REG - Caledonia Investmnts - Final Results
23/05/2023 07:00
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RNS Number : 2622A Caledonia Investments PLC 23 May 2023
Caledonia Investments plc
Final results for the year ended 31 March 2023
Financial highlights(1)
31 Mar 2023 31 Mar 2022 Change
Net asset value total return 5.5% 27.9%
Net asset value 5068p 5041p +0.5%
Net assets £2,798m £2,783m +0.5%
Annual dividend per share 67.4p 64.8p +4.0%
1. NAV total return, and investment and pool returns are Alternative performance
measures. Definitions of these measures may be found at
https://www.caledonia.com/invest-with-us/investment-trusts/
Highlights
● 5.5% NAV total return for the year. Net assets of £2.8bn, after special
dividend payment in summer 2022.
● 4.0% increase in the dividend to 67.4p per share, 56th consecutive year of
increase.
● Private assets, both Private Capital and Funds, were the key drivers of
returns in the year.
● Strong balance sheet with £472m of total liquidity (£222m cash and £250m
undrawn facilities).
● Chief Financial Officer succession announced.
Quoted Equity
● Public equity holdings were adversely impacted by volatility and weakness in
global equity markets, with total return of 0.2% in the year.
Private Capital
● Private Capital portfolio delivered total return of 8.4%, following very
strong returns in FY22.
● Majority of portfolio companies demonstrated good progress in terms of both
growth and profitability.
● Acquisition of AIR-Serv Europe announced post year end.
Funds
● Funds portfolio generated total return of 13.3% for the year, supported by 6%
weakening of Sterling against the US dollar.
● Strong underlying performance from the North American funds partially offset
by weaker Asia fund performance in the year: longer-term performance from both
regions remains very strong.
Private Capital
● Private Capital portfolio delivered total return of 8.4%, following very
strong returns in FY22.
● Majority of portfolio companies demonstrated good progress in terms of both
growth and profitability.
● Acquisition of AIR-Serv Europe announced post year end.
Funds
● Funds portfolio generated total return of 13.3% for the year, supported by 6%
weakening of Sterling against the US dollar.
● Strong underlying performance from the North American funds partially offset
by weaker Asia fund performance in the year: longer-term performance from both
regions remains very strong.
Mat Masters, Chief Executive Officer, commented:
"Our approach of investing in a diversified portfolio of high-quality
companies and funds has generated positive returns over the last year against
a challenging market environment.
We have a strong platform from which to continue to deliver our objectives of
growth in net assets and dividends paid to shareholders over the long term."
22 May 2023
Enquiries
Caledonia Investments plc Teneo
Mat Masters, Chief Executive Officer Tom Murray
Tim Livett, Chief Financial Officer Robert Yates
caledonia@teneo.com
+44 20 7802 8080 +44 20 7353 4200
Chair's statement
Results
The NAV total return for the year ended 31 March 2023 was 5.5% which, whilst
below our long-term target of inflation plus 3% to 6%, compares favourably to
the FTSE All-Share return of 2.9% for the same period. This follows strong
returns of 27.9% last year, 25.9% in the preceding year and 19.3% annualised
over the last three years. Our private assets, in both Private Capital and
Funds, generated good returns during the year, based on a mix of positive
underlying performance and the advantageous impact of the 6% fall in the value
of Sterling against the US dollar. In contrast, our public equity holdings
were adversely impacted by volatility and weakness in global equity markets.
Our balance sheet remains strong with total liquidity of £472m available at
31 March 2023, reflecting our banking facilities and £222m of cash.
Income and dividends
Investment and other income (revenue account) declined by 15% to £44m and net
income was £21m. The gradual reduction in investment income was highlighted
last year and we will maintain our focus on total returns rather than pure
income from our portfolio. The Funds pool generated a net cash inflow of £24m
which, together with net income of £21m, was sufficient to cover our proposed
annual dividend. The board is recommending a final dividend of 49.2p per
share, which represents a full year dividend of 67.4p, an increase of 4.0%
when compared to the previous year. If approved by shareholders, this would
represent the 56th consecutive year of increases in our annual dividend.
Board
Will Wyatt, who retired as Chief Executive at last year's annual general
meeting, continues to serve on the board as a non-executive director following
re-election by shareholders. Will was succeeded by Mat Masters who has made an
excellent start in his new role.
In November, Tim Livett, our Chief Financial Officer, advised the board of his
intention to retire and leave the company to develop a portfolio of
non-executive roles once his successor joins the board. The search for Tim's
successor very recently concluded with the appointment of Rob Memmott. Rob
will join the company and the board on 1 September 2023.
Towards the end of the financial year, we welcomed Farah Buckley as a new
independent non-executive director. Stuart Bridges, who has served on the
board since 2013, will retire at the forthcoming annual general meeting as
planned. Following a period of notable change, the board has asked me to
extend my tenure until the annual general meeting in 2025, subject to ongoing
approval by shareholders.
On behalf of the board, I would like to thank Tim and Stuart for their
contribution to Caledonia.
Strategy
We completed a strategic review during the year. Aside from the small
refinements set out in the Chief Executive Officer's report, we have not
implemented any significant changes.
Annual general meeting
I look forward to once again meeting shareholders at our annual general
meeting on 19 July.
Outlook
While inflation is at last showing signs of peaking, rising interest rates are
a threat to global growth. The recent banking sector issues on both sides of
the Atlantic reveal the economic stress lurking in the system after years of
ultra-low interest rates. The high levels of government debt, built up since
the last financial crisis, have accelerated significantly on the back of
pandemic and energy support measures. It may well be that our attention will
turn to the underlying deflationary forces from this debt once the current
round of fiscal tightening is complete.
As Mat has outlined in his report, we remain confident in our strategy of
selecting quality companies and funds which can deliver long-term compounding
returns. However, it would not be a surprise to see increased volatility in
the year ahead as the impact of rate rises becomes more apparent in the global
economy.
David Stewart
Chair
Chief Executive Officer's report
Purpose
Caledonia's purpose is to grow the real value of net assets and dividends paid
to shareholders over the long term, whilst managing risk to avoid the
permanent loss of capital. We pursue this through a strategy of taking a
long-term approach, identifying and investing directly, and indirectly via
funds, into well-managed businesses. The company is self-managed and,
investing from our own balance sheet, we do not seek to raise new funds so can
remain focused on investing without compromising our investment process.
I succeeded Will Wyatt as Chief Executive Officer during the year, having
previously held the position of Head of Quoted Equity. I am privileged to work
with exceptional colleagues who share the same values of conducting business
to the highest standards coupled with a long-term horizon.
Strategy and allocation
Our three investment pools provide a clear structure for managing specialist
teams and risk diversification. Each investment team is able to focus on a
concentrated portfolio which, in combination, provide a good level of
diversification for our shareholders.
Over the course of the year, we completed a strategic review to ensure that we
maintain our focus on investments capable of delivering our long-term
objectives and continue to execute well via our three pools, supported by our
distinctive culture. Aside from the minor adjustments outlined below, we have
not implemented any significant changes.
To enable our investment teams to continue to invest in quality businesses we
have reduced the overall income requirement. We have not changed Caledonia's
strategic aim of growing the dividend over time but have revised the company's
dividend policy. Caledonia has very high levels of retained reserves available
to pay the dividend with little requirement for earned income to provide
dividend cover. However, ensuring cash flow cover to meet operational costs
and dividend payments without recourse to the investment portfolio is prudent.
The Funds pool has reached its strategic allocation target, delivered returns
above the average for the group, with a portfolio of sufficient scale to
appropriately manage risk and has reached a stage of maturity where we
anticipate positive cash flow. We have therefore moved from an income cover
policy to one where half of Caledonia's costs and normal dividend is covered
by income from the investment portfolio and the remainder from net cash inflow
from the Funds pool.
In 2019 we reduced the income target for the Income portfolio from 4.5% on
value to 3.5% on cost. Moving from measuring yield on value to cost enables
investment in good quality companies when the market presents opportunities,
without the need to sell when share prices subsequently recover. This
reduction in yield requirement expanded the opportunity set and further
enabled the team to focus on quality. The change led to the disposal of
several potentially riskier, lower quality assets over the winter of 2019 and
early 2020 before funds were reinvested into higher quality companies during
the period of market volatility brought on by the Covid-19 pandemic. We have
recently made a similar reduction to the income target for the Private Capital
pool from 5% on value to 2.5% on cost. A summary of each pool, together with
return requirement and revised income target, is shown below.
Pool name Description Return requirements
Caledonia Capital strategy 10% total return,
Quoted Equity no yield target
Income strategy 7% total return,
3.5% yield (on cost)
Caledonia Majority and minority investments predominantly in UK mid-market companies 14% total return,
with equity values of between £50m and £150m
Private Capital
2.5% yield (on cost)
Caledonia US and Asian private equity funds and funds of funds 12.5% total return
Funds
We have also refined the asset allocation model, with the following new
bandings.
Pool name New Old
% %
Quoted Equity 30-40 35-50
Private Capital* 25-35 35-45
Funds 25-35 20-30
*includes Cobepa
The most significant change was a reduction to Private Capital's allocation
range, which supports a portfolio of six to eight holdings at an average entry
equity value of around £100m, together with our existing investment in
Cobepa. We also adjusted the allocation to the Funds pool to facilitate a
small increase in our exposure to US lower mid-market private equity funds
which have shown strong, reliable performance over time.
Results
The result for the year was a NAVTR of 5.5% which, whilst lower than our
previous two years of very strong results (2021: 25.9%, 2022: 27.9%), was a
good outcome given the challenging market environment. The table below shows
our results over multiple time periods compared to our strategic KPIs.
Years to 31 March 1 year 3 years 5 years 10 years
% % % %
NAVTR 5.5 69.8 72.9 179.4
FTSE All-Share 2.9 47.4 27.8 75.9
NAVTR v FTSE All-Share TR +2.6 +22.4 +45.1 +103.5
Annualised performance
NAVTR 5.5 19.3 11.6 10.8
RPI 13.5 7.9 5.7 4.0
NAVTR v RPI -8.0 +11.4 +5.9 +6.8
FTSE All-Share TR 2.9 13.8 5.0 5.8
NAVTR v FTSE All-Share TR +2.6 +5.5 +6.6 +5.0
The macro-economic impact can be seen, with increases in inflation and
interest rates presenting a notable change to the investment environment. In
most cases it is reasonable to assume that increased interest rates will
reduce the rating valuation for equities. This rating change has been factored
into our thinking and led to a pause in significant investment activity for
much of the year.
Pool performance - annualised
Year to 31 March 1 year 3 years 5 years 10 years
% % % %
Pool name
Quoted Equity 0.2 14.2 11.2 8.8
- Capital portfolio 1.1 16.4 14.1 10.8
- Income portfolio -2.4 9.2 5.2 4.2
Private Capital 8.4 27.4 13.5 14.5
Funds 13.3 28.3 18.7 18.4
Portfolio 7.2 21.9 13.6 12.7
Quoted Equity
The Quoted Equity pool, a concentrated portfolio of high-quality companies,
delivered a return of 0.2%, reflecting wider market performance. During the
year the portfolio made selective changes to existing holdings with a net
total investment of £26m. The increase in interest rates was generally
reflected in equity valuations although the team made opportunistic purchases
when individual companies traded at good prices.
The Capital portfolio produced a good performance relative to major
international markets. Longer-term performance remains very strong, with the
continued focus on high-quality companies and global developed markets,
especially North America, reflected in the performance outcomes.
The Income portfolio produced weaker performance over the period. Companies in
the energy and banking sectors, which generally do not meet our long-term
quality criteria, were the main contributors to the positive performance of
the FTSE All-Share during the year. Our investment in high-quality real estate
investment trusts ('REITs'), which continued to deliver robust operational
performance, were de-rated. In addition, our holding in specialist insurer
Sabre materially underperformed as the insurance market recovers from the
impact of Covid-19 and responds to high inflation.
Private Capital
Private Capital delivered a return of 8.4% for the year. The return reflects
continued development from portfolio companies where most, by value and
number, continued to make progress. Despite making good strategic and
operational progress, Liberation Group (5% of Group NAV) was impacted by
rising costs and weakening consumer demand.
After the year end, we acquired a majority interest in AIR-Serv Europe, a
leading designer and manufacturer of air, vacuum and jet wash machines which
it provides as turn-key solutions to fuel station forecourt operators across
Western Europe. Caledonia invested £142.5m for a 99.8% equity stake,
alongside the management team. The balance of the purchase price was financed
by bank debt facilities of £60.0m. We now hold five core businesses and
remain disciplined as we look for future opportunities.
Funds
The Funds pool delivered a return of 13.3% for the year, which comprised the
North American and Asian-based funds achieving 21.8% and 3.6% respectively.
The weakening in Sterling against the US dollar over the year added 6% to
performance. The divergence in the regional short-term returns reflects the
profile of their respective investments and markets.
The success of North American funds (18% of Group NAV) is closely linked to
the operational development of investee companies and their cash flows. There
is a deep, robust market for potential divestment, either via trade sales or
to other, larger private equity funds.
Asian funds invest in earlier stage companies and consequently their economic
success is driven by their continued development, subsequent funding rounds
and more volatile public markets. Liquidity within the Asian markets has been
resilient with the A-share IPO market remaining buoyant and accounting for
nearly half of global proceeds during 2022. The Shanghai Composite Index
reduced in value by 9% between June and December 2022, before recovering in
the period to March 2023, which provides context for performance.
Over the year the Funds pool generated £24.2m in cash (2022: £67.5m),
including £10.6m from Asia, reflecting the maturing strategy and its position
as a meaningful cash generator.
Liquidity and balance sheet
Caledonia ended the financial year with net cash of £221.6m having made net
investments of £2.7m plus annual and special dividend payments of £130.5m.
In addition, our committed bank facilities of £250m provide us with a good
level of liquidity and the ability to take advantage of opportunities that may
arise. Over the course of the year the absence of net investment activity
reflected the challenge of investing in high quality assets at reasonable
prices. The year-end commitment for the Funds pool was £423m. We aim to be
conservatively funded with bank facilities and liquidity available from the
Quoted Equity pool should extreme, unforeseen risks occur.
During the year we conducted a review of our North American private equity
fund holdings held in our subsidiary Caledonia US Investments Ltd ('CUSIL').
We determined that a significant proportion of these holdings could be
transferred from CUSIL into the parent company and therefore benefit from its
investment trust tax status. The proceeds from the transfer are shown within
our non-pool assets at the year end. The majority of the proceeds were loaned
back to the parent entity.
Inflation measure
We have completed a review of the inflation measure used in our strategic
objective of generating total returns that outperform inflation by at least 3%
over the medium and long term. Retail Prices Index ('RPI'), our current
inflation measure, had lost its status as a national statistic which resulted
in a decision to move to Consumer Prices Index including owner occupiers'
housing costs ('CPIH') from 1 April 2023.
Our annual bonus scheme assesses performance against this strategic objective
and will also be adjusted to use CPIH over time.
People
Our staff are, of course, our most important asset and over the course of the
year we have continued to invest in their development. Our first colleague
engagement survey has enabled us to receive anonymous feedback to help us
better understand our employees' thoughts and areas for future improvement. We
were particularly pleased that 98% of those who participated in the survey
would recommend Caledonia as a great place to work.
Alan Murran and Ben Archer succeeded me as joint Co-Heads of the Quoted Equity
pool, with Alan leading the Capital portfolio and Ben leading the Income
portfolio. We also made a number of additions to the Private Capital team to
further improve our focus on this important market and our existing portfolio.
The Funds pool has also added a small number of new staff bringing additional
energy, ideas, skills and resource to both the US and Asian strategies.
During the year we extended the membership and remit of our Investment
Committee to increase knowledge and experience and draw on a broader, more
diverse range of views.
Being a responsible investor and corporate
We have always been very engaged and attentive investors. Team members serve
on the boards of companies within our Private Capital portfolio and on the
majority of the advisory boards for our North American funds. The listed
companies in which we invest appreciate our long-term approach and empowerment
of the investment team to develop close working relationships. The Quoted
Equity investment team review and determine votes for all the stocks we hold.
Over the course of the year, we have further developed our approach and
systems integrating consideration of Environmental, Social and Governance
('ESG') matters into our investment process formally and established a working
group to develop our thinking, provide effective coordination, monitor our
activities and market developments and to share good practice. We have given
further consideration to the issues associated with climate change and its
potential impact on our business. A separate Taskforce on Climate-related
Financial Disclosure ('TCFD') report has also been developed.
Outlook
It is clear that the current issues facing the global economy, including high
levels of inflation, rising interest rates and geopolitical tensions, together
with more recent concerns about the banking sector and potential recession,
provides a very challenging backdrop for investment activity.
However, the team at Caledonia are well placed to operate in this environment
drawing on decades of experience. Investing in good quality companies and
funds operating in attractive markets, which eschew the use of risky levels of
leverage to magnify returns, remains highly relevant in current conditions. We
have learnt, over time, that ignoring these basic risk management principles
is unwise. Our long-term mindset and current allocation provide a strong
platform from which to continue to deliver our objectives of growth in net
assets and dividends paid to shareholders over the long term.
Mat Masters
Chief Executive Officer
Investments summary
Holdings over 1% of net assets at 31 March 2023 were as follows:
Net
Value assets
Name Pool Geography Business £m %
Seven Investment Management Private Capital Jersey Investment management 187.1 6.7
Cobehold Private Capital Belgium Investment company 176.1 6.3
Stonehage Fleming Private Capital Guernsey Family office services 141.6 5.1
Liberation Group Private Capital Jersey Pubs & restaurants 131.9 4.7
Cooke Optics Private Capital UK Cine lens manufacturer 124.5 4.4
Aberdeen US PE Funds Funds US Funds of funds 114.9 4.1
Axiom Asia funds Funds Asia Funds of funds 84.3 3.0
Watsco Quoted Equity US Ventilation products 70.4 2.5
Oracle Quoted Equity US Software 70.1 2.5
Microsoft Quoted Equity US Software 66.6 2.4
Texas Instruments Quoted Equity US Semiconductors 61.5 2.2
Philip Morris Quoted Equity US Tobacco 50.0 1.8
Asia Alternatives funds Funds Asia Funds of funds 48.1 1.7
Thermo Fisher Scientific Quoted Equity US Pharma & life sciences services 46.7 1.7
Fastenal Quoted Equity US Industrial supplies 39.3 1.4
Unicorn funds Funds Asia Funds of funds 37.7 1.3
Charter Communications Quoted Equity US Cable communications 37.3 1.3
Stonepeak funds Quoted Equity US Private equity funds 37.1 1.3
British American Tobacco Quoted UK Tobacco & vaping 37.0 1.3
SIS Private Capital UK Content services 36.1 1.3
CenterOak funds Funds US Private equity funds 33.5 1.2
Decheng funds Funds US/Asia Private equity funds 33.2 1.2
Spirax Sarco Quoted Equity UK Steam engineering 31.8 1.1
Hill & Smith Quoted Equity UK Infrastructure 31.4 1.1
Ironbridge Funds Funds Canada Private equity funds 30.3 1.1
PAG Asia funds Funds Asia Private equity funds 29.6 1.1
Becton Dickinson Quoted Equity US Medical technology 29.2 1.0
Other investments 717.4 25.8
Investment portfolio 2,534.7 90.6
Non pool investments(1) 260.2 9.3
Cash and other 3.1 0.1
Net assets 2,798.0 100.0
(1) Non pool investments comprise legacy investments, cash and receivables and
deferred tax liabilities in subsidiary investment entities.
Geography is based on the country of listing, country of domicile for unlisted
investments and underlying regional analysis for funds.
Risk management
Effective risk management is a key component 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, Strategic review completed and approved by the board. Three-pool approach
long-term growth in capital and income.
retained with banding slightly amended. Dividend policy refined.
against market conditions and target returns.
Strategic risks include the allocation of capital between public and private
Private Capital strategy amended, with
equity, The performance of the company and its key risks are monitored regularly
lower yield target for new investments to optimise risk-adjusted returns.
and in relation to geography, sector, currency, yield, liquidity by management and the board.
Funds pool increased annual commitments agreed, reflecting growing cash
inflows, managed through three year vintage allocations.
Investment
Risks in respect of specific investment and realisation decisions. Investment opportunities are subject to rigorous appraisal and a multi- New staff added to investment teams to
Investment risks include the appropriate research and due diligence of new stage approval process. Investment managers have well-developed ensure appropriate skills and resources are in place.
investments and the timely execution of both investments and realisations for
optimising value. networks through which they attract proprietary deal flow. Investment Committee established with
Opportunities to enter or exit investments are reviewed regularly, being broader representation to approve key
informed by market conditions, pricing and strategic aims.
investment decisions / recommendations.
Activity of the Private Capital team rebalanced to provide an increased
focus on sourcing and transacting new
investments.
Market
Risk of losses in value of investments arising from sudden and significant Market risks and sensitivities are reviewed weekly with actions taken, Market volatility remains a factor, but has reduced compared to this time last
movements in public market prices, particularly in highly volatile markets.
year, when it was elevated due to uncertainties arising from higher inflation
where appropriate, to balance risk and return. and the conflict in Ukraine.
Private asset valuations have an element of judgement and could also be
impacted by market fluctuations. A regular review of market and portfolio volatility is conducted by The Quoted Equity team, whilst remaining long term focused, remains alert to
pricing opportunities to add target holdings when appropriate.
Caledonia's principal market risks are therefore equity price volatility, the board.
foreign exchange rate movements
Foreign exchange exposure remains a live issue. Review undertaken during the
Reviews also consider investment concentration, currency exposure and year concluded that no hedging action would be taken at present, but the
and interest rate volatility. portfolio liquidity. Portfolio construction, including use of private assets, position would remain under review.
provides some mitigation.
Liquidity
Risk that liabilities cannot be met or new investments made due to a lack of Detailed cash forecasting for the year ahead is updated and reviewed ING existing £112.5m facility renewed for further three years to July 2025.
liquidity. Such risk can arise from not being able to sell an investment due
to lack of a market or from not holding cash or being able to raise debt. quarterly, including the expected drawdown of capital commitments. A Existing facilities with RBSI renewed as a
weekly cash update is produced focused on the short-term cash forecast. single facility of £137.5m for five years to
Loan facilities are maintained to provide appropriate liquidity headroom. November 2027.
All excess liquidity placed in AAA rated money market funds on an overnight
basis. Regular counterparty reviews undertaken.
No bank term deposits utilised.
ESG & Climate change
Risks in relation to the successful incorporation of ESG and climate change Caledonia continues to build ESG Responsible Investment / Responsible
impacts into our investment approach.
knowledge, particularly on climate Corporate Working Group established under leadership of the CEO to integrate
Identifying opportunities to drive our policy objectives, deliver strong
ESG matters into core business approach. New investment proposals include
returns and change, and develop policy and processes to integrate ESG matters into our relevant ESG information. Biannual investment pool board reporting to include
investment approach. We anticipate ESG information relevant to the pool's investments.
manage the risks to meet evolving stakeholder expectations.
that the assessment of new and existing Revised TCFD reporting for current year, with significantly enhanced
disclosure in our 2023 Annual Report.
investments will fully incorporate ESG and climate change risks and
opportunities.
Regulatory & legal
Risks arising from exposure to litigation or fraud or failure to adhere to the Caledonia has internal resources to consider regulatory and tax matters Full review undertaken regarding holding
tax and
as they arise. Professional advisers are engaged, where necessary, to structure for US private equity funds.
regulatory environment. supplement internal knowledge in specialised areas or when new regulations are
introduced. Activities supported by regular staff training. Following detailed investigation and analysis, the legal ownership of a number
Caledonia operates across a number of jurisdictions and in an industry that is
of funds was transferred within the Caledonia Group in March 2023.
Caledonia is a member of the Association of Investment Companies and operates
subject to significant regulatory oversight. in line with industry standards.
Operational
Risks arising from inadequate or failed processes, people and systems or from Systems and control procedures are developed and reviewed regularly. Focus on cyber security continues. Project to assess maturity against NIST
external factors.
(National Institute of Standards and Technology) cyber security framework
They are tested to ensure effective operation. undertaken, with improvements identified and being addressed. At least annual
Operational risks arise from the recruitment, development and retention of
training for all staff maintained and successful penetration testing
staff, systems and procedures and business disruption. Appropriate remuneration and other policies are in place to facilitate the
completed. Remuneration review undertaken with external support to assess
retention of key staff. suitability and competitiveness of remuneration structure. Number of small
changes to current approach
Business continuity plans are maintained and updated as the business evolves
and in response to emerging threats. This includes a specific focus on cyber recommended and being put into action.
security.
Business continuity improved with three
key initiatives. Additional power protection provided for Cayzer House.
Off-site back-up data centre set up and fully tested. Business interruption
scenario workshop undertaken by
the senior team: improvements identified and currently being implemented.
New Enfusion system, covering public equity trading activity and investment
accounting, successfully implemented. Oracle NetSuite selected as replacement
core finance system, with 2023 implementation planned.
Group statement of comprehensive income
for the year ended 31 March 2023
2023 2022
Revenue Capital Total Revenue Capital Total
£m £m £m £m £m £m
Revenue
Investment income 43.2 - 43.2 51.0 4.8 55.8
Other income 0.8 1.3 2.1 0.6 - 0.6
Net gains on fair value investments - 133.0 133.0 - 567.1 567.1
Net (losses)/gains on fair value property - (1.4) (1.4) - 3.6 3.6
Total revenue 44.0 132.9 176.9 51.6 575.5 627.1
Management expenses (21.3) (8.6) (29.9) (21.0) (11.8) (32.8)
Profit before finance costs 22.7 124.3 147.0 30.6 563.7 594.3
Treasury interest receivable 4.6 - 4.6 0.1 - 0.1
Finance costs (2.4) - (2.4) (2.3) - (2.3)
Exchange movements - - - (0.1) - (0.1)
Profit before tax 24.9 124.3 149.2 28.3 563.7 592.0
Taxation (4.3) (2.0) (6.3) 11.0 8.2 19.2
Profit for the year 20.6 122.3 142.9 39.3 571.9 611.2
Other comprehensive income items never to be reclassified to profit or loss
Re-measurements of defined benefit pension schemes - 1.4 1.4 - (1.4) (1.4)
Tax on other comprehensive income - (0.3) (0.3) - 1.5 1.5
Total comprehensive income 20.6 123.4 144.0 39.3 572.0 611.3
Basic earnings per share 37.9p 225.3p 263.2p 72.1p 1049.3p 1121.4p
Diluted earnings per share 37.3p 221.7p 259.0p 70.8p 1030.7p 1101.5p
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 2023
Group Company
2023 2022 2023 2022
£m £m £m £m
Non-current assets
Investments held at fair value through profit or loss 2,794.9 2,385.4 2,803.2 2,394.6
Investments in subsidiaries held at cost - - 0.9 0.9
Investment property 15.1 16.0 - -
Property, plant and equipment 27.9 29.2 - -
Deferred tax assets 5.7 24.2 - 18.1
Other receivables - - 37.1 37.3
Employee benefits 4.0 2.3 - -
Non-current assets 2,847.6 2,457.1 2,841.2 2,450.9
Current assets
Trade and other receivables 6.9 7.5 3.1 3.8
Current tax assets 19.3 8.9 20.3 9.8
Cash and cash equivalents 221.6 341.1 221.1 341.0
Current assets 247.8 357.5 244.5 354.6
Total assets 3,095.4 2,814.6 3,085.7 2,805.5
Current liabilities
Interest bearing loans and borrowings (266.0) - (266.0) -
Trade and other payables (22.1) (22.4) (33.8) (35.6)
Employee benefits (2.4) (3.6) - -
Current tax liabilities - (0.1) - (0.1)
Current liabilities (290.5) (26.1) (299.8) (35.7)
Non-current liabilities
Employee benefits (5.1) (4.7) - -
Deferred tax liabilities (1.8) (1.1) - -
Non-current liabilities (6.9) (5.8) - -
Total liabilities (297.4) (31.9) (299.8) (35.7)
Net assets 2,798.0 2,782.7 2,785.9 2,769.8
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 2,555.4 2,527.0 2,554.3 2,526.0
Retained earnings 247.4 263.2 236.4 251.3
Own shares (10.6) (13.3) (10.6) (13.3)
Total equity 2,798.0 2,782.7 2,785.9 2,769.8
Undiluted net asset value 5150p 5133p
Diluted net asset value 5068p 5041p
The Company profit for the year ended 31 March 2023 was £144.8m (2022:
£608.2m)
The financial statements were approved by the board and authorised for issue
on 22 May 2023 and were signed on its behalf by:
Mat Masters Tim Livett
Chief Executive Officer Chief Financial Officer
Statement of changes in equity
for the year ended 31 March 2023
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 2021 3.2 1.3 1.3 1,979.1 254.3 (13.9) 2,225.3
Total comprehensive income
Profit for the year - - - 571.9 39.3 - 611.2
Other comprehensive income - - - 0.1 - - 0.1
Total comprehensive income - - - 572.0 39.3 - 611.3
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments - - - - 8.2 - 8.2
Transfer of shares to employees - - - - (4.0) 4.0 -
Own shares purchased and cancelled (0.1) - 0.1 (24.1) - - (24.1)
Own shares purchased - - - - - (3.4) (3.4)
Dividends paid - - - - (34.6) - (34.6)
Total transactions with owners (0.1) - 0.1 (24.1) (30.4) 0.6 (53.9)
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
Company
Balance at 31 March 2021 3.2 1.3 1.3 1,979.8 243.8 (13.9) 2,215.5
Profit and total comprehensive income - - - 570.3 37.9 - 608.2
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments - - - - 8.2 - 8.2
Transfer of shares to employees - - - - (4.0) 4.0 -
Own shares purchased and cancelled (0.1) - 0.1 (24.1) - - (24.1)
Own shares purchased - - - - - (3.4) (3.4)
Dividends paid - - - - (34.6) - (34.6)
Total transactions with owners (0.1) - 0.1 (24.1) (30.4) 0.6 (53.9)
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
Statement of cash flows
for the year ended 31 March 2023
Group Company
2023 2022 2023 2022
£m £m £m £m
Operating activities
Dividends received 41.6 52.9 44.5 52.9
Interest received 6.5 1.7 6.5 1.7
Cash received from customers 2.6 0.5 1.8 -
Cash paid to suppliers and employees (25.3) (20.4) (28.2) (21.0)
Taxes received 0.1 0.1 0.1 0.1
Taxes paid - (0.1) - (0.1)
Group tax relief received 2.0 1.4 2.1 1.4
Group tax relief paid - - (0.1) -
Net cash flow from operating activities 27.5 36.1 26.7 35.0
Investing activities
Purchases of investments (468.1) (226.9) (468.1) (226.9)
Proceeds from disposal of investments 192.1 602.2 192.1 602.2
Purchases of property, plant and equipment (0.3) (0.4) - -
Net cash flow (used in)/from investing activities (276.3) 374.9 (276.0) 375.3
Financing activities
Interest paid (2.2) (2.6) (2.0) (2.3)
Dividends paid to owners of the company (130.5) (34.6) (130.5) (34.6)
Proceeds from bank borrowings 266.0 - 283.7 -
Repayment of bank borrowings - (15.0) - (15.0)
Loan payments to subsidiaries - (4.4) (17.8) (4.4)
Purchases of own shares (4.0) (27.5) (4.0) (27.5)
Net cash flow from/(used in) financing activities 129.3 (84.1) 129.4 (83.8)
Net (decrease)/increase in cash and cash equivalents (119.5) 326.9 (119.9) 326.5
Cash and cash equivalents at year start 341.1 14.2 341.0 14.5
Cash and cash equivalents at year end 221.6 341.1 221.1 341.0
Notes to the final results announcement
1. General information and basis of preparation
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.
Under the UK Corporate Governance Code and applicable regulations, the
directors are required to satisfy themselves that it is reasonable to presume
that the company is a going concern.
As at 31 March 2023 the group holds £1,058m of liquid assets and has access
to £250m of undrawn committed banking facilities, £112.5m of which expires
in July 2025 and £137.5m of which expires in November 2027. The Directors
therefore believe the group will be able to meet its liabilities as they fall
due for at least 12 months from the date of approval of 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 risks arising from the war in
Ukraine and the inflationary 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) reduction in investment income, (c) reduction in distributions
received from private equity funds and drawdown of all existing private equity
fund commitments, (d) a delay and reduction in disposals of directly owned
private equity investments, and (e) a significant temporary market decline for
part of the year and (f) the cumulative impact of the 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:
2023 2022
p/share £m p/share £m
Final dividend for the year ended 31 March 2022 (2021) 47.3 25.6 45.9 25.1
Special dividend for the year ended 31 March 2022 175.0 95.0
Interim dividend for the year ended 31 March 2023 (2022) 18.2 9.9 17.5 9.5
240.5 130.5 63.4 34.6
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 2023 49.2 26.7
The proposed final dividend for the year ended 31 March 2023 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 19 July 2023, will be
payable on 3 August 2023 to holders of shares on the register on 30 June 2023.
The ex-dividend date will be 29 June 2023. The deadline for elections under
the dividend reinvestment plan offered by Link Group will be the close of
business on 13 July 2023.
For the purposes of section 1158 of the Corporation Tax Act 2010 and
associated regulations, the dividends payable for the year ended 31 March 2023
are the interim and final dividends for that year, amounting to £36.6m (2022:
£130.1m).
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:
2023 2022
£m £m
Revenue 20.6 39.3
Capital 122.3 571.9
Total 142.9 611.2
The weighted average number of shares was as follows:
2023 2022
000's 000's
Issued shares at the year start 55,664 55,374
Effect of shares cancelled - (404)
Effect of shares held by the employee share trust (376) (468)
Basic weighted average number of shares in the year 54,288 54,502
Effect of performance shares, share options and deferred bonus awards 881 987
Diluted weighted average number of shares in the year 55,169 55,489
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
2023 2022 2023 2022
£m £m £m £m
Quoted Equity 1.4 100.7 836.9 830.1
Private Capital 64.6 322.0 824.0 781.7
Funds 103.6 230.4 873.8 794.4
Investment portfolio 169.6 653.1 2,534.7 2,406.2
Other investments 7.3 (26.0) 260.2 (20.7)
Total revenue/investments 176.9 627.1 2,794.9 2,385.5
Cash and cash equivalents 4.6 0.1 221.6 341.1
Other items(1) (32.3) (35.2) 78.9 88.0
Reportable total 149.2 592.0 3,095.4 2,814.6
1. Other investments included £260.2m of non-pool investments (2022: -£20.7m of
non-pool provisions).
5. Share-based payments
In the year to 31 March 2023, participating employees in the performance share
scheme were awarded options over 172,802 shares at nil-cost (2022: 237,861
shares). Also in the year to 31 March 2023, participating employees received
deferred awards over 39,500 shares (2022: 49,267 shares). The IFRS 2 expense
included in profit or loss for the year was £7.4m (2022: £9.0m).
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.
2023 2022
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 2,798.0 54,326 5150 2,782.7 54,211 5133
Share awards - 881 (82) - 987 (92)
Diluted 2,798.0 55,207 5068 2,782.7 55,198 5041
1. Number of shares in issue at the year end is stated after the deduction of
337,962 (2022: 452,645) ordinary shares held by the Caledonia Investments plc
Employee Share Trust.
Net asset value total return is calculated in accordance with AIC guidance, 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.
2023 2022
p p
Diluted NAV at year start 5041 4000
Diluted NAV at year end 5068 5041
Dividends payable in the year 241 63
Reinvestment adjustment(2) 9 12
5318 5116
NAVTR over the year 5.5% 27.9%
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
2023 2022 2023 2022
£m £m £m £m
Investments
Contracted but not called 422.6 331.1 422.6 331.1
Conditionally contracted - - 4.5 4.5
422.6 331.1 427.1 335.6
Amounts are callable within the next twelve months. The group has conducted
a going concern assessment which considered future cash flows, the
availability of liquid assets and debt facilities, and consideration of the
risks arising from the war in Ukraine and the inflationary environment over
the 12 month period required. In making this assessment a number of stress
scenarios were developed. The most severe scenario included all outstanding
private equity fund commitments being drawn. Under this severe scenario 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 benchmark performance. The calculation follows
the method prescribed by the Association of Investment Companies ('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 £824.0m (2022: £781.7m) 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 £869.0m (2022: £784.7m) 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. Where required, valuations are adjusted for
investments and distributions between the valuation date and the reporting
date.
The following table provides information on significant unobservable inputs
used at 31 March 2023 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 2023
Description / valuation method Fair value Unobservable input Weighted average input Input sensitivity Change in valuation
£m +/- +/- £m
Internally developed
Private companies
Large, earnings 460.6 EBITDA multiple 14.0x 10.0% +39.6/-55.5
Medium, earnings 160.6 EBITDA multiple 11.0x 10.0% +/-13.1
Small, earnings 10.3 EBITDA multiple 4.6x 15.0% +/-1.2
Net assets / manager valuation 192.5 Multiple 1 0.1x +/-21.8
824.0 +75.7/-91.6
Non-pool companies 260.2
Total internal 1,084.2
Externally developed
Private equity fund
Net asset value 869.0 Manager NAV 1 5% +/-43.5
1,953.2 +119.2/-135.1
10. Financial information
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 March 2023 or 2022 but is derived
from those accounts. Statutory accounts for 31 March 2022 have been delivered
to the Registrar of Companies, and those for 31 March 2023 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 2023 will be published on
16 June 2023 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 2023 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 Tim Livett
Chief Executive Officer Chief Financial Officer
22 May 2023 22 May 2023
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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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