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Annual Report and
Audited Financial Statements
For the year ended 31 December 2022
Strategic Report
Summary Information ............................................................................................................. 3
Chair’s Statement ...................................................................................................................... 5
Holdings ..........................................................................................................................................7
Portfolio Analysis .........................................................................................................................7
Investment Manager’s Report ...............................................................................................8
Statement from the CIO of the Investment Manager .............................................. 13
Governance
Board Members .........................................................................................................................17
Directors’ Report ...................................................................................................................... 20
Directors’ Remuneration Report ....................................................................................... 35
Statement of Directors’ Responsibilities ........................................................................ 36
Audit Committee Report ...................................................................................................... 38
Independent Auditor’s Report ............................................................................................ 41
Financial Statements
Consolidated Statement of Comprehensive Income ..............................................47
Consolidated Statement of Financial Position ........................................................... 48
Consolidated Statement of Changes in Equity .......................................................... 49
Consolidated Statement of Cash Flows ....................................................................... 50
Notes to the Consolidated Financial Statements ...................................................... 51
Alternative Performance Measures (Unaudited) .......................................................73
Appendix (Unaudited) ...........................................................................................................74
Group Information ...................................................................................................................75
Contents.
We strive to compound
shareholders’ capital at
high rates of return.
Castelnau Group was formed by Phoenix Asset Management Partners
Limited in 2020. The listed structure provides the manager with a
permanent capital vehicle with which to make long-term investments
and acquisitions of all structures and sizes.
Castelnau Group
Strategic Report
Castelnau Group Ltd Annual Report 2022
1
Our Mission.
At Castelnau Group we strive to compound
shareholders’ capital at high rates of return.
The higher the better.
We aim to do this by collecting businesses which possess a
competitive advantage, at attractive prices.
Our structure helps us clear away short-term pressures that inhibit
value creation and nurture rational long-term capital allocation
frameworks in our holdings.
Strategic Report
The growth potential of
Castelnau’s traditional
businesses and enabling
companies is hugely
exciting.
Castelnau Group Ltd Annual Report 2022
2
Castelnau Group Ltd Annual Report 2022
3
Strategic Report
Summary
Information
The Group
Castelnau Group Limited (the “Company” 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 Annual Report and Audited Consolidated Financial
Statements (the “Financial Statements” or the
“Consolidated 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
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 (the “Investment Manager” or “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 31 December 2022, the number of Ordinary
Shares in issue was 183,996,059 (31 December 2021:
183,996,059).
Castelnau Group Ltd Annual Report 2022
4
Strategic Report
Results and Performance
The results for the year are set out in the Consolidated
Statement of Comprehensive Income. Retained
earnings remain negative and they include realised
and unrealised gains and losses on the Group’s
assets. Expenses have been accrued in line with the
accounting policies during the year.
The Group’s loss before tax for the year amounted to
£34,091,196 (31 December 2021: £11,989,976).
The benchmark is the FTSE All-Share Index (total
return). The Group’s performance since PAMP was
appointed is shown below:
Year ended
31 December
2022
pence
Year ended
31 December
2021
pence
Change/
return
%
NAV per Ordinary Share* 75.02 93.55 (19.81)
Ordinary Share price 69.00 105.50 (34.60)
Benchmark return 0.30
The Ongoing Charge Ratio was as follows:
Year ended
31 December
2022
%
Year ended
31 December
2021
%
Ongoing charge ratio* 0.52 0.32
* These are Alternative Performance Measures (“APMs”)
Alternative Performance Measures
(“AP Ms” )
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 on page 73.
Discount/premium to NAV
The discount/premium of the Ordinary Share price
to NAV per Ordinary Share is closely monitored by
the Board. The Ordinary Share price closed at an
8.02% discount to the NAV per Ordinary Share as at 31
December 2022 (31December 2021: premium of 12.77%).
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.
Summary Information - continued
Castelnau Group Ltd Annual Report 2022
5
Strategic Report
Chair’s
Statement
Performance Review
This report covers a twelve-month period from
1January 2022 to 31 December 2022.
The total number of Ordinary Shares in the Company
at the period end date was 183,996,059.
The NAV total return for the year ended 31 December
2022, was -19.81%, and the share price return
was -34.6%, versus the benchmark FTSE All Share
Total Return Index of +0.3%, that’s a -20.1% relative
underperformance of the NAV.
The main contributors to the underperformance were
Dignity Plc, Phoenix S.G. Ltd and Hornby Plc. Dignity
Plc represents 31.2% of the portfolio and had a -29.7%
price movement. Hornby Plc. represents 19.1% of the
portfolio and had a -31.3% price movement. Additional
commentary around the underperformance on both
stocks can be found further down in the Investment
Managers report.
Reflective of the changing business and wider economic
environment, the discount rate used for valuing our
privately held investments was also increased , in line
with the wider market.
31 December
2022
31 December
2021
Cambium International Ltd. -
Core business
12.5% 12.5%
Cambium International Ltd. -
*Little List business
25% N/A
Phoenix S.G. Ltd 12% 15%
Rawnet Ltd. 15% 15%
* Little List is a new strategy
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 premium or
discount on an ongoing basis.
Whilst we are naturally disappointed with the NAV total
return and the share price return, this is a long-term
investment and it is still early days for the Company.
We continue to have confidence in the strategic
actions taken by the Investment Manager and look
forward to seeing this reflected in the NAV total return
and the share price return over time.
Castelnau Group Share Price & NAV per Share – 31st December 2022
Past performance is not a reliable indicator of future performance.
Source: Bloomberg, Phoenix Asset Management Partners Limited
Castelnau Group Ltd Annual Report 2022
6
Strategic Report
Outlook
Although while the short-term performance is
disappointing, the outlook for the future is very
promising. New CEOs were hired by three of the
businesses in 2022: Dignity Plc, Hornby Plc and Stanley
Gibbons Plc. The Castelnau team at Phoenix were
heavily involved in the recruitment process and hiring
these individuals is a fundamental step forward for all
three businesses.
2022 was a year of high activity between the Castelnau
team at Phoenix and the management teams of
the portfolio companies. Much foundational work
is going on behind the scenes to offer support and
practical help with business strategy, capital allocation,
leadership, and culture.
The announcement of the offer to acquire Dignity
Plc. is of great significance to the future success of
the Company. The partnership with SPWOne and
the industry expertise Sir Peter Wood and his team
bring to the table are key components in Dignity’s
transformation. We are very excited by this proposition
and the future value creation from this investment. It is
sure to keep everyone very busy over the next 12months.
Documents relating to this transaction can be
foundhere.
Significant opportunities lie ahead for Castelnau
Group. We have a clear vision and strategy for growth
and believe that we are well-positioned going into
2023. We remain committed to delivering value to our
shareholders, and are confident that the outlook for the
Company is very promising.
If you would like to get in touch directly with the
Chair of the Board; Joanne Peacegood; please email
chair@castelnaugroup.com.
Joanne Peacegood
Chair
3 April 2023
Chair’s Statement - continued
Castelnau Group Ltd Annual Report 2022
7
Strategic Report
Company Sector Holding Cost Valuation
% of net
assets
31 Dec 2022
% of net
assets
31 Dec 2021
Dignityplc Specialised Consumer
Services - Equity
10,361,149 70,675,707 42,998,768 31.2%* 35.2%
Hornby plc Leisure Products - Equity 92,337,876 39,050,634 26,316,295 19.1%* 22.0%
Cambium
InternationalLtd**
Specialised Consumer
Services - Equity
19,274 22,619,471 20,486,698 14.8% 2.3%
Phoenix S. G. Ltd Speciality Retail - Equity 9,522 22,974,303 19,178,302 13.9% 10.5%
Rawnet Ltd IT Services - Equity 284,173 2,750,000 6,600,000 4.8% 3.5%
Silverwood Brands plc Specialised Consumer
Services - Loan
5,900,000 5,900,000 5,900,000 4.3%* –
Ocula Technologies
Holdings Ltd
IT Services - Equity 9,326 700,367 4,925,247 3.6% 0.0%
Showpiece
TechnologiesLtd
Internet Retail - Loan 2,700,000 2,700,000 2,700,000 2.0% 0.4%
Silverwood Brands plc Specialised Consumer
Services - Equity
2,285,715 1,600,001 2,171,429 1.6%* –
Rawnet Ltd IT Services - Loan 860,632 860,632 860,632 0.6% 0.6%
Cambium
International Ltd
Specialised Consumer
Services - Loan
500,000 500,000 500,000 0.4% –
Ocula Technologies
Holdings Ltd
IT Services - Loan 3,000,000 3,000,000 – 0.0% 0.9%
Showpiece
TechnologiesLtd
Internet Retail - Equity 8,000 8,000 8,000 0.0% 0.0%
Total Holdings 132,645,371 96.1% 75.4%
Other net assets 5,387,329 3.9% 24.6%
Net assets 138,032,700 100.0% 100.0%
Portfolio Analysis
* 56.2% of total net assets were listed companies with 51.9% in equity and 4.3% in loans. 40.1% were unlisted companies with 37.1% in equity and 3% in
loans. All companies are UK businesses.
** On 30 September 2022, WLS International Ltd changed its name to Cambium International Ltd.
Refer to note 5 for additional disclosure on the valuation of the holdings.
Holdings as at
31 December 2022
Castelnau Group Ltd Annual Report 2022
8
Strategic Report
The NAV relative to the ASX index for the period was
-20.2%. Although the performance is disappointing, it
has been a challenging year for our industry. We have
continued to look for opportunities to create long term
value for shareholders.
Castelnau Group Track Record Performance
Nav return
%
Share price
total
return
**
%
All share
index
**
%
Relative
NAVto ASX
%
2022 (to 31 December) (19.8) (34.6) 0.3 (20.2)
2021* (6.5) 5.5 2.5 (9.0)
Cumulative* (25.0) (31.0) 2.8 27.8
* 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 31 December 2021:
Net Asset Value Table
£million
Portfolio Weight
%
Share Price/
valuation
moves
Asset 2022 2022 2021 2022 2021 2022
Dignity 43 60.5 31.2% 35.2% (29.7)%
Hornby 26.3 37.9 19.1% 22.0% (31.3)%
Cambium Group 20.5 4 14.8% 2.3% (1.5)%
Phoenix Stanely Gibbons 19.2 18.2 13.9% 10.5% (15.6)%
Rawnet 6.6 6.1 4.8% 3.5% 9.1%
Ocula 0.9 0.0 3.6% 0.0% 33.1%
Silverwood 2.2 0.0 1.6% 0.0% 13.6%
Showpiece 0.01 0.0 0.01% 0.0% 0.00%
Since the launch of CGL on the 18 October 2021, the
portfolio has remained relatively unchanged. The only
additional investment was made in Silverwood Brands
plc (“Silverwood”) for 0.7 GBP per share, where the
equity position represents 1.6% of the total NAV and the
loan position less than 5%. Additional information on
this investment can be found later in this report.
In addition to the investment in Silverwood mentioned
above, the Company topped up its position in The
Cambium Group by £15.7 million and in Ocula by
£0.7million. The Cambium Group capital raise allowed
the company to clear its debt taken out to survive the
Covid pandemic, provide funds for a new Baby List
business, a stake in Hostology (an events software
management business) and for further investment in
the business. In December 2022, the Company valued
the original loan of £3 million to Ocula Technologies
at £nil. Post year end the loan was written off. This
facilitated Ocula securing Lloyds as their first external
shareholder, which is a significant step forward for
Ocula. Less than two years since its formation, it values
Ocula on a post new money basis of £10 million. The
initial loan from the Company was in effect equity-like
and post the Lloyds investment the Company owns
49% for a total investment of £3.7 million.
The additional investment in Ocula enabled the
Company to secure external investors as part of a
funding round that started in the summer of last year.
This has proven very fruitful and we are glad to report
that on the 6 March 2023, Ocula confirmed that it has
received new investment from Lloyds Banking Group
and their Fintech Investment Team. Lloyds Banking
Investment Manager’s Report
Castelnau Group Ltd Annual Report 2022
9
Strategic Report
Group’s investment is in the form of new equity
capital and completes the funding round previously
announced in November 2022.
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 year 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 Group
has assessed the credit risk of the loans and has
concluded that they have not deteriorated significantly
in credit quality since initial recognition.
The NAV per share for the year decreased by 19.81%
and underperformed the benchmark which was up
0.3%. The main contributors to the underperformance
in the year were Dignity Plc, (31.2% of the total portfolio),
Phoenix SG Ltd (13.9% of the total portfolio) and Hornby
Plc (19.1% of the portfolio).
Dignity Plc
During the course of the year, Dignity continued
to implement the new strategy as set out in the
company’s 2021 annual report. The company is going
through significant transformation in operations,
culture, customer acquisition and proposition, and
capital structure. These included becoming fully
FCAregulated, a marked change in its pricing strategy
and staff shortages particularly through the middle
and latter part of the year. As part of the new strategy,
the company experienced a significant amount of
operational change which impacted its profitability.
Following the end of the year, Castelnau was part of
a consortium, alongside PAMP and SPWOne, an entity
controlled by Sir Peter Wood, which made a bid for
Dignity. Details below:
On the 1 of February, the Company announced
publication of a prospectus outlining the details of the
bid for Dignity. Gary Channon, CIO of Phoenix Asset
Management Partners Ltd commented as follows:
“Buying Dignity is a game changer for Castelnau. It
brings together all the best of what Castelnau is about
in a transaction that will change our scale and add
considerably to upside value. We expect great things
of this partnership with Sir Peter Wood and his team,
and today’s announced capital raise will allow existing
and new investors to participate in it.”
Details from the prospectus can be found below.
Articles relating to the deal can be found here on the
Company’s website.
“On 23 January 2023, the boards of directors of
Dignity plc (“Dignity”) and Yellow (SPC) Bidco Limited
(“Bidco”), a newly formed company indirectly
owned or controlled by a consortium comprised
joint offerors SPWOne V Limited, Castelnau Group
Limited (“Castelnau” or the “Company”) and Phoenix
Asset Management Partners Limited (“PAMP” and,
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
Castelnau and PAMP (the “Announcement”).
Castelnau Group Ltd Annual Report 2022
10
Strategic Report
Further to the Announcement, Castelnau has today
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 is 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.
The subsequent Placing Programme allows the
Company to issue up to a further 300 million Ordinary
Shares and/or C Shares (together the “Shares”),
inaggregate, in the twelve months from the date
ofthe Prospectus”.
Hornby Plc
With the help of Castelnau, Hornby have now
appointed a new CEO, Olly Raeburn, who joined the
group on 23 January 2023. Much of the foundational
work has been put in place at Hornby over the last
few years and we believe that Olly’s experience in
marketing, customer communication and strategy is
ideally suited to take Hornby forward.
Hornby released a half yearly trading statement
(March 2022 - September 2022) on 24 of November
2022 where it reported group revenue for the six
months to September 2022 of £22.4 million which
was 3% higher than the prior year (2021: £21.8 million).
The gross margin for the period was 48% (2021: 46%),
a slight increase reflecting the product/channel mix
in the first half of 2022 compared to prior year. The
operating loss before exceptional costs (including
IFRS 16) for the six months to September 2022 was
£2.6 million compared to a loss of £0.3 million for the
same period last year. This is due to the continued
high cost of shipping containers, increased overheads
as mentioned above and a non-cash share-based
payment of £0.5 million. Hornby Group loss before tax
was £2.9 million (2021: loss of £0.7 million). The basic
loss per share was 1.29p (2021: loss per share of 0.45p).
Direct sales via Hornby’s websites during the half-year
ended 30 September 2022 were 54% higher than those
achieved in the prior year.
We believe that the long-term potential of both of
these businesses is as strong as ever and the actions
that have been taken over the past twelve months
have improved the likelihood that this potential will be
realised.
Phoenix SG Ltd
The investment was down 15.6% in the period. The
Group’s trading performance and operations have
slowly improved since the COVID-19 pandemic as a
result of the increased mobility and effective sales
effort. As of March 2022, the revenue of the Group was
up by 22% year-on-year, with a decreased total loss of
£1.7million for the financial period ending 2022.
Philatelic and numismatic sales were lower than
expected for the year. This was exacerbated in philately
by higher than anticipated sales of old Great Britain
stock at lower margins. In publications, the magazines,
album & accessories margins were ahead of budget
but cancelled out by the lower margins achieved on
catalogues. Overheads increased due to unbudgeted
legal costs around the pension negotiations.
The shares of Stanley Gibbons PLC were delisted in
September 2022, the same month which saw the arrival
of the new CEO, Tom Pickford. Tom is currently working on
a new vision and strategy for the group. In the short term,
he believes there is a great opportunity in auctions. The
company is actively pursuing this opportunity with the
hire of a Head of Auctions, who started in March 2023.
Investment Manager’s Report - continued
Castelnau Group Ltd Annual Report 2022
11
Strategic Report
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. Find out more about the brands here.
The Group aims to assist the Silverwood team achieve
their long-term goals through giving access to a
broader network of expertise and the decades of
experience in effective capital allocation.
Rawnet
Rawnet is headquartered in Ascot, Berkshire, and was
founded over 20 years ago by its current CEO Adam
Smyth and has grown into a business comprising
70 digital marketing professionals. Rawnet’s core
competency is in digital strategy and digital services
design. Rawnet was acquired by Castelnau in 2021 and
continues to balance the service provision for internal
Castelnau group businesses alongside that of legacy
and new external clients.
Rawnet’s external client roster includes some top-tier
UK and International businesses, and the company
is enjoying increasing recurring revenue streams
which reflects its increased value-add and strategic
importance to its those customers.
Showpiece
The way people are collecting is changing, and
Showpiece will tap into this dynamic by offering a
digital collectable experience where customers have
beneficial ownership of the underlying item.
The first item made available was the One Cent
Magenta stamp. In 2022, three further items were
made available on the platform. A curation of only
the most extraordinary items will differentiate the
Showpiece offering.
With Stanley Gibbons’ purchase of the world’s most
valuable stamp, the British Guiana One Cent Magenta,
Showpiece has access to an extraordinary seed item
that can generate significant public interest. The
Stanley Gibbons brand also adds credibility to the
Showpiece product.
Having been established in 2021, this year has primarily
been about building for the future while also releasing
three additional items onto the platform. This building
of capability has revolved around bringing the majority
of our tech development capability in house as
well as strengthening our marketing and customer
services capability. The rationale behind this being in
preparation for more aggressive growth in the coming
months and years. The primary driver of this being a
planned increase in the number of items being made
available on the platform. In addition, the plan involves
further development of the model to incorporate a
larger number of third-party items. In practice, growth
has been slightly slower than we had hoped with the
main barrier being a difficulty in sourcing the right
types of items at values we have been happy with.
Castelnau Group Ltd (“CGL”) owns an 80% equity stake
in Showpiece Technologies Limited, the remaining 20% is
owned by Stanley Gibbons Plc. CGL owns 63% of Stanley
Gibbons Plc and Phoenix Asset Management in total
own 80% of Stanley Gibbons Plc across numerous funds.
CGL currently values the equity portion of its stake
in Showpiece at cost or 8,000 shares at £1 per share
and the £2.7 million loan at par. The fair value of
the investment we believe is the value of our total
investment in the company to date, or £2.7 million as of
December 2022.
Cambium
2022 experienced a strong rebound having been
significantly impacted by the Covid-19 pandemic that
saw countrywide lockdowns with only the return to
more typical full-size weddings, that did not restrict
number of guests attending, not happening till the
Castelnau Group Ltd Annual Report 2022
12
Strategic Report
end of June 2021. All brands now operate out of the
one warehouse and whilst there were supplier issues
because of Covid that impacted deliveries to couples,
these have now been resolved and The Wedding Shop
and Wedding Present Company are back to 5-star
Trustpilot scores.
For the whole year pledge revenue was up 60% on
2019. The post-COVID bulge in wedding activity has
subsided and the Directors expect the industry to
return to more normal levels. The business continues to
be optimised with a new management structure and
cost base.
In June 2022 £16 million was raised in a Rights Issue that
was used to repay the £8.0 million financing facility
plus interest accrued with the Phoenix UK Fund as well
as to secure investment for two other ventures. The
first was the purchase of Hostology, an online portal for
wedding venues. The second is for the development
of a baby list offering named “Little List”. Little List soft
launched in February 2023.
A £5.5 million loan facility extension was made
available in March 2023 by the Castelnau Group for
development in the business and producing Rock My
Wedding 3.0.
Graham Shircore
Partner, Phoenix Asset Management Partners Ltd.
3 April 2023
Investment Manager’s Report - continued
Strategic Report
Statement from the CIO
of the Investment Manager
The rules that we are constrained by in our
Dear Shareholders,
communication with you right now (from the Takeover
This report concludes our first full year (as a listed
Panel regarding the bid and the FCA regarding the
company) and coincides with the aforementioned
placement) stop us just laying out what we see those
bid for Dignity, which we deal with in some detail
values being, but we will do our best within the rules to
in the latest Castelnau Group quarterly report. For
convey the significance of this to you. We are partially
consistency and clarity, we have replicated the
helped by using the presentation at the 2021 Dignity
relevant section from the report below:
AGM by the CEO who at that time was Gary Channon.
Gary is also the CIO of Phoenix. In that presentation he
“Buying control of Dignity plc is a game changer for
used a Phoenix style methodology to talk about the
Castelnau Group in so many ways. It brings together
potential intrinsic value of Dignity should the strategy
all the best of what Castelnau is about in a transaction
be successfully executed.
that will change our scale and add considerably to
upside value.
This divergence in the current valuation versus the
potential intrinsic value (as referred to above) came
The NAV of Castelnau Group fell 20% in 2022 (from 94p
about because of a confluence of factors including
to 75p) despite the cheapness of the starting assets.
delays in executing the strategy, staff shortages, a
That was caused by a fall in the share prices of our
rise in input price inflation, especially employees and
listed holdings and an adjustment in the valuation of
energy, and the slow pace of the capital restructuring
our private holdings. Because the public market prices
work. Taken together, these put strains on Dignity’s
declined and interest rates rose, the discount rate used
current financial position which can be seen in its
to value our private company holdings was increased
published results. That difference between share price
by around 5%, e.g. where it was 15% it was increased to
and potential intrinsic value reflected the market’s
20%. Intrinsic value did not decline.
scepticism about the likely success of the strategy and
Using our estimates of intrinsic value, Castelnau Group
perhaps a concern that it would need more capital to
shares are worth considerably more after the Dignity
get there.
bid than before. We would like to be able to share
The value creating formula at Dignity though can
those intrinsic value calculations with you, but as
be summarised in this way. The business has high
Castelnau is a bidder for Dignity, offering its shares as
operational gearing and so growth translates into
an alternative to cash, then we are not permitted to
profits at a high marginal level, meaning that modest
do that under the rules laid out by the Takeover Panel.
growth causes big gains in profits. The best way to
We will do it when the bid process is over, as we do
grow is to earn the right by being the best and drawing
inPhoenix.
attention to that. Gaining customers starts with funeral
The impact of this transaction will be to increase the
plans which feed into funerals and growing funerals
proportion of the fund held in Dignity to over 60% and it
grows activity at the crematoria. Dignity is being
will represent around 75% to 80% of the intrinsic value.
positioned to earn and deliver that growth.
Given the enormity of that, we will focus on Dignity in
Gaining control allows us to do a number of things
this report.
which we believe change the probability of success
Suggesting that we have the potential to transform
very materially. Operating with control and partnering
your £1s into multiples of that, and do it in a fairly short
with Sir Peter Wood and his team allows us to speed
time frame, 3 to 5 years, is a bold and seemingly
up strategy execution and bring more resource
overconfident assertion that requires proper
to assist the Dignity executive team. There is a lot
explanation. Even those who know the Dignity story well
being changed at Dignity which would challenge the
and understand the value potential will want to know
bandwidth of any executive team.
how inside Castelnau that will translate into observable
and realisable gains. We aim to cover all of that.
Castelnau Group Ltd Annual Report 2022
13
Castelnau Group Ltd Annual Report 2022
14
Strategic Report
We have a clear vision and a detailed plan for Dignity
which, if successfully executed, increases the value into
the range from that AGM presentation.
Execution, i.e., the ability to get things done, is an
underappreciated differentiator in business. At
Castelnau, we use a system in all our businesses
called OKRs (Objectives and Key Results) which John
Doerr taught famously to Google and wrote about in
his excellent book, Measure What Matters. He learned
it at the foot of a true master of high- performance
management, Andy Grove of Intel who is considered
by some to be the best CEO of all time. He shared
with Doerr what he considers to be the single most
important lesson of his career. He said, “John, it almost
doesn’t matter what you know…it’s execution that
matters most.”
The transformation of Dignity, from a group in terminal
decline and losing share in all its activities, into the
UK’s leading end of life business, growing share on
the basis of merit by offering the best proposition to
the communities it serves, is well underway. It is worth
putting what has happened so far into perspective.
A top-down hierarchical organisation arranged into
divisional silos has been inverted, those silos abolished
and rearranged into around 180 separate local
businesses. Almost all of the most senior leadership
from 2019 has left, around 300 middle management
roles have been abolished and every one of those
new local businesses has run a process to appoint
a new business leader. Those business leaders are
empowered to serve families and build successful
funeral and crematoria businesses in their area. That
process took longer than initially forecast but is now
done and it is no surprise that it was disruptive.
When your aim is to make a very significant change to
an entrenched organisational culture, then it is thought
best to start by dramatically smashing up what went
before. We have certainly done that. At the same time,
the company has laid out the Company Principles that
define what the new culture will be. The work now is
to teach, embed, train, recruit and retain for that new
culture. The Company Principles focus the group on
serving families, the ultimate customers of the group,
and doing it in way that empowers those closest
tothem.”
Castelnau Group Ltd Annual Report 2022
14
Statement from the CIO of the Investment Manager - continued
Castelnau Group Ltd Annual Report 2022
15
Strategic Report
Read the rest of the report here.
Summary:
We expect to see growing sales and improving
profitability across all four of our core businesses in the
coming years. They all serve large markets and have
big opportunities to expand their businesses further.
With all the leadership teams now in place, the focus of
Castelnau can shift to a greater extent towards helping
those teams plan and execute their growth strategies.
Our two enabling businesses Rawnet and Ocula are
also growing, both in terms of their impact on our
portfolio businesses and with third party clients.
2022 was a formative year for Castelnau, including
within our own team. A huge amount has been
done but you may rightly conclude that not much
seemed to happen in what really counts, which is
growth in value at a per share level. We believe that
we have put in place the conditions for that value to
start coming through and, if successful, achieving a
controlling interest in Dignity has the potential to be
transformational.
We will update you openly and honestly whatever
path it takes but we have never been more excited
about the future. We believe that we can continue to
find businesses where we can add materially to their
value by applying our resources and expertise. If we
succeed, you will hold a portfolio of great companies
compounding your value into the future, those
currently in the portfolio being joined occasionally by
new candidates provided that we have the bandwidth
to handle them.
Gary Channon
CIO, Phoenix Asset Management Partners Ltd.
3 April 2023
Castelnau Group Ltd Annual Report 2022
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Castelnau Group Ltd Annual Report 2022
16
Strategic Report
Governance
We intend to
conduct ourselves
at all times with
integrity and
fairness.
Castelnau Group Ltd Annual Report 2022
16
Governance
Castelnau Group Ltd Annual Report 2022
17
Board Members
Biographical details of the Directors are as follows:
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 Chair of the Guernsey
Investment & Fund Association Executive Committee and also sits on the
Guernsey International Business Association Council. Joanne resides in
Guernsey.
Directorships in other public listed companies:
NextEnergy Solar Fund Limited, London
Joanne Peacegood
Independent Chair
(aged 45)
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 almost 30 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.
Andrew Whittaker
Independent Non-Executive
Director
(aged 49)
Governance
Castelnau Group Ltd Annual Report 2022
18
Joanna has over 30 years’ experience working in the finance industry in
Guernsey. Joanna is currently the 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.
Joanna Duquemin
Nicolle
Independent Non-Executive
Director)
(aged 52)
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.
Directorships in other public listed companies:
Aurora Investment Trust plc, London
David Stevenson
Non-Independent Non-Executive
Director
(aged 56)
Lorraine resigned from the Board on 15 December 2022. She 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 represented the Investment Manager on the boards of the Group
and Rawnet. 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”).
Lorraine Smyth
Non-Independent Non-Executive
Director
(aged 40)
Board Members - continued
Governance
Castelnau Group Ltd Annual Report 2022
19
Graham was appointed to the Board on 15 December 2022. He 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 is a non-executive director of Stanley Gibbons having formerly
acted as Chief Executive Officer and a non- executive director of
Showpiece Technologies Ltd. He is also a non-executive director of
Castelnau Group.
Graham Shircore
Non-Independent Non-Executive
Director
(aged 41)
Governance
Castelnau Group Ltd Annual Report 2022
20
The Directors present their Annual Report and Audited
Consolidated Financial Statements for the year ended
31 December 2022.
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. CGSL was set up to employ people
with particular skillsets required within the Group.
Key skillsets have been acquired within CGSL to help
develop, transform and create value within the Portfolio
Companies. Employees are deployed to the Portfolio
Companies as and when required. In the short term,
this is a marketing strategist and a skilled branding
person. Both employees are 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.
Dividend Policy
The Group has no stated dividend target. The Group’s
investment objective is one of capital growth and it
is anticipated that returns for Shareholders will derive
primarily from capital gains. The Group will target a Net
Asset Value total return of 10-15% above the return on
the FTSE All-Share Total Return Index per annum and
a minimum absolute Net Asset Value total return of
20%per annum.
Investors should note that the target returns noted
above are targets only and not a profit forecast. There
may be a number of factors that adversely affect the
Company’s ability to achieve the target returns and
there can be no assurance that the target will be met.
Borrowing Policy
There is no limit in the Articles on the level of gearing
which the Group can employ. Whilst the Group does
not currently expect to have long-term gearing as
part of its strategy, any such gearing utilised would be
expected to be below 50% of the Group’s gross asset
value (including undrawn capital commitments),
in each case measured at the time of investment.
The Board may, however, approve a higher level of
gearing from time to time, in circumstances where the
Investment Manager recommends it should do so on
an opportunistic basis.
Going Concern
The Directors believe that, having considered the
Group’s investment objective on page 3, financial risk
management (see note 2 to the Financial Statements),
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 Company 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 Financial Statements.
The Alternative Investment Fund
Manager (“AIFM”) and Investment
Manager
Investment Manager
The Investment Management Agreement with 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 performance fee period is three years and
is equal to one-third of the relative outperformance to
the FTSE All share Total Return Index.
The Board considers that the interests of Shareholders,
as a whole, are best served by the ongoing
appointment of the Investment Manager to achieve
the Company’s investment objectives.
Alternative Investment Fund Manager (“AIFM”)
PAMP has been investing in UK listed equities for
24years using a “value investing” approach to buy
high-quality businesses at attractive prices. PAMP
has delivered excellent long-term investment returns
Directors’
Report
Governance
Castelnau Group Ltd Annual Report 2022
21
since being set up by Gary Channon in 1998. PAMP
also manage the Aurora Investment Trust Plc and the
Huginn Fund. Shareholders can view the historic track
record of the Phoenix UK Fund here.
PAMP’s investment process aims to identify great
businesses and management through intensive
primary research. PAMP is known for the depth of its
research which can often last many years before
making an investment. Once an investment is made, the
investment team maintains this intensive approach to
research by closely monitoring the investments.
PAMP has an investment philosophy and approach
that is inspired and influenced by some of the great
investors such as Warren Buffett, Phil Fisher, Charlie
Munger and John Maynard Keynes. These philosophies
have been built into a “Phoenix approach”, which
PAMP has continuously refined using experience
of application and analysis and learning. This has
turned the philosophical approach into a proprietary
technical approach which have been applied to the
investments managed by PAMP and have helped to
deliver long term outperformance.
This philosophy and approach are the bedrock for the
approach which Castelnau also takes, however this has
been further developed in order to be more applicable
to entities which we control or are able to give greater
assistance to. More information about this is included in
our quarterly investor reports which can be found here.
The Investment Management Agreement dated
23 September 2021 between the Company and
the Investment Manager, pursuant to which the
Investment Manager is appointed to act as the
Company’s alternative investment fund manager for
the purposes of the UK AIFM Regime, and accordingly
the Investment Manager is responsible for providing
portfolio management and risk management services
to the Company, subject to the overall control
and supervisions of the Directors. The Investment
Manager, in its capacity as the Company’s alternative
investment fund manager, will also make the relevant
notifications for the marketing of the Shares in the
United Kingdom and elsewhere (if required).
Shareholders may be interested in reading the historic
track record of the Phoenix UK Fund since inception,
which is an Appendix at the back of the Annual Report
and Audited Consolidated Financial Statements.
PAMP’s investment process aims to identify great
businesses and management through intensive
primary research. PAMP is known for the depth of its
research which can often last many years before
making an investment. Once an investment is
made, the investment team maintains this intensive
approach to research through an ongoing, rigorous
monitoring programme.
Building on PAMP’s experience of investing in private
companies and companies where they have control
or influence, and in particularly in respect of what is
now The Cambium Group, the Investment Manager
has built a “Castelnau Toolbox”, essentially a way
of standardising PAMP’s critical knowledge and
techniques that can be applied to a specific type
of investee company, which can be assessed and
improved through application over time.
Control of the Level of Ongoing Charges
The Board monitors the Group’s operating costs carefully.
Based on the Group’s average net assets for the year
ended 31 December 2022, the Group’s ongoing charges
figure calculated in accordance with the Association
of Investment Companies (AIC) methodology was
0.52% (2021: 0.32%). The movement is down to a new
licencing agreement between the Company and
Ocula Technologies. For additional information on this
agreement, refer to note 15 to the Financial Statements.
As the size of the Group grows, the Board will manage
expenses with the intention of keeping costs down and
reducing the ongoing charge ratio accordingly.
Custodian and Depositary
Custody and Depositary services are provided by
Northern Trust (Guernsey) Limited (the “Depositary”).
The Depositary was appointed on 18 October 2021.
The terms of the Depositary agreement allow the
Depositary to receive professional fees for services
rendered. The Depositary agreement includes
custodian duties. For additional information, refer to
note 14 to the Financial Statements.
Governance
Castelnau Group Ltd Annual Report 2022
22
Directors
The Directors of the Group during the year and at the
date of this Report are set out on pages 17 to 19.
Directors’ and Other Interests
The Directors of the Group held the following Ordinary
Shares beneficially:
31 December
2022
Number of
ordinary shares
31 December
2022
% of issued
share capital
31 December
2021
Number of
ordinary shares
31 December
2021
% of issued
share capital
Joanne Peacegood 10,000 0.01% 10,000 0.01%
Andrew Whittaker 40,000 0.02% 40,000 0.02%
Joanna Duquemin Nicolle 75,000 0.04% 75,000 0.04%
David Stevenson – – – –
Lorraine Smyth* – – – –
Graham Shircore** – – – –
* Resigned on 15 December 2022.
** Appointed on 15 December 2022.
Corporate Governance
The Board is committed to high standards of corporate
governance and has implemented a framework
for corporate governance which it considers to be
appropriate for an investment company in order
to comply with the principles of the UK Corporate
Governance Code (the “UK Code”). The Company is
also required to comply with the Code of Corporate
Governance (the “GFSC Code”) issued by the Guernsey
Financial Services Commission.
This Corporate Governance Statement, together with
the Going Concern Statement, Viability Statement
and the Statement of Directors’ Responsibilities set out
on pages 36 to 37, indicates how the Company has
complied with the principles of good governance of
the UK Code and its requirements on Internal Control.
The Group is a member of the AIC and by complying
with the AIC Code of Corporate Governance (the “AIC
Code”) is deemed to comply with both the UK Code
and the GFSC Code. The Board has considered the
principles and recommendations of the AIC Code,
and considers that reporting against these will provide
better information to Shareholders. To ensure ongoing
compliance with these principles, the Board reviews a
report from the Corporate Secretary at each quarterly
meeting, identifying how the Group is in compliance
and identifying any changes that might be necessary.
The AIC Code is available on the AIC’s website,
www.theaic.co.uk. The UK Code is available in the
Financial Reporting Council’s website, www.frc.org.uk.
Since listing on the SFS (Specialist Fund Segment)
of the London Stock Exchange’s Main Market on
18 October 2021, the Group has complied with the
recommendations of the AIC Code and thus the
relevant provisions of the UK Code, except as set out
below.
The UK Code includes provisions relating to:
• The role of the Chief Executive;
• Executive Directors’ remuneration;
• Annually assessing the need for an internal audit
function; and
• Senior Independent Director.
It is acknowledged in the UK Corporate Governance
Code that some of its provisions may not be relevant
to externally managed investment companies (such
Directors’ Report - continued
Governance
as the Group). The Board does not consider that the
pages36 to 37. Biographies for all the Directors can be
above provisions are relevant to the Group. The Group
found on pages 17 to 19.
will therefore not comply with these provisions.
The Board consists of five non-executive Directors all
Whilst the Group will seek to comply with the AIC Code
of whom have diverse skillsets and experience. Three
as far as practicable, it is likely that it will not be able
of the five directors are considered to be independent
to so comply with all of the AIC Code requirements. In
of the Investment Manager and as prescribed by
particular, in relation to the Director appointed by the
the Listing Rules. The Board does not consider it
holder of the B Share, this Director will be appointed
appropriate to appoint a Senior Independent Director
by the Investment Manager and therefore will not
because the majority of the Directors are deemed to
be entirely independent of the Investment Manager.
be independent of the Group. The Board considers
Further, such Director will not be subject to annual
that it has the appropriate balance of diverse skills
re-election. In addition, the holder of the B Share has
and experience, independence and knowledge of the
the power to ensure that no Directors are removed or
Group and the wider sector, to enable it to discharge
appointed without its consent.
its duties and responsibilities effectively and that
no individual or group of individuals dominates
The GFSC’s Finance Sector Code of Corporate
decisionmaking.
Governance (the “Code”) applies to the Group. The
GFSC has stated in the Code that companies which
The Chair is responsible for leadership of the Board
report against the UK Corporate Governance Code or
and ensuring its effectiveness. The Chair is Joanne
the AIC Code are deemed to meet the requirements of
Peacegood. The Chair of the Board must be, and is
the Code, and need take no further action. Accordingly,
considered to be, independent for the purposes of
as the Group will report against the AIC Code, it will be
Chapter 15 of the Listing Rules.
deemed to meet the requirements of the Code.
The Board needs to ensure that the Annual Report and
Audited Consolidated Financial Statements, taken as
Role, Composition and Independence of the
a whole, is fair, balanced and understandable and
Board
provides the information necessary for Shareholders
The Board is the Group’s governing body and has
to assess the Group’s position and performance,
overall responsibility for maximising the Group’s
business model and strategy. In seeking to achieve
success by directing and supervising the affairs of
this, the Directors have set out the Group’s investment
the business and meeting the appropriate interests
objective and policy and have explained how the
of Shareholders and relevant stakeholders, while
Board and its delegated Committees operate and
enhancing the value of the Group and also ensuring
how the Directors review the risk environment within
protection of investors. A summary of the Board’s
which the Group operates and sets appropriate risk
responsibilities is as follows:
controls. Furthermore, throughout the Annual Report
• statutory obligations and public disclosure;
and Audited Consolidated Financial Statements, the
Board has sought to provide further information to
• strategic matters and financial reporting;
enable Shareholders to have a fair, balanced and
understandable view.
• risk assessment and management including
reporting compliance, governance, monitoring and
The Board has contractually delegated responsibility
control; and
for the management of its investment portfolio, the
arrangement of custodial and depositary services
• other matters having a material effect on the
and the provision of administration, accounting,
Group.
registrar and company secretarial services including
The Board’s responsibilities for the Annual Report and
the independent calculation of the Group’s NAV and
Audited Consolidated Financial Statements are set
the production of the Annual Report and Audited
out in the Statement of Directors’ Responsibilities on
Castelnau Group Ltd Annual Report 2022
23
Governance
Castelnau Group Ltd Annual Report 2022
24
Consolidated Financial Statements which are
independently audited.
The Board is responsible for the appointment and
monitoring of all service providers to the Group.
The Directors are kept fully informed of investment and
financial controls and other matters by all services
providers that are relevant to the business of the Group
and should be brought to the attention of the Directors.
The Nominations Committee regularly reviews the
structure, size, composition (including the skills,
knowledge, experience and diversity) of the Board as a
whole and makes recommendations to the Board with
regard to any changes.
The Board has a breadth of experience relevant to the
Group and the Directors believe that any changes to
the Board’s composition can be managed without
undue disruption. With any new director appointment
to the Board, consideration will be given as to what
induction process is appropriate.
Directors’ Attendance at Meetings
The Board holds quarterly Board meetings to discuss
matters including: portfolio performance, strategy,
dividend policy, structure, finance, corporate
governance, marketing, risk management, liquidity,
compliance, asset allocation and gearing, contracts
and Group performance. The quarterly Board meetings
are the principal source of regular information for the
Board enabling it to determine policy and to monitor
performance, compliance and controls but these
meetings are also supplemented by communication
and discussions throughout the year.
A representative from each of the Investment Manager,
AIFM, Administrator and Corporate Broker attends
each Board meeting either in person or by telephone
thus enabling the Board to fully discuss and review the
Group’s operation and performance. Each Director has
direct access to the Portfolio Manager and Company
Secretary and may, at the expense of the Group, seek
independent professional advice on any matter. Both
appointment and removal of these parties is to be
agreed by the Board as a whole.
The Audit Committee now meets five times a year, the
Management Engagement Committee (“MEC”) and
Remuneration and Nomination Committee meet at
least once a year. In addition, adhoc meetings of the
Board to review specific items between the regular
scheduled quarterly meetings can be arranged.
Between formal meetings, there is regular contact with
the Portfolio Manager, AIFM, Administrator, Custodian
and Depositary and the Corporate Broker.
Although some of the Directors hold other listed Board
positions, none of these is for a trading company and
the Board is satisfied that they have sufficient time
commitment to carry out their duties for the Group as
evidenced by their attendance at the Board and Audit
Committee meetings during the year.
At the Board meetings, the Directors review the
management of the Group’s assets and liabilities and
all other significant matters so as to ensure that the
Directors maintain overall control and supervision of
the Group’s affairs.
Appointment and Retirement of Directors
Subject to the Companies Law and the Articles, the
Directors shall have power at any time, and from
time to time, without sanction of the Group in general
meeting but subject to receiving the written consent
of the holder of the B Share, to appoint any person to
be a Director, either to fill a casual vacancy or as an
additional Director. Any Director so appointed shall
hold office only until the next following annual general
meeting and shall then be eligible for re-appointment.
Subject to the Companies Law and the Articles, the
Group may by ordinary resolution appoint any person
as a Director; and remove any person from office as
a Director and there shall be no requirement for the
appointment or removal of two or more Directors to
be considered separately. A Director may resign from
office as a Director by giving notice in writing to that
effect to the Group. There is no age limit at which a
Director is required to retire. At each annual general
meeting of the Group, each Director, other than
the Director appointed by the holder of the B Share
pursuant to the Articles, shall retire from office and
each Director may offer themselves for election or re-
election by the Shareholders.
Directors’ Report - continued
Governance
Board Performance and Training
Management Engagement Committee
In accordance with the AIC Code, the Group has
On appointment to the Board, Directors will be offered
established a Management Engagement Committee
relevant training and induction. Training is an ongoing
which is chaired by Joanna Duquemin Nicolle and
matter as is discussion on the overall strategy of
includes Andrew Whittaker, Joanne Peacegood and
the Group. The Board will undertake an annual
David Stevenson. The Management Engagement
Board Evaluation of performance. This exercise was
Committee will meet at least once a year or more
completed in February 2022 and in March 2023. The
often if required. Its principal duties will be to consider
results of the evaluation were satisfactory with no
the terms of appointment of the Investment Manager
issues identified but future evaluations will be more
and other service providers and it will annually review
meaningful as it is very early in the Group’s life to
those appointments and the terms of engagement.
comment meaningfully.
Audit Committee
On appointment to the Board, each Director
The Group’s Audit Committee is chaired by Andrew
considered the expected time needed to discharge
Whittaker and includes Joanna Duquemin Nicolle and
their responsibilities effectively. The Directors confirmed
Joanne Peacegood. The Audit Committee will meet at
that each had sufficient time to allocate and would
least five times a year. The Board considers that the
inform the Board of any subsequent changes. In
members of the Audit Committee have the requisite
accordance with the AIC Code, if and when any
skills and sector experience to fulfil the responsibilities
Director, including the Chair, has been in office (or
of the Audit Committee. The Audit Committee will
upon re-election would at the end of that term, be in
examine the effectiveness of the Group’s control
office) for more than nine years, the Board will consider
systems and amongst other items, will review the
whether there is a risk that such Director might
half-yearly and annual reports and also request
reasonably be deemed to have lost independence
certain information from the Investment Manager and
through such long service.
the Administrator. It will also review the scope, results,
In respect of the Criminal Finances Act 2017 which has
cost effectiveness, independence and objectivity of the
introduced a new corporate criminal offence (“CCO”)
external Auditor.
of ‘failing to take reasonable steps to prevent the
Further details on the Audit Committee can be found in
facilitation of tax evasion’, the Board confirms that they
the Audit Committee Report on page 38.
are committed to zero tolerance towards the criminal
facilitation of tax evasion.
Remuneration Committee
The Group’s Remuneration Committee consists of all
Board Diversity
of the Directors and is chaired by Joanne Peacegood.
When appointing new Directors and reviewing the
The Remuneration Committee will meet at least twice
Board composition, the Board considers, amongst
a year or more often if required. The Remuneration
other factors, diversity, balance of skills, knowledge,
Committee’s main functions include:
gender, social and ethnic background and experience.
The Board, however, does not consider it appropriate
(i) agreeing the policy for the remuneration of the
to establish targets or quotas in this regard. The Board
Directors and reviewing any proposed changes to
comprises diverse skillset and knowledge that is
the policy;
appropriate for an entity of this nature.
(ii) reviewing and considering ad hoc payment to the
Directors in relation to duties undertaken over and
Board Committees and their Activities
above normal business; and
Terms of Reference
All Terms of Reference of the Board’s Committees are
(iii) appointing independent professional remuneration
available from the Administrator upon request.
advice.
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25
Governance
Castelnau Group Ltd Annual Report 2022
26
Nomination Committee
The Group’s Nomination Committee consists of all of
the Directors and is chaired by Andrew Whittaker. The
Nomination Committee will meet at least once a year
or more often if required. Its principal duties will be to
advise the Board on succession planning bearing in
mind the balance of skills, knowledge and experience
existing on the Board and will make recommendations
to the Board in this regard. The Nomination Committee
advises the Board on its balance of relevant skills,
experience, gender, race, ages and length of service
of the Directors serving on the Board. All appointments
to the Board will be made in a formal and transparent
manner.
For each Director, the tables below set out the number
of Board and Committee meetings they were entitled
to attend during the year ended 31 December 2022
and the number of such meetings attended by each
Director.
Held Attended
Scheduled Board Meetings
Joanne Peacegood 4 4
Andrew Whittaker 4 4
David Stevenson 4 4
Joanna Duquemin Nicolle 4 4
Lorraine Smyth* 4 3
Graham Shircore** 1 1
Management Engagement Committee Meetings
Joanne Peacegood 1 1
Andrew Whittaker 1 1
David Stevenson 1 1
Joanna Duquemin Nicolle 1 1
Audit Committee Meetings
Joanne Peacegood 3 3
Andrew Whittaker 3 3
Joanna Duquemin Nicolle 3 3
Lorraine Smyth* 2 1
Remuneration Committee Meetings
Joanne Peacegood 1 1
Andrew Whittaker 1 1
Joanna Duquemin Nicolle 1 1
David Stevenson 1 1
Lorraine Smyth* 1 1
Directors’ Report - continued
Governance
Castelnau Group Ltd Annual Report 2022
27
Held Attended
Nomination Committee Meetings
Joanne Peacegood 1 1
Andrew Whittaker 1 1
David Stevenson 1 1
Joanna Duquemin Nicolle 1 1
Lorraine Smyth* 1 1
Ad hoc Committee Meetings
Joanne Peacegood 4 3
Andrew Whittaker 4 3
David Stevenson 4 3
Joanna Duquemin Nicolle 4 4
Lorraine Smyth* 3 1
No other sub-committee meetings were held during the year. The Audit Committee meetings will be held five
times a year going forward.
* Resigned on 15 December 2022.
** Appointed on 15 December 2022.
Strategy
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.
Internal Controls
The Board is ultimately responsible for establishing
and maintaining the Group’s system of internal
financial and operating control and for maintaining
and reviewing its effectiveness. The Group’s risk matrix
continues to be the core element of the Group’s risk
management process in establishing the Group’s
system of internal financial and reporting control. The
risk matrix is prepared and maintained by the Board
which initially identifies the risks facing the Group
and then collectively assesses the likelihood of each
risk, the impact of those risks and the strength of
the controls operating over each risk. The system of
internal financial and operating control is designed to
manage rather than to eliminate the risk of failure to
achieve business objectives and by their nature can
only provide reasonable and not absolute assurance
against misstatement and loss.
These controls aim to ensure that assets of the
Group are safeguarded, proper accounting records
are maintained and the financial information for
publication is reliable. The Board confirms that there
is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Group.
This process has been in place for the year under
review and up to the date of approval of this
Annual Report and Audited Consolidated Financial
Statements. It has been reviewed by the Board and is
in accordance with the AIC Code.
The AIC Code requires Directors to conduct at least
annually a review of the Group’s system of internal
financial and operating control, covering all controls,
including financial, operational, compliance and risk
management. The Board has evaluated the systems
of internal controls of the Group. In particular, it has
prepared a process for identifying and evaluating the
significant risks affecting the Group and the policies
Governance
Castelnau Group Ltd Annual Report 2022
28
by which these risks are managed. The Board also
considers whether the appointment of an internal
auditor is required and has determined that there is no
requirement for a direct internal audit function.
The Board has delegated the day-to-day
responsibilities for the management of the Group’s
investment portfolio, the provision of custodial and
depositary services and administration, accounting,
registrar and company secretarial functions including
the independent calculation of the Group’s NAV and
the production of the Annual Report and Audited
Consolidated Financial Statements which are
independently audited.
Formal contractual agreements have been put in
place between the Group and providers of these
services. Even though the Board has delegated
responsibility for these functions, it retains
accountability for these functions and is responsible
for the systems of internal control. At each quarterly
Board meeting, compliance reports are provided
by the Administrator, Company Secretary, Portfolio
Manager, AIFM and Depositary. The Board also receives
confirmation from the Administrator of its accreditation
under its controls report.
Procedure for Identifying Risks
The procedures in place to identify emerging or
principal risks are described below.
The Audit Committee regularly reviews the Group’s
risk matrix, focusing on ensuring that the appropriate
controls are in place to mitigate each risk. A system
has been established to identify emerging risks as
they occur as detailed below. The experience and
knowledge of the Audit Committee and Board is
invaluable to these discussions, as is advice received
from the Board’s service providers, specifically the
Investment Manager who is responsible for all portfolio
management services.
The market and operational risks were discussed by
the Board, with updates on operational resilience
received from the Investment Manager, Administrator
and other key service providers.
The following is a description of the role each service
provider plays in the identification of emerging risks.
I. Investment Manager: the Investment Manager
advises the Board at each meeting on world
markets, stock market trends, information on stock
specific matters as well as regulatory, political and
economic changes likely to impact the Group’s
portfolio;
II. Distributor and Broker: provides advice periodically
specific to the Board on the Group’s share register,
sector, competitors and the investment company
market;
III. Company Secretary and Accounting Advisor: briefs
the Board on forthcoming legislation or regulatory
changes that might impact the Group; and
IV. AIC: The Group is a member of the AIC, which
provides regular technical updates as well as
drawing members’ attention to forthcoming
industry and regulatory issues.
Procedure for Oversight of Risks
Audit Committee: The risk matrix is kept under review.
This includes a review of the risk procedures and
controls in place at the key service providers to ensure
that emerging (as well as known) risks are adequately
identified and – so far as practicable – mitigated.
Experienced Non-Executive Directors on the
Committee, each bringing external knowledge of the
investment trust (and financial services generally)
marketplace, trends, threats etc. as well as macro/
strategic insight.
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
£132,645,371 as at 31 December 2022 (31 December 2021:
£129,979,441). 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 note 2 and note 3 to the Financial Statements. The
risks associated with valuation of investments are
Directors’ Report - continued
Governance
managed by the Investment Manager and reviewed
investing in equity markets are sensitive to various
by the Board. The Board considered the valuation of
factors, including but not limited to: expectations
the investments held by the Group as at 31 December
of future dividends and profits; economic growth;
2022 to be reasonable based on information provided
exchange rates; interest rates; and inflation. The value
by the Investment Manager, underlying portfolio
of any investment in equity markets is therefore volatile
companies, AIFM, Administrator, Custodian and
and it is possible, even when an investment has been
Depositary on their processes for the valuation of these
held for a long time, that an investor may not get back
investments.
the sum invested. Any adverse effect on the value
of any equities in which the Group invests from time
The Board reviewed the valuations policy and PAMP
to time could have a material adverse effect on the
went through the valuation process/techniques with
Group’s financial condition, business, prospects and
the Board around private assets investments. There
results of operations and, consequently, the Net Asset
has been no change to the valuation policy and
Value and/or the market price of the Shares.
the process remains the same which has also been
confirmed with the Board. The Board are satisfied with
The Board receives a quarterly update, or more
the approach and the valuation policy and processes.
frequently as required, from the Investment Manager
regarding investment performance.
The Board receives the monthly NAV as well as
quarterly detailed updates on the portfolio which
Liquidity risk
includes changes to the valuations. The Board is
Investments made by the Group may be illiquid and
updated when there is/or potential to be significant
this may result in delays/shortfall of expected cash
changes in valuation. As part of the annual audit
flows to the Group.
process and the Board signing off on the annual
Investments in private assets (including private
financial statements, the Board receives the valuations
Portfolio Companies) are highly illiquid and have no
packs and also the third-party (Kroll) reports. The
public market. There may not be a secondary market
Board scrutinises the valuations / reports and ensures
for interests in private assets. Such illiquidity may affect
they are satisfied prior to sign off.
the Group’s ability to vary its portfolio or dispose of, or
The Board also asks questions regularly (including
liquidate part of, its portfolio, in a timely fashion (or at
during quarterly board meetings, or ad hoc meetings)
all) and at satisfactory prices in response to changes
to understand performance and the impact on
in economic or other conditions.
valuation. The Board has access to detailed valuation
If the Group were required to dispose of or liquidate an
reports as and when requested.
investment on unsatisfactory terms, it may realise less
Market risk
than the value at which the investment was previously
As a result of investments in publicly traded Portfolio
recorded, which could result in a decrease in Net Asset
Companies, the Group will be exposed to equity
Value.
securities price risk. The market value of the Group’s
The performance of investments in private assets can
holdings in publicly traded Portfolio Companies could
also be volatile because those assets may have limited
be affected by a number of factors, including, but
product lines, markets or financial reserves, or be more
not limited to: a change in sentiment in the market
susceptible to major economic setbacks or downturns.
regarding such companies; the market’s appetite
Private assets may be exposed to a variety of business
for specific business sectors; and the financial or
risks including, but not limited to: competition from
operational performance of the publicly traded
larger, more established firms; advancement of
Portfolio Companies which may be driven by, amongst
incumbent services and technologies; and the
other things, the cyclicality of some of the sectors
resistance of the market towards new companies,
in which some or all of the publicly traded Portfolio
services or technologies.
Companies operate. Equity prices and returns from
Castelnau Group Ltd Annual Report 2022
29
Governance
Castelnau Group Ltd Annual Report 2022
30
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 year. 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. At the Management
Engagement Committee on 15 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 next
annual Management Engagement Committee
meeting.
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
Directors’ Report - continued
Governance
with assurance from each of the key service providers
Viability Statement
during the year ended 31 December 2022, the Board
Under the UK Corporate Governance Code (the “UK
was satisfied that no such breach had occurred.
Code”) and the AIC Code of Corporate Governance
The Board’s next review will be at the next annual
(the “AIC Code”), the Board is required to produce
Management Engagement Committee meeting.
a “Viability statement” which considers the Group’s
current position and principal risks and uncertainties
Geopolitical risk
combined with an assessment of the prospects of
Russia’s invasion of Ukraine was a new emerging risk
the Group in order to be able to state that they have
to the global economy. The resulting imposition of
a reasonable expectation that the Group will be
international sanctions on Russia have had a wider
able to continue in operation over the period of their
global effect on the supply and prices of certain
assessment. The Board considers that five years is
commodities and consequently on inflation and
an appropriate period to assess the viability of the
general economic growth of the global economy
Group. Whilst the Board has no reason to believe
and has delayed the global economic recovery from
that the Group will not be viable for a longer period,
COVID-19.
it has chosen this period given the uncertainty of the
Environmental, Social and Governance (“ESG”)
investment world and the strategy period. In selecting
matters
this period, the Board considered the environment
The Board recognises the importance of
within which the Group operates and the risks
Environmental, Social and Governance (“ESG”) factors
associated with the Group.
in the investment management industry and the
The Group’s prospects are driven by its business model
wider economy as a whole. It is the view of the Board
and strategy. The Group’s investment objective is to
that direct environmental and social impact of the
compound Shareholder’s capital at a higher rate of
Group is limited and that ESG considerations are most
return than the FTSE All Share Total Return Index over
applicable in respect of the asset allocation decisions
the long term. The Group will target a Net Asset Value
made for its portfolio.
total return of 10-15% above the return on the FTSE All
The Group has appointed the Investment Manager
Share Total Return Index per annum and a minimum
to advise it in relation to all aspects relevant to the
absolute Net Asset Value total return of 20% per
Investment Portfolio. The Investment Manager has a
annum.
formal ESG framework which incorporates ESG factors
The Board confirms that they have performed a
into its investment process. The Board receives regular
robust assessment of the principal and emerging risks
updates from the Investment Manager on its ESG
facing the Group and the Board’s assessment of the
processes and assesses their suitability for the Group.
Group over the five year period has been made with
ESG factors are assessed by the Investment Manager
reference to the Group’s current strategy, position
for every transaction as part of their investment
and prospects and the Board’s risk appetite having
process. Climate risks are incorporated in the ESG
considered each of the Group’s Principal Risks and
analysis under environmental factors.
Uncertainties summarised on pages 28 to 30.
The Group has entered into contractual arrangements
The Board has also considered the Group’s cash flows
with a network of third parties (the “Service Providers”)
and income flows. The Group has no stated dividend
who provide services to it. The Board, through the
target.
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.
Castelnau Group Ltd Annual Report 2022
31
Governance
Castelnau Group Ltd Annual Report 2022
32
Key assumptions considered by the Board in relation to
the viability of the Group are as follows and these are
stressed in terms of liquidity of the portfolio:
(i) investments are in line with the investment
objective and investment policy as set out in the
Group’s prospectus; and
(ii) the Group has the ability to meet running costs
and standing expenses.
The Board has a reasonable expectation that the
Group will be able to continue in operation and meet
its liabilities as they fall due over the period of their
assessment.
The Board having considered the analysis above, have
a reasonable expectation that the Group will remain
viable over the five year period to 31 December 2027.
Report under Section 172 of the Companies
Act2006
Although the Group is domiciled in Guernsey, in
accordance with the guidance set out in the AIC Code,
the Directors have included below how the matters
set out in Section 172 of the UK Companies Act 2006
have been considered in their board discussions and
decision making.
Further information as to how the Board has had regard to the Section 172 factors:
Section 172 factor Key examples Location
Consequences of decisions in the long term Investment Objectives and Policy Summary Information
Future Prospects Directors’ Report
Dividend policy Directors’ Report
Viability Statement Directors’ Report
Fostering business relationships with suppliers,
customers and other stakeholders
Shareholder engagement; Key Service
Providers
Directors’ Report;
Impact of operations on the community and the
environment
Environmental, Social and Governance Director’s Report
Maintaining high standard of business conduct Corporate Governance Directors' Report
Directors’ duty to promote the success of the Group
The Board seeks to understand the views of the Group’s
Shareholders and its other key stakeholders as well as
how their interests and the matters set out in section
172 of the Companies Act 2006 in the UK (“Companies
Act”) have been considered. As part of the Board and
stakeholder evaluation processes that are undertaken
annually, the Board reviews its engagement
mechanisms to ensure they remain effective. In
fulfilling their duties, the Directors carefully consider the
likely consequences of their actions over the long-term
and on other key stakeholders.
(i) the Group’s investment objective and policy;
(ii) the main trends and factors likely to affect the
future development, performance and position of
the Group’s business;
(iii) the Group’s key performance indicators;
(iv) the Group’s peers;
(v) the Group’s overall strategy; and
(vi) the Group’s core values which are integrity,
accountability, transparency and commitment.
Identifying stakeholders
The Board has identified its key stakeholders which
include Shareholders, Investee Companies, Investment
Manager, Financial Advisers, the Company Secretary,
Administrator, Registrar, Lawyers, Depositary and
Custodian. The Board is aware of the need to foster
the Group’s relationships with its key stakeholders
through its stakeholder management activities.
The Board provides oversight and challenge to the
Investment Manager to ensure that the Group meets
its requirements to create and preserve Shareholder
value.
Directors’ Report - continued
Governance
Shareholder engagement
including any changes; its Secretary on latest
The Board welcomes Shareholders’ views and places great
governance issues, legal or market announcements;
importance on communication with its Shareholders.
and its Administrator on the Group’s management
Shareholders wishing to meet with the Chair and
accounts. Furthermore, the Board receives reports
other Board members should contact the Group’s
from its Stockbroker on the performance of the
Administrator by emailing Castelnau_group@ntrs.com.
Group’s peers and ad hoc reports from its other key
stakeholders as deemed appropriate.
On 6 September 2022, Shareholders had the
opportunity to vote on the resolutions as specified
On an annual basis, the Board will undertake a review
in the Notice of AGM. The Notice of the AGM and the
of its stakeholders which include a review of their
results were released to the LSE in the form of an
control report and policies, such as whistleblowing,
announcement.
anti-bribery, anti-money laundering and corruption,
cyber security, data protection policies and each
Key service providers
entity’s business continuity arrangements to ensure
The Board delegates responsibility for its day to day
they are in place and are adequate.
operations to a number of key service providers. The
activities delegated, service levels and other related
Boardroom diversity
reports to the activities of each service provider (such
The Board currently comprises five non-executive
as their own approach to such matters as cyber risk
Directors whom all have diverse experience and
and assessment of climate change risk to operations)
backgrounds.
are closely monitored, where and as appropriate by
The Board considers its composition, including the
the Board and they are required to report to the Board
balance of skills, knowledge, diversity and experience,
at set intervals.
amongst other factors on an annual basis and when
Monitoring of key decisions and the outcome of those
appointing new Directors. The Board has considered
decisions
the recommendations of the Davies and Parker review
The Board meets at least quarterly and at such other
but does not consider it appropriate to establish
times as deemed appropriate. During these meetings,
targets or quotas in this regard. The Board will continue
the Board considers reports from the Investment
to consider diversity when considering succession
Manager on the Group’s portfolio, its investment
in the future. Refer to page 25 for more information.
activity and sector diversity. In addition, the Investment
Summary biographical details of the Directors are set
Manager provides an overview of engagement with
out on pages 17 to 19.
the investee companies as well as potential investee
Stewardship code
companies. The Board debates the Group’s portfolio
The Board and the Investment Manager support and
and notable acquisitions or disposals at each of
have a strong commitment to the UK Stewardship
its meetings and challenges stock selection where
Code, the latest version of which was issued by FRC
deemed appropriate. In between meetings, the
took effect from 1 January 2020 and endorsed by
Investment Manager and Board maintain contact
the AIC which sets out the principles of effective
through which they consider investment ideas,
stewardship by institutional investors.
further fundraising initiatives and market outlook and
strategies to consider adjusting the Group’s portfolio
Modern slavery disclosure
in line with the Group’s investment policy. During the
Due to the nature of the Group’s business, being a
year, the Board discussed the merits and structure of
company that does not offer goods or services to
the Group, with the Investment Manager and advisers
consumers, the Board considers that it is not within
and considered the long-term interests of the Group’s
the scope of modern slavery. The Board considers the
Shareholders during those discussions.
Group’s supply chains, dealing predominately with
professional advisers and service providers in the
In addition, the Board receives reports from the
financial service industry, to be low risk in this matter.
Financial Adviser on the Group’s Shareholder base
Castelnau Group Ltd Annual Report 2022
33
Governance
Castelnau Group Ltd Annual Report 2022
34
Anti-bribery and corruption
It is the Group’s policy to conduct all of its business in
an honest and ethical manner. The Group takes a zero-
tolerance approach to bribery and corruption and
is committed to acting professionally, fairly and with
integrity in all its business dealings and relationships
wherever it operates. The Group’s policy and the
procedures that implement it are designed to support
that commitment. The Board has made enquiries
of its third-party service providers to ensure their
procedures and policies are in place. Refer to page 33
for more information.
Tax evasion
The Group maintains a zero-tolerance policy towards
the provision of illegal services, including the facilitation
of tax evasion. The Group has received assurances
from the Group’s main contractors and suppliers that
they maintain a zero-tolerance policy towards the
provision of illegal services, including the facilitation of
tax evasion.
Significant Shareholdings
Shareholders with holdings of more than 5.0% of the
Shares of the Group at 31 December 2022 were as
follows:
Number of
ordinary shares
% of issued
share capital
Phoenix Asset Management Partners 130,942,757 71.17%
Sir Peter Wood 25,000,000 13.59%
Those invested directly or indirectly in 5.0% or more
of the issued share capital of the Group will have the
same voting rights as other holders of the Shares.
Annual General Meeting (AGM)
The Group’s AGM will be held at 1.15pm on 13 September
2023 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 Group’s website at www.castelnaugroup.com.
Independent Auditor
A resolution for the reappointment of Grant Thornton
Limited (“Grant Thornton”) as auditor to the Group will
be proposed at the annual general meeting. Grant
Thornton have indicated their willingness to continue
in office.
Signed on behalf of the Board of Directors on
3 April 2023 by:
Joanne Peacegood Andrew Whittaker
Director Director
Directors’ Report - continued
Governance
Castelnau Group Ltd Annual Report 2022
35
Directors’ Remuneration
Report
The Group is not required to present a Directors’
Remuneration Report, and this report does not purport
to meet all of the requirements of a typical listed UK
company’s Directors’ Remuneration Report, but has
been provided as the Directors believe that it may be
useful of this annual report and Financial Statements.
The aggregate amount of Directors’ fees should
not exceed £250,000 per annum to allow for the
appointment of additional director(s), to allow for an
overlap in appointments, thereby assisting with Board
succession planning.
Remuneration Policy
The Group's policy in regard to Directors' remuneration
is to ensure that the Group maintains a competitive fee
structure in order to recruit, retain and motivate non-
executive Directors of excellent quality in the overall
interests of Shareholders.
It is the responsibility of the Remuneration
Committee to consider the Directors' remuneration,
however the Nomination Committee will review any
proposed changes. The Board ultimately receives
the recommendations and approves the Director’s
Remuneration.
No element of the Directors' remuneration is
performance related, nor does any Director have any
entitlement to pensions, share options or any long-
term incentive plans from the Group.
Directors are remunerated in the form of fees, payable
annually, to the Director personally. No Directors have
been paid additional remuneration by the Group
outside their normal Directors’ fees and expenses.
Joanne Peacegood is entitled to an annual fee of
£40,000. Andrew Whittaker is entitled to an annual fee of
£35,000. Joanna Duquemin Nicolle and David Stevenson
are entitled to an annual fee of £30,000. Lorraine Smyth
and Graham Shircore waived their right to receive a
Director fee. The Directors received the following pro-rate
remuneration in the form of Directors’ fees relating to the
year ended 31 December 2022 and 31 December 2021:
31 December 2022
GBP
31 December 2021
GBP
Joanne Peacegood 40,000 24,137
Andrew Whittaker 35,000 17,836
Joanna Duquemin Nicolle 30,000 11,219
David Stevenson 30,000 6,082
Lorraine Smyth* – –
Graham Shircore** – –
135,000 59,274
* Resigned on 15 December 2022.
** Appointed on 15 December 2022.
Appropriate Directors' and Officers’ liability insurance
cover is maintained by the Group on behalf of the
Directors.
Each Director’s appointment letter provides that,
upon the termination of his/her appointment that he/
she must resign in writing and all records remain the
property of the Group. The Directors’ appointments
can be terminated in accordance with the Articles and
without compensation.
A Director may resign from office as a Director by
giving notice in writing to that effect to the Group.
There is no age limit at which a Director is required to
retire. Notwithstanding the foregoing, all Directors have
agreed to stand for re-election annually and are re-
elected by the Shareholders at the AGM.
The amounts payable to Directors shown in note 7 to the
Financial Statements are for services as non-executive
Directors. No Director has a service contract with the
Group, nor are any such contracts proposed.
Signed on behalf of the Board of Directors on 3 April
2023 by:
Joanne Peacegood Andrew Whittaker
Director Director
Governance
Castelnau Group Ltd Annual Report 2022
36
Statement of Directors’
Responsibilities
The Directors are responsible for preparing the
Financial Statements in accordance with applicable
Guernsey law and regulations.
The Companies (Guernsey) Law, 2008 requires the
Directors to prepare Financial Statements for each
financial year. Under that law, they have elected to
prepare the Financial Statements in accordance with
International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards
Board ("IASB") and applicable law.
The Financial Statements are required by law to give
a true and fair view of the state of affairs of the Group
and of the profit or loss of the Group for that period.
In preparing these Financial Statements, the Directors
are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the Financial
Statements; and
• prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Group will continue in business.
The Directors confirm that they have complied
with these requirements in preparing the Financial
Statements.
The Directors are responsible for keeping proper
accounting records which disclose with reasonable
accuracy at any time the financial position of
the Group and to enable them to ensure that the
Financial Statements have been properly prepared
in accordance with The Companies (Guernsey)
Law, 2008. They have the general responsibility for
taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
So far as each Director is aware, there is no relevant
audit information of which the Group’s auditor is
unaware, and each Director has taken all the steps
that he or she ought to have taken as a Director in
order to make himself or herself aware of any relevant
audit information and to establish that the Group’s
auditor is aware of that information.
The Directors are responsible for the oversight of
the maintenance and integrity of the corporate and
financial information in relation to the Group website;
the work carried out by the auditor does not involve
consideration of these matters and, accordingly, the
auditor accepts no responsibility for any changes that
may have occurred to the Financial Statements since
they were initially presented on the website.
Legislation in Guernsey governing the preparation and
dissemination of Financial Statements may differ from
legislation in other jurisdictions.
The Directors are responsible for ensuring that the
annual report and Financial Statements include
information requirements by the Disclosure Guidance
and Transparency Rules ("DTR") of the Financial
Conduct Authority ("FCA") with regard to corporate
governance, require the Group to disclose how it has
applied the principles, and complied with the provision
of the corporate governance code applicable to the
Group.
The Directors confirm that to the best of their
knowledge:
(a) The Financial Statements have been prepared in
accordance with IFRS and give a true and fair view
of the assets, liabilities, financial position and profit
or loss of the Group as at and for the year ended
31December 2022.
Governance
(b) The Annual Report includes information detailed
(ii) DTR 4.1.11 of the Disclosure Guidance and
in the Chair’s Statement, Investment Manager’s
Transparency Rules, being an indication of
Report, Directors’ Report, Statement of Directors’
important events that have occurred since the
Responsibilities, Directors’ Remuneration Report and
end of the financial year and the likely future
Audit Committee Report and provides a fair review
development of the Group.
of the information required by:
In the opinion of the Board, the Financial
(i) DTR 4.1.8 and DTR 4.1.9 of the Disclosure Guidance
Statements taken as a whole, are fair, balanced
and Transparency Rules, being a fair review of
and understandable and provide the information
the Group business and a description of the
necessary to assess the Group’s position and
principal risks and uncertainties facing the
performance, business model and strategy.
Group; and
By order of the Board,
Joanne Peacegood
Andrew Whittaker
Director
Director
3 April 2023
Castelnau Group Ltd Annual Report 2022
37
Governance
Castelnau Group Ltd Annual Report 2022
38
On the following pages, we present the Audit
Committee’s Report, setting out the responsibilities of
the Audit Committee and its key activities for the year
ended 31 December 2022.
The Audit Committee has reviewed the
appropriateness of the Group’s system of risk
management and internal financial and operating
controls, the robustness and integrity of the Group’s
financial reporting, along with the external audit
process. The Audit Committee has devoted time in
ensuring that controls and processes have been
properly established, documented and implemented.
During the course of the year, the information that the
Audit Committee has received has been timely and
clear and has enabled the Committee to discharge its
duties effectively.
Role and Responsibilities
The primary function of the Audit Committee is to
assist the Board in fulfilling its oversight responsibilities.
This includes reviewing the financial reports and other
financial information and any significant financial
judgement contained therein before publication.
In addition, the Audit Committee reviews the systems
of internal and operating controls on a continuing
basis that the Administrator, Portfolio Manager, AIFM,
and Custodian and Depositary and the Board have
established with respect to finance, accounting, risk
management, compliance, fraud and audit. The Audit
Committee also reviews the accounting and financial
reporting processes, along with reviewing the roles,
independence and effectiveness of the external
auditor.
The ultimate responsibility for reviewing and approving
the Annual and Interim Financial Statements remain
with the Board.
The Audit Committee's full terms of reference can be
obtained by contacting the Group's Administrator.
Risk Management and Internal
Control
The Board, as a whole, considers the nature and extent
of the Group’s risk management framework and the risk
profile that is acceptable in order to achieve the Group’s
strategic objectives. As a result, it is considered that the
Board has fulfilled its obligations under the AIC Code.
The Audit Committee continues to be responsible
for reviewing the adequacy and effectiveness of
the Group’s ongoing risk management systems and
processes. Its system of internal controls, along with its
design and operating effectiveness, is subject to review
by the Audit Committee through reports received
from the Portfolio Manager, AIFM and Custodian and
Depositary, along with those from the Administrator
and external auditor.
Fraud, Bribery and Corruption
The Board has relied on the overarching requirement
placed on the service providers under the relevant
agreements to comply with applicable law,
including anti-bribery laws. A review of the service
provider policies will take place at the Management
Engagement Committee Meetings. The Board receives
confirmation from all service providers that there has
been no fraud, bribery or corruption.
Financial Reporting and Significant
Financial Issues
The Audit Committee assesses whether suitable
accounting policies have been adopted and whether
the Portfolio Manager has made appropriate estimates
and judgements. The Audit Committee reviews
accounting papers prepared by the Portfolio Manager
and Administrator which provides details on the main
financial reporting judgements.
The Audit Committee also reviews reports by the
external auditors which highlight any issues with
respect to the work undertaken on the audit. The Audit
Committee is satisfied that the judgements made
by the Investment Manager and Administrator are
reasonable, and that appropriate disclosures have
been included in the Financial Statements.
Audit Committee
Report
Governance

External Auditor
during the year by the Audit Committee
The Audit Committee has responsibility for making
in relation to the Financial Statements
a recommendation on the appointment, re-
appointment and removal of the external auditor.
and how they were addressed are
Grant Thornton was appointed as the first auditor of
detailed below:
the Group following a competitive tender process.
Valuation of investments
During the year, the Audit Committee received and
reviewed audit plans and reports from the external
Some of the Group’s investments (including
auditor. It is standard practice for the external auditor
certain of the Target Assets) will include securities
to meet privately with the Audit Committee without the
and other interests that are very thinly traded, for
Investment Manager and other service providers being
which no market exists or which are restricted as
present at each Audit Committee meeting.
to their transferability under applicable laws and/
or the relevant investment documentation. Whilst
To assess the effectiveness of the external audit
the valuations of the Group’s investments will be in
process, the auditor was asked to articulate the
compliance with IFRS, some of the Group’s investments
steps that they have taken to ensure objectivity and
will be difficult to value accurately. Such valuations
independence, including where the auditor provides
may be conducted on an infrequent basis, are
non-audit services. The Audit Committee monitors the
subject to a range of uncertainties and will involve
auditor’s performance, behaviour and effectiveness
the Investment Manager and/or the Audit Committee
during the exercise of their duties, which informs the
exercising judgement. The Board reviewed the
decision to recommend reappointment on an annual
valuations policy and PAMP went through the valuation
basis.
process/techniques with the Board around private
assets investments. There has been no change to
The Group does not utilise the external auditor for
the valuation policy and the process remains the
internal audit purposes, secondments, tax compliance,
same which has also been confirmed with the Board.
private letter rulings, accounting advice or valuation
The Board are satisfied with the approach and the
advice. The Group's auditor performed the audit of the
valuation policy and processes.
Group's Financial Statements, prepared in accordance
with IFRS as issued by the IASB, in accordance with
Revenue
International Standards on Auditing (ISAs).
Proceeds from any disposal of the Group’s interests in
The audit engagement leader responsible for the audit,
Portfolio Companies through liquidity events, including
Mr Cyril Swale, will rotate off CGL in 2025 after having
sales of equity following IPOs and trade sales, may vary
served five years.
substantially from year to year. In addition, earnings
produced by Portfolio Companies are typically
reinvested for the purpose of growth, and payments
of dividends by assets are often subject to milestones
which may not be achieved. This means the return
received by the Group from these sources may vary
substantially from year to year. Notwithstanding that
the Group does not expect to receive much in the way
of returns from dividends, these variations in overall
returns may have a material adverse effect on the
portfolio and on 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.
Castelnau Group Ltd Annual Report 2022
39
Governance
Castelnau Group Ltd Annual Report 2022
40
The remuneration paid to Grant Thornton and to other Grant Thornton member firms for audit and non-audit
services in respect of the year ended 31 December 2022 is shown below:
31 December 2022
GBP
31 December 2021
GBP
Audit
Annual audit of the Company 49,800 43,000
Non- audit
Desktop review of unaudited Interim Financial Statements 4,500 –
Review of IFRS 10 and requirements for consolidation 2,500 –
7,000 –
For any questions on the activities of the Audit Committee not addressed in the foregoing, a member of the Audit
Committee remains available to attend each AGM to respond to such questions.
The Audit Committee Report was approved by the Audit Committee on 3 April 2023 and signed on behalf by:
Andrew Whittaker
Chair, Audit Committee
Audit Committee Report - continued
Governance
Independent Auditor’s Report to the
Members of Castelnau Group Limited
Opinion
We have audited the consolidated financial statements of Castelnau Group Limited and its subsidiary (the
“Group”) for the year ended 31 December 2022, which comprise the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cash Flows, and Notes to the consolidated financial statements, including a summary
of significant accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB).
In our opinion, the consolidated financial statements:
• give a true and fair view of the state of the Group’s affairs as at 31 December 2022 and of its loss for the year
then ended;
• are in accordance with IFRSs as issued by the IASB; and
• comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the
consolidated financial statements’ section of our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code), together with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Guernsey, and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Castelnau Group Ltd Annual Report 2022
41
Governance
Castelnau Group Ltd Annual Report 2022
42
Independent Auditor’s Report to the Members of Castelnau Group Limited – continued
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements of the current period. These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The key audit matter How the matter was addressed in our audit
Valuation of unquoted investments
(2022: £51.2m, and 2021: £28.2m)
The valuation of unquoted investments, which comprised 37%
(2021: 22%) of the total fair value of the Group’s investments,
requires significant judgment, use of estimates, industry
specialism and expertise and specific market consideration,
as described in notes 3a, 4.1 and 5 to the consolidated
financial statements and in the Audit Committee Report on
pages 38 to 40.
The fair value of unquoted investments might be
misstated due to the application of inappropriate methods
(methodologies), assumptions or source data for estimates
made and/or inappropriate underlying judgments made due
to error or fraud.
Our audit procedures consisted of:
• Updating our understanding of management’s processes,
policies and methodologies, and controls in relation to the
valuation of the unquoted investments and confirming our
understanding by performing walkthrough tests of design
and implementation of relevant controls in the valuation
process to confirm they are appropriately designed and
implemented;
• Obtaining and inspecting the valuation models prepared
by the Investment Manager and management’s expert,
and inspecting the supporting data to assess whether the
data used is appropriate and relevant;
• Assessing whether the valuation of unquoted investments’
accounting policy is in line with the requirements of IFRS 13
and consistently applied;
• Assessing the independence, competence and objectivity
of management’s external valuation expert;
• Obtaining the valuations prepared by management and
the valuation report prepared by management’s external
expert and challenging the valuation conducted by them
through the following;
• Holding discussions with the Investment Manager to
obtain information and understanding of how they
valued the unquoted investments and inspecting
supporting documents which we obtained to
corroborate the information provided;
• Assessing whether the valuation model used by
management to estimate the fair values of the unquoted
investments is consistent with methods usually used by
market participants for similar types of instruments;
• Reviewing key assumptions considered within
management’s and management’s external expert’s
report and ensure that these assumptions are reasonable
and consistent with the requirements of IFRS 13;
• Testing key inputs/data used in the calculation of
the fair value, such as discount rates, forecasts etc.,
through inspecting supporting documents and
discussions with management; and
• Determining if the fair value estimates are within the
range of values determined by the audit team.
Our results
Based on the audit work performed, we have not identified any
matters to report to those charged with governance in relation
to the fair value measurement of unquoted investments
valued at fair value through profit or loss.
Governance
Other information
The Directors are responsible for the other information. The other information comprises the information included
in the Annual Report and Audited Consolidated Financial Statements, but does not include the consolidated
financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law,
2008 requires us to report to you if, in our opinion:
• proper accounting records have not been kept by the Company; or
• the Company’s financial statements are not in agreement with the accounting records; or
• we have not obtained all the information and explanations, which to the best of our knowledge and belief, are
necessary for the purposes of our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on pages 36 to 37, the Directors
are responsible for the preparation of the consolidated financial statements which give a true and fair view in
accordance with IFRSs as issued by the International Accounting Standards Board (IASB), and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Castelnau Group Ltd Annual Report 2022
43
Governance
Castelnau Group Ltd Annual Report 2022
44
Independent Auditor’s Report to the Members of Castelnau Group Limited – continued
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
Governance
From the matters communicated with the directors, we determine those matters that were of most significance in
the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with section 262 of the
Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Cyril Swale
For and on behalf of Grant Thornton Limited
Chartered Accountants
St Peter Port
Guernsey
Date: 3 April 2023
Castelnau Group Ltd Annual Report 2022
45
Financial Statements
Financial
Statements
46
Castelnau Group Ltd Annual Report 2022
Financial Statements
Castelnau Group Ltd Annual Report 2022
47
Consolidated Statement of
Comprehensive Income
For the year ended 31 December 2022
Notes
31 December
2022
Total
GBP
31 December
2021
Total
GBP
Income 6 548,767 –
Expenses 7 (1,234,288) (1,968,331)
(685,521) (1,968,331)
Impairment of financial assets at amortised cost 5 (3,000,000) –
Net losses on financial assets at fair value through profit or loss 5 (30,405,675) (10,021,645)
Loss before tax (34,091,196) (11,989,976)
Tax expense 3f (2,889) –
Total comprehensive loss for the year (34,094,085) (11,989,976)
Pence Pence
Loss per ordinary share – Basic and diluted 12 (18.53) (6.57)
All items in the above statement derive from continuing operations. All revenue is attributable to the equity holders
of the Group.
The accompanying notes on pages 51 to 72 form an integral part of these Financial Statements.
Financial Statements
Castelnau Group Ltd Annual Report 2022
48
Consolidated Statement of
Financial Position
As at 31 December 2022
Notes
31 December
2022
GBP
31 December
2021
GBP
NON-CURRENT ASSETS
Investments - equity 5 122,684,739 126,617,646
Investments - loans 5 9,960,632 3,361,795
132,645,371 129,979,441
CURRENT ASSETS
Trade and other receivables 8 357,102 39,033
Cash and cash equivalents 7,652,732 44,497,139
8,009,834 44,536,172
TOTAL ASSETS 140,655,205 174,515,613
CURRENT LIABILITIES
Earn-out liability 9 – 916,667
Other payables 10 275,857 188,828
275,857 1,105,495
NON-CURRENT LIABILITIES
Earn-out liability 9 2,346,648 1,283,333
TOTAL LIABILITIES 2,622,505 2,388,828
NET ASSETS 138,032,700 172,126,785
EQUITY
Share capital 11 184,116,761 184,116,761
Retained deficit (46,084,061) (11,989,976)
TOTAL EQUITY 138,032,700 172,126,785
Number of Ordinary Shares in issue 11 183,996,059 183,996,059
NAV per Ordinary Share (pence) 13 75.02 93.55
The Financial Statements on pages 47 to 72 were approved and authorised for issue by the Board of Directors on
3 April 2023 and signed on its behalf by:
Joanne Peacegood
Director
Andrew Whittaker
Director
The accompanying notes on pages 51 to 72 form an integral part of these Financial Statements.
Financial Statements
Castelnau Group Ltd Annual Report 2022
49
Consolidated Statement of
Changes in Equity
For the year ended 31 December 2022
Note
Share Capital
GBP
Retained Deficit
GBP
Total
GBP
Opening equity 184,116,761 (11,989,976) 172,126,785
Loss for the year – (34,094,085) (34,094,085)
Closing equity 11 184,116,761 (46,084,061) 138,032,700
For the year ended 31 December 2021
Share Capital
GBP
Retained Deficit
GBP
Total
GBP
Opening equity 1 – 1
Loss for the year – (11,989,976) (11,989,976)
Issue of new Ordinary Shares 184,116,760 – 184,116,760
Closing equity 11 184,116,761 (11,989,976) 172,126,785
The accompanying notes on pages 51 to 72 form an integral part of these Financial Statements.
Financial Statements
Castelnau Group Ltd Annual Report 2022
50
Consolidated Statement of
Cash Flows
For the year ended 31 December 2022
Notes
31 December
2022
GBP
31 December
2021
GBP
Operating activities
Total comprehensive loss for the year (34,094,085) (11,989,976)
Net losses on financial assets at amortised cost 3,000,000 –
Net losses on financial assets at fair value through profit or loss 30,405,675 10,021,645
Increase in receivables 8 (318,069) (39,032)
Increase in provisions 9 146,648 2,200,000
Increase in payables 10 87,029 188,828
Net cash (used in)/from operating activities (772,802) 381,465
Investing activities
Purchases of equity and bonds 5 (107,826,128) (136,639,291)*
Loans issued 5 (13,325,000) (3,675,000)*
Sale/maturity of equity and bonds 5 81,353,360 –
Cash received from repayment of loans 5 3,726,163 313,205
Net cash used in investing activities (36,071,605) (140,001,086)
Financing activities
Issue of Ordinary Shares 11 – 184,116,760
Net cash flow from financing activities – 184,116,760
(Decrease)/increase in cash and cash equivalents (36,844,407) 44,497,139
Cash and cash equivalents at beginning of year 44,497,139 –
Cash and cash equivalents at end of year 7,652,732 44,497,139
The accompanying notes on pages 51 to 72 form an integral part of these Financial Statements.
* The 31 December 2021 amounts have been reclassified to conform with the current year presentation of separate disclosure for transactions
related to equity, bonds and loans. Purchases of equity and bonds of £136,639,291 and loans issued of £3,675,000 were previously shown as
purchase of investments of £140,314,291. The change in presentation was done so as to provide more reliable and more relevant information.
Financial Statements
Notes to the Consolidated Financial
Statements
For the year ended 31 December 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.
The Annual Report and Audited Consolidated Financial Statements (the “Consolidated Financial Statements” or
the “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 on page 75.
The Financial Statements of the Group are presented for the year ended 31 December 2022 and were authorised
for issue by the Board on 3 April 2023.
2. Accounting policies
a. Statement of compliance
The Financial Statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and are in compliance with The
Companies (Guernsey) Law, 2008. The Group is subject also to the continuing obligations imposed on all
investment companies whose shares are admitted to trading on the SFS of the Main Market.
These Financial Statements are presented in Sterling (“GBP or £”), which is also the Company’s functional currency.
b. Going concern
The Directors believe that, having considered the Principal risks and uncertainties disclosed on pages 28 to 30 as
well as 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 Financial Statements.
c. Basis of measurement
The Financial Statements have been prepared under the historical cost basis, except for financial assets held at
fair value through profit or loss (“FVTPL”).
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Financial Statements
Castelnau Group Ltd Annual Report 2022
52
d. New standards, interpretations and amendments adopted by the Group
A number of new standards, amendments to standards and interpretations are effective for the annual periods
beginning after 1 January 2022. None of these are expected to have a significant effect on the measurement of the
amounts recognised in the Financial Statements of the Group.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for
31 December 2022 reporting periods and have not been early adopted by the Group. These standards are not
expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions.
IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (amendments
to IAS 12)
1 January 2023
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (amendments regarding
the definition of accounting estimates)
1 January 2023
IAS 1 Disclosure of Accounting Policies (amendments to IAS 1 and IFRS Practice Statement 2) 1 January 2023
IAS 1 Presentation of Financial Statements (amendments regarding the classification of liabilities
and the disclosure of accounting policies)
1 January 2024
e. Basis of consolidation
The Group’s Financial Statements consolidate those of the parent company and its Subsidiary as of 31 December
2022. 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
• 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.
Notes to the Consolidated Financial Statements – continued
Financial Statements
3. Significant accounting policies
a. Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are
transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expired.
Financial assets
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component all financial assets are
initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets are classified into one of the following categories:
• amortised cost
• fair value through profit or loss (FVTPL), or
• fair value through other comprehensive income (FVOCI).
In the periods presented the Group does not have any financial assets categorised as FVOCI.
The classification is determined by both:
• the entity’s business model for managing the financial asset, and
• the contractual cash flow characteristics of the financial asset.
Subsequent measurement of financial assets
a) Investments as FVTPL
Investments held at fair value through profit or loss are initially recognised at fair value, being the consideration
given and excluding transaction or other dealing costs associated with the investment. Refer to note 4 and note 5
for judgements, estimations and assumptions made in relation to financial instruments.
After initial recognition, investments are measured at fair value through profit or loss. Gains or losses on
investments measured at fair value through profit or loss are included in the Consolidated Statement of
Comprehensive Income and transaction costs on acquisition or disposal of investments are also included in the
Consolidated Statement of Comprehensive Income.
For investments that are actively traded in organised financial markets, fair value is determined by reference to
stock exchange quoted market bid prices at the close of business on the year-end date. All purchases and sales
of investments are recognised on the trade date, i.e. the date that the Group commits to purchase or sell an asset.
Investments held at fair value through profit or loss are initially recognised at fair value, being the consideration
given and excluding transaction or other dealing costs associated with the investment.
Unquoted investments are measured at fair value, which is determined by the Directors in accordance with the
International Private Equity and Venture Capital valuation guidelines and IFRS 13. Valuation reports provided by the
Investment Manager of the unquoted investments are used to calculate the fair value where there is evidence
Castelnau Group Ltd Annual Report 2022
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Financial Statements
Castelnau Group Ltd Annual Report 2022
54
that the valuation is derived using fair value principles that are consistent with the Group’s accounting policies
and valuation methods. Such valuation reports may be adjusted to take account of changes or events to the
reporting date, or other facts and circumstances which might impact the underlying value.
Silverwood Brands plc was valued using a quoted price from a market that is viewed as inactive.
Upon the sale of an investment, in part or wholly, the fair value would be the expected sale price where this is
known or can be reliably estimated.
b) Financial assets at amortised cost
The Group’s financial assets at amortised cost are made up of loans to investments and receivables.
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not
designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual
cash flows, and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial.
Fair Value Hierarchy
Under IFRS 13, investment companies are required to disclose the fair value hierarchy that classifies financial
instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to
estimate the fair values.
Level 1 Valued using quoted prices in active markets for identical assets
Level 2 Valued by reference to valuation techniques using observable inputs other than quoted prices included
within Level 1
Level 3 Valued by reference to valuation techniques using inputs that are not based on observable market data
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to
the fair value measurement of the relevant asset.
Impairment of financial assets
IFRS 9’s impairment requirements use forward-looking information to recognise expected credit losses– the
‘expected credit loss (ECL) model’. Instruments within the scope of the requirements included loans and trade
receivables.
The Group considers a broader 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.
Notes to the Consolidated Financial Statements – continued
Financial Statements
In applying this forward-looking approach, a distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that
have low credit risk (‘Stage 1’) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose
credit risk is not low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category (i.e. Stage 1) while ‘lifetime expected credit
losses’ are recognised for the second category (i.e. Stage 2).
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over
the expected life of the financial instrument.
Receivables
Other receivables are amounts due in the ordinary course of business. If collection is expected in one year or
less, they are classified as current assets. If not, they are presented as non-current assets. Other receivables are
recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate
method, less provision for impairment assessed using the simplified approach of expected credit loss model on
experience of previous losses and expectation of future losses.
Financial liabilities
Classification and measurement of financial liabilities
The Group’s financial liabilities are made up of trade and other payables. Financial liabilities are initially measured
at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability
at FVTPL.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except
for financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses
recognised in profit or loss. All interest-related charges and, if applicable, changes in an instrument’s fair value
that are reported in profit or loss are included within finance costs or finance income.
b. Income and expenses
All income and expenses are included in the Consolidated Statement of Comprehensive Income on an accrual
basis and are recognised through profit or loss in the Consolidated Statement of Comprehensive Income.
c. Foreign currency
The currency of the primary economic environment in which the Company operates (the functional currency)
is pounds sterling (“sterling”), which is also the presentational currency of the Group. Transactions involving
currencies other than sterling are recorded at the exchange rate ruling on the transaction date. At each year end
date, monetary items and non-monetary assets and liabilities, which are fair valued, and which are denominated
in foreign currencies, are retranslated at the closing rates of exchange. Such exchange differences are included
in the Consolidated Statement of Comprehensive Income and allocated to capital if of a capital nature or to
revenue if of a revenue nature. Exchange differences allocated to capital are taken to gains on disposal or
investment holding losses, as appropriate.
Castelnau Group Ltd Annual Report 2022
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Financial Statements
Castelnau Group Ltd Annual Report 2022
56
d. Cash and cash equivalents
Cash and Cash Equivalents in the Consolidated Statement of Cash Flows comprise cash held at bank.
e. Share capital
The Group’s Ordinary Shares are classified as equity.
f. Taxation
The parent Company has been granted Exempt Status under the terms of The Income Tax (Exempt Bodies)
(Guernsey) Ordinance, 1989 to income tax in Guernsey. Its liability for Guernsey taxation is limited to an annual fee
of £1,200 (2021: £1,200). The activities of the Company do not constitute relevant activities as defined by the Income
Tax (Substance Requirements) (Implementation) Regulations, 2018 (as amended) and as such the Company was
out of scope.
The taxation expense represents the aggregate amount of current and deferred tax recognised in the reporting
period for the Subsidiary. Tax is recognised in profit or loss, except to the extent that it relates to items recognised
in other comprehensive income or directly in equity. In this case, tax is recognised in other comprehensive income
or directly in equity, respectively.
Current tax is recognised on taxable profit for the current and past periods. Current tax is measured at the
amounts of tax expected to pay or recover using the tax rates and laws that have been enacted or substantively
enacted at the reporting date.
The main components of income tax for the Subsidiary are detailed below:
31 December
2022
GBP
31 December
2021
GBP
Profit before tax 15,204 –
Tax chargeable Tax rate 19% 2,889 –
Deferred tax – –
Income tax expense 2,889 –
Reconciliation of profit before tax and the accounting profit:
31 December
2022
GBP
31 December
2021
GBP
Accounting profit before tax 11,937 –
Disallow: Pension Creditor 3,267 –
Adjusted profit before tax 15,204 –
Notes to the Consolidated Financial Statements – continued
Financial Statements
g. Provisions, contingent assets and contingent liabilities
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the
most reliable evidence available at the reporting date, including the risks and uncertainties associated with the
present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their
present values, where the time value of money is material.
No liability is recognised if an outflow of economic resources as a result of present obligations is not probable.
Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.
h. Operating segments
The Board has considered the requirements of IFRS 8 “Operating Segments”. Segment information for the financial
year is detailed in note 6.
4. Judgements, estimations or assumptions
The Directors have reviewed matters requiring judgements, estimations or assumptions. The preparation of the
Financial Statements requires management to make judgements, estimations or assumptions that affect the
amounts reported for assets and liabilities as at the year-end date and the amounts reported for revenue and
expenses during the year. However, the nature of the estimation means that actual outcomes could differ from
those estimates.
Key sources of estimation uncertainty
4.1 Investment valuation
The critical estimate or assumption that may have a significant risk of causing a material adjustment to the
Group’s NAV relates to the valuation of the Group’s unquoted (Level 3) investments, which is approximately 37% of
the Group’s NAV.
The Level 3 holdings are valued in line with significant accounting policies as disclosed in note 3(a).
Whilst the Board considers the methodologies and assumptions adopted in the valuation of unquoted
investments are reasonable and robust, because of the inherent uncertainty of the valuation, the values used
may differ significantly from the values that would have been used had a ready market for the investment existed
and the differences could be significant. These values may need to be revised as circumstances change and
material adjustments may still arise as a result of revaluation of the unquoted investments fair value within the
next year. See note 5 for further information regarding the valuation of investments and the sensitivity of fair value
to changes in unobservable inputs.
Other sources of estimation uncertainty
4.2 Earn-out liability
The total purchase price for Rawnet included both an up-front consideration as well as an earn-out payment
contingent on future performance of the business. In addition to the valuation of the investment, there was an
assessment of the fair value of the liability related to the potential future payment of the earn-out (see note 9). In line
with IFRS 3, the earn-out payment has been recognised at fair value (taking into account the probability of payment
and a discount rate). The earn-out payment is considered to be additional purchase price and as such the fair
value of the earn-out payment has been recorded as a liability and the fair value considered part of the purchase
price. Subsequent remeasurement of the liability is recognised under expenses in the Consolidated Statement of
Comprehensive Income as “Change in fair value of contingent consideration”.
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Financial Statements
Castelnau Group Ltd Annual Report 2022
58
4.3 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 31 December 2022, the net asset value of CGSL is £59,048 which is made up of assets of £192,360 and
liabilities of £133,312.
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 on page 3.
Judgements
4.4 Assessment as investment entity
Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at
fair value through profit or loss rather than consolidate them. The criteria which define an investment entity are as
follows:
(i) An entity that obtains funds from one or more investors for the purpose of providing those investors with
investment services;
(ii) An entity that commits to its investors that its business purpose is to invest solely for returns from capital
appreciation, investment income or both; and
(iii) An entity that measures and evaluates the performance of substantially all of its investments on a fair value
basis.
The Group has several investors that have access to investment management services and opportunities. In
addition, some of the investors are not related parties of the Group or members of the group.
The Group’s objective to provide a “high rate of compound return” is consistent with that of an investment entity.
The Group has clearly defined exit strategies for each of its investment classes, these strategies are again
consistent with an investment entity.
The Group uses a variety of methods or valuation techniques and makes assumptions based on market
conditions existing at each Consolidated Statement of Financial Position date to value financial assets at fair value
through profit or loss that are not traded in active markets. The valuation techniques have been prepared with the
goal that fair value measurements derived when using these valuation techniques are compliant with IFRS.
The Directors, upon considering the above criteria, have concluded that the Group meets the definition of an
investment entity. Therefore, the Group has classified its investments at fair value through profit or loss in the
Consolidated Statement of Financial Position with the exception of CGSL. 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 2(e).
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2022
59
5. Investments in unconsolidated subsidiaries/associates
For the year ended 31 December 2022
FVTPL
Bonds
GBP
FVTPL
Equity
GBP
Amortised cost
Loans
GBP
Total
GBP
INVESTMENTS
Opening portfolio cost – 136,639,291 3,361,795 140,001,086
Purchases at cost 81,353,973 26,472,155 13,325,000 121,151,128
Proceeds on maturity/principal
repayment
(81,353,360) – (3,726,163) (85,079,523)
Realised losses on maturity (613) – – (613)
Cost – 163,111,446 12,960,632 176,072,078
Unrealised gains on investments – 5,913,346 – 5,913,346
Unrealised losses on investments/
impairment*
– (46,340,053) (3,000,000) (49,340,053)
Fair value/carrying amount – 122,684,739 9,960,632 132,645,371
Realised losses on maturity (613) – – (613)
Movement in unrealised gains on
investments
– 5,143,839 – 5,143,839
Movement in unrealised losses on
investments/impairment*
– (35,548,901) (3,000,000) (38,548,901)
Net losses on financial assets (613) (30,405,062) (3,000,000) (33,405,675)
For the year ended 31 December 2021
Bonds
GBP
Equity
GBP
Loans
GBP
Total
GBP
INVESTMENTS
Opening portfolio cost – – – –
Purchases at cost – 136,639,291 3,675,000 140,314,291
Principal repayment – – (313,205) (313,205)
Cost – 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/carrying amount – 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)
* £3,000,000 impairment of financial assets at amortised cost relates to a loan facility with Ocula Technologies Holdings Limited. See below for
further information.
Financial Statements
Castelnau Group Ltd Annual Report 2022
60
The transaction charges on the purchase and sale of investments during the current year were £2,904 (31
December 2021: £14,134) included in the Consolidated 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 67.45%
Showpiece Technologies Limited 12 November 2021 United Kingdom 80%
Cambium International Limited 14 October 2021 Cayman Islands 60.14%
Phoenix SG Limited 14 October 2021 Cayman Islands 62.66%
Silverwood Brands plc 13 October 2022 United Kingdom 0.88%
Loans
As at 31 December 2022 the Group had a loan facility of £3,000,000 with Ocula Technologies Holdings Limited as
borrower with a termination date of 6 May 2024, and no interest accruing or payable. Post year end (3 March
2023) this 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. The Group held 55.08% of the issued share capital after the Lloyds Banking Group investment.
The Group has a loan facility of £4,200,000 with Showpiece Technologies Limited as borrower. An extension of 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 Group has a loan facility of £2,000,000 with the Cambium Group as borrower. The termination date is 11 March
2023. No interest shall accrue or be payable.
The Group has two loan facilities for £4,399,999 dated 13 October 2022 and for £1,500,000 dated 15 December 2022
with Silverwood Brands plc as borrower. The termination date for both facilities is on the first anniversary of the first
drawdown of each Loan. Interest is accrued at 15% on both facilities.
The utilised amounts on each facility are disclosed on the Portfolio Holdings on page 7.
31 December
2022
GBP
31 December
2021
GBP
Classification
Level 1 69,315,063 98,409,862
Level 2 2,171,429 –
Level 3 51,198,247 28,207,784
Total non-current investments held at ‘FVTPL’ 122,684,739 126,617,646
There were no transfers between levels during the year (31 December 2021: Nil).
Notes to the Consolidated Financial Statements – continued
Financial Statements
Measurement of fair value of investments
Listed assets are priced using end of day market prices. For investments that are not listed, Phoenix has processes
in place to ensure valuations provide an objective, consistent and transparent basis for the fair value of unquoted
securities in accordance with International Financial Reporting Standards. Phoenix creates individual valuation
frameworks for all unlisted securities. The final framework will vary depending on the characteristics of the holding
(for instance it may also incorporate a listed aspect or loan).
To ensure the unlisted valuation framework is robust, Phoenix engages a third-party valuation expert to review the
methodologies and assumptions for each new material unlisted security. Then on at least a semi-annual basis the
third-party valuation expert will review and verify the framework and carry out an independent valuation against
which the Investment Managers valuation is compared. Independent value verification may be more frequent
depending on the characteristics of each investment and the occurrence of a material change in value. Although
Phoenix is ultimately responsible for the final valuation, in practice, we would work with the third-party valuation
expert to agree a valuation. If Phoenix could not agree, a final decision would be made at Board level.
There may be circumstances when Phoenix values an unlisted security at cost when that represents Phoenix’s
best estimate of fair value. In this scenario and when investments are deemed immaterial in the context of their
value relative to the total portfolio value and there are no significant changes to the portfolio company from when
it was purchased (i.e., no material changes to cash flow projections, no material change in the performance of
the company, and no transactions have taken place of the portfolio company shares with other parties), then no
third-party valuation review will be obtained.
Unlisted equities will be valued monthly by the Phoenix investment team. These valuations will then be reviewed
and approved by Phoenix’s business team who are functionally separate from the investment team. Ultimate
approval of the valuation is from Phoenix’s COO. The Phoenix business team will liaise directly with the third-party
valuation expert who review PAMP’s valuation methodology to ensure the framework and valuation is robust.
The following valuation techniques are used for instruments categorised in Level 3:
Investment in Rawnet – The fair value of this investment was determined using a discounted cash flow model.
This approach indicates fair value based on the present value of the cash flows that a business (or security) is
expected to generate in the future. Fair value is estimated by discounting the expected cash flows of a business to
present value at a discount rate that reflects the timing and risk of collecting the projected cash flows.
Investment in Phoenix S.G (“PSG”) – PSG is a company incorporated in the Cayman Islands whose sole purpose
was to make a number of investments in Stanley Gibbons entities. The Company’s investment in PSG is valued by
utilising the Net Asset Value per share of PSG. The Net Asset Value of PSG includes its shares in Stanley Gibbons and
some other assets related to Stanley Gibbons. During the year, Stanley Gibbons delisted from the London Stock
Exchange. At year end the fair value of the equity held in Stanley Gibbons was determined using a discounted
cash flow model. The fair value of PSG was determined based on the sum of all approach. The other assets include
a loan to Stanley Gibbons and rights to receivables in relation to the sale of stamp inventories.
Investment in Cambium International (“Cambium”) – Cambium is a company incorporated in the Cayman
Islands whose sole purpose was to investment in Cambium Group UK Holdings Limited. The Company’s investment
in Cambium is valued by utilising the Net Asset Value per share of Cambium. The fair value of Cambium includes
it’s 100% ownership of Cambium Group UK Holdings Limited. The fair value of Cambium was determined using a
discounted cash flow model.
Castelnau Group Ltd Annual Report 2022
61
Financial Statements
Castelnau Group Ltd Annual Report 2022
62
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 31 December 2022 are shown below:
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)*
Discount rate 15% An increase to 16%/(decrease to 14%)
would (decrease)/increase fair value by
(-9.52%)/11.34%
Sales rate exc auctions 10% An increase to 12%/(decrease to 8%)
would increase/(decrease) fair value
by 5.02%/(-4.93%)
Sales rate auctions 29% An increase to 31%/(decrease to 27%)
would increase/(decrease) fair value
by 3.88%/(-3.84%)
Coins margins exc auctions 28% An increase to 30%/(decrease to 26%)
would increase/(decrease) fair value
by 4.06%/(-4.16%)
Coins auction sales margins 20% An increase to 22%/(decrease to 18%)
would increase/(decrease) fair value
by 4.11%/(-4.20%)
Stamps margins exc
auctions
44% An increase to 45%/(decrease to 43%)
would increase/(decrease) fair value
by 1.78%/(-1.83%)
Stamp auction sales
margins
27% An increase to 29%/(decrease to 25%)
would increase/(decrease) fair value
by 6.80%/(-6.85%)
Investment in Rawnet FY22-26 Compound sales
Growth rate
19% An increase to 24%/(decrease to 15%)
would increase/(decrease) fair value
by 82%/(-59%)
Discount rate 15% An increase to 18%/(decrease to 12%)
would (decrease)/increase fair value
by (-19%)/24%
Investment in Cambium Discount rate 12.5% An increase to 13.5%/(decrease to
11.5%) would (decrease)/increase fair
value by (-6.76%)/7.65%
Revenue growth rate 12% An increase to 13%/(decrease to 11%)
would increase/(decrease) fair value
by 7.35%/(-7.65%)
Group product margin 42% An increase to 44%/(decrease to 40%)
would increase/(decrease) fair value
by 0.88%/(-1.18%)
* The sensitivity analysis for the stamp inventories has been calculated on a weighted average basis.
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2022
63
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 31 December 2021 are shown below:
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.
Financial Statements
Castelnau Group Ltd Annual Report 2022
64
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.
The accounting policy for the reportable segments are consistent with the Group’s accounting policy described in
note 3. Segment information for the financial year is as follows:
Castelnau
Group
Limited
Castelnau
Services
Group
Limited
Total
31 December
2022
Income
Consultancy services – 327,895 327,895
Interest income 220,872 – 220,872
Segment income 220,872 327,895 548,767
Gross wages – (299,141) (299,141)
Other expenses (918,330) (16,817) (935,147)
(918,330) (315,958) (1,234,288)
Net losses on financial assets (33,405,675) – (33,405,675)
Segment (loss)/profit before tax (34,103,133) 11,937 (34,091,196)
Taxation – (2,889) (2,889)
Segment comprehensive (loss)/income (34,103,133) 9,048 (34,094,085)
Segment assets 140,462,845 192,360 140,655,205
Segment liabilities (2,489,193) (133,312) (2,622,505)
Segment net assets 137,973,652 59,048 138,032,700
As at 31 December 2021 the Group was engaged in a single segment of business, being Castelnau Group Limited.
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2022
65
7. Expenses
31 December
2022
GBP
31 December
2021
GBP
Administrator's fee 78,386 50,821
Audit fees 45,841 43,000
Bank interest – 400
Change in fair value of contingent consideration 146,648 (550,001)
Depositary fee 30,297 7,344
Directors' fee 135,000 27,370
Employee benefits* 299,141 –
Investment transaction charges 2,904 14,134
Legal and professional fees** 258,358 47,856
Operating expenses 91,568 –
Set up costs – 2,247,739
Sundry costs 115,848 72,324
Trustee fee 30,297 7,344
1,234,288 1,968,331
** Includes non-audit fees of £7,000.
7.1 Employee benefits expense
31 December
2022
GBP
31 December
2021
GBP
*Included in expenses
Wages and salaries 281,692 –
Employers national insurance contributions 14,183 –
Pension costs 3,266 –
299,141 –
8. Trade and other receivables
31 December
2022
GBP
31 December
2021
GBP
Prepayments 51,860 39,032
Income receivable 151,468 –
Trade receivables 153,774 1
357,102 39,033
Financial Statements
Castelnau Group Ltd Annual Report 2022
66
9. Earn-out liability
31 December
2022
GBP
31 December
2021
GBP
Earn-out liability - Non-current 2,346,648 1,283,333
Earn-out liability - Current – 916,667
2,346,648 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%.
10. Other payables
31 December
2022
GBP
31 December
2021
GBP
Other accrued expenses 156,199 188,828
Trade payables 93,923 –
Social security and other taxes 25,735 –
275,857 188,828
11. Share capital
31 December
2022
31 December
2021
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 year ended 31 December 2022 or during the year
ended 31 December 2021. No shares were cancelled during either year.
No shares were held in Treasury or sold from Treasury during the year ended 31 December 2022 or during the year
ended 31 December 2021.
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2022
67
12. Loss per ordinary share
Loss per share is based on the loss of £34,094,085 (31 December 2021: £11,989,976) attributable to the weighted
average of 183,996,059 (31 December 2021: 182,573,503) Ordinary Shares in issue during the year.
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.
13. Net assets per ordinary share
The figure for net assets per Ordinary Share is based on £138,032,700 (2021: £172,126,784) divided by 183,996,059
(2021: 183,996,059) voting Ordinary Shares in issue at 31 December 2022.
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 Financial Statements.
Net assets
GBP
NAV per share
Pence
NAV as published on 31 December 2022 138,032,700 75.02
NAV as disclosed in these financial statements 138,032,700 75.02
14. Material agreements
Details of the management, administration and secretarial contracts can be found in the Directors’ Report on
page 20. There were no transactions with directors other than disclosed in note 15. As at 31 December 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 year, performance fees of Nil (31 December 2021: Nil) were charged to the Group, of which Nil
(31 December 2021: Nil) remained payable at the end of the year.
Financial Statements
Castelnau Group Ltd Annual Report 2022
68
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 year,
administration and secretarial fees of £78,386 (31 December 2021: £50,821) were charged to the Group, of which
£35,206 (31 December 2021: £18,361) remained payable at the end of the 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 year,
depositary fees of £30,297 (31 December 2021: £7,344) were charged to the Group, of which £7,043 (31 December
2021: £7,344) remained payable at the end of the 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
year, registrar fees of £5,803 (31 December 2021: £4,219) were charged to the Group, of which £11,613 was prepaid as
at 31 December 2022 (31 December 2021: £4,219 remained payable).
15. Related parties
Directors’ remuneration & expenses
The Directors’ fees for the year are as follows;
31 December
2022
GBP
31 December
2021
GBP
Joanne Peacegood 40,000 24,137
Andrew Whittaker 35,000 17,836
Joanna Duquemin Nicolle 30,000 11,219
David Stevenson 30,000 6,082
Lorraine Smyth* - -
Graham Shircore** - -
135,000 59,274
No Directors’ fees were outstanding as at 31 December 2022 (31 December 2021: £Nil).
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2022
69
Shares held by related parties
The number of Ordinary Shares held by the Directors were as follows;
31 December
2022
Number of
ordinary
shares
31 December
2021
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* – –
Graham Shircore** – –
* Resigned on 15 December 2022.
** Appointed on 15 December 2022.
As at 31 December 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 was a Director of the Company until 15 December 2022. She was appointed as Director of the
subsidiary on 14 June 2022. She is an employee of Phoenix Asset Management Partners Limited, the Investment
Manager. Ms. Smyth is currently a Director of Rawnet which is a portfolio holding.
Graham Shircore is a Director of the Group and an employee of Phoenix Asset Management Partners Limited, the
Investment Manager.
The Company has entered into an agreement with Ocula, the “Ocula Castelnau Software Services Agreement”,
where Ocula charged the Company £200,000 for the year ended 31 December 2022, to provide services to some of
the Company’s portfolio companies.
16. Financial instruments – risk analysis
The general risk analysis undertaken by the Board and its overall policy approach to risk management are set out
in the Directors’ Report. Issues associated with portfolio distribution and concentration risk are discussed in the
Investment Policy section of the Strategic Report. This note, which is incorporated in accordance with accounting
standard IFRS 7, examines in greater detail the identification, measurement and management of risks potentially
affecting the value of financial instruments and how those risks potentially affect the performance and financial
position of the Group. The risks concerned are categorised as follows:
(a) Potential Market Risks, which are principally:
(i) Currency Risk
Financial Statements
Castelnau Group Ltd Annual Report 2022
70
(ii) Interest Rate Risk and
(iii) Other Price Risk
(b) Liquidity Risk
(c) Credit Risk; and
(d) Capital management policies and procedures
Each is considered in turn below:
A (i) Currency Risk
The portfolio as at 31 December 2022 was invested in sterling securities and there was no currency risk arising from
the possibility of a fall in the value of sterling impacting upon the value of investments or income.
The Group had no foreign currency borrowings at 31 December 2022 or 31 December 2021 and no sensitivity
analysis is presented for this risk.
A (ii) Interest Rate Risk
The Group did not hold fixed interest securities at 31 December 2022 or 31 December 2021.
With the exception of cash, no interest rate risks arise in respect of any current asset. All cash held as a current
asset is sterling denominated, earning interest at the bank’s or custodian’s variable interest rates.
The Group had no borrowings at 31 December 2022 or 31 December 2021.
A (iii) Other Price Risk
The principal price risk for the Group is the price volatility of shares that are owned by the Group. As described in
the Investment Manager’s Review, the Group spreads its investments across different sectors and geographies,
but, as shown by the Portfolio Analysis in the Business Review, the Group may maintain relatively strong
concentrations in particular sectors selected by the Investment Manager.
The effect on the portfolio of a 10.0% increase or decrease in market prices would have resulted in an increase
or decrease of £12,268,474 (2021: £9,840,986) in the investments held at fair value through profit or loss at the
year end, which is equivalent to 8.89% (2021: 5.72%) in the net assets attributable to equity holders. This analysis
assumes that all other variables remain constant.
B Liquidity Risk
The following table analyses the Group’s liabilities into relevant maturity groupings based on the maturities at the
Consolidated Statement of Financial Position date. The amounts in the table are the undiscounted net cash flows
on the financial liabilities:
1-12
months
More than 12
months Total
As at 31 December 2022
Earn-out liability – 2,346,648 2,346,648
Other payables 275,857 – 275,857
275,857 2,346,648 2,622,505
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2022
71
1-12
months
More than 12
months Total
As at 31 December 2021
Earn-out liability 916,667 1,283,333 2,200,000
Other payables 188,828 – 188,828
1,105,495 1,283,333 2,388,828
C Credit Risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to
credit risk from financial assets including loans, cash and cash equivalents held at banks, and trade and other
receivables.
Agency credit ratings do not apply to the Group’s investment in loans. The credit quality of the loans are deemed
to be reflected in the fair value of the investee company. Financial assets that are stated at amortised cost are
reviewed and assessed for impairment at each reporting date in line with the expected credit loss policy.
The Group invests in quoted and unquoted equities and fixed interest securities which are level 1, level 2 and level
3 investments. The majority of cash is currently placed with The Northern Trust Company. The Group is subject to
credit risk to the extent that this institution may be unable to return this cash. The Northern Trust Company is a
wholly owned subsidiary of The Northern Trust Corporation. The Northern Trust Corporation is publicly traded and
a constituent of S&P 500. The Northern Trust Corporation has a credit rating of A+ from Standard & Poor’s and
A2 from Moody’s. At 31 December 2022, cash held at bank comprised £7,652,732 (2021: £44,497,139) held by the
Depository which is the maximum credit risk that the Group is exposed to.
Credit Risk arising on transactions with brokers relates to transactions awaiting settlement. This risk is considered
to be very low because transactions are almost always undertaken on a delivery versus payment basis with
member firms of the London Stock Exchange.
D Capital management policies and procedures
The Group’s capital management objectives are:
• to ensure the Group’s ability to continue as a going concern; and
• to provide an adequate return to Shareholders by pursuing investment policies commensurately with the level
of risk.
The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as
presented on the face of the Consolidated Statement of Financial Position.
The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial
liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to Shareholders (within the statutory limits applying
to investment trusts), return capital to Shareholders, issue new shares, or sell assets.
Financial Statements
Castelnau Group Ltd Annual Report 2022
72
Notes to the Consolidated Financial Statements – continued
17. Post year end events
These Financial Statements were approved for issuance by the Board on 3 April 2023. Subsequent events have
been evaluated to this date.
On 20 January 2023, the Company entered into an unsecured term loan facility to borrow up to an amount of
£60,000,000 from Phoenix UK Fund Limited pursuant to the Standby Loan Facility A, as amended and restated on
1 February 2023, which is currently nil drawn.
On 20 January 2023, the Company entered into an unsecured term loan facility to borrow up to an amount of
£49,000,000 from Phoenix UK Fund Limited pursuant to the Standby Loan Facility B, as amended and restated on
1 February 2023, which is currently nil drawn.
On 23 January 2023, the boards of directors of Dignity plc (“Dignity”) and Yellow (SPC) Bidco Limited (“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”).
Further to the Announcement, 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 is 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.
The subsequent Placing Programme allows the Company to issue up to a further 300 million Ordinary Shares and/
or C Shares (together the “Shares”), in aggregate, in the twelve months from the date of the Prospectus.
Further information on the Takeover Offer will be contained in the offer document, when published by Bidco.
A copy of the Prospectus is available on the Company’s website at www.castelnaugroup.com, subject to certain
access restrictions. A copy of the Prospectus will also be submitted to the National Storage Mechanism and will
shortly be available for inspection at https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/
national-storage-mechanism.
On 27 January 2023, the Phoenix UK Fund Limited signed the PUK Commitment Letter pursuant to which it agreed
that in the event the Placing does not raise Gross Proceeds of at least £10 million by 30 April 2023, it will subscribe
for such number of new Ordinary Shares at a subscription price of 75.02 pence per Ordinary Share as will provide
the Company with gross proceeds of £10 million (less the Gross Proceeds raised under the Placing (if any)).
Financial Statements
Castelnau Group Ltd Annual Report 2022
73
Alternative Performance Measures
(Unaudited)
In accordance with ESMA Guidelines on Alternative Performance Measures (“APMs”), the Board has considered
what APMs are included in the Annual Report and Audited Consolidated 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 annual report are unaudited and outside the scope of IFRS.
Discount/Premium to NAV
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 year end of 69.00p (31 December
2021: 105.50p) from the NAV per share at year end of 75.02p (31 December 2021: 93.55p) and is usually expressed as
a percentage of the NAV per share of 8.02% (31 December 2021: 12.77%). 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 year. The Board continues to be conscious of
expenses and works hard to maintain a sensible balance between good quality service and cost.
Year
ended
31 December
2022
Year
ended
31 December
2021
Average NAV for the year (A) 150,013,156 171,343,518
Operating expenses (annualised) (B) 786,345 556,863
Ongoing charges (B/A) 0.52% 0.32%
NAV Total Return
NAV total return is the percentage increase or decrease in NAV, inclusive of dividends paid and reinvested, in the
reporting 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.
Year
ended
31 December
2022
Period
ended
31 December
2021*
Opening NAV per share (A) 93.55 100.00
Closing NAV per share 75.02 93.55
Decrease in NAV per share (B) (18.53) (6.45)
NAV total return (B/A) -19.81% -6.45%
NAV per Ordinary Share
NAV per share is calculated by dividing the total net asset value of £138,032,700 (2021: £172,126,785) by the number
of shares at the end of the year of 183,996,059 shares (2021: 183,996,059). This produces a NAV per share of 75.02p
(2021: 93.55p), which was a decrease of 19.81% (2021: decrease of 6.45%*).
* From 18 October 2021 to 31 December 2021.
Financial Statements
Castelnau Group Ltd Annual Report 2022
74
Phoenix UK Fund Performance Table
The FTSE Allshare index used is with dividends reinvested.
Year
Investment Return
(Gross) NAV Return (Net) FTSE All Share Index Share Price £
May 1998-2007 210.0% 150.0% 56.0% 2,498.40
2008 -39.5% -40.2% -29.9% 1,494.31
2009 62.8% 59.7% 30.2% 2,386.48
2010 1.1% 0.0% 14.7% 2,386.37
2011 3.0% 1.9% -3.2% 2,430.75
2012 48.3% 42.2% 12.5% 3,456.27
2013 40.5% 31.3% 20.9% 4,539.47
2014 1.9% 0.1% 1.2% 4,544.25
2015 20.1% 14.7% 0.9% 5,211.13
2016 9.1% 7.6% 16.8% 5,605.58
2017 21.5% 16.3% 13.1% 6,518.69
2018 -13.6% -14.7% -9.5% 5,558.97
2019 30.3% 27.7% 19.1% 7,098.36
2020 -3.9% -4.9% -9.7% 6,748.66
2021 23.4% 18.7% 18.3% 8,011.17
2022 -16.7% -17.4% 0.2% 6,619.32
Cumulative 1098% 562% 233%
Annualised Returns 10.6% 8.0% 5.0%
Appendix (Unaudited)
Financial Statements
Castelnau Group Ltd Annual Report 2022
75
Group Information
Directors – Parent (all non-executive)
Joanne Peacegood (Chair)
Andrew Whittaker
Joanna Duquemin Nicolle
David Stevenson
Lorraine Smyth (resigned 15 December 2022)
Graham Shircore (appointed 15 December 2022)
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St. Sampson
Guernsey
GY2 4LH
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands
GY1 3QL
Financial Adviser and Broker
Liberum Capital Limited
25 Ropemaker Street
London
EC2Y 9LY
AIFM and Investment Manager
Phoenix Asset Management Partners Limited
64-66 Glentham Road
London
SW13 9JJ
Solicitors to the Group as to English law
Gowling WLG (UK) LLP
4 More Riverside
London
SE1 2AU
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
Solicitors to the Group as to Guernsey law
Carey Olsen (Guernsey) LLP
PO Box 96,
Carey House
Les Banques
St Peter Port
Guernsey
Channel Islands
GY1 4BZ
Custodian and Depositary
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands
GY1 3DA
Independent Auditor
Grant Thornton Limited
St James Place
St James Street
St Peter Port
Guernsey
GY1 2NZ
www.castelnaugroup.com
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands
GY1 3QL