DJ Chelverton UK Dividend Trust plc: Full year results for the year ended 30 April 2021
Chelverton UK Dividend Trust plc (SDVP)
Chelverton UK Dividend Trust plc: Full year results for the year ended 30 April 2021
24-Jun-2021 / 07:00 GMT/BST
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The issuer is solely responsible for the content of this announcement.
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CHELVERTON UK DIVIDEND TRUST PLC
Annual Report and Accounts for the year to 30 April 2021
Printed copies of the Annual Report will be sent to shareholders shortly. Additional copies may be obtained from the
Corporate Secretary - Maitland Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford, Essex CM1 3BY.
The financial information set out below does not constitute the Company's statutory accounts for the year ended 30
April 2021. The financial information for 2021 is derived from the statutory accounts for that year. The auditors,
Hazlewoods LLP, have reported on the 2021 accounts. Their report was unqualified and did not include a reference to any
matters to which the auditors draw attention by way of emphasis without qualifying their report. The financial
information for 2020 is derived from the statutory accounts for that year. The following text is copied from the Annual
Report & Accounts.
Strategic Report
The Strategic Report comprising pages 1 to 17 has been prepared in accordance with Section 414A of the Companies Act
2006 ('the Act'). Its purpose is to inform shareholders and help them understand how the Directors have performed their
duty under Section 172 of the Act to promote the success of the Company.
Chelverton UK Dividend Trust PLC ('the Company') and its subsidiary SDV 2025 ZDP PLC ('SDVP') ('the subsidiary')
together form the Group. The Group's funds are invested principally in mid and smaller capitalised UK companies. The
portfolio comprises companies listed on the Of?cial 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 ?xed interest securities.
Financial Highlights
30 April 30 April
Capital 2021 2020 % change
Total gross assets (GBP'000) 64,013 42,040 52.27
Total net assets (GBP'000) 47,345 26,034 81.86
Net asset value per Ordinary share 227.07p 124.86p 81.86
Mid-market price per Ordinary share 220.00p 127.50p
72.55
(Discount)/premium (3.11%) 2.11%
Net asset value per Zero Dividend Preference share 2025 114.01p 109.67p 3.96
Mid-market price per Zero Dividend Preference share 2025 116.00p
102.00p (6.99%) 13.73
Premium/(discount) 1.75%
Year ended Year ended
Revenue 2021 2020 % change
Return per Ordinary share 6.12p 9.45p (35.24)
Dividends declared per Ordinary share 10.00p 9.60p 4.17
Special dividends declared per Ordinary share 0.272p - 100
Total return
Total return on Group gross assets 57.18%
(28.16%)
Total return on Group's net assets* (total return as proportion of net
(25.85%)
assets after the provision for the Zero Dividend Preference shares) 57.24%
Total return on Group's net assets* 89.79% (36.06%)
Ongoing charges** 2.33% 2.12%
Ongoing charges*** 1.56% 1.50%
* Adding back dividends paid in the year.
** Calculated in accordance with the Association of Investment Companies ('AIC') guidelines. Based on total expenses, excluding ?nance costs, for the year and average net asset value.
*** Based on gross assets. Chairman's Statement
It gives me great pleasure to introduce this Annual Report for the ?nancial year to 30 April 2021 to shareholders.
The last 12 months as a whole have undoubtedly been challenging, with a continuation of the problems arising from the global Covid-19 pandemic and considerable ongoing economic uncertainty. Nevertheless your company has performed very well, bene?tting from a strong recovery in the performance of its investee companies and an improving business and economic outlook in the UK from early 2021 onwards.
I and the Board would like to thank David Horner and the Chelverton team for delivering these excellent results, which are a testament to the skill of their portfolio management. Results
The Company's net asset value per Ordinary share as at 30 April 2021 was 227.07p (2020: 124.86p), an increase over the year of 81.86% with an Ordinary share price of 220.00p per share (2020: 127.50p). Total assets, including audited revenue reserves, were GBP64.013m (2020: GBP42.040m), an increase over the year of 52.3%, and the total net assets were GBP47.345m (2020: GBP26.034m). During the same period the MSCI Small Cap Index increased by 42.75%.
The Company was launched on 12 May 1999, and the net asset value per Ordinary share has risen by 138.2% and a total of 206.12p has been paid in dividends, including the fourth interim dividend announced with this report. Since the year end, the net asset value per Ordinary share has risen to 239.16p as at 21 June 2021 and the discount to market NAV is currently 2.99%.
In the year total dividends of 10.272p per Ordinary share were paid and proposed, including the fourth interim dividend of 2.50p and a special dividend of 0.272p. The total dividend in 2021 represents an increase of 7.0% year on year (2020: 9.60p). The Company uses its revenue reserves built over many years to declare the core and any special dividends each year.
The underlying portfolio yield has considerably stabilised this year as our investee companies either return to paying dividends or outline their future plans to do so. As a result of the policy over the past eleven years of growing the annual dividend and retaining to revenue reserves the maximum permitted under the legislation, the Company is in a strong position and can continue to pay its dividend for some time from accumulated reserves should it be required. The Board is con?dent that the company is well positioned to further grow the annual dividend, assuming more favourable macro-economic conditions continue.
The Company's portfolio is currently invested in 74 companies spread across 16 sectors. This spread creates a well diversi?ed portfolio which should, in the future, lead to a strong return of dividend income and subsequently steady revenue growth and, in time, capital growth. Capital structure
During the year the Company's shares occasionally traded at a premium to net asset value, and we have been asked to issue new shares in order to meet market demand. The Board's policy is that it will only consider issuing new shares if it can do so at a premium to NAV which is suf?cient not only to cover all the costs of issuance but also to recognise the value of the revenue reserves that have been built up over many years by retaining pro?ts which would otherwise have been distributed to holders of the existing share capital. Provided these criteria are met, the issue of new shares will enhance net asset value per share, and the increase in the size of the Company should improve liquidity in the market for its shares while making it more attractive to potential new investors.
If the issue of new shares is considered in the future, the Board will take into account the two factors discussed above, and the potential to improve the underlying performance and returns of the company for the bene?t of all shareholders. Dividend
As brie?y discussed in the Results section, the Board has declared a fourth interim dividend of 2.50p per Ordinary share (2020: 2.40p) which, when added to the three quarterly interim dividends of 2.50p per Ordinary share, brings the total to 10.0p (2020: 9.60p) for the year ended 30 April 2021, an increase of 4.2% over the previous year.
In addition, the Board has declared a special dividend of 0.272p per Ordinary share (2020: nil) to be paid with the fourth interim dividend. Shareholders will effectively receive a fourth dividend of 2.772p per Ordinary share. This equates to a total dividend for the year of 10.272p per Ordinary share.
In 2020 the Board successfully balanced the Company's income ?ows and reserves such that interim dividends are declared as four equal payments paid quarterly across the ?nancial year. This approach was maintained in 2021 and is expected to form the foundation of the Company's dividend policy for the foreseeable future. The Company has revenue reserves which after payment of the fourth interim dividend represent some 97.3% of the current annual dividend or some 9.9p per Ordinary share.
The Board is committed to progressively improving the Company's dividend for investors and as such has decided that the four interim dividends paid in respect of the ?nancial year ending 30 April 2022 will very likely exceed, but in any event will not be less than, that paid in respect of the ?nancial year ended 30 April 2021. Outlook
(MORE TO FOLLOW) Dow Jones Newswires
June 24, 2021 02:04 ET (06:04 GMT)
DJ Chelverton UK Dividend Trust plc: Full year -2-
While there is some uncertainty as to the economic recovery in sectors with exposure to global trade, the outlook across the Company's portfolio companies is promising. The Board is con?dent that it is well placed to bene?t from both improving domestic activity and a potential rebound in consumer spending and corporate investment.
The Board accordingly looks forward to continuing to work with David Horner and his Chelverton team to seek out opportunities in the UK smaller companies sector, and to maintaining the Company's strong performance relative to its investment company peers. Lord Lamont of Lerwick
Chairman
24 June 2021 Investment Manager's Report
In the year to 30 April 2021 the Company's net asset value per share rose from 124.86p to 227.07p. At the same time the core dividend was increased 4.2% to 10.0p, in line with the intentions outlined in September 2020. The Company also announced a special dividend of 0.272p, which has been aggregated with the fourth interim dividend.
Including the special dividend the total dividend for the year was 10.272p, a 7.0% increase on the 9.6p paid in 2020. Prior to the Covid-19 pandemic it was the manager's intention to deliver a 7% increase in the core dividend for the year to April 2021, however given the unprecedented reduction in dividends and uncertainty across the market at the time of the ?rst interim dividend decision, we prudently took a more conservative approach to dividend growth. With the trading outlook for our investee companies back on ?rmer footing and dividend payments gradually returning to 'normal' levels, we now have the con?dence to pay a special dividend, in effect boosting the core dividend to the level originally planned. It is the intention to use the total dividend of 10.272p as the base from which to grow the core dividend in the current year.
While the 81.9% increase in NAV in the period is clearly pleasing, it should be taken in the context of the sharp fall in NAV in February and March 2020 during the initial phase of the pandemic. With this in mind, the two-year performance since 30 April 2019 is perhaps a more appropriate measure. During this period the Company's net asset value rose 6.01% from 214.19p to 227.07p. A satisfactory performance over a period of extreme volatility which was delivered alongside increases in the core dividend in both years.
The turning point in the year was the announcement of an effective Covid-19 vaccine in November. Prior to this, uncertainty and fear governed both share prices and management actions at our investee companies, with guidance largely removed from the market and analyst estimates focusing on the "worst case scenario". The impact on dividends across the market has been widely reported and our portfolio was not unaffected, with dividend income versus 2019 (the last year unaffected by Covid-19) reducing 53.0% to GBP1.71m. Given the high level of government support, corporate balance sheets were not, in the main, put under the same pressure as in previous crises. Despite this, due to the ?xation on worst case scenarios, there was a signi?cant uptick in equity issuance. As long-term income focused investors we see dilution as a major headwind against achieving good returns over the medium/long term. As such we believe additional equity should be issued sparingly. Unfortunately, the period saw a number of management teams raise new equity at very low prices, to give their businesses a short-term buffer against potential downside scenarios. While in some instances, particularly in the leisure sector, a capital injection was genuinely required to see them through the pandemic, other businesses raised cash where there simply was no need, and the dilution from these raises is permanent.
The announcement of multiple successful vaccine trials in November brought about a substantial swing in sentiment, with optimism now the order of the day. The market largely shrugged off new waves of the pandemic and additional lockdowns, with the focus now ?rmly on the post pandemic recovery and the expected wave of consumerism, funded by savings built up during the pandemic. Importantly, companies have been very cautious in their return to guidance, largely keeping enough powder dry to weather any re- opening delays.
During this time the much anticipated free trade agreement with the EU was also agreed and signed. The impact on our companies was relatively benign given the extensive preparations which had been taken previously for a "no-deal" scenario, however it removed a signi?cant element of medium-term uncertainty and perceived risk.
The strong NAV performance delivered in 2021 was a direct result of the careful management of the Company's revenue reserves in prior years. Going into this downturn the Company had suf?cient revenue reserves to cover around two years' worth of dividend payments. This level of cover, and the stable ?nancial position of the trust provided by the Zero Dividend Preference shares, allowed us to focus on capital growth during the ?rst phase of the recovery, adding to existing holdings which we felt were materially undervalued despite short term uncertainty over the ability to pay dividends. With the UK vaccination program continuing apace, the outlook for the vast majority of our holdings is more certain, with many currently bene?tting from an element of "pent-up demand". As such we have seen share prices recover strongly since the initial vaccine announcement, with some share prices now materially higher than in February 2020.
We wrote in last year's report that we expected companies to emerge from this downturn stronger and ?tter than before, as had been the case in previous crises. Having now been through several results seasons and been in regular contact with our management teams through the pandemic, we are increasingly convinced that this will be the case. Companies have not been idle through the pandemic, using the period of reduced business activity to accelerate planned improvement programs and speed up the digital transformation process. The pandemic forced us all to adopt new ways of working and interacting with each other. We see multiple examples across the portfolio where this has led to increased acceptance of more ef?cient business models, which would otherwise have taken a number of years to implement. How much of the changes in working practices will be permanent once the economy fully re-opens remains to be seen, but we believe the "hybrid" models which will likely emerge will leave our companies both more ef?cient and more scalable. Portfolio review
In the last year takeover activity in the portfolio signi?cantly reduced from the level seen in 2020 (7 takeovers). Moss Bros Group and Low & Bonar were the only deals completed in the year, although both were originally announced in the prior year. In addition to the takeovers, eight other holdings from the portfolio were sold in their entirety (2020: 2): Elementis, Entain, Foxtons Group, Galliford Try Holdings, Kin & Carter, Titon Holdings, XP Power and XPS Pensions.
Shareholdings were reduced in 21 companies (2020: 11) including Alumasc Group, Amino Technologies, Bloomsbury Publishing, Braemar Shipping Services, Diversi?ed Gas & Oil (now renamed Diversi?ed Energy), DX Group, Headlam Group, Polar Capital Holdings, Randall & Quilter, Strix Group, Tyman and UP Global Sourcing Holdings, all after strong share price performance.
Eight new shareholdings were added to the Company's portfolio in the year (2020: 8), including: Anglo Paci?c - a diversi?ed natural resources royalty company, Contour Global - wholesale power generation, Curtis Banks Group - pension administration services, Duke Royalty - private SME ?nancing, Hargreaves Services - industrial and property services, iEnergizer - business process outsourcing and content delivery services, MP Evans - sustainable palm oil producer and Vector Capital - commercial lending.
Shareholdings were increased in 33 companies (2020: 19) which were in the portfolio at the start of the year. As ever, this represents a signi?cant part of the portfolio and this year includes a number of holdings which were increased at the lows during the ?rst half of the year and were subsequently "top sliced" once the shares had rallied. Outlook
The positive momentum from the second half of last year has continued into the beginning of this year, with the Company's net asset value rising a further 5.3% since 30th April 2021 to 239.16p as at 21 June 2021.
As outlined above, we believe our investee companies are, in the main, emerging as better companies with more ef?cient processes. As the recovery continues, we expect the supply of skilled labour to become increasingly tight. This will make adoption of more ?exible working practices to access new pools of talent increasingly important, with processes which will allow businesses to grow without requiring additional labour also to be encouraged. The market is currently focused on how quickly businesses can return to pre- pandemic levels of activity however, in time, we believe our companies will get the credit they deserve for improving their business models over the course of the downturn.
Finally, while it feels like a long time ago now, the impact of Brexit on this portfolio should not be forgotten. While we now have a free trade agreement in place with the European Union, Covid-19 has focused investor attention elsewhere. We ?rmly believe the "Brexit discount" which our investee companies were suffering from has not yet reversed, a situation which we believe will start to rectify itself over the coming periods. David Horner
Chelverton Asset Management Limited
24 June 2021 Breakdown of Portfolio by Industry
(MORE TO FOLLOW) Dow Jones Newswires
June 24, 2021 02:04 ET (06:04 GMT)
DJ Chelverton UK Dividend Trust plc: Full year -3-
at 30 April 2021
Market
Value
% of
Bid
Market sector GBP'000 portfolio
Financial Services 10,776 17.1
Industrial Goods & Services 10,460 16.6
Construction & Materials 6,050 9.7
Consumer Products and Services 5,582 9.0
Retail 4,442 7.1
Insurance 4,326 6.8
Real Estate 4,182 6.6
Travel & Leisure 3,526 5.6
Media 3,509 5.5
Food, Beverage & Tobacco 2,873 4.7
Telecommunications 2,184 3.5
Energy 1,827 2.9
Basic Resources 1,232 2.0
Banks 794 1.3
Utilities 597 1.0
Personal Care, Drugs & Grocery Stores 408 0.6
62,768 100.0 Breakdown of Portfolio by Market Capitalisation
at 30 April 2021
Number of Companies
>GBP500m - 20
GBP250-500m - 11
GBP100-250m - 17
GBP75-100m - 6
GBP50-75m - 9
GBP25-50m - 5
% of Portfolio as at 30 April 2021
>GBP500m - 27%
GBP250-500m - 15%
GBP100-250m - 23%
GBP75-100m - 8%
GBP50-75m - 12%
GBP25-50m - 7%
Source: Maitland Administration Services Limited Portfolio Statement
at 30 April 2021
at 30 April 2021 (continued)
Total Portfolio 62,768 100.0
Investment Objective and Policy
The investment objective of the Company is to provide Ordinary shareholders with a high income and opportunity for capital growth, having provided a capital return suf?cient to repay the full ?nal capital entitlement of the Zero Dividend Preference shares issued by the wholly owned subsidiary company SDVP.
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
Of?cial 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 ?xed interest
securities or any similar securities convertible into shares; nor will it invest in the securities of other
investment trusts or in unquoted companies. Performance Analysis using Key Performance Indicators
At each quarterly Board meeting, the Directors consider a number of key performance indicators ('KPIs') to assess the Group's success in achieving its objectives, including the net asset value ('NAV'), the dividend per share and the total ongoing charges. - The Group's Consolidated Statement of Comprehensive Income is set out on page 47. - A total dividend for the year to 30 April 2021 of 10.272p (2020: 9.60p) per Ordinary share has been declared to
shareholders by way of three payments totalling 7.50p per Ordinary share plus a planned fourth interim dividend
payment of 2.50p per Ordinary share and a special dividend of 0.272p per Ordinary share. - The NAV per Ordinary share at 30 April 2021 was 227.07p (2020: 124.86p). - The ongoing charges (including investment management fees and other expenses but excluding exceptional items) for
the year ended 30 April 2021 were 2.33% (2020: 2.12%). The increase in the annualised ongoing charges during the
year is primarily due to the reduction in net asset value for the ?rst half of the year due to the uncertainties
around Covid-19.
The Directors, in conjunction with the Investment Manager, also took time during the 2020-21 ?nancial year to speci?cally benchmark the Group's performance against different comparator peer groups and performance metrics to inform decision making.
Further detailed information is available in the Company's Key Information Document which was updated during the year and can be found on the Company's website: https://www.chelvertonam.com/fund/ chelverton-uk-dividend-trust-plc/ Principal Risks
(MORE TO FOLLOW) Dow Jones Newswires
June 24, 2021 02:04 ET (06:04 GMT)
Market value % of
Security Sector GBP'000 portfolio
Belvoir Lettings Real Estate 2,150 3.4
Diversi?ed Gas & Oil Energy 1,827 2.9
Alumasc Group Construction & Materials 1,712 2.7
UP Global Sourcing Holdings Consumer Products and Services 1,610 2.6
Jarvis Securities Financial Services 1,500 2.4
Finncap Group Financial Services 1,320 2.1
Randall & Quilter Insurance 1,320 2.1
Flowtech Fluid Power Industrial Goods & Services 1,265 2.0
Devro Food, Beverage & Tobacco 1,230 2.0
STV Media 1,220 1.9
MTI Wireless Edge Telecommunications 1,206 1.9
DFS Furniture Retail 1,197 1.9
Redde Northgate Industrial Goods & Services 1,091 1.7
Vistry Group Consumer Products and Services 1,065 1.7
Tyman Construction & Materials 1,056 1.7
Epwin Group Construction & Materials 1,045 1.7
Premier Miton Group Financial Services 1,032 1.6
Coral Products Industrial Goods & Services 1,015 1.6
Brewin Dolphin Holdings Financial Services 1,014 1.6
Clarke (T.) Construction & Materials 1,000 1.6
Brown (N) Group Retail 983 1.6
Amino Technologies Telecommunications 978 1.6
Sever?eld Construction & Materials 975 1.6
Marston's Travel & Leisure 970 1.5
Chesnara Insurance 964 1.5
Polar Capital Holdings Financial Services 958 1.5
Numis Corporation Financial Services 950 1.5
MP Evans Food, Beverage & Tobacco 918 1.5
Castings Industrial Goods & Services 915 1.5
Bloomsbury Publishing Media 903 1.4
Vertu Motors Retail 902 1.4
TheWorks.co.uk Retail 876 1.4
Regional REIT Real Estate 840 1.3
Crest Nicholson Consumer Products and Services 818 1.3
Ramsdens Holdings Financial Services 810 1.3
Headlam Group Consumer Products and Services 796 1.3
Close Brothers Group Banks 794 1.3
Essentra Industrial Goods & Services 794 1.3
Appreciate Group Financial Services 760 1.2
Smiths News Industrial Goods & Services 760 1.2
Braemar Shipping Services Industrial Goods & Services 756 1.2
Bakkavor Food, Beverage & Tobacco 725 1.2
Restaurant Group Travel & Leisure 720 1.1
Centaur Media Media 714 1.1
Personal Group Holdings Insurance 708 1.1
Photo-me International Consumer Products and Services 693 1.1
Anglo Paci?c Basic Resources 692 1.1 Portfolio Statement
Market value % of
Security Sector GBP'000 portfolio
Curtis Banks Group Financial Services 690 1.1
Hansard Global Insurance 684 1.1
Palace Capital Real Estate 674 1.1
Wilmington Group Media 672 1.1
Saga Travel & Leisure 665 1.1
Sabre Insurance Insurance 650 1.0
Duke Royalty Financial Services 630 1.0
iEnergizer Industrial Goods & Services 612 1.0
Go-Ahead Group Travel & Leisure 611 1.0
Portmeirion Group Consumer Products and Services 600 1.0
Contour Global Utilities 597 1.0
Gattaca Industrial Goods & Services 592 0.9
Babcock International Industrial Goods & Services 576 0.9
Revolution Bars Group Travel & Leisure 560 0.9
Chamberlin Basic Resources 540 0.9
Town Centre Securities Real Estate 518 0.8
Hargreaves Services Industrial Goods & Services 505 0.8
Strix Group Industrial Goods & Services 493 0.8
Shoe Zone Retail 484 0.8
Orchard Funding Group Financial Services 480 0.8
RTC Group Industrial Goods & Services 441 0.7
RPS Group Industrial Goods & Services 440 0.7
McColl's Retail Group Personal Care, Drugs & Grocery Stores 408 0.6
Vector Capital Financial Services 352 0.6
GLI Finance Financial Services 280 0.4
Kier Group Construction & Materials 262 0.4
DX Group Industrial Goods & Services 205 0.3
