)
Net decrease in cash (24) (5)
Cash at the beginning of the
year 34 39
Cash at the end of the year 11 10 34
------- -------
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 July 2022. 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.
INCOME
2
2022 2021
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
Loan stock interest 9 - 9 (4) - (4)
Total income 9 - 9 10 - 10
------------- ------------ ------------ ------- ------- -------
3 INVESTMENT MANAGEMENT FEE
2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fee - - - - - -
----------- -------- -------- ------- ------- -------
With effect from 1 September 2020, the Investment Manager has
agreed to waive the entitlement to a fee.
4 OTHER EXPENSES 2022 2021
GBP'000 GBP'000
Administrative and secretarial services 40 36
Directors' remuneration 20 20
Auditors' remuneration
* audit services 18 18
* non-audit services - -
Finance costs 3 10
Other expenses 41 40
122 124
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5 TAXATION 2022 2021
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:
2022 2021
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% (2021:
19%)
Corporation tax (21) (14) (35) (20) 196 176
Investment income
not taxable - - - (3) - (3)
Non-taxable investment
losses/(gains) - 14 14 - (198) (198)
Excess expenses for
the year 21 - 21 23 2 25
Current tax charge - - - - - -
for the year
------- ------- ------- ------- ------- -------
At 31 August 2022, the Company had surplus management expenses
and losses of GBP4,924,000 (2021: GBP4,813,000) 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
2022 2021
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic (2.04) (1.35) (3.39) (1.95) 18.95 17.00
------- ------- ------ ------- ------- -----
Revenue return per Ordinary share is based on the net revenue
loss on ordinary activities after taxation attributable of
GBP111,000 (2021: GBP107,000) and on 5,460,301 (2021: 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 GBP74,000 (2021: gain of GBP1,035,000) and on 5,460,301
(2021: 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
GBP185,000 (2021: gain of GBP928,000) and on 5,460,301 (2021:
5,460,301) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year.
7 INVESTMENTS 2022 2021
GBP'000 GBP'000
Fully Listed - 24
Traded on AIM 2,850 2,631
Unquoted 203 443
NASDAQ - -
3,053 3,098
------------ --- -------
Fully Traded
on
Listed AIM Unquoted* NASDAQ Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 118 3,696 772 166 4,752
Opening investment holding
losses (94) (1,065) (329) (166) (1,654)
24 2,631 443 - 3,098
Movements in the year:
Purchases - 160 - - 160
Sales - proceeds (24) (82) (27) - (133)
- losses on sales (94) (132) (273) - (499)
Movement in investment
holding losses 94 273 60 - 427
Closing valuation - 2,850 203 - 3,053
Closing book cost - 3,642 472 166 4,280
Closing investment holding
losses - (792) (269) (166) (1,227)
Closing valuation - 2,850 203 - 3,053
------- -------- ----------- --------- -------
2022 2021
GBP'000 GBP'000
Realised (losses)/gains on sales (499) 338
Movement in fair value of investments 427 704
Net (losses)/gains on investments (72) 1,042
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 (2021: GBPnil) and nil (2021: GBPnil) on purchases and sales
of investments, respectively.
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
2021 Additions Disposals 2022 (loss)/gain losses 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
La Salle
Education 180 - - 180 - - 182 182
Pedalling
Forth 300 - (300) - (291) 60 - 240
Parmenion - - - - 18 - - -
Redecol 292 - - 292 - - 21 21
772 - (300) 472 (273) 60 203 443
------- --------- --------- ------- ------------ -------------- --------- ---------
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
2022 2022 2021 2021 end assets * *
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
La Salle
Education 180 182 180 182 5.2 31/12/21 198 - -
Redecol 292 21 292 21 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 2022, 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 5,460,301 26.00 21,000,000
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
9 DEBTORS 2022 2021
GBP'000 GBP'000
Amounts falling due within one year
Prepayments and other debtors 8 8
Amounts due from investment proceeds
* 138 138
146 146
* 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 2022,
interest is past due and impaired and a total of GBP1,000
has been written off in the year under review.
CREDITORS - amounts falling due within
10 one year
2022 2021
GBP'000 GBP'000
Accruals and other creditors 33 32
Short term loan 215 100
248 132
-------- -------
On 4 June 2018, the Company entered in to a GBP600,000 loan
agreement with Jarvis Securities plc. Interest was 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 of GBP280,000 on 11 May 2020, GBP220,000 on 2 March 2021,
GBP50,000 on 7 February 2022 and GBP50,000 on 31 May 2022. The loan
has therefore been fully repaid .
On 16 September 2021, the Company entered into an interest free
loan agreement with Mr Horner. Drawdowns were made of GBP165,000 on
16 September 2021, GBP25,000 on 30 May 2022 and GBP25,000 on 31 May
2022. At the year end, GBP215,000 was outstanding. The loan is
unsecured, interest free and can be repaid by the Company at any
time or on 18 months' notice from Mr Horner.
11 ANALYSIS OF CHANGES IN NET DEBT
At 31
At 1 September Cash August
2021 flows 2022
GBP'000 GBP'000 GBP'000
Cash and cash equivalents
Cash 34 (24) 10
34 (24) 10
Borrowings
Debt due within one year (100) (115) (215)
Total (66) (139) (205)
-------------- ------- -------
12 CALLED UP SHARE CAPITAL 2022 2021
GBP'000 GBP'000
Allotted, called up and fully paid:
5,460,301 (2021: 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 54.24p
(2021:57.62p) is based on net assets of GBP2,961,000 (2021:
GBP3,146,000) and on 5,460,301 (2021: 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 2022, there were no capital commitments outstanding
(2021: GBP160,132) and no contingent liabilities (2021:
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 David Horner 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 2022 on its investments is as follows:
2022 2021
GBP'000 GBP'000
Fair value through profit or loss investments 3,053 3,098
------- -------
A 20% decrease in the market value of investments at 31 August
2022 would have decreased net assets attributable to Shareholders
by 11 pence per share (2021: 11 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:
2022 2021
GBP'000 GBP'000
Amounts due from investment proceeds 138 138
------- -------
Short term loan - (100)
------- -------
The Company receives no interest on its bank balances currently
receives no interest from SpaDental Limited as stated in note 9 and
pays no 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 GBPnil (2021: GBP1,000). If there was a
decrease in interest rates of 0.1% (2021: 0.1%) net revenue before
taxation would increase by GBPnil (2021: GBP100). These
calculations are based on balances as at 31 August 2022 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
Ninety three 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 seven 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 GBP215,000
from Mr Horner. At the year-end an amount of GBP215,000 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
cost receivables or loss Total
31 August 2022 GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the Statement
of Financial Position
Investments - - 3,053 3,053
Debtors 8 138 - 146
Cash at bank and cash
equivalents 10 - - 10
Total 18 138 3,053 3,209
------------ ----------- -------- -------
Liabilities as per the
Statement of Financial
Position
Creditors 33 215 - 248
Total 33 215 - 248
----------- ----------- ------------ -------
Assets at
At fair value
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 8 138 - 146
Cash at bank and cash
equivalents 34 - - 34
Total 42 138 3,098 3,278
----------- ----------- ------------ -------
Liabilities as per the
Statement of Financial
Position
Creditors 32 100 -132
Total 32 100 -132
--- ---
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
2022 GBP'000 GBP'000 GBP'000 GBP'000
Investments 2,850 - 203 3,053
Total 2,850 - 203 3,053
---------- ----------- ----------- ---------
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
------- ------- ------- -------
The following table presents the movement in the Level 3
investments for the year ended 31 August 2022:
Investments
GBP'000
Opening balance 443
Sale proceeds (27)
Total losses on investments in the Income Statement (213)
Closing balance 203
------------
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 28
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 Limited, 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
As stated in note 10 the Company entered into a loan agreement
with Mr Horner. At the year end GBP215,000 remained
outstanding.
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 2022. 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, Ground Floor Office, Basildon House, 7
Moorgate, London EC2R 6AF at 11.30 a.m. on Thursday 15 December
2022. Shareholders should refer to page 29 of the Annual Report
regarding the arrangements for the Meeting.
NATIONAL STORAGE MECHANISM
A copy of the 2022 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 FSIFAAEESEFF
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November 09, 2022 02:00 ET (07:00 GMT)
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