Sandon Capital Activist Fund's commentary for the month ended March 31, 2025.
The Fund return for March 2025 was 2.4%, bringing total returns (net of all fees and expenses) since inception to the equivalent of 10.5% per annum. Cash levels ended the month at approximately 6%.
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March saw another volatile month for global capital markets with most indices experiencing significant declines. Against this backdrop, the positive performance of the portfolio was again pleasing, in absolute terms, and even more so in relative terms. The largest positive contributors were COG Financial Services Ltd (COG) (+2.6%), Fleetwood Ltd (FWD) (+1.8%) and Wellard Ltd (WLD) (+0.7%). These were partially offset by Coventry Group Ltd (CYG) (-1.5%) and an undisclosed position (-0.8%).
COG announced significant changes at Board level with Patrick Tuttle, Stephen White and Mark Crain resigning as directors and Cameron McCullagh moving from an executive to a non-executive director role. Joining the Board will be John Dwyer and Tony Robinson, who both have a long and successful history in the insurance broking market in Australia, most recently at PSC Insurance which was acquired for $2.3 billion in October 2024. The Board at COG has steered the growth of the company from being a small equipment lease book to Australia’s largest small-to-medium enterprise (SME) broker in less than a decade. This has resulted in a capital light company that generates tremendous cash and returns on equity. They deserve to be congratulated on their accomplishments, and we look forward to the leadership of the refreshed Board.
CYG announced that MD & CEO, Robert Bulluss, has tendered his resignation and will leave the company no later than 20 September 2025. Robert has done an outstanding job in the ~8 years since he was appointed CEO. When he took over, the company was loss making and haemorrhaging cash. Today, after renewing the senior leadership team, rejuvenating the culture, acquiring tangential businesses and implementing a company wide ERP system, CYG is in good shape to grow profitably and generate strong free cash flows. The board has decided to appoint heads to each of the two businesses, Trade Distribution and Fluid Systems rather than immediately appointing a new group CEO.
WLD released the Notice of Meeting (NoM) with resolutions to approve the sale of the M/V Ocean Drover and subsequent return of capital of 15cps. Included in the NoM was a proforma balance sheet that showed WLD will have remaining cash of ~4cps of cash should both of these transactions be approved and executed. These amounts (15cps return of capital plus 4cps of proforma cash) compared favourably to the prevailing share price of 15cps at the beginning of March.
Volatility in global capital markets remains high and this is presenting interesting investment opportunities. During April, we expect to receive a number of 3QFY25 trading updates from our portfolio companies. We will report on any material updates in our next newsletter.
