TIDMCLDN
RNS Number : 7133V
Caledonia Investments PLC
11 April 2023
Caledonia Investments plc
Unaudited net asset value and portfolio update
Caledonia Investments plc (" Caledonia ") announces that its
unaudited diluted net asset value per share (" NAV ") as at 31
March 2023, calculated on a cum-income basis, was 5043p.
The NAV total return (" NAVTR ") for the year to 31 March 2023
was 5.0%. A final dividend of 47.3p per ordinary share for the year
ended 31 March 2022 plus a special dividend of 175p per share was
paid to shareholders on 4 August 2022. An interim dividend of 18.2p
per ordinary share for the year ended 31 March 2023 was paid on 5
January 2023.
The NAVTR of 5.0% was below our long-term target of inflation
(RPI) plus 3% to 6%. However, it compares favourably to the FTSE
All Share return of 2.9% for the same period. This follows strong
returns of 27.9% last year and 25.9% in the preceding year. The
three-year annualised NAVTR is 19.1%.
This announcement provides an update on Caledonia's portfolio
and should be read in conjunction with the factsheet dated 31 March
2023 and released on 11 April 2023, a copy of which is available at
www.caledonia.com . Caledonia will announce its audited full year
results on 23 May 2023.
Summary
Our private assets, in both Private Capital and Funds, have
generated good returns during the year, based on a mix of positive
underlying performance and the favourable 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.
The Quoted Equity pool produced a return of 0.2%, reflecting the
general trends across public equity markets, with some mitigation
from the movement in foreign exchange rates. The Private Capital
pool produced a return of 8.4%, based on the biannual valuation
review in March 2023. The return reflects continued investee
company development, where all the businesses made good progress
across the year, with the exception of Liberation Group which,
despite making good strategic and operational progress, faced
rising costs and weakening consumer demand. The Funds pool produced
a return of 12.4%, generated by the positive exchange rate position
and valuation growth from our North American based funds.
Performance for the year is summarised in the table below.
Caledonia pool per f o rmance
Net asset value - year to 31 March 20 23
GBPm NAV Net Capital Other NAV Income Total
31/3/22 investment gains 31/3/23 Return
/(disposal) /
(losses)
Quoted Equity 830.1 26.2 (19.4) - 836.9 20.7 0.2%
Private Capital 781.7 (1.0) 44.0 (0.6) 824.1 20.6 8.4%
Funds 794.4 (22.4) 95.1 - 867.1 1.8 12.4%
--------- ------------- ---------- -------- --------- ------- --------
Portfolio 2,406.2 2.8 119.7 (0.6) 2,528.1 43.1
-------
Net Cash/(debt) 341.1 (2.8) - (116.8) 221.5
Other assets 35.4 - - (0.6) 34.8
Net assets 2,782.7 - 119.7 (118.0) 2,784.4 NAVTR 5.0%
--------- ------------- ---------- -------- --------- --------
Caledonia has continued to invest and dispose of assets, in line
with our active approach to portfolio management. There was a net
cash outflow of GBP120m in the year, largely due to dividends of
GBP131m paid to shareholders in August and January. Investment
activity within the Quoted Equity pool resulted in a net cash
outflow of GBP26m. The Private Capital pool made an additional
investment into Liberation Group to support the recently completed
merger with Cirrus Inns and received repayment of a tranche of
preference shares, plus accrued dividends, from Seven Investment
Management. The Funds pool continued to see good levels of
distributions, with net cash inflows of GBP22m.
Total liquidity remains healthy with cash of GBP222m and undrawn
bank facilities of GBP250m at 31 March 2023. In late November 2022
we completed the renegotiation of our banking facilities with RBSI,
creating a single facility of GBP137.5m which runs to November
2027. The balance of GBP112.5m with ING expires in July 2025.
Caledonia Quoted Equity - Capital and Income portfolios (30% of
NAV)
The total return on the Quoted Equity pool was 0.2% over the
year. Global public equity markets have been impacted by a number
of adverse factors, notably rising inflation and resulting interest
rate increases, together with uncertainty created by the ongoing
conflict in Ukraine and, more recently, issues affecting the
banking sector. These factors have contributed to market volatility
and a general weakening in market pricing across many sectors. Our
portfolios have been directly impacted with many of our stocks
registering price reductions over the course of the financial
year.
The Capital portfolio delivered a return of 1.1%. Individual
stock performance was mixed with good returns from Oracle, Philip
Morris and Watsco being more than offset by significant valuation
declines impacting our holdings in Charter Communications, Croda
and Polar Capital. The portfolio has significant exposure to US
stocks and saw some return mitigation from the increased strength
of the US dollar compared to Sterling.
The Income portfolio delivered a return of -2.4%, with notable
valuation reductions for our property stocks, Big Yellow Group and
London Metric, and also for Sabre Insurance. The positive
performance of Unilever, Watsco and our tobacco holdings provided
some mitigation to these adverse returns.
Trading activity was relatively limited, in line with our
long-term investment approach, with net investment of GBP26m.
Activity included increasing our holdings in Moody's, Charter
Communications and London Metric. We disposed of our remaining
holdings in A G Barr and Imperial Brands during the first half of
the year. Other activity was restricted to refining positions in
existing investments, with a focus on augmenting our holdings at
attractive entry price levels.
Caledonia Private Capital (30% of NAV)
Caledonia's Private Capital portfolio is dominated by
significant positions in four UK centric businesses and Cobepa, a
private European investment company. These five investments
represent over 90% of portfolio value. Investee companies are
revalued in March and September each year. The portfolio generated
a total return of 8.4% for the year. All four UK centric businesses
are well-established, growing, profitable, cash generative and have
strong market positions. Each is valued on an earnings multiple
basis, with multiples in the range 9 to 14 times current year
earnings, with the two financial services businesses at the upper
end of the range. Gearing levels are modest, with net debt ranging
from one to two times earnings before interest, tax, depreciation
and amortisation ("EBITDA").
Seven Investment Management ("7IM"), a vertically integrated
multi-asset class investment manager continues to perform well. The
company saw strong net fund inflows supported by new customer
contracts, but the fall in global equity markets adversely impacted
assets under management which declined by 5% over the year to
GBP20bn. Earnings advanced materially, aided by savings on key
supplier contracts and improved interest income. The valuation at
31 March 2023 was GBP187m, a return of 16% for the year.
Cobepa, the Belgium based investment company, owns a diverse
global portfolio of well developed, profitable, private
investments. Following significant disposals agreed in the previous
financial year, its management team has focused on deploying
capital in new investments. Four new businesses were acquired in
the year, covering a broad range of industries and geographies.
Cobepa's portfolio continues to trade well and valuations have
progressed accordingly. The valuation of Caledonia's holding in
Cobehold (the holding company of Cobepa) was GBP176m at 31 March
2023, a return of 12% for the year.
Stonehage Fleming, the international multi-family office,
successfully completed the integration of the Maitland private
client business acquired in January 2021 and has grown earnings
year on year. Family office services focused on tax, legal, trust
and related activity have performed well, delivering healthy
earnings progression. In contrast, progress in the investment
management division has been more limited with market volatility
and lower public equity markets adversely impacting revenues.
Acquisition activity continues with Rootstock, a South African
focused investment management business, being added in March 2023.
The valuation at 31 March 2023 was GBP142m, a return of 4% for the
year.
Liberation Group, a pub, restaurant and drinks business with a
pub estate stretching from Southwest London to Bristol and the
Channel Islands traded well through the summer, but has been
impacted by the more challenging trading conditions in the last six
months. Whilst year on year earnings have grown, the weaker second
half has reflected a reduction in demand, due to lower consumer
discretionary spending as a result of the cost of living crisis,
plus increased costs due to higher inflation, particularly energy
and food costs. The business successfully completed the merger of
Cirrus Inns, a portfolio of 22 quality pubs throughout London and
the South of England, in December 2022. An integration process is
now underway to consolidate these pubs into Liberation's UK
business. The transaction was supported by a new equity investment
of GBP12.5m from Caledonia. The valuation at 31 March 2023 was
GBP132m, a return of -12% for the year.
Cooke Optics, a leading manufacturer of cinematography lenses,
continues to trade well with a strong order book. The business has
delivered good earnings progression and has been successfully
addressing supply chain issues in China, which have limited an
expected uplift in production levels. With demand for the recently
launched range of full frame lenses still strong, the business
anticipates increased production and resulting earnings growth
through the rest of 2023. The market remains robust as global
demand for both streaming and cinema content continues at an
elevated level. The valuation at 31 March 2023 was GBP125m
including GBP24m of term debt, an equity return of 20% for the
year.
Caledonia Funds (31% of NAV)
Caledonia's fund investments are principally in third party
managed private equity funds operating in North America and in
Asia. The total return on the Funds portfolio was 12.4% for the
year. This performance reflects valuation growth across the
portfolio of North American based funds, which was partially offset
by valuation declines for some of our Asian based funds, together
with the positive impact of exchange rate movements, given that
most holdings are US dollar denominated.
Caledonia's valuation policy is to utilise the latest valuations
reported by the managers of the funds in which we invest, adjusted
for any cash movements to our reporting date. 64% of NAV is based
on valuations dated 31 December 2022, primarily our directly owned
funds. The remainder, mostly fund of funds holdings, are dated 30
September 2022. The valuation information is summarised below.
Private equity fund valuation dates included in NAV at 31 March
2023
Manager NAV date GBPm % of NAV
30 September 2022 312.0 36.2
31 December 2022 550.3 63.8
------ ---------
Total 862.3 100.0
------ ---------
Note: The balance of GBP4.8m of the Funds pool NAV is invested
in a quoted market fund.
The North American based funds invest into the lower-mid market,
with a focus on small to medium sized, often owner-managed,
established businesses. These funds normally provide the first
institutional investment into these businesses, and support their
professionalisation and growth, both organically and through
M&A activity. The entry pricing levels are relatively modest
and there is a deep, robust market for future divestment, either
via trade sales or to other, larger private equity funds. The
portfolio is a combination of directly owned funds (43% of Funds
NAV), with a broad range of managers generally managing funds in
the range of US$250m to US$500m. The balance is fund of funds
investments (13% of Funds NAV) with Abrdn US private equity funds,
our largest single manager exposure, over five separate funds. The
valuation of our North America based funds, which have continued to
perform strongly in terms of return and distributions, was GBP488m
at 31 March 2023, generating a return of 20.2% for the year.
Our Asian based funds invest across a wide range of sectors with
a focus on 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 through an IPO or trade sale. The portfolio
is a combination of directly owned funds (24% of Funds NAV), with a
broad range of managers, some sourced through our fund of funds
relationships but mostly through our own knowledge and contacts in
the region. The balance (20% of Funds NAV) is invested with Asia
Alternatives, Axiom and Unicorn, all fund of funds providers who
continue to be strategically important to us in navigating the
dynamic landscape of Asia, whilst investing successfully across the
region. The Asian based funds have had a more challenging year.
Although a good level of distributions has been maintained, there
were some valuation declines on a local currency basis, resulting
in a valuation of GBP375m at 31 March 2023 and a return of 3.5% for
the year.
During the year net cash flows were positive, with GBP125m being
invested and distributions of GBP147m received. The level of
distributions remains strong, with both Asian and North American
based funds generating notable cash inflows, reflecting ongoing
deal flow and some limited IPO activity in the broader private
equity market.
The Funds portfolio is made up of investments in over 50 direct
fund positions, covering more than 500 individual company
investments, plus 15 fund of fund holdings, which are spread over
multiple underlying funds. The outcome of our approach is a highly
diversified set of holdings, over a wide range of businesses,
allowing us to manage risk whilst investing in private assets.
Company contacts
Caledonia Investments plc +44 20 7802 8080
Mat Masters
Chief Executive Officer
Tim Livett
Chief Financial Officer
Media contacts
Teneo +44 20 7353 4200
Tom Murray
Robert Yates
caledonia@teneo.com
11 April 2023
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 31 March
2023.
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 2023.
The single exception to this approach was our holding in Cobehold,
where fair value was derived from the external valuation prepared
by Cobepa. In the case of Liberation Group, the earnings derived
valuation was supported by the underlying value of the principally
freehold pub estate plus the value of the drink production and
distribution business.
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. We achieve
this 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, covering 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 .
END
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