Caledonia Investmnts - Final Results
21/05/2024 07:00
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RNS Number : 1826P Caledonia Investments PLC 21 May 2024
Caledonia Investments plc
Final results for the year ended 31 March 2024
Financial highlights
Year Year
31 March 2024 31 March 2023
Net asset value per share total return(1) 7.4% 5.5%
Net asset value per share 5369p 5068p
Net assets £2,965m £2,798m
Annual dividend per share 70.4p 67.4p
1. NAV total return, and investment and pool returns are Alternative performance
measures - see note 8.
NAV total return of 7.4%
● NAV of £2,965m (5,369p per share) +7.4% NAV Total Return ('NAVTR')
● All three investment pools contributed to growth, with the investment
portfolio delivering a return of 8.7% in the year, despite foreign exchange
headwinds of c.£39m
- +12.0% return from Public Companies
- +12.3% return from Private Capital
- +2.2% return from Funds
57 consecutive years of progressive dividend growth
● Proposed final dividend of 51.47p, taking total dividend for the year to
70.4p, a 4.5% increase compared to 2023 and extending our record of growing
annual dividends to 57 consecutive years
Robust balance sheet with significant liquidity and well positioned to take
advantage of investment opportunities
● Net cash of £227m combined with an undrawn revolving credit facility of
£250m, providing total liquidity of £477m
● £346m invested into new and existing investments with proceeds of £371m
received from the portfolio in the year
● 290,219 of shares repurchased in March and April 2024 at an average discount
of 36%, resulting in a 10.1p accretion to NAV per share
Performance to 31 March 2024
1 year 3 years 5 years 10 years
% % % %
NAV total return 7.4 44.8 67.5 160.5
Annualised
NAV total return 7.4 13.1 10.9 10.0
CPIH(1) 3.8 6.3 4.2 2.9
FTSE All Share total return 8.4 8.0 5.4 5.8
1. Consumer Prices Index including owner occupiers' housing costs ('CPIH')
Mat Masters, Chief Executive Officer, commented:
"Our long-standing philosophy of investing in high-quality, well-managed
companies, with a truly long-term view, continues to serve us well. All three
investment pools have contributed to our growth over the past year, despite a
background of continuing macroeconomic and geopolitical uncertainty, and we
are delighted to be increasing our dividend for the 57(th) consecutive year.
While the external environment remains uncertain, we remain focused on what we
can control. Our long-term approach, diversified global portfolio and strong
balance sheet position us well to take advantage of investment opportunities
and continue delivering attractive long-term returns."
21 May 2024
Enquiries
Caledonia Investments plc Teneo
Mat Masters (CEO), Rob Memmott (CFO) Tom Murray, Robert Yates, Jessica Pine
+44 20 7802 8080 +44 20 7260 2700
Chair's statement
Results
I am pleased to report another year of growth at Caledonia, with net assets
increasing to £3bn. NAVTR was 7.4%, within our long-term target of inflation
plus 3% to 6%. Each of the Public Companies, Private Capital and Funds pools
contributed to growth, despite foreign exchange headwinds. It is also
welcoming to see our longer-term performance continuing to outperform
inflation and FTSE All-Share total return, both key strategic objectives for
the company.
Income and dividend
The board is recommending a final dividend of 51.47p per share which, if
approved by shareholders, will be payable on 1 August 2024 to ordinary
shareholders on the register on 28 June 2024. This represents a full-year
dividend of 70.4p, an increase of 4.5% when compared to the previous year, and
57 consecutive years of increased annual dividends.
Investment and other income(1) increased from £44m to £63m(2). Total net
revenue was £41m, sufficient to cover the dividend for the year. As
previously reported, we expect a gradual reduction in investment income as we
maintain our focus on total returns and, over time, we anticipate that net
distributions from our investments will play a more material role in dividend
cover.
Board
We welcomed Rob Memmott as our new Chief Financial Officer on 1 September
2023. Rob, a chartered accountant with over 20 years' experience in senior
financial leadership roles, has made an excellent start. He succeeds Tim
Livett who retired last year. I would like once again to extend the board's
thanks to Tim for his contribution to Caledonia and we wish him every success
as he pursues a portfolio of non-executive roles. Stuart Bridges also retired
as a non-executive director at the conclusion of last year's annual general
meeting and we remain very grateful for his wise counsel over the years. As
previously reported, following a period of notable change, the board has asked
that I extend my tenure until the annual general meeting in 2025, subject to
ongoing approval by shareholders.
Share buybacks
The board firmly believes that the company's ability to make market purchases
of its own shares is in the best interest of all shareholders. The Cayzer
family concert party is a long-term shareholder and the source of Caledonia's
strong culture and long-term outlook. Given the obligation that could arise on
the concert party to make a general offer for the company under Rule 9 of The
City Code on Takeovers and Mergers ('Code'), we will once again be seeking
shareholder approval of the waiver of the Code's mandatory offer provisions.
Annual general meeting
Each year I, together with my board colleagues, welcome the opportunity to
meet with shareholders in person at our annual general meeting which once
again takes place in London on 17 July 2024.
Outlook
Caledonia's investment strategy takes a long-term view, with the premise being
that exposure to good-quality companies over long time periods is preferable
to short-term trading. Focusing on the long term necessitates a balanced
approach to building a portfolio and has resulted in Caledonia's exposure
being well-diversified and having a global reach.
The economic, fiscal, geopolitical and technological environments appear to be
in a state of flux and somewhat unpredictable. Our key steps to mitigate these
risks continue to be with the quality and resilience of each investment being
carefully considered, as well as avoiding debt to drive returns. While
Caledonia is a long-term investor, an active approach to portfolio management
enables us to take advantage of opportunities as they arise.
David Stewart
Chair
1. Revenue account.
2. Including the benefit of £15m of revenue from non-consolidated
subsidiaries.
Chief Executive Officer's report
Caledonia's long-standing philosophy is to invest in high-quality,
well-managed companies, with a truly long-term view. This has continued to
serve us well over the past year, with NAVTR increasing by 7.4% and all three
investment pools contributing to growth.
This performance has been delivered against a background of continuing
macroeconomic and geopolitical uncertainty, underlining the strength of our
investment strategy, which has generated consistent long-term real returns
outperforming inflation by 7.2% p.a. over the last decade. We have continued
to increase dividends paid to shareholders, which we have now done for 57
consecutive years - a track record we are incredibly proud of.
Years to 31 March 3 years 5 years 10 years
% % %
Annualised performance
NAVTR 13.1 10.9 10.0
Total shareholder return(1) 11.3 5.0 8.6
CPIH 6.3 4.2 2.9
FTSE All Share total return 8.0 5.4 5.8
1. Alternative performance measure - see note 8.
Strategy and allocation
We hold investments in both listed and private markets via three pools: Public
Companies, Private Capital and Funds. The diversity and long-term outlook of
our investment approach mean we can effectively manage risk, both through
diversification and disciplined capital allocation across our three pools,
providing shareholders with a well-balanced, global portfolio.
Performance highlights
The overall portfolio generated a return of 8.7% in the year, despite foreign
exchange headwinds which impacted returns by (0.6)%.
Annualised investment pool returns
Years to 31 March 1 year 3 years 5 years 10 years
% % % %
Public Companies 12.0 8.6 10.7 8.6
Private Capital 12.3 23.5 13.7 13.9
Funds 2.2 17.0 16.0 17.3
Our Public Companies pool is invested in high-quality, well-managed businesses
with strong market positions and pricing power. The global portfolio is split
between capital and income investments, with the latter providing an important
contribution to covering our cost base and dividend. Performance in the year
was driven by the Capital Portfolio, with material contributions from
Microsoft, Oracle and Watsco. Each of these investments is a testament to our
long-term strategy, having been held for many years and all have delivered
double digit annual returns since our initial investment.
Within Private Capital, we sold Seven Investment Management ('7IM') for
£256m, a 32% increase on the 31 March 2023 valuation and a 2.3x multiple of
cost. Our ownership of 7IM embodies our investment philosophy. We acquired the
business in 2015 and, over the following almost eight years, worked with the
management team to successfully pivot the business from pure investment
manager to a 'platform-led' wealth manager. The team integrated four
acquisitions and almost tripled assets under management, significantly
enhancing 7IM's revenue and profitability before agreeing the sale of the
business to Ontario Teachers' Pension Plan Board last year. In April 2023, we
announced the acquisition of AIR-serv Europe, adding an excellent business to
our portfolio. AIR-serv Europe is a leading designer and manufacturer of air,
vacuum and jet wash machines, which it provides as a turnkey solution to fuel
station forecourt operators across Western Europe.
Growth from our Funds pool was lower than in recent years, with positive
performance from our North American funds partially offset by weaker results
from our Asia growth and venture capital funds. We also saw a slowdown in
distributions, reflecting the broader market environment for private equity
exits. During the last quarter of our financial year, we began to see an
increase in distributions from our North American funds, with the underlying
managers cautiously optimistic that exit markets will continue to improve. In
contrast, we believe continued market volatility in Asia, and the portfolio's
focus on earlier stage businesses, will likely mean that it will take longer
for distributions from this region to improve.
Liquidity and balance sheet
Caledonia ended the year with net cash of £227m which, alongside our existing
£250m revolving credit facility, provides significant liquidity to invest in
attractive opportunities as they arise.
Shareholder returns
Sentiment towards investment companies, and in particular those investing in
private assets, continues to weigh on discounts across the sector. Caledonia's
share price has not been immune to this, with the shares delivering a total
return of (1.2)% in the year, and our discount widening from 33% to 39%. We
believe that the share price fundamentally undervalues the quality of
Caledonia's investment portfolio and its long-term performance. The ongoing
support of the Cayzer family underpins Caledonia's long-term culture and
investment approach. However, given the family's significant holding, there
are limitations to the number of shares we are able to repurchase. In March
and April of this year, we purchased 290,219 shares at an average discount of
36%, resulting in a 10.1p accretion to NAV per share.
During the year, we also instigated a review of our investor relations and
communications programme and activities, to ensure our investment proposition
is well understood and recognised by the market. We will be building on
several initiatives this year and will continue to improve and expand these in
the coming months to increase our profile among existing and new investors.
Our culture and purpose
A healthy and vibrant culture, built around a set of aligned values, is
fundamental to the success of any business. When I became CEO, one of my first
priorities was to thoroughly interrogate what we do as a business, how we do
it and, most importantly, why we do it. The project has brought our culture
and values to the forefront of who we are - a long-term investor, investing in
high-quality companies that have the potential to generate exceptional
long-term value, alongside building rewarding relationships and a deep
understanding of our investments. I am grateful to my colleagues and other
stakeholders who provided invaluable feedback to help create our new
manifesto, written by a broad cross section of employees and rooted in the
concept of 'time well invested'. This manifesto will guide us as we look
ahead, underpinning our focus on generating long-term compounding real returns
that outperform inflation by 3%-6% over the medium to long term, and the FTSE
All-Share index over 10 years.
People
Our employees remain our most important asset and we seek to create an
environment that enables us to attract, retain and develop exceptional people.
Alongside Rob Memmott's appointment as Chief Financial Officer, we also
strengthened the team across a number of functions, promoting internal talent
and hiring new expertise. I would like to thank my colleagues for their
ongoing enthusiasm and commitment across the business.
In 2021, we implemented a formal internship programme, underscoring our
commitment to developing future talent within the investment management
industry, having provided internships on an informal basis for many years. In
2023, we welcomed a cohort of 12 interns with all respondents to our
post-programme survey describing it as "excellent" and one which they would
recommend. We look forward to continuing to support our interns' ongoing
growth and development through our alumni programme.
Our approach to responsible investment
Over the course of the year, we have further developed our approach to
responsible investment through our working group, embedding skills within our
investment teams and strengthening our investment processes. We continue to
consider the issues associated with climate change and its potential impact on
our business and portfolio. Our second Taskforce on Climate-related Financial
Disclosures report will be published alongside the annual report.
Looking forward
While the external environment remains uncertain, we remain focused on what we
can control. Our long-term approach, diversified global portfolio and strong
balance sheet position us well to take advantage of investment opportunities
and continue delivering attractive long-term returns.
Mat Masters
Chief Executive Officer
Investment review
Caledonia's portfolio is invested across three investment pools, each managed
by a specialist team investing in well-managed businesses that combine
long-term growth characteristics with, in many cases, an ability to deliver
increasing levels of income. We invest in both listed and private markets,
covering a range of sectors, resulting in a well-balanced
diversified portfolio of investments with a global reach.
Strategic allocation Allocation % NAV at 31 March 2024
Public Companies 30%-40% 32%
Private Capital 25%-35% 28%
Funds 25%-35% 31%
Overall performance
At 31 March 2024, the investment portfolio was valued at £2.7bn, delivering a
return of 8.7% during the year, despite foreign exchange headwinds, building
on our long-term track record of delivering real returns.
All investment pools contributed to growth, with Public Companies and Private
Capital pools delivering double-digit growth of 12.0% and 12.3% respectively
and our Funds pool delivering a return of 2.2% in the year. Within the Public
Companies pool, performance was principally driven by our Capital portfolio.
Performance across our Private Capital portfolio was driven by realisation
activity and continued good operating progress across the majority of the
portfolio. Performance from the Funds pool was lower than in recent years,
with continued good performance from our North American mid-market buyout
funds, partially offset by weaker performance from our Asia growth and venture
capital funds.
Investment activity
During the year, we invested a total of £346.3m into the portfolio, against
which £371.3m of proceeds were received, resulting in net movement of
£25.0m.
New investment activity was primarily driven by the £142.5m acquisition of
AIR-serv Europe by Private Capital, £108.6m into our Funds pool and £76.5m
into our Public Companies pool.
Realisations proceeds were driven by the sale of Seven Asset Management
('7IM') for £255.8m and distributions from the Funds pool of £72.0m, the
majority of which came from our maturing North American funds. Within the
Public Companies pool, the team crystalised £43.5m on a small portion of
several holdings following a period of strong share price appreciation.
Investment movements in the year
31 Investments Realisations Accrued income Gains / (losses) 31 Income Return(4)
March 2023 March
2024
£m £m £m £m £m £m £m %
Public Companies 836.9 76.5 (43.5) - 79.9 949.8 21.8 12.0
Private Capital 824.0 161.2 (255.8) 1.4 89.5 820.3 21.7 12.3
Funds 873.8 108.6 (72.0) - 15.9 926.3 3.6 2.2
Total pools 2,534.7 346.3 (371.3) 1.4 185.3 2,696.4 47.1 8.7
Other investments(1) 260.2 (2.9) (228.4) - (10.9) 18.0 14.7
Total investments(2) 2,794.9 343.4 (599.7) 1.4 174.4 2,714.4 61.8
Net cash 221.6 227.4
Other net (liabilities) / assets(3) (218.5) 23.5
Net assets 2,798.0 2,965.3
1. Other investments comprise legacy investments and cash, receivables and
deferred tax liability in subsidiary investment entities
2. Total investment portfolio includes £19.0m of investments that are
classified as assets held for sale in the Group's Statement of financial
position
3. Movement in other net (liabilities) / assets primarily relates to the
repayment of the loan to a non-consolidated subsidiary
4. Returns for investments are calculated using the Modified Dietz Methodology
Investments summary
Holdings over 1% of net assets at 31 March 2024 were as follows:
Net
Value assets
Name Pool Geography Business £m %
Cobepa Private Capital Europe Investment company 181.0 6.1
AIR-serv Europe Private Capital UK Forecourt vending 170.1 5.7
Stonehage Fleming Private Capital Chan Is. Family office services 168.5 5.7
HighVista Strategies Funds US Funds of funds 139.7 4.7
Liberation Group Private Capital Chan Is. Pubs, bars & inns 135.2 4.6
Cooke Optics Private Capital UK Cine lens manufacturer 105.4 3.6
Microsoft Public Companies US Software 84.3 2.8
Oracle Public Companies US Software 83.5 2.8
Axiom Asia funds Funds Asia Funds of funds 83.2 2.8
Watsco Public Companies US Ventilation products 77.0 2.6
Texas Instruments Public Companies US Semiconductors 63.6 2.1
Decheng funds Funds Asia Private equity funds 59.0 2.0
Fastenal Public Companies US Industrial supplies 53.2 1.8
Philip Morris Public Companies US Tobacco & smoke-free products 53.1 1.8
Thermo Fisher Scientific Public Companies US Pharma & life sciences services 46.1 1.6
Hill & Smith Public Companies UK Infrastructure 45.7 1.5
Asia Alternatives funds Funds Asia Funds of funds 44.2 1.5
Unicorn funds Funds Asia Funds of funds 39.9 1.3
Ironbridge Funds Funds Canada Private equity funds 35.9 1.2
SIS Private Capital UK Content services 35.0 1.2
Stonepeak funds Funds US Private equity funds 34.9 1.2
Spirax Sarco Public Companies UK Steam engineering 34.1 1.1
Boyne funds Funds US Private equity funds 33.8 1.1
British American Tobacco Public Companies UK Tobacco & vaping 32.4 1.1
Moody's Corporation Public Companies US Financial services 33.0 1.1
Charter Communications Public Companies US Cable communications 32.5 1.1
Becton Dickinson Public Companies US Medical technology 28.6 1.0
CenterOak funds Funds US Private equity funds 28.3 1.0
Other investments 735.2 24.9
Investment portfolio 2,696.4 91.0
Cash and other net assets 268.9 9.0
Net assets 2,965.3 100.0
Public Companies
Strategy
The Public Companies pool provides Caledonia with exposure to a concentrated
portfolio of high-quality well-managed businesses. We take a long-term
ownership approach because we believe that it is better to allow the companies
to drive returns, rather than simply trading them. The qualities we focus on
include a strong market position, good and sustainable returns on capital and
capable management closely aligned with long-term investors. We expect that a
combination of these factors will reward long-term ownership.
Caledonia invests its own balance sheet, so our strategy does not need to
contend with subscriptions or redemptions. This structure enables us to
introduce and realise capital to and from the pool when markets provide good
opportunities. Our approach allows us to introduce capital into the portfolio
with a margin of safety around each investment, which cumulatively provides
downside protection.
The global portfolio comprises two strategies, the Capital portfolio and the
Income portfolio, each generally holding between 15 and 20 companies. There
are five stocks that are held in both portfolios. The Income portfolio aims to
deliver an initial yield on invested cost of 3.5% with the dividend per share
from these holdings growing ahead of inflation over the longer term. The
Capital portfolio has no dividend target, is unconstrained and, as a
consequence, should produce higher returns over time.
The portfolios are managed by a single team, with the same research
methodology and operational discipline used across both.
Performance
During the year, the Public Companies pool generated a total return of +12.0%,
or +13.7% in local currencies, reflecting positive performance of a number of
our holdings. Over the last 10 years the Public Companies pool has delivered
returns of 8.6% p.a.
Public Companies - Capital portfolio
Performance
At the year end, the Capital portfolio was valued at £698.2m and delivered a
return of +14.0% (+16.0% in local currencies) in the year. The portfolio is
concentrated, with 18 holdings with no benchmark. Including the impact of
foreign exchange, over the last 10 years the Capital portfolio has delivered
returns of 10.2% p.a.
Operating performance was generally good across the portfolio. The strongest
performers in terms of share price returns were Hill & Smith (+49.2%),
Microsoft (+44.2%), Fastenal (+43.0%), Oracle (+38.1%) and Watsco (+37.2%).
Their performance was driven by a combination of underlying company operating
results coupled with future growth prospects. Hill & Smith demonstrated
strong momentum in its US businesses across both composites and galvanising
together with increased M&A, and both Microsoft and Oracle benefited from
strong growth in cloud services.
Gains were partially offset by negative contributions from companies including
Alibaba (-27.9%), Charter Communications (-21.3%) and Croda International
(-19.1%). This was primarily due to company or industry dynamics. For example,
following a period of underperformance, Alibaba has undertaken some notable
management changes with a new CEO and a renewed focus on its core ecommerce
business. We continue to closely monitor all our holdings as they adapt
through time.
Investment activity
Consistent with our long-term investment approach, trading activity remained
targeted, primarily with increased holdings in Croda International, Philip
Morris, Spirax Sarco and Symrise. Following a period of strong share price
appreciation, we crystalised gains on a portion of our holdings in Microsoft,
Oracle and Watsco.
Public Companies - Income portfolio
Performance
The Income portfolio was valued at £251.6m and generated a return of +6.8%
(+7.7% in local currencies). Like the Capital portfolio, it is concentrated,
comprising 17 holdings and is not managed against a benchmark. Including the
impact of foreign exchange, over the last 10 years the Income portfolio has
delivered returns of 4.9% p.a.
The strongest performers were Fastenal (+43.5%), Watsco (+37.7%), RELX
(+43.0%), DS Smith (+34.6%) and Sabre Insurance (+61.4%). Fastenal and Watsco
are leading distributors in their end markets and continue to execute
particularly well. The performance of RELX reflects its improved growth as the
business continues to shift towards data and analytics. DS Smith received two
takeover approaches during March 2024, following which, we decided to exit our
position post the year end. Sabre Insurance has enjoyed a strong recovery as
the UK motor insurance market improved after a challenging period last year.
Gains were partially offset by weaker share price performances from Reckitt
Benckiser (-24.5%) and Diageo (-15.2%). Reckitt Benckiser was impacted by
litigation concerns within its infant nutrition business. Diageo was impacted
by the slowing macro-environment and broader destocking, particularly in its
Latin American business. This follows several strong years and we have used
the share price weakness to add to our position.
Investment activity
The team added one new company to the portfolio, RELX, the global provider of
information-based analytics and decision tools and made selective partial
realisations and investments in existing portfolio companies to take advantage
of share price movements.
Private Capital
Strategy
The Private Capital pool comprises a small number of direct investment
holdings in private companies, predominantly in the UK mid-market. We focus on
cash generative businesses with strong growth potential. We typically invest
£50m to £150m in private companies with low leverage, providing long-term
capital along with operational and strategic support to portfolio company
management teams. Unlike many private equity firms, as a balance sheet
investor, we are not constrained by the finite life of a private equity fund,
which allows us to take a truly long-term approach to managing and realising
value from our investments.
Performance
At 31 March 2024, the Private Capital portfolio consisted of eight companies,
with five investments representing over 90% of value.
The portfolio was valued at £820.3m and generated a return of +12.3% (+12.9%
in local currencies), driven by the sale of Seven Investment Management
('7IM'), generating a £59m or 32% uplift to the 31 March 2023 carrying value
and good operating performance across the majority of the investee companies.
Over the last 10 years the Private Capital pool has delivered a return of
13.9% p.a.
The majority of the portfolio is valued on an earnings multiple basis, with
multiples in the range 9 to 14 times current year earnings. Gearing levels are
low, with net debt typically in the range of 2 to 2.5 times earnings before
interest, tax, depreciation and amortisation ('EBITDA').
Investment activity
We invested a total of £161.2m during the year, primarily driven by our
£142.5m acquisition of AIR-serv Europe in April 2023. We received £255.8m of
proceeds from the sale of 7IM in January 2024.
Portfolio summary
Cobepa, the Belgian-based investment company, owns a diverse portfolio of
private global investments. The majority of the businesses within the Cobepa
portfolio continue to trade well, with many delivering good performance and
valuation progression. The valuation at 31 March 2024 was £181.0m, a return
of 4.3% for the year.
AIR-serv Europe, a leading designer and manufacturer of air, vacuum and jet
wash machines, which it provides to fuel station forecourt operators across
the UK and Western Europe, was acquired by Caledonia in April 2023. The
business has since reported year-on-year growth, trading ahead of
expectations. Having been held at equity purchase cost since acquisition in
April 2023, the business is now valued on an earnings basis, leading to an
increase in value of £28m. The valuation at 31 March 2024 was £170.1m, a
return of 19.4% for the year.
Stonehage Fleming, the international multi-family office, continues to deliver
good revenue and margin growth across each of the Family Office, Investment
Management and Financial Services businesses, driven by client wins and
increased activity levels. The valuation at 31 March 2024 was £168.5m, a
return of 18.8% for the year.
Liberation Group, an inns and drinks business with a pub estate stretching
from south-west London to Bristol and the Channel Islands. The business has
been adversely impacted by the cost of living crisis, reducing consumer
discretionary incomes and sustained cost inflation, particularly UK energy
costs. Profitability and revenue growth continues to improve and the
optimisation of the Cirrus Inns business, acquired in December 2022, is
ongoing. The valuation at 31 March 2024 was £135.2m, a return of 2.6% for the
year.
Cooke Optics, a leading manufacturer of cinematography lenses, as previously
reported, has been heavily impacted by the Hollywood writers' strike which
started in early May 2023 and the subsequent actors' strike. Both disputes
were resolved in November 2023. We are pleased to see improvement in demand
for Cooke Optics' core products and the success of the new SP3 'prosumer'
range. The valuation at 31 March 2024 includes a 10% equity discount to
reflect continued uncertainty around the timing and nature of the post-strike
recovery. The valuation at 31 March 2024 was £105.4m, a return of (14.9)% for
the year.
Funds
Strategy
We invest in funds operating in North America and Asia with a bias to buyouts.
The pool provides attractive diversification, investing in 74 funds managed by
42 managers with an underlying portfolio of over 600 companies, across a wide
range of sectors and company sizes.
The North American based funds, which represent 59% of the Funds pool (18% of
Caledonia's NAV), invest into the lower mid-market, with a focus on small to
medium sized, often owner-managed, established businesses. These funds
regularly provide the first institutional investment into these businesses,
and support their professionalisation and growth, both organically and through
M&A activity. Realisations are typically through trade sales or to other,
larger private equity funds. The pool is a combination of directly owned funds
(45% of Funds pool), with a broad range of managers generally managing funds
under US$750m. The balance is in funds of funds investments (13% of Funds
pool) with HighVista Strategies US private equity funds, our largest single
manager over five separate funds with highly diversified portfolios.
Our Asia fund which represent 41% of the Funds pool (13% of Caledonia's NAV)
invest across a wide range of sectors, which are set to benefit from wider
demographic trends, such as healthcare and technology. The funds typically
invest in businesses in the early years of significant growth, having
successfully developed their business model. Whilst focused on local markets,
a number, particularly those with a healthcare focus, also invest into the US.
The market is less developed than in North America with divestments, in the
absence of a mature buyout market, mainly achieved through an IPO or trade
sale. The pool is a combination of directly owned funds (23% of Funds pool),
with a broad range of managers, the balance (18% of Funds pool) is invested
with Asia Alternatives, Axiom and Unicorn, all funds of funds providers,
investing in buyout, growth and venture capital.
Performance
At 31 March 2024, the pool was valued at £926.3m, generating a total return
of +2.2%, or +4.3% in local currencies, driven by continued positive
performance from our North American holdings (+9.8% in local currency)
partially offset by the decline in the value of our Asia holdings (-3.1% in
local currency) reflecting the more challenging market conditions in the
region. Over the last 10 years, the Funds pool has delivered returns of 17.3%
p.a.
Looking at the performance drivers in our North American primary fund
programme, alongside realisation activity, robust operating performance
continues to be a key driver of returns. Within our Asia portfolio, we believe
underlying portfolios are well positioned, and trading is generally healthy.
However, valuations have continued to be impacted by the weakness in local
public markets and reduced attractiveness of foreign public markets for IPOs.
Investment activity
The Funds pool invested £108.6m over the year, with 63% deployed into North
American funds and the balance into Asia funds. Distributions of £72.0m were
broadly split 75%/25% between North America and Asia. After a quieter first
half, we have seen a meaningful increase in activity in the North American
portfolio, especially in the last quarter of the financial year, with our
underlying managers cautiously optimistic that exit markets will continue to
improve. In our Asia portfolio, given the market volatility and macro
uncertainty in the region, alongside its earlier stage focus, we expect the
pace of distributions to take longer to regain momentum.
Portfolio maturity
Our primary funds portfolio has a weighted average age of approximately 4.3
years. The weighted average age of our North American holdings is 4.0 years,
within the window of a four to six year holding period typically targeted by
our managers. Given the earlier stage focus of our Asia portfolio the weighted
average age of these holdings is 5.1 years. As noted above, we expect exit
activity in Asia to take longer to improve.
Uncalled commitments
During the year, we made a new commitment to a leading North American
mid-market industrials fund and one secondary purchase of an Asia fund. We
have a good investment pipeline of potential new fund commitments and in
particular, we expect a number of our US managers to be fundraising over the
next 12-18 months, as broader market conditions for exits in this market
improve.
At 31 March 2024, uncalled commitments were £377m, 66% to North America and
34% to Asia.
Financial review
Our diversified portfolio underpinned another year of growth for Caledonia,
with the company reporting a NAVTR of 7.4%, despite continuing challenges from
elevated levels of inflation, higher interest rates and geopolitical
uncertainty. This continued positive performance has further extended our
long-term track record of consistent returns, with the company reporting NAVTR
of 10.0% over 10 years, a 7.2% and 4.2% respective outperformance of inflation
and the FTSE-All Share index over the same period.
Caledonia ended the year with net assets of £2,965m (5369p per share) (2023:
£2,798m; 5068p per share), with the uplift largely reflecting capital gains
and investment income across our portfolio, partially offset by foreign
exchange movements, dividend payments to our shareholders and the group's cost
base.
Change in net assets
£m
31 March 2023 2,798.0
Net investment gains 224.1
Portfolio investment income 47.1
Foreign exchange impact (38.8)
Management expenses (31.3)
Other 3.2
Net assets before dividends 3,002.3
Dividends paid (37.0)
31 March 2024 2,965.3
Total comprehensive income
The company seeks to generate total profits from both investment income and
capital growth. For the year ended 31 March 2024, the total comprehensive
income was £203.4m (2023: £144.0m), of which £40.5m (2023: £20.6m) derived
from income and £162.9m (2023: £123.4m) from capital.
31 Mar 2024 31 Mar 2023
£m £m
Revenue Capital Total Revenue Capital Total
Investment income - portfolio(1) 47.1 - 47.1 43.2 - 43.2
Net gains on fair value investments - portfolio(2) - 185.3 185.3 - 126.4 126.4
Total return 47.1 185.3 232.4 43.2 126.4 169.6
Investment income - other investments(1) 14.7 - 14.7 - - -
Net (losses)/gains on fair value investments - other investments(2) - (10.9) (10.9) - 6.6 6.6
Net losses on fair value property - (3.9) (3.9) - (1.4) (1.4)
Other income 0.9 0.6 1.5 0.8 1.3 2.1
Total revenue 62.7 171.1 233.8 44.0 132.9 176.9
- ongoing management (22.9) - (22.9) (21.3) - (21.3)
- performance awards - (8.3) (8.3) - (8.2) (8.2)
- transaction costs - (0.1) (0.1) - (0.4) (0.4)
- exchange movements and other (0.7) - (0.7) - - -
- other transactions with intra-group (non-consolidated) entities(3) (0.2) - (0.2) (0.1) - (0.1)
Net finance costs (0.2) - (0.2) 2.3 - 2.3
Taxation and other 1.8 0.2 2.0 (4.3) (0.9) (5.2)
Total comprehensive income 40.5 162.9 203.4 20.6 123.4 144.0
1. Total investment income from the portfolio and other investments £61.8m
(2023: £43.2m)
2. Total net gains on fair value investments from the portfolio and other
investments £174.4m (2023: £133.0m)
3. Other transactions with intra-group (non-consolidated) entities includes a
£7.2m foreign exchange gain (2023: £nil) on an intra-group loan facility and
a £7.2m (2023: £0.1m) interest expense on the intra-group loan facility
which is reflected in finance costs in the Group statement of comprehensive
income.
Caledonia allocates expenses between revenue and capital in accordance with
guidance from the Association of Investment Companies and broader market
practice. In addition to transaction costs, share-based payment expenses are
allocated to capital. Caledonia's share-based compensation is directly linked
to investment performance and is therefore viewed as an expense against gains
on investments.
Revenue performance
Total comprehensive income was £40.5m (2023: £20.6m), an increase of
£19.9m, primarily driven by the £14.7m investment income from a
non-consolidated intra-group entity and a movement in the tax charge of
£6.1m.
Investment income in the year totalled £47.1m, £3.9m higher than the prior
year. Income from the Public Companies pool increased to £21.8m (2023:
£20.8m). Investment income from the Private Capital pool was £21.7m (2023:
£20.6m). Investment income from the Funds pool was £3.6m (2023: £1.8m).
Investment income from other investments totalled £14.7m representing a
distribution paid by an intra-group non-consolidated entity. This primarily
comprised income from the Funds pool and treasury income retained by the
subsidiary over the preceding four years.
The company's revenue management expenses were £1.6m higher than last year at
£22.9m (2023: £21.3m), reflecting higher personnel expenses of £0.9m,
primarily driven by an inflationary increase, coupled with an increase in the
average number of employees in our investment teams to support our growth.
This was partially offset by a reduction in pension costs on our closed
defined benefit scheme. There was also an increase in other costs, primarily
driven by an increase in property expenses and marketing and communication
expenditure.
Capital performance
Total comprehensive income was £162.9m (2023: £123.4m). The movement
compared to last year was generated by higher levels of capital gains achieved
by our investments.
Our investment portfolio continued to provide a degree of diversification,
generating gains over the year. Net fair value gains from the portfolio were
£185.3m (2023: £126.4m), and together with portfolio investment income, as
described above, of £47.1m (2023: £43.2m) generated a total return of
£232.4m (2023: £169.6m), an 8.7% return. Foreign exchange detracted from
performance, with 52% of our NAV denominated in US dollars, predominantly the
2% strengthening of Sterling against the US dollar resulted in the £38.8m
loss across our investment pools.
Within the net fair value gains from other investments is a loss of £10.9m
related principally to foreign exchange losses on loans and tax movements in a
non-consolidated subsidiary. The loan to the non-consolidated subsidiary was
fully repaid at 31 March 2024. There is a reduction of £3.9m on property
(2023: £1.4m reduction), reflecting higher yields on commercial properties.
The company's capital management expenses relating to performance awards were
£8.3m (2023: £8.2m). Transaction costs of £0.1m (2023: £0.4m) were
incurred, mainly linked to due diligence work on new private equity fund
investments.
Ongoing charges
Our ongoing charges ratio for the year was 0.81% (2023: 0.77%). The ongoing
charges ratio is calculated on an industry standard basis, comprising
published management expenses over the monthly average net assets.
Valuation
The company maintains a considered valuation approach to all investments,
applying caution in exercising judgement and making the necessary estimates.
All listed investments are valued based on the closing bid price on the
relevant exchange as at 31 March 2024.Private Capital investments are valued
biannually, principally on a normalised EBITDA/market multiple basis, in line
with the latest IPEV guidelines. Our holding in Cobepa is derived from the
external valuation it prepares. The Funds pool valuations are based on the
most recent valuations provided by the fund managers, subject to cash
movements from the valuation date. Within our Funds pool, we also reviewed the
underlying valuation methodologies adopted by our fund managers and were
satisfied that the techniques utilised were appropriate. The NAV of the Funds
pool comprised 0.9% based on valuations dated 29 February 2024, 74.6%dated 31
December 2023, 24.4%, mostly funds of funds holdings, dated 30 September 2023
and 0.1% at 30 June 2023.
The following table summarises the source of valuations across the portfolio,
illustrating that 76% of the portfolio value is subject to either market
prices or independent external valuation.
Pool assets by valuation method %
Quoted price 35
Fund NAV(1) 41
Earnings 24
(1) Includes Private Capital investment in Cobepa
Dividend
We recognise that a reliable source of growing dividends is an important part
of shareholder return over both the short and longer term and have extended
our record of growing annual dividends to 57 consecutive years. We paid an
interim dividend of 18.93p per share on 4 January 2024 and have proposed a
final dividend of 51.47p. The total annual dividend for the year of 70.4p is
an increase of 4.5% on last year.
Including the proposed final dividend, the dividends to be paid out of revenue
earnings for the year ended 31 March 2024 total £38.3m, which was covered by
net revenue for the year of £40.5m.
Capital allocation
Prudent and disciplined management of our balance sheet is key to its
continued strength and to ensure an efficient allocation of capital. We have
performed additional modelling and stress testing during the year, which has
informed our viability assessment.
To ensure that we maintain a balanced portfolio, each of our investment pools
has a strategic allocation range. At 31 March 2024, all of our investment
pools were within their strategic allocation range, albeit both our Public
Companies and Private Capital pools are at the lower end of their respective
ranges.
Alongside allocation to our investment strategies, we are committed to our
dividend policy and, when appropriate, share buybacks. As more fully outlined
in the Chair's and Chief Executive Officer's statements, we are limited in the
number of shares we can repurchase. However, with the shares trading at a
significant discount to NAV, the company has purchased and cancelled 290,219
shares at an average discount of 36% during March and April 2024, resulting in
a 10.1p NAV per share accretion.
Cash flows, liquidity and facilities
Our net investment cashflows were an inflow of £27.6m. Investments into our
portfolio totalled £343.7m, relating mainly to our Private Capital investment
into AIR-serv Europe of £142.5m, £76.5m of investment into our Public
Companies pool and £108.6m of investment into our Funds pool. Realisations
from our portfolio totalled £371.3m, relating to the sale of our Private
Capital investment 7IM for £255.8m, realisations of our Public Companies
holdings of £43.5m and £72.0m of distributions from our Funds pool.
After investment income, management expenses and dividend payments to our
shareholders, net cash inflow was £5.8m. At 31 March 2024, our net cash was
£227.4m (31 March 2023: £221.6m). This combined with our undrawn revolving
credit facility of £250m, provides the group with total liquidity of
£477.4m.
Uncalled commitments
Our total uncalled commitments were US$476m (£377m), split 66% in North
America and 34% Asia. During the year we committed US$59m.
Treasury management
Our treasury department provides a central service to group companies and
conducts its operations in accordance with clearly defined guidelines and
policies. Treasury transactions are only undertaken as a consequence of
underlying commercial transactions or exposures and we do not seek to take
active risk positions.
It is the treasury function's role to ensure that the group has sufficient
available funds and facilities to meet its needs in the foreseeable future.
Credit facilities of the group totalled £250m, comprising £112.5m from ING
Group expiring in July 2025 and £137.5m from RBSI expiring in November 2027.
One of the outcomes from the capital allocation modelling described above has
informed an ongoing review and renewal of our credit facilities.
61% of our net asset value is non-Sterling denominated. We do not hedge our
foreign currency exposure. However, this risk is fully recognised by the
business and considered carefully within our risk management approach.
Shareholder communication
Since joining Caledonia in September 2023, one of the areas I have focused on
has been to enhance the company's investor relations and communications
programme to ensure our investment proposition is well understood and
recognised by the market. As part of this process, we have recently reviewed
and made significant updates to our monthly factsheet, and have increased our
disclosures and case studies in the annual report and half and full year
results presentations. We will continue to evolve this in future periods.
I have also reviewed the company's shareholder reporting cycle. Going forward,
we will continue to announce a monthly NAV and factsheet, which capture
movements in the value of our Public Companies and Funds investment pools,
foreign exchange movements and key news. Our Private Capital pool is revalued
twice a year and these valuations will be included in our March and September
NAV and factsheets. Detailed analysis and commentary on all of our investment
pools will be released in our half and full-year results announcements.
Rob Memmott
Chief Financial Officer
Risk management
Effective risk management is an integral part of the company's business model
and assists in ensuring that the different parts of the group operate within
strategic risk parameters. The board has overall responsibility for setting
and monitoring the company's risk appetite.
Principal risks Mitigation and management Key developments
Strategic
Risks in relation to the appropriateness of the business model to deliver The company's business model and strategy are reviewed periodically, against All pools operated within the defined banding. As part of the financial
long-term growth in capital and income. market conditions and target returns. planning cycle, enhanced stress testing was completed to ensure resilience to
financial market volatility. The stress testing was supported by a third-party
Strategic risks include the allocation of capital between public and private The performance of the company and its key risks are monitored regularly by analytics company and the output supported backtesting pool assets over
equity, and in relation to geography, sector, currency, yield and liquidity. management and the board. historical periods of volatility, for example the global financial crisis.
Investment
Risks in respect of specific investment and realisation decisions. Investment Investment opportunities are subject to rigorous appraisal and a multi-stage The investment teams continue to review capacity and capability to ensure
risks include appropriate research and due diligence for new investments and approval process. Investment managers have well-developed networks through appropriate skills and resources are in place. New positions have been
the timely execution of both investments and realisations for optimising which they attract proprietary deal flow. approved, including expertise in data and analytics.
value.
Opportunities to enter or exit investments are reviewed regularly, being The Investment Committee met throughout the year to consider all material
informed by market conditions, pricing and strategic aims. investment decisions.
Market
Risk of losses in value of investments arising from sudden and significant Market risks and sensitivities are reviewed weekly with actions taken, where Market volatility has remained a factor during the year, although through the
movements in public market prices, particularly in highly volatile markets. appropriate, to balance risk and return. second half of 2023 and early 2024 this has reduced. Geopolitical conflicts
Private asset valuations have an element of judgement and could also be
remain, with the wars in the Ukraine and Middle East. Inflation pressures have
impacted by market fluctuations. A regular review of market and portfolio volatility is conducted by the board. reduced but remain higher than central bank targets, with interest rates
Reviews also consider investment concentration, currency exposure and likely to be higher for longer.
Caledonia's principal market risks are therefore equity price volatility, portfolio liquidity. Portfolio construction, including use of private assets,
foreign exchange rate movements and interest rate volatility. provides some mitigation. The Public Companies team, whilst focused on long-term returns, remain alert
to pricing opportunities around their core holdings.
Foreign exchange movements continue to be an inherent risk. Ongoing monitoring
remains the key control, with no appetite to hedge at the current time.
Liquidity
Risk that liabilities, including private equity fund drawdowns, cannot be met Detailed cash forecasting for the year ahead is updated and reviewed £227m of cash on balance sheet at 31 March 2024, in addition to £250m of
or new investments cannot be made due to a lack of liquidity. Such risk can quarterly, including the expected drawdown of capital commitments. A weekly undrawn revolving credit facilities, providing significant capacity to fund
arise from being unable to sell an investment due to lack of a market, or from cash update is produced, focused on the short-term cash forecast. attractive investment opportunities. Enhanced stress-testing and capital
not holding cash or being able to raise debt.
allocation modelling completed during the year, with activity in place to
Loan facilities are maintained to provide appropriate liquidity headroom. review and renew credit facilities.
The liquidity of the portfolio is reviewed regularly. All excess cash placed in AAA-rated money market funds on an overnight basis.
Regular counterparty reviews are undertaken. No bank term deposits utilised.
ESG & Climate change
Risks in relation to the successful incorporation of ESG matters and climate Caledonia continues to build ESG knowledge, particularly on climate change, Biannual pool reports to the board include ESG information and developments
change impacts into our investment approach. and develop policy and processes to integrate ESG matters into our investment relating to that pool. Third party consultants were engaged to support the
approach. The assessment of new and existing investments will fully assessment of climate risks and opportunities associated with the Private
Identifying opportunities to drive our approach to ESG matters, deliver strong incorporate ESG and climate change risks and opportunities. Capital pool, enabling increased disclosure in this year's TCFD Report.
returns and manage the risks to meet evolving stakeholder expectations.
Regulatory & legal
Risks arising from exposure to litigation or fraud, or failure to adhere to Caledonia has internal resources to Key changes to the UK Corporate Governance Code occurred, including
the tax and regulatory environment.
enhancements to the reporting of the monitoring and review of the
consider regulatory and tax matters as they arise. Professional advisers are effectiveness of the company's risk management and internal control framework,
Caledonia operates across a number of jurisdictions and in an industry that is engaged, where necessary, to supplement internal knowledge in specialised and a future declaration of the effectiveness of the material controls.
subject to significant regulatory oversight. areas or when new regulations are introduced. Activities supported by regular Additional resource has been engaged to drive the company's response, coupled
staff training. with the further enhancement of existing governance arrangements with the
formation of an Operational Risk Committee. The requirements are
Caledonia is a member of the Association of Investment Companies and operates non-prescriptive, with core developments planned for 2024 in preparation for
in line with industry standards. pilot reporting to the board in March 2025.
Operational
Risks arising from inadequate or failed processes, people and systems, or from Systems and control procedures are developed and reviewed regularly. They are Cyber security remains a material risk exposure, with focused activity during
external factors. tested to ensure effective operation. the year to further strengthen the control environment. Technology control
improvements included firewall enhancements, penetration testing and disaster
Operational risks arise from the recruitment, development and retention of Appropriate remuneration and other policies are in place to facilitate the recovery improvements. Human error remains a key potential weakness for all
staff, systems and procedures, and business disruption. retention of key staff. businesses and, to further strengthen controls, compulsory annual cyber
security training has been enhanced alongside targeted phishing campaigns.
Business continuity plans are maintained and updated as the business evolves
and in response to emerging threats. This includes a specific focus on cyber Simulated scenario exercises have helped focus remediation on weaker controls.
security. These were a key driver in migrating servers from Cayzer House to a secure
off-site data centre, mitigating a number of potential threats to business
continuity.
A real-time cyber security simulation was facilitated by a third-party for
executives, which strengthened planned incident management and cyber defence
improvements.
Oracle NetSuite replaced legacy finance systems, bringing greater resilience
and facilitating a refresh of key processes. A new expenses system is being
rolled out to further enhance controls and assist with the automation of tax
compliance processes.
Group statement of comprehensive income
for the year ended 31 March 2024
2024 2023
Revenue Capital Total Revenue Capital Total
£m £m £m £m £m £m
Revenue
Investment income 61.8 - 61.8 43.2 - 43.2
Other income 0.9 0.6 1.5 0.8 1.3 2.1
Net gains on fair value investments - 174.4 174.4 - 133.0 133.0
Net losses on fair value property - (3.9) (3.9) - (1.4) (1.4)
Total revenue 62.7 171.1 233.8 44.0 132.9 176.9
Management expenses (22.9) (8.4) (31.3) (21.3) (8.6) (29.9)
Profit before finance costs 39.8 162.7 202.5 22.7 124.3 147.0
Treasury interest receivable 3.2 - 3.2 4.6 - 4.6
Finance costs (10.6) - (10.6) (2.4) - (2.4)
Exchange movements 6.3 - 6.3 - - -
Profit before tax 38.7 162.7 201.4 24.9 124.3 149.2
Taxation 1.8 0.6 2.4 (4.3) (2.0) (6.3)
Profit for the year 40.5 163.3 203.8 20.6 122.3 142.9
Other comprehensive income items never to be reclassified to profit or loss
Re-measurements of defined benefit pension schemes - (0.8) (0.8) - 1.4 1.4
Tax on other comprehensive income - 0.4 0.4 - (0.3) (0.3)
Total comprehensive income 40.5 162.9 203.4 20.6 123.4 144.0
Basic earnings per share 74.5p 300.2p 374.7p 37.9p 225.3p 263.2p
Diluted earnings per share 73.3p 295.7p 369.0p 37.3p 221.7p 259.0p
The total column of the above statement represents the group's statement of
comprehensive income, prepared in accordance with IFRSs as adopted in the
United Kingdom.
The revenue and capital columns are supplementary to the group's statement of
comprehensive income and are prepared under guidance published by the
Association of Investment Companies.
The profit for the year and total comprehensive income for the year is
attributable to equity holders of the parent.
Statement of financial position
at 31 March 2024
Group Company
2024 2023 2024 2023
£m £m £m £m
Non-current assets
Investments held at fair value through profit or loss 2,695.4 2,794.9 2,700.7 2,803.2
Investments in subsidiaries held at cost - - 0.9 0.9
Investment property 13.3 15.1 - -
Property, plant and equipment 25.2 27.9 - -
Deferred tax assets 5.3 5.7 - -
Other receivables - - 35.5 37.1
Employee benefits 4.3 4.0 - -
Non-current assets 2,743.5 2,847.6 2,737.1 2,841.2
Current assets
Asset held for sale 19.0 - 19.0 -
Trade and other receivables 7.3 6.9 5.0 3.1
Current tax assets 1.7 19.3 2.0 20.3
Cash and cash equivalents 227.4 221.6 227.3 221.1
Current assets 255.4 247.8 253.3 244.5
Total assets 2,998.9 3,095.4 2,990.4 3,085.7
Current liabilities
Interest bearing loans and borrowings - (266.0) - (266.0)
Trade and other payables (24.4) (22.1) (38.2) (33.8)
Employee benefits (3.1) (2.4) - -
Current liabilities (27.5) (290.5) (38.2) (299.8)
Non-current liabilities
Employee benefits (5.0) (5.1) - -
Deferred tax liabilities (1.1) (1.8) - -
Non-current liabilities (6.1) (6.9) - -
Total liabilities (33.6) (297.4) (38.2) (299.8)
Net assets 2,965.3 2,798.0 2,952.2 2,785.9
Equity
Share capital 3.1 3.1 3.1 3.1
Share premium 1.3 1.3 1.3 1.3
Capital redemption reserve 1.4 1.4 1.4 1.4
Capital reserve 2,716.6 2,555.4 2,717.1 2,554.3
Retained earnings 250.2 247.4 236.6 236.4
Own shares (7.3) (10.6) (7.3) (10.6)
Total equity 2,965.3 2,798.0 2,952.2 2,785.9
Undiluted net asset value 5452p 5150p
Diluted net asset value 5369p 5068p
The Company profit for the year ended 31 March 2024 was £202.4m (2023:
£144.8m)
The financial statements were approved by the board and authorised for issue
on 20 May 2024 and were signed on its behalf by:
Mat Masters Rob Memmott
Chief Executive Officer Chief Financial Officer
Statement of changes in equity
for the year ended 31 March 2024
Capital
Share Share redemption Capital Retained Own Total
capital premium reserve reserve earnings shares equity
£m £m £m £m £m £m £m
Group
Balance at 31 March 2022 3.1 1.3 1.4 2,527.0 263.2 (13.3) 2,782.7
Total comprehensive income
Profit for the year - - - 122.3 20.6 - 142.9
Other comprehensive income - - - 1.1 - - 1.1
Total comprehensive income - - - 123.4 20.6 - 144.0
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments - - - - 5.8 - 5.8
Transfer of shares to employees - - - - (6.7) 6.7 -
Own shares purchased - - - - - (4.0) (4.0)
Dividends paid - - - (95.0) (35.5) - (130.5)
Total transactions with owners - - - (95.0) (36.4) 2.7 (128.7)
Balance at 31 March 2023 3.1 1.3 1.4 2,555.4 247.4 (10.6) 2,798.0
Total comprehensive income
Profit for the year - - - 163.3 40.5 - 203.8
Other comprehensive income - - - (0.4) - - (0.4)
Total comprehensive income - - - 162.9 40.5 - 203.4
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments - - - - 6.2 - 6.2
Transfer of shares to employees - - - - (6.9) 6.9 -
Own shares purchased and cancelled - - - (1.7) - - (1.7)
Own shares purchased - - - - - (3.6) (3.6)
Dividends paid - - - - (37.0) - (37.0)
Total transactions with owners - - - (1.7) (37.7) 3.3 (36.1)
Balance at 31 March 2024 3.1 1.3 1.4 2,716.6 250.2 (7.3) 2,965.3
Company
Balance at 31 March 2022 3.1 1.3 1.4 2,526.0 251.3 (13.3) 2,769.8
Profit and total comprehensive income - - - 123.3 21.5 - 144.8
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments - - - - 5.8 - 5.8
Transfer of shares to employees - - - - (6.7) 6.7 -
Own shares purchased - - - - - (4.0) (4.0)
Dividends paid - - - (95.0) (35.5) - (130.5)
Total transactions with owners - - - (95.0) (36.4) 2.7 (128.7)
Balance at 31 March 2023 3.1 1.3 1.4 2,554.3 236.4 (10.6) 2,785.9
Profit and total comprehensive income - - - 164.5 37.9 - 202.4
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments - - - - 6.2 - 6.2
Transfer of shares to employees - - - - (6.9) 6.9 -
Own shares purchased and cancelled - - - (1.7) - - (1.7)
Own shares purchased - - - - - (3.6) (3.6)
Dividends paid - - - - (37.0) - (37.0)
Total transactions with owners - - - (1.7) (37.7) 3.3 (36.1)
Balance at 31 March 2024 3.1 1.3 1.4 2,717.1 236.6 (7.3) 2,952.2
Statement of cash flows
for the year ended 31 March 2024
Group Company
2024 2023 2024 2023
£m £m £m £m
Operating activities
Dividends received 57.9 41.6 57.9 44.5
Interest received 3.8 6.5 3.8 6.5
Cash received from customers 1.5 2.6 0.6 1.8
Cash paid to suppliers and employees (24.5) (25.3) (24.7) (28.2)
Taxes received 0.1 0.1 0.1 0.1
Group tax relief received 20.9 2.0 21.1 2.1
Group tax relief paid (0.8) - - (0.1)
Net cash flow from operating activities 58.9 27.5 58.8 26.7
Investing activities
Purchases of investments (340.8) (468.1) (340.8) (468.1)
Proceeds from disposal of investments 599.7 192.1 599.7 192.1
Purchases of property, plant and equipment (0.5) (0.3) - -
Net cash flow from/(used in) investing activities 258.4 (276.3) 258.9 (276.0)
Financing activities
Interest paid (10.4) (2.2) (10.4) (2.0)
Dividends paid to owners of the company (37.0) (130.5) (37.0) (130.5)
Proceeds from bank borrowings 70.0 - 70.0 -
Proceeds from group borrowings - 266.0 - 283.7
Repayment of bank borrowings (70.0) - (70.0) -
Loan payments to subsidiaries (258.8) - (258.8) (17.8)
Purchases of own shares (5.3) (4.0) (5.3) (4.0)
Net cash flow (used in)/from financing activities (311.5) 129.3 (311.5) 129.4
Net increase/(decrease) in cash and cash equivalents 5.8 (119.5) 6.2 (119.9)
Cash and cash equivalents at year start 221.6 341.1 221.1 341.0
Cash and cash equivalents at year end 227.4 221.6 227.3 221.1
Reconciliation of Net Cash Flow to Movement in Net Debt
for the year ended 31 March 2024
Group Company
2024 2023 2024 2023
£m £m £m £m
Net increase/(decrease) in cash and cash equivalents in the year 5.8 (119.5) 6.2 (119.9)
Cash inflow from increase in borrowings (70.0) (266.0) (70.0) (283.7)
Cash outflow from decrease in borrowings 328.8 - 328.8 17.8
Change in net debt resulting from cash flows 264.6 (385.5) 265.0 (385.8)
Change in net debt resulting from foreign exchange movements 7.2 - 7.2 (0.1)
Net (debt)/cash at the start of the year (44.4) 341.1 (44.9) 341.0
Net cash/(debt) at the end of the year 227.4 (44.4) 227.3 (44.9)
Notes to the final results announcement
1. General information
Caledonia Investments plc is an investment trust company domiciled in the
United Kingdom and incorporated in England in 1928, under number 235481. The
address of its registered office is Cayzer House, 30 Buckingham Gate, London
SW1E 6NN. The ordinary shares of the company are premium listed on the London
Stock Exchange.
Going concern
As at 31 March 2024, the board has undertaken an assessment of the
appropriateness of preparing its financial statements on a going concern
basis, taking into consideration future cash flows, current cash holdings of
£227m, undrawn banking facilities of £250m and readily realisable assets of
£950m as part of a wider process in connection with its viability assessment.
It has concluded that the group has sufficient cash, other liquid resources
and committed bank facilities to meet existing and new investment commitments.
The directors have concluded that the group has adequate resources to continue
in operational existence for a period of at least 12 months from the date of
approval of the financial statements. Accordingly, they continue to consider
it appropriate to adopt the going concern basis in preparing the financial
statements.
The group has conducted a going concern assessment which considered future
cash flows, the availability of liquid assets and debt facilities, banking
covenant requirements and consideration of the economic environment over at
least 12 months from the date of approval of these financial statements. In
making this assessment a number of stress scenarios were developed, factoring
in (a) adverse foreign exchange movements, (b) a delay in disposals of
directly owned private equity investments, (c) drawdown of all existing
private equity fund commitments, (d) a significant market decline for two
years and (e) the cumulative impact of (c) and (d) above.
Under these scenarios the group would have a range of mitigating actions
available to it, including sales of liquid assets, and usage of banking
facilities, which would provide sufficient funds to meet all of its
liabilities as they fall due and still hold significant liquid assets over the
assessment period. As a result of this assessment the directors are confident
that the company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date of approval
of the financial statements and therefore have prepared the financial
statements on a going concern basis.
2. Dividends
Amounts recognised as distributions to owners of the company in the year were
as follows:
2024 2023
p/share £m p/share £m
Final dividend for the year ended 31 March 2023 (2022) 49.20 26.7 47.3 25.6
Special dividend for the year ended 31 March 2022 175.0 95.0
Interim dividend for the year ended 31 March 2024 (2023) 18.93 10.3 18.2 9.9
68.13 37.0 240.5 130.5
Amounts proposed after the year end and not recognised in the financial
statements were as follows:
Proposed final dividend for the year ended 31 March 2024 51.47 28.0
The proposed final dividend for the year ended 31 March 2024 was not included
as a liability in these financial statements. The dividend, if approved by
shareholders at the annual general meeting to be held on 17 July 2024, will be
payable on 1 August 2024 to holders of shares on the register on 28 June 2024.
The ex-dividend date will be 27 June 2024. The deadline for elections under
the dividend reinvestment plan offered by Link Group will be the close of
business on 11 July 2024.
For the purposes of section 1158 of the Corporation Tax Act 2010 and
associated regulations, the dividends payable for the year ended 31 March 2024
are the interim and final dividends for that year, amounting to £38.3m (2023:
£36.6m).
3. Earnings per share
Basic and diluted earnings per share
The calculation of basic earnings per share of the group was based on the
profit attributable to shareholders and the weighted average number of shares
outstanding during the year. The calculation of diluted earnings per share
included an adjustment for the effects of dilutive potential shares.
The profit attributable to shareholders (basic and diluted) was as follows:
2024 2023
£m £m
Revenue 40.5 20.6
Capital 163.3 122.3
Total 203.8 142.9
The weighted average number of shares was as follows:
2024 2023
000's 000's
Issued shares at the year start 54,664 54,664
Effect of shares cancelled (1) -
Effect of shares held by the employee share trust (270) (376)
Basic weighted average number of shares in the year 54,393 54,288
Effect of performance shares, share options and deferred bonus awards 844 881
Diluted weighted average number of shares in the year 55,237 55,169
4. Operating segments
The following is an analysis of the profit/(loss) before tax for the year and
assets analysed by primary operating segments:
Profit/(loss) before tax Total assets
2024 2023 2024 2023
£m £m £m £m
Public Companies 101.8 1.4 949.8 836.9
Private Capital 111.2 64.6 820.3 824.0
Funds 19.4 103.6 926.3 873.8
Investment portfolio 232.4 169.6 2,696.4 2,534.7
Other investments(1) 1.4 7.3 18.0 260.2
Total revenue/investments 233.8 176.9 2,714.4 2,794.9
Cash and cash equivalents 3.2 4.6 227.4 221.6
Other items (35.6) (32.3) 57.1 78.9
Reportable total 201.4 149.2 2,998.9 3,095.4
1. Other investments included £18.0m of non-pool investments (2023: 260.2m of
non-pool investments).
5. Share-based payments
In the year to 31 March 2024, participating employees in the performance share
scheme were awarded options over 212,049 shares at nil-cost (2023: 172,802
shares). Also in the year to 31 March 2024, participating employees received
deferred awards over 1,976 shares (2023: 39,500 shares). The IFRS 2 expense
included in profit or loss for the year was £7.1m (2023: £7.4m).
6. Net asset value
The group's undiluted net asset value is based on the net assets of the group
at the year end and on the number of ordinary shares in issue at the year-end
less ordinary shares held by The Caledonia Investments plc Employee Share
Trust. The group's diluted net asset value assumes the calling of performance
share and deferred bonus awards.
2024 2023
Net Number Net Number
assets of shares(1) NAV assets of shares(1) NAV
£m 000's p/share £m 000's p/share
Undiluted 2,965.3 54,388 5452 2,798.0 54,326 5150
Share awards - 844 (83) - 881 (82)
Diluted 2,965.3 55,232 5369 2,798.0 55,207 5068
1. Number of shares in issue at the year-end is stated after the deduction of
223,666 (2023: 337,962) ordinary shares held by the Caledonia Investments plc
Employee Share Trust.
Net asset value total return is calculated in accordance with guidance from
the Association of Investment Companies ('AIC'), as the change in NAV from
the start of the period, assuming that dividends paid to shareholders are
reinvested at NAV at the time the shares are quoted ex-dividend.
2024 2023
p p
Diluted NAV at year start 5068 5041
Diluted NAV at year end 5369 5068
Dividends payable in the year 68 241
Reinvestment adjustment(2) 6 9
5443 5318
NAVTR over the year 7.4% 5.5%
2. The reinvestment adjustment is the gain or loss resulting from reinvesting the
dividends in NAV at the ex-dividend date.
7. Capital commitments
At the reporting date, the group and company had entered into unconditional
commitments to limited partnerships, committed loan facility agreements and a
conditional loan and purchase agreement, as follows:
Group Company
2024 2023 2024 2023
£m £m £m £m
Investments
Contracted but not called 377.3 422.6 377.3 422.6
Conditionally contracted - - 4.5 4.5
377.3 422.6 381.8 427.1
Amounts are callable within the next 12 months. The group has conducted a
going concern assessment which considered future cash flows, the availability
of liquid assets and debt facilities, over the 12-month period required. In
making this assessment a number of stress scenarios were developed. All
scenarios include all outstanding private equity fund commitments being drawn.
Under these scenarios the group would have a range of mitigating actions
available to it, including sales of liquid assets and usage of banking
facilities, which would provide sufficient funds to meet all of its
liabilities as they fall due and still hold significant liquid assets over the
assessment period.
8. Performance measures
Caledonia uses a number of performance measures to aid the understanding of
its results. The performance measures are standard within the investment trust
industry and Caledonia's use of such measures enhances comparability.
Principal performance measures are as follows:
Net assets
Net assets provides a measure of the value of the company to shareholders and
is taken from the IFRS group net assets.
Net asset value ('NAV')
NAV is a measure of the value of the company, being its assets - principally
investments made in other companies and cash held - minus any liabilities. NAV
per share is calculated by dividing net assets by the number of shares in
issue, adjusted for shares held by the Employee Share Trust and for dilution
by the exercise of outstanding share awards. NAV takes account of dividends
payable on the ex-dividend date.
NAV total return ('NAVTR')
NAVTR is a measure of how the net asset value per share has performed over a
period, considering both capital returns and dividends paid to shareholders.
NAVTR is calculated as the increase in NAV between the beginning and end of
the period, plus the accretion from assumed dividend reinvestment during the
period. We use this measure as it enables comparisons to be drawn against an
investment index in order to compare performance. The calculation follows the
method prescribed by the AIC.
Total shareholder return ('TSR')
TSR measures the return to shareholders through the movement in the share
price and dividends paid during the measurement period.
9. Financial instruments - private asset valuation
Caledonia makes private equity investments in two forms: direct private equity
investments (the Private Capital pool) and investments into externally managed
unlisted private equity funds and fund of funds (the Funds pool). The
directors have made two estimates which they deem to have a significant risk
of resulting in a material adjustment to the amounts recognised in the
financial statements within the next financial year, which relate to the
valuation of assets within these two pools.
For directly owned private investments (Private Capital investments),
totalling £820.3m (2023: £824.0m) valuation techniques using a range of
internally and externally developed unobservable inputs are used to estimate
fair value. Valuation techniques make maximum use of market inputs, including
reference to the current fair values of instruments that are substantially the
same (subject to appropriate adjustments).
For private equity fund investments (unlisted Funds Pool investments),
totalling £898.8m (2023: £869.0m) held through externally managed fund
vehicles, the estimated fair value is based on the most recent valuation
provided by the external manager, usually received within 3-6 months of the
relevant valuation date.
The following table provides information on significant unobservable inputs
used at 31 March 2024 in measuring financial instruments categorised as Level
3 in the fair value hierarchy.
For private company assets we have chosen to sensitise and disclose EBITDA
multiple or tangible asset multiple inputs because their derivation involves
the most significant judgements when estimating valuation, including which
data sets to consider and prioritise. Valuations also include other
unobservable inputs, including earnings and tangible assets, which are based
on historic and forecast data and are less judgmental. For each asset
category, inputs were sensitised by a percentage deemed to reflect the
relative degree of estimation uncertainty, and valuation calculations
re-performed to identify the impact.
Private equity fund assets are each held in and managed by the same type of
fund vehicle, valued using the same method of adjusted manager valuations, and
subject to broadly the same economic risks. They are therefore subject to a
similar degree of estimation uncertainty. They have been sensitised at an
aggregated level by 5% to reflect a degree of uncertainty over managers'
valuations which form the basis of their fair value.
At 31 March 2024
Description / valuation method Fair value Unobservable input Weighted average input Input sensitivity Change in valuation
£m +/- +/- £m
Internally developed
Private companies
Large, earnings 473.9 EBITDA multiple 12.1x 10.0% +51.1/-52.7
Small and medium, earnings 164.0 EBITDA multiple 9.1x 10.0%-15% +15.3/-14.4
Net assets / manager valuation 182.4 Multiple 1 0.1x +18.6/-18.8
820.3 +85.0/-85.9
Non-pool companies 18.0
Total internal 838.3
Externally developed
Private equity fund
Net asset value 898.8 Manager NAV 1 5% +/-44.9
1,737.1 +129.9/-130.8
10. Financial information
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 March 2024 or 2023 but is derived
from those accounts. Statutory accounts for 31 March 2023 have been delivered
to the Registrar of Companies, and those for 31 March 2024 will be delivered
in due course. The auditor has reported on those accounts; their reports were:
(i) unqualified; (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
The statutory accounts for the year ended 31 March 2024 will be published on
14 June 2024 and made available for download from the company's website on
that date. Also, a copy will be delivered to the Registrar of Companies in
accordance with section 441 of the Companies Act 2006, following approval by
shareholders.
The statutory accounts for the year ended 31 March 2024 include a 'Directors'
statement of responsibility' as follows:
Each of the directors confirm that, to the best of their knowledge:
● The group and parent company financial statements, which have been prepared in
accordance with applicable accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the company
and the undertakings included in the consolidation taken as a whole
● The strategic report includes a fair review of the development and performance
of the business and the position of the company and the undertakings included
in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that it faces.
Signed on behalf of the board by:
Mat Masters Rob Memmott
Chief Executive Officer Chief Financial Officer
20 May 2024 20 May 2024
Forward looking statements: This announcement may contain statements about the
future including certain statements about the future outlook for Caledonia
Investments plc and its subsidiaries ('Caledonia'). These are not guarantees
of future performance and will not be updated. Although we believe our
expectations are based on reasonable assumptions, any statements about the
future outlook may be influenced by factors that could cause actual outcomes
and results to be materially different.
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FTSE's express written consent.
END
Copies of this statement are available at the company's registered office,
Cayzer House, 30 Buckingham Gate, London SW1E 6NN, United Kingdom, or from its
website at www.caledonia.com.
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