Castelnau Group (CGL) announced its results for the 12-month period ending December 31 2022, concluding its first full year as a listed company. The NAV total return for the year was -19.81%, and the share price return was -34.6%, versus the benchmark FTSE All Share Total Return Index of +0.3%, a -20.1% relative underperformance of the NAV. Despite the poor performance, the discount stood at around 6%.
Management maintained that changing discount rates have had a significant impact on their valuation, but believe the intrinsic value of their underlying assets has not changed. The main contributors to the underperformance were Dignity Plc, Phoenix S.G. Ltd and Hornby Plc. Dignity Plc represents 31.2% of the portfolio and had a -29.7% price movement. Hornby Plc. represents 19.1% of the portfolio and had a -31.3% price movement.
Despite the challenging year, management remains confident of the long-term upside of Castlnau. Commenting on the results, Gary Channon, CIO of the investment manager, Phoenix Asset Management noted:
“We expect to see growing sales and improving profitability across all four of our core businesses in the coming years. They all serve large markets and have big opportunities to expand their businesses further. With all the leadership teams now in place, the focus of Castelnau can shift to a greater extent towards helping those teams plan and execute their growth strategies. Our two enabling businesses Rawnet and Ocula are also growing, both in terms of their impact on our portfolio businesses and with third party clients.
“2022 was a formative year for Castelnau, including within our own team. A huge amount has been done but you may rightly conclude that not much seemed to happen in what really counts, which is growing in value at a per share level. We believe that we have put in place the conditions for that value to start coming through and, if successful, achieving a controlling interest in Dignity has the potential to be transformational.
“We will update you openly and honestly on whatever path it takes but we have never been more excited about the future. We believe that we can continue to find businesses where we can add materially to their value by applying our resources and expertise. If we succeed, you will hold a portfolio of great companies compounding your value into the future, those currently in the portfolio being joined occasionally by new candidates provided that we have the bandwidth to handle them.”
CGL : Concentration risk sinks Castelnau Group