TIDMCGL
Castelnau Group Limited
Interim Report and Unaudited Condensed Consolidated Interim Financial Statements
For the period from 1 January 2023 to 30 June 2023
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
The Group has today, released its Interim Report and Unaudited Condensed
Consolidated Interim Financial Statements for the period from 1 January 2023 to
30 June 2023. The Report will shortly be available from the Company's website:
https://www.castelnaugroup.com
Summary Information
The Group
Castelnau Group Limited (the "Company", "Castelnau" or "CGL") and its subsidiary
(collectively, the "Group" or "Castelnau Group") is a Guernsey domiciled closed
-ended investment company which was incorporated in Guernsey on 13 March 2020
under the Companies (Guernsey) Law, 2008. The Company is classified as a
registered fund under the Protection of Investors (Bailiwick of Guernsey) Law,
2020. Its registered office address is PO Box 255, Les Banques, Trafalgar Court,
St. Peter Port, Guernsey GY1 3QL. The Company listed on the London Stock
Exchange's Specialist Fund Segment ("SFS") on 18 October 2021.
This Interim Report and Unaudited Condensed Consolidated Interim Financial
Statements (the "Interim Financial Statements") comprise the financial
statements of Castelnau Group Limited and Castelnau Group Services Limited
(incorporated on 14 June 2022).
Investment Objective
The Group's investment objective is to compound Shareholders' capital at a
higher rate of return than the FTSE All-Share Total Return Index over the long
term.
Investment Policy
The Group will seek to achieve a high rate of compound return over the long term
by carefully selecting investments using a thorough and objective research
process and paying a price which provides a material margin of safety against
permanent loss of capital, but also a favourable range of outcomes.
The Group will follow a high conviction investment strategy. The expertise and
processes developed by the Investment Manager can be applied to all parts of the
capital structure of a business, both private and publicly quoted. These
positions could be represented by a minority stake, a control position combined
with operational involvement, full ownership of a company, a joint venture, a
loan or convertible instrument, a short position or any other instrument which
allows the Group to access value.
The Group may select investments from all asset classes, geographies and all
parts of the capital structure of a business. Both private and public markets
are within the scope of the Group's investment policy. The constraints on the
Investment Manager lie in the high standards, strict hurdles and diligent
processes used to select investments. These constraints help to maximise returns
by reducing mistakes, enforcing a margin of safety and only accepting
investments with a favourable range of outcomes.
The Group expects to hold a concentrated portfolio of investments and the Group
will not seek to reduce concentration risk through diversification. The
opportunity set will dictate the number of holdings and the weighting of
investments in the Portfolio. The investments with the best return profiles will
receive the largest weightings. The Group will therefore have no set
diversification policies.
The volatility of mark-to-market prices does not affect the investment process.
It is likely that volatility in the market price of a listed investment will
provide attractive entry or exit points and so investors should expect high
volatility to sit alongside the high long-term compounding rates that the Group
is aiming to achieve.
The constituents of local indices, the weightings of investments in these
indices and the volatility of the indices relative to the Group will not affect
investment decisions. It is anticipated that agnosticism towards local indices
will help focus research efforts, decision making and ultimately investment
performance.
The Group may invest directly or through special purpose vehicles if considered
appropriate.
Shareholder Information
As at 30 June 2023, the number of Ordinary Shares in issue was 318,627,777 (31
December 2022: 183,996,058). The existing clients of Phoenix Asset Management
Partners Ltd (the "Investment Manager", "Phoenix" or "PAMP") made up 70.3% of
the issued shares and the investment from SPWOne III Limited, 7.8%.
Results and Performance
The results for the period are set out in the Unaudited Condensed Consolidated
Statement of Comprehensive Income. Retained earnings remain negative and include
finance costs, realised and unrealised gains and losses on the Group's assets.
Additional expenses have been accrued during the period.
The Group's loss before tax for the period amounted to £15,301,815 (30 June
2022: £30,064,713).
The benchmark is the FTSE All-Share Index (total return). The Group's
performance since PAMP was appointed is shown below:
Period ended Year ended 31 Change/return
30 June 2023 December 2022
pence pence %
NAV per 70.21 75.02 (6.41)
Ordinary
Share*
Ordinary 75.50 69.00 9.42
Share
price
Benchmark 2.61
return
The
Ongoing
Charges
ratio was
as
follows:
Period ended Year ended 31
30 June 2023 December 2022
% %
Ongoing 0.62 0.52
Charges
ratio*
* These are Alternative Performance Measures ("APMs")
Alternative Performance Measures ("APMs")
The disclosures of performance above are considered to represent the Group's
APMs. An APM is a financial measure of historical or future financial
performance, financial position, or cash flows, other than a financial measure
defined or specified in the applicable financial reporting framework.
Definitions of these APMs together with how these measures have been calculated
can be found in the Alternative Performance Measures (Unaudited) section.
Premium/Discount to NAV
The premium/discount of the Ordinary Share price to NAV per Ordinary Share is
closely monitored by the Board. The Ordinary Share price closed at a 7.53%
premium to the NAV per Ordinary Share as at 30 June 2023 (31 December 2022:
discount of 8.02%).
Fees
The Investment Management Agreement with Phoenix Asset Management Partners Ltd
("PAMP") creates significant Shareholder alignment, as PAMP does not earn a
management fee but earns a performance fee only, which is paid in shares, and
not in cash.
The Company's performance is measured over consecutive periods of not less than
three years (each a "Performance Period") and is equal to one-third of the
relative outperformance to the FTSE All-Share Total Return Index. The first
Performance Period will run from Initial Admission to 31 December 2024. No
performance fees have been earned to date.
Dividend
No dividend is being issued for the period.
Chair's Statement
Performance Review
This report covers a six-month period from 1 January 2023 to 30 June 2023.
The highlight of the period was the Dignity Plc transaction. This resulted in an
issuance of 134,631,719new Ordinary Shares in the Company on 10 May 2023 to
enable the company to invest into Valderrama Limited ("Valderrama") (the bid
vehicle), with Valderrama then investing into Dignity Plc. The total number of
Ordinary Shares in the Company at the period end date was 318,627,777. This is a
73% increase compared to the previous reporting period. The Board along with the
Investment Manager are pleased with the results of the issue in a challenging
market environment.
We would like to extend a warm welcome to new shareholders, who either
subscribed for new shares or exchanged their Dignity shares for shares in the
Company and we thank those existing shareholders that added to their holding in
the Company. We believe this acquisition will add substantial value per share to
Castelnau Group. Post the acquisition, the Company now holds 66.5% of the shares
in Valderrama. The Company does not hold any shares directly in Dignity Plc post
the acquisition.
The share price return was 9.4% and the NAV total return for the period was
-6.4%, versus the benchmark FTSE All-Share Total Return Index of +2.6%, which
equates to a -9.0% relative underperformance of the NAV.
The main contributors to the underperformance were Hornby Plc ("Hornby") and
Cambium International Ltd. ("Cambium"). Hornby represents 6.0% of the portfolio
and had a -36.8% price movement. Cambium represents 5.4% of the portfolio and
had a -27.1% price movement. Additional commentary around the underperformance
on both stocks can be found in the Investment Managers report.
The discount rates used for valuing our privately held investments have not
changed from the previous reporting period.
30 June 2023 31 December 2022
Cambium International 12.5% 12.5%
Ltd. - Core business
Cambium International 25% 25%
Ltd. - Little List
business
Phoenix S.G. Ltd 15% 15%
Rawnet Ltd. 15% 15%
The CGL share price predominantly traded at a premium to NAV throughout the
period. The Board, along with Liberum Capital Limited (the "Advisers") and the
Investment Manager, monitor the share price and any corresponding premium or
discount on an ongoing basis.
During the period, the Company extended the loan facility to Cambium by £5.5
million of which £4,950,000 was drawn down. £1.5 million of the Silverwood
Brands Plc ("Silverwood") loan was converted to equity and an impairment
adjustment was made to the Showpiece Technologies Ltd ("Showpiece") loan in line
with International Financial Reporting Standards ("IFRS"), which resulted in a
0.9% reduction in the NAV.
Outlook
It is still early days for the Company. The acquisition of Dignity Plc is a
strategic one that aligns with the long-term investment goals of the Company. We
are confident that this investment will contribute positively to our overall
performance in the future. The acquisition is discussed in more detail in the
Alternative Investment Fund Manager and Investment Manager Report.
In conclusion, while we acknowledge the disappointment with the NAV return for
the period, we want to assure our shareholders that we remain steadfast in our
long-term vision. The journey is not without its challenges, but we believe in
the resilience of our portfolio and the capabilities of the Investment Manager
and its Partners to navigate through these times.
The Company has a clear vision and strategy for growth and we are well
-positioned going into H2 2023. We remain committed to delivering value to our
shareholders and are confident that the outlook for the Company is very
promising.
Thank you for your ongoing trust and support. We will continue to keep you
informed about our progress and developments as we work towards delivering
sustainable value for our shareholders over the long term.
If you would like to get in touch directly with me, as the Chair of the Board;
please email chair@castelnaugroup.com.
Joanne Peacegood
Chair
13 September 2023
Holdings as at 30 June 2023
Company Sector Holding Cost Valuation % of
% of
net
net
assets
assets
30 Jun
31 Dec
2023
2022
Valderrama Specialised 192,449,120 194,772,419 191,010,286 85.4%
N/A
Ltd Consumer
Services -
Equity
Phoenix S. G. Speciality 9,991 23,924,303 20,569,560 9.2%
13.9%
Ltd Retail -
("Stanley Equity
Gibbons")
Hornby Plc Leisure 92,337,876 39,050,634 16,620,818 7.4% *
19.1%
Products -
Equity
Cambium Specialised 19,274 22,619,471 14,924,831 6.7%
14.8%
International Consumer
Ltd Services -
Equity
Rawnet Ltd IT Services 284,173 5,500,001 6,600,000 3.0%
4.8%
-
Equity
Cambium Specialised 4,950,000 4,950,000 4,950,000 2.2%
0.4%
International Consumer
Ltd Services -
Loan
Ocula IT Services 9,326 700,367 4,925,247 2.2%
3.6%
Technologies -
Holdings Ltd Equity
Silverwood Specialised 4,400,000 4,400,000 4,400,000 2.0% *
4.3%
Brands Consumer
Plc Services -
Loan
Silverwood Specialised 4,570,353 3,199,247 3,427,765 1.5% *
1.6%
Brands Consumer
Plc Services -
Equity
Rawnet Ltd IT Services 972,255 972,255 972,255 0.4%
0.6%
- Loan
Showpiece Internet 2,950,000 2,950,000 965,000 0.4%
2.0%
Technologies Retail -
Ltd Loan
Dignity plc Specialised - - - 0.0%
31.2%
("Dignity") Consumer
Services -
Equity
Ocula IT Services 3,000,000 3,000,000 - 0.0%
0.0%
Technologies - Loan
Holdings Ltd
Showpiece Internet 8,000 8,000 - 0.0%
0.0%
Technologies Retail -
Ltd Equity
Total 269,365,762 120.4%
96.1%
Holdings
Other net (45,645,996) (20.4%)
3.9%
(liabilities)/
asset
s
Net assets 223,719,766 100.0%
100.0%
*As at 30 June 2023, Hornby Plc and Silverwood Brands Plc were listed companies.
All other companies were unlisted companies. All companies are UK businesses.
Portfolio Analysis as at 30 June 2023
Sector Percentage of
Net Assets
Specialised Consumer Services - Equity 93.6%
Speciality Retail - Equity 9.2%
Leisure Products - Equity 7.4%
IT Services - Equity 5.2%
Specialised Consumer Services - Loan 4.2%
IT Services - Loan 0.4%
Internet Retail - Loan 0.4%
Internet Retail - Equity 0.01%
Other net liabilities (20.4%)
Total 100.0%
Refer to note 5 for additional disclosure on the valuation of the holdings.
The Alternative Investment Fund Manager ("AIFM") and Investment Manager Report
The NAV relative to the ASX index for the period was -9.0%. We acknowledge that
the NAV return since inception is disappointing. However, the Company has
increased its share capital by 73% since the previous reporting period. Overall,
we are pleased with this result in a challenging economic market.
Castelnau Group Track Record
Performance NAV return Share price All-Share Relative NAV
total return ** index** to ASX
% % % %
2023 (to 30 June) (6.4) 9.4 2.6 (9.0)
2022 (to 31 December) (19.8) (34.6) 0.3 (20.2)
2021 (to 31 December)* (6.5) 5.5 2.5 (9.0)
Cumulative* (29.8) (24.0) 5.5 (35.3)
* From 18 October 2021.
** Share price return with dividends reinvested; All-Share index returns with
dividends reinvested. Past performance is not a reliable indicator of future
performance.
Source: Bloomberg, Phoenix Asset Management Partners Limited.
The table below reports the portfolio position and share price/valuation
movements between 31 December 2022 and 30 June 2023:
Net Asset Value Table Portfolio Weight Share Price/
Asset £ million % valuation moves
2023 2022 2023 2022 2023
Valderrama 191.0 N/A 85.4% N/A N/A
Phoenix 20.6 19.2 9.2% 13.9% 2.2%
Stanley
Gibbons
Hornby 16.6 26.3 7.4% 19.1% (36.8%)
Cambium 14.9 20.5 6.7% 14.8% (27.1%)
Group
Rawnet 6.6 6.6 3.0% 4.8% 0.0%
Ocula 4.9 4.9 2.2% 3.6% 0.0%
Silverwood 3.4 2.2 2.0% 1.6% (21.1%)
Showpiece 0.01 0.01 0.0% 0.01% 0.0%
Dignity N/A 43 0.0% 31.2% N/A
Source: Phoenix Asset Management Partners Limited.
Performance
In performance terms, the underperformance was mainly driven by Hornby and
Cambium. Hornby was down 37% and Cambium down 27%. Silverwood was down 21% in
the period but only represented 2.0% of the portfolio. Phoenix SG Ltd ("PSG")
was up 2%. Rawnet Limited ("Rawnet"), Ocula Technologies ("Ocula") and Showpiece
Technologies ("Showpiece") remained relatively unchanged.
Other activity
During the period, the £1.5 million Silverwood loan (plus £99,247 accrued
interest) was converted to equity, as originally intended. The conversion of
this loan is indicative of the continued confidence in the progress which the
Silverwood team are making. The remaining loan (excluding interest) to
Silverwood equates to 2% of the NAV at the end of the reporting period.
The Company also added to its position in Phoenix SG to fund the underlying
business; Stanley Gibbons Ltd.
Loan position
The principal amount of loans outstanding to portfolio companies (excluding the
Dignity deal) as a % of NAV decreased from 7.3% in December 2022 to 5.3% at the
end of this period. The Silverwood loan conversion mentioned above contributed
to this and an impairment was made to the Showpiece Technologies Ltd position in
line with IFRS accounting standards. The Company also extended the loan facility
to Cambium by £5.5 million in the period.
The Group considers both qualitative and quantitative factors when determining
whether an asset may be impaired. The Group considered the following indications
of impairment across the corporate loans outstanding at the period end:
- default or delinquency by a debtor;
- restructuring of an amount due to the Group on terms that the Group would not
consider otherwise;
- indications that a debtor or issuer will enter bankruptcy;
- adverse changes in the payment status of borrowers; or
- observable data indicating that there is a measurable decrease in the expected
cash flows from a group of financial assets.
The Group considers a broad range of information when assessing credit risk and
measuring expected credit losses, including past events, current conditions,
reasonable and supportable forecasts that affect the expected collectability of
the future cash flows of the instrument.
There have been no historical credit losses on the corporate loans issued by the
Group. The Investment Manager has assessed the credit risk of the loans and has
concluded that they have not deteriorated significantly in credit quality since
initial recognition (with the exception of Showpiece).
Valderrama (Dignity Plc)
Valderrama was set-up to invest in Dignity Plc. The Company holds 66.5% of the
equity in Valderrama.
Valderrama is a private company limited by shares that was incorporated in
Guernsey on 25 August 2022 with registered number 70991 and has its registered
of?ce at PO Box 650, 1st Floor, Royal Chambers, St Julian's Avenue, St Peter
Port, Guernsey GY1 3JX. Castelnau and SPWOne V Limited ("SPWOne") are currently
Valderrama's majority shareholders, with the company having been incorporated
for the purposes of a 50:50 joint venture between Castelnau and SPWOne, pursuant
to which Castelnau and SPWOne agreed to invest in Valderrama for the purposes of
making an investment in Dignity Plc.
Gary Channon, CIO of Phoenix, wrote the following in the Q2 2023 report to
investors; "Although the acquisition and delisting are now complete, we still
have a final step, which is making sure that Valderrama has sufficient capital
to support the strategy. We expect that will conclude by the end of the year and
when it is done, the temporary facility from Phoenix inside Castelnau to
complete the deal will be repaid. Castelnau owns 66% of Valderrama, that
investment is valued at £191 million, which represents 74% of the Castelnau
equity portfolio (£258 million) however, due to the temporary gearing, it works
out at 85% of the current net assets (£224 million). There are no restrictions
on portfolio construction in Castelnau, which lets us do the intelligent thing,
looking for the highest risk adjusted returns without risking a permanent loss
of capital, and then explain it to you. We would never advocate this amount of
portfolio concentration in any arm's length investment, no matter how cheap and
downside protected, but we do have control here and therefore, have ways to
protect and manage the downside so that Castelnau will not suffer any permanent
losses of capital". The full report can be found here:
https://www.castelnaugroup.com/application/files/5916/9208/5097/Castelnau_Group_L
td_Q2_2023.pdf, and an extract can be found below.
Q2 2023 Quarterly Report
In the Q2 2023 factsheet for the Company published in August 2023, Gary Channon,
Phoenix CIO, outlined some thoughts to shareholders on the recent Dignity
acquisition and the outlook for the year ahead. It is repeated below, as those
thoughts remain relevant today:
Dignity - now owned by Valderrama
Now that we have secured full ownership of Dignity and taken it private we can
talk about what it is we are doing to turn it into a much more valuable
business. That understates the scope of the ambition, but this report is about
the investment and ultimately the judgement of its success in that regard will
be on the investment returns it delivers.
Capital Structure
Before we get into the business side let's first talk about the capital
structure. It's dull and arcane so if you just want to get into the business
discussion then just skip this section, save it for bedtime. This report was
delayed because we have been seeking an agreement with the bondholders of
Dignity which has now been reached and announced. There will be a formal vote on
the 4th of September 2023.* We negotiated with bond holders representing more
than 75% of the outstanding Series A bonds. In summary, the agreement if
approved extends last year's deal until the end of 2024.
The need for an agreement arose because the deal we reached with bondholders a
year ago is due to expire at the end of September 2023. That deal gave us
certain waivers from the covenant test whilst we sell 7 of our crematoria to pay
down some of the debt and reduce leverage. The 7 were chosen as the freeholds
sat outside the securitisation but the businesses sat within.
Once the leverage is reduced, a number of other consents kick in which loosen
the restrictions on the business that come from the whole business
securitisation structure that most of Dignity sits in.
Our expectation was that the natural buyers for those crematoria would be
Dignity's funeral plan trusts, because of the alignment between their long term
returns and the long-term liabilities in the trusts.
The trusts have been going through a complicated process of their own due to the
start of FCA regulation of the sector. That required Dignity to set up an
entirely new trust which was FCA compliant and then merge all of the past trusts
into it. The trustees were advised that the merger process required the consent
of the court which then got delayed and derailed by a very slow and unhelpful
response from HMRC. The process to fix this is underway and a solution has been
found, however, in the absence of a merger the sale of the crematoria to the
combined new trust was not doable in the original timeframe.
The extension of the deal with the bondholders allows us the time to implement
the right deleveraging transaction, whilst shielding us from the risk of a
covenant breach at a time when the profitability is most depressed. This is
essential. The reason why it is an investment principle of Phoenix to avoid
leverage is not only due to the damage done when gearing works against you, but
also because of the damage when breaches of covenant give power to bondholders
to assert themselves at the expense of the equity.
Value Creation
Which should be subtitled: `the work to take Dignity from what it was to the
UK's truly leading end of life business, generating high and enduring returns on
its capital whilst being a force for good in the society it serves.'
The building blocks of Value Creation are:
1.A leading funeral plan business that expands market penetration
2.A network of leading community-based end of life businesses operating with the
benefits of national scale
3.A national network of community focused crematoria and cemeteries
Organising the business in a way that benefits from scale, vertical integration
and a dynamic, customer-focused culture is what will make it a commercial
success.
On top of those three main areas there are also complementary and meaningful
opportunities for us in memorialisation, coffin manufacturing and adding other
related services.
Funeral Plans
The number of funeral plans we will sell is a function of the population size,
our share of the market and the proportion of the population who have one. The
introduction of regulation by the FCA this time last year has removed more than
half the competitors (by number), making market share growth easier. The
population of those who might think about taking a funeral plan is also growing,
and so our most difficult challenge will be growing product penetration.
We have set about this goal firstly by creating a product that is best in class,
that is innovative and that we will continually improve upon. It is the top
recommendation of Martin Lewis of MoneySavingExpert.
The next challenge is properly launching that from a marketing perspective in a
way that reaches a much wider audience in order to expand the market. The work
on that is underway and announcements will come when ready.
Yet we can see that even without promotion, even though we have gradually rolled
out the product through the branch network making sure we had all the new FCA
based training and competency in place and still don't have it yet in all
branches, the product is being well received and is selling much better than the
previous products. We have already sold over 15,000 plans since launch, and on
top of that, we have offered the product to plan holders in schemes that didn't
make it into regulation and have sold more than 60,000 plans to those customers.
Value creation in funeral plans happens in three ways.
i.) From any excess return received on monies held over and above the
assumptions used when the plans were sold. In essence this amounts to the
investment return over inflation if there is one. The investment strategy has a
goal of exceeding funeral price inflation by 3% per annum. The size of the float
of capital held in our funeral plan trusts will be a function of how much we can
grow the market and our share in it. At 10% penetration (versus 7% currently)
the float reaches c.£1.7 billion and 3% equates to over £50 million per annum.
10% is our first objective, if we achieve 12.5% penetration then assets would be
£2.3 billion, and so on.
ii.) We build up a store of future funerals on which we will make our margin. As
we improve the efficiencies in our funeral businesses and grow volumes our unit
cost will fall which will increase the value of a future funeral. Currently the
average life expectancy of a plan purchaser is 15 years. We aim to build margins
to 30% in funerals. Against that return is the cost of acquiring a plan which in
the past was at a similar level. We believe once we have ourselves properly
launched, growing volumes will mean that our cost of acquisition (CPA) will
decline and will be much lower than the margin on a funeral.
iii.) We start a relationship with a customer to whom we wish to offer other
relevant products and services. The value for this will grow as we build out our
overall end of life offering.
Funeral Homes
We have inherited the results of decades of a strategy that undermined the
businesses that were acquired by making it uncompetitive, by not investing
enough in it, by taking away local decision making and by failing to adapt and
innovate.
Dignity has not previously delivered any benefits of scale; the cost structure
of our funeral businesses was higher after integration into the group than it
was before they were acquired. We believe we can change that through improved
ways of operating, introduction of better technology and the effect of growth on
operating costs per funeral.
Throughout 2022 the funeral division went through a restructuring that removed
the management layer and organised all the branches into local businesses run by
a Business Leader. This is a newly created role and had to be interviewed for
even though most of the candidates were internal. The end result was 168
businesses and 46 crematoria all also run by a business leader.
That process impacted over 3,000 people in the business and was completed at the
beginning of 2023. Although the removal of so many management roles was expected
to reduce headcount and cost, the result has been the opposite. This was
probably due to a combination of what was a highly disruptive process at a time
of an elevated death rate creating short term need for help. So, in 2023 even as
revenues have grown strongly, costs rose even further.
Since acquisition there has been a team of people, drawn from good practitioners
in Dignity, working with analysts from Phoenix and SPWOne reviewing every
business in numbers and in the field. From that work; good operating models will
be applied, best in class practices shared, and unviable marginal activities and
operations will be ended. The whole portfolio of funeral businesses will then be
invested in for growth. You should expect the business and branch numbers
initially to reduce along with the headcount. Currently there are 100 less
branches than we started with in 2021.
To give an idea of the magnitude of the effect, our top quartile branches make a
contribution of a £1,000 a funeral more than those in the bottom quartile and it
is largely a result of the cost side of the equation. The current work has been
identifying the reasons and the solutions and we will soon move into execution
mode.
We have been trialling the new strategy in Bristol now for 2 years and have had
a person from Phoenix embedded there throughout. That business has grown from
doing an average of 24 funerals a week across 10 branches to 30 and has grown
from 14% to 17% market share. Some of those funerals come from pre-sold funeral
plans, so to really appreciate the movement in local performance, you need to
look at At Need volumes and share. At that level the growth is 40%, going from
8.5% to 12% market share.
Whilst growing the business, it also improved the operating efficiencies and
therefore contributes profits at well over 30%.
The business introduced its own products using alternative venues that has
increased volumes at our crematorium in Weston-Super-Mare.
You should expect to see the profitability of our funeral business to grow
significantly in 2024 as these changes take place.
One of the key skills we need to possess for this model to work is an
understanding of what it takes to be a good business leader in this end of life
space; how to recruit, retain and develop such talent, and what kind of
operating framework we need to provide so that we get the best of empowered
customer focused entrepreneurial decision making close to customers combined
with the benefits of operating at a national scale which requires some
standardisation.
Once we have refined our own estate, we will be ready to consider expansion
knowing what value we bring and what kind of expansion makes sense for us, i.e.
new openings, acquisitions, partnerships and franchise.
We see our funeral homes as more than arrangers of funerals; we want them to
provide a full end of life service in the communities they serve. So, as well as
funeral plans we expect to introduce more products and services. We see our
branches becoming a place where you can drop by to discuss any aspect connected
to preparing for end of life and for us to be able to help you.
Value creation comes as our focused portfolio of businesses builds good margins,
grows volumes and local share and we start to grow the portfolio in a number of
ways. At 100,000 funerals (our 2025 objective), which would be 15.5% of the
market, we would expect the funeral division to contribute over £60m per annum
after capex. At a 20% share by 2032 we would be handling 140,000 funerals a
year, double our current numbers as the ONS estimates the annual death rate by
then will have reached 700,000.
We don't know what our ultimate market share potential is, we will earn our
right to grow by winning and earning the trust of families and retaining it. In
the Barnes postcodes, where Castelnau is based, we have an over 50% share. That
happens in communities where we have good performing operations, and in Barnes,
there is still so much potential. Although the branch is very well positioned,
it is underwhelming visually and seems designed to avoid having anyone drop in
and yet there is a whole community here ready to be engaged and without any
alternative aside from the internet.
Crematoria
We see great potential in our portfolio of crematoria to make them individually
better, to make a lot more of memorialisation both through the crematoria and
our funeral homes, and to take advantage of the national footprint to build our
direct cremation business. We also have a pipeline of 7 more to build.
We see a lot of scope to do more memorialisation by offering choice, innovation
and through closer working with our funeral businesses.
Unlike the revolution in the funeral business, the work in the crematoria
division is more evolutionary. Exchanging best practice and making incremental
improvements is the goal. Every crematorium will have a new website and ways of
engaging with the local communities digitally as well as physically. We have
some wonderful establishments, but you wouldn't know without visiting them. We
want to make them easier for all funeral directors to use and reserve.
Value creation comes through that growth in numbers, volumes, and memorial
revenues. A contribution this year which, after capex is likely to be around £45
million, we see doubling in 6 years as a result of those forces above.
Central Costs
Dignity became bloated at the centre as a result of the Transformation Plan
started in 2018. In 2021 they reached £40 million. The work of reducing it
started last year (2022 = £33 million) and now that the company is private, we
have been making further changes. Some efficiencies require investment in
technology and better processes which take more time. We expect to get down to
the right cost level by the end of 2024 which we believe will be no more than
£25 million and then that ratio to sales (c.6%) will be maintained as the
business grows.
New Services
Our desire to be a true full-service end of life provider means that we will
introduce new products and services, and partner with complimentary
organisations to achieve that. These are commercially sensitive and so we will
discuss them as they happen.
Other Areas of Value Creation
We believe our manufacturing operation and our large portfolio of freehold
commercial and residential property offers considerable scope for value
creation, and that work is already underway.
Profitability
As with 2022, we expect profitability to be depressed in 2023 as we restructure
the business. We expect 2023 to show some improvement on 2022 depending on the
death rate for the rest of the year, but it is from next year onwards that we
expect to see profitability rise more significantly. As the restructuring
reduces the core cost base and improves efficiencies, margins will rise on
increasing revenues. In two to three years, we expect to be making over £100
million before tax. With all of the forces of vertical integration working, more
funeral plan sales drives more funerals, which in turn means more cremations and
a growth in profitability. On our plans it takes 7 years to get that pre-tax
profitability to £200 million. Things may and probably will unfold differently,
faster or slower, depending on a number of things both within our control and
beyond it, but once we have the business model in the right shape, it will be
generating high returns on capital and marginal growth will also come at high
returns and we will have a very valuable business.
Using the Phoenix intrinsic value methodology, and even allowing for dilution
for the equity being raised at the Valderrama level, we get a value of c.£30 per
share on our central case plan. That doesn't mean we will be able to achieve
that value in a float, but it is a guide to the amount of potential value, and
we will update that figure using the same methodology so you will be able to see
the extent to which the plan is working.
People
The most important determinant of our success will be our people. A new ExCo has
been assembled post-acquisition. Kate Davidson remains as Chief Executive and a
new Chief Financial Officer has been appointed (he was previously the CFO and
acting CEO of eSure where he worked with Sir Peter Wood) and we have also
appointed a Chief Marketing Officer, Director of Operations, Chief
Transformation Officer, Chief Commercial Officer and Chief Risk Officer. This
sounds like a lot of chiefs, but these are all high quality, driven people who
are incentivised to deliver the value discussed above. SPWOne and Phoenix are
also utilising the full breadth of their network to bring resource and expertise
into this exercise. The work of crafting a great company out of such a complex
starting situation is now about executing and building the right culture.
Summarising the Value Creation Formula
What turns this into a great investment are three forces; i.) the price we paid
in relation to the value purchased, ii.) the value that comes from reorganising
the capital structure and having the capital being intelligently allocated and
then iii.) the value that comes from building a growing and commercially
successful end of life business. The first two turbo charge the third. Currently
the holding is valued at the price of the acquisition. As the results of
strategy execution come through, that valuation will change.
* There was a formal vote on 4 September 2023 and this was approved.
Hornby Plc
The appointment of Olly Raeburn as CEO in January 2023 was a strategic one for
the Group. During his initial six months he has faced the challenge of
understanding a new business and its people. Despite the limited time, Olly has
demonstrated his leadership capabilities and has also now strengthened his
executive team with two additional key hires.
Hornby released its annual accounts in June 2023 where it reported total revenue
of £55.1 million, which represents a 2.5% increase compared to the previous
year's revenue of £53.7 million. This growth in revenue indicates some level of
improvement in the company's sales during the year. The underlying loss before
tax for the year was (£1.1) million, which is a significant decline from the
previous year's profit of £3.2 million. Reported loss was (£5.9) million (2022:
£0.6 million profit). Sales were disappointing in their most important trading
period between October-December. Several factors contributed to the
disappointing sales performance during the crucial trading period; economic
uncertainties, changes in consumer behaviour, and imperfect demand forecasting
have all played a role in the company's challenge.
A positive highlight from the year was digital sales. The investment in digital
and the new websites enabled a 49% increase in digital revenue. With direct to
customer sales now at c.15% of total sales there is clear potential for further
growth.
Olly, in collaboration with the Castelnau Team, is beginning to formulate a
strategic plan and vision for the company.
A few key areas of focus to drive growth and enhance the company's competitive
position are outlined below:
1. Brand Vision and Proposition Development:
Olly recognises the importance of a strong vision and a compelling value
proposition to resonate with customers for each of the company's brands. The
strategic plan involves refining and communicating these clear identities that
reflects the brand's values, heritage, and product offerings. By developing a
distinctive brand proposition, each brand aims to strengthen its position in its
respective markets and attract a wider customer base.
2. Product Development and Merchandising:
Producing products that customers value and love is key to remaining competitive
and Hornby Plc plans to continuing investing in product development and
innovative designs. The company will focus on introducing new product lines,
enhancing existing ones, and catering to evolving customer preferences.
3. Data, Loyalty, and Segmentation:
As mentioned in Olly's CEO report, "We have 5 years of transaction history from
our D2C channel but have not taken full advantage of that information to develop
relationships and drive purposeful growth". Understanding customer data is
crucial for informing product development, targeted marketing, and personalised
experiences. Hornby Plc will prioritise data analysis to gain insights into
customer behaviour, preferences, and purchase patterns.
4. Customer Experience:
Customer experience plays a vital role in building lasting relationships with
consumers. Hornby Plc will place a strong emphasis on enhancing customer
service, post-purchase support, and engagement across all touchpoints.
5. Retail Development:
The strategic plan acknowledges the importance of retail channels in the
company's overall success. The company will invest in an experiential retail
development to create an engaging and visually appealing experience for
customers.
Conclusion:
We are working closely with Olly to determine a solid strategic plan which will
be vital to assessing the company's performance and potential for long-term
investment success and shareholder value.
Cambium
Cambium was down 27% in the period.
The year-to-date performance for the company has been impacted by the effects of
COVID on the wedding industry. From March 2020 to June 2021, COVID restrictions
caused most weddings to be cancelled or limited to only thirty participants.
This resulted in a significant backlog of postponed weddings, which combined
with a normal wedding year in the second half of 2021 and 2022.
However, the expected growth for 2023 did not materialise, as the wave of
postponed weddings unwound, and the market has reverted back to a more normal
pre-COVID situation. As a result, product revenue for the first five months of
2023 is down by 22% compared to the equivalent period in 2022. This decline was
also impacted by the reversion to more pre-COVID cash list levels, as couples
can now travel and have larger weddings.
Hitched, a leading wedding planning business, estimates that the total number of
weddings for all of 2023 will be 18% less than in 2022. To account for the
changing dynamics and a return to more normal wedding trends, a model has been
developed that assumes a year-on-year decline of 20%.
To counter these challenges and improve financial performance, management has
taken cost-cutting measures. In March, they successfully cut expenses by
approximately £750,000. A second round amounting to £1.2 million is currently
being planned, mainly from salaries expected in the Autumn when a comprehensive
plan to automate roles and utilise Artificial Intelligence is implemented.
The company has also launched a new business called "Little List" in the baby
list and gifting market. This venture has seen positive early traction, with
2,500 registrations since its soft launch in February 2023. Additionally,
investment is being made to enhance RockMyWedding's position as a leading
wedding planner and resource platform, aiming to guide engaged couples in
planning their wedding day and driving customers directly to gift lists without
intermediaries.
Historical Performance - Wedding List (including Homeware Outlet)
(GBP millions)
FY-22 FY-21 FY-20 FY-19
Pledge Product Revenue 23.1 19.1 4.7 14.3
Gross Profit 7.0 6.8 1.2 3.7
Costs (9.2) (6.8) (7.8) (9.8)
EBITDA on pledge (2.4) 0.0 (6.6) (6.2)
Source: Cambium International Ltd.
Current
Fiscal
Year -
Wedding
List
(including
Homeware
Outlet)
(GBP
millions)
Current Previous Change vs
Fiscal Year Expectations Previous
Expectations
Expectation for Current (%)
Year
Pledge 18.1 25.0 (27%)
Revenue
Gross 7.0 8.8 (20%)
Profit
Costs (8.4) (9.6) 9%
EBITDA (3.0) (0.8)
Source: Cambium International Ltd.
Phoenix SG Ltd
In Q4 of 2022, Tom Pickford was appointed CEO of the Stanley Gibbons Group (the
"SG Group"). He has been focused on cost savings and simplifying the company
structure in parallel to building out a new strategy and vision for the company.
The SG Group `s revenue and EBITDA underperformed in FY2023 compared to budget
estimates. The main reason for the underperformance was a fall in sales volume
despite a small increase in gross margin driven by operational changes towards
the end of the year. The SG Group undertook a substantial reduction in staff in
the first half of 2023 in recognition of the decline in volume and changes in
business focus outlined below: the associated costs contributed to reduction in
EBITDA in the year, however, lower staff costs should now drive improvements in
future quarters.
31 March 31 March
2023 2023
Income Statement (GBP millions) (Actual) (Budget) Variance
Revenue 11.1 13.8 (20%)
Cogs (6.3) (7.9) (20%)
Gross Profit 4.8 5.9 (19%)
Gross Margin 43% 43%
Overheads (7.4) (6.7) 10%
EBITDA (2.6) (0.8) 225%
EBITDA Margin (23%) (6%)
Depreciation and Amortisation (0.6) (0.4) 50%
Loss before tax (3.1) (1.2) 158%
Source: SG Group.
The new strategy will leverage the historic brand value of Stanley Gibbons and A
H Baldwins & Sons, along with their extensive in-house expertise and data
assets, to extend the group's activities into a multi-category collectibles
business with associated collecting services. The SG Group will add categories
such as trading cards and sporting memorabilia to its portfolio and bring to
market new added-value services for collectors.
A key hire was made in April 2023 to lead the extension of collectibles
categories into a broader and more diverse customer base, and discussions are
ongoing with potential partners in the UK and abroad where activities can be
accelerated.
The SG Group intends to significantly expand its auction activities, including
into the new collectibles categories. This recognises the market trend for
collectors to go direct to auction with its open, market-led pricing rather than
using more opaque commission-based dealing. Auctions bring the advantage of
lower capital requirements when acquiring consignments compared to buying in
stock for direct dealing, although both will continue to be part of the future
strategy for appropriate customers and transactions.
The SG Group is exploring options to move the publications business from a
physical to digital form. This reduces the costs of physical publications and
creates opportunities to monetise data assets. In addition, branded product
manufacturing will be franchised to reduce the capital requirements.
Finally, the SG Group is also exploring business adjacencies in the coin dealing
market, which can be outlined in more detail in future updates.
Ocula Technologies
Valuation
The value of our stake in Ocula was unchanged from the previous reporting period
(as at 31 December 2022) at £4.9 million although our equity ownership of the
company fell from 67% to 50% post the recent equity raise.
This valuation is based on a combination of factors, most notably, the recent
external investment from Lloyds Bank (March 2023) but also the ongoing market
validation of Ocula's products, its revenue growth potential, and the
probability of success.
Activity
Ocula, as an early-stage technology company, has made significant strides in the
marketplace and shows much promise for the future. With the aforementioned
successful external investment from Lloyds and a post-money valuation of £10
million, the company has demonstrated its potential and garnered early
validation. To solidify its position and establish itself as a sustainable
player in the industry, Ocula needs to continue to focus on winning new
customers and sustaining its revenue growth. The company's performance so far
has been encouraging. Securing circa ten paying clients, including renowned
names such as the winners of the 2023 Super Bowl the Kansas City Chiefs and the
Atlanta Falcons in the US, showcases Ocula's ability to attract prestigious
clientele. Additionally, their successful conversion of AO World, a prominent UK
online retailer, into a paying client adds further credibility to their
offerings. This customer momentum in 2023 indicates increasing market traction,
reaffirming the external valuation it received.
Yet, in the competitive landscape of technology and SaaS businesses, continuous
growth is imperative. Ocula's near-term pipeline of prospective clients, which
includes some very prominent UK high street brands presents a critical
opportunity for expansion. Winning these clients will not only boost revenue but
also serve as further validation of Ocula's value proposition.
Silverwood
Silverwood was founded in 2021 by experienced consumer entrepreneurs Andrew Tone
and Andrew Gerrie and is listed on the AQSE exchange. It is an investment
vehicle focusing primarily on the beauty sector, an industry in which both
founders have considerable experience.
To date, Silverwood has made investments into five different businesses with a
controlling interest in three of those. To find out more about the brands, visit
https://www.silverwoodbrands.com.
The £1.5 million loan to Silverwood's was converted to equity in the period. The
conversion of this loan is indicative of our continued confidence in the
progress the Silverwood team are making.
Rawnet
Valuation
The valuation of our 100% stake in Rawnet Limited remains unchanged from the
previous reporting period (as at 31 December 2022) at £6.6 million.We value
Rawnet using a straightforward Discounted Cash Flow model of its future
cashflows.The company's track record of profitable growth and simple business
model mean it is not a complicated business to value.
Activity
Rawnet's revenue performance in the first half of 2023 temporarily fell short of
expectations. The company experienced project setbacks including the loss of a
major project due to resource constraints. Moreover, the macroeconomic
conditions in the market in 2023 has led to some prospective clients tightening
their budgets, resulting in a hesitancy towards new spending. In response to
these difficulties, Rawnet management took proactive measures to reduce costs
across the company.
As the second half of the year begins, the management enacted a plan to downsize
the headcount from 70 to around 60 employees. This move, coupled with other cost
-cutting initiatives, aims to reduce monthly operating expenses significantly,
bringing the breakeven revenue level down to approximately £4.3 million for the
full year.Impressively, management handled the adjustment well and remains
optimistic about the potential to achieve a profit this year, assuming the
successful conversion of new third-party business in the second half of
2023.Supporting this optimism, it recently won a very large contract with a new
customer which serves as a reminder of Rawnet's longstanding position and
reputation in the market.
Showpiece
Showpiece continued to present four existing assets on its platform: the Magenta
1c stamp, Charles Darwin's Origin of Species 1st edition, Andy Warhol's Reigning
Queens masterpiece and a 1937 Edward VIII penny. The company also continues to
seek the right types of assets to fractionalise at values we are happy with, and
a further two assets likely to generate extraordinary public interest have been
explored, with one very promising for presentation in Q3 2023.
As part of Showpiece's journey to explore opportunity in the marketplace, the
company researched the potential for an FCA-regulated alternative investment
platform fractionalising high growth assets, such as collectible vehicles and
whisky, to sit alongside its `hobby' collectibles platforms. Such assets could
be presented to retail investors as investment products rather than
collectibles. This has generated valuable insights into the marketplace, and a
model to build the platform has been identified which can be used if assets and
capital are available at the right price, however, a move into this market is
not currently planned.
Showpiece will continue to focus on the core hobby collectibles and is also
using the expertise of its technology team to assist the wider Stanley Gibbons
business in its online plans, which also helps to reduce Showpiece's operational
costs while maintaining the business capabilities. During the period, the
company continued its software platform development activities to include
enhanced onboarding for new customers and improvements to the User Interface and
User Experience on its website homepage. The company also explored potential
partnerships to facilitate a potential future US expansion.
CGL owns an 80% equity stake in Showpiece Technologies Limited, the remaining
20% is owned by Stanley Gibbons Plc. CGL owns 64% of Stanley Gibbons and Phoenix
Asset Management in total own 83% of the company across numerous funds.
During the period, the Group recognised an expected credit loss of £1,985,000 on
the original loan of £4.2 million to Showpiece Technologies Limited and at 30
June 2023, the Group valued its equity stake in Showpiece at £Nil. The
adjustments to the loan and equity value have been made due to an increased
level of uncertainty around the Showpiece business.
Graham Shircore
Partner; Phoenix Asset Management Partners Ltd.
13 September 2023
Board Members
Biographical details of the Directors are as follows:
Joanne Peacegood (aged 45) (Independent Chair)
Joanne has over 24 years of experience in the financial services/asset
management sector. Joanne is a non-executive director with a portfolio of
clients including Financial Services and Operating Businesses. Joanne's
portfolio includes Listed, Private Equity, Debt, Utilities, Renewables, Hedge,
Real Estate and Asset Managers. Prior to becoming a non-executive director,
Joanne worked for PwC in the Channel Islands, UK and Canada and held leadership
roles in Audit, Controls Assurance, Risk & Quality and Innovation & Technology.
Joanne is an FCA with the ICAEW, graduating with an honours degree in Accounting
and holds the IOD Diploma. Joanne is the Deputy Chair of the Guernsey
International Business Association and the immediate past Chair of the Guernsey
Investment & Fund Association. Joanne resides in Guernsey.
Andrew Whittaker (aged 50) (Independent non-executive Director)
Andrew is an experienced director and currently sits on several investment
manager and investment fund boards specialising in debt, venture, renewables and
buyouts. Andrew has over 20 years of experience in the investment sector and the
funds industry.
Andrew is currently the Managing Director of Aver Partners, having previously
been Managing Director at Ipes (Barings/Apex) and preceding that, Managing
Director at Capita (Sinclair Henderson/Link). He has held senior management
roles at Moscow Narodny (VTB Capital), DML (Halliburton) and qualified whilst at
Midland (HSBC/Montagu).
Andrew graduated from Cardiff University and Aix-Marseille Université. He is a
Chartered Management Accountant and is a Member of the Chartered Institute for
Securities and Investment (CISI). Andrew is currently Chair of the British
Venture Capital Association (BVCA) Channel Islands Working Group and a member of
the Association of Investment Companies' (AIC) Technical Committee. He is a
previous Chair of the Guernsey Investment Fund Association (GIFA), Council
member of Guernsey International Business Association (GIBA), member of the
Association of Real Estate Funds (AREF) Regulatory Committee and of Invest
Europe's (formally European Venture Capital Association's (EVCA)) Technical
Group.
Joanna Duquemin Nicolle (aged 53) (Independent non-executive Director)
Joanna has over 30 years' experience working in the finance industry in
Guernsey. Joanna is currently Chief Executive Officer of Elysium Fund Management
Limited, having previously been a Director and the Company Secretary of Collins
Stewart Fund Management Limited where she worked on, and led, numerous corporate
finance assignments and stock exchange listings in addition to undertaking fund
administration and company secretarial duties.
Joanna has extensive experience in the provision of best practice corporate
governance and company secretarial services to a diverse range of companies
traded on the AIM market of the London Stock Exchange, listed on the Main Market
of the London Stock Exchange, Euronext and The International Stock Exchange.
Joanna qualified as an associate of ICSA: The Chartered Governance Institute UK
& Ireland in 1994 and was elected to Fellowship in May 2023.
David Stevenson (aged 57) (Non-Independent non-executive Director)
David Stevenson is a columnist for the Financial Times, Citywire and Money Week
and author of a number of books on investment matters. He was the founding
director of Rocket Science Group. Currently he is a director of Aurora
Investment Trust Plc, Secured Income Fund Plc, Gresham House Energy Storage Fund
Plc and AltFi Limited and a strategy consultant to a number of asset management
firms and investment banks.
Graham Shircore (aged 41) (Non-Independent non-executive Director)
Graham graduated from Bath University with a BSc (Hons.) degree in Business
Administration. During his time at university, he completed internships with
Fidelity, Principal Investment Management and Motorola Finance as well as
passing the IMC exam.
In 2005, he joined Aviva Investors on the graduate scheme, and then became a UK
Equity Analyst. Having passed all three levels of the CFA exam, he became a UK
Equity Fund Manager in 2008 and later also managed European funds before joining
Rothschild Wealth Management in 2013 as a Senior Equity Analyst. There he helped
shape and implement the equity research process, investing on a geographically
unconstrained basis.
Graham was, until recently, a non-executive director of Stanley Gibbons having
formerly acted as Chief Executive Officer, and a non-executive director of
Showpiece Technologies Ltd. Graham is now a non-executive director of Dignity
Plc and Dignity Finance Plc.
Directors' Report
The Directors are responsible for preparing the Interim Report and the Unaudited
Condensed Consolidated Interim Financial Statements in accordance with
applicable law and regulations. The Directors consider that the AIFM and
Investment Manager Report of this Interim Report and Unaudited Condensed
Consolidated Interim Financial Statements provide details of the important
events which have occurred during the period and their impact on the financial
statements. The following statement on the Principal Risks and Uncertainties,
the Related Party Transactions, the Statement of Directors' Responsibilities and
the AIFM and Investment Manager Report together constitute the Directors' Report
of the Group for the six months ended 30 June 2023. The outlook for the Group
for the remaining six months of the year ending 31 December 2023 is discussed in
the AIFM and Investment Manager Report. Details of the investments held at the
period end and the structure of the portfolio at the period end are provided in
the Holdings and Portfolio Analysis sections.
Principal Risks and Uncertainties
The principal risks faced by the Group, together with the approach taken by the
Board towards them, have been summarised below.
Valuation of investments
The Group's investments had a total value of £269,365,762 as at 30 June 2023 (31
December 2022: 132,645,371). The portfolio represents a substantial portion of
the net assets of the Group. As such, this is the largest factor in relation to
the consideration of the financial statements. These investments are valued in
accordance with the accounting policies set out in the Annual Financial
Statements. The risks associated with valuation of investments are managed by
the Investment Manager and reviewed by the Board. The Board considered the
valuation of the investments held by the Group as at 30 June 2023 to be
reasonable based on information provided by the Investment Manager, AIFM,
Administrator, Custodian and Depositary on their processes for the valuation of
these investments.
The Board reviewed the valuation policy and PAMP went through the valuation
process/techniques with the Board around private asset investments. There has
been no change to the valuation policy and the process remains the same which
has also been confirmed with the Board. The Board are satisfied with the
approach and the valuation policy and processes.
The Board receives the monthly NAV as well as quarterly detailed updates on the
portfolio which include changes to the valuations. The Board is updated when
there is/or potential to be significant changes in valuation. As part of the
annual audit process and the Board signing off on the annual financial
statements, the Board receives the valuations packs and also the third-party
(Kroll) reports. The Board scrutinises the valuations/reports and ensures they
are satisfied prior to sign off.
The Board also asks questions regularly (including during quarterly board
meetings, or ad hoc meetings) to understand performance and the impact on
valuation. The Board has access to detailed valuation reports as and when
requested.
Market risk
As a result of investments in publicly traded portfolio companies, the Group
will be exposed to equity securities price risk. The market value of the Group's
holdings in publicly traded portfolio companies could be affected by a number of
factors, including, but not limited to: a change in sentiment in the market
regarding such companies; the market's appetite for specific business sectors;
and the financial or operational performance of the publicly traded portfolio
companies which may be driven by, amongst other things, the cyclicality of some
of the sectors in which some or all of the publicly traded portfolio companies
operate. Equity prices and returns from investing in equity markets are
sensitive to various factors, including but not limited to: expectations of
future dividends and profits; economic growth; exchange rates; interest rates;
and inflation. The value of any investment in equity markets is therefore
volatile and it is possible, even when an investment has been held for a long
time, that an investor may not get back the sum invested. Any adverse effect on
the value of any equities in which the Group invests from time to time could
have a material adverse effect on the Group's financial condition, business,
prospects and results of operations and, consequently, the Net Asset Value
and/or the market price of the Shares.
The Board receives a quarterly update, or more frequently as required, from the
Investment Manager regarding investment performance.
Liquidity risk
Investments made by the Group may be illiquid and this may result in
delays/shortfall of expected cash flows to the Group.
Investments in private assets (including private portfolio companies) are highly
illiquid and have no public market. There may not be a secondary market for
interests in private assets. Such illiquidity may affect the Group's ability to
vary its portfolio or dispose of, or liquidate part of, its portfolio, in a
timely fashion (or at all) and at satisfactory prices in response to changes in
economic or other conditions.
If the Group is required to dispose of or liquidate an investment on
unsatisfactory terms, it may realise less than the value at which the investment
was previously recorded, which could result in a decrease in Net Asset Value.
The performance of investments in private assets can also be volatile because
those assets may have limited product lines, markets or financial reserves, or
be more susceptible to major economic setbacks or downturns. Private assets may
be exposed to a variety of business risks including, but not limited to:
competition from larger, more established firms; advancement of incumbent
services and technologies; and the resistance of the market towards new
companies, services or technologies.
The crystallisation of any of these risks or a combination of these risks may
have a material adverse effect on the development and value of a portfolio
company and, consequently, on the portfolio and the Group's financial condition,
results of operations and prospects, with a consequential adverse effect on the
Net Asset Value and/or the market price of the Shares.
Furthermore, repeated failures by portfolio companies to achieve success may
adversely affect the reputation of the Group or Investment Manager, which may
make it more challenging for the Group and the Investment Manager to identify
and exploit new opportunities and for other portfolio companies to raise
additional capital, which may therefore have a material adverse effect on the
portfolio and the Group's financial condition, results of operations and
prospects, with a consequential adverse effect on the Net Asset Value and/or the
market price of the Shares.
The Board receives a quarterly update, or more frequently as required, from the
Investment Manager regarding investment performance.
Credit risk
Counterparties such as financial institutions may not meet their obligations
regarding foreign currency and cash balances. The Board ensures that
counterparties have an acceptable long and short term credit rating.
Concentration risk
The Group expects to hold a concentrated portfolio of investments and the Group
will not seek to reduce concentration risk through diversification. The
opportunity set will dictate the number of holdings and the weighting of
investments in the portfolio. The investments with the best return profiles will
receive the largest weightings. The Group will therefore have no set
diversification policies.
Other Risks and Uncertainties
Cyber risk
The Board ensures they have a sufficient understanding of cyber risk to enable
them to manage any potential unauthorised access into systems and identifying
passwords or deleting data. The Board discusses cyber risks at the quarterly
board meeting and also ensures they are continuing to keep themselves up to date
on the risks through attending professional seminars on the topic, following
good password practices and vigilance to any suspicious links or attachments.
The Group is exposed to the cyber risks of its third-party service providers.
The Audit Committee received the internal controls reports of the relevant
service providers where available, and was able to satisfy itself that adequate
controls and procedures were in place to limit the impact to the Group's
operations.
Operational risk
The Group is exposed to the operational and cyber risks of its third-party
service providers and considered the risk and consequences in the event that
these systems failed during the period. The Investment Manager, Registrar,
Depositary, Administrator and Company Secretary each have comprehensive business
continuity plans which facilitate continued operation of the business in the
event of a service disruption or major disruption. The Audit Committee received
the internal controls reports of the relevant service providers where available,
and was able to satisfy itself that adequate controls and procedures were in
place to limit the impact to the Group's operations, particularly with regard to
a financial loss. The performance of service providers is reviewed annually via
its Remuneration and Management Engagement Committee. Each service provider's
contract defines the duties and responsibilities of each and has safeguards in
place including provisions for the termination of each agreement in the event of
a breach or under certain circumstances. Each agreement also allows for the
Board to terminate subject to a stated notice period. During the year ended 31
December 2022, the Board undertook a thorough review of each service provider
and agreed that their continued appointment remained appropriate and in the
Group's long term interest. The Board's next review will be at the Management
Engagement Committee meeting on 13 December 2023.
Regulatory risk
Poor governance, compliance or administration, including particularly the risk
of loss of investment trust status and the impact this may have on the Group
were considered by the Board. Having been provided with assurance from each of
the key service providers during the year ended 31 December 2022, the Board was
satisfied that no such breach had occurred. The Board's next review will be at
the Management Engagement Committee meeting on 13 December 2023.
Geopolitical risk
Russia's invasion of Ukraine and the subsequent energy crisis are risks to the
global economy. The invasion itself and resulting international sanctions on
Russia are believed to have already caused substantial economic damage to that
country, which is likely to worsen the longer the sanctions are in place, and
had some wider global effect on the supply and prices of certain commodities and
consequently on inflation and general economic growth of the global economy. The
effects vary from country to country, depending, for example, on their
dependence on Russian energy supplies, particularly gas, which cannot be so
easily transported and substituted as oil. The full effects will take time to
flow through fully and manifest themselves in the balance sheets of companies,
and impact their ability to repay loans.
Environmental, Social and Governance ("ESG") matters
The Board recognises the importance of Environmental, Social and Governance
("ESG") factors in the investment management industry and the wider economy as a
whole. It is the view of the Board that direct environmental and social impact
of the Group is limited and that ESG considerations are most applicable in
respect of the asset allocation decisions made for its portfolio.
The Group has appointed the Investment Manager to advise it in relation to all
aspects relevant to the Investment Portfolio. The Investment Manager has a
formal ESG framework which incorporates ESG factors into its investment process.
The Board receives regular updates from the Investment Manager on its ESG
processes and assesses their suitability for the Group. ESG factors are assessed
by the Investment Manager for every transaction as part of their investment
process. Climate risks are incorporated in the ESG analysis under environmental
factors.
The Group has entered into contractual arrangements with a network of third
parties (the "Service Providers") who provide services to it. The Board, through
the Management Engagement Committee, undertakes annual due diligence on, and
ongoing monitoring of, all such Service Providers including obtaining a
confirmation that each such Service Provider complies with relevant laws
regulations and good practice and has ESG policies in place.
Related Party Transactions
The Group's Investment Manager is Phoenix Asset Management Partners Limited,
("Phoenix" or "PAMP" or the "Investment Manager"). PAMP is considered a related
party in accordance with the Listing Rules. The Investment Manager will not
receive a management fee in respect of its portfolio management services to the
Group. The Investment Manager will become entitled to a performance fee subject
to meeting certain performance thresholds. Details of the investment management
arrangements are shown in note 14.
The members of the Board are also considered related parties. Further details of
the Board's remuneration and shareholdings can be found in note 15.
Castelnau Group Services Limited
Castelnau Group Services Limited ("CGSL"), the 100% subsidiary of the Castelnau
Group, retained the services of an average of 3 staff during the 6-month period
to 30 June 2023, all deployed to portfolio companies or to PAMP. During the
period, one member of staff transitioned to a permanent role in a portfolio
company, as this was more suited to the role, however we expect this member of
staff to return to CGSL in 2024. A graduate intern was hired and immediately
deployed within the Group.
CGSL is also acting as an intermediary to promote the use of key resources among
group companies, and in this period there was a significant sharing of
development resources. CGSL charges relatively small commissions in order to
cover the running costs of the subsidiary itself and should present a negligible
positive contribution to the parent company's profit and loss in this and all
future periods. The use of CGSL as an intermediary greatly assists in tracking
the benefits attributable to shared resources, and for planning purposes.
Valderrama
During the period, Yellow (SPC) Bidco Limited ("Bidco"), a newly formed indirect
wholly-owned subsidiary of Valderrama Limited ("Valderrama"), a joint venture
between SPWOne and the Group, made an offer to acquire the issued and to be
issued share capital of Dignity Plc (the "Acquisition"). Valderrama is a private
company limited by shares that is incorporated in Guernsey. The cash
consideration payable by Bidco to Dignity Shareholders under the terms of the
Acquisition was financed by equity capital invested by SPWOne and the Group in
Valderrama, which was made available by Valderrama to Bidco pursuant to a series
of intercompany loans, via Valderrama subsidiaries.
Valderrama was set-up to invest in Dignity Plc and the Group holds 66.5% of the
equity in Valderrama. Refer to the AIFM and Investment Manager Report and note
15 of the Financial Statements for additional details on the Acquisition.
Going Concern
The Directors believe that, having considered the Group's investment objective
in the Summary Information section, financial risk management, principal risks
and in view of the Group's holdings in cash and cash equivalents, the liquidity
of investments and the income deriving from those investments, the Group has
adequate financial resources and suitable management arrangements in place to
continue as a going concern for at least twelve months from the date of approval
of the Unaudited Condensed Consolidated Interim Financial Statements.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
· These Interim Financial Statements have been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting" and give a
true and fair view of the assets, liabilities, equity and profit or loss of the
Group as required by the UK Listing Authority's Disclosure and Transparency Rule
("DTR") 4.2.4R.
· The Interim Management Report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority, being an indication of important
events that have occurred during the period from 1 January 2023 to 30 June 2023
and their impact on the Interim 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 Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority, being related party transactions
that have taken place during the period from 1 January 2023 to 30 June 2023 and
that have materially affected the financial position or performance of the Group
during that period as included in note 15 and any changes in the related party
transactions described in the Annual Report and Audited Financial Statements for
the year ended 31 December 2022 that could do so.
By order of the Board,
Joanne PeacegoodAndrew Whittaker
DirectorDirector
13 September 2023
Unaudited Condensed Consolidated Statement of Comprehensive Income
For the period from 1 January 2023 to 30 June 2023
For the For the For the year
period from period from ended 31 December
1 1 2022
January 2023 January 2022
to 30 June to 30 June
2023 2022
Total Total Total
(Unaudited) (Unaudited) (Audited)
Notes GBP GBP GBP
Income 966,768 47,028 548,767
Expenses 7 (2,702,113) (433,501) (1,234,288)
(1,735,345) (386,473) (685,521)
Finance costs 15 (6,739,310) - -
Impairment of 5 (1,985,000) - (3,000,000)
financial
assets at
amortised
cost
Net gains on 171 - -
foreign
currency
Net losses on 5 (4,842,331) (29,678,240) (30,405,675)
financial
assets at
fair value
through
profit or
loss
Loss before (15,301,815) (30,064,713) (34,091,196)
tax
Tax expense - - (2,889)
Total (15,301,815) (30,064,713) (34,094,085)
comprehensive
loss for the
period/year
Pence Pence Pence
Loss per 12 (6.67) (16.34) (18.53)
ordinary
share - Basic
and
diluted
All items in the above statement derive from continuing operations. All revenue
is attributable to the equity holders of the Group.
The accompanying notes form an integral part of these Interim Financial
Statements.
Unaudited Condensed Consolidated Statement of Financial Position
As at 30 June 2023
30 June 2023 30 June 2022 31 December 2022
Notes GBP GBP GBP
(Unaudited) (Unaudited) (Audited)
NON-CURRENT
ASSETS
Investments - - 3,998,795 -
bonds
Investments - 5 258,177,754 118,572,197 122,684,739
equity
Investments - 5 11,188,008 5,186,795 9,960,632
loans
Office equipment 1,170 - -
269,366,932 127,757,787 132,645,371
CURRENT ASSETS
Trade and other 8 584,909 54,139 357,102
receivables
Cash and cash 8,926,543 16,701,180 7,652,732
equivalents
9,511,452 16,755,319 8,009,834
TOTAL ASSETS 278,878,384 144,513,106 140,655,205
CURRENT
LIABILITIES
Earn-out 9 2,482,395 - -
liability
Loans payable 15 48,199,020 - -
Finance costs 15 4,207,643 - -
payable
Other payables 10 269,560 150,592 275,857
55,158,618 150,592 275,857
NON-CURRENT
LIABILITIES
Earn-out 9 - 2,300,442 2,346,648
liability
TOTAL LIABILITIES 55,158,618 2,451,034 2,622,505
NET ASSETS 223,719,766 142,062,072 138,032,700
EQUITY
Share capital 11 285,105,642 184,116,761 184,116,761
Retained deficit (61,385,876) (42,054,689) (46,084,061)
TOTAL EQUITY 223,719,766 142,062,072 138,032,700
Number of 11 318,627,777 183,996,058 183,996,058
Ordinary Shares
in issue
NAV per Ordinary 13 70.21 77.21 75.02
Share (pence)
The Interim Financial Statements were approved and authorised for issue by the
Board of Directors on 13 September 2023 and signed on its behalf by:
Joanne PeacegoodAndrew Whittaker
DirectorDirector
The accompanying notes form an integral part of these Interim Financial
Statements.
Unaudited Condensed Consolidated Statement of Changes in Equity
For the period from 1 January 2023 to 30 June 2023
Note Share Retained Total
Capital Deficit
GBP GBP GBP
Opening 184,116,761 (46,084,061) 138,032,700
equity
Loss for - (15,301,815) (15,301,815)
the period
Issue of 100,988,881 - 100,988,881
new
Ordinary
Shares
Closing 11 285,105,642 (61,385,876) 223,719,766
equity
For the
period from
1 January
2022 to 30
June 2022
(Unaudited)
Share Retained Total
Capital Deficit
GBP GBP GBP
Opening 184,116,761 (11,989,976) 172,126,785
equity
Loss for - (30,064,713) (30,064,713)
the period
Closing 11 184,116,761 (42,054,689) 142,062,072
equity
For the
year ended
31 December
2022
(Audited)
Share Retained Total
Capital Deficit
GBP GBP GBP
Opening 184,116,761 (11,989,976) 172,126,785
equity
Loss for - (34,094,085) (34,094,085)
the year
Closing 11 184,116,761 (46,084,061) 138,032,700
equity
The accompanying notes form an integral part of these Interim Financial
Statements.
Unaudited Condensed Consolidated Statement of Cash Flows
For the period from 1 January 2023 to 30 June 2023
For the For the period from 1 Year to 31
period from 1 January 2022 to 30 June December 2022
January 2023 2022
to 30 June
2023
(Unaudited) (Unaudited) (Audited)
Notes GBP GBP GBP
Operating
activities
Total (15,301,815) (30,064,713) (34,094,085)
comprehensive
loss for the
period/year
Impairment of 1,985,000 - 3,000,000
financial
assets at
amortised
cost
Net losses on 4,842,331 29,678,240 30,405,675
financial
assets at
fair value
through
profit or
loss
Net gains on (171) - -
foreign
currency
Increase in 8 (227,807) (15,106) (318,069)
receivables
Increase in 9 135,747 100,442 146,648
provisions
Increase in 4,207,643 - -
finance
costs payable
(Decrease)/inc 10 (6,297) (38,236) 87,029
rease in
payables
Net cash used (4,365,369) (339,373) (772,802)
in
operating
activities
Investing
activities
Purchases of 5 (200,071,666) (106,010,773) (107,826,128)
equity
and bonds
Loans issued 5 (4,920,000) - (13,325,000)
Sale/maturity 5 59,736,320 78,554,187 81,353,360
of
equity and
bonds
Cash received 5 1,707,624 - 3,726,163
from
repayment of
loans
Purchase of (1,170) - -
office
equipment
Net cash used (143,548,892) (27,456,586) (36,071,605)
in
investing
activities
Financing
activities
Issue of 11 100,988,881 - -
Ordinary
Shares
Proceeds from 85,301,968 - -
loans
received
Repayment of (37,102,948) - -
loans
received
Net cash flow 149,187,901 - -
from
financing
activities
Increase/(decr 1,273,640 (27,795,959) (36,844,407)
ease) in
cash and cash
equivalents
Cash and cash 7,652,732 44,497,139 44,497,139
equivalents
at
beginning of
period/year
Exchange gain 171 - -
on cash
and cash
equivalents
Cash and cash 8,926,543 16,701,180 7,652,732
equivalents
at end of
period/year
The accompanying notes form an integral part of these Interim Financial
Statements.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the period from 1 January 2023 to 30 June 2023
1. General information
Castelnau Group Limited (the "Company") is a Guernsey domiciled closed-ended
investment company which was incorporated in Guernsey on 13 March 2020 under the
Companies (Guernsey) Law, 2008. The Company is classified as a registered fund
under the Protection of Investors (Bailiwick of Guernsey) Law 2020. Its
registered office address is PO Box 255, Les Banques, Trafalgar Court, St. Peter
Port, Guernsey GY1 3QL. The Company listed on the London Stock Exchange's
Specialist Fund Segment ("SFS") on 18 October 2021.
These Unaudited Condensed Consolidated Interim Financial Statements (the
"Interim Financial Statements") comprise the financial statements of Castelnau
Group Limited and Castelnau Group Services Limited (the "Subsidiary")
(incorporated on 14 June 2022), together referred to as the "Group".
The Group's principal activity is to seek to achieve a high rate of compound
return over the long term by carefully selecting investments using a thorough
and objective research process and paying a price which provides a material
margin of safety against permanent loss of capital, but also a favourable range
of outcomes.
Details of the Directors, Investment Manager and Advisers can be found in the
Group Information section.
The Interim Financial Statements of the Group are presented for the six months
ended 30 June 2023 and were authorised for issue by the Board on 13 September
2023.
2. Accounting policies
a. Statement of compliance
The Interim Financial Statements of the Company for the period 1 January 2023 to
30 June 2023 have been prepared in accordance with IAS 34, "Interim Financial
Reporting", together with applicable legal and regulatory requirements of the
Companies (Guernsey) Law, 2008 and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority. The Interim Financial
Statements do not include all the information and disclosure required in the
Annual Consolidated Financial Statements and should be read in conjunction with
the Annual Report and Audited Financial Statements for the year ended 31
December 2022, which were prepared in accordance with International Financial
Reporting Standards as issued by the IASB ("IFRS") and which received an
unqualified audit report.
These Interim Financial Statements are presented in Sterling ("GBP" or "£"),
which is also the Group's functional currency.
There are no accounting pronouncements which have become effective from 1
January 2023 that have a significant impact on the Group's Interim Financial
Statements.
b. Basis of preparation
The Interim Financial Statements have been prepared under the historical cost
basis, except for financial assets held at fair value through profit or loss
("FVTPL"). The principal accounting policies adopted in the preparation of these
Interim Financial Statements are consistent with the accounting policies stated
in note 3 of the Annual Consolidated Financial Statements for the year ended 31
December 2022. The preparation of these Interim Financial Statements is in
conformity with IAS 34, "Interim Financial Reporting", and requires the Company
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the Interim Financial Statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could materially differ from those estimates.
c. New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the Interim Financial
Statements are consistent with those followed in the preparation of the Group's
Annual Financial Statements for the year ended 31 December 2022, which were
prepared in accordance with IFRS. There has been no early adoption, by the
Group, of any other standard, interpretation or amendment that has been issued
but is not yet effective.
d. Basis of consolidation
The Group's Interim Financial Statements consolidate those of the parent company
and its subsidiary as of 30 June 2023. The reporting date for the Group is 31
December.
A subsidiary is an entity over which the Company exercises control. A subsidiary
is fully consolidated from the date on which control is transferred to the
Company. They are deconsolidated from the date that control ceases.
Control is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Specifically, the Group
controls an investee if, and only if, the Group has:
· Power over the investee (i.e., existing rights that give it the current
ability to direct the relevant activities of the investee),
· Exposure, or rights, to variable returns from its involvement with the
investee, and
· The ability to use its power over the investee to affect its returns.
All transactions and balances between Group companies are eliminated on
consolidation, including unrealised gains and losses on transactions between
Group companies. Where unrealised losses on intra-group asset sales are reversed
on consolidation, the underlying asset is also tested for impairment from a
Group perspective. Amounts reported in the financial statements of the
Subsidiary have been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Profit or loss and other comprehensive income of the Subsidiary is recognised
from the effective date of acquisition, or up to the effective date of disposal,
as applicable.
The main purpose and activities of the Subsidiary are providing services that
relate to the Group's investment activities and therefore the entity is required
to consolidate the Subsidiary.
3. Judgements, estimations or assumptions
The assessment of the Group as an investment entity is consistent with that made
in the Audited Financial Statements for the year ended 31 December 2022 and
therefore the Company has classified its investments at fair value through
profit or loss in the Statement of Financial Position, with the exception of the
subsidiary. An investment entity is still required to consolidate a subsidiary
where that subsidiary largely provides services that relate to the investment
entity's activities. The Subsidiary is discussed in note 2d.
All other estimates and judgements made by the Board of Directors are consistent
with those made in the Audited Financial Statements for the year ended 31
December 2022.
Going concern
The Directors believe that, having considered the Group's investment objective,
financial risk management and in view of the Group's holdings in cash and cash
equivalents, the liquidity of investments and the income deriving from those
investments, the Group has adequate financial resources and suitable management
arrangements in place to continue as a going concern for at least twelve months
from the date of approval of the Interim Financial Statements.
4. Interest in the Subsidiary
Set out below are the details of the Subsidiary held directly by the Group:
Name of Subsidiary Date of acquisition Domicile Ownership
Castelnau Group 14 June 2022 United Kingdom 100%
Services Limited
"CGSL"
Castelnau Group Limited acquired 50,000 ordinary shares in CGSL at a total cost
of £50,000. No goodwill, bargain purchase or other gains were recognised on the
acquisition of CGSL.
As at 30 June 2023, the net asset value of CGSL is made up of £76,467 which is
made up of assets of £230,266 and liabilities of £153,799.
The objective of CGSL is to provide skilled services to the Group's portfolio
companies. Additional background information can be found in the Directors'
Report.
5. Investments in unconsolidated subsidiaries/associates
For the
period
ended 30
June 2023
FVTPL FVTPL Amortised
cost
Bonds Equity Loans Total
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP GBP GBP GBP
INVESTMENTS
Opening - 163,111,446 12,960,632 176,072,078
portfolio
cost
Purchases - 200,071,666 4,920,000 204,991,666
at cost
Proceeds on - (59,736,320) (1,707,624) (61,443,944)
maturity/pri
ncipal
repayment
Realised - (13,590,140) (3,000,000) (16,590,140)
losses on
maturity
Cost - 289,856,652 13,173,008 303,029,660
Unrealised - 5,570,435 - 5,570,435
gains on
investments
Unrealised - (37,249,333) (1,985,000) (39,234,333)
losses on
investments/
impairment*
Fair - 258,177,754 11,188,008 269,365,762
value/carryi
ng amount
Realised - (13,590,140) (3,000,000) (16,590,140)
losses on
maturity
Movement in - (342,911) - (342,911)
unrealised
gains on
investments
Movement in - 9,090,720 1,015,000 10,105,720
unrealised
losses on
investments/
impairment*
Net losses - (4,842,331) (1,985,000) (6,827,331)
on
financial
assets
* £1,985,000 impairment of financial assets at amortised cost relates to a loan
facility with Showpiece Technologies Limited.
For the
year ended
31 December
2022
FVTPL FVTPL Amortised
cost
Bonds Equity Loans Total
(Audited) (Audited) (Audited) (Audited)
GBP GBP GBP GBP
INVESTMENTS
Opening - 136,639,291 3,361,795 140,001,086
portfolio
cost
Purchases 81,353,973 26,472,155 13,325,000 121,151,128
at cost
Proceeds on (81,353,360) - (3,726,163) (85,079,523)
maturity/pri
ncipal
repayment
Realised (613) - - (613)
losses on
maturity
Cost - 163,111,446 12,960,632 176,072,078
Unrealised - 5,913,346 - 5,913,346
gains on
investments
Unrealised - (46,340,053) (3,000,000) (49,340,053)
losses on
investments/
impairment*
Fair - 122,684,739 9,960,632 132,645,371
value/carryi
ng amount
Realised (613) - - (613)
losses on
maturity
Movement in - 5,143,839 - 5,143,839
unrealised
gains on
investments
Movement in - (35,548,901) (3,000,000) (38,548,901)
unrealised
losses on
investments/
impairment*
Net losses (613) (30,405,062) (3,000,000) (33,405,675)
on
financial
assets
* £3,000,000 impairment of financial assets at amortised cost relates to a loan
facility with Ocula Technologies Holdings Limited.
Name of investee Date of acquisition Domicile Ownership
company
Rawnet Limited 12 February 2021 United Kingdom 100.00%
Showpiece 12 November 2021 United Kingdom 80.00%
Technologies
Limited
Ocula 22 January 2021 United Kingdom 50.26%
Technologies
Holdings Limited
Silverwood Brands 13 October 2022 United Kingdom 1.77%
Plc
Phoenix SG 14 October 2021 Cayman Islands 63.78%
Limited
Cambium 14 October 2021 Cayman Islands 60.14%
International
Limited
Valderrama 14 April 2023 Channel Islands 66.48%
Limited
Loans
The Group had a loan facility of £3,000,000 with Ocula Technologies Holdings
Limited as borrower with termination date of 6 May 2024, and no interest
accruing or payable. On 3 March 2023, the loan was written off as part of a
funding round whereby Lloyds Banking Group acquired 14.54% of Ocula Technologies
Holdings Limited through the issue of new shares at a post-money valuation for
Ocula Technologies of £10 million, resulting in an increase in the value of the
Group's holding in Ocula from £700,367 pre-money to £4,925,247 post-money. The
Group held 50.26% of the issued share capital after the Lloyds Banking Group
investment.
The Group had a loan facility of £2,000,000 with the Cambium Group as borrower.
The termination date was 11 March 2023. On this date, the loan facility was
increased to £7,500,000 and the termination date was extended to 11 March 2025.
No interest was accrued or payable.
The Group had a loan facility for £1,500,000 dated 15 December 2022 with
Silverwood Brands Plc as borrower, with interest accruing at 15%. On 31 May
2023, the loan was converted into equity in Silverwood. The Group held 1.8% of
the equity in Silverwood following the conversion.
The Group has a loan facility for £4,399,999 dated 13 October 2022 with
Silverwood Brands Plc as borrower. The termination date is on the first
anniversary of the first drawdown. Interest is accrued at 15%.
The Group has a loan facility of £4,200,000 with Showpiece Technologies Limited
as borrower. During the period, an amount of £1,985,000 was recognised as
expected credit loss. The termination date is 19 November 2024. No interest
shall accrue or be payable.
The Group has a loan facility of £1,186,795 with Rawnet Limited as borrower. The
termination date is 16 February 2025. No interest shall accrue or be payable.
The utilised amounts on each facility are disclosed in the Portfolio Holdings
section.
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
Classification GBP GBP GBP
Level 1 16,720,065 73,559,200 69,315,063
Level 2 3,427,765 - 2,171,429
Level 3 238,029,924 49,011,792 51,198,247
Total non 258,177,754 122,570,992 122,684,739
-current
investments
held at
`FVTPL'
There were no transfers between levels during the period (31 December 2022:
Nil).
Measurement of fair value of investments for the period ended 30 June 2023
The same valuation methodology and process was deployed for the year ended 31
December 2022. Valderrama (acquired during the period), is valued at the
acquisition cost of Dignity Plc less transaction costs.
Quantitative information of significant unobservable inputs and sensitivity
analysis to significant changes in unobservable inputs within Level 3 hierarchy
The significant unobservable inputs used in fair value measurement categorised
within Level 3 of the fair value hierarchy together with a quantitative
sensitivity as at 30 June 2023 and 31 December 2022 are shown below:
As at 30
June
2023
(Unaudited)
Description Significant Estimate of the input Sensitivity of fair
unobservable value to changes in
input unobservable inputs
Investment Discount 15% An increase to
in rate 16%/(decrease to 14%)
Phoenix would
S.G. (decrease)/increase
fair value by (
-93%)/111%
Auction 65% An increase to
sales 70%/(decrease to 60%)
would
increase/(decrease)
fair value by 28%/(
-35%)
Stamp 15% An increase to
dealing 17%/(decrease to 13%)
sales would
increase/(decrease)
fair value by 4%/(-4%)
Coin 10% An increase to
dealing 12%/(decrease to 8%)
sales would
increase/(decrease)
fair value by 4%/(-4%)
Auction op 53% An increase to
margin 56%/(decrease to 50%)
would
increase/(decrease)
fair value by 7%/(-4%)
Stamp 5% An increase to
dealing 7%/(decrease to 3%)
op margin would
increase/(decrease)
fair value by 4%/(-4%)
Coin 15% An increase to
dealing 17%/(decrease to 13%)
op margin would
increase/(decrease)
fair value by 2%/(-4%)
Investment FY22-26 9% An increase to
in Compound 12%/(decrease to 3%)
Rawnet sales Growth would
rate increase/(decrease)
fair value by 64%/(
-50%)
Discount 15% An increase to
rate 18%/(decrease to 12%)
would
(decrease)/increase
fair value by (
-17%)/21%
Investment Discount 12.5% An increase to
in rate 13.5%/(decrease to
Cambium 11.5%) would
(decrease)/increase
fair value by (
-6.13%)/7.67%
Revenue 10% An increase to
growth rate 11%/(decrease to 9%)
would
increase/(decrease)
fair value by 7.67%/(
-7.36%)
Group 42% An increase to
product 44%/(decrease to 40%)
margin would
increase/(decrease)
fair value by 1.23%/(
-0.92%)
As at 31
December
2022
(Audited)
Description Significant Estimate of the input Sensitivity of fair
unobservable value to changes in
input unobservable inputs
Investment Discount 15% An increase to
in rate 16%/(decrease to 14%)
Phoenix would
S.G. (decrease)/increase
fair value by (
-9.52%)/11.34%
Sales rate 10% An increase to
exc 12%/(decrease to 8%)
auctions would
increase/(decrease)
fair value by 5.02%/(
-4.93%)
Sales rate 29% An increase to
auctions 31%/(decrease to 27%)
would
increase/(decrease)
fair value by 3.88%/(
-3.84%)
Coins 28% An increase to
margins 30%/(decrease to 26%)
exc would
auctions increase/(decrease)
fair value by 4.06%/(
-4.16%)
Coins 20% An increase to
auction 22%/(decrease to 18%)
sales would
margins increase/(decrease)
fair value by 4.11%/(
-4.20%)
Stamps 44% An increase to
margins exc 45%/(decrease to 43%)
auctions would
increase/(decrease)
fair value by 1.78%/(
-1.83%)
Stamp 27% An increase to
auction 29%/(decrease to 25%)
sales would
margins increase/(decrease)
fair value by 6.80%/(
-6.85%)
Investment FY22-26 19% An increase to
in Compound 24%/(decrease to 15%)
Rawnet sales Growth would
rate increase/(decrease)
fair value by 82%/(
-59%)
Discount 15% An increase to
rate 18%/(decrease to 12%)
would
(decrease)/increase
fair value by (
-19%)/24%
Investment Discount 12.5% An increase to
in rate 13.5%/(decrease to
Cambium 11.5%) would
(decrease)/increase
fair value by (
-6.76%)/7.65%
Revenue 12% An increase to
growth rate 13%/(decrease to 11%)
would
increase/(decrease)
fair value by 7.35%/(
-7.65%)
Group 42% An increase to
product 44%/(decrease to 40%)
margin would
increase/(decrease)
fair value by 0.88%/(
-1.18%)
6. Segment reporting
The Group had two reportable segments which are Castelnau Group Limited (an
investment company with an objective to compound Shareholders' capital at a
higher rate of return than the FTSE All-Share Total Return Index over the long
term) and Castelnau Group Services Limited (a company that provides marketing
and branding services). In identifying these operating segments, management
follows the objectives of Castelnau Group Limited and Castelnau Group Services
Limited.
Segment information for the period/year is as follows:
Castelnau Castelnau Total
Services Services Group 30 June 2023
Group Limited
Limited
Income
Consultancy - 575,174 575,174
services
Interest 391,594 - 391,594
income
Segment 391,594 575,174 966,768
income
Gross wages - (344,317) (344,317)
Other (2,144,358) (213,438) (2,357,796)
expenses
(2,144,358) (557,755) (2,702,113)
Finance costs (6,739,310) - (6,739,310)
Net gains on 171 - 171
foreign
currency
Net losses on (6,827,331) - (6,827,331)
financial
assets
Segment (15,319,234) 17,419 (15,301,815)
(loss)/profit
before tax
Taxation - - -
Segment (15,319,234) 17,419 (15,301,815)
comprehensive
(loss)/income
Segment 278,648,118 230,266 278,878,384
assets
Segment (55,004,819) (153,799) (55,158,618)
liabilities
Segment net 223,643,299 76,467 223,719,766
assets
Castelnau Castelnau Total
Services Services Group 31 December 2022
Group Limited
Limited
Income
Consultancy - 327,895 327,895
services
Interest 220,872 - 220,872
income
Segment 220,872 327,895 548,767
income
Gross wages - (299,141) (299,141)
Other (918,330) (16,817) (935,147)
expenses
(918,330) (315,958) (1,234,288)
Net losses on (33,405,675) - (33,405,675)
financial
assets
Segment (34,103,133) 11,937 (34,091,196)
(loss)/profit
before tax
Taxation - (2,889) (2,889)
Segment (34,103,133) 9,048 (34,094,085)
comprehensive
(loss)/income
Segment 140,462,845 192,360 140,655,205
assets
Segment (2,489,193) (133,312) (2,622,505)
liabilities
Segment net 137,973,652 59,048 138,032,700
assets
As at 30 June 2022, the Group was engaged in a single segment of business, being
Castelnau Group Limited.
7. Expenses
30 June 30 June 31
2023 2022 December
2022
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Administrator's fee 48,680 39,179 78,386
Audit fees 32,194 21,324 45,841
Change in fair value of contingent 135,747 140,510 146,648
consideration
Depositary fee 23,390 16,214 30,297
Directors' fee 67,500 67,500 135,000
Employee benefits* 344,317 - 299,141
Investment transaction charges - 2,904 2,904
Legal and professional fees 1,911,275 23,513 258,358
Operating 64,430 52,157 91,568
expenses
Sundry costs 57,641 53,986 115,848
Trustee fee 16,939 16,214 30,297
2,702,113 433,501 1,234,288
7.1 Employee benefits expense
Employee
benefits
30 June 30 June 31
2023 2022 December
2022
(Unaudited) (Unaudited) (Audited)
*Included in GBP GBP GBP
expenses
Wages and 298,106 - 281,692
salaries
Employers' 38,282 - 14,183
national
insurance
contributions
Pension costs 7,061 - 3,266
Employee 868 - -
healthcare
344,317 - 299,141
8. Trade and other receivables
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Prepayments 66,986 52,459 51,860
Income receivable 471,740 1,680 151,468
Trade receivables 46,183 - 153,774
584,909 54,139 357,102
9. Earn-out liability
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Earn-out liability - Non-current - 2,300,442 2,346,648
Earn-out liability - Current 2,482,395 - -
2,482,395 2,300,442 2,346,648
The earn-out liability is the fair value of the liability related to the
potential future payment of the earn-out of Rawnet. The total earn-out payment
is to be paid over three different periods, with a maximum payment of £903,311
at each payment date. Payments for all three years will be made within 5 days of
12 February 2024. The amount of the earn-out which will be paid is conditional
upon not only the performance of Rawnet itself, but also on the growth and
performance of its clients (other Castelnau portfolio companies). It is
considered likely that the earn-out will be paid in full based on expectations
as of the valuation date. While full payment of the first and second tranches is
effectively guaranteed, some uncertainty remains with regards to the final
tranche.
The earn-out liability has been revalued by discounting the probability-weighted
earn-out payments back to present value at a rate of 12%.
10. Other payables
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
GBP GBP
Other 132,642 150,592 156,199
accrued
expenses
Trade 111,308 - 93,923
payables
Social 25,610 - 25,735
security
and
other
taxes
269,560 150,592 275,857
11. Share capital
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
Allotted,
called up
and fully
paid
Ordinary
Shares* 318,627,777 183,996,058 183,996,058
Class B 1 1 1
Share**
Total 318,627,778 183,996,059 183,996,059
number of
shares in
issue
Allotted,
called up
and fully
paid
Ordinary
Shares GBP 285,105,641 184,116,760 184,116,760
Class B GBP 1 1 1
Share
Total GBP 285,105,642 184,116,761 184,116,761
Share
Capital
* No par value with one voting right per share
** Held by the Investment Manager with no voting rights
On 23 January 2023, the boards of directors of Dignity and Bidco, a newly formed
company indirectly owned or controlled by a consortium comprised joint offerors
SPWOne V Limited, the Group and PAMP, together with SPWOne V Limited and
Castelnau (the "Consortium"), announced that they had reached agreement on the
terms of a recommended cash offer to be made by Bidco to acquire the entire
issued and to be issued share capital of Dignity, other than the Dignity shares
already owned or controlled by the Group and PAMP (the "Announcement").
On 1 February 2023, the Group published a prospectus (the "Prospectus")
containing details of:
·a proposed issue of up to 133,052,656 new Ordinary Shares to be issued by the
Company in connection with the acquisition of Dignity Plc (the "Takeover
Offer");
·a proposed issue of up to 32,442,740 Ordinary Shares to be issued by the
Company pursuant to the Consortium Rollover;
·a placing of up to 154,000,000 Ordinary Shares at 75.02p (the "Issue Price")
per Ordinary Share (the "Placing"); and
·a placing programme for up to 300,000,000 Ordinary Shares and/or C Shares (the
"Placing Programme").
The Placing was intended to raise proceeds to assist with the funding of the
Company's cash funding obligation pursuant to the Takeover Offer and, if
sufficient, further investment in accordance with the Company's investment
policy.
On 5 May 2023, the Group announced that it had raised gross proceeds of £56.6
million through the placing of an aggregated of 75,461,138 new Ordinary Shares.
A further 26,727,844 Ordinary Shares were issued in connection with the Takeover
Offer to those Dignity Shareholders who opted for the Listed Share Alternative.
In addition, 32,442,737 Ordinary Shares were issued pursuant to the Consortium
Rollover as described in the Prospectus. The aggregate number of new Ordinary
Shares issued pursuant to the Placing, Takeover Offer and Consortium Rollover
was 134,631,719.
The Group did not purchase any of its own shares during the period ended 30 June
2023 or during the year ended 31 December 2022. No shares were cancelled during
either period/year.
No shares were held in Treasury or sold from Treasury during the period ended 30
June 2023 or during the year ended 31 December 2022.
12. Loss per ordinary share
Loss per share is based on the loss of £15,301,815 (30 June 2022: £30,064,713)
attributable to the weighted average of 229,369,179 (30 June 2022: 183,996,058)
Ordinary Shares in issue during the period.
There is no difference between the weighted average Ordinary diluted and
undiluted number of Shares. There is no difference between basic and diluted
loss per share as there are no diluted instruments.
13. Net Asset Value per ordinary share
The figure for Net Asset Value ("NAV") per Ordinary Share is based on
£223,719,766 (31 December 2022: £138,032,700) divided by 318,627,777 voting
Ordinary Shares in issue at 30 June 2023 (31 December 2022: 183,996,058).
The table below is a reconciliation between the NAV per Ordinary Share announced
on the London Stock Exchange and the NAV per Ordinary Share disclosed in these
Interim Financial Statements.
Net assets NAV per share
(Unaudited) (Unaudited)
GBP Pence
NAV as published on 30 June 2023 223,719,766 70.21
NAV as disclosed in these financial statements 223,719,766 70.21
14. Material agreements
Details of the management, administration and secretarial contracts can be found
in the Directors' Report of the Group's Annual Financial Statements for the year
ended 31 December 2022. There were no transactions with Directors other than
disclosed in note 15. As at 30 June 2023, there were no fees payable to PAMP.
a) Investment Manager and Alternative Investment Fund Manager ("AIFM")
The Investment Manager will not receive a management fee in respect of its
portfolio management services to the Group. The Investment Manager will become
entitled to a performance fee subject to meeting certain performance thresholds.
The Performance Fee is equal to one third of the outperformance of the Net Asset
Value total return (on an undiluted basis and excluding any accrual or payment
of the Performance Fee) after adjustment for inflows and outflows (such inflows
and outflows including, for the avoidance of doubt, tender payments and,
buybacks), with dividends reinvested, over the FTSE All-Share Total Return
Index, for each Performance Period (or, where no performance fee is payable in
respect of a financial year, in the period since a Performance Fee was last
payable). The Net Asset Value total return is based on the weighted number and
Net Asset Value of the Ordinary Shares in issue over the relevant Performance
Period.
During the period, performance fees of £Nil (30 June 2022: £Nil) were charged to
the Group, of which £Nil (31 December 2022: £Nil) remained payable at the end of
the period/year.
b) Administrator and Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
(the "Administrator") is entitled to: (i) an administration fee of 0.05% of the
Net Asset Value of the Group up to £200 million, 0.03% of the Net Asset Value of
the Group between £200 million and £400 million, and 0.02% of the Net Asset
Value of the Group over £400 million (subject to a minimum administration fee of
£60,000); (ii) a financial reporting fee of £10,000; (iii) a company secretarial
services fee of £10,000; and (iv) an additional fee of £2,000 while the
Administrator acts as the Group's nominated firm (as described in the FCA
Handbook), in each case per annum (exclusive of VAT). In addition, the
Administrator is entitled to certain other fees for ad hoc services rendered
from time to time. During the period, administration and secretarial fees of
£48,680 (30 June 2022: £39,179) were charged to the Group, of which £24,696 (31
December 2022: £35,206) remained payable at the end of the period/year.
c) Depositary
Northern Trust (Guernsey) Limited (the "Depositary") is entitled to: (i) a
custody fee of 0.02% of the Net Asset Value of the Group (subject to a minimum
of £20,000); and (ii) a depositary services fee of 0.02% of the Net Asset Value
of the Group up to £200 million, falling to 0.01% of the Net Asset Value of the
Group over £200 million (subject to a minimum depositary services fee of
£20,000), in each case per annum (exclusive of VAT). In addition, the Depositary
is entitled to certain other fees for ad hoc services rendered from time to
time. During the period, depositary fees of £23,390 (30 June 2022: £16,214) were
charged to the Group, of which £8,238 (31 December 2022: £7,043) remained
payable at the end of the period/year.
d) Registrar
The Group utilises the services of Link Market Services (Guernsey) Limited as
Registrar in relation to the transfer and settlement of Ordinary Shares. Under
the terms of the Registrar Agreement, the Registrar is entitled to a fee
calculated on the basis of the number of Shareholders and the number of
transfers processed (exclusive of VAT). In addition, the Registrar is entitled
to certain other fees for ad hoc services rendered from time to time. During the
period, registrar fees of £18,806 (30 June 2022: £7,223) were charged to the
Group, of which £8,136 was prepaid (31 December 2022: £11,613) at the end of the
period/year.
15. Related parties
Directors' remuneration & expenses
The Directors' fees for the period/year are as follows:
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Joanne Peacegood 20,000 20,000 40,000
Andrew Whittaker 17,500 17,500 35,000
Joanna Duquemin Nicolle 15,000 15,000 30,000
David Stevenson 15,000 15,000 30,000
Graham Shircore - - -
67,500 67,500 135,000
No Directors' fees were outstanding as at 30 June 2023 (31 December 2022: £Nil).
Shares held by related parties
The number of Ordinary Shares held by the Directors were as follows:
30 June 2023 30 June 2022 31 December
2022
(Unaudited) (Unaudited) (Audited)
Number of Number of Number of
Ordinary Ordinary Ordinary
shares Shares Shares
Joanne 10,000 10,000 10,000
Peacegood
Andrew 40,000 40,000 40,000
Whittaker
Joanna 75,000 75,000 75,000
Duquemin
Nicolle
David - - -
Stevenson
Graham - - -
Shircore
Shares held by related parties
As at 30 June 2023, the Investment Manager held no Ordinary Shares and 1 Class B
Share (31 December 2022: no Ordinary Shares and 1 Class B Share) of the Issued
Share Capital. Partners and employees of the Investment Manager held 49,830
Ordinary Shares at 30 June 2023 (31 December 2022: no Ordinary Shares).
Other
Gary Channon is CEO and CIO of Phoenix Asset Management Partners Limited, the
Investment Manager. Mr Channon was CEO of Dignity which was a portfolio holding
before the acquisition. Mr Channon became CEO of Dignity Plc on 22 April 2021
and his final day as CEO was 9 June 2022, when he also stepped down from the
Dignity Plc Board following the Group's Annual General Meeting.
During the period, Bidco, a newly formed indirect wholly-owned subsidiary of
Valderrama, a joint venture between SPWOne and the Group, made an offer to
acquire the issued and to be issued share capital of Dignity Plc (the
"Acquisition"). The cash consideration payable by Bidco to Dignity Shareholders
under the terms of the Acquisition was financed by equity capital invested by
SPWOne and the Group in Valderrama, which was made available by Valderrama to
Bidco pursuant to a series of intercompany loans, via Valderrama subsidiaries.
The Group and SPWOne are currently Valderrama's sole controlling shareholders,
with the company having been incorporated for the purposes of a 50:50 joint
venture between the Group and SPWOne, pursuant to which the Group and SPWOne
agreed to invest in Valderrama for the purposes of making investments in line
with the Group's investment objectives and investment policy, namely the
acquisition of Dignity Plc. Steven Tatters, who is COO of Phoenix Asset
Management Partners Limited, the Investment Manager, was appointed as a Director
of Valderrama on 25 August 2022, and Director of Bidco and all other Valderrama
subsidiaries on 13 October 2022. More details of the Valderrama structure can be
found in the Offer Document:
https://www.castelnaugroup.com/application/files/2816/7639/1442/Offer_document_FI
NAL_14-Feb-23.pdf
Following the acquisition of Dignity Plc, Mr. Tatters was appointed as a
Director of Dignity Group Holdings Limited on 25 May 2023 and as a Director of
Dignity Funerals Limited on 12 June 2023.
Graham Shircore is a Director of the Group and an employee of Phoenix Asset
Management Partners Limited. Mr. Shircore was also appointed as a Director of
Dignity Group Holdings Limited on 25 May 2023.
Lorraine Smyth continues to be a Director of the Subsidiary. Ms. Smyth is an
employee of Phoenix Asset Management Partners Limited, the Investment Manager.
Ms. Smyth is currently also a Director of Rawnet which is a portfolio holding.
Roderick Manzie is a Director of the Subsidiary. Mr. Manzie is also a Director
of some of the portfolio holding companies. Mr. Manzie became a Director of
Stanley Gibbons Group Plc on 11 July 2023, a Director of Showpiece Technologies
Limited on 10 August 2023 and has been a Director of Ocula Technologies Holdings
Limited, and Ocula Technologies Limited since 16 August 2022.
A number of other Phoenix Asset Management Partners Limited employees hold
Directorships at certain Group portfolio companies. The Directorships are held
in the normal course of business and enable Phoenix Asset Management Partners
Limited to be represented on the Boards of the portfolio companies.
The Company has entered into an agreement with Ocula, the "Ocula Castelnau
Software Services Agreement", to provide services to some of the Company's
portfolio companies. Ocula charged the Company £400,000 for the 12 months to 30
June 2023. As of 1 July 2023, the annual Ocula fee has increased to £450,000 per
annum.
On 20 January 2023, the Company entered into an unsecured term loan facility of
£49,000,000 with Phoenix UK Fund Limited as lender. During the period,
£25,301,968 was drawn down and repaid from this facility and the facility was
subsequently terminated on 19 May 2023. Interest on the facility accrued at 15%
per annum and a total of £2,531,667 in interest was accrued and paid in the
period. £Nil remains payable at 30 June 2023.
On 20 January 2023, the Company entered into an unsecured term loan facility of
£60,000,000 made available through Phoenix UK Fund Limited, with Morgan Stanley
Bank N.A. as original lender. As at 30 June 2023, total drawdowns on the
facility were £48,199,020. Interest is accrued at SONIA+7.5% per annum. During
the period, loan facility fees of £1,020,000 were charged, and interest accrued
of £3,187,643, both of which remains payable at 30 June 2023.
Total interest and facility fees charged on the loan facilities with Phoenix UK
Fund Limited for the period was £6,739,310.
16. Financial risk management
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, interest rate risk and other price risk), credit risk,
liquidity risk and capital risk.
These Interim Financial Statements do not include the financial risk management
information and disclosures required in the Annual Financial Statements; they
should be read in conjunction with the Group's Annual Financial Statements for
the year ended 31 December 2022.
17. Post period end events
These Interim Financial Statements were approved for issuance by the Board on 13
September 2023. Subsequent events have been evaluated to this date.
Subsequent to the period end and up to the date of signing of the Unaudited
Condensed Consolidated Interim Financial Statements, the following events took
place:
On 19 July 2023, further to the issue of new ordinary shares in connection with
the acquisition of Dignity Plc as announced on 5 May 2023, the Company issued a
further 7,479 Ordinary Shares in connection with the Listed Share Alternative
pursuant to the Statutory Squeeze Out. Following this, the Company's issued
share capital was 318,635,256 Ordinary Shares with one voting right per share,
and 1 Class B Share held by the Investment Manager with no voting rights.
As of 21 August 2023, Graham Shircore has advised of his intention to step down
from the Board and the Investment Manager has advised the Company's Directors of
its intention to imminently nominate a replacement for Graham which will be
considered by the Company's Nomination Committee and by the Board at a board
meeting to be held directly after the Annual General Meeting.
Alternative Performance Measures (Unaudited)
In accordance with ESMA Guidelines on Alternative Performance Measures ("APMs"),
the Board has considered what APMs are included in the Interim Report and
Interim Financial Statements which require further clarification. APMs are
defined as a financial measure of historical or future financial performance,
financial position or cash flows, other than a financial measure defined or
specified in the applicable financial reporting framework. The APMs included in
the interim report are unaudited and outside the scope of IFRS.
Premium/Discount
If the share price is higher than the NAV per share, the shares are said to be
trading at a premium. The size of the premium is calculated by subtracting the
share price at period end of 75.50p (31 December 2022: 69.00p) from the NAV per
share at period end of 70.21p (31 December 2022: 75.02p) and is usually
expressed as a percentage of the NAV per share of 7.53% (31 December 2022:
discount of 8.02%). If the share price of an investment company is lower than
the NAV per share, the shares are said to be trading at a discount.
Ongoing Charges
The ongoing charges represent the Group's operational and recurring expenses,
excluding finance costs, expressed as a percentage of the average of the monthly
net assets during the period. The Board continues to be conscious of expenses
and works hard to maintain a sensible balance between good quality service and
cost.
Period ended Year ended 31 December 2022
30 June 2023
(Unaudited) (Audited)
GBP GBP
Average NAV 172,827,968 150,013,156
for the
period/year
(A)
Operating 1,068,014 786,345
expenses
(annualised)
(B)
Ongoing 0.62% 0.52%
charges
(B/A)
NAV Total Return
NAV total return is the percentage increase or decrease in NAV, inclusive of
dividends paid and reinvested, in the reporting period/year. It is calculated by
adding the increase or decrease in NAV per share with the dividend per share
when paid and reinvested back into the NAV, and dividing it by the NAV per share
at the start of the year.
Period ended Year ended 31 December 2022
30 June 2023
(Unaudited) (Audited)
pence pence
Opening 75.02 93.55
NAV per
share
(A)
Closing 70.21 75.02
NAV per
share
Decrease (4.81) (18.53)
in NAV
per
share
(B)
NAV (19.81%)
total (6.41%)
return
(B/A)
NAV per Ordinary Share
NAV per share is calculated by dividing the total Net Asset Value of
£223,719,766 (31 December 2022: £138,032,700) by the number of Ordinary Shares
at the end of the period of 318,627,777 Ordinary Shares (31 December 2022:
183,996,058). This produces a NAV per share of 70.21p (31 December 2022:
75.02p), which was a decrease of 6.41% (31 December 2022: decrease of 19.81%).
Group Information
Directors - Parent (all non-executive)Financial Adviser and Broker
Joanne Peacegood(Chair)Liberum Capital Limited
Andrew Whittaker 25 Ropemaker Street
Joanna Duquemin Nicolle London
David StevensonEC2Y 9LY
Graham Shircore
Registered OfficeSolicitors to the Group as to English law
PO Box 255Gowling WLG (UK) LLP
Trafalgar Court4 More London Riverside
Les BanquesLondon
St. Peter PortSE1 2AU
Guernsey
Channel Islands
GY1 3QL
AIFM and Investment ManagerSolicitors to the Group as to Guernsey law
Phoenix Asset Management Partners LimitedCarey Olsen (Guernsey) LLP
64-66 Glentham Road Carey House
London SW13 9JJLes Banques
Guernsey
Channel Islands
GY1 4BZ
Administrator and Company SecretaryIndependent Auditor
Northern Trust International Fund Grant Thornton Limited
Administration Services (Guernsey) Limited St. James Place
PO Box 255St. James Street
Trafalgar CourtSt. Peter Port
Les BanquesGuernsey
St. Peter PortGY1 2NZ
Guernsey
Channel Islands
GY1 3QL
Custodian and Depositary
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands
GY1 3DA
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
This information was brought to you by Cision http://news.cision.com
END
(END) Dow Jones Newswires
September 14, 2023 02:00 ET (06:00 GMT)
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