REG-Castelnau Group Ltd: Half-year Report
07/09/2022 07:15
Castelnau Group Limited
Interim Report and Unaudited Condensed Consolidated Interim Financial
Statements
For the period from 1 January 2022 to 30 June 2022
LEI: 213800PED8RFUBMK1T64
(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 2022
to 30 June 2022. The Report will shortly be available from the Company’s
website: https://www.castelnaugroup.com
Summary Information
The Group
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.
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), together referred to as the "Group".
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
The total number of Ordinary Shares in the Group in issue immediately
following Admission was 177,552,719.
The existing clients of Phoenix Asset Management Partners Ltd (“PAMP”)
made up 70.1% of the issued shares, the Offer for Subscription and the Placing
Programme in aggregate made up 15.8% and the investment from SPWOne 14.1%. As
at 30 June 2022, the number of Ordinary Shares in issue was 183,996,059 (31
December 2021: 183,996,059).
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 they
include 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 £30,064,713 (30 June
2021: Nil).
The benchmark is the FTSE All-Share Index (total return). The Group’s
performance since PAMP was appointed is shown below:
Period ended 30 June 2022 Year ended 31 December 2021 Change/return
pence pence %
NAV per Ordinary Share 77.21 93.55 (17.47)
Ordinary Share price 87.50 105.50 (17.06)
Benchmark return (4.60)
The Ongoing Charge Ratio was as follows:
Period ended 30 June 2022 Year ended 31 December 2021
% %
Ongoing charge ratio* 0.36 0.32
* 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 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 13.33%
premium to the NAV per Ordinary Share as at 30 June 2022 (31 December 2021:
12.77%).
Chair’s Statement
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 by using the Investment Manager's toolbox of modern techniques to
transform old economy businesses into valuable long-term winners. The total
number of Ordinary Shares in issue at the end of the period was 183,996,059.
The Company did not issue any new shares in the period.
Significant portfolio company share price moves of note in the half year
include Dignity Plc (“Dignity”) down 32% and Hornby Plc (“Hornby”)
down 28%.
Performance Review:
The NAV total return for the period was -17.5%, versus the benchmark FTSE
All-Share Index (Total Return) of -4.6%, equating to a -12.9% relative
underperformance. The main contributors to the underperformance were Dignity
Plc and Hornby Plc. Dignity Plc represents 33% of the portfolio of investments
and had a -32% price movement. Hornby Plc. represents 22% of the portfolio of
investments and had a -28% price movement. This underperformance is naturally
disappointing however given the investment strategy of the Group over the long
term, and the strategic initiatives that are taking place within the portfolio
(some of which are detailed in the Investment Managers Report), the Board and
the Investment Manager are hopeful that when the various initiatives start to
come through in the results, the share prices will start to rerate.
The cash position decreased over the period. This was in part due to a
follow-on investment into the Cambium Group, whose position increased by
£15.7 million via a rights issue on 1 June. The capital raise allows the
Cambium Group to pay down debt taken out during the COVID-19 pandemic,
purchase a new business and develop a baby list product.
The CGL share price traded at a premium to NAV throughout the period. The
Board, along with its Advisers, and the Investment Manager, monitor the
premium or discount on an ongoing basis.
Annual General Meeting (“AGM”)
The Company’s AGM will be held at 1:00pm on 6 September 2022 at the offices
of Northern Trust International Fund Administration Services (Guernsey)
Limited, Trafalgar Court, Les Banques, St Peter Port, Guernsey, Channel
Islands, GY1 3QL. Should a Shareholder have a question that they would like to
raise at the AGM, the Board requests that they ask the question in advance of
the AGM by sending it by email to Castelnau_group@ntrs.com. All questions
raised, together with the relevant answer, will be placed on the Company’s
website at www.castelnaugroup.com.
Joanne Peacegood
Chair
6 September 2022
Holdings as at 30 June 2022
Company Sector Holding Cost Valuation % of net assets
Dignity plc Specialised Consumer Services 10,361,149 70,675,707 41,859,042 29.5%
Hornby plc Leisure Products 92,337,876 39,050,634 27,701,363 19.5%
WLS International Ltd* Specialised Consumer Services 19,274 22,619,471 24,127,842 17.0%
Phoenix S. G. Ltd Speciality Retail 8,405 20,474,303 18,825,870 13.3%
Rawnet Ltd IT Services 2,750,000 5,459,933 6,050,000 4.3%
Rawnet Ltd IT Services - Loan 1,186,795 1,186,795 1,186,795 0.8%
UK Treasury Bill 0.00% Treasury bills 4,000,000 3,999,173 3,998,795 2.8%
Ocula Technologies Holdings Ltd IT Services - Loan 2,500,000 2,500,000 2,500,000 1.8%
Ocula Technologies Holdings Ltd IT Services 8,000 80 80 0.0%
Showpiece Technologies Ltd Internet Retail - Loan 1,500,000 1,500,000 1,500,000 1.1%
Showpiece Technologies Ltd Internet Retail 8,000 8,000 8,000 0.0%
Total Holdings 127,757,787 90.1%
Other net assets 14,304,285 9.9%
Net assets 142,062,072 100.0%
* WLS International Ltd is the holding company for Cambium Group.
Portfolio Analysis
54.45% of total holdings were listed companies, 42.42% were unlisted and the
remaining 3.13% was a UK treasury bill. All companies are UK businesses.
The Alternative Investment Fund Manager (“AIFM”) and Investment Manager
Report
The NAV total return for the period was -17.5%, versus the benchmark FTSE
All-Share Index (Total Return) of -4.6%, that’s a -12.9% relative
underperformance.
Portfolio Review:
Dignity Plc (“Dignity”)
In April, Dignity announced that Andrew Judd had stepped down from the Board
with immediate effect.
In May, Dignity provided investors with a trading update for the first quarter
to 26 March, indicating that underlying deaths for the quarter were 19% lower
at 166,000. Revenues followed suit at -22% and underlying operating profit for
the Group fell from £27m to £9m in the quarter. The company also publicly
committed to support those families that had been impacted by Safe Hands
Funeral Plans entering administration. The full article can be found here;
First quarter trading update 11/05/2022 | Dignity Plc
(https://www.dignityplc.co.uk/investors/news/press-releases/2022-05-11/2078/first-quarter-trading-update/).
Also in May, Kate Davison was announced as the new CEO of Dignity effective
from 10 June 2022, and that Gary Channon would step down from the board on the
same date.
Dignity hosted its AGM in June, and a replay of the AGM presentation and Q&A
is available on the Dignity Investor website.
Later in June, the FCA confirmed that it was “intending to authorise"
Dignity Funerals Limited as a regulated entity under the new regulatory regime
for pre-paid funeral plans.
Hornby Plc (“Hornby”)
In April, Hornby issued a scheduled trading update for its 4th quarter to 31
March 2022 in which the Group reported sales as being "very encouraging",
margins "in line with budget" and a return to profitability for the year.
Supply chains were said to "continue to be challenging".
Hornby announced FY22 results to 31 March 2022 in June, with revenue of
£53.7m, underlying PBT of £3.2m and net cash of £3.8m. The CEO's report
cited "gaining momentum" in Digital with a short-term ambition to double
Digital sales in the next two financial years. Trading in April and May was
cited as being "in line with expectations". The full article can be found
here; Annual Financial Report - 07:00:03 16 Jun 2022 - HRN News article |
London Stock Exchange
(https://www.londonstockexchange.com/news-article/HRN/annual-financial-report/15497658).
Stanley Gibbons Ltd. (“Stanley Gibbons”)
In April, Stanley Gibbons issued a trading update for the year to 31 March
2022. Trading in H2 was said to improve across all areas of the business and
revenue for the year was expected to be c. £12m. The full article can be
found here:
https://www.londonstockexchange.com/news-article/SGI/trading-statement-and-corporate-update/15414693.
On 22 July, the company posted a circular to shareholders proposing the
cancellation of admission of the ordinary shares in the company to trading on
AIM. The independent directors listened carefully to the drawbacks identified
by Phoenix Asset Management Partners (on behalf of Phoenix S.G.) of retaining
the company's listing on AIM. These included the following:
* the continued listing on AIM is unlikely to provide the company with
significantly wider or more cost-effective access to capital than the funding
options it already has from the majority shareholder in the near to mid-term;
* the considerable cost, management time and the legal and regulatory burden
associated with maintaining the company's admission to trading on AIM are
disproportionate to the benefits to the company;
* there are negative operational influences on the business which come about
directly as a result of being listed, something which is accentuated by
operating in an industry where the vast majority of the company's peers are
privately owned. The company's peers also have far greater insight into its
strategy, operational activities and future plans than the company has into
theirs, a factor which reduces the company's relative competitiveness;
* there is also a limited free float and liquidity in the ordinary shares with
the consequence that the AIM listing of the ordinary shares does not offer
investors the opportunity to trade in meaningful volumes or with frequency
within an active market.
The full article can be found here:
https://www.londonstockexchange.com/news-article/SGI/proposed-cancellation-of-trading-on-aim/15551710.
The Cambium Group (“Cambium”)
At the end of May, Cambium successfully raised £17.7m in a rights issue of
which c. £12.6m was used to pay off all outstanding debt and interest. Post
the transaction, Castelnau’s stake in Cambium has increased to 60%.
Rawnet Ltd. (“Rawnet”)
Rawnet experienced a strong start to 2022 regarding client activity and run
rate. This momentum has continued in Q2. The momentum in the external sales
pipeline and increased Castelnau Group work has understandably buoyed
management who have raised their internal growth projections for the business.
At a granular level, Rawnet's work with Hornby Plc. is bearing much fruit and
looks to be a clear validation of its inclusion in the Castelnau Group - that
of an enabler of technology productivity. Of course, Hornby has played its
part too with its new-found openness to e-commerce which must be recognised
and applauded. Rawnet is also deeply embedded in Stanley Gibbons and most
especially, Dignity.
Ocula Technologies Ltd. (“Ocula”)
Note: the below extract is taken from the Castelnau Q2 quarterly report:
13 August marks the first anniversary of Ocula's incorporation as a business
entity. In that short time and from a standing start, the Ocula team has
already amassed a growing pool of intellectual property (IP) and is slowly
forging its own corporate identity and culture. The business is beginning to
see some early signs of open-market validation too.
The second quarter saw a continuation of investment with two notable new
hires: a VP of Operations (ex Dunnhumby) and a Head of Sales. The next step
and highest priority for the team is monetisation of that IP, i.e., converting
client leads into Recurring Revenue.
Last quarter we mentioned that Ocula was "in early discussions with VCs to
increase market awareness and fund the necessary investment ahead of its
revenue ramp".
For context: of the £5.2m of loans extended by Castelnau to Group companies
as of 30 June, £2.5m is issued to Ocula. We don’t know the timing or
magnitude of any new external financing that Ocula might secure (whether later
this year or next year). It is possible (and we are prepared) that Castelnau
could be asked to increase its capital contribution to Ocula in the second
half of this year.
This should not detract from our long-term enthusiasm for what this business
can deliver to its shareholders. As Nick Sleep might put it: we should
'Focus on the Destination'. We believe the opportunity for Ocula in the retail
analytics market with its differentiated solutions is substantial. Equally,
our opportunity as its owner to deploy Ocula's 'Actionable AI' IP into our own
companies at Castelnau is an exciting prospect in terms of the value it can
create”.
Showpiece Technologies Ltd. (“Showpiece”)
Showpiece, our nascent digital collectibles business (80% owned by Castelnau)
continues to demonstrate momentum. On 2 June, Showpiece successfully completed
its first 'Marketplace' (i.e., secondary) transaction - a piece of the Edward
VII penny.
Just after the Q2 quarter end on 5 July, Showpiece added Andy Warhol's
Reigning Queens masterpiece to its collection of assets available to its
customers for shared ownership. This great addition brings to three (after the
1c Magenta and the Edward VII Penny) the number of Showpiece assets now
available via fractional ownership. The hunt for rare collectible assets (at
the right price) continues - as does the disruptive quest to democratise
access to them. For those of you interested in this area, we recommend
subscribing to the Showpiece blog https://blog.showpiece.com/which is highly
informative and entertaining.
Lorraine Smyth
Partner; Phoenix Asset Management Partners Ltd.
6 September 2022
Statement from the CIO of the Investment Manager
All our businesses are making positive progress. On the people front, we’ve
added two CEOs (Dignity and Collectibles) as well as key leadership
appointments across the Group. Structural activity has seen us tidy up the
post-COVID balance sheet of Cambium and delist Stanley Gibbons. All the
portfolio businesses have new innovations and growth initiatives in the
pipeline. Across the Group, the help from Castelnau, whether directly or
through intercompany collaborations or by tapping into the wider Phoenix
network, is bearing fruit and demonstrating the benefits of our approach. In
time you should expect to see this in value creation and trading results.
The market and economic backdrop are opening up interesting opportunities for
us and we will say more when we are ready to act.
The NAV of the Company is largely a reflection of the share prices of its
portfolio companies rather than their inherent value. Stock markets are weak,
and prices are down, but in our estimation the Group is more valuable now than
it was at the beginning of the year. If we are right, then in time it will
show. Rising values and falling prices combine to make, we believe, excellent
future investment returns. We were optimistic when we floated so you can
imagine we are even more optimistic now.
The full report can be found here:
https://www.castelnaugroup.com/investor-relations/reports-factsheets.
Gary Channon
CEO and CIO of Phoenix
6 September 2022
Board Members
Biographical details of the Directors are as follows:
Joanne Peacegood (aged 44) (Independent Chair)
Joanne has over 22 years of experience in the asset management sector across a
range of asset classes. Joanne is a Non-Executive Director across a number of
sectors / asset classes including Listed, Private Equity, Debt, Utilities,
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 Chair of the Guernsey
Investment & Fund Association Executive Committee, is a member of the
Association of Investment Companies’ (AIC) Channel Islands Committee and
also sits on the Guernsey International Business Association Council. Joanne
resides in Guernsey.
Andrew Whittaker (aged 49) (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 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 52) (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 The Chartered Institute of
Secretaries and Administrators in 1994.
Lorraine Smyth (aged 40) (Non-Independent non-executive Director)
Lorraine has over 15 years’ experience working in the finance industry. This
includes working in the fund and investment accounting sectors for large banks
in Dublin and London. She also worked as a client operations manager for a
software vendor and has been involved in multiple accounting software
implementation projects.
Lorraine represents the Investment Manager on the boards of the Group, Rawnet
and Ocula. Lorraine holds a Bachelor (Hons) degree in Economics, from
University College Dublin. On 14 June 2022, she was appointed as director of
Castelnau Group Services Limited (the “Subsidiary”).
David Stevenson (aged 56) (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.
Directors’ Report
The Directors are responsible for preparing the Interim Report and the Interim
Consolidated Financial Statements in accordance with applicable law and
regulations. The Directors consider that the Investment Manager’s Review of
this Interim Report and 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 Investment Manager’s Review together constitute the
Directors’ Report of the Group for the six months ended 30 June 2022. The
outlook for the Group for the remaining six months of the year ending 31
December 2022 is discussed in the Investment Manager’s Review. Details of
the investments held at the period end and the structure of the portfolio at
the period end are provided in the Portfolio Analysis section.
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 £127,757,787 as at 30 June
2022. The portfolio represents a substantial portion of 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 2022 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.
Some of the Group’s investments (including certain of the Target Assets)
will include securities and other interests that are very thinly traded, for
which no market exists or which are restricted as to their transferability
under applicable laws and/or the relevant investment documentation. Whilst the
valuations of the Group’s investments will be in compliance with IFRS, some
of the Group’s investments will be difficult to value accurately. Such
valuations may be conducted on an infrequent basis, are subject to a range of
uncertainties and will involve the Investment Manager and/or the Audit
Committee exercising judgement. Valuations made by or on behalf of the Group
may be made, in part, on valuation information provided by the Investment
Manager and/or third parties (including entities in which the Group may
directly or indirectly invest). The Group and the Investment Manager may not
be in a position to confirm the completeness, genuineness or accuracy of such
information or data. There can be no guarantee that the basis of calculation
of the value of the Group’s investments used in the valuation process will
reflect the actual value achievable on realisation of those investments. This
may lead to volatility in the valuation of the Group’s portfolio and, as a
result, volatility in the price of the Shares.
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.
The Group’s investments in private assets will not be liquid, which may
limit its ability to realise investments at short notice, at a fair value or
at all and may be subject to risks.
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 were 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
The other risks faced by the Group, together with the approach taken by the
Board towards them, have been summarised below:
COVID-19
Consideration of the impact of COVID-19 in the market and in regard to all
assets, but in particular the assets that constitute a higher risk due to
closure of these types of businesses or challenges to operate due to resource
constraints. The Investment Manager is in constant communication with the
Directors of each investment and has mitigants in place for each investment.
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 2021, 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 15 December 2022.
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
was considered by the Board. Having been provided with assurance from each of
the key service providers during the year ended 31 December 2021, the Board
was satisfied that no such breach had occurred. The Board’s next review will
be at the Management Engagement Committee meeting on 15 December 2022.
Geopolitical risk
Russia’s invasion of Ukraine is a new emerging risk to the global economy.
The resulting imposition of international sanctions on Russia will have wider
global effect on the supply and prices of certain commodities and consequently
on inflation and general economic growth of the global economy and will have
the potential to delay the global economic recovery from COVID-19.
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 13.
The Board are also considered related parties. Further details of the
Board’s remuneration and shareholdings can be found in note 14.
Acquisition of the Subsidiary
On 14 June 2022 Castelnau Group Limited purchased 50,000 ordinary shares, 100%
holding in Castelnau Group Services Limited (the “Subsidiary” or
“CGSL”), a UK company. Castelnau Group Limited would like to employ people
via CGSL. Key skillsets would be acquired within CGSL to help develop,
transform and create value within the Portfolio Companies. Employees would be
deployed to the Portfolio Companies as and when required. In the short term,
this would be a marketing strategist and a skilled branding person. Both
employees would be deployed to Dignity Plc. for the next 12-18 months to work
on developing the branding and marketing strategy for over 250 funeral
businesses.
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.
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.
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:
1. 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 2022 to 30 June
2022 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
1. 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 2022 to 30 June 2022 and
that have materially affected the financial position or performance of the
Group during that period as included in note 13 and any changes in the related
party transactions described in the Annual Report and Audited Financial
Statements for the year ended 31 December 2021 that could do so.
By order of the Board,
Joanne Peacegood
Andrew Whittaker
Director
Director
6 September 2022
Unaudited Condensed Consolidated Statement of Comprehensive Income
For the period from 1 January 2022 to 30 June 2022
For the period from 1 January 2022 to 30 June 2022 For the period from 1 January 2021 to 30 June 2021
Total Total
(Unaudited) (Unaudited)
Notes GBP GBP
Income 47,028 -
Expenses 6 (433,501) -
(386,473) -
Net losses on financial assets at fair value through profit or loss 5 (29,678,240) -
Loss before tax (30,064,713) -
Tax - -
Total comprehensive loss for the period (30,064,713) -
Pence Pence
Loss per share – Basic and diluted 11 (16.34) -
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 2022
30 June 2022 31 December 2021
Notes GBP GBP
(Unaudited) (Audited)
NON-CURRENT ASSETS
Investments- bonds 5 3,998,795 -
Investments- equity 5 118,572,197 126,617,646
Investments- loans 5 5,186,795 3,361,795
127,757,787 129,979,441
CURRENT ASSETS
Trade and other receivables 7 54,139 39,033
Cash and cash equivalents 16,701,180 44,497,139
16,755,319 44,536,172
TOTAL ASSETS 144,513,106 174,515,613
CURRENT LIABILITIES
Earn-out liability 8 - 916,667
Other payables 9 150,592 188,828
150,592 1,105,495
NON-CURRENT LIABILITIES
Earn-out liability 8 2,300,442 1,283,333
TOTAL LIABILITIES 2,451,034 2,388,828
NET ASSETS 142,062,072 172,126,785
EQUITY
Share capital 10 184,116,761 184,116,761
Retained deficit (42,054,689) (11,989,976)
TOTAL EQUITY 142,062,072 172,126,785
Number of Ordinary Shares in issue 10 183,996,059 183,996,059
NAV per Ordinary Share (pence) 12 77.21 93.55
The Interim Financial Statements were approved and authorised for issue by the
Board of Directors on 6 September 2022 and signed on its behalf by:
Joanne
Peacegood
Andrew Whittaker
Director
Director
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 2022 to 30 June 2022
For the period from 1 January 2022 to 30 June 2022 (Unaudited)
Note Share Capital Retained Deficit Total
GBP GBP GBP
Opening equity at 1 January 2022 10 184,116,761 (11,989,976) 172,126,785
Loss for the period - (30,064,713) (30,064,713)
Closing equity at 30 June 2022 184,116,761 (42,054,689) 142,062,072
For the period from 1 January 2021 to 30 June 2021 (Unaudited)
Share Capital Retained Earnings Total
GBP GBP GBP
Opening equity at 1 January 2021 1 - 1
Loss for the year - - -
Issue of new Ordinary Shares - - -
Closing equity at 30 June 2021 1 - 1
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 2022 to 30 June 2022
For the period from 1 January 2022 to 30 June 2022 For the period from 1 January 2021 to 30 June 2021
(Unaudited) (Unaudited)
Notes GBP GBP
Operating activities
Loss before tax (30,064,713) -
Net losses on financial assets at fair value through profit or loss 29,678,240 -
Increase in receivables 7 (15,106) (1)
Increase in provisions 8 100,442 -
Decrease in payables 9 (38,236) -
Net cash used in operating activities (339,373) (1)
Investing activities
Purchase of investments 5 (106,010,773) -
Sale/maturity of investments 5 78,554,187 -
Net cash used in investing activities (27,456,586) -
Financing activities
Issue of Ordinary Shares 10 - 1
Net cash flow from financing activities - 1
Decrease in cash and cash equivalents (27,795,959) -
Cash and cash equivalents at beginning of period 44,497,139 -
Cash and cash equivalents at end of period 16,701,180 -
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 2022 to 30 June 2022
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 (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 Group has no employees as at 30 June 2022.
The Interim Financial Statements of the Group are presented for the six months
ended 30 June 2022 and were authorised for issue by the Board on 6 September
2022.
2. Accounting policies
a. Statement of compliance
The Interim Financial Statements of the Company for the period 1 January 2022
to 30 June 2022 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 Audited Consolidated Financial Statements
and should be read in conjunction with the Annual Report and Financial
Statements for the year ended 31 December 2021.
These Interim Financial Statements are presented in Sterling ("GBP or £"),
which is also the Group's functional currency.
The Interim Financial Statements should be read in conjunction with the Annual
Financial Statements for the year ended 31 December 2021 which were prepared
in accordance with International Financial Reporting Standards as issued by
the IASB (“IFRS”) and which received an unqualified audit report.
There are no accounting pronouncements which have become effective from 1
January 2022 that have a significant impact on the Group’s Condensed
Consolidated 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 2021. The preparation of these Interim Financial Statements
are 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 2021,
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 Financial Statements consolidate those of the parent company and
its Subsidiary as of 30 June 2022. The reporting date for the Group is 31
December.
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 2021
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 2021.
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 Services Limited “CGSL” 14 June 2022 United Kingdom 100%
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 2022 the net asset value of CGSL is made up of £50,000 equity
receivable from the parent company. The amount will be transferred when CGSL
bank accounts are opened.
The objective of CGSL is to provide skilled services to the Group’s
Portfolio Companies. Additional background information can be found in the
Director’s Report.
5. Investments in unconsolidated subsidiaries/associates
Name of investee company Date of acquisition Domicile Ownership
Rawnet Limited 12 February 2021 United Kingdom 100%
Ocula Technologies Holdings Limited 22 January 2021 United Kingdom 78%
Showpiece Technologies Limited 12 November 2021 United Kingdom 80%
WLS International Limited 14 October 2021 Cayman Islands 19%
Phoenix SG Limited 14 October 2021 Cayman Islands 55%
Bonds Equity Loans Total
30 June 2022 30 June 2022 30 June 2022 30 June 2022
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP GBP GBP GBP
INVESTMENTS
Opening cost - 136,639,291 3,361,795 140,001,086
Purchases at cost 81,353,973 21,631,800 3,025,000 106,010,773
Proceeds on maturity/principal repayment (77,354,187) - (1,200,000) (78,554,187)
Realised losses on maturity (613) - - (613)
Cost 3,999,173 158,271,091 5,186,795 167,457,059
Unrealised gains on investments - 2,115,475 - 2,115,475
Unrealised losses on investments (378) (41,814,369) - (41,814,747)
Fair value 3,998,795 118,572,197 5,186,795 127,757,787
Realised losses on maturity (613) - - (613)
Movement in unrealised gains on investments - 1,345,968 - 1,345,968
Movement in unrealised losses on investments (378) (31,023,217) - (31,023,595)
Net losses on financial assets (991) (29,677,249) - (29,678,240)
Bonds Equity Loans Total
31 December 2021 31 December 2021 31 December 2021 31 December 2021
GBP GBP GBP GBP
(Audited) (Audited) (Audited) (Audited)
INVESTMENTS
Opening portfolio cost - - - -
Purchases at cost - 136,639,291 3,675,000 140,314,291
Principal repayment - - (313,205) (313,205)
- 136,639,291 3,361,795 140,001,086
Unrealised gains on investments - 769,507 - 769,507
Unrealised losses on investments - (10,791,152) - (10,791,152)
Fair value - 126,617,646 3,361,795 129,979,441
Movement in unrealised gains on investments - 769,507 - 769,507
Movement in unrealised losses on investments - (10,791,152) - (10,791,152)
Net losses on financial assets - (10,021,645) - (10,021,645)
The transaction charges on the purchase and sale of investments during the
current period were £2,904 (31 December 2021: 14,134) included in the
Statement of Comprehensive Income.
Name of investee company Date of acquisition Domicile Ownership
Rawnet Limited 12 February 2021 United Kingdom 100%
Ocula Technologies Holdings Limited 22 January 2021 United Kingdom 78%
Showpiece Technologies Limited 12 November 2021 United Kingdom 80%
WLS International Limited 14 October 2021 Cayman Islands 19%
Phoenix SG Limited 14 October 2021 Cayman Islands 55%
Loans
The Group has a loan facility of £2,500,000 with Ocula Technologies Holdings
Limited as borrower. The termination date is 6 May 2024. No interest shall
accrue or be payable.
The Group has a loan facility of £1,500,000 with Showpiece Technologies
Limited as borrower. An extension of £1 million to the original loan
agreement was made on 27 April 2022. 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 on the Portfolio Report.
30 June 2022 31 December 2021
(Unaudited) (Audited)
Classification GBP GBP
Level 1 73,559,200 98,409,862
Level 2 - -
Level 3 49,011,792 28,207,784
Total non-current investments held at ‘FVTPL’ 122,570,992 126,617,646
There were no transfers between levels during the period (31 December2021:
None).
Measurement of fair value of investments
The same valuation methodology and process was deployed for the year ended 31
December 2021.
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 2022 and 31 December 2021 are shown below:
As at 30 June 2022 (Unaudited)
Description Significant unobservable input Estimate of the input Sensitivity of fair Value to changes in unobservable inputs
Investment in Phoenix S.G. (valuation of the rights to receivables in relation to the sale of stamp inventories)* Monthly sales rate -0.5% An increase to -0.4%/(decrease to -0.6%) would (decrease)/increase fair value by (-1.00%)/1.00%
Discount rate 5% An increase to 6%/(decrease to 4%) would (decrease)/increase fair value by (-4.38%)/4.66%
Sales premium to SGG valuation 95% An increase to 105%/(decrease to 85%) would increase/(decrease) fair value by 0.45%/(-0.45%)
Investment in Rawnet FY22-26 Compound sales Growth rate 18% An increase to 23%/(decrease to 13%) would increase/(decrease) fair value by 20%/(-18%)
Investment in WLS International Discount rate Growth rate 12.5% An increase to 13.5%/(decrease to 11.5%) would(decrease)/increase fair value by (-2.01%)/2.01%
As at 31 December 2021 (Audited)
Description Significant unobservable input Estimate of the input Sensitivity of fair Value to changes in unobservable inputs
Investment in Phoenix S.G. (valuation of the rights to receivables in relation to the sale of stamp inventories)* Monthly sales rate -1.0% An increase to -0.9%/(decrease to -1.1%) would (decrease)/increase fair value by (-1.52%)/1.43%
Discount rate 5% An increase to 6%/(decrease to 4%) would (decrease)/increase fair value by (-4.19%)/4.46%
Sales premium to SGG valuation 98% An increase to 108%/(decrease to 88%) would increase/(decrease) fair value by 2.10%/(-1.72%)
Investment in Rawnet FY22-26 Compound sales Growth rate 18% An increase to 23%/(decrease to 13%) would increase/(decrease) fair value by 20%/(-18%)
Investment in WLS International Discount rate Growth rate 15% An increase to 16%/(decrease to 14%) would(decrease)/increase fair value by (-3.38%)/3.38%
* The sensitivity analysis for the stamp inventories has been calculated on a
weighted average basis.
6. Expenses
30 June 2022 30 June 2021
(Unaudited) (Unaudited)
GBP GBP
Administrator's fee 39,179 -
Audit fees 21,324 -
Directors' fee 67,500 -
Legal and professional fees 23,513 -
Investment transaction charges 2,904 -
Change in fair value of contingent consideration 140,510 -
Operating expenses 52,157 -
Sundry costs 53,986 -
Depositary fee 16,214 -
Trustee fee 16,214 -
433,501 -
7. Trade and other receivables
30 June 2022 31 December 2021
(Unaudited) (Audited)
GBP GBP
Prepayments 52,459 39,032
Income receivable 1,680 -
Other receivables - 1
54,139 39,033
8. Earn-out liability
30 June 2022 31 December 2021
(Unaudited) (Audited)
GBP GBP
Earn-out liability - Non current 2,300,442 1,283,333
Earn-out liability - Current - 916,667
2,300,442 2,200,000
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 tranche is effectively guaranteed, some uncertainty remains with regards
to the second two tranches.
The earn-out liability has been revalued by discounting the
probability-weighted earn-out payments back to present value at a rate of 12%.
9. Other payables
30 June 2022 31 December 2021
(Unaudited) (Audited)
GBP GBP
Other accrued expenses 150,592 188,828
150,592 188,828
10. Share capital
30 June 2022 31 December 2021
(Unaudited) (Audited)
Allotted, called up and fully paid Number 183,996,059 183,996,059
Ordinary Shares GBP 184,116,761 184,116,761
The Group did not purchase any of its own shares during the period ended 30
June 2022 or during the year ended 31 December 2021. No shares were cancelled
during either period/year.
No shares were held in Treasury or sold from Treasury during the period ended
30 June 2022 or during the year ended 31 December 2021.
11. Loss per ordinary share
Loss per share is based on the loss of £30,064,713 (30 June 2021: Nil)
attributable to the weighted average of 183,996,059 (30 June 2021:1) 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
earnings per share as there are no diluted instruments.
12. Net assets per ordinary share
The figure for net assets per Ordinary Share is based on £142,062,072 (2021:
£172,126,785) divided by 183,996,059 (2021: 183,996,059) voting Ordinary
Shares in issue at 31 December 2021.
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) (Audited)
GBP pence
NAV as published on 30 June 2022 142,062,072 77.21
NAV as disclosed in these financial statements 142,062,072 77.21
13. Material agreements
Details of the management, administration and secretarial contracts can be
found in the Directors’ Report of the annual Financial Statements for the
year ended 31 December 2021. There were no transactions with directors other
than disclosed in note 14. As at 30 June 2022, 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 2021: Nil) were charged to
the Group, of which Nil (31 December 2021: Nil) remained payable at the end of
the period/year.
b) Administrator and Secretary
Northern Trust International Fund Administration Services (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
£39,179 (30 June 2021: Nil) were charged to the Group, of which £58,897 (31
December 2021: £18,361) remained payable at the end of the period/year.
c) 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 £7,223 (30 June 2021: Nil) were charged to the
Group, of which £7,223 (31 December 2021: £4,219) remained payable at the
end of the period/year.
d) 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 £16,214 (30
June 2021: Nil) were charged to the Group, of which £5,219 (31 December 2021:
£7,344) remained payable at the end of the period/year.
14. Related parties
Directors’ remuneration & expenses
The Directors’ fees for the period are as follows;
30 June 2022 30 June 2021
(Unaudited) (Unaudited)
GBP GBP
Joanne Peacegood 20,000 -
Andrew Whittaker 17,500 -
Joanna Duquemin Nicolle 15,000 -
David Stevenson 15,000 -
Lorraine Smyth - -
67,500 -
No Directors’ fees were outstanding as at 30 June 2022 (31 December 2021:
£Nil).
Shares held by related parties
The number of Ordinary Shares held by the Directors were as follows;
30 June 2022 31 December 2021
(Unaudited) (Audited)
Number of ordinary shares Number of ordinary shares
Joanne Peacegood 10,000 10,000
Andrew Whittaker 40,000 40,000
Joanna Duquemin Nicolle 75,000 75,000
David Stevenson - -
Lorraine Smyth - -
As at 30 June 2022, the Investment Manager held no Shares (31 December 2021:
no Shares) of the Issued Share Capital. Partners and employees of the
Investment Manager held no Shares (31 December 2021: no Shares).
Gary Channon is CEO and CIO of Phoenix Asset Management Partners Limited, the
Investment Manager. Mr Channon was CEO of Dignity which is a portfolio
holding. Mr Channon became CEO on 22 April 2021 and his final day as CEO of
Dignity Plc was 9 June 2022, when he also stepped down from the Board
following the Group's Annual General Meeting.
Lorraine Smyth is a Director of the Group and its Subsidiary and an employee
of Phoenix Asset Management Partners Limited, the Investment Manager. Ms.
Smyth is currently a Director of Rawnet and Ocula which are portfolio
holdings.
15. Financial risk management
The Group’s activities expose it to a variety of financial risks: Market
risk (including price risk, reinvestment risk, interest rate risk and foreign
currency 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 2021.
16. Post period end events
These Interim Financial Statements were approved for issuance by the Board on
6 September 2022. Subsequent events have been evaluated to this date.
The Group subscribed for additional ordinary shares in Phoenix S.G. Ltd for an
aggregate consideration of £2,500,000 to be paid in cash at a share price of
the 30 June 2022 NAV for trade date of 20 July 2022.
On 15 August 2022 the loan agreement between the Group and Showpiece
Technologies was amended to increase the principal amount to £4,200,000.
On 30 August 2022, the Board of The Stanley Gibbons Group plc (“Stanley
Gibbons”) announced that at the Extraordinary General Meeting held earlier
that day, the special resolution to approve the proposed cancellation of the
admission of the Stanley Gibbon’s Ordinary Shares to trading on AIM
("Cancellation") was duly passed. As a result, the last day of dealings in
Stanley Gibbons Shares on AIM is Tuesday 6 September 2022 and the Cancellation
will become effective at 7.00 a.m. on Wednesday 7 September 2022, subject to a
dealing notice, as defined in the AIM Rules for Companies, being issued. For
more information, please refer to the Stanley Gibbons announcement:
https://www.londonstockexchange.com/news-article/SGI/result-of-egm-and-update-on-cancellation/15606587.
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.
Discount/Premium
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. The size of the discount is
calculated by subtracting the share price at period end (87.50p) from the NAV
per share at period end (77.21p) and is usually expressed as a percentage of
the NAV per share (13.33%). If the share price is higher than the NAV per
share, the shares are said to be trading at a premium.
Ongoing Charges
The ongoing charges represent the Group’s operating 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.
Average NAV for the period (A) 163,486,205
Operating expenses (annualised) (B) 587,592
Ongoing charges (B/A) 0.36%
NAV Total Return
NAV total return is the percentage increase or decrease in NAV, inclusive of
dividends paid and reinvested, in the reporting period. 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 period.
Group Information
Directors - Parent (all non-executive) Joanne Peacegood (Chair) Andrew Whittaker Joanna Duquemin Nicolle Lorraine Smyth David Stevenson Financial Adviser Liberum Capital Limited 25 Ropemaker Street London EC2Y 9LY
Registered Office PO Box 255 Trafalgar Court Les Banques St. Peter Port Guernsey Channel Islands GY1 3QL Solicitors to the Group as to English law Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU
AIFM and Investment Manager Phoenix Asset Management Partners Limited 64-66 Glentham Road London SW13 9JJ Solicitors to the Group as to Guernsey law Carey Olsen (Guernsey) LLP Carey House Les Banques Guernsey Channel Islands GY1 4BZ
Administrator and Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited PO Box 255 Trafalgar Court Les Banques St. Peter Port Guernsey Channel Islands GY1 3QL Independent Auditor Grant Thornton Limited P O Box 313 Lefebvre House Lefebvre Street St Peter Port Guernsey GY1 3TF
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
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