REG - Caledonia Investmnts - Unaudited net asset value and portfolio update

Caledonia InvestmentsAnnouncement

07/07/2022 07:16

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RNS Number : 6000R  Caledonia Investments PLC  07 July 2022

Caledonia Investments plc

 

Unaudited net asset value and portfolio update

 

Caledonia Investments plc ("Caledonia") announces its unaudited diluted net
asset value per share ("NAV") as at 30 June 2022, calculated on a cum-income
basis, was 4884p. The NAV includes an accrual for the proposed final and
special dividends at a value of 222.3p per share.

 

The NAV total return ("NAVTR") for the three months to 30 June 2022 was 1.3%.

 

This announcement provides an update on Caledonia's portfolio and should be
read in conjunction with the factsheet dated 30 June 2022 and released on 7
July 2022, a copy of which is available at www.caledonia.com
(http://www.caledonia.com) .

 

Summary

 

The first quarter has been subject to volatility and weakness in global equity
markets, but this has been more than offset by the performance of our fund
investments and the positive impact of the 7.8% fall in the value of Sterling
against the US dollar.

 

The Quoted Equity portfolio produced a return of -5.8%, reflecting the wider
market trend. The Capital portfolio, which comprises stocks with a growth
orientation, was more adversely affected. The Income portfolio, with a bias
towards UK stocks, was also impacted to a lesser degree. There was no material
transaction activity in the Private Capital portfolio during the period. As
investee companies are revalued biannually, with the next review taking place
on 30 September 2022, the 1.1% return principally reflected positive valuation
movement in our US and European investments driven by exchange rate movements.
The Funds portfolio produced a return of 11.4% based on valuation growth from
many of the holdings across our maturing investments, plus the significant
positive impact of weaker Sterling on a predominantly US dollar-based
portfolio.

 

Performance for the first three months is summarised in the table below.
 

 

Caledonia pool performance

Net asset value - three months to 30 June 2022

 

 £m                 Opening       Net           Capital    Other         Closing     Income    Total

                    balance       investment    gains /                  balance               Return

                                  /(disposal)   (losses)

 Quoted Equity      830.1         7.2           (52.7)     -             784.6       4.9       -5.8%
 Private Capital    781.7         (1.3)         5.0        0.9           786.3       3.8       1.1%
 Funds              794.4         8.8           86.2       -             889.4       1.1       11.4%
 Portfolio          2,406.2       14.7          38.5       0.9           2,460.3     9.8
 Net Cash/(debt)    341.1         (14.7)        -          6.2           332.6

 Accrued dividend   -             -             -          (120.6)       (120.6)

 Other assets       35.4          -             -          (7.1)         28.3

 Net assets         2,782.7       -             38.5       (120.6)       2,700.6     NAVTR     1.3%

 

Caledonia has continued to invest and dispose of assets, in line with our
active approach to portfolio management, with a net cash outflow of £9m in
the first quarter of the year. The Quoted Equity portfolio increased its
holdings in two companies, refined positions in a number of others and
completed the sale of our holding A G Barr, creating a net investment outflow
of £7m. The Funds portfolio continued to see a good level of fund
distributions, but with new fund investments requiring £37m of funding, there
was a net cash outflow of £9m in the quarter. As noted above, there were no
material transactions in the Private Capital portfolio in the period.

 

Total liquidity remains healthy with cash of £333m and undrawn bank
facilities of £250m as at 30 June 2022. Caledonia's £250m banking facilities
include £137.5m expiring in May 2025, with the balance of £112.5m expiring
in July 2025, following the successful renewal of our facility with ING in
late May 2022 for a further three years.

 

Caledonia Quoted Equity - Capital and Income portfolios (29% of NAV)

 

The total return on the Quoted Equity pool was -5.8% over the first three
months of the year. This performance reflected the challenging nature of
global public equity markets over recent months, as the impact of the sharp
rise in inflation and the conflict in Ukraine was factored into market
pricing. The exchange rate movement has provided some mitigation for US dollar
denominated stocks, although this only had a limited impact on the more highly
rated stocks in the Capital portfolio, with a total return for the quarter of
-6.5%. In contrast, the Income portfolio, with a focus on yield and weighting
to UK stocks, was less severely affected and produced a total return of -3.9%.
The strongest performers in the period were tobacco and consumer goods
investments.

 

Trading activity has been relatively limited, in line with our long-term
investment approach. The main activity was in the Capital portfolio, with
further purchases to build our positions in Moody's and Charter Communications
and the sale of our remaining holding in A G Barr. Other activity was
restricted to refining positions in existing investments.

 

Caledonia Private Capital (29% of NAV)

 

Caledonia's Private Capital portfolio is comprised of significant positions in
four UK based businesses and one private European investment company. These
five investments represent over 95% of its value. Investee companies are
revalued in March and September each year.

 

The total return on the Private Capital portfolio was 1.1% for the first three
months of the year. The return principally reflects the positive impact of
foreign exchange on non-sterling denominated holdings.

 

Our financial services businesses, Seven Investment Management ("7IM") and
Stonehage Fleming, continue to perform well. The volatility in the public
equity markets has impacted net new fund inflows and revenue growth has been
weaker than anticipated. However, initiatives in both businesses are expected
to drive future growth and improved returns. 7IM has added an important
sizeable new IFA grouping to its client base and has secured significant cost
savings from key service providers, with both initiatives expected to underpin
profit growth. The focus at Stonehage Fleming has been the integration of the
recently acquired Maitland private client business which is progressing well
and will be reflected in the financial performance of the business in the
second half of the year. The Cobehold portfolio continues to develop
positively, following the completion of two major disposals over the last
twelve months.

 

Liberation Group, a pub, restaurant and drinks business with operations in the
Channel Islands and the South West of the UK has traded well through the early
part of the year and recorded good growth in revenue and profits. Its
portfolio is well positioned with many destination pubs, a strong food
offering, large outdoor spaces and, in many cases, quality accommodation.
However, the trading environment is challenging with inflationary pressure
across elements of its cost base and a tight market for quality staff, plus
the potential for a reduction in demand as the increased cost of living
impacts discretionary consumer expenditure. The business is addressing these
issues with targeted interventions, but we anticipate progress in
profitability will be more challenging through the rest of the year.

 

Cooke Optics, a leading manufacturer of cinematography lenses, has traded well
during the period. The recently launched range of full-frame cine lenses has
generated good market demand. The business is ramping up production to meet
this demand, whilst maintaining a very healthy order book, resulting in good
revenue and profit growth.

 

A more detailed update on trading and valuation of the principal investee
companies within the Private Capital portfolio will be provided in Caledonia's
half year results announcement in November 2022.

 

Caledonia Funds (33% of NAV)

 

The total return on the Funds portfolio was 11.4% for the first three months
of the year, including an uplift of around 7.5% from exchange rate movements.
The underlying performance reflects continued strong valuation growth from
holdings across the portfolio and particularly from the fund of funds
managers. The key managers in this group are Aberdeen US private equity funds
("Aberdeen"), Axiom Asia funds and Asia Alternatives funds. Updated valuations
dated 31 March 2022 amount to 84% of the Funds' NAV. The holdings in Aberdeen
and American Industrial Partners, which represent 16% of Funds NAV, are based
on the manager's 31 December 2021 valuation.

 

Caledonia's fund investments are principally in third party managed private
equity funds operating in the US and in Asia. The feedback from the fund
managers remains positive. The majority of the underlying business investments
are performing well, in line with, or ahead of plan, with only a small number
tracking below expectations.

 

During the first three months of the year, £37m was invested and
distributions of £28m were received. The level of distributions remains
positive, principally reflecting deal flow in the broader private equity
markets.

 

 

 

 Company contacts
 Caledonia Investments plc   +44 20 7802 8080
 Will Wyatt

 Chief Executive

 Mathew Masters

 Chief Executive Designate

 Tim Livett

 Chief Financial Officer

 Media contacts
 Tulchan Communications      +44 20 7353 4200
 Tom Murray                  caledonia@tulchangroup.com

 Lisa Jarrett-Kerr

 

7 July 2022

 

 

Notes

 

Valuation approach and methodology

 

The valuation approach utilised for each asset portfolio is summarised below.

 

Caledonia Quoted Equity: all listed companies are valued based on the closing
bid price on the relevant exchange as at 30 June 2022.

 

Caledonia Private Capital: the holdings are valued biannually, principally on
a normalised EBITDA x market multiple basis (in line with the latest IPEV
guidelines). This approach was applied to the majority of significant assets
in the portfolio at 31 March 2022. There are two exceptions to this approach:
Liberation Group, where fair value was based on a combination of normalised
EBITDA x market multiple and a market based multiple of fixed assets; and our
holding in Cobehold, where fair value was derived from the external valuation
prepared by Cobepa.

 

The holdings have not been revalued at 30 June 2022; however, the valuations
have been updated to reflect FX movements and cash transactions completed in
the last quarter.

 

Caledonia Funds: the fund valuations are based on the most recent valuations
provided by the fund managers, subject to cash movements from the valuation
date. Valuations are received 60 to 180 days from the valuation date.

 

Caledonia Investments plc

 

Caledonia is a self-managed investment trust company. Our aim is to grow net
assets and dividends paid to shareholders, whilst managing risk to avoid the
permanent loss of capital. This is achieved by investing in proven,
well-managed businesses that combine long-term growth characteristics with an
ability to deliver increasing levels of income. We hold investments in both
listed and private markets, a range of sectors and, particularly through the
listed and fund investments, have a global reach.

 

For additional information on Caledonia, please visit www.caledonia.com
(http://www.caledonia.com) .

 

END

 

 

 

 

 

 

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