REG - Caledonian Trust PLC - Unaudited interim results
28/03/2024 12:15
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RNS Number : 7380I Caledonian Trust PLC 28 March 2024
28 March 2024
Caledonian Trust plc
("Caledonian Trust", the "Company" or the "Group")
Unaudited interim results for the six months ended 31 December 2023
Caledonian Trust plc, the Edinburgh-based property investment holding and
development company, announces its unaudited interim results for the six
months ended 31 December 2023.
Enquiries:
Caledonian Trust plc
Douglas Lowe, Chairman and Chief Executive Officer Tel: 0131 220 0416
Mike Baynham, Finance Director Tel: 0131 220 0416
Allenby Capital Limited
(Nominated Adviser and Broker)
Nick Athanas Tel: 0203 328 5656
Dan Dearden-Williams
CHAIRMAN'S STATEMENT
Introduction
The Group made a pre-tax loss of £415,000 in the six months to 31 December
2023 compared with a pre-tax profit of £353,000 for the same period last
year. The loss per share for the six months to 31 December 2023 was 3.52p
and the NAV per share as at 31 December 2023 was 199.9p compared with a profit
per share of 3.00p and a NAV per share of 200.3p last year.
Review of Activities
The Group's property investment business continues unchanged, except that the
public house in Alloa, the last of the four originally refurbished in the late
1990s, is currently under offer.
St Margaret's House, continues to be fully let at a nominal rent £1.50 per
ft(2) of lettable space (excluding VAT), to a charity, Edinburgh Palette,
which has reconfigured and sub-let all the space to over 200 artists,
artisans, entrepreneurs and galleries. The exceptional value ensures St
Margaret's continues to have a waiting list.
At St. Margaret's we have gained and, subsequently, endured the planning
permission for a development of 377 student bedrooms and 107 residential
flats. Furthermore, we have secured a non-material variation of the consent
to increase the number of studio rooms in the student block from 73 to 277
while reducing the cluster bedrooms from 304 to 84. We have retained Montagu
Evans to advise on the sale of St Margaret's House for which we plan to launch
a marketing campaign later this year provided market conditions are
propitious.
At Brunstane, in East Edinburgh, in September 2022 we completed the
construction of the final part of the listed former farm steading, the
Steading Courtyard, comprising five new build stone faced houses over
8,650ft(2). The last of the five houses was sold in August 2023 for
£0.66m. The application for 10 new houses (c.20,000ft(2)) "Upper
Brunstane", in the field to the east of the steading was granted in November
2022 - we intend to prepare the site for development, take up the planning
consent and shortly intend to submit the application for the requisite
building warrant with a view to undertaking the development as soon as market
conditions improve. A previous application to modify the consent for a very
large house (3,500ft(2)), "Plot 10", lying between the Steading phase and
Upper Brunstane, by replacing the existing permission with two smaller houses
of a combined similar size, was unsuccessful.
At Wallyford, East Lothian, we have made several minor but important
variations to the planning consent for six detached houses and four
semi-detached houses totalling over 13,350ft(2). We obtained detailed tender
prices last September, but delayed construction in light of the current and
prospective market conditions. The site lies within 400m of the East Coast
mainline station, is near the A1/A720 City Bypass junction and is contiguous
with a large completed development of houses. To the south of Wallyford
another very large development of new houses is being built at St Clement's
Wells on ground rising to the south, affording extensive views over the Forth
estuary to Fife. Taylor Wimpey, Barratt, Cruden Homes and Ambassador Homes
are currently building at Wallyford, but recent sales volumes have declined
and incentives are often offered. Nearby, Dandara have started ground works
on their site of 87 homes. Wallyford, no longer a mining village, is rapidly
becoming another leafy commuting Edinburgh suburb on the fertile East Lothian
coastal strip.
The Company owns thirteen rural development opportunities, nine in Perthshire,
three in Fife and one in Argyll and Bute, all of which are set in areas of
high amenity where development is more controversial and therefore can be
subject to wider objection, especially as such small developments, outwith
major housing allocations, may not merit high priority. We have endured
planning consents on all of those sites where planning consent has been
granted, most recently at Larennie Farm, Peat Inn near St. Andrews. No
further development work has been undertaken at these sites as there are more
attractive immediate opportunities for the Group in and around Edinburgh.
Economic Prospects
Economic prospects are good in the short-term while disappointing
longer-term. The economy grew 0.2% in January 2024, raising expectations of
the economy expanding in Q1 2024, which would end the current recession.
Evidence of a likely recovery is becoming more widely available, notably in
the housing market where sales "subject to contract" rose by 23% in February
2024 compared to last year, while mortgage approvals rose to 55,000 in January
2024. The Nationwide HPI rose 1.2% in February, its first annual rise
(seasonally adjusted) since January 2023. The RICS house price survey in
February showed the percentage of agents forecasting rises over falls doubled
to 36 compared to 18 in January. The PMI Manufacturing Index rose to 47.5 in
February, the highest in ten months in spite of disruptions in production and
delivery schedules due to the ongoing crisis in the Red Sea. The output
expectations PMI for the year ahead is above its historic average, and
similarly the Lloyds Business Barometer has risen to its highest level since
2017. Inflation has fallen rapidly in February from 4.0% to 3.4%.
Inflation caused by food and fuel prices fell sharply as lower prices 13
months ago fell out of the calculation. In contrast "Core" inflation is 6.5%
of which services inflation, a major component, continues at a high 5.1%.
Due to lags the full contractionary impact of recent interest rises is yet to
be felt on the service economy. As this takes effect, and the rising figures
of the relevant previous 12 months become the comparator, the rate should
fall.
The OBR observe that recent forecasts of the Bank Rate in the longer term have
been volatile, oscillating between 2.7% and 4.2% since November last year.
The OBR is forecasting CPI inflation to fall rapidly and average 2.2% in 2024
and only 1.5% in 2025, due primarily to continuing falls in global energy
prices, and their second rounds affects, and a "looser" labour market, i.e.
the reverse of the past excess aggregate demand over supply. Or, as the Bank
of England expressed it, "a margin of excess supply is judged to emerge during
the first half of the forecast period and to remain around 1% of potential GDP
towards the end of the forecast period, putting downward pressure on
inflation".
The fall in inflation has reduced the market implied path for the Bank Rate
from 5¼ to around 3¼ by Q1 2027, a full 1 percentage point lower than the
Bank's November 2023 forecast. The OBR forecasts the Bank Rate falling to an
average of 4.4% in 2024-25 then to 3.2% in 2026-27 to 2028-29.
Enigmatically, it forecasts a rate of 4.2% by the final quarter of 2024
without specifying when falls will take place. Given that the Bank Rate was
unchanged on 21 March 2024, that there are only two meetings before 7 November
(the last 2024 meeting is 19 December) and that cuts of more than 0.25% would
appear "panicky" the forecast of 4.2% for Q4 2024 implies cuts starting no
later than 9 May 2024, followed by quarter point cuts in the remaining three
meetings in 2024. By Q1 2025 the Bank Rate is expected to be 3.9%, (1.1
percentage points lower than the November forecast), 3.3% in Q1 2026 and 3.2%
in Q1 2027.
The rapid fall in the Bank Rate is not matched by an equivalent forecast rise
in year-on-year GDP - Q1 2024 nil; Q1 2025 0.5%; Q1 2026 0.8% and Q12027
1.5%. Disappointingly, following a recession there is usually a "bounce":
growth is above average, but no such catch-up is forecast.
The OBR forecasts (calendar year on calendar year) are slightly better, in
part because, being made a month later than the Bank, conditions had improved,
forecasting from year ending 2023 as follows: 0.3%; 0.8%; 1.9%; 2.0%,
consistently above the Bank's forecast. For years 2027 and 2028 - beyond the
Bank's remit - the OBR forecast averages 1.75%/year. Unfortunately, the
OBR's forecasts have an inherent bias, as they are required to assume that the
Chancellor's expectations - such as for his forecast increased productivity -
are met, which is unlikely given the poor outcome of past expectations. Such
a bias implies that the OBR's longer term forecasts are "optimistic".
GDP growth reflects the whole economy which comprises the UK population, which
is expected to grow, primarily due to net immigration (670,000 in 2023
forecast to fall to c.350,000 in 2028). The OBR forecasts GDP per capita to
be 1 percentage point lower than GDP, i.e. -0.7 in 2023 and 0.5 percentage
point lower over the years to 2028: thus, per capita growth over the four
years to 2028 is forecast at only 1.0% per annum. The OBR summarises the
effect of an increased population, together with other factors: -
"Having steadily declined since early 2022, real GDP per person is forecast to
trough at 1¼ percent below its pre-pandemic peak in the first half of 2024.
Persistent weakness in per person output has been driven by rises in
inactivity and subdued productivity growth, which has remained well below its
pre-financial crisis average in recent years, even after accounting for the
rebound from the pandemic. We expect real GDP per person to begin to recover
later this year and regain its pre-pandemic level in 2025."
Per capita growth in GDP is primarily dependent on productivity growth which
was estimated at only 0.3% in 2022 to 2024, which both the Bank and the OBR
forecast to be about 1% for 2025, the OBR qualifying its forecast: "the
outlook for productivity growth is our most important and uncertain forecast
judgement".
Indeed, as Paul Klugman said: "Productivity isn't everything, but, in the
long-term, it is almost everything". To paraphrase, change in productivity
isn't everything, but, in the long-term, it has determined almost
everything. Had productivity increased at the 1955 - 2008 trend rate, GDP
per head would now be 39% higher; living standards would have increased rather
than stagnated and tax rates as a percentage of GDP would not be higher than
at any time since WWII. Martin Wolf says succinctly: "in all, this is a
disaster"
Wolf's cures for the "disaster" include "high-quality" investment, faster
innovation, improved capital markets and human capital development. He
includes climate change, a worldwide problem, to which the UK contributes 1%
of emissions. Patently, whatever the total return to the UK's investment,
the UK will only benefit by 1% of it… economically better to leave it to
other 99%. However, this moral stand does not detract from economic analysis
or his conclusion "the institutions in charge of British policy process are
broken".
Wolf's description of some of the symptoms is clear, but the cure is opaque.
To improve productivity there is no magic pill nor silver bullet - surely so
simple a cure would already have been used. Improving productivity implies
"change", a great inherent difficulty summarised by Richard Hooker
(1554-1600): "Change is not made without inconvenience, even from worse to
better".
Crucially, changes are beneficial only if they are relevant, consistent and
compatible with existing skills, technologies or practices, requiring intimate
knowledge of their economic environment. The opportunity and the means to
effect such changes does not reside even in the "Rolls Royce" minds of
Treasury officials and certainly not elsewhere in central or local
officialdom. Too often "wonder" schemes, undertaken quite out of context end
in failure. Investment development programmes are littered with economic
wrecks: motorway style roads that have little traffic; state airlines that
burn money; and large-scale western style investment incompatible with the
existing infrastructure, condition and culture such as the East African
Groundnut Scheme. Major advances usually occur "bit by bit", as Newton,
qualifying his insight, said "if I have seen further, it is by standing on the
shoulders of others". The importance of progressive change is easily
exemplified: if there are 100 new variables each with a 99% chance of working,
then the chance of the whole working is 0.37! And 1,000 variables each with
a 99.9% chance of working, also have a 37% chance of working! Nothing works
unless it all works: a Ferrari without an appropriate transmission will soon
"blow-up"; an iPhone 14 with a poor signal is of no greater value than the
iPhone 2G. The Challenger space programme had 25 flights before the disaster
of STS-51-L in 1986. It "blew-up" because a simple but essential component,
simple rubber "O" rings, had stiffened in cold weather reducing their
flexibility to seal the joint in the rocket booster. Everything must work
for anything to work.
Similarly, the achievement of higher productivity requires the successful
integration of several components. The first component is technical change:
economically relevant education and improved skills; the second is for
sociological change: advancement by merit rather than by affiliation and
association; the third is for cultural change: promoting freedom and reduced
dependency and an acceptance that improvement to public goods and services,
amenity and "greening" requires resources which can only be provided without
diminution elsewhere by increased output, not miraculously conjured up "out of
thin air"; the fourth is an institutional change that eliminates red tape and
encourages and rewards entrepreneurship; the fifth is an economic change that
encourages competition and dismantles oligopolies, including professional
bodies, acting as distributional coalitions against the public interest; and
lastly, political change to encourage freer trade and the interchange of
ideas, technologies and skills, the independence of universities, the
development of research findings and the support of growth areas and
industries rather than the continued subsidy of those failing.
A more radical but politically difficult opportunity to increase productivity
is available by substituting appropriate investment (note increasing wages is
not "investment"). The NIESR compute that the two percentage point cut in NI
will raise GDP by 0.05% over the next five years. The 10.5 billion cost of
the NI cut invested in appropriate infrastructure or equipment would raise GDP
by 0.17%, a 0.12 percentage point improvement.
Thus, compared to pre-2008 standards, economic prospects are disappointing,
due to low productivity raising GDP per head by less than 1% per year, but
compared to recent outcomes, prospects are good. However, once the economy
is returned to growth the opportunity will be available to effect the change
necessary to improve productivity and prospects. Any such improvement will
depend on the long-term policy of the next Government which seems likely to
have a sufficient majority, if it so wishes, to implement beneficial changes,
rather than those required to "fight fires" or those simply politically
expedient.
Property Prospects
I reviewed property prospects comprehensively in my statement to the year
ended 30 June 2023 based on the forecasts made in the autumn. The Investment
Property Forum (IPF) All Property return for 2024, previously forecast at
5.0%, improved in March to 5.9% primarily because Capital Value growth rose
from 0.1% to 0.8%. In March all sectors are forecast to have improved Rental
Value growth and Capital Value growth. In 2024 Industrials are forecast to
have the highest Total Return of 8.2%, followed by Retail Warehouses at 6.7%,
while Offices have the lowest Total Returns: 1.8% City Office; 2.5% "Office";
and 3.8% West End Office.
Forecasts for later years are for continued improvement in returns from 5.9%
in 2024 to 8.8% in 2025 and 8.4% in 2026 and 7.6% for the five years from 2024
to 2028. In all years the Industrial sector has the highest Rental Value and
Capital Value growth and Shopping Centres the lowest, although they return an
average of 7.1% in the 5 years to 2028 because of the existing high yield.
West End Offices have the second highest Rental Value growth 2.5% and Capital
Value growth 2.8% in each year over 2024 to 2028.
The IPF forecasts are based on the mean of normally 20 forecasts evenly
divided into two groups - Property Advisors and Fund Managers, and within each
of these two groups individual forecasts are widely dispersed. Until
recently there has been little difference between the average forecasts of
these two groups, but for 2024 there is a sharp distinction. Whereas the
nine Property Advisors mean forecast for the Total Return is 7.3%, the Fund
Managers forecast was 5.4%. In subsequent years the difference between the
two groups of forecasters is gradually eliminated.
Colliers provide comprehensive forecasts which, until 2023, had been very
similar to the IPF means. Currently, the Colliers forecasts are again
markedly different to the IPF's forecasts, particularly for 2024 where the
2024 Total Return is forecast as 10.2% in contrast to the IPF's 5.9%. There
is a corresponding difference of 4.9 percentage points for Retail and Office
returns, and a much smaller 1.8 percentage points difference for Industrials
(11.0% cf 8.2%). There is a smaller disparity in the five-year return
forecast where Colliers forecast an increased return of 0.9 percentage points
for Offices and 2.2 percentage points for Industrials. In general, Colliers
forecast a higher growth in Capital Values than the IPF, forecasting five-year
Capital Value growth of 4.8%pa, double IPF's 2.4%.
Patently, returns as forecast by Colliers are greatly to be desired, but the
scale of the increases forecast for 2024 by Colliers seems anomalous. The
difference between the IPF Fund Managers and Property Advisors for the 2024
Return was 1.9 percentage points, accounting for some of the difference
between the two forecasts. The IPF survey closed in February but the
Colliers forecast was made post the March OBR report when the forecast
improved economic conditions made the prospect of lower Bank Rate become less
distant. Most forecasters tend to project a continuation of recent changes
and very unusually are turning points accurately forecast. Colliers
forecasts, being less pessimistic, may correctly be forecasting such an
inversion!
Online sales were 20.5% of all retail sales in the three months before the
Covid crisis in late March 2020, rose considerably during that crisis peaking
at 37.8% in January 2021, and in January 2023 were 27.3% but fell in January
2024 to 26.3%, the first year on year fall.
Online sales administration and the associated distribution services appear to
be becoming even more convenient and efficient. However, several factors
militate against a further expansion of their proportion of retail sales: the
"easiest", the low lying fruit, has been harvested; goods' returns are rising
and are probably increasingly expensive to resell, especially of "personal"
goods; working from home, while established, is declining; retail rents
declined about 25%; existing retailers are adopting a hybrid system of online
/ collection / in-store services; and retail services are becoming
increasingly "personal", for example, in areas of health and beauty, services
which cannot be delivered online! While online sales will continue to
expand, no significant change in their percentage of retail sales seems
likely, but continuing small adjustment by bricks and mortar stores seems
likely. Unfortunately, the total growth in retail sales will be limited by
expected low growth in Real Household Disposable Income.
In the 12 months to June 2023 there were 4,000 net store closures compared to
923 in 2022 and a peak of 7,834 in 2020, and closures are expected to decrease
only very slightly to 3,900 in 2025. The 4,000 net closures in 2023 included
net openings of 304 barber units, 272 beauty or nail salons, 186 "Take-aways"
and the net closure of 414 hairdressers, 310 chemists / toiletries and about
250 each of Estate Agents, Public Houses, Bookmakers and Fast Food Shops.
The retail sector is continuing to adapt to changed economic circumstances,
but the percentage of high street long-term vacancies of over three years has
risen to a record 5.1%, reflecting reduced demand.
The office sector also faces reducing demand for its existing premises,
reinforced by the effect of the continuing slow growth in the economy.
Demand for existing offices has been reduced because of the changing work
routines, especially "work from home", which, however disadvantageous for some
work categories, seems likely to persist. For instance, anecdotal reports
are Registers of Scotland's 125,00ft(2) office in Edinburgh is currently only
20% occupied. The office sector will continue to suffer, not only from a
reduced demand, but from a change in demand as a result of energy pricing and
ESG policies rendering much existing office stock outdated or redundant.
Thus, while values will be high for the limited high-quality space meeting ESG
aspirations, values of all other office stock will be greatly impaired.
The industrial sector is the only main property sector where demand is
forecast to increase, a surprising volte-face from the traditional position
where it traded on low nearly static rents and consistently high yields.
The OBR, comparatively optimistic in economics prospects, forecasts that
"Commercial Property Prices" will decline 6.2% to 31 March this year and grow
less than 2.0% p.a. for the next five years, less than forecast inflation,
resulting in the real value of Commercial Property continuing to fall, albeit
more slowly than during the recent high inflation. Thus, the poor
performance of commercial property since 2007 will continue.
In the year to February 2024 both the Bank and the OBR expect house prices to
have fallen about 2.0%, similar to the 2.9% reported by Acadata (E&W).
The mortgage providers, Halifax and Nationwide, report rises of 1.7% and 1.2%
respectively for mortgages agreed some months ahead of the actual sale
conclusion. Exceptionally, Scotland showed a year on year fall only in
December 2023.
Forecasts for 2024 vary considerably. The OBR is pessimistic, forecasting
falls of about 2%, but notably a forecast under half the 5% they forecast in
November. The Bank notes that house prices are positively correlated with
consumption, which is expected to "remain weak", but comments that most of the
impact of tighter monetary policy seems to have come through, suggesting that
further price falls are unlikely. Forecasts range widely: Capital Economics
-5%; Savills (November 2023) -3%; Lloyds Banking Group -2% to -4%; Halifax and
Zoopla -2%; Rightmove -1% and Knight Frank +3%.
Comprehensive forecasts are given by Savills covering the next five years.
Mainstream UK prices are forecast to fall 3.0% in 2024 but rise 17.9% over the
five years to 2028, but in London prices are forecast to fall 4.0% in 2024 and
rise 13.9% over five years. Areas outside London have higher five-year
forecasts from 16.7% in South East and East of England, rising to over 20% in
Northern regions, Wales (21.4%) and Scotland (20.2%). Unusually, prime UK
prices are forecast to be similar to mainstream, with five year forecasts,
after a smaller fall in 2024 of c.1.0%, rising 18.0% in London and 20.9% in
Scotland.
Current and prospective economic conditions do not indicate that an extension
of the recession is likely. Following five year interest rates and the
anticipation of falls this year in Bank Rate is stabilising demand for houses
while the supply of new houses will be restricted by the slowdown in
development, and the second-hand market is not experiencing significant
"forced" sales. Consequently, house prices are forecast to rise in 2024
moderately, but above inflation, reversing the recent trend of falling real
house values.
Conclusion
The UK economy is poised for a recovery, its timing dependent on the timing of
the start of a progressive series of interest rate cuts, which I expect to
start in the late summer.
The Covid pandemic and the war in Ukraine have delivered very severe exogenous
shocks whose effects are becoming etiolated, leaving the systemic problems of
the UK economy unresolved. Unfortunately, this recovery is a reprieve: there
has been no cure.
The reprieve returns the economy to a position experienced when stopping
"banging one's head against a wall"; a relative improvement! Two main
underlying problems remain. The first limits growth because of recurring
economic or financial mismanagement which caused or accentuated the post WWI
recession, the Great Depression, Black Wednesday, the Global Financial
Recession, the post-Covid recession and, most recently, the UK pensions crisis
and the failure of the SVB and Credit Suisse. To remedy such unnecessary
economic setbacks, a change in regulation is required together with a change
in some regulators. The Bank's decision to put up interest rates on the eve of
the Great GFC and then to maintain low interest rates into the current "Great
Inflation" illustrate such shortcomings.
The second impediment to better economic performance is the UK's poor
productivity. Since 2015/16 productivity has increased only by 0.8% per
year. Prior to 2008 productivity improved by about 2.25% pa, about 1.5
percentage points above the post 2008 level, and had it been maintained at the
2.25% pre-2008 level, would have resulted in current output being around 39%
higher than at present.
In its analysis of productivity, the NIESR concludes: -
"The UK has one of the poorest productivity performances among the OECD's 38
advanced economies and this has been made worse by Covid-19. If policymakers
return to the same economic structures post-pandemic that failed to resolve
the productivity problem pre-pandemic, then the UK is set for another decade
of a low-growth, low-productivity and low-wage economy". Of this Martin Wolf
says "The biggest problem for the UK remains its dismal underlying
productivity growth". This is dramatically illustrated by the NIESR's recent
analysis of Public Sector productivity - of which it says: "inputs rising by
19% since 2019 and output by only about half that".
Fortunately, although the prospectively poor long-term lack of growth in the
economy with the consequent denial of improved living standards is extremely
disappointing, the short-term recovery is expected to provide the long-awaited
opportunity for the Company to effect the sale of St. Margaret's House at the
appropriate price. As St. Margaret's House has consent for 361 student
units, mostly studios, in one of the very few property sectors where demand is
growing and supply is limited, prospects for its sale will continue to
improve.
Similarly, other development opportunities in our existing portfolio are
expected to continue to improve and I conclude, as previously, "In our
existing portfolio, most development properties are valued at cost, usually
based on existing use, and when these sites are developed or sold, I expect
their considerable upside will be realised. Some investment properties also
have considerable development value, as we expect to realise at St
Margaret's".
I D LOWE
Chairman
28 March 2024
Consolidated income statement for the six months ended 31 December 2023
__________________________________________________________________________________
Note 6 months 6 months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
£000 £000 £000
Revenue
Revenue from development property sales 660 1,990 2,665
Gross rental income from investment properties 173 195 373
Total Revenue 833 2,185 3,038
Cost of development property sales (502) (1,393) (1,795)
Property charges (26) (35) (139)
Cost of Sales (528) (1,428) (1,934)
Gross Profit 305 757 1,104
Administrative expenses (424) (294) (626)
Other income 4 - 10
Net operating (loss)/profit before investment property disposals and valuation
movements
(115) 463 488
Valuation gains on investment properties 5 - 560
Valuation losses on investment properties 5 (174) (80)
Net (losses)/gains on investment properties (174) 480
Operating (loss)/profit (289) 463 968
Financial income 7 - 1
Financial expenses (133) (110) (251)
(Loss)/profit before taxation (415) 353 718
Income tax 6 - - -
(Loss)/profit/(loss) and total comprehensive (expenditure)/income
for the financial period attributable to equity
holders of the parent Company (415) 353 718
(Loss)/Earnings per share
Basic and diluted (loss)/earnings per share (pence) 7 (3.52p) 3.00p 6.09p
Consolidated statement of changes in equity as at 31 December 2023
__________________________________________________________________________________
Share Capital Share Retained Total
Capital redemption premium earnings
reserve account
£000 £000 £000 £000 £000
At 1 July 2023 2,357 175 2,745 18,694 23,971
(Loss) and total
comprehensive expenditure
for the period - - - (415) (415)
At 31 December 2023 2,357 175 2,745 18,279 23,556
At 1 July 2022 2,357 175 2,745 17,976 23,253
Profit and total
comprehensive income
for the period - - - 353 353
At 31 December 2022 2,357 175 2,745 18,329 23,606
At 1 July 2022 2,357 175 2,745 17,976 23,253
Profit and total
comprehensive income
for the period - - - 718 718
At 30 June 2023 2,357 175 2,745 18,694 23,971
Consolidated balance sheet as at 31 December 2023
__________________________________________________________________________________
31 Dec 31 Dec 30 Jun
2023 2022 2023
Note £000 £000 £000
Non-current assets
Investment property 8 16,916 16,610 17,090
Plant and equipment 11 10 10
Investments 1 1 1
Total non-current assets 16,928 16,621 17,101
Current assets
Trading properties 9,031 9,840 9,451
Trade and other receivables 136 159 154
Cash and cash equivalents 2,214 2,367 1,953
Total current assets 11,381 12,366 11,558
Total assets 28,309 28,987 28,659
Current liabilities
Trade and other payables (733) (1,001) (668)
Interest bearing loans and borrowings - (360) -
Total current liabilities (733) (1,361) (668)
Non-current liabilities
Interest bearing loans and borrowing (4,020) (4,020) (4,020)
Total liabilities (4,753) (5,381) (4,688)
Net assets 23,556 23,606 23,971
Equity
Issued share capital 10 2,357 2,357 2,357
Capital redemption reserve 175 175 175
Share premium account 2,745 2,745 2,745
Retained earnings 18,279 18,329 18,694
Total equity attributable to equity
holders of the parent Company 23,556 23,606 23,971
NET ASSET VALUE PER SHARE 199.9p 200.3p 203.4p
Consolidated cash flow statement for the six months ended 31 December 2023
__________________________________________________________________________________
6 months 6 months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
£000 £000 £000
Cash flows from operating activities
(Loss)/profit for the period (415) 353 718
Adjustments for:
Net loss/(gain) on revaluation of investment properties
174 - (480)
Depreciation and Loss on sale of fixed assets - - 5
Net finance expense 126 110 250
Operating cash flows before movements (115) 463 493
in working capital
Decrease in trading properties 420 832 1,221
Decrease/(increase)in trade and other receivables 18 (25) (20)
Increase/(decrease) in trade and other payables 85 (218) (377)
Cash generated from operations 408 1,052 1,317
Interest received 7 1
Interest paid (153) - (315)
Net cash inflow from operating activities 262 1,052 1,003
Investment activities
Acquisition of plant and equipment (1) (2) (7)
Cash flows (absorbed by) investing activities (1) (2) (7)
Financing activities - - (360)
(Decrease) in borrowings
Cashflows (used) from financing activities - - (360)
Net increase in cash and cash equivalents 261 1,050 636
Cash and cash equivalents at beginning of period 1,953 1,317 1,317
Cash and cash equivalents at end of period 2,214 2,367 1,953
Notes to the interim statement
1 This interim statement for the six-month period to 31
December 2023 is unaudited and was approved by the directors on 28 March
2024. Caledonian Trust PLC (the "Company") is a company incorporated in
England and domiciled in the United Kingdom. The information set out does
not constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006.
2 Going concern basis
The Group and parent Company finance their day to day working capital
requirements through related party loans and bank funding is considered for
specific development projects. The related party lender has indicated its
willingness to continue to provide financial support and not to demand
repayment of its principal loan during 2024.
The directors have prepared cash flow projections and expect that the Group's
cash reserves and existing loan arrangements are expected to be sufficient for
the Group's cash flow needs.
For these reasons, the directors continue to adopt the going concern basis in
preparing this interim statement.
3 Basis of preparation
The consolidated interim financial statements of the Company for the six
months ended 31 December 2023 are in respect of the Company and its
subsidiaries, together referred to as the "Group". The financial information
set out in this announcement for the year ended 30 June 2023 does not
constitute the Group's statutory accounts for that period within the meaning
of Section 434 of the Companies Act 2006. Statutory accounts for the year
ended 30 June 2023 are available on the Company's website at
www.caledoniantrust.com (http://www.caledoniantrust.com) and have been
delivered to the Registrar of Companies. The accounts for the year ended 30
June 2023 have been prepared in conformity with UK-adopted International
Accounting Standards. The auditors have reported on those financial
statements; their reports were (i) unqualified, (ii) did not include
references to any matters to which the auditors drew attention by way of
emphasis without qualifying their reports, and (iii) did not contain
statements under Section 498 (2) or (3) of the Companies Act 2006.
The financial information set out in this announcement has been prepared in
accordance with International Accounting Standard IAS34 "Interim Financial
Reporting". The financial information is presented in sterling and rounded
to the nearest thousand.
The interim financial statements have been prepared in conformity with
UK-adopted International Accounting Standards that are expected to exist at
the date on which the Group prepares its financial statements for the year
ending 30 June 2024. To the extent that UK-adopted International Accounting
Standards at 30 June 2024 do not reflect the assumptions made in preparing the
interim statements, those financial statements may be subject to change.
In the process of applying the Group's accounting policies, management
necessarily makes judgements and estimates that have a significant effect on
the amounts recognised in the interim statement. Changes in the assumptions
underlying the estimates could result in a significant impact to the financial
information. The most critical of these accounting judgement and estimation
areas are included in the Group's 2023 consolidated financial statements and
the main areas of judgement and estimation are similar to those disclosed in
the financial statements for the year ended 30 June 2023.
4 Accounting policies
The accounting policies used in preparing these financial statements are the
same as those set out and used in preparing the Group's audited financial
statements for the year ended 30 June 2023.
5 Valuation (losses)/gains on investment properties
31 Dec 31 Dec 30 Jun
2023 2022 2023
£000 £000 £000
Valuation gains in investment properties - - 190
Valuation losses on investment properties after transaction costs
(174) - (690)
Net valuation (losses)/gains on investment properties (174) - (500)
6 Income tax
Taxation for the six months ended 31 December 2023 is based on the effective
rate of taxation which is estimated to apply to the year ending 30 June
2024. Due to the tax losses incurred there is no tax charge for the period.
In the case of deferred tax in relation to investment property revaluation
surpluses, the base cost used is historical book cost and includes allowances
or deductions which may be available to reduce the actual tax liability which
would crystallise in the event of a disposal of the asset. At 31 December
2023 there is a deferred tax asset which is not recognised in these accounts.
7 Earnings per share
Basic profit or loss per share is calculated by
dividing the profit or loss attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding
during the period as follows:
6 months 6 months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
£000 £000 £000
(Loss)/profit for financial period (415) 353 718
No. No. No.
Weighted average no. of shares:
For basic and diluted profit or
loss per share 11,783,577 11,783,577 11,783,577
·
Basic (loss)/earnings per share (3.52.p) 3.00p 6.09p
Diluted (loss)/earnings per share (3.52.p) 3.00p 6.09p
8 Investment Properties
31 Dec 31 Dec 30 Jun
2023 2022 2023
£000 £000 £000
Valuation
Opening valuation 17,090 16,610 16,610
Revaluation in period (174) - 480
Closing valuation 16,916 16,610 17,090
The fair value of investment property at 31 December 2023 was determined by
the directors' taking cognisance of the independent valuation by Montagu
Evans, Chartered Surveyors as at 30 June 2022 having made adjustments for
changes in market conditions.
9 Financial instruments
Fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the
carrying amounts shown in the balance sheet, are as follows:
31 Dec 2023 31 Dec 2022 30 Jun 2023
Fair Carrying Fair Carrying Fair Carrying
value amount value amount value amount
£000 £000 £000 £000 £000 £000
Trade and other receivables 82 82 144 144 118 118
Cash and cash equivalents 2,214 2,214 2,367 2,367 1,953 1,953
2,296 2,296 2,511 2,511 2,071 2,071
Loans from related parties 4,020 4,020 4,380 4,380 4,020 4,020
Trade and other payables 26 26 992 992 21 21
4,046 4,046 5,372 5,372 4,041 4,041
Estimation of fair values
The following methods and assumptions were used to
estimate the fair values shown above:
Trade and other receivables/payables - the fair value of receivables and
payables with a remaining life of less than one year is deemed to be the same
as the book value.
Cash and cash equivalents - the fair value is deemed to be the same as the
carrying amount due to the short maturity of these instruments.
Other loans - the fair value is calculated by discounting the expected future
cashflows at prevailing interest rates.
10 Issued share capital
31 Dec 2023 31 Dec 2022 30 Jun 2023
No. No. No.
000 £000 000 £000 000 £000
Issued and
Fully paid
Ordinary shares of 20p each 11,784 2,357 11,784 2,357 11,784 2,357
11 Seasonality
Investment property sales by the Group are not
seasonal and sales of completed houses on development sites are driven more by
completion of construction projects than by season.
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