www.castelnaugroup.com
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands
GY1 3QL
Annual Report and Audited
Consolidated Financial Statements
For the year ended 31 December 2023
Strategic Report
Summary Information ............................................................................................................. 3
Chair’s Statement ...................................................................................................................... 5
Holdings ..........................................................................................................................................7
Portfolio Analysis .........................................................................................................................8
The Alternative Investment Fund Manager (“AIFM”)
and Investment Manager’s Report ..................................................................................... 9
Statement from the CIO of the Investment Manager .............................................. 14
Governance
Board Members ........................................................................................................................ 16
Directors’ Report ........................................................................................................................18
Directors’ Remuneration Report ....................................................................................... 34
Statement of Directors’ Responsibilities ........................................................................ 35
Audit Committee Report .......................................................................................................37
Independent Auditor’s Report ........................................................................................... 40
Financial Statements
Consolidated Statement of Comprehensive Income ............................................. 46
Consolidated Statement of Financial Position ............................................................47
Consolidated Statement of Changes in Equity .......................................................... 48
Consolidated Statement of Cash Flows ....................................................................... 49
Notes to the Consolidated Financial Statements ..................................................... 50
Alternative Performance Measures (Unaudited)
...............80
Appendix (Unaudited)
.........................................................................................81
Group Information
.................................................................................................. 82
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 2023
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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 2023
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Castelnau Group Ltd Annual Report 2023
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Strategic Report
Summary
Information
The Group
Castelnau Group Limited (the “Company”, “Castelnau”
or “CGL”) and its subsidiary (collectively, the “Group” or
“Castelnau Group”) is a Guernsey domiciled closed-
ended investment company which was incorporated
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’s Ordinary
Shares were admitted to trading 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”) comprise the
financial statements of Castelnau Group Limited and
Castelnau Group Services Limited (incorporated on
14 June 2022).
Investment Objective
The Group’s investment objective is to compound
Shareholders’ capital at a higher rate of return than the
FTSE All-Share Total Return Index over the long term.
Investment Policy
The Group will seek to achieve a high rate of
compound return over the long term by carefully
selecting investments using a thorough and objective
research process and paying a price which provides
a material margin of safety against permanent loss of
capital, but also a favourable range of outcomes.
The Group will follow a high conviction investment
strategy. The expertise and processes developed by
the Investment Manager can be applied to all parts of
the capital structure of a business, both private and
publicly quoted. These positions could be represented
by a minority stake, a control position combined with
operational involvement, full ownership of a company,
a joint venture, a loan or convertible instrument, a
short position or any other instrument which allows the
Group to access value.
The Group may select investments from all asset
classes, geographies and all parts of the capital
structure of a business. Both private and public
markets are within the scope of the Group’s
investment policy. The constraints on the Investment
Manager lie in the high standards, strict hurdles and
diligent processes used to select investments. These
constraints help to maximise returns by reducing
mistakes, enforcing a margin of safety and only
accepting investments with a favourable range
of outcomes.
The Group expects to hold a concentrated portfolio
of investments and the Group will not seek to reduce
concentration risk through diversification. The
opportunity set will dictate the number of holdings
and the weighting of investments in the Portfolio. The
investments with the best return profiles will receive the
largest weightings. The Group will therefore have no set
diversification policies.
The volatility of mark-to-market prices does not
affect the investment process. It is likely that volatility
in the market price of a listed investment will provide
attractive entry or exit points and so investors should
expect high volatility to sit alongside the high
long-term compounding rates that the Group is
aiming to achieve.
The constituents of local indices, the weightings of
investments in these indices and the volatility of the
indices relative to the Group will not affect investment
decisions. It is anticipated that agnosticism towards
local indices will help focus research efforts, decision
making and ultimately investment performance.
The Group may invest directly or through special
purpose vehicles if considered appropriate.
Shareholder Information
As at 31 December 2023, the number of Ordinary
Shares in issue was 318,635,256 (31 December 2022:
183,996,058). For further details, see note 12 to the
Financial Statements. The existing clients of Phoenix
Asset Management Partners Ltd (the “Investment
Manager”, “Phoenix” or “PAMP”) made up 70.3% of the
issued shares and the investment from SPWOne III
Limited, 7.6%.
Castelnau Group Ltd Annual Report 2023
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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.
Income and expenses have been accrued in line with
the accounting policies during the year.
The Group’s loss before tax for the year amounted to
£7,772,322 (31 December 2022: £34,091,196).
The benchmark is the FTSE All-Share Index (total
return). The Group’s performance since PAMP was
appointed is shown below:
Summary Information - continued
Year ended
31 December
2023
pence
Year ended
31 December
2022
pence
Change/
return
%
NAV per Ordinary Share* 72.58 75.02 (3.25)
Ordinary Share price 75.50 69.00 9.42
Benchmark return 7.92
Source: Bloomberg, Phoenix Asset Management Partners Limited.
The Ongoing Charges Ratio was as follows:
Year ended
31 December
2023
Year ended
31 December
2022
Ongoing charges ratio* 0.59 0.52
* 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 80.
Premium/Discount to NAV
The premium/discount of the Ordinary Share price to
NAV per Ordinary Share is closely monitored by the
Board. The Ordinary Share price closed at a 4.02%
premium to the NAV per Ordinary Share as at 31
December 2023 (31 December 2022: discount of 8.02%).
Fees
The Investment Management Agreement with Phoenix
Asset Management Partners Ltd (“PAMP”) creates
significant Shareholder alignment, as PAMP does not
earn a management fee, but earns a performance fee
only, which is paid in shares, and not in cash.
The Company’s performance is measured over
consecutive periods of not less than three years (each
a “Performance Period”) and the performance fee
is equal to one-third of the relative outperformance
of the NAV Total return to the FTSE All-Share Total
Return Index for each Performance Period. 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 year.
Castelnau Group Ltd Annual Report 2023
5
Strategic Report
Chair’s
Statement
Performance Review
This report covers a twelve-month period from
1 January 2023 to 31 December 2023.
The total number of Ordinary Shares in the Company
at the year end date was 318,635,256 versus
183,996,058 at year end 2022, which equates to a 73.2%
increase year-on-year. This increase was primarily
driven by the share issuance linked to the acquisition of
Dignity Plc (“Dignity”) during the year, details of which
can be found in note 12 to the Financial Statements.
The NAV total return for the year ended 31 December
2023, was -3.3%, versus the benchmark FTSE All-Share
Total Return Index of +7.9%. That represents a -11.2%
relative underperformance to the NAV. The share price
return was +9.4%, which reflects a 1.5% outperformance
compared to the benchmark.
The main contributors to the underperformance in the
NAV were Cambium International Ltd. (“Cambium”),
Phoenix S.G. Ltd (“Phoenix S.G”) and Hornby Plc
(“Hornby”). Cambium represents 4.2% of the investment
portfolio and had a -40.5% investment return, Hornby
represents 5.1% of the investment portfolio with a
-43.9% investment return, and Phoenix S.G represents
3.6% of the investment portfolio and had a -48.6%
investment return.
Offsetting this with positive performance was
Valderrama Ltd. (“Valderrama”) (owner of Dignity Plc),
which represents 76.9% of the investment portfolio
which had a +21.6% investment return.
Additional commentary on investment performance
can be found in the Alternative Investment Fund
Manager and Investment Manager’s Report.
The share price traded at a premium to NAV
throughout the second half of 2023.
Castelnau Group Share Price & NAV per Share – 31st December 2023
Past performance is not a reliable indicator of future performance.
Source: Bloomberg, Phoenix Asset Management Partners Limited
Share Price Monthly NAV per share, based on RNS release date
0.60
0.70
0.80
0.90
1.00
1.10
1.20
17-Oct-21 17-Jan-22 17-Apr-22 17-Jul-22 17-Oct-22 17-Jan-23 17-Apr-23 17-Jul-23 17-Oct-23 17-Jan-24
GBP
Castelnau Group Ltd Annual Report 2023
6
Strategic Report
Outlook 2024
Performance during 2023 was clearly disappointing,
albeit we believe only temporary and should be
considered in the context of the long-term nature of
our investment strategy. We discussed the strategic
plan to buy Dignity Plc in last year’s report. We were
proud to deliver on that plan with the successful
bid, via the bid vehicle, Valderrama, in May 2023,
and we are now majority owners of that highly
attractive business. This was a huge undertaking by
the Castelnau, SPWOne V Limited (“SPWOne”) and
Phoenix teams and has set us on a path to delivering
further long-term value to our shareholders. We are
starting to see some of the value come through with
Valderrama’s NAV up 15.8% in December 2023. We
also recognise the balance sheet implications of this
transaction and are focused on ensuring that exposure
is proactively managed.
We were pleased to announce the appointment of
Richard Brown as CEO of Castelnau Group Services
Limited in Q4 2023, reinforcing our dedication to
bringing in top-tier talent to lead the strategy. Richard
is expected to contribute significantly to the ongoing
success of the Castelnau Group.
We also had to make some difficult decisions during
the year such as at Stanley Gibbons, which went into
a pre-pack administration. We subsequently acquired
the business on the other side and hopefully, free of
the material legacy liabilities that were holding back
the business, it will have a chance to deliver on its
potential. This decision did come at a short-term cost
to our valuation, with Phoenix S.G’s valuation at year
end being 48.6% lower than at the start.
Whilst 2023 in many ways was a year of laying
foundations for future success in many of our
investments and at Castelnau Group level, we hope
that 2024 will be a year of delivery. We see significant
value in the strategies being implemented in our
investments, if execution can follow the vision. The
Board has spent considerable time thinking about how
to ensure that we are providing the optimum support
for our portfolio companies and what else we can do
to support them. Consequently, during 2024 we are
rolling out a range of initiatives with a view to fostering
the best environment for our businesses to perform, as
well as aiming to create a highly attractive home for
potential future acquisitions.
We remain confident in our clear vision and growth
strategy. We are committed to delivering value to
our shareholders and believe that the outlook for
Castelnau Group is exceptionally promising.
Thank you for your continued trust and support. If you
would like to get in touch directly with me, as the Chair
of the Board; please email chair@castelnaugroup.com.
Joanne Peacegood
Chair
18 April 2024
Chair’s Statement - continued
Castelnau Group Ltd Annual Report 2023
7
Strategic Report
Company Sector Holdings Cost Valuation
% of net
assets
31 Dec 2023
% of net
assets
31 Dec 2022
Valderrama Ltd Specialised Consumer
Services - Equity
194,294,182 196,667,644 222,106,336 96.0% N/A
Hornby Plc Leisure Products - Equity 92,406,448 39,061,617 14,785,032 6.4%* 19.1%
Cambium International Ltd Specialised Consumer
Services - Equity
19,291 22,629,471 12,198,426 5.3% 14.8%
Phoenix S. G. Ltd Speciality Retail - Equity 10,093 24,134,303 10,451,874 4.5% 13.9%
Cambium International Ltd Specialised Consumer
Services - Loan
8,050,000 8,050,000 7,245,000 3.1% 0.4%
Rawnet Ltd (“Rawnet”) IT Services - Equity 284,173 5,500,001 6,200,000 2.7% 4.8%
Ocula Technologies
Holdings Ltd (“Ocula”)
IT Services - Equity 9,326 700,367 4,925,247 2.1% 3.6%
Silverwood Brands Plc
(“Silverwood”)
Specialised Consumer
Services - Loan
4,400,000 4,400,000 4,400,000 1.9%* 4.3%
Silverwood Brands Plc Specialised Consumer
Services - Equity
4,570,353 3,199,247 2,467,991 1.1%* 1.6%
Phoenix S.G. Ltd Speciality Retail - Loan 2,466,000 2,466,000 2,466,000 1.1% N/A
Rawnet Ltd IT Services - Loan 872,255 872,255 865,277 0.4% 0.6%
Showpiece Technologies
Ltd (“Showpiece”)
Internet Retail - Loan 2,950,000 2,950,000 643,000 0.3% 2.0%
Dignity Plc Specialised Consumer
Services - Equity
- - - 0.0% 31.2%
Showpiece Technologies
Ltd
Internet Retail - Equity 8,000 8,000 - 0.0% 0.0%
Total holdings 288,754,183 124.9% 96.3%
Other net (liabilities)/assets (57,502,396) (24.9%) 3.7%
Net assets 231,251,787 100.0% 100.0%
* As at 31 December 2023, Hornby Plc was a listed company and Silverwood Brands Plc, a previously listed company, has been temporarily
suspended. Further discussion on the suspension is found in the Alternative Investment Fund Manager and Investment Manager’s Report. All other
companies were unlisted companies. All companies are UK businesses.
Holdings as at
31 December 2023
Castelnau Group Ltd Annual Report 2023
8
Strategic Report
Portfolio Analysis as at
31 December 2023
Sector Percentage of Net Assets
Specialised Consumer Services - Equity 102.4%
Leisure Products - Equity 6.4%
Specialised Consumer Services - Loan 5.0%
IT Services - Equity 4.8%
Speciality Retail - Equity 4.5%
Speciality Retail - Loan 1.1%
IT Services - Loan 0.4%
Internet Retail - Loan 0.3%
Other net liabilities (24.9%)
Total 100.0%
Refer to note 5 for additional disclosure on the valuation of the holdings.
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
Other net liabilities
Internet Retail - Loan
IT Services - Equity
Speciality Retail - Loan
Speciality Retail - Equity
IT Services - Loan
Specialised Consumer Services - Loan
Leisure Products - Equity
Specialised Consumer Services - Equity
102.4%
0.4%
1.1%
4.5%
4.8%
5.0%
6.4%
(24.9)%
0.3%
Castelnau Group Ltd Annual Report 2023
9
Strategic Report
The number of the Company’s Ordinary Shares in
issue has increased by 73.2%. The NAV relative to
the All-Share index (“ASX”) for the year was -11.2%. As
Joanne mentioned in the Chair’s report, the overall
NAV return is disappointing but not unexpected given
the Company’s long-term focus. As long-term value
investors, we have mastered the art of patience and
are confident in our overall portfolio of businesses,
nonetheless we are focused on looking to reward our
shareholders patience.
The Alternative Investment Fund
Manager (“AIFM”) and Investment
Manager’s Report
Castelnau Group Track Record Performance
Nav return
%
Share price
total
return
**
%
All-Share
index
**
%
Relative
NAVto ASX
%
2023 (to 31 December) (3.3) 9.4 7.9 (11.2)
2022 (to 31 December) (19.8) (34.6) 0.3 (20.2)
2021 (to 31 December)* (6.5) 5.5 2.5 (9.0)
Cumulative* (27.4) (24.5) 11.0 (38.4)
* 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 returns between 31 December 2023 and 31 December 2022:
Investment Value Table
£million
Investment Weight
%
Investment
Return
Asset 2023 2022 2023 2022 2023
Dignity/Valderrama 222.1 43.0 76.9% 30.6% 21.6%
Hornby 14.8 26.3 5.1% 18.8% (43.9%)
Cambium 12.2 20.5 4.2% 14.6% (40.5%)
Phoenix S.G 10.5 19.2 3.6% 13.7% (48.6%)
Rawnet 6.2 6.6 2.1% 4.7% (6.1%)
Ocula 4.9 4.9 1.7% 3.5% 0.0%
Silverwood 2.5 2.2 0.9% 1.5% (34.5%)
Showpiece – 0.01 0.0% 0.0% (100.0%)
Loans 15.6 10.0 5.4% 7.1% N/A
Cash 0.1 7.7 0.0% 5.5% N/A
Source: Phoenix Asset Management Partners Limited.
The overall positions in the portfolio have not
changed significantly during the year with the
exception of Dignity Plc which is now held via the bid
vehicle, Valderrama.
The overall ownership in Ocula decreased from
67.5% in 2022 to 50.3% in 2023 largely driven by their
fundraising round. Our ownership in Silverwood
increased from 0.9% in 2022 to 1.8% at year end, due to
the partial conversion of the Silverwood loan to equity
during the year. It is worth noting the Company’s loan
position of c.£4.4 million to Silverwood was converted
to equity post year end and the Company currently
owns 4.7%. On 20 February 2024, Silverwood issued
a Proposed Reduction of Share Capital and Notice
of General Meeting announcement. If the proposed
Capital Reduction is confirmed on 18 April 2024,
the Group’s ownership of Silverwood will change to
29.93%.
Castelnau Group Ltd Annual Report 2023
10
Strategic Report
Dignity Plc Acquisition and Business
Transformation
In 2022, the Company communicated its strategic
objective of acquiring Dignity Plc, a milestone
achievement aimed at delivering substantial
long-term value. The bid process completed in May
2023, resulting in a successful acquisition where the
Company increased its ownership stake from
21% to 65%. This acquisition marks a significant
moment for the Company in its pursuit of long-term
value creation.
In order to facilitate the Dignity Plc Acquisition, a loan
facility was entered into with the Phoenix UK Fund (the
”Facility”). During the year, the total Facility available
to the Group was £109 million, which by the year end
had reduced to £60 million. The purpose of the Facility
was to provide the Group with available funds to
enable it to participate in the acquisition of Dignity Plc.
At year end, the loan payable in relation to this Facility
was £47.7 million and accrued finance costs were
£8.1million. During the year, £89.2 million of the Facility
was drawn down and £41.5 million was repaid. Facility
interest payments of £2.5 million were made during
the year.
Management acknowledges the impact of this
transaction on the Group’s statement on financial
position and cash flow position. Since H2 2023,
management has actively pursued various strategies
to address the resulting debt position. Management
firmly believes that the long-term value potential of
this investment far outweighs any short-term debt
and cash flow challenges.
Post-acquisition, an extensive transformational effort
has been underway to overhaul various facets of the
business. Significant strides made in the latter half
of the year are poised to positively impact financial
performance in 2024. Notable initiatives include
comprehensive branch reviews across all regions,
resulting in the closure of underperforming locations,
which has already been implemented in the Home
Counties. This strategic realignment is expected to
optimise operational efficiency, with emphasis placed
on enhancing the performance of the remaining
stores through targeted capital investments.
Key strategic hires during Q4 2023, including a
Director of Memorialisation, a Chief Operating
Officer and a Head of Performance, have bolstered
the leadership team’s capabilities and sharpened
the focus on growth. Furthermore, the business
accessed £30 million from the funeral plan surplus to
fuel business expansion without relying on external
financing. The introduction of a funeral plan offering
holds significant promise, particularly if it is possible
to materially increase product penetration rates in
the UK market, to more align with that in continental
Europe.
Despite encountering challenges in our capital
structure, negotiations with bondholders have yielded
favourable terms for any successful bond buyback
in 2024. The uptick in NAV performance in December
underscores the groundwork laid in 2023, positioning
us for sustained growth in the forthcoming year.
The Alternative Investment Fund Manager (“AIFM”) and Investment Manager’s Report - continued
Castelnau Group Ltd Annual Report 2023
11
Strategic Report
Phoenix S.G / Strand Collectibles
Group (formerly Stanley Gibbons)
During the first half of 2023, the business
communicated its new strategy, with a heightened
focus on auctions and diversifying collectible
categories into entertainment and popular culture
realms such as trading cards. Codification of cultural
principles has served as a foundational cornerstone
for all our Group companies.
Operational momentum gathered pace throughout
the year, with October marked by a bustling and
highly successful period for auctions, generating
£1.1 million under the hammer in a single week. The
inaugural Pokémon auction conducted by Stanley
Gibbons proved to be a resounding success, with over
90% of lots sold.
However, it became evident over the course of the
year that for Stanley Gibbons to secure a viable
long-term future, it needed to free itself from legacy
liabilities. Consequently, the company entered
administration in December, following an exhaustive
sales process during Q4 that failed to attract buyers
or investors willing to assume the liabilities owed to
Phoenix/Castelnau. While the decision to buy back
the business post-administration entailed significant
costs, it was deemed necessary to afford the business
the opportunity to realise its future potential and
safeguard jobs.
We remain steadfast in our belief in what is now
the Strand Collectibles Group (comprising Stanley
Gibbons and Baldwins), and the opportunities these
renowned brands present. The NAV reduction at year
end reflects the costs associated with administration
and the pursuit of new, albeit unproven, business
initiatives. Additional capital injections
post-administration aim to drive new ventures within
the business, including ventures into bullion and
a digital stamp collecting experience, alongside
the core businesses, further accentuating our
commitment to growth.
Hornby
Under stewardship of CEO, Olly Raeburn, a new
strategy and vision is being implemented aimed
at reshaping the company into an enterprise
characterised by enhanced brand autonomy. This
transition from a traditional corporate hierarchy to a
network of semi-independent, brand-centric entities
seeks to foster the unique development of each
brand while leveraging shared central services
and resources.
To implement Hornby’s strategic vision, the company
has recruited top-tier talent, including a Group
Sales Director (previously with Mattel), a Head of
Export Sales (previously with WHSmith), and a Head
of Research and Insight (also formerly with Lego).
Notable initiatives include the development of
new products with entry-level pricing, increased
engagement with customers, bolstering data
analytics and customer loyalty programs.
The successful launch of WonderWorks, Hornby’s
interactive experience in Margate, underscores the
company’s commitment to innovation and customer
engagement, with promising performance metrics
and positive customer feedback.
Financially, interim results released in November 2023
demonstrated a 6% increase in group revenue for
the six months ended September 2023 compared to
the previous year, albeit with slight declines in gross
margin attributed to product/channel mix variations
and increased overheads. Despite these challenges,
direct sales via Hornby’s websites continued to
exhibit robust growth, underpinning confidence in the
strategic trajectory.
On 23 February 2024, Hornby announced that Frasers
Group Plc (“Frasers”), the FTSE 100 listed company,
had acquired 8.9% of Hornby. Hornby and Frasers are
looking forward to exploring commercial opportunities
in working together to unlock the full potential of
Hornby’s brands.
Castelnau Group Ltd Annual Report 2023
12
Strategic Report
Cambium
Following the post-COVID wedding boost, which saw
significant pent-up demand hit the market in 2022,
2023 saw a slowing of that demand and was a
tough year.
This challenging backdrop has focused the business
on operational efficiencies as it looks to achieve
profitability in its core business. Cambium is looking
to innovate in terms of automation, using artificial
intelligence (“AI”) to augment workflows, as well as
further embedding financial discipline across the
business. We see Cambium as a business that can
drive a lot of technological innovation, which should
benefit the wider Castelnau Group companies.
To support the core Cambium business, Rock My
Wedding, a wedding resource and planning platform,
is being relaunched in 2024 to engage with customers
at the beginning of their wedding journey and funnel
them into the gift list business. Little List was launched
in 2023 with a focus on the baby gifting market, which
is nascent in the UK, but could have huge potential.
The focus is on growing registrations and a detailed,
measurable roadmap was implemented in Q4 2023.
For both Rock My Wedding and Little List, given the
early stage of the businesses, our focus has been on
giving them sufficient capital and the opportunity to
grow, but at the same time being clear on the shorter
term key performance indicators and roadmap to
achieve that growth so we can adapt and evolve the
plans as needed.
The focus in 2024 for Cambium is to drive customer
acquisition, conversions, and operational efficiencies
through an improved personalised customer journey,
using technology and AI to build a scalable,
profitable business.
Silverwood
Silverwood was suspended from its Aquis Growth
Market listing at the start of October 2023, due to
legal proceedings around the Lush stake, however
the company updated the market on 10 January 2024
that Lush is no longer being transferred into the listed
entity. We remain excited about Silverwood’s other
brands including Balmond’s, Nailberry, Steamcream
and Cigarro, and the recent announcement of the
acquisition of Sonotas.
On 29 January 2024, the Group agreed to convert its
unsecured loan facility of £4.4 million to Silverwood
Brands Plc into equity in Silverwood, increasing its
equity holding in Silverwood.
On 20 February 2024, Silverwood issued a Proposed
Reduction of Share Capital and Notice of General
Meeting announcement. If the proposed capital
reduction is confirmed on 18 April 2024, the Group’s
ownership of Silverwood will change to 29.93%.
Additional updates will follow upon the lifting of the
suspension.
Ocula
Ocula started the year completing its seed funding
round with the entry of LBG Equity Investments
Limited, part of the Lloyds Banking Group (“Lloyds”),
as a new investor and partner and a significant uplift
in valuation validated by an arm’s length investor.
This was an important partnership which opened
an opportunity to offer Ocula products to business
banking customers of Lloyds, who have a good history
of investing in and assisting relatively new startups
with their growth. Lloyds have a director on the Ocula
board and opportunities have started to flow through
the sales pipeline.
The Alternative Investment Fund Manager (“AIFM”) and Investment Manager’s Report - continued
Castelnau Group Ltd Annual Report 2023
13
Strategic Report
Ocula have continued to add external clients
beyond Castelnau Group companies including
Blain’s, Direct Ferries, Covetrus, Boots and L.K. Bennett
amongst others in the last 6 months. In Q4 2023,
Ocula continued to grow rapidly both in terms of
customer and annual recurring revenue (“ARR”), and
moved through the £1 million ARR barrier driven by
new customer acquisition. Since year end, it has also
added Asda as a client.
Ocula’s ‘Boost’ has been validated by existing
customers such as AO who began on a paid trial
initially, expanding to a single product contract and
are now using Ocula for their entire website. AO is now
a case study demonstrating the traction Ocula has
with clients once they can see the tangible results.
Ocula formally commenced the Series A funding
round in November 2023 and we look forward to
seeing the outcome, which we expect to be in H1 2024.
Rawnet
Despite hoping to reach breakeven, unfortunately
Rawnet fell to a loss of c.£190,000 for the year due to
weak trading in the last two months of the year. The
shift in mandates that Rawnet had been seeing from
lower margin development work to higher margin
strategy/UX work continued in Q4 2023. This change
in the market had an impact on utilisation of Rawnet
and negatively impacted its results. Rawnet has
undertaken an exercise to reshape its business during
January 2024 to ensure its resources are aligned to
the client demand it is seeing, which should leave it
better placed for 2024.
Showpiece
The Showpiece business model evolved during 2023
and the focus was reviewed to shift to a consignment
model offering for future opportunities. Previously,
assets had been acquired using capital investment
and the fractionalisation then released the capital
back to the company. The consignment model means
that third-party asset-owners offer part or all of an
asset for fractionalisation and a collector’s ownership
experience, with capital released back to the owner
and Showpiece collecting sales commissions
through the process along with returns from a
marketplace on which fractions can be sold. The
first consignment asset has been a Banksy piece –
Valentine’s Day Mascara, created on 14 February 2023.
The first drop of fractions sold out very quickly, and a
second drop of fractions began in Q4 2023. Following
the first implementation of the consignment model
approach, the success of this revised approach is
being assessed.
Showpiece is a technology-driven company and
very close to the Strand Collectibles team, operating
out of their offices. During late 2023, the team has
migrated into the Strand Collectibles structure
and is an important part of developing the Stanley
Gibbons website, digital marketing, auctions and
digital catalogues, as well as the development of the
Showpiece platform.
Phoenix Asset Management Partners Ltd.
18 April 2024
Castelnau Group Ltd Annual Report 2023
14
Strategic Report
Dear Shareholders,
2023 was a busy year with the capital raise and
completion of the acquisition of Dignity Plc. in H1. The
Dignity acquisition is a pivotal strategic investment
for the Group, laying groundwork for clear value
creation, as we continue to refocus and improve the
business. We also appointed Richard Brown as the new
CEO of Castelnau Group Services Limited, who brings
over 14 years of corporate finance experience, and will
be important in driving future success at Castelnau.
During 2023, we spent a significant amount of time
working out how best to enhance our support for
portfolio companies – refining operational strategies
through initiatives such as knowledge-sharing
events, introducing the ‘Castelnau Way’ frameworks,
emphasising prudent capital allocation and optimising
board compositions for effectiveness. We have also
been focused on embedding a sense of group identity
across the portfolio companies, focusing on hosting
compelling group-wide events, and we launched a
quarterly newsletter as well.
We are aiming to launch Iona Star later in the year,
a new fund supported by Phoenix and Castelnau,
focusing on high-growth potential technology
companies. Led by Gerry Buggy (one of the founders),
a seasoned expert in technology investment, Iona
Star’s track record speaks volumes about its ability to
back promising ventures. With a focus on AI, Machine
Learning, and Distributed Ledger Technology, Iona Star
aligns closely with our strategic objectives. We are
confident that this collaboration will contribute to the
growth and success of Castelnau Group, providing
valuable returns for our investors.
Conclusion
Thank you for your support and patience. We believe
we are laying the foundations for something special
but we know that we have yet to demonstrate that
in results. A lot of good work is going on behind the
scenes which we expect will start to show up in
tangible performance.
Gary Channon
CIO, Phoenix Asset Management Partners Ltd.
18 April 2024
Statement from the CIO
of the Investment Manager
Strategic Report
Governance
We intend to
conduct ourselves
at all times with
integrity and
fairness.
Castelnau Group Ltd Annual Report 2023
15
Governance
Castelnau Group Ltd Annual Report 2023
16
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 Deputy Chair of the
Guernsey International Business Association and the immediate past Chair
of the Guernsey Investment & Fund Association. Joanne resides
in Guernsey.
Directorships in other public listed companies:
NextEnergy Solar Fund Limited, London
Volta Finance Limited, London & Euronext
Joanne Peacegood
Independent Chair
(aged 46)
Andrew is an experienced director and currently sits on several investment
manager and investment fund boards specialising in debt, venture,
renewables and buyouts. Andrew has over 20 years of experience in the
investment sector and the funds industry.
Andrew is currently the Managing Director of Aver Partners, having
previously been Managing Director at Ipes (Barings/Apex) and preceding
that, Managing Director at Capita (Sinclair Henderson/Link). He has
held senior management roles at Moscow Narodny (VTB Capital), DML
(Halliburton) and qualified whilst at Midland (HSBC/Montagu).
Andrew graduated from Cardiff University and Aix-Marseille Université. He is
a Chartered Management Accountant and is a Member of the Chartered
Institute for Securities and Investment (CISI). Andrew is currently Chair of
the British Venture Capital Association (BVCA) Channel Islands Working
Group and a member of the Association of Investment Companies’ (AIC)
Technical Committee. He is a previous Chair of the Guernsey Investment
Fund Association (GIFA), Council member of Guernsey International
Business Association (GIBA), member of the Association of Real Estate
Funds (AREF) Regulatory Committee and of Invest Europe’s (formally
European Venture Capital Association’s (EVCA)) Technical Group.
Directorships in other public listed companies:
ARCH SRF Listed Holdco Limited, International
Shore Capital Group Limited, Bermuda
Andrew Whittaker
Independent Non-Executive
Director
(aged 50)
Governance
Castelnau Group Ltd Annual Report 2023
17
Joanna has over 30 years’ experience working in the finance industry
in Guernsey. Joanna is currently Chief Executive Officer of Elysium Fund
Management Limited, having previously been a Director and the Company
Secretary of Collins Stewart Fund Management Limited where she worked
on, and led, numerous corporate finance assignments and stock exchange
listings in addition to undertaking fund administration and company
secretarial duties.
Joanna has extensive experience in the provision of best practice
corporate governance and company secretarial services to a diverse
range of companies traded on the AIM market of the London Stock
Exchange, listed on the Main Market of the London Stock Exchange, Euronext
and The International Stock Exchange. Joanna qualified as an associate
of ICSA: The Chartered Governance Institute UK & Ireland in 1994 and was
elected to Fellowship in May 2023.
Directorships in other public listed companies:
MAN AHL Diversified PCC Limited, International
Joanna Duquemin
Nicolle
Independent Non-Executive
Director)
(aged 53)
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 57)
Richard was appointed to the Board on 13 September 2023. A former
investment banker, Richard has over 14 years of corporate finance
experience. He has advised firms ranging from the largest FTSE 100
companies to private businesses, UK-focused as well as international.
Richard has also played an instrumental part in numerous high-profile
M&A and ECM transactions and has significant experience of acting more
generally as a key boardroom adviser.
Richard most recently worked for more than seven years at Morgan Stanley
in its UK investment banking and corporate broking team. He has previously
worked at Peel Hunt and Barclays, having initially qualified as a chartered
accountant at KPMG.
Richard Brown
Non-Independent Non-Executive
Director
(aged 39)
Board Members - continued
Governance
Castelnau Group Ltd Annual Report 2023
18
The Directors present their Annual Report and Audited
Consolidated Financial Statements for the year ended
31 December 2023.
Valderrama
During the year, Yellow (SPC) Bidco Limited (“Bidco”),
a newly formed indirect wholly-owned subsidiary of
Valderrama Limited (“Valderrama”), a joint venture
between SPWOne and the Group, made an offer to
acquire the issued and to be issued share capital of
Dignity Plc (the “Acquisition”). Valderrama is a private
company limited by shares that is incorporated in
Guernsey. The cash consideration payable by Bidco to
Dignity Shareholders under the terms of the Acquisition
was financed by equity capital invested by SPWOne
and the Group in Valderrama, which was made
available by Valderrama to Bidco pursuant to a series
of intercompany loans, via Valderrama subsidiaries.
Valderrama was set-up to invest in Dignity Plc and the
Group holds 65.4% of the equity in Valderrama. Please
refer to the AIFM and Investment Manager’s Report
and note 16 of the Financial Statements for additional
details on the Acquisition.
Castelnau Group Services Limited
Castelnau Group Services Limited (“CGSL”), the 100%
subsidiary of the Castelnau Group, retained the
services of an average of four staff during the year to
31December 2023, all deployed to portfolio companies
or to PAMP. During the year, one member of staff
transitioned to a role in a portfolio company, as this
integration was more suited for the role they were
performing. However, we expect this member of staff to
return to CGSL in 2024. A graduate intern was hired and
immediately deployed within the Group. Mr. Richard
Brown was appointed as Chief Executive Officer of
CGSL on 13 September 2023, following the resignation
of Mr. Graham Shircore. Mr.Graham Shircore remains
an employee of PAMP.
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 stated
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
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.
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
Directors’
Report
Governance
Castelnau Group Ltd Annual Report 2023
19
is equal to one-third of the relative outperformance of
the NAV total return over the FTSE All-Share Total Return
Index for each Performance Period.
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
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: https://www.
phoenixassetmanagement.com/performance/
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 has been applied to the
investments managed by PAMP and has 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: https://www.castelnaugroup.com/
investor-relations/reports-factsheets
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 supervision 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 Ordinary 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.
Building on PAMP’s experience of investing in private
companies and companies where they have control
or influence, 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 2023, the Group’s
ongoing charges figure calculated in accordance
with the Association of Investment Companies (“AIC”)
methodology was 0.59% (2022: 0.52%). 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
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Castelnau Group Ltd Annual Report 2023
20
custodian duties. For additional information, refer to
note 15 to the Financial Statements.
Directors
The Directors of the Group during the year and at the
date of this Report are set out in the Group Information
section on page 82.
Directors’ and Other Interests
The Directors of the Group held the following Ordinary
Shares beneficially:
31 December
2023
Number of
Ordinary Shares
31 December
2023
% of issued
share capital
31 December
2022
Number of
Ordinary Shares
31 December
2022
% of issued
share capital
Joanne Peacegood 10,000 0.00% 10,000 0.01%
Andrew Whittaker 40,000 0.01% 40,000 0.02%
Joanna Duquemin Nicolle 75,000 0.02% 75,000 0.04%
David Stevenson – – – –
Graham Shircore* – – – –
Richard Brown** – – – –
* Resigned on 21 August 2023.
** Appointed on 13 September 2023.
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 Group 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 35 to 36, 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
as the Group). The Board does not consider that the
above provisions are relevant to the Group. The Group
will therefore not comply with these provisions.
Directors’ Report - continued
Governance
Castelnau Group Ltd Annual Report 2023
21
Whilst the Group will seek to comply with the AIC Code
as far as practicable, it is likely that it will not be able
to comply with all of the AIC Code requirements. In
particular, in relation to the Director appointed by the
holder of the B Share, this Director will be appointed
by the Investment Manager and therefore will not
be entirely independent of the Investment Manager.
Further, such Director will not be subject to annual
re-election. In addition, the holder of the B Share has
the power to ensure that no Directors are removed or
appointed without its consent.
The Administrator maintains a system of internal
control on which it reports to the Board. The Board
has reviewed the need for an internal audit function
and has decided that the systems and procedures
employed by the Administrator provide the assurance
that a sound system of risk management and internal
control should. An internal audit function specific to the
Company is therefore considered unnecessary.
Role, Composition and Independence of the
Board
The Board is the Group’s governing body and has
overall responsibility for maximising the Group’s
success by directing and supervising the affairs of
the business and meeting the appropriate interests
of Shareholders and relevant stakeholders, while
enhancing the value of the Group and also ensuring
protection of investors. A summary of the Board’s
responsibilities is as follows:
• statutory obligations and public disclosure;
• strategic matters and financial reporting;
• risk assessment and management including
reporting compliance, governance, monitoring and
control; and
• other matters having a material effect on the Group.
The Board’s responsibilities for the Annual Report and
Audited Consolidated Financial Statements are set
out in the Statement of Directors’ Responsibilities on
pages35 to 36. Biographies for all the Directors can be
found on pages 16 and 17.
The Board consists of five non-executive Directors all
of whom have diverse skillsets and experience. Three
of the five Directors are considered to be independent
of the Investment Manager and as prescribed by
the Listing Rules. The Board does not consider it
appropriate to appoint a Senior Independent Director
at this time because the majority of the Directors
are deemed to be independent of the Group. The
Board considers that it has the appropriate balance
of diverse skills and experience, independence and
knowledge of the Group and the wider sector, to
enable it to discharge its duties and responsibilities
effectively and that no individual or group of
individuals dominates decision making.
The Chair is responsible for leadership of the Board
and ensuring its effectiveness. The Chair is Joanne
Peacegood. The Chair of the Board must be, and is
considered to be, independent for the purposes of
Chapter 15 of the Listing Rules.
The Board needs to ensure that the Annual Report and
Audited Consolidated Financial Statements, taken as
a whole, is fair, balanced and understandable and
provides the information necessary for Shareholders to
assess the Group’s position and performance, business
model and strategy. In seeking to achieve this, the
Directors have set out the Group’s investment objective
and policy and have explained how the Board and its
delegated Committees operate and how the Directors
review the risk environment within which the Group
operates and sets appropriate risk controls. Furthermore,
throughout the Annual Report and Audited Consolidated
Financial Statements, the Board has sought to provide
further information to enable Shareholders to have a fair,
balanced and understandable view.
The Board has contractually delegated responsibility
for the management of its investment portfolio, the
arrangement of custodial and depositary services
and the provision of administration, accounting,
registrar and company secretarial services 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.
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 service
providers that are relevant to the business of the Group
and should be brought to the attention of the Directors.
Governance
Castelnau Group Ltd Annual Report 2023
22
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 meets five times a year, the
Management Engagement Committee (“MEC”) and
Remuneration and Nomination Committee meet at
least once a year. In addition, ad-hoc 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, the Board is satisfied that they have
sufficient time to carry out their duties for the Group
as evidenced by their engagement and attendance
at the Board and Audit Committee meetings during
theyear.
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.
Board Performance and Training
On appointment to the Board, Directors will be offered
relevant training and induction. Training is an ongoing
matter as is discussion on the overall strategy of
the Group. The Board undertakes an annual internal
Board Evaluation of performance. This exercise was
completed in March 2023 and 2024. The Company
Secretary circulated questionnaires to each Director
to complete independent of each other, and
anonymously. Their completed forms were returned to
the Company Secretary, and their responses collated
Directors’ Report - continued
Governance
Castelnau Group Ltd Annual Report 2023
23
into a report that was tabled at the Nomination
Committee meeting. The report findings were
discussed at the meeting. The results of the evaluation
were satisfactory with no issues identified.
On appointment to the Board, each Director
considered the expected time needed to discharge
their responsibilities effectively. The Directors confirmed
that each had sufficient time to allocate and would
inform the Board of any subsequent changes. In
accordance with the AIC Code, if and when any
Director, including the Chair, has been in office (or
upon re-election would at the end of that term, be in
office) for more than nine years, the Board will consider
whether there is a risk that such Director might
reasonably be deemed to have lost independence
through such long service.
In respect of the Criminal Finances Act 2017 which has
introduced a new corporate criminal offence (“CCO”)
of failing to take reasonable steps to prevent the
facilitation of tax evasion, the Board confirms that they
are committed to zero tolerance towards the criminal
facilitation of tax evasion.
Board Diversity
When appointing new directors and reviewing the
Board composition, the Board considers, amongst
other factors, diversity, balance of skills, knowledge,
gender, social and ethnic background and experience.
The Board considers the Listing Rules requirement in
appointing new directors, however, does not consider it
appropriate to establish targets or quotas in this regard.
As at 31 December 2023, the Board consisted of two
female and three male directors. Joanne Peacegood
is the Chair of the Board and the Remuneration
Committee, and Joanna Duquemin Nicolle is the Chair
of the Management Engagement Committee. The
Group has therefore met the targets set by the Listing
Rules LR 9.8.6R(9) and LR 14.3.33R(1) in relation to board
diversity for the percentage of its board members who
are female and also in a senior position. The Group
has not met the target to have at least one director
from a minority ethnic background, but considers
this satisfactory as the individual Board members
are performing within their role and comprise a
diverse skillset and knowledge. Looking forward,
when succession arises, the Board will consider the
requirements of the Listing Rules.
Board Committees and their Activities
Terms of Reference
All Terms of Reference of the Board’s Committees are
available from the Administrator upon request.
Management Engagement Committee
In accordance with the AIC Code, the Group has
established a Management Engagement Committee
which is chaired by Joanna Duquemin Nicolle and
includes Andrew Whittaker, Joanne Peacegood and
David Stevenson. The Management Engagement
Committee meets at least once a year or more often
if required. Its principal duties are to consider the
terms of appointment of the Investment Manager and
other service providers and it annually reviews those
appointments and the terms of engagement.
Audit Committee
The Group’s Audit Committee is chaired by Andrew
Whittaker and includes Joanna Duquemin Nicolle
and Joanne Peacegood. The Audit Committee meets
at least five times a year. The Board considers that
the members of the Audit Committee have the
requisite skills and sector experience to fulfil the
responsibilities of the Audit Committee. The Audit
Committee examines the effectiveness of the Group’s
control systems and amongst other items, reviews the
annual and interim reports and also requests certain
information from the Investment Manager and the
Administrator. It also reviews the scope, results, cost
effectiveness, independence and objectivity of the
external Auditor.
Further details on the Audit Committee can be found in
the Audit Committee Report on page 37.
Remuneration Committee
The Group’s Remuneration Committee consists of all
of the Directors and is chaired by Joanne Peacegood.
The Remuneration Committee meets at least once
a year or more often if required. The Remuneration
Committee’s main functions include:
(i) agreeing the policy for the remuneration of the
Directors and reviewing any proposed changes to
the policy;
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Castelnau Group Ltd Annual Report 2023
24
(ii) reviewing and considering ad hoc payment to the
Directors in relation to duties undertaken over and
above normal business; and
(iii) appointing independent professional remuneration
advice.
Nomination Committee
The Group’s Nomination Committee consists of all of
the Directors and is chaired by Andrew Whittaker. The
Nomination Committee meets at least once a year or
more often if required. Its principal duties are to advise
the Board on succession planning bearing in mind the
balance of skills, knowledge and experience existing on
the Board and 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 are 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 2023
and the number of such meetings attended by each
Director.
Held Attended
Scheduled Board Meetings
Joanne Peacegood 4 4
Andrew Whittaker 4 4
Joanna Duquemin Nicolle 4 4
David Stevenson 4 4
Graham Shircore* 3 3
Richard Brown** 1 1
Management Engagement Committee Meetings
Joanne Peacegood 1 1
Andrew Whittaker 1 1
Joanna Duquemin Nicolle 1 1
David Stevenson 1 1
Audit Committee Meetings
Joanne Peacegood 4 4
Andrew Whittaker 4 4
Joanna Duquemin Nicolle 4 4
Remuneration Committee Meetings
Joanne Peacegood 1 1
Andrew Whittaker 1 1
Joanna Duquemin Nicolle 1 1
David Stevenson 1 1
Graham Shircore* 1 1
Richard Brown** – –
Directors’ Report - continued
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Castelnau Group Ltd Annual Report 2023
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Held Attended
Nomination Committee Meetings
Joanne Peacegood 2 2
Andrew Whittaker 2 2
Joanna Duquemin Nicolle 2 2
David Stevenson 2 2
Graham Shircore* 2 1
Richard Brown** – –
There were 10 Ad-hoc Committee meetings held during the year.
* Resigned on 21 August 2023.
** Appointed on 13 September 2023.
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
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
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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
Some of the Group’s investments will include securities
and other interests that are very thinly traded, for
which no market exists or which are restricted as
to their transferability under applicable laws and/
or the relevant investment documentation. Whilst
the valuations of the Group’s investments will be in
compliance with IFRS, some of the Group’s investments
will be difficult to value. Such valuations may be
conducted on an infrequent basis, are subject to
a range of uncertainties. The risks associated with
valuation of investments are managed by the
Investment Manager and reviewed by the Board. The
Board considered the valuation of the investments
held by the Group as at 31 December 2023 to be
reasonable based on information provided by the
Investment Manager, underlying portfolio companies,
AIFM, Administrator, Custodian and Depositary on their
processes for the valuation of these investments, which
were validated by an independent third party.
The Board reviewed the valuation policy and PAMP
has agreed the valuation process/techniques with
the Board around private asset investments. There
has been no change to the valuation policy and
the process remains the same which has also been
confirmed with the Board. The Board is satisfied with
the approach and the valuation policy and processes.
Directors’ Report - continued
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Castelnau Group Ltd Annual Report 2023
27
The Board receives the monthly NAV as well as
quarterly detailed updates on the portfolio which
include changes to the valuations. The Board is
updated when there is/or potential to be significant
changes in valuation. As part of the annual audit
process and the Board signing off on the annual
financial statements, the Board receives the valuation
packs and also the third-party (Kroll) reports. The
Board scrutinises the valuations/reports and ensures
they are satisfied prior to sign off.
The Board also asks questions regularly (including
during quarterly Board meetings, or ad hoc meetings)
to understand performance and the impact on
valuation and receives regular presentations from the
portfolio executives. The Board has access to detailed
valuation reports as and when requested.
Market risk
As a result of investments in publicly traded portfolio
companies with a total value of £14,785,032 (31
December 2022: £69,315,063), the Group will be
exposed to equity securities price risk. The market value
of the Group’s holdings in publicly traded portfolio
companies could be affected by a number of factors,
including, but not limited to: a change in sentiment in
the market regarding such companies; the market’s
appetite for specific business sectors; and the financial
or operational performance of the publicly traded
portfolio companies which may be driven by, amongst
other things, the cyclicality of some of the sectors
in which some or all of the publicly traded portfolio
companies operate. Equity prices and returns from
investing in equity markets are sensitive to various
factors, including but not limited to: expectations
of future dividends and profits; economic growth;
exchange rates; interest rates; and inflation.
The value of any investment in equity markets is
therefore volatile and it is possible, even when an
investment has been held for a long time, that an
investor may not get back the sum invested. Any
adverse effect on the value of any equities in which the
Group invests from time to time could have a material
adverse effect on the Group’s financial condition,
business, prospects and results of operations and,
consequently, the Net Asset Value and/or the market
price of the Ordinary Shares.
The Board receives updates on the Group’s investment
performance at quarterly Board meetings, or more
frequently as required, and challenges the Investment
Manager on investment performance, stock selection,
and portfolio composition.
Liquidity risk
Liquidity risk is defined as the risk that the Group will
encounter difficulty in meeting obligations associated
with financial liabilities. Investments made by the
Group may be illiquid and this may result in delays/
shortfall of expected cash flows to the Group.
Investments in private assets (including private
portfolio companies) are highly illiquid and have no
public market. There may not be a secondary market
for interests in private assets. Such illiquidity may affect
the Group’s ability to vary its portfolio or dispose of, or
liquidate part of, its portfolio, in a timely fashion (or at
all) and at satisfactory prices in response to changes
in economic or other conditions.
If the Group were required to dispose of or liquidate
an investment on unsatisfactory terms, it may realise
less than the value at which the investment was
previously recorded, which could result in a decrease
in Net Asset Value.
The performance of investments in private assets can
also be volatile because those assets may have limited
product lines, markets or financial reserves, or be more
susceptible to major economic setbacks or downturns.
Private assets may be exposed to a variety of business
risks including, but not limited to: competition from
larger, more established firms; advancement of
incumbent services and technologies; and the
resistance of the market towards new companies,
services or technologies.
The crystallisation of any of these risks or a
combination of these risks may have a material
adverse effect on the development and value of
a portfolio company and, consequently, on the
portfolio and the Group’s financial condition, results
of operations and prospects, with a consequential
adverse effect on the Net Asset Value and/or the
market price of the Ordinary Shares.
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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 Ordinary Shares.
The Board and Investment Manager review liquidity
needs (including operational costs, and loan
repayments), quarterly or more frequently as required,
relative to the value and liquidity of the Group’s assets
and the Group’s portfolio income. The majority of
the expected liquidity requirements are known (for
example operational costs) while others are at the
discretion of the Group (for example share buy-backs).
The Board is satisfied that the Group’s unexpected
liquidity needs are not significant.
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 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 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 meeting of the Management Engagement
Committee on 13 December 2023, 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
with assurance from each of the key service providers
during the year ended 31 December 2023, the Board
Directors’ Report - continued
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Castelnau Group Ltd Annual Report 2023
29
was satisfied that no such breach had occurred.
The Board’s next review will be at the next annual
Management Engagement Committee meeting.
Geopolitical risk
Russia’s ongoing invasion of Ukraine, the Israel-Hamas
conflict, and increasing tensions in the Middle East all
continue to be risks to the global economy. Escalation
in conflicts may result in an increase in sanctions
globally affecting commodity prices and supply
chains, and increasing compliance monitoring costs
for businesses. The exceptional number of national
elections scheduled to take place in 2024 also has the
potential to increase volatility in financial markets and
alter economic and investment landscapes.
Environmental, Social and Governance (“ESG”) matters
The Board recognises the importance of
environmental, social and governance (“ESG”) factors
in the investment management industry and the
wider economy as a whole. It is the view of the Board
that direct environmental and social impact of the
Group is limited and that ESG considerations are most
applicable in respect of the asset allocation decisions
made for its portfolio.
The Group has appointed the Investment Manager
to advise it in relation to all aspects relevant to the
Investment Portfolio. The Investment Manager has a
formal ESG framework which incorporates ESG factors
into its investment process. The Board receives regular
updates from the Investment Manager on its ESG
processes and assesses their suitability for the Group.
ESG factors are assessed by the Investment Manager
for every transaction as part of their investment
process. Climate risks are incorporated in the ESG
analysis under environmental factors.
The Group has entered into contractual arrangements
with a network of third parties (the “Service Providers”)
who provide services to it. The Board, through the
Management Engagement Committee, undertakes
annual due diligence on, and ongoing monitoring
of, all such Service Providers including obtaining a
confirmation that each such Service Provider complies
with relevant laws regulations and good practice and
has ESG policies in place.
Viability Statement
The Directors, with recommendation from the Audit
Committee, have assessed the prospects of the Group
and relevant stresses i.e. additional funding requirements
to existing portfolio companies, loan repayments and
expenses, over a longer period than required by the
going concern provision. With recommendation from the
Audit Committee, the Board chose to conduct a review
for a period of five years to 31 December 2028 as it was
determined to be an appropriate timeframe given the
uncertainty of the investment world and the strategy
period. In selecting this period, the Board considered
the environment within which the Group operates and
the principal and emerging risks and their mitigations
associated with the Group. On a rolling basis, the
Directors evaluate the outcome of the investments and
the Group’s financial position as a whole.
The Group’s prospects are driven by its business model
and strategy. 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. 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.
In support of this statement, the Audit Committee
recommended to the Directors to take into account all
of the principal and emerging risks facing the Group
as summarised on pages 26 to 29, the nature of the
Group’s business including cash reserves and other
liquid investments held by the Group, the potential of
its portfolio of investments to generate future income
and capital proceeds, and the ability of the Directors
to minimise the level of cash outflows, if necessary.
The most relevant potential impacts of the identified
principal risks and uncertainties on viability were
determined to be:
(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.
Each quarter, the Directors, through the Audit
Committee, review threats to the Group’s viability
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30
utilising the risk matrix, which it updates as required
due to recent developments and/or changes in the
global market. The Board relies on periodic reports
provided by the Alternative Investment Fund Manager
and Investment Manager, and Administrator regarding
risks faced by the Group. When required, experts are
utilised to gather relevant and necessary information,
regarding tax, legal, and other factors.
The Alternative Investment Fund Manager and
Investment Manager considers the future cash
requirements of the Group before funding portfolio
companies. Furthermore, the Board receives regular
updates from the Alternative Investment Fund
Manager and Investment Manager on the Group’s
cash position, which allows the Board to maintain
their fiduciary responsibility to the Shareholders and, if
required, limit funding for existing commitments.
Based on the aforementioned procedures and
the existing internal controls of the Group, and the
Alternative Investment Fund Manager and Investment
Manager, the Board, with recommendation from
the Audit Committee, has concluded that there is a
reasonable expectation that the Group will remain
viable over the five-year period to 31 December 2028.
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 Directors’ 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, Custodian and
Depositary. 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
Directors’ Report - continued
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Castelnau Group Ltd Annual Report 2023
31
Investment Manager to ensure that the Group meets its
requirements to create and preserve Shareholder value.
Shareholder engagement
The Board welcomes Shareholders’ views and
places great importance on communication with its
Shareholders. Shareholders wishing to meet with the
Chair and other Board members should contact
the Group’s Administrator by emailing
Castelnau_group@ntrs.com.
On 13 September 2023, Shareholders had the
opportunity to vote on the resolutions as specified
in the Notice of AGM. The Notice of the AGM and the
results were released to the London Stock Exchange in
the form of an announcement.
Key service providers
The Board delegates responsibility for its day to day
operations to a number of key service providers. The
activities delegated, service levels and other related
reports to the activities of each service provider (such
as their own approach to such matters as cyber risk
and assessment of climate change risk to operations)
are closely monitored, where and as appropriate by
the Board and they are required to report to the Board
at set intervals.
Monitoring of key decisions and the outcome of those
decisions
The Board meets at least quarterly and at such other
times as deemed appropriate. During these meetings,
the Board considers reports from the Investment
Manager on the Group’s portfolio, its investment
activity and sector diversity. In addition, the Investment
Manager provides an overview of engagement with
the investee companies as well as potential investee
companies. The Board debates the Group’s portfolio
and notable acquisitions or disposals at each of
its meetings and challenges stock selection where
deemed appropriate. In between meetings, the
Investment Manager and Board maintain contact
through which they consider investment ideas,
further fundraising initiatives and market outlook and
strategies to consider adjusting the Group’s portfolio
in line with the Group’s investment policy. During the
year, the Board discussed the merits and structure of
the Group, with the Investment Manager and advisers
and considered the long-term interests of the Group’s
Shareholders during those discussions.
In addition, the Board receives reports from the
Financial Adviser on the Group’s Shareholder base
including any changes; its Secretary on latest
governance issues, legal or market announcements;
and its Administrator on the Group’s management
accounts. Furthermore, the Board receives reports
from the Group’s Broker on the performance of the
Group’s peers and ad hoc reports from its other key
stakeholders as deemed appropriate.
On an annual basis, the Board will undertake a review
of its stakeholders which include a review of their
control report and policies, such as whistleblowing,
anti-bribery, anti-money laundering and corruption,
cyber security, data protection policies and each
entity’s business continuity arrangements to ensure
they are in place and are adequate.
Stewardship code
The Board and the Investment Manager support and
have a strong commitment to the UK Stewardship
Code, the latest version of which was issued by FRC
took effect from 1 January 2020 and endorsed by
the AIC which sets out the principles of effective
stewardship by institutional investors.
Modern slavery disclosure
Due to the nature of the Group’s business, being a
company that does not offer goods or services to
consumers, the Board considers that it is not within
the scope of modern slavery. The Board considers the
Group’s supply chains, dealing predominately with
professional advisers and service providers in the
financial service industry, to be low risk in this matter.
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
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Castelnau Group Ltd Annual Report 2023
32
procedures and policies are in place. Refer to page 31
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
Ordinary Shares of the Group at 17 April 2024 were as
follows:
Number of
Ordinary Shares
% of issued
share capital
State Street Nominees Limited OM01 123,925,672 38.89%
Nortrust Nominees Limited 100,657,878 31.59%
Goldman Sachs Securities (Nominees) Limited 26,540,000 8.33%
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
Ordinary Shares.
Annual General Meeting (AGM)
The Group’s AGM will be held at 1.00pm on
18 September 2024 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.
Upcoming Review of Performance Fee
Arrangements
As shareholders will be aware, the Investment Manager
does not charge a management fee to the Company
and is instead incentivised solely via a performance
based fee arrangement. In summary, the performance
fee arrangement is measured over consecutive
periods of not less than three years with first period
commencing on the Company’s IPO on 18 October 2021
and ending on 31 December 2024. The performance
fee payable is one third of the outperformance of the
Net Asset Value total return after adjustment for inflows
and outflows, over the FTSE All-Share Total Return Index
(the “Benchmark”) with, subject to certain regulatory
considerations, the performance fee being satisfied
through the issuance of new ordinary shares.
The directors consider that the performance fee,
measured over a three year period and receivable
in shares, remains a significant point of alignment
between the Company, its shareholders and the
Investment Manager; however, the performance
fee arrangement is under review to ensure this
alignment is equitable to all parties. Pursuant to the
terms of the Investment Management Agreement, the
performance fee is paid based on the outperformance
over the Benchmark, calculated by reference to the
average adjusted net assets of the Company over
each performance period. The averaging of the net
asset value over the performance period does not
fully take into account the outperformance that has
Directors’ Report - continued
Governance
Castelnau Group Ltd Annual Report 2023
33
been delivered by the Investment Manager and
principally for this reason, it is proposed that a limited
number of adjustments will be made to the IMA, with
the Company entering into a revised agreement
in the near future. In considering a change to the
performance fee arrangements, certain additional
amendments are proposed, with the revisions
summarised below.
• The fee will remain as one third of the
outperformance over the Benchmark, however, the
fee will be calculated by reference to the audited
closing net asset value (“Closing NAV”) rather than
the average net asset value, and will be compared
to the ‘Benchmark NAV’.
• The Closing NAV is the reported audited net asset
value of the Company at the period end, excluding
any accrued performance fees. This will be compared
to the Benchmark NAV, which is the Company’s
opening audited NAV for the performance period
to which the Benchmark return is applied. The
Benchmark NAV will also be adjusted for the impact
of inflows and outflows to the share capital of the
Company, to ensure that both the Closing NAV and
Benchmark NAV reflect performance adjusted for the
impact of these events.
• In addition, the revised fee arrangement will include
a provision such that no performance fee would be
earned until the net asset value (“NAV”) per share
is above the original NAV per share at IPO (100p),
adjusted for the performance of the Benchmark.
• The fee will continue to be paid in shares.
For the avoidance of doubt, no performance fee for
the period to 31 December 2024 would currently be
payable under either the original or proposed revisions
to the performance fee calculation. In addition, no
additional changes to the IMA (other than in respect
of the performance fee) are being proposed. A further
announcement will be made following consultation
and approval of the revised IMA and the revised
performance fee arrangements, which it is planned will
replace those currently in place for the period from IPO
to 31 December 2024 and on a continuing basis.
Signed on behalf of the Board of Directors on
18April2024 by:
Joanne Peacegood Andrew Whittaker
Director Director
Governance
Castelnau Group Ltd Annual Report 2023
34
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 is a useful
addition to 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 Directors’
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
quarterly in advance, to the Directors 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. Graham
Shircore and Richard Brown waived their right to receive
a Director fee. The Directors received the following
remuneration in the form of Directors’ fees relating to the
year ended 31 December 2023 and 31 December 2022:
31 December 2023
GBP
31 December 2022
GBP
Joanne Peacegood 40,000 40,000
Andrew Whittaker 35,000 35,000
Joanna Duquemin Nicolle 30,000 30,000
David Stevenson 30,000 30,000
Graham Shircore* – –
Richard Brown** – –
135,000 135,000
* Resigned on 21 August 2023.
** Appointed on 13 September 2023.
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 charged to the Group for Directors as
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
18 April 2024 by:
Joanne Peacegood Andrew Whittaker
Director Director
Governance
Castelnau Group Ltd Annual Report 2023
35
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 2023.
Governance
Castelnau Group Ltd Annual Report 2023
36
(b) The Annual Report includes information detailed
in the Chair’s Statement, Investment Manager’s
Report, Directors’ Report, Statement of Directors’
Responsibilities, Directors’ Remuneration Report and
Audit Committee Report and provides a fair review
of the information required by:
(i) DTR 4.1.8 and DTR 4.1.9 of the Disclosure Guidance
and Transparency Rules, being a fair review of
the Group business and a description of the
principal risks and uncertainties facing the
Group; and
(ii) DTR 4.1.11 of the Disclosure Guidance and
Transparency Rules, being an indication of
important events that have occurred since the
end of the financial year and the likely future
development of the Group.
In the opinion of the Board, the Financial
Statements taken as a whole, are fair, balanced
and understandable and provide the information
necessary to assess the Group’s position and
performance, business model and strategy.
By order of the Board,
Joanne Peacegood
Director
18 April 2024
Andrew Whittaker
Director
Statement of Directors' Responsibilities - continued
Governance
Castelnau Group Ltd Annual Report 2023
37
On the following pages, we present the Audit
Committee Report, setting out the responsibilities of
the Audit Committee and its key activities for the year
ended 31 December 2023.
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.
The Audit Committee has prepared a risk matrix,
which considers the controls applied by the Board, the
Investment Manager and key service providers.
The Audit Committee considers, at least once a year,
whether there is a need for an internal audit function.
Currently, the Audit Committee does not consider there
to be a need for an internal audit function, given that
all outsourced functions are with parties who have
their own internal controls and procedures.
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
Providers’ 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
Audit Committee
Report
Governance
Castelnau Group Ltd Annual Report 2023
38
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.
The significant issues considered
during the year by the Audit
Committee in relation to the Financial
Statements and how they were
addressed are detailed below:
Valuation of investments
Some of the Group’s investments (including
certain of the Target Assets) will include securities
and other interests that are very thinly traded, for
which no market exists or which are restricted as
to their transferability under applicable laws and/
or the relevant investment documentation. Whilst
the valuations of the Group’s investments will be in
compliance with IFRS, some of the Group’s investments
will be difficult to value. Such valuations may be
conducted on an infrequent basis, are subject to a
range of uncertainties and will involve the Investment
Manager and/or the Audit Committee exercising
judgement. The Board reviewed the valuation policy
and PAMP went through the valuation process/
techniques with the Board around private asset
investments. The Board satisfactorily benchmarked
this valuation methodology with a third party. There
has been no change to the valuation policy and
the process remains the same which has also been
confirmed with the Board. The Board are satisfied with
the approach and the valuation policy and processes.
Revenue
Proceeds from any disposal of the Group’s interests in
portfolio companies through liquidity events, including
sales of equity following IPOs and trade sales, may vary
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 Ordinary Shares.
External Auditor
The Audit Committee has responsibility for making
a recommendation on the appointment, re-
appointment and removal of the external auditor.
Grant Thornton was appointed as the first auditor of
the Group following a competitive tender process.
During the year, the Audit Committee received and
reviewed audit plans and reports from the external
auditor. It is standard practice for the external auditor
to meet privately with the Audit Committee without the
Investment Manager and other service providers being
present at each Audit Committee meeting.
To assess the effectiveness of the external audit
process, the auditor was asked to articulate the
steps that they have taken to ensure objectivity and
independence, including where the auditor provides
non-audit services. The Audit Committee monitors
the auditor’s performance, behaviour and
effectiveness during the exercise of their duties, which
informs the decision to recommend reappointment on
an annual basis.
The Group does not utilise the external auditor for
internal audit purposes, secondments, tax compliance,
private letter rulings, accounting advice or valuation
advice. The Group's auditor performed the audit of the
Group's Financial Statements, prepared in accordance
with IFRS as issued by the IASB, in accordance with
International Standards on Auditing (ISAs).
The audit engagement leader responsible for the audit,
Mr Cyril Swale, will rotate off CGL in 2025 after having
served five years.
Audit Committee Report - continued
Governance
Castelnau Group Ltd Annual Report 2023
39
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 2023 is shown below:
31 December 2023
GBP
31 December 2022
GBP
Audit
Annual audit of the Group 62,000 49,800
Non- audit
Desktop review of Unaudited Interim Financial Statements 4,950 4,500
Review of IFRS 10 and requirements for consolidation – 2,500
Agreed upon procedures in relation to review of the prospectus 31,150 –
36,100 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 18 April 2024 and signed on behalf by:
Andrew Whittaker
Chair, Audit Committee
Governance
Castelnau Group Ltd Annual Report 2023
40
Independent Auditor’s Report to the
Members of Castelnau Group Limited
Opinion
We have audited the consolidated financial statements of Castelnau Group Limited (the “Company”) and its
subsidiary (the “Group”) for the year ended 31 December 2023 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 material accounting policy information.
In our opinion, the accompanying consolidated financial statements:
• give a true and fair view of the financial position of the Group as at 31 December 2023, and of consolidated
financial performance and its consolidated cash flows for the year then ended;
• are in accordance with International Financial Reporting Standards (IFRSs) as issued by the International
Standards Board (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.
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 financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Governance
Castelnau Group Ltd Annual Report 2023
41
The key audit matter How the matter was addressed in our audit
Valuation of unquoted investments
(2023: £258.3m, and 2022: £51.2m)
We identified the valuation of unquoted investments as one of
the most significant assessed risks of material misstatement
due to fraud and error, with these being measured using
significant estimates and judgements, and inputs that
are not based on observable market data (using models
incorporating discounted cash flow flows and discount rates)
which are subject to estimation uncertainty and the possibility
of management override of controls, giving rise to a higher risk
of misstatement and requiring significant audit attention.
The fair value of unquoted investments may be misstated
due to the application of inappropriate methodologies or
inappropriate inputs to the valuations and/or inappropriate
judgemental factors.
Refer to the Audit Committee Report (pages 37-39);
Accounting policies on pages 52-56, and Note 5, `Investments
in unconsolidated subsidiaries', to the consolidated financial
statements.
Our audit procedures consisted of:
• In responding to the key audit matter, we performed the
following audit procedures:
• We obtained and inspected the valuation models
prepared by the Investment Manager and management’s
valuation expert, and inspected the supporting data to
assess whether the data used is appropriate and relevant.
• We assessed whether the valuation of unquoted
investments’ accounting policy is in line with the
requirements of IFRS 13 Fair Value Measurement and
consistently applied, and if the valuation models are
performed accordingly.
• We assessed the independence, competence, and
objectivity of management’s external valuation expert.
• We obtained the valuations prepared by management
and the valuation report prepared by management’s
valuation expert and challenged the valuation conducted
by them through the following:
• We held discussions with the Investment Manager and
management’s valuation expert to obtain information
and understanding of how they valued the unquoted
investments and inspected supporting documents we
obtained and corroborated the information provided.
• We assessed whether the valuation models 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.
• We assessed the key assumptions considered
within management’s valuation expert’s report and
ensured that these assumptions were reasonable and
consistent with the requirements of IFRS 13 ‘Fair Value
Measurement’.
• We agreed key inputs/data used in the calculation
of the fair value, such as discount rates, growth
rates, forecasts etc., through inspecting supporting
documents and discussions with management.
• We determined if the fair value estimates are within the
range of values determined by the audit team.
• We performed back-testing to evaluate the
reasonableness of the discount rates applied in the
models, the actual performance of the investee entities
compared to the projections used in the discounted cash
flow models
• We evaluated whether fair value disclosure in the
consolidated financial statements is appropriate,
complete and in accordance with IFRS 13 ‘Fair Value
Measurement’.
Our results
We have not identified any material matters to report to
those charged with governance in relation to the fair value
measurement of unquoted investments.
Governance
Castelnau Group Ltd Annual Report 2023
42
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 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.
Responsibilities of the directors for the consolidated financial statements
As explained more fully in the statement of directors’ responsibilities set out on pages 35 to 36, the directors
are responsible for the preparation of the consolidated financial statements that give a true and fair view in
accordance with IFRSs as issued by the 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.
Auditor’s responsibilities for the audit of the consolidated 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 judgement 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.
Independent Auditor’s Report to the Members of Castelnau Group Limited – continued
Governance
Castelnau Group Ltd Annual Report 2023
43
• 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.
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.
Governance
Castelnau Group Ltd Annual Report 2023
44
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 consolidated 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.
Cyril Swale
For and on behalf of Grant Thornton Limited
Chartered Accountants
St Peter Port
Guernsey
Date: 18 April 2024
Independent Auditor’s Report to the Members of Castelnau Group Limited – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
45
Financial
Statements
Castelnau Group Ltd Annual Report 2023
45
Financial Statements
Castelnau Group Ltd Annual Report 2023
46
Consolidated Statement of
Comprehensive Income
For the year ended 31 December 2023
| 31 December | 31 December | ||
| 2023 | 2022 | ||
| Total | Total | ||
| Notes | GBP | GBP | |
Income | 6 | ||
Expenses | 7 | ( | ( |
( | ( | ||
Finance costs | 16 | ( | |
Impairment of financial assets at amortised cost | 5 | ( | |
Movement in expected credit loss provision | 5 | ( | |
Net gains on foreign currency | |||
| Net gains/(losses) on financial assets at fair value through profit | 5 | ( | |
| or loss | |||
Loss before tax | ( | ( | |
Tax expense | 8 | ( | ( |
Total comprehensive loss for the year | ( | ( | |
Pence | Pence | ||
Loss per Ordinary Share – Basic and diluted | 13 | ( | ( |
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 50 to 79 form an integral part of these Consolidated Financial Statements.
Financial Statements
Castelnau Group Ltd Annual Report 2023
47
Consolidated Statement of
Financial Position
As at 31 December 2023
| 31 December | 31 December | ||
| 2023 | 2022 | ||
| Notes | GBP | GBP | |
| NON-CURRENT ASSETS | |||
Investments - equity | 5 | ||
Investments - loans | 5 | ||
Interest receivable – loans | |||
Office equipment | |||
| CURRENT ASSETS | |||
Investments - loans | 5 | ||
Trade and other receivables | 9 | ||
Cash and cash equivalents | |||
TOTAL ASSETS | |||
| CURRENT LIABILITIES | |||
Earn-out liability | 10 | ||
Loans payable | 16 | ||
Finance costs payable | 16 | ||
Other payables | 11 | ||
| NON-CURRENT LIABILITIES | |||
Earn-out liability | 10 | ||
TOTAL LIABILITIES | |||
NET ASSETS | |||
| EQUITY | |||
Share capital | 12 | ||
Retained deficit | ( | ( | |
TOTAL EQUITY | |||
Number of Ordinary Shares in issue | 12 | ||
NAV per Ordinary Share (pence) | 14 |
The accompanying notes on pages 50 to 79 form an integral part of these Consolidated Financial Statements.
Financial Statements
Castelnau Group Ltd Annual Report 2023
48
Consolidated Statement of
Changes in Equity
For the year ended 31 December 2023
| Share Capital | Retained Deficit | Total | ||
| Note | GBP | GBP | GBP | |
Opening equity | ( | |||
Loss for the year | ( | ( | ||
Issue of new Ordinary Shares | ||||
Closing equity | 12 | ( |
For the year ended 31 December 2022
| Share Capital | Retained Deficit | Total | ||
| GBP | GBP | GBP | ||
Opening equity | ( | |||
Loss for the year | ( | ( | ||
Closing equity | 12 | ( |
The accompanying notes on pages 50 to 79 form an integral part of these Consolidated Financial Statements.
Financial Statements
Castelnau Group Ltd Annual Report 2023
49
Consolidated Statement of
Cash Flows
For the year ended 31 December 2023
| 31 December | 31 December | ||
| 2023 | 2022 | ||
| Notes | GBP | GBP | |
| Operating activities | |||
Total comprehensive loss for the year | ( | ( | |
Impairment of financial assets at amortised cost | 5 | ||
Movement in expected credit losses | 5 | ||
| Net (gains)/losses on financial assets at fair value through profit | ( | ||
| or loss | |||
Net gains on foreign currency | ( | ||
Finance costs | 16 | ||
Depreciation of office equipment | |||
Decrease/(increase) in trade and other receivables | 9 | ( | |
Increase in provisions | 10 | ||
Increase in payables | 11 | ||
Increase in interest receivable – loans | ( | ||
Net cash used in operating activities | ( | ( | |
| Investing activities | |||
Purchases of equity and bonds | ( | ( | |
Loans issued | 5 | ( | ( |
Sale/maturity of equity and bonds | 5 | ||
Cash received from repayment of loans | |||
Purchase of office equipment | ( | ||
Net cash used in investing activities | ( | ( | |
| Financing activities | |||
Issue of Ordinary Shares | 12 | ||
Finance costs paid | 16 | ( | |
Proceeds from loans received | |||
Repayment of loans received | ( | ||
Net cash flow from financing activities | |||
Decrease in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at beginning of year | |||
Exchange gain on cash and cash equivalents | |||
Cash and cash equivalents at end of year |
The accompanying notes on pages 50 to 79 form an integral part of these Consolidated Financial Statements.
Financial Statements
Castelnau Group Ltd Annual Report 2023
50
1. General information
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”.
Details of the Directors, Investment Manager and Advisers can be found on page 82.
The Financial Statements of the Group are presented for the year ended 31 December 2023 and were authorised
for issue by the Board on 18 April 2024.
2. Accounting policies
Notes to the Consolidated Financial
Statements
For the year ended 31 December 2023
Financial Statements
Castelnau Group Ltd Annual Report 2023
51
Financial Statements
Castelnau Group Ltd Annual Report 2023
52
Name of Subsidiary | Date of acquisition | Domicile | Ownership |
Castelnau Group Services Limited “CGSL” | 14 June 2022 | United Kingdom | 100% |
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
53
Financial Statements
Castelnau Group Ltd Annual Report 2023
54
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
55
Financial Statements
Castelnau Group Ltd Annual Report 2023
56
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 110.65%
of the Group’s NAV.
The Level 3 holdings are valued in line with 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 10).
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 earn-out liability”.
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
57
Judgements
4.3 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
Board have satisfactorily benchmarked this methodology with an independent third party.
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).
Financial Statements
Castelnau Group Ltd Annual Report 2023
58
| FVTPL | FVTPL | Amortised cost | ||
| Bonds | Equity | Loans | Total | |
| GBP | GBP | GBP | GBP | |
| INVESTMENTS | ||||
Opening portfolio cost | – | 163,111,446 | 12,960,632 | 176,072,078 |
Purchases at cost | – | 199,447,865 | 10,486,000 | 209,933,865 |
| Proceeds on maturity/principal | - | (56,986,319) | (1,708,377) | (58,694,696) |
| repayment | ||||
| Realised losses on sale/maturity/ | - | (13,689,391) | (3,000,000) | (16,689,391) |
| write-off | ||||
Cost | – | 291,883,601 | 18,738,255 | 310,621,856 |
Unrealised gains on investments | – | 30,380,621 | – | 30,380,621 |
Unrealised losses on investments* | – | (49,129,316) | (3,118,978) | (52,248,294) |
Fair value/carrying amount | – | 273,134,906 | 15,619,277 | 288,754,183 |
| Realised losses on sale/maturity/ | - | (13,689,391) | (3,000,000) | (16,689,391) |
| write-off | ||||
Movement in unrealised gains on investments | - | 24,467,275 | - | 24,467,275 |
Movement in unrealised losses on investments* | - | (2,789,263) | (118,978) | (2,908,241) |
| Net gains/(losses) on financial | - | 7,988,621 | (3,118,978) | 4,869,643 |
| assets |
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
59
| FVTPL | FVTPL | Amortised cost | ||
| Bonds | Equity | Loans | Total | |
| GBP | GBP | GBP | 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 | (81,353,360) | - | (3,726,163) | (85,079,523) |
| repayment | ||||
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/ | - | (46,340,053) | (3,000,000) | (49,340,053) |
| impairment | ||||
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) |
Name of investee company | Date of acquisition | Domicile | Ownership |
Rawnet Limited | 12 February 2021 | United Kingdom | 100.00% |
Showpiece Technologies Limited | 12 November 2021 | United Kingdom | 80.00% |
Ocula Technologies Holdings Limited | 22 January 2021 | United Kingdom | 50.26% |
Silverwood Brands Plc | 13 October 2022 | United Kingdom | 1.75% |
Phoenix SG Limited | 14 October 2021 | Cayman Islands | 64.02% |
Cambium International Limited | 14 October 2021 | Cayman Islands | 60.16% |
Valderrama Limited | 14 April 2023 | Channel Islands | 65.39% |
Financial Statements
Castelnau Group Ltd Annual Report 2023
60
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
| Classification | ||
Level 1 | 14,785,032 | 69,315,063 |
Level 2 | – | 2,171,429 |
Level 3 | 258,349,874 | 51,198,247 |
Total non-current investments held at ‘FVTPL’ | 273,134,906 | 122,684,739 |
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
61
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
| Level 3 investments | ||
Opening balance | 51,198,247 | 28,207,784 |
Purchases of financial assets | 197,837,646 | 23,928,245 |
Net realised losses for the year | (3) | – |
Net unrealised gains/(losses) for the year | 6,845,993 | (937,782) |
Transfers from Level 2 to Level 3 | 2,467,991 | – |
Closing balance | 258,349,874 | 51,198,247 |
Financial Statements
Castelnau Group Ltd Annual Report 2023
62
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
63
| Significant | |||
| unobservable | Estimate of the | Sensitivity of fair value to changes in | |
| Description | input | input | unobservable inputs |
Discount rate | 15% | An increase to 16%/(decrease to 14%) | |
| would (decrease)/increase fair value | |||
| by (-10%)/+10% | |||
Inflation | 2% | An increase to 3%/(decrease to 1%) | |
| would increase/(decrease) fair value | |||
| by +25%/(-27%) | |||
Funeral plan excess return | 2.5% | An increase to 3.5%/(decrease to 1.5%) | |
| Investment in Valderrama | would increase/(decrease) fair value | ||
| by +16%/(-20%) | |||
Terminal growth rate | 2% | An increase to 3%/(decrease to 1%) | |
| would increase/(decrease) fair value | |||
| by +4%/(- 4%) | |||
Annual operating profit | n/a | An increase of 5%/(decrease of -5%) | |
| would increase/(decrease) fair value | |||
| by +8%/(-9%) | |||
Discount rate | 15% | An increase to 16%/(decrease to 14%) | |
| would (decrease)/increase fair value | |||
| by (- 7%)/+9% | |||
| Investment in Phoenix S.G. | Terminal growth rate | 2% | An increase to 3%/(decrease to 1%) |
| would increase/(decrease) fair value | |||
| by +3%/(- 3%) | |||
Annual operating profit | n/a | An increase of 5%/(decrease of -5%) | |
| would increase/(decrease) fair value | |||
| by +5%/(-5%) | |||
Discount rate | 15% | An increase to 18%/(decrease to 12%) | |
| would (decrease)/increase fair value | |||
| Investment in Rawnet | by (- 16%)/+19% | ||
| FY22-27 Compound sales | 9% | An increase to 13%/(decrease to 8%) | |
| Growth rate | would increase/(decrease) fair value | ||
| by +100%/(-65%) | |||
Discount rate | 15% | An increase to 16%/(decrease to 14%) | |
| would (decrease)/increase fair value | |||
| by (-9 %)/+10% | |||
Revenue growth rate | 12% | An increase to 14%/(decrease to 10%) | |
| Investment in Cambium | would increase/(decrease) fair value | ||
| by+9%/(-8%) | |||
Group product margin | 45% | An increase to 46%/(decrease to 44%) | |
| would increase/(decrease) fair value | |||
| by +4%/(-4%) |
Financial Statements
Castelnau Group Ltd Annual Report 2023
64
| Significant | |||
| unobservable | Estimate of the | Sensitivity of fair value to changes in | |
| Description | input | input | unobservable inputs |
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 | 28% | An increase to 30%/(decrease to 26%) | |
| Investment in Phoenix S.G. | auctions | would increase/(decrease) fair value | |
| by 4.06%/(-4.16%) | |||
| Coins auction sales | 20% | An increase to 22%/(decrease to 18%) | |
| margins | would increase/(decrease) fair value | ||
| by 4.11%/(-4.20%) | |||
| Stamps margins exc | 44% | An increase to 45%/(decrease to 43%) | |
| auctions | would increase/(decrease) fair value | ||
| by 1.78%/(-1.83%) | |||
| Stamp auction sales | 27% | An increase to 29%/(decrease to 25%) | |
| margins | would increase/(decrease) fair value | ||
| by 6.80%/(-6.85%) | |||
Investment in Rawnet | FY22-26 Compound sales | 19% | An increase to 24%/(decrease to 15%) |
| Growth rate | 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%) |
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
65
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 | |||
| Castelnau | Services | Total | |
| Group | Group | 31 December | |
| Limited | Limited | 2023 | |
| Income | |||
Consultancy services | - | 1,122,884 | 1,122,884 |
Interest income | 864,209 | – | 864,209 |
Other income | – | 5,000 | 5,000 |
Segment income | 864,209 | 1,127,884 | 1,992,093 |
Gross wages | – | (592,014) | (592,014) |
Other expenses | (2,812,456) | (519,619) | (3,332,075) |
(2,812,456) | (1,111,633) | (3,924,089) | |
Finance costs | (10,710,140) | – | (10,710,140) |
Net gains on foreign currency | 171 | – | 171 |
Net gains on financial assets | 4,869,643 | – | 4,869,643 |
Segment (loss)/profit before tax | (7,788,573) | 16,251 | (7,772,322) |
Taxation | – | (3,081) | (3,081) |
Segment comprehensive (loss)/income | (7,788,573) | 13,170 | (7,775,403) |
Segment assets | 289,685,742 | 258,063 | 289,943,805 |
Segment liabilities | (58,537,391) | (154,627) | (58,692,018) |
Segment net assets | 231,148,351 | 103,436 | 231,251,787 |
Financial Statements
Castelnau Group Ltd Annual Report 2023
66
Notes to the Consolidated Financial Statements – continued
Segment information for the year ended 31 December 2022 is as follows:
| Castelnau | |||
| Castelnau | Services | Total | |
| Group | Group | 31 December | |
| Limited | Limited* | 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 |
* From date of acquisition, 14 June 2022.
Financial Statements
Castelnau Group Ltd Annual Report 2023
67
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Administrator’s fee | 107,231 | 78,386 |
Audit fees | 72,198 | 45,841 |
Change in fair value of earn-out liability | 175,478 | 146,648 |
Depositary fee | 49,475 | 30,297 |
Depreciation of office equipment | 598 | – |
Directors’ fee | 135,000 | 135,000 |
Employee benefits* | 592,014 | 299,141 |
Investment transaction charges | 11 | 2,904 |
Legal and professional fees** | 2,490,902 | 258,358 |
Operating expenses | 135,114 | 91,568 |
Sundry costs | 128,288 | 115,848 |
Trustee fee | 37,780 | 30,297 |
3,924,089 | 1,234,288 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
| *Included in expenses | ||
Wages and salaries | 515,694 | 281,692 |
Employers’ national insurance contributions | 61,682 | 14,183 |
Pension costs | 12,412 | 3,266 |
Employee healthcare | 2,226 | – |
592,014 | 299,141 |
Financial Statements
Castelnau Group Ltd Annual Report 2023
68
Notes to the Consolidated Financial Statements – continued
8. Taxation
The main components of income tax for the Subsidiary are detailed below:
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Profit before tax | 16,216 | 15,204 |
Tax chargeable – Tax rate 19% | 3,081 | 2,889 |
Deferred tax | – | – |
Tax expense | 3,081 | 2,889 |
Reconciliation of profit before tax and the accounting profit:
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Accounting profit before tax | 16,216 | 11,937 |
Disallow: Employer’s pension payments | 12,412 | 3,267 |
Adjusted profit before tax | 28,628 | 15,204 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Prepayments | 44,486 | 51,860 |
Income receivable | 11,770 | 151,468 |
Trade receivables | 204,977 | 153,774 |
261,233 | 357,102 |
10. Earn-out liability
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Earn-out liability – Non-current | – | 2,346,648 |
Earn-out liability – Current | 2,522,126 | – |
2,522,126 | 2,346,648 |
Financial Statements
Castelnau Group Ltd Annual Report 2023
69
The earn-out liability, at year end, was calculated as the fair value of the liability related to the potential future
payment of the Rawnet earn-out. The total earn-out payment was to be crystallised over three different periods,
with a maximum payment of £903,311 at each crystallisation date. Payments for all three years were due to
be made within 5 days of 12 February 2024. The amount of the earn-out was conditional on the growth and
performance of certain Rawnet clients (other Castelnau portfolio companies). It was considered likely that the
earn-out would be paid in full based on expectations as of the valuation date. While full payment of the first and
second tranches was effectively guaranteed, there was some uncertainty with regards to the final tranche.
Post year end, an earn-out amount of £2,464,361 was agreed to be paid, reflecting good performance in the first
two periods and a reduction in the maximum available year three earn-out due to third year performance.
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Other accrued expenses | 149,546 | 156,199 |
Trade payables | 134,788 | 93,923 |
Social security and other taxes | 30,655 | 25,735 |
314,989 | 275,857 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Share capital at the beginning of the year | 184,116,760 | 184,116,760 |
Issue of Ordinary Shares | 100,994,490 | – |
Allotted, called up and fully paid Ordinary Shares* | 285,111,250 | 184,116,760 |
Class B Share held by the Investment Manager** | 1 | 1 |
Total Share capital at the end of the year | 285,111,251 | 184,116,761 |
Financial Statements
Castelnau Group Ltd Annual Report 2023
70
Notes to the Consolidated Financial Statements – continued
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Ordinary Shares at the beginning of the year | 183,996,058 | 183,996,058 |
Issue of Ordinary Shares | 134,639,198 | – |
Total number of Ordinary Shares in issue* | 318,635,256 | 183,996,058 |
Class B Share held by the Investment Manager** | 1 | 1 |
Financial Statements
Castelnau Group Ltd Annual Report 2023
71
13. Loss per Ordinary Share
Loss per Ordinary Share is based on the loss of £7,775,403 (31 December 2022: £34,094,085) attributable to the
weighted average of 274,368,675 (31 December 2022: 183,996,058) Ordinary Shares in issue during the year.
There is no difference between the weighted average diluted and undiluted number of Ordinary Shares. There is
no difference between basic and diluted loss per share as there are no diluted instruments.
14. Net assets per Ordinary Share
The figure for net assets per Ordinary Share is based on £231,251,787 (2022: £138,032,700) divided by 318,635,256
voting Ordinary Shares in issue at 31 December 2023 (2022: 183,996,058).
The table below is a reconciliation between the NAV per Ordinary Share announced on the London Stock Exchange
and the NAV per Ordinary Share disclosed in these financial statements.
| Net assets | NAV per share | |
| GBP | Pence | |
NAV as published on 31 December 2023 | 231,251,787 | 72.58 |
NAV as disclosed in these financial statements | 231,251,787 | 72.58 |
15. Material agreements
Details of the management, administration and secretarial contracts can be found in the Directors’ Report on
page 18. There were no transactions with Directors other than disclosed in note 16. As at 31 December 2023, there
were £Nil fees payable to PAMP (31 December 2022: £Nil).
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 2022: £Nil) were charged to the Group, of which £Nil (31
December 2022: £Nil) remained payable at the end of the year.
Financial Statements
Castelnau Group Ltd Annual Report 2023
72
Notes to the Consolidated Financial Statements – continued
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 NAV of the
Group between £200 million and £400 million, and 0.02% of the NAV 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 £107,231 (31 December 2022: £78,386) were charged to the Group, of which £52,550 (31 December
2022: £35,206) 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 NAV of the Group
(subject to a minimum of £20,000); and (ii) a depositary services fee of 0.02% of the NAV of the Group up to £200
million, falling to 0.01% of the NAV 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 £49,475 (31 December 2022:
£30,297) were charged to the Group, of which £13,650 (31 December 2022: £7,043) 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 £32,308 (31 December 2022: £5,803) were charged to the Group, of which £3,145 was prepaid
as at 31 December 2023 (31 December 2022: £11,613 was prepaid).
Financial Statements
Castelnau Group Ltd Annual Report 2023
73
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Joanne Peacegood | 40,000 | 40,000 |
Andrew Whittaker | 35,000 | 35,000 |
Joanna Duquemin Nicolle | 30,000 | 30,000 |
David Stevenson | 30,000 | 30,000 |
Graham Shircore* | – | – |
Richard Brown** | – | – |
135,000 | 135,000 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| Number of | Number of | |
| Ordinary Shares | Ordinary Shares | |
Joanne Peacegood | 10,000 | 10,000 |
Andrew Whittaker | 40,000 | 40,000 |
Joanna Duquemin Nicolle | 75,000 | 75,000 |
David Stevenson | – | – |
Graham Shircore* | – | – |
Richard Brown** | – | – |
Financial Statements
Castelnau Group Ltd Annual Report 2023
74
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
75
| 31 December | 31 December | |
| 2023 | 2022 | |
| GBP | GBP | |
Loans payable at the beginning of the year | – | – |
Proceeds from loans received | 89,217,968 | – |
Repayment of loans received | (41,541,539) | – |
Loans payable at the end of the year | 47,676,429 | – |
Finance costs payable at the beginning of the year | – | – |
Finance costs charged | 10,710,140 | – |
Repayment of finance costs | (2,531,666) | – |
Finance costs payable at the end of the year | 8,178,474 | – |
Financial Statements
Castelnau Group Ltd Annual Report 2023
76
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
77
| 1-12 | More than 12 | ||
| months | months | Total | |
| As at 31 December 2023 | |||
Earn-out liability | 2,522,126 | – | 2,522,126 |
Loans payable | 47,676,429 | – | 47,676,429 |
Finance costs payable | 8,178,474 | – | 8,178,474 |
Other payables | 314,989 | – | 314,989 |
58,692,018 | – | 58,692,018 |
| 1-12 | More than 12 | ||
| months | 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 |
Financial Statements
Castelnau Group Ltd Annual Report 2023
78
Notes to the Consolidated Financial Statements – continued
Financial Statements
Castelnau Group Ltd Annual Report 2023
79
18. Post year end events
These financial statements were approved for issuance by the Board on 18 April 2024. Subsequent events have
been evaluated to this date.
On 4 January 2024, amendment was made to the loan facility with Phoenix S.G. Limited as borrower, to
increase total commitment of the facility from £450,000 to £6,066,000 and to extend the termination date from
31 December 2023 to 31 December 2025.
On 29 January 2024, the Group agreed to convert its unsecured loan facility of £4,399,999 to Silverwood Brands Plc
into equity in Silverwood. The conversion price is 54 pence per Ordinary Share, resulting in the issue of 8,148,147 new
Ordinary Shares to the Group. The accrued interest remains as an outstanding loan accruing interest in line with
the original loan terms, repayable 29 January 2026 subject to certain conditions. Following conversion, the Group
owns 12,718,499 Ordinary Shares or 4.7% of the equity in Silverwood.
In February 2024, an amount of £2,464,361 was agreed to be paid in relation to the Rawnet earn-out, reflecting
good performance in the first two periods and a reduction in the maximum available year three earn-out due to
third year performance.
Financial Statements
Castelnau Group Ltd Annual Report 2023
80
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.
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
2023
GBP
Year
ended
31 December
2022
GBP
Average NAV for the year (A) 195,994,634 150,013,156
Operating expenses (annualised) (B) 1,159,512 786,345
Ongoing charges (B/A) 0.59% 0.52%
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
2023
pence
Year
ended
31 December
2022
pence
Opening NAV per share (A) 75.02 93.55
Closing NAV per share 72.58 75.02
Decrease in NAV per share (B) (2.44) (18.53)
NAV total return (B/A) (3.25%) (19.81%)
NAV per Ordinary Share
NAV per Ordinary Share is calculated by dividing the total Net Asset Value of £231,251,787 (31 December 2022:
£138,032,700) by the number of Ordinary Shares at the end of the year of 318,635,256 Ordinary Shares
(31 December 2022: 183,996,058). This produces a NAV per Ordinary Share of 72.58p (2022: 75.02p), which was a
decrease of 3.25% (2022: decrease of 19.81%).
Premium/Discount to NAV
If the share price is higher than the NAV per Ordinary Share, the shares are said to be trading at a premium. The
size of the discount is calculated by subtracting the share price at year end of 75.50p (31 December 2022: 69.00p)
from the NAV per Ordinary Share at year end of 72.58p (31 December 2022: 75.02p) and is usually expressed as a
percentage of the NAV per Ordinary Share of 4.02% (31 December 2022: discount of 8.02%). If the share price of an
investment company is lower than the NAV per Ordinary Share, the shares are said to be trading at a discount.
Financial Statements
Castelnau Group Ltd Annual Report 2023
81
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
2023 (to December 31) 34.0% 32.8% 7.7% 8,791.99
Cumulative 1505.1% 779.2% 258.9%
Annualised Returns 11.4% 8.8% 5.1%
Appendix (Unaudited)
Financial Statements
Castelnau Group Ltd Annual Report 2023
82
Group Information
Directors – Parent (all non-executive)
Joanne Peacegood (Chair)
Andrew Whittaker
Joanna Duquemin Nicolle
David Stevenson
Graham Shircore (resigned 21 August 2023)
Richard Brown (appointed 13 September 2023)
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
Strategic Report
Summary Information ............................................................................................................. 3
Chair’s Statement ...................................................................................................................... 5
Holdings ..........................................................................................................................................7
Portfolio Analysis .........................................................................................................................8
The Alternative Investment Fund Manager (“AIFM”)
and Investment Manager’s Report ..................................................................................... 9
Statement from the CIO of the Investment Manager .............................................. 14
Governance
Board Members ........................................................................................................................ 16
Directors’ Report ........................................................................................................................18
Directors’ Remuneration Report ....................................................................................... 34
Statement of Directors’ Responsibilities ........................................................................ 35
Audit Committee Report .......................................................................................................37
Independent Auditor’s Report ........................................................................................... 40
Financial Statements
Consolidated Statement of Comprehensive Income ............................................. 46
Consolidated Statement of Financial Position ............................................................47
Consolidated Statement of Changes in Equity .......................................................... 48
Consolidated Statement of Cash Flows ....................................................................... 49
Notes to the Consolidated Financial Statements ..................................................... 50
Alternative Performance Measures (Unaudited)
...............80
Appendix (Unaudited)
.........................................................................................81
Group Information
.................................................................................................. 82
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
www.castelnaugroup.com
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands
GY1 3QL
Annual Report and Audited
Consolidated Financial Statements
For the year ended 31 December 2023