TIDMCLDN
RNS Number : 8590Y
Caledonia Investments PLC
08 January 2024
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
December 2023, calculated on a cum-income basis, was 5180p.
The NAV total return ("NAVTR") for the nine months to 31
December 2023 was 3.6%. A final dividend of 49.2p per ordinary
share for the year ended 31 March 2023 was paid to shareholders on
3 August 2023 and an interim dividend of 18.93p per ordinary share
for the current year was paid on 4 January 2024, amounting to
payments of GBP26.7m and GBP10.3m respectively.
This announcement provides a further update on Caledonia's
portfolio and should be read in conjunction with the factsheet
dated 31 December 2023 and released on 8 January 2024, a copy of
which is available at www.caledonia.com .
Summary
All three pools generated positive returns during the first nine
months of the year. This positive performance was despite the
adverse impact of Sterling strengthening against the US dollar in
the period.
The Public Companies pool produced a return of 6.8%, reflecting
strong performance of a number of our holdings offset by the
adverse foreign exchange movement. The Private Capital portfolio
produced a return of 6.1%, following good performance from the
majority of the investee companies and the contractually agreed
disposal of Seven Investment Management ("7IM"). The 7IM
transaction is expected to complete in January 2024, with
anticipated cash proceeds of c.GBP255m. The Funds pool returned
1.0% in the period, driven by valuation growth of our North
American funds, offset by adverse foreign exchange movements. As
previously reported, there has been a notable slowdown in the level
of fund distributions over the nine month period reflecting reduced
market transaction activity. Based on feedback from fund managers,
an improvement in distributions is anticipated over the next six to
eighteen months.
Performance for the nine month period to 31 December 2023 is
summarised in the table below.
Caledonia pool per f o rmance
Net asset value - nine months to 31 December 2023
GBPm NAV Net Capital Other NAV Income Total
31/3/23 investment gains 31/12/23 Return
/(disposal) /
(losses)
Public Companies 836.9 33.6 39.4 - 909.9 17.7 6.8%
Private Capital 824.0 159.3 37.6 3.0 1,023.9 20.2 6.1%
Funds 873.8 59.0 5.5 - 938.3 3.8 1.0%
--------- ------------- ---------- ------- ---------- ------- --------
Portfolio 2,534.7 251.9 82.5 3.0 2,872.1 41.7
-------
Net Cash/(Debt) 221.6 (251.9) - (23.5) (53.8)
Other assets 41.7 - - 3.5 45.2
Net assets 2,798.0 - 82.5 (17.0) 2,863.5 NAVTR 3.6%
--------- ------------- ---------- ------- ---------- --------
Caledonia has continued to invest and dispose of assets, in line
with our active approach to portfolio management.
The movement in net debt in nine month period was GBP275m,
largely reflecting net investments made by all three pools and,
most significantly, the acquisition of a majority stake in the
European division of AIR-serv in April 2023 by Private Capital. The
Public Companies pool made additions to its holdings in three
companies, refined positions in a number of others and reduced
positions in two high performing stocks, creating a net investment
outflow of GBP34m. The Funds pool net cash outflow was GBP55m in
the period.
Net debt at 31 December 2023 is GBP54m. Total liquidity of
GBP196m remains healthy and will increase following the receipt of
7IM sales proceeds of c.GBP255m in January 2024. The GBP250m
revolving credit facilities include GBP137.5m expiring in November
2027, with the balance of GBP112.5m expiring in July 2025.
Caledonia Public Companies - Capital and Income portfolios (32% of NAV)
The total return of the Public Companies pool was 6.8% over the
first nine months of the year. This outcome reflected strong
performance of a number of our holdings offset by the adverse
foreign exchange movement.
The Capital portfolio delivered a return of 8.4%. Key
performance contributors included Hill & Smith, Microsoft,
Oracle and Watsco, which delivered very strong returns ranging from
15% to 45%. However, these gains were partially offset by negative
contribution from companies including Alibaba, Croda International
and Thermo Fisher Scientific.
The Income portfolio generated a return of 2.3%. Strong returns
from Watsco, RELX (a new position in the portfolio), Sabre and
Fastenal were offset by weaker share price performances from
Diageo, Reckitt, BAT and Texas Instruments.
Trading activity remained targeted and opportunistic, in line
with our long-term investment approach, with increases in our
holdings including Croda International, Spirax Sarco, Symrise as
well as the new position in RELX. We sold down a portion of our
holdings in Microsoft, Oracle and Watsco, following a period of
strong share price appreciation. In addition, the Income portfolio
moved closer to its target of GBP250m of invested cost.
Caledonia Private Capital (35% of NAV)
Caledonia's Private Capital portfolio is dominated by
significant positions in five UK-centric businesses and one private
European investment company. These six investments represent over
90% of the pool's value. Investee companies are revalued in March
and September each year. The portfolio generated a total return of
6.1% in the nine-month period.
The five UK centric businesses are well-established and have
strong market positions. Of these five businesses four, excluding
7IM, are valued on an earnings multiple basis, with multiples in
the range 9 to 14 times current year earnings. Gearing levels are
modest, with net debt of approximately 2 to 3 times earnings before
interest, tax, depreciation and amortisation ("EBITDA").
In early September 2023, Caledonia announced the agreed sale of
a majority stake in 7IM, a vertically integrated retail wealth
management business, to Ontario Teachers' Pension Plan Board. The
transaction is expected to complete in January 2024, with cash
proceeds of c.GBP255m (net of transaction expenses) expected. The
valuation at the end of December of GBP249m, reflects expected cash
proceeds less a 3% discount to equity value in recognition of the
very limited degree of transaction execution risk.
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 develop well,
with many delivering strong performance and valuation
progression.
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.
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
in April 2023. The business is trading ahead of expectations,
demonstrating good year on year growth. In September 2023 the
valuation was maintained at the equity purchase cost of GBP143m.
The position will be reviewed in March 2024 in line with our
valuation policy.
Liberation Group, an inns and drinks business with a pub estate
stretching from Southwest London to Bristol and the Channel
Islands, continues to deliver strong revenue growth and improving
profitability. The integration of the Cirrus Inns business,
acquired in December 2022, is progressing well and now largely
complete.
Cooke Optics, a leading manufacturer of cinematography lenses,
has been heavily impacted by the Hollywood writers' strike which
started in early May 2023 and the subsequent actors' strike. With
both disputes now resolved, demand for the company's products is
recovering. The valuation as at 30 September 2023, reflected a 15%
equity discount to reflect this matter. No change has been made to
this discount which will be reviewed in March 2024.
A more detailed update on the trading and valuation of all
investee companies within the Private Capital portfolio will be
provided in Caledonia's full year results announcement in May
2024.
Caledonia Funds (33% of NAV)
The total return on the Funds portfolio was 1.0% for the nine
month period, reflecting valuation growth of the North American
holdings offset by the 3.1% strengthening in Sterling versus the US
Dollar.
During the nine month period, GBP90m was invested and
distributions of GBP35m were received. There has been a notable
slow down in the level of distributions, compared to the last two
years, reflecting more challenging market conditions. Based on
feedback from fund managers, an improvement in distributions is
anticipated over the next six to eighteen months.
Company contacts
Caledonia Investments plc +44 20 7802 8080
Mat Masters
Chief Executive Officer
Rob Memmott
Chief Financial Officer
Media contacts
Teneo +44 20 7353 4200
Tom Murray
Robert Yates
caledonia@teneo.com
8 January 2024
Notes
Valuation approach and methodology
The valuation approach utilised for each asset portfolio is
summarised below.
Caledonia Public Companies : all listed companies are valued
based on the closing bid price on the relevant exchange as at 31
December 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 on 30 September
2023. The exceptions to this approach were our holdings in
Cobehold, where fair value was derived from the external valuation
prepared by Cobepa, and 7IM, where the valuation was derived from
the contractually agreed disposal announced in early September
2023. 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. 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, 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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