Chelverton UK Dividend Trust plc: Half-Yearly Results for the Six Months Ended 31 October 2022
Chelverton UK Dividend Trust plc (SDVP)
Chelverton UK Dividend Trust plc: Half-Yearly Results for the Six Months Ended 31 October 2022
29-Nov-2022 / 11:56 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Chelverton UK Dividend Trust PLC
Half-Yearly Financial Report
For the Six Months ended 31 October 2022
Investment Objective and Policy
The investment objective of Chelverton UK Dividend Trust PLC (‘the Company’) is to provide Ordinary Shareholders with a high income and opportunity for capital growth, having provided a capital return sufficient to repay the full final capital entitlement of the Zero Dividend Preference shares issued by the wholly owned subsidiary company, SDV 2025 ZDP PLC (‘SDVP’).
Chelverton UK Dividend Trust PLC, and its subsidiary SDV 2025 ZDP PLC (‘SDVP’) (‘the Subsidiary’), together form the Group (‘the Group’).
The Company’s investment policy is that:
the Company will invest in equities in order to achieve its investment objectives, which are to provide both income and capital growth, predominantly through investment in mid and smaller capitalised UK companies admitted to the Official List of the UK Listing Authority and traded on the London Stock Exchange Main Market or traded on AIM.
the Company will not invest in preference shares, loan stock or notes, convertible securities or fixed interest securities or any similar securities convertible into shares; nor will it invest in the securities of other investment trusts or in unquoted companies.
Financial Highlights
31 October
30 April
Capital
2022
2022
% change
Total gross assets (£’000)
49,543
58,805
(15.75)
Total net assets (£’000)
31,899
41,382
(22.92)
Net asset value per Ordinary share
152.99p
198.47p
(22.92)
Mid-market price per Ordinary share
162.00p
192.50p
(15.84)
Premium/(discount)
5.89%
(3.01%)
Net asset value per Zero Dividend Preference share
120.87p
118.52p
1.98
Mid-market price per Zero Dividend Preference share
116.50p
118.50p
(1.69)
Premium/(discount)
(3.62%)
(0.02%)
Six months to
Six months to
31 October
31 October
Revenue
2022
2021
% change
Return per Ordinary share
6.63p
4.67p
41.97
Dividends declared per Ordinary share*
5.89p
5.50p
7.00
Special dividends declared per Ordinary share
–
–
-
Total return
Total return on Group’s net assets**
(20.05%)
(7.74%)
*
Dividend per Ordinary share includes the first interim paid and second interim declared for the period to 31 October 2022 and 2021 and will differ from the amounts disclosed within the statement of changes in net equity.
**
Adding back dividends distributed in the period.
Interim Management Report
This half-yearly report covers the six months to 31 October 2022. The net asset value per Ordinary share as at 31 October 2022 was 152.99p down from 198.47p at 30 April 2022, a decrease of 22.92% during the period compared to the MSCI Small Cap Index which also decreased by 15.1%. As at 21 November 2022 the NAV per share has increased to 165.97p.
Since the beginning of the Company’s financial year, the Ordinary share price has decreased from 192.50p to 162.00p as at 31 October 2022, a decrease of 15.84%. Since the period end the shares have increased in price to 166.00p and as at 21 November 2022 the shares traded on a premium of 0.02%.
Dividend
Maintaining its record of increasing the annual core dividend paid by the Company for 13 years, the first interim dividend for the current year of 2.9425p (2021: 2.75p) per Ordinary share was paid on 14 October 2022. The Board has declared a second interim dividend of 2.9425p per Ordinary share (2021: 2.75p) payable on 9 January 2023 to shareholders on the register on 16 December 2022, making a total for the half year of 5.885p per Ordinary share (2021: 5.5p) an increase of 7.0%.
It is anticipated that the Company will maintain the level of dividend for the third and fourth quarter at 2.9425p making a total core dividend declared of 11.77p for the year (2022: 11.0p) an annual increase of 7.0%.
Portfolio
In the last six months we have increased our investment in 13 of our existing holdings, taking advantage of lower share prices and shares being available in Bakkavor Group, Chesnara, Close Brothers, Crest Nicholson, Duke Royalty, Jarvis Securities, R and Q Insurance, Spectra Systems, Springfield Properties, Strix, The Works.co.uk, Tyman and UP Global Sourcing.
During the period we added four new names to the portfolio: Fonix – Mobile Payments, Genuit (formerly Polypipe) – Sustainable Built Environment Products, Liontrust – Asset Management and Marshalls – Building Materials.
Funds were raised from the outright sale of two of our holdings, Contourglobal and RPS, both as a result of bids. The following holdings were reduced as they grew to become larger weightings on lower yields: Belvoir, Bloomsbury Publishing, Centaur Media, Curtis Banks, Town Centre Securities (as a result of a tender offer by the company at a significant premium to the prevailing share price), TP ICAP and Wilmington.
Outlook
Having recovered strongly from the depths of the pandemic, the market has reacted very badly to the ongoing Ukrainian conflict and its impact on energy prices and other commodities. Coupled with this, the UK has exacerbated the general European problems by creating massive self-inflicted political uncertainty. It is hoped that the recent changes within government, will, in time, restore stability and therefore confidence.
However, it is reassuring that the underlying performance of the companies in the portfolio continues to be positive as the companies are reacting rapidly to changing circumstances and the challenges of the current marketplace. We continue to see compelling evidence that our companies are, in the main, emerging from the pandemic episode as better companies with more efficient processes. It is likely that our companies will only receive the ratings they deserve once the World political and economic situation is stable and then improving.
We are pleased to recommend an annual 7% rise in the dividend and, after three years of utilising reserves to pay the increasing dividends, the forecasts for the current year indicate that we will be able to pay the increased dividend from current revenue.
Chelverton Asset Management
29 November 2022
Principal Risks
The principal risks facing the Group are substantially unchanged since the date of the Annual Report for the year ended 30 April 2022 and continue to be as set out in that report on pages 11 to 13. Risks faced by the Group include, but are not limited to, market risk, discount volatility, regulatory risks, financial risk, political risk, climate change risk, global pandemics and risks associated with accounting policies and gearing.
Going concern
Having assessed the principal risks and the other matters discussed in connection with the viability statement as set out on pages 14 and 15 of the Annual Report for the year ended 30 April 2022, including the additional risks related to the coronavirus pandemic, the Directors believe that the Group is well placed to manage its business risks successfully and it is appropriate to adopt the going concern basis in preparing the accounts.
Responsibility Statement of the Directors in respect of the Half-Yearly Report
We confirm that to the best of our knowledge:
the condensed set of financial statements has been prepared in compliance with the IAS 34 ‘Interim Financial Reporting’ and gives a true and fair view of the assets, liabilities and financial position of the Group; and the interim management report and notes to the Half-Yearly Report include a fair view of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.
This Half-Yearly Report was approved by the Board of Directors on 29 November 2022 and the above responsibility statement was signed on its behalf by Howard Myles, Chairman.
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months ended 31 October 2022
Six months to 31 October
2022
Year to 30 April
2022
Six months to 31 October
2021
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
(Losses)/gains on investments at fair value through profit or loss
–
(9,134)
(9,134)
–
(4,610)
(4,610)
–
649
649
Investment income
1,631
–
1,631
2,576
–
2,576
1,214
–
1,214
Investment management fee
(65)
(195)
(260)
(158)
(473)
(631)
(83)
(248)
(331)
Other expenses
(168)
(8)
(176)
(302)
(12)
(314)
(144)
(5)
(149)
Net (deficit)/surplus before finance costs and taxation
1,398
(9,337)
(7,939)
2,116
(5,095)
(2,979)
987
396
1,383
Finance costs
Preference shares
Preference shares
–
(340)
(340)
–
(654)
(654)
–
(326)
(326)
Net (deficit)/surplus before taxation
1,398
(9,677)
(8,279)
2,116
(5,749)
(3,633)
987
70
1,057
Taxation (see note 2)
(16)
–
(16)
(32)
–
(32)
(13)
–
(13)
Total comprehensive (expense)/ income for the period
1,382
(9,677)
(8,295)
2,084
(5,749)
(3,665)
974
70
1,044
Revenue
Capital
Total
Revenue
Capital
Total
Revenue
Capital
Total
pence
pence
pence
pence
pence
pence
pence
pence
pence
Net return per:
Ordinary share (see note 3)
6.63
(46.41)
(39.78)
10.00
(27.57)
(17.57)
4.67
0.34
5.01
Zero Dividend Preference share 2025 (see note 3)
–
2.34
2.34
–
4.51
4.51
–
2.25
2.25
The total column of this statement is the Statement of Comprehensive Income of the Group prepared in accordance with UK adopted IFRSs and in with the requirements of the Companies Act 2006. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All of the net return for the period and the total comprehensive income for the period is attributed to the Shareholders of the Group. The supplementary revenue and capital return columns are presented for information purposes as recommended by the Statement of Recommended Practice issued by the Association of Investment Companies (‘AIC’).
Condensed Consolidated Statement of Changes in Net Equity (unaudited)
for the six months ended 31 October 2022
Share capital
Share premium account
Capital redemption reserve
Capital reserve
Revenue
reserve
Total
£’000
£’000
£’000
£’000
£’000
£’000
Six months ended 31 October 2022
30 April 2022
5,213
17,517
5,004
11,201
2,447
41,382
Total comprehensive (expense)/ income for the period
–
–
–
(9,677)
1,382
(8,295)
Dividends paid (see note 4)
–
–
–
–
(1,188)
(1,188)
31 October 2022
5,213
17,517
5,004
1,524
2,641
31,899
Year ended 30 April 2022 (audited)
30 April 2021
5,213
17,517
5,004
16,950
2,661
47,345
Total comprehensive (expense)/ income for the year
–
–
–
(5,749)
2,084
(3,665)
Dividends paid (see note 4)
–
–
–
–
(2,298)
(2,298)
30 April 2022
5,213
17,517
5,004
11,201
2,447
41,382
Six months ended 31 October 2021
30 April 2021
5,213
17,517
5,004
16,950
2,661
47,345
Total comprehensive income for the year
–
–
–
70
974
1,044
Dividends paid (see note 4)
–
–
–
–
(1,151)
(1,151)
31 October 2021
5,213
17,517
5,004
17,020
2,484
47,238
Condensed Consolidated Balance Sheet
(unaudited)
as at 31 October 2022
31 October
2022
£’000
30 April
2022
£’000
31 October
2021
£’000
Non-current assets
Investments at fair value through profit or loss
48,919
57,751
63,888
Current assets
Trade and other receivables
289
520
181
Cash and cash equivalents
335
534
187
624
1,054
368
Total assets
49,543
58,805
64,256
Current liabilities
Trade and other payables
(118)
(237)
(160)
(118)
(237)
(160)
Total assets less current liabilities
49,425
58,568
64,096
Non-current liabilities
Zero Dividend Preference shares 2025
(17,526)
(17,186)
(16,858)
Total liabilities
(17,644)
(17,423)
(17,018)
Net assets
31,899
41,382
47,238
Represented by:
Share capital
5,213
5,213
5,213
Share premium account
17,517
17,517
17,517
Capital redemption reserve
5,004
5,004
5,004
Capital reserve
1,524
11,201
17,020
Revenue reserve
2,641
2,447
2,484
Equity shareholders’ funds
31,899
41,382
47,238
Net asset value per: (see note 5)
pence
pence
pence
Ordinary share
152.99
198.47
226.56
Zero Dividend Preference share 2025
120.87
118.52
116.26
Condensed Consolidated Statement of Cash Flows
(unaudited)
for the six months ended 31 October 2022
Six months to
31 October
2022
£’000
Year to
30 April
2022
£’000
Six months to
31 October
2021
£’000
Operating activities
Investment income received
1.799
2,370
1,320
Investment management fee paid
(278)
(643)
(324)
Administration and secretarial fees paid
(32)
(67)
(34)
Other cash payments
(187)
(236)
(113)
Cash generated from operations (see note 7)
1,302
1,424
849
Purchases of investments
(4.028)
(8,795)
(5,079)
Sales of investments
3,715
9,715
5,080
Net cash inflow/(outflow) from operating activities
989
2,344
850
Financing activities
Dividends paid
(1,188)
(2,298)
(1,151)
Net cash outflow from financing activities
(1,188)
(2,298)
(1,151)
Change in cash and cash equivalents
(199)
46
(301)
Cash and cash equivalents at start of period
534
488
488
Cash and cash equivalents at end of period
335
534
187
Notes to the Condensed Half-Yearly Report
for the six months ended 31 October 2022
1 General information
The financial information contained in this Half-Yearly Report does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The statutory financial statements for the year ended 30 April 2021, which contained an unqualified auditors’ report, have been lodged with the Registrar of Companies and did not contain a statement required under the Companies Act 2006. These statutory financial statements were prepared in accordance with UK adopted International Financial Reporting Standards (‘UK adopted IFRSs’) and in accordance with the Statement of Recommended Practice (‘SORP’): Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the AIC in July 2022.
The Group has financial resources which substantially exceed its expense commitments and therefore the Directors believe that the Group is well placed to manage its business risks and also believe that the Group will have sufficient resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this report.
This report has not been reviewed by the Group’s Auditors.
This report has been prepared using accounting policies adopted in the audited financial statements for the year ended 30 April 2022. This report has also been prepared in compliance with IAS 34 ‘Interim Financial Reporting’ and the Companies Act 2006.
2 Taxation
The Company has an effective tax rate of 0% as investment gains are exempt from tax owing to the Company’s status as an Investment Trust and there is expected to be an excess of management expenses over taxable income and thus there is no charge for corporation tax.
Deferred tax assets in respect of unrelieved excess expenses are not recognised as it is unlikely that the Group will generate sufficient taxable income in the future to utilise these expenses. Deferred tax is not provided on capital gains and losses because the Company meets the conditions for approval as an investment trust company.
3 Earnings per share
Ordinary shares
Revenue earnings per Ordinary share is based on revenue on ordinary activities after taxation of £1,382,000 (30 April 2022: £2,084,000. 31 October 2021: £974,000) and on 20,850,000 (30 April 2022: 20,850,000, 31 October 2021: 20,850,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.
Capital earnings per Ordinary share is based on the capital loss of £9,677,(30 April 2022: £5,749,000. 31 October 2021: profit of £70,000) and on 20,850,000 (30 April 2022: 20,850,000, 31 October 2021: 20,850,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
Zero Dividend Preference shares
Capital earnings per Zero Dividend Preference share 2025 is based on allocations from the Company of £340,000 (30 April 2022: £654,000, 31 October 2021: £326,000) and on 14,500,000 (30 April 2022: 14,500,000, 31 October 2021: 14,500,000) Zero Dividend Preference shares 2025, being the weighted average number of Zero Dividend Preference shares in issue during the year.
4 Dividends
During the period, a fourth interim dividend of 2.75p per Ordinary share was paid to Shareholders in respect of the financial year ended 30 April 2022.
In respect of the year ended 30 April 2023, a first interim dividend of 2.9425p per ordinary share has been paid to the Shareholders.
In addition, for the year ended 30 April 2023, the Board has declared a second interim dividend of 2.9425p per Ordinary share payable on 9 January 2023 to Shareholders on the register at 16 December 2022 (ex-dividend date 15 December 2022).
5 Net asset values
Ordinary shares
The net asset value per Ordinary share is based on assets attributable of £31,899,000 (30 April 2022:
£41,382,000, 31 October 2021: £47,238,000) and on 20,850,000 (30 April 2022: 20,850,000, 31 October
2021: 20,850,000) Ordinary shares being the number of shares in issue at the period end.
Zero Dividend Preference shares
The net asset value per Zero Dividend Preference shares is based on assets attributable of £17,526,000 (30 April 2022: £17,186,000, 31 October 2021: £16,858,000) and on 14,500,000 (30 April 2022: 14,500,000, 31 October 2021: 14,500,000) Zero Dividend Preference shares being the number of shares in issue at the period end.
6 Fair value hierarchy
Financial assets and financial liabilities of the Company are carried in the condensed Consolidated Balance Sheet at their fair value. The fair value is the amount at which the asset could be sold or the liability transferred in a current transaction between market participants, other than a forced or liquidation sale. For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices and Stock Exchange Electronic Trading Services (‘SETS’) at last trade price at the Balance Sheet date, without adjustment for transaction costs necessary to realise the asset.
The Company measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant assets as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in Level 1, if they reflect actual and regularly occurring market transactions on an arm’s length basis.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 2 inputs include the following:
quoted prices for similar (i.e. not identical) assets in active markets;quoted prices for identical or similar assets or liabilities in markets that are not active. Characteristics of an inactive market include a significant decline in the volume and level of trading activity, the available prices vary significantly over time or among market participants or the prices are not current;
inputs other than quoted prices that are observable for the asset (for example, interest rates and yield curves observable at commonly quoted intervals); and
inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market-corroborated inputs).
Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
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. 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.
As at 31 October 2022, 30 April 2022 and 31 October 2021 all of the Company’s investments are classified as Level 1.
7 Reconciliation of net return before and after taxation to cash generated from operations
31 October
2022
£’000
30 April
2022
£’000
31 October
2021
£’000
Net return before taxation
(8,279)
(3,633)
1.057
Taxation
(16)
(32)
(13)
Net return after taxation
(8,295)
(3,665)
1.044
Net capital return
9,677
5,749
(70)
Decrease/(increase) in receivables
184
(172)
119
(Decrease)/increase in payables
(61)
(3)
9
Interest and expenses charged to the capital reserve
(203)
(485)
(253)
Cash generated from operations
1,302
1,424
849
8 Related party transactions
The Group’s investments are managed by Chelverton Asset Management Limited. The amounts paid to the Investment Manager in the period to 31 October 2022 were £260,000 (year ended 30 April 2022: £314,000, six months to 31 October 2021: £331,000).
At 31 October 2022 there were amounts outstanding to be paid to the Investment Manager of £55,000 (year ended 30 April 2022: £73,000, six months to 31 October 2021: £92,000).
Portfolio Investments
as at 31 October 2022
Market
value
% of
Security
Sector
£’000
portfolio
Diversified Energy
Energy
1,761
3.6
iEnergizer
Industrial Goods & Services
1,631
3.3
Belvoir Lettings
Real Estate
1,600
3.3
UP Global Sourcing Holdings
Consumer Products and Services
1,190
2.4
Alumasc Group
Construction & Materials
1,152
2.4
Coral Products
Industrial Goods & Services
1,085
2.2
Kitwave Group
Personal Care, Drugs & Grocery Stores
1,060
2.2
MP Evans Group
Food, Beverage & Tobacco
1,015
2.1
Chesnara
Insurance
998
2.0
ME Group
Consumer Products and Services
927
1.9
Bloomsbury Publishing
Media
911
1.9
STV
Media
905
1.9
Smiths News
Industrial Goods & Services
895
1.8
Devro
Food, Beverage & Tobacco
894
1.8
MTI Wireless Edge
Telecommunications
864
1.8
Curtis Banks Group
Financial Services
861
1.8
Wilmington Group
Media
858
1.8
Duke Royalty
Financial Services
853
1.7
Redde Northgate
Industrial Goods & Services
831
1.7
Ramsdens Holdings
Financial Services
830
1.7
Appreciate Group
Financial Services
780
1.6
Jarvis Securities
Financial Services
774
1.6
Castings
Industrial Goods & Services
765
1.6
Ecora Resources
Basic Resources
765
1.6
Braemar Shipping Services
Industrial Goods & Services
730
1.5
R & Q Insurance
Insurance
730
1.5
Clarke (T.)
Construction & Materials
708
1.4
Fonix Mobile
Industrial Goods & Services
700
1.4
Vector Capital
Financial Services
695
1.4
Vertu Motors
Retail
683
1.4
Regional REIT
Real Estate
668
1.4
Hargreaves Services
Industrial Goods & Services
648
1.3
Palace Capital
Real Estate
642
1.3
Epwin Group
Construction & Materials
621
1.3
DFS Furniture
Retail
605
1.2
Vistry Group
Media
603
1.2
Severfield
Construction & Materials
600
1.2
Close Brothers Group
Banks
589
1.2
Orchard Funding Group
Financial Services
588
1.2
Bakkavor
Food, Beverage & Tobacco
585
1.2
Retail
579
1.2
Finncap Group
Financial Services
569
1.2
Essentra
Industrial Goods & Services
561
1.1
Personal Group Holdings
Insurance
552
1.1
TP ICAP
Financial Services
552
1.1
DSW Capital
Financial Services
550
1.1
Strix Group
Industrial Goods & Services
538
1.1
Polar Capital Holdings
Financial Services
526
1.1
Premier Miton Group
Financial Services
510
1.0
Crest Nicholson
Consumer Products and Services
505
1.0
Town Centre Securities
Real Estate
504
1.0
Tyman
Construction & Materials
480
1.0
Hansard Global
Insurance
474
1.0
Spectra Systems
Retail
461
0.9
Springfield Properties
Consumer Products and Services
460
0.9
Numis Corporation
Financial Services
450
0.9
Liontrust Asset Management
Financial Services
426
0.9
Headlam Group
Consumer Products and Services
421
0.9
Kier Group
Construction & Materials
418
0.9
Centaur Media
Media
403
0.8
Chamberlin
Basic Resources
396
0.8
Topps Tiles
Retail
383
0.8
Marshalls
Construction & Materials
379
0.8
Aferian
Telecommunications
352
0.7
Marston’s
Travel & Leisure
351
0.7
Sabre Insurance
Insurance
312
0.6
Brown (N) Group
Retail
304
0.6
Portmeirion Group
Consumer Products and Services
300
0.6
Gattaca
Industrial Goods & Services
272
0.6
RTC Group
Industrial Goods & Services
249
0.5
Synthomer
Chemicals
225
0.5
Genuit Group
Construction & Materials
191
0.4
Restaurant Group
Travel & Leisure
191
0.4
Revolution Bars Group
Travel & Leisure
176
0.4
Saga
Travel & Leisure
150
0.3
Sancus Lending Group
Financial Services
149
0.3
Total Portfolio
48,919
100.0
ISIN: GB0006615826, GB00BZ7MQD81 Category Code: IR TIDM: SDVP LEI Code: 213800DAF47EJ2HT4P78 Sequence No.: 204863 EQS News ID: 1500659
End of Announcement EQS News Service