DJ Chelverton UK Dividend Trust plc: Half-yearly Results
Chelverton UK Dividend Trust plc (SDV)
Chelverton UK Dividend Trust plc: Half-yearly Results
06-Dec-2019 / 12:43 GMT/BST
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The issuer is solely responsible for the content of this announcement.
CHEVERTON UK DIVIDEND TRUST PLC
Half-Yearly Financial Report
For the six months ended 31 October 2019
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, together form
the Group ('the Group'). The Group's funds are invested principally in mid and
smaller capitalised UK companies. The portfolio comprises companies listed on the
Official List and companies admitted to trading on AIM. The Group does not invest in
other investment trusts or in unquoted companies. No investment is made in preference
shares, loan stock or notes, convertible securities or fixed interest securities.
Financial Highlights
Capital 31 October 30 April %
2019 2019 change
Total gross assets 56,734 62,032 (8.54)
(GBP'000)
Total net assets 40,932 44,659 (8.35)
(GBP'000)
Net asset value per 196.32p 214.19p (8.34)
Ordinary share
Mid-market price per 182.50p 173.50p 5.19
Ordinary share
Discount (7.04%) (19.00%)
Net asset value per 107.57p 105.48p 1.98
Zero Dividend
Preference share
Mid-market price per 108.00p 110.00p (1.82)
Zero Dividend
Preference share
Premium 0.40% 4.29%
Revenue Six months to 31 Six months to %
October
31 October change
2019
2018
Return per Ordinary 6.71p 7.15p (6.15)
share
Dividends declared per 4.80p 4.38p 9.59
Ordinary share*
Special dividends 2.50p 0.66p 278.79
declared per Ordinary
share
Total Return
Total return on Group (4.94%) 12.16%
net assets**
* Dividend per Ordinary share includes the first interim paid and second interim
declared for the period to 31 October 2019 and 2018 and will differ from the amounts
disclosed within the statement of changes in net equity, owing to the timings of
payments.
** Adding back dividends distributed in the period.
Interim Management Report
Results
This half-yearly report covers the six months to 31 October 2019. The net asset value
per Ordinary share at 31 October 2019 was 196.3p down from 214.2p at 30 April 2019, a
decrease of 8.3% during the period compared to an increase of 0.8% in the MSCI Small
Cap Index, and NAV now stands at 202.5p.
Since the beginning of the Company's financial year, the Ordinary share price has
increased from 173.5p to 182.5p at 31 October 2019, an increase of 5.19%. Since the
period end the shares have increased further to 191.0p, a percentage increase of
4.66% as at 2 December 2019 and the shares now trade on a reduced discount of 4.3%.
Dividend
Following 11 years of increase in the total annual core dividend paid by the Company,
the first interim dividend for the current year of 2.40p (2018: 2.19p) per Ordinary
share was paid on 1 October 2019. The Board has declared a second interim dividend of
2.40p per Ordinary share (2018: 2.19p) payable on 2 January 2020 to shareholders on
the register on 13 December 2019, making a total for the half year of 4.80p per
Ordinary share (2018: 4.38p) an increase of 9.6%. It is anticipated that the Company
will maintain this level of dividend for the third quarter and will likewise maintain
the same level for the fourth interim of 2.40p making a total core dividend of 9.60p
for the year (2018: 8.97p) an increase of 7.0%.
Portfolio
In the last six months we have increased our investment in eighteen of our existing
holdings (2018: 18), taking advantage of lower share prices and shares being
available in Alumasc Group, Amino Technologies, Badcock International, Brewin Dolphin
Holdings, Castings, Chesnara, Crest Nicholson, De La Rue, Devro, Essentra, GVC
Holdings, McColls Retail Group, Northgate, Personal Group Holdings, Saga, Shoe Zone,
STV and Town Centre Securities.
During the period we added four new names to the portfolio (2018: 3) - Close Brothers
Group1, Tyman2, Vertu Motors3 and XPS Pensions4. Funds were raised from the outright
sale of four of our holdings (2018: 4); Kcom Group, Mucklow (A&J), Sanderson Group
and StatPro were taken over in the period. The following holdings were reduced as
they grew to become larger weightings on lower yields: Clarke (T.), Titon Holdings
and UP Global Sourcing Holdings.
Outlook
The shares of the companies in which the fund is invested have experienced a tough 18
months as smaller companies that pay increasing dividends and are labelled "value
shares" have fallen further out of favour. In the last few months there has been some
improvement as it is hoped that the whole Brexit process will reach resolution. The
underlying performance of most of the companies has generally been positive with
associated dividend growth. With the recent decline in the general market the number
of attractive opportunities available to invest in has increased significantly and
the portfolio has been increased to 75 holdings (2018: 73).
UK GDP growth has been very subdued for the past six months, although there are signs
that UK Growth will be maintained and might, next year, start to gently accelerate.
As we write this report today the whole Brexit position of course remains unresolved.
We are close to the General Election on 12 December 2019 and a great deal depends on
the result of that. At this point no one can say what the position will be on 1
January 2020 however it is to be hoped that the "Brexit issue", which has
progressively absorbed more and more time and attention, will be resolved in some
manner. In the meantime our companies, for whom trading across border with the EU is
a very small part of their sales, have been dragged down by this generally negative
sentiment.
Reassuringly the dividends of the underlying companies continue to be increased and
we believe that this will continue into 2020 with company balance sheets remaining in
a strong state.
Chelverton Asset Management
6 December 2019
1 Close Brothers Group - financial services provider
2 Tyman - building materials manufacturer
3 Vertu Motors - automotive retailer
4 XPS Pensions - pensions actuarial, consulting and administration services
Principal Risks
The principal risks facing the Group are substantially unchanged since the date of
the Annual Report for the year ended 30 April 2019 and continue to be as set out in
that report on pages 10 to 11. Risks faced by the Group include, but are not limited
to, market risk, discount volatility, regulatory risk, financial risk and risks
associated with banking counterparties.
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) (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 6 December 2019 and
the above responsibility statement was signed on its behalf by Lord Lamont, Chairman.
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months ended 31 October 2019
Six months to Year to Six months to
31 October 2018 30 April 2019 31 October 2018
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(audited)
Losses on - (3,080) (3,08 - (7,083) (7,08 - (7,472) (7,47
investment 0) 3) 2)
s at fair
value
through
profit or
loss
Investment 1,604 - 1,604 3,221 - 3,221 1,712 - 1,712
income
Investment (71) (214) (285) (153) (459) (612) (79) (236) (315)
management
fee
Other (134) (8) (142) (274) (37) (311) (142) (30) (172)
expenses
Net 1,399 (3,302) (1,90 2,794 (7,579) (4,78 1,491 (7,738) (6,24
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surplus/(d 3) 5) 7)
eficit)
before
finance
costs and
taxation
Finance
costs
Preference - (302) (302) (1) (582) (583) - (290) (290)
shares
Net 1,399 (3,604) (2,20 2,793 (8,161) (5,36 1,491 (8,028) (6,53
surplus/(d 5) 8) 7)
eficit)
before
taxation
Taxation - - - - - - - - -
(see note
2)
Total 1,399 (3,604) (2,20 2,793 (8,161) (5,36 1,491 (8,028) (6,53
comprehens 5) 8) 7)
ive
income/(ex
pense) for
the period
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Net 6.71 (17.29) (10.58) 13.40 (39.15) (25.75) 7.15 (38.51) 31.36
return
per:
Ordinary
share
(see
note 3)
Zero - 2.08 2.08 - 4.02 4.02 - 2.00 2.00
Dividend
Preferen
ce share
2025
(see
note 3)
The total column of this statement is the Statement of Comprehensive Income of the
Group prepared in accordance with International Financial Reporting Standards
('IFRS') as adopted by the European Union. 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 2019
Share Share Capital Capital Revenue Total
capital premium Redemptio reserve reserve
account n reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Six months
ended 31
October 2019
30 April 5,213 17,517 5,004 12,925 4,000 44,659
2019
Total - - - (3,604) 1,399 (2,205)
comprehensiv
e income/
(expense)
for the
period
Dividends - - - - (1,522) (1,522)
paid (see
note 4)
31 October 5,213 17,517 5,004 9,321 3,877 40,932
2019
Year ended
30 April
2019
(audited)
30 April 5,188 17,301 5,004 21,086 3,215 51,794
2018
Total - - - (8,161) 2,793 (5,368)
comprehensiv
e income/
(expense)
for the
period
Ordinary 25 228 - - - 253
shares
issued
Expenses of - (12) - - - (12)
Ordinary
share issue
Dividends - - - - (2,008) (2,008)
paid
30 April 5,213 17,517 5,004 12,925 4,000 44,659
2019
Six months
ended 31
October 2018
30 April 5,188 17,301 5,004 21,086 3,215 51,794
2018
Total - - - (8,028) 1,491 (6,537)
comprehensiv
e income/
(expense)
for the
period
Ordinary 25 215 - - - 240
shares
issued
Dividends - - - - (1,094) (1,094)
paid (see
note 4)
31 October 5,213 17,516 5,004 13,058 3,612 44,403
2018
Condensed Consolidated Balance Sheet (unaudited)
as at 31 October 2019
Non-current assets 31 October 30 April 31 October
2019 2019 2018
GBP'000 GBP'000 GBP'000
(audited)
Investments at fair value 56,239 59,895 58,571
through profit or loss
Current assets
Trade and other receivables 259 447 313
Cash and cash equivalents 236 1,690 647
495 2,137 960
Total assets 56,734 62,032 59,531
Current liabilities
Trade and other payables (205) (2,078) (125)
205 (2,078) (125)
Total assets less current 56,529 59,954 59,406
liabilities
Non-current liabilities
Zero Dividend Preference shares (15,597) (15,295) (15,003)
2025
Total liabilities (15,802) (17,373) (15,128)
Net assets 40,932 44,659 44,403
Represented by:
Share capital 5,213 5,213 5,213
Share premium account 17,517 17,517 17,516
Capital redemption reserve 5,004 5,004 5,004
Capital reserve 9,321 12,925 13,058
Revenue reserve 3,877 4,000 3,612
Equity shareholders' funds 40,932 44,659 44,403
Net asset value per: (see note pence pence pence
5)
Ordinary share 196.32 214.19 212.96
Zero Dividend Preference share 107.57 105.48 103.47
2025
Condensed Consolidated Statement of Cash Flows (unaudited)
for the six months ended 31 October 2019
Operating activities 31 October 30 April 2019 31 October
2019 GBP'000 2018
GBP'000 (audited) GBP'000
Investment income received 1,665 3,160 1,686
Investment management fee (324) (614) (368)
paid
Administration and (32) (72) (40)
secretarial fees paid
Other cash payments (152) (254) (181)
Loan interest paid - (1) -
Cash generated from 1,157 2,219 1,097
operations (see note 7)
Purchases of investments (7,021) (9,841) (6,220)
Sales of investments 5,932 10,032 5,588
Net cash inflow from 68 2,410 465
operating activities
Financing activities
Issue of Zero Dividend - 313 313
Preference shares 2025
Expenses of C shares issue - - (2)
Issue of ordinary shares - 876 875
Expenses for redemption and - - (8)
issue of Zero Dividend
Preference shares
Expenses of ordinary share - (12) (13)
issue
Dividends paid (1,522) (2,008) (1,094)
Net cash (outflow)/inflow (1,522) (831) 71
from financing activities
Change in cash and cash (1,454) 1,579 536
equivalents for period
Cash and cash equivalents at 1,690 111 111
start of period
Cash and cash equivalents at 236 1,690 647
end of period
Comprised of:
Cash and cash equivalents 236 1,690 647
Notes to the Condensed Half-Yearly Report
for the six months ended 31 October 2019
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 2019, 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 under International Financial Reporting Standards
('IFRS') 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 October 2019, except to any extent where it conflicts with IFRS.
The Group has considerable financial resources 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 2019. This report has also been
prepared in compliance with IAS 34 'Interim Financial Reporting' as adopted by the
European Union.
2 Taxation
The Company has an effective tax rate of 0%. The estimated effective tax rate is 0%
as investment gains are exempt from tax owing to the Company's status as an
Investment Trust and there is expected to be an excess of management expenses over
taxable income 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 GBP1,399,000 (30 April 2019: GBP2,793,000, 31 October 2018: GBP1,491,000) and
on 20,850,000 (30 April 2019: 20,847,534, 31 October 2018: 20,845,109) 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 GBP3,604,000 (30
April 2019: capital loss of GBP8,161,000, 31 October 2018: capital loss of GBP8,028,000)
and on 20,850,000 (30 April 2019: 20,847,534, 31 October 2018: 20,845,109) Ordinary
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