DJ Chelverton UK Dividend Trust plc: Half-Yearly Financial ReportFor the six months ended 31 October 2020
Chelverton UK Dividend Trust plc (SDVP)
Chelverton UK Dividend Trust plc: Half-Yearly Financial ReportFor the six months ended 31 October 2020
30-Nov-2020 / 14:35 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
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 2020
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 ('the Company'), and its subsidiary SDV 2025 ZDP PLC ('SDVP') ('the Subsidiary'),
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 %
2020 2020 change
Total gross assets (GBP'000) 41,602 42,040 (1.04)
Total net assets (GBP'000) 25,205 26,034 (3.18)
Net asset value per 120.89p 124.86p (3.18)
Ordinary share
Mid-market price per 111.00p 127.50p (12.94)
Ordinary share
(Discount)/premium (8.18%) 2.11%
Net asset value per Zero 111.84p 109.67p 1.98
Dividend Preference share
Mid-market price per Zero 108.00p 102.00p 5.88
Dividend Preference share
Discount (3.43%) (6.99%)
Revenue Six months to Six months to %
31 October
31 October change
2020
2019
Return per Ordinary share 2.80p 6.71p (58.27)
Dividends declared per 5.00p 4.80p 4.17
Ordinary share*
Special dividends declared - 2.50p (100.00)
per Ordinary share
Total Return
Total return on Group net 0.74% (4.94%)
assets**
* Dividend per Ordinary share includes the first interim paid and second interim declared for the period to 31 October
2020 and 2019 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
Overview
Given the extraordinary events of the past few months the Board felt it appropriate to update shareholders on the
positioning of the Company with a more detailed view of the current state of the portfolio and the market.
In the period since the depths of the market collapse in March, a time we have called "The Great Panic", matters have
become progressively clearer as more is now known medically about the Covid-19 virus and over this period companies have
developed processes and systems to manage their businesses within the constraints of keeping employees and customers safe
and operating within Government regulations.
Initially, after the significant market collapse of share prices in the Small and Mid-Cap sector, share values
"flatlined". Whilst the portfolio companies, universally, started reporting that trading had been better than expected,
there was no marked improvement in their share prices. Since that period share prices have in general modestly recovered,
although the sectors most affected by Covid-19 driven restrictions - travel and hospitality - have continued to be
depressed.
However, after a little while companies began to work out new ways of operating and were innovative in what they did and
how they did it. Whilst some of our companies are dependent on people interacting and coming together, others have very
definitely benefited from the restrictions of the lockdown.
Across the companies invested in by the funds managed by Chelverton Asset Management it is fair to say that all of them
felt they were in a better position after four to six months of lockdown than they had at first anticipated in March.
Clearly companies involved in the hospitality industry have, through the recent tightening of regulations, gone backwards
of late.
Another very clear feature that has become evident over the past six months is that this period has been used by our
companies to adopt new business practices and to drive through efficiency improvements that will make a difference now
but particularly in the future as demand picks up. The furlough scheme, and the subsequent gradual unwinding of the
furlough scheme, has highlighted the productivity, or indeed lack of productivity, of the marginal employee. It might
well be that the spike in unemployment that we all expect in the next few months could be partially from a reduction in
demand but also from a reduction in workforces resulting in improvement in their productivity. It looks like the absolute
level of expected unemployment might be reduced by the news that some 800,000 visitors from the European Community have
already returned to their home countries.
Hopefully, if and when, we finally see a Free Trade Agreement in the next few weeks or months then the country and the
companies we are invested in can get on with managing with what will then be "known-knowns". The energy, time and
resources spent on the Brexit process will be applied much more productively. There is a feeling that once the
relationship with the European Union is resolved, either with a Free Trade Agreement or indeed No Agreement, then there
will be a release of pent-up demand that has been held up while waiting several years for this to be resolved.
The portfolio is invested in small listed and AIM-traded companies whose business is largely conducted in the UK and
therefore the strength and growth of the UK economy is by far and away the most important determinant of our underlying
companies' success.
It is a well-documented fact that UK and overseas investors remain very underweight in UK equities, as it has been all
too easy to sit on the side-lines waiting for a resolution of the Brexit Debate and then the Free Trade Agreement
impasse. The trend we highlighted last year of the large differential in the relative ratings between "Growth" companies
and "Value" companies has continued to widen in the year. An example of this is the extraordinary rise in the past year
in the value of Apple, the American technology company, which on its own became worth more than the aggregate value of
the components of FTSE 100. Those of us who have been working in and observing markets for some time know that these
extremes of valuation difference do not last forever.
As is often the case after a market sell-off, the share prices of smaller companies take much longer to recover as
compared to members of the FTSE100. This period, after a market collapse and then a stabilisation period, generally
throws up a large number of deeply undervalued companies and this is particularly true as one moves down the market
capitalisation scale, especially in under researched smaller companies which is this fund's area of focus.
Results
This half-yearly report covers the six months to 31 October 2020. The net asset value per Ordinary share at 31 October
2020 was 120.89p, down from 124.86p at 30th April 2020, a decrease of 3.18% in the past six months compared to an
increase of 2.03% in the MSCI Small Cap Index.
Since the beginning of the Company's financial year, the Ordinary share price has decreased from 127.5p to 111.0p at 31th
October 2020, a decrease of 12.9%. Since the period end the net asset value per share has increased to 156.34p, a
percentage increase of 29.3% as at 26 November 2020 and the shares at a price of 151.0p now trade on a discount of some
3.41%.
Dividend
In respect of the year ended 30 April 2021, a first interim dividend of 2.50p (2019: 2.40p) per Ordinary share was paid
on 1 October 2020. The Board has declared a second interim dividend of 2.50p per Ordinary share (2019: 2.40p) payable on
4 January 2021 to shareholders on the register on 11 December 2020, making a total for the half year of 5.00p per
Ordinary share (2019: 4.80p) an increase of 4.2%. At present the Company intends to at least maintain this level of
dividend for the third and fourth interim dividends making a total core dividend of 10.00p for the year (2019: 9.6p) an
increase of 4.2%.
The Board will review the dividend flow from the company's portfolio over the next six months and consider the forecast
dividend flow for 2021/2022 before deciding on the absolute amount of the fourth interim dividend. A number of the
Company's investee companies initially adopted a very cautious approach in respect of the uncertainties that lay ahead
and reduced or passed their dividends. Some of these companies have restored their dividends and others have already
indicated that they will resume paying dividends next year.
Shareholders will also be aware that your Company has built up significant revenue reserves over the past ten years and
has one of the highest levels of reserves relative to its annual core dividend. It is therefore in a strong position to
continue increasing the dividend paid even in this period where others are having to cut or maintain their dividend.
Portfolio
(MORE TO FOLLOW) Dow Jones Newswires
November 30, 2020 09:36 ET (14:36 GMT)
DJ Chelverton UK Dividend Trust plc: Half-Yearly -2-
In the last six months we have increased our investment in twenty-three of our existing holdings, taking advantage of
lower share prices and shares being available, including Amino Technologies, Appreciate Group, Belvoir Lettings,
Bloomsbury Publishing, Brewin Dolphin Holdings, Brown (N) Group, Close Brothers Group, Coral Products, Elementis,
Marstons, MTI Wireless Edge, Orchard Funding Group, Personal Group Holdings, Portmeirion Group, Premier Miton Group,
Randall & Quilter, Regional REIT, Revolution Bars Group, RPS Group, Saga, STV, TheWorks.co.uk [1] and Wilmington Group.
During the period we added four new names to the portfolio; Contourglobal - a power generation business, Curtis Banks
Group (a company that the fund has owned before) - an administrator of Self Invested Pension Schemes, Hargreaves Services
- providing services to industrial and property sectors and i-Energiser - a global supplier of Business Outsourcing
Solutions.
Funds were raised from the outright sale of six of our holdings; Low and Bonar and Moss Bros were both taken over in the
period. Elementis has received a very preliminary takeover approach at this time. The following holdings were reduced as
they grew to become larger weightings on lower yields, Jarvis Securities, Strix Group and UP Global Sourcing Holdings.
Outlook
Despite the current extraordinary conditions we expect that once we as a nation have navigated the next six months, a
period when the political situation in the USA will be clarified and, when the arrangements with the European Union have
been resolved, life will return to a more stable and normal position once the Covid-19 pandemic has been brought under
control.
It is being consistently reported and routinely discussed in the media that UK equities are cheaper than they have been
for some 40 years. Once the matters referred to above are resolved then it is reasonable to expect that the improved
certainty and clarity in the UK will encourage investors back to invest in UK companies. In time the Board believes this
will lead to a significant increase in the net asset value per share.
We believe that the companies in the portfolio have shown great resilience over the past 12 months and it will be this
strength that will enable them to survive and prosper whilst some of their competitors will not last the course. We hope,
and expect, that the investment and development that has taken place in the past few years will begin to bear fruit over
the next period.
Chelverton Asset Management
30 November 2020
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 30 November 2020 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 2020
Six months to Year to Six months to
31 October 2020 30 April 2020 31 October 2019
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)
Gains/(losses) - 84 84 - (17,046) (17,046) - (3,080) (3,080)
on investments
at fair value
through profit
or loss
Investment 790 - 790 2,414 - 2,414 1,604 - 1,604
income
Investment (52) (156) (208) (135) (407) (542) (71) (214) (285)
management fee
Other expenses (139) (5) (144) (270) (13) (283) (134) (8) (142)
Net 599 (77) 522 2,009 (17,466) (15,457) 1,399 (3,302) (1,903)
surplus/(defic
it) before
finance costs
and taxation
Finance costs
Preference - (314) (314) - (607) (607) - (302) (302)
shares
Net 599 (391) 208 2,009 (18,073) (16,064) 1,399 (3,604) (2,205)
surplus/(defic
it) before
taxation
Taxation (see (15) - (15) (38) - (38) - - -
note 2)
Total 584 (391) 193 1,971 (18,073) (16,102) 1,399 (3,604) (2,205)
comprehensive
income/(expens
e) for the
period
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Net return per: 2.80 (1.87) 0.93 9.45 (86.68) (77.23) 6.71 (17.29) (10.58)
Ordinary share
(see note 3)
Zero Dividend - 2.17 2.17 - 4.19 4.19 - 2.08 2.08
Preference 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 2020
Share Share Capital Capital Revenue Total
capital premium Redempti reserve reserve
account on
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Six months
ended 31
October
2020
30 April 5,213 17,517 5,004 (5,148) 3,448 26,034
2020
Total - - - (391) 584 193
comprehensi
ve income/
(expense)
for the
period
Dividends - - - - (1,022) (1,022)
paid (see
note 4)
31 October 5,213 17,517 5,004 (5,539) 3,010 25,205
2020
Year ended
30 April
2020
(audited)
30 April 5,213 17,517 5,004 12,925 4,000 44,659
2019
Total - - - (18,073) 1,971 (16,102
comprehensi )
ve income/
(expense)
for the
period
Dividends - - - - (2,523) (2,523)
paid
30 April 5,213 17,517 5,004 (5,148) 3,448 26,034
2020
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)
comprehensi
ve 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
Condensed Consolidated Balance Sheet (unaudited)
as at 31 October 2020
Non-current assets 31 October 30 April 31 October
2020 2020 2019
GBP'000 GBP'000 GBP'000
(audited)
Investments at fair value 41,347 40,588 56,239
through profit or loss
Current assets
Trade and other receivables 123 186 259
Cash and cash equivalents 132 1,266 236
255 1,452 495
Total assets 41,602 42,040 56,734
Current liabilities
Trade and other payables (181) (104) (205)
(181) (104) (205)
Total assets less current 41,421 41,936 56,529
liabilities
Non-current liabilities
Zero Dividend Preference shares (16,216) (15,902) (15,597)
2025
Total liabilities (16,397) (16,006) (15,802)
Net assets 25,205 26,034 40,932
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 (5,539) (5,148) 9,321
(MORE TO FOLLOW) Dow Jones Newswires
November 30, 2020 09:36 ET (14:36 GMT)
© 2020 Dow Jones News
