TIDMCLDN
RNS Number : 0471U
Caledonia Investments PLC
21 November 2023
Caledonia Investments plc
Half-year results for the six months ended 30 September 2023
Financial highlights
6 months Year
30 Sep 2023 31 Mar 2023 Change
Net asset value per share total return* 3.7% 5.5%
Net asset value per share* 5203p 5068p +2.7%
Net assets GBP2,876m GBP2,798m +2.8%
Interim dividend per share 18.9p 18.2p +4.0%
*Alternative Performance Measure (please refer to Glossary of
terms and alternative performance measures at end). Net asset value
per share referred to throughout is calculated on a diluted
basis.
Highlights
- +3.7% NAV total return ("NAVTR") for the six months, with all
parts of the portfolio contributing to growth.
- Caledonia Public Companies returned 2.8%, following mixed performance
of global public equity markets.
- Caledonia Private Capital returned 5.9%, predominantly driven
by the agreed sale of Seven Investment Management ("7IM"). AIR-serv
Europe was acquired in April 2023 for GBP142.5m.
- Caledonia Private Equity Funds returned 4.6% with modest valuation
growth across both North American and Asian private equity funds.
- Final dividend of GBP27m (49.2p per share) paid to shareholders
in August 2023, in respect of the year ended 31 March 2023.
- Progressive dividend maintained, with the interim increased by
4.0% to 18.93p per share.
- Strong balance sheet. Total liquidity position remains healthy,
with undrawn facilities of GBP215m at 30 September 2023 and anticipated
cash proceeds of c.GBP255m from the upcoming disposal of 7IM
(net of transaction expenses).
Mat Masters, Chief Executive Officer, commented :
"We delivered a good return in the first half of the year
against a backdrop of continued market volatility, demonstrating
the benefits of our diversified portfolio. We have remained active
in our approach to enhancing shareholder value, demonstrated by the
successful acquisition of AIR-serv Europe, together with the agreed
disposal of 7IM with anticipated returns at the top end of our
target range.
The global economic outlook remains challenging, with ongoing
volatility influencing short-term performance. However, we believe
our long-term outlook and focus on investing in high-quality,
well-financed and managed companies, underpinned by our strong
balance sheet, leaves us well-placed to continue delivering strong
long-term returns in line with our aims."
21 November 2023
A presentation for analysts will take place at 11 am, with live
webcast available via this link.
Enquiries
Company contacts
Caledonia Investments plc
Mat Masters +44 20 7802 8080
Chief Executive Officer
Rob Memmott
Chief Financial Officer
Media contacts
Teneo
Tom Murray +44 20 7353 4200
Robert Yates
caledonia@teneo.com
Management report
Results
Caledonia's NAVTR for the six months to 30 September 2023 was
3.7% with net assets at the period end totalling GBP2,876m. The
NAVTR for the 12 months to 30 September 2023 was 4.6%. Revenue
income for the half year increased 33% to GBP33.8m largely due to
an GBP8.6m dividend received from retained private equity fund
income distributions. Net debt at the period end (comprising
external borrowings of GBP35m and cash of GBP15m) was GBP20m (31
March 2023: net cash of GBP222m) principally due to investments,
including the GBP143m acquisition of a majority stake in AIR-serv
Europe, a leading supplier of forecourt vending equipment. Total
liquidity remains healthy with undrawn bank facilities of GBP215m
(31 March 2023: GBP250m).
During the period the Company repaid GBP211.2m on a loan
facility with a wholly owned subsidiary. The wholly owned
subsidiary subsequently distributed GBP212.1m, with minimal impact
on group cash.
The directors have declared an interim dividend of 18.93p per
share, an increase of 4.0% compared with the previous year.
The tables below show Caledonia's performance track record and
asset allocation to 30 September 2023:
Performance record
6 months 1 year 3 years 5 years 10 years
% % % % %
------------------------------------- -------- ------ ------- ------- --------
NAVTR 3.7 4.6 59.4 63.2 183.8
Annualised
NAVTR 4.6 16.8 10.3 11.0
CPI-H 6.4 6.0 4.1 2.8
NAVTR vs CPI-H -1.8 10.8 6.2 8.2
FTSE All-Share Total Return 3.7 5.6
NAVTR vs FTSE All-Share Total Return 6.6 5.4
------------------------------------- -------- ------ ------- ------- --------
All three pools generated good, positive returns in the first
half of the year. The impact of foreign exchange rate movements was
limited, with Sterling weakening by 1.3% against the US dollar and
strengthening by 1.3% against the Euro in the period.
The Public Companies pool produced a return of 2.8%, reflecting
the mixed performance of global public equity markets. The Private
Capital portfolio produced a return of 5.9% following the biannual
revaluation of our holdings, reflecting the contractually agreed
disposal of 7IM and that most of the investee businesses are
performing well. The Private Equity Funds portfolio returned 4.6%
based on modest valuation growth across both our North American and
Asian private equity funds, although there has been a notable
slowdown in the level of fund distributions in the period
reflecting reduced market transaction activity.
Asset allocation
Net assets allocation Return
Strategic Sep 2023 Mar 2023 target
% % % %
--------------------- --------- -------- -------- ------
Public Companies 30-40 30 30 9.0
Private Capital 25-35 36 29 14.0
Private Equity Funds 25-35 33 31 12.5
--------------------- --------- -------- -------- ------
The movement in asset allocation recorded in the first half of
the year is a combination of the relative performance of each pool,
as explained below, together with the net impact of investment and
disposal activity.
Caledonia has continued to invest in and dispose of assets, in
line with our active approach to portfolio management. The movement
in net debt in the first half of the year was GBP242m, largely
reflecting net investments made by all three investment pools, and,
most significantly, the acquisition of a majority stake in the
European division of AIR-serv Europe in April 2023 by Private
Capital. The Public Companies pool made significant additions to
its holdings in three companies, refined positions in a number of
others and reduced positions in two high performing stocks,
resulting in a net investment outflow of GBP17m. The Private Equity
Funds pool has seen an increased level of drawdowns, including the
purchase of secondary positions in two Decheng Private Equity Funds
at attractive levels of discount, and only modest fund
distributions, resulting in a net cash outflow of GBP50m in the
period.
Performance for the first half of the year is summarised in the
table below.
Pool performance
31 Mar Invest- Realis- Gains/ Accrued 30 Sep
2023 ments ations losses income 2023 Income Return(3)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
---------------------- ------- ------- ------- ------ ------- ------- ------ ---------
Public Companies 836.9 41.2 (24.7) 11.5 - 864.9 12.0 2.8
Private Capital(1) 824.0 157.1 (0.3) 44.2 2.1 1,027.1 11.6 5.9
Private Equity
Funds 873.8 64.5 (14.8) 39.6 - 963.1 1.5 4.6
---------------------- ------- ------- ------- ------ ------- ------- ------ ---------
Portfolio investments 2,534.7 262.8 (39.8) 95.3 2.1 2,855.1 25.1
Other investments(2) 260.2 4.9 (208.1) (7.1) - 49.9 8.7
---------------------- ------- ------- ------- ------ ------- ------- ------ ---------
Total investments 2,794.9 267.7 (247.9) 88.2 2.1 2,905.0 33.8
Cash and other 3.1 (28.9)
---------------------- ------- ------- ------- ------ ------- ------- ------ ---------
Net assets 2,798.0 2,876.1 NAVTR 3.7
---------------------- ------- ------- ------- ------ ------- ------- ------ ---------
1. The Private Capital valuation at September 2023 includes GBP3.3m
of accrued income (March 2023: GBP1.2m), and GBP248.5m classified
as an Asset Held for Sale in the Consolidated Statement of Financial
Position as at 30 September 2023, relating to the agreed sale
of 7IM.
2. Other investments comprised legacy investments and cash and receivables
in subsidiary investment entities. The GBP208.1m realisation
principally reflects a capital re-organisation, followed by a
return of capital by an investment subsidiary.
3. Returns for investments are calculated using the Modified Dietz
methodology and the return is Caledonia's NAVTR.
Caledonia Public Companies - Capital and Income portfolios (30%
of NAV)
The total return on the Public Companies pool was 2.8% over the
first half of the year. This outcome reflected the mixed
performance of major markets during the period with technology
stocks being in favour and US indices moving more positively than
the UK, together with muted performance in Asia.
The Capital portfolio delivered a return of 4.6%. Key stocks
Hill & Smith, Charter Communications, Microsoft, Oracle and
Watsco delivered very strong returns ranging from 10% to 30%, in
contrast to the first half of the previous financial year. However,
these gains were partially offset by notable price reductions for
Croda International, Spirax Sarco, Texas Instruments and Thermo
Fisher Scientific.
The Income portfolio delivered a return of -2.2% with the
majority of holdings recording adverse share price movements. These
adverse returns were partially offset by stronger performance from
RELX, Watsco and Sabre. The performance of Sabre reflects premium
growth following a difficult trading period last year.
Holdings were increased in Symrise, Croda International and
RELX. We sold down a portion of our holdings in Oracle and Watsco,
following a period of strong share price appreciation. Other
activity was restricted to refining positions in existing
investments resulting in our Income portfolio moving closer to its
target of GBP250m of invested cost.
Caledonia Private Capital (36% of NAV)
The Private Capital portfolio generated a total return of 5.9%
in the first half of the year.
Caledonia's Private Capital strategy is focused on high-quality,
UK mid-market companies. We take a long-term approach that aims to
deliver enduring value throughout the business cycle, enabling us
to give these businesses time to fulfil their potential and only
sell when the time is right to maximise value.
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
5.9% in the first half of the year. The five UK centric businesses
are well-established and have strong market positions. With the
exception of Cooke Optics, which has been impacted by temporary
industry issues as outlined below, all are growing, profitable and
cash generative.
Investee companies are revalued in March and September each
year. Excluding 7IM, the remaining four businesses are valued on an
earnings multiple basis, with multiples in the range 9 to 14 times
current year earnings. AIR-serv Europe was acquired in April 2023
and is valued on a transaction basis using cost of recent
investment. Gearing levels are modest, with net debt of
approximately two times earnings before interest, tax, depreciation
and amortisation ("EBITDA").
In early September 2023, Caledonia announced that we had agreed
terms for the sale of our majority stake in 7IM, a vertically
integrated retail wealth management business, to Ontario Teachers'
Pension Plan Board. The transaction is subject to change in control
approval by the Financial Conduct Authority and is expected to
complete by early 2024. Subject to the exact timing of completion,
we expect to receive cash proceeds of c.GBP255m, net of transaction
expenses, for the sale of our ordinary and preference shares in
7IM. The valuation at the end of September of GBP248m, reflects
expected cash proceeds less a 3% discount to equity value in
recognition of the very limited degree of transaction execution
risk. To reflect this transaction, this asset was disclosed as held
for sale on the condensed group statement of financial position as
at 30 September 2023. 7IM generated a return of 28.0% in the first
half of the year.
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.
Two significant disposals, one of which completed in the period,
have been agreed which, together with progress from portfolio
companies, supported the overall modest uplift in valuation. The
valuation of Caledonia's holding of Cobehold, the holding company
of Cobepa, was GBP179m at the end September, a return of 3.1% for
the first half of the year.
Stonehage Fleming, the international multi-family office,
continues to deliver good earnings growth across both the Family
Office and Investment Management businesses. The former has seen a
positive combination of new client wins and increased activity
levels with existing clients; the latter has felt the benefit of
recovering equity markets. The valuation at the end of September
was GBP157m, a return of 11.7% for the first half of the year.
AIR-serv Europe, a leading designer and manufacturer of air,
vacuum and jet wash machines, which it provides to fuel station
forecourt operators across the UK and Western Europe, was acquired
in April 2023. The business is trading well with earnings slightly
ahead of expectations and demonstrating good year on year growth.
The valuation has been maintained at the equity purchase cost of
GBP143m, generating no return for the period. The position will be
reviewed in March 2024.
Liberation Group, an inns and drinks business with a pub estate
stretching from Southwest London to Bristol and the Channel
Islands, has traded slightly below expectations through the spring
and summer. It has been adversely impacted by the cost-of-living
crisis reducing consumer discretionary incomes, sustained cost
inflation (particularly UK energy costs) and poor UK weather
affecting peak early-summer trading months. However, the
integration of the Cirrus Inns business, whilst not complete, has
progressed well. The valuation at the end of September was GBP135m,
a return of 2.3% for the first half of the year.
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
film and TV production severely affected, Cooke has seen a
subsequent fall in sales and a resulting reduction in earnings. We
anticipate that these industrial disputes will be resolved, with
the writers' strike appearing to have concluded recently, and
product demand will return. However, the timing and nature of a
recovery in financial performance is uncertain. This is reflected
in our valuation at the end of September of GBP102m, which includes
a 15% equity discount to reflect this matter. The equity return is
-22.7% for the first half of the year.
Caledonia Private Equity Funds (33% of NAV)
The total return on the Private Equity Funds pool was 4.6% for
the first half of the year, including a 1% favourable impact from
exchange rate movements. Underlying performance reflects modest
valuation growth from holdings across the pool in both North
America and Asia, with local currency returns of around 4% and 1%
respectively.
Caledonia's fund investments are principally in third party
managed private equity funds operating in North America and in
Asia. The North American based private equity 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 private
equity funds. The portfolio is a combination of directly owned
funds (45% of Private Equity Funds NAV), with a broad range of
managers generally managing funds in the range of US$250m to
US$500m. The balance is in fund of private equity funds investments
(13% of Private Equity Funds NAV) with HighVista Strategies
(formerly Aberdeen), our largest single manager exposure, over five
separate funds.
In contrast, 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 Private Equity Funds NAV), with a broad range of managers, some
sourced through our fund of private equity funds relationships but
mostly through our own knowledge and contacts in the region. The
balance (18% of Private Equity Funds NAV) is invested with Asia
Alternatives, Axiom and Unicorn, all fund of private equity funds
providers.
During the first half of the year, GBP52m was invested via
drawdowns, GBP13m was invested in the secondary purchase of two
Decheng funds positions and distributions of GBP15m, evenly
balanced between North America and Asia, were received. The level
of distributions has declined compared to the last two years,
reflecting more challenging market conditions. We anticipate, based
on feedback from our managers, something of a recovery in
distributions over the next six to eighteen months.
Management and Board
Rob Memmott joined the board as Chief Financial Officer on 1
September 2023, succeeding Tim Livett.
Dividend
The board has declared an interim dividend of 18.93p per share,
an increase of 4.0% on last year's interim. This will be paid to
shareholders on 4 January 2024.
Outlook
The global economic outlook continues to be challenging with the
impact of high rates of inflation, elevated interest rates and
central bank debt reduction leading to mixed performance across
global markets. These factors may influence the short-term
performance of our portfolio but Caledonia's long-term outlook and
ethos of investment in high quality, well-financed and managed
companies, leaves us well-placed to withstand these pressures and
deliver long-term returns in line with our aims.
Change in pool investments value Net assets distribution
Sep Mar
GBPm 2023 2023
------------------------------- ------------- ------------------------ ---- ----
Opening portfolio balance 2,534.7 Public Companies 30% 30%
Investments 262.8 Private Capital 36% 29%
Realisations (39.8) Private Equity Funds 33% 32%
Gains/losses 95.3 Cash and other 1% 9%
------------------------ ---- ----
Accrued income 2.1
------------------------------- -------------
Closing portfolio balance 2,855.1
Cash and other 21.0
------------------------------- -------------
Closing net assets 2,876.1
------------------------------- -------------
Net assets geographic Net assets currency
distribution distribution
Sep Mar Sep Mar
2023 2023 2023 2023
------------------------------- ------- ---- ------------------------ ---- ----
United Kingdom 38% 31% Pound sterling 39% 41%
Europe 7% 8% US dollar 51% 50%
North America 39% 39% Euro 7% 7%
Asia 15% 13% Other currencies 3% 2%
------------------------ ---- ----
Cash and other 1% 9%
------------------------------- ------- ----
1. The geographic distribution is based on the country of listing,
country of domicile for unlisted investments and underlying regional
analysis for funds.
2. Currency distribution is based on the denomination of the securities
held. This does not look through to the underlying exposures,
which may be different.
Portfolio summary
Holdings of 1% or more of net assets at 30 September 2023 were
as follows:
Net
Value assets
Name Pool Geography(1) Business GBPm %
------------------------- -------------------- ------------- ----------------------- --------- ------
Seven Investment
Management Private Capital Jersey Investment management 248.5 8.6
Cobehold Private Capital Belgium Investment company 178.8 6.2
Stonehage Fleming Private Capital Guernsey Family office services 157.0 5.5
AIR-serv Europe Private Capital UK Forecourt vending 142.5 5.0
Liberation Group Private Capital Jersey Pubs, bars & inns 135.0 4.7
Private Equity
HighVista Strategies(2) Funds US Funds of funds 123.5 4.3
Cooke Optics Private Capital UK Cine lens manufacturer 102.3 3.6
Private Equity
Axiom Asia funds Funds Asia Funds of funds 88.1 3.1
Watsco Public Companies US Ventilation products 73.9 2.6
Microsoft Public Companies US Software 72.3 2.5
Oracle Public Companies US Software 69.8 2.4
Private Equity Asia/
Decheng funds Funds US Private equity funds 57.4 2.0
Texas Instruments Public Companies US Semiconductors 54.2 1.9
Tobacco & smoke-free
Philip Morris Public Companies US products 49.3 1.7
Asia Alternatives Private Equity
funds Funds Asia Funds of funds 47.3 1.6
Charter Communications Public Companies US Cable communications 46.4 1.6
Pharma & life sciences
Thermo Fisher Scientific Public Companies US services 41.6 1.4
Fastenal Public Companies US Industrial supplies 40.3 1.4
Hill & Smith Public Companies UK Infrastructure 40.2 1.4
Private Equity
Unicorn funds Funds Asia Funds of funds 39.6 1.4
Private Equity
CenterOak funds Funds US Private equity funds 38.9 1.4
Private Equity
Stonepeak funds Funds US Private equity funds 36.2 1.3
SIS Private Capital UK Content services 35.3 1.2
British American
Tobacco Public Companies UK Tobacco & vaping 33.6 1.2
Private Equity
Ironbridge funds Funds Canada Private equity funds 34.0 1.2
Becton Dickinson Public Companies US Medical technology 30.9 1.1
Private Equity
AE Industrial funds Funds US Private equity funds 27.7 1.0
Private Equity
PAG Asia funds Funds Asia Private equity funds 27.6 1.0
Spirax Sarco Public Companies UK Steam engineering 27.6 1.0
Moody's Corporation Public Companies US Financial services 27.5 1.0
------------------------- -------------------- ------------- ----------------------- --------- ------
Other investments 727.8 25.3
Investment portfolio 2,855.1 99.6
Cash and other 21.0 0.4
--------------------------------------------------------------------------------------- --------- ------
Net assets 2,876.1 100.0
--------------------------------------------------------------------------------------- --------- ------
1. Geography is based on the country of listing, country of domicile
for unlisted investments and underlying regional analysis for
funds.
2. Previously Aberdeen.
Risks and uncertainties
Caledonia has a risk management framework that provides a
structured process for identifying, assessing, and managing risks
associated with the company's business objectives and strategy.
The principal risks and uncertainties faced by the company are
set out in the strategic report section of Caledonia's annual
report 2023 pages 44-45. External risks arise from political,
legal, regulatory and economic changes. Strategic risks arise from
the conception, design and implementation of the company's business
model. Investment risks arise from specific investment and
realisation decisions. Market risks arise from equity price
volatility, foreign exchange rate movements and interest rate
volatility. Liquidity risks arise from counterparties, uncertainty
in market prices and rates and liquidity availability. Operational
risks arise from potentially inadequate or failed controls,
processes, people or systems. Regulatory risks arise from exposure
to litigation or fraud or failure to adhere to the taxation and
regulatory environment. Environmental, social and governance
("ESG") and climate change risks relate to the successful
incorporation of ESG matters and climate change impacts into
investment strategy.
The principal risks and uncertainties identified in the annual
report 2023 remain unchanged, other than the following
developments: the global economic outlook is increasingly
uncertain, with the ongoing conflict in Ukraine and the Middle East
coupled with elevated inflation and interest rates, leading to
greater volatility across global markets. Caledonia actively
monitors key risk factors, including portfolio concentration,
liquidity and volatility, and aims to manage risk by:
- diversifying the portfolio by sector and geography.
- ensuring access to relevant information from investee companies, particularly in the case
of unquoted investments through board representation. Consideration of changes to the economic
environment forms an important part of the valuation process for the assets within the Private
Capital pool.
- managing cash and borrowings to ensure liquidity is available to meet investment and operating
needs.
- reducing counterparty risk by limiting maximum aggregate exposures.
Going concern
The factors likely to affect the company's ability to continue
as a going concern were set out in the annual report 2023. As at 30
September 2023, there have been no significant changes to these
factors other than our cash position which has reduced in the
period.
The group has conducted an interim going concern assessment
which considered future cash flows including drawdown of all
outstanding private equity fund commitments, the availability of
liquid assets and debt facilities, and banking covenant
requirements over at least 12 months from the date of approval of
these financial statements. In making this assessment, several
stress scenarios were considered to reflect the increasingly
uncertain economic outlook, addressing the risks of foreign
exchange appreciation, investment income decline, a decline in
distributions from private equity funds, a delay in known Private
Capital pool disposal and market price reduction. A final scenario
considered the cumulative impact of all variables.
Under these scenarios the group would have a range of mitigating
actions available to it, including the sale of liquid assets and
usage of banking facilities. In all scenarios the group would have
sufficient cash reserves to enable it 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 interim financial
statements and therefore have been prepared on a going concern
basis.
Directors' responsibility statement
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted
by the United Kingdom;
- the interim management report includes a fair review of the
information required by:
- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred
during the first six months of the financial year and their
impact on the condensed set of financial statements and a
description of the principal risks and uncertainties for the
remaining six months of the financial year;
- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related parties transactions that have taken place in
the first six months of the current financial year and that
have materially affected the financial position or performance
of the entity during that period and any changes in the related
party transactions described in the last annual report that
could do so.
Signed on behalf of the board
Mat Masters, Chief Executive Officer
20 November 2023
Independent review report
to Caledonia Investments plc
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2023 which comprises condensed group
statement of comprehensive income, the condensed group statement of
financial position, the condensed group statement of changes in
equity and the condensed group statement of cash flows and the
related explanatory notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority. In preparing the half-yearly financial report, the
directors are responsible for assessing the company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
UK
20 November 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127)
Condensed group statement of comprehensive income
for the six months ended 30 September 2023
Unaudited Unaudited Audited
Six months 30 Sep Six months 30 Sep Year 31 Mar 2023
2023 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Revenue
Investment income 33.8 - 33.8 25.4 - 25.4 43.2 - 43.2
Other income 0.4 - 0.4 0.4 0.3 0.7 0.8 1.3 2.1
Net gains and losses
on fair value investments - 88.2 88.2 - 105.2 105.2 - 133.0 133.0
Net gains and losses
on fair value property - 0.3 0.3 - 0.3 0.3 - (1.4) (1.4)
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total revenue 34.2 88.5 122.7 25.8 105.8 131.6 44.0 132.9 176.9
Management expenses (12.1) (4.4) (16.5) (10.6) (2.9) (13.5) (21.3) (8.6) (29.9)
Profit before
finance costs 22.1 84.1 106.2 15.2 102.9 118.1 22.7 124.3 147.0
Treasury interest
receivable 1.8 - 1.8 1.5 - 1.5 4.6 - 4.6
Finance costs (7.2) - (7.2) (1.2) - (1.2) (2.4) - (2.4)
Exchange movements 4.8 - 4.8 1.2 - 1.2 - - -
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Profit before
tax 21.5 84.1 105.6 16.7 102.9 119.6 24.9 124.3 149.2
Taxation (0.2) (1.1) (1.3) 1.4 (0.4) 1.0 (4.3) (2.0) (6.3)
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Profit for the
period 21.3 83.0 104.3 18.1 102.5 120.6 20.6 122.3 142.9
Other comprehensive
income items never
to be reclassified
to
profit or loss
Re-measurement
of defined benefit
pension schemes - (0.4) (0.4) - (0.1) (0.1) - 1.4 1.4
Tax on other comprehensive
income - 0.4 0.4 - (0.5) (0.5) - (0.3) (0.3)
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Total comprehensive
income 21.3 83.0 104.3 18.1 101.9 120.0 20.6 123.4 144.0
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
Basic earnings
per share 39.2p 152.7p 191.9p 33.4p 188.9p 222.3p 37.9p 225.3p 263.2p
Diluted earnings
per share 38.6p 150.3p 188.9p 32.9p 185.9p 218.8p 37.3p 221.7p 259.0p
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- ------
The total column of the above statement represents the condensed
group statement of comprehensive income, prepared in accordance
with IFRSs as adopted by the United Kingdom.
The revenue and capital columns are supplementary to the
condensed group statement of comprehensive income and are prepared
under guidance published by the Association of Investment
Companies.
The profit for the period and total comprehensive income for the
period is attributable to equity holders of the parent.
Condensed group statement of financial position
at 30 September 2023
Unaudited Unaudited Audited
30 Sep 30 Sep 31 Mar
2023 2022 2023
GBPm GBPm GBPm
------------------------------------------------------ --------- --------- -------
Non-current assets
Investments held at fair value through profit or loss 2,656.5 2,479.3 2,794.9
Investment property 15.1 16.0 15.1
Property, plant and equipment 28.0 29.0 27.9
Deferred tax assets 4.8 21.1 5.7
Employee benefits 4.1 2.4 4.0
------------------------------------------------------ --------- --------- -------
Non-current assets 2,708.5 2,547.8 2,847.6
------------------------------------------------------ --------- --------- -------
Current assets
Asset held- for sale 248.5 - -
Trade and other receivables 14.9 8.3 6.9
Current tax assets 20.1 12.0 19.3
Cash and cash equivalents 14.9 242.7 221.6
------------------------------------------------------ --------- --------- -------
Current assets 298.4 263.0 247.8
------------------------------------------------------ --------- --------- -------
Total assets 3,006.9 2,810.8 3,095.4
------------------------------------------------------ --------- --------- -------
Current liabilities
Interest bearing loans and borrowings (49.2) - (266.0)
Trade and other payables (39.0) (23.6) (22.1)
Employee benefits (1.5) (1.2) (2.4)
------------------------------------------------------ --------- --------- -------
Current liabilities (89.7) (24.8) (290.5)
------------------------------------------------------ --------- --------- -------
Non-current liabilities
Interest bearing loans and borrowings (35.0) - -
Employee benefits (4.2) (3.2) (5.1)
Deferred tax liabilities (1.9) (1.3) (1.8)
Non-current liabilities (41.1) (4.5) (6.9)
------------------------------------------------------ --------- --------- -------
Total liabilities (130.8) (29.3) (297.4)
------------------------------------------------------ --------- --------- -------
Net assets 2,876.1 2,781.5 2,798.0
------------------------------------------------------ --------- --------- -------
Equity
Share capital 3.1 3.1 3.1
Share premium 1.3 1.3 1.3
Capital redemption reserve 1.4 1.4 1.4
Capital reserve 2,638.4 2,533.9 2,555.4
Retained earnings 239.9 252.4 247.4
Own shares (8.0) (10.6) (10.6)
------------------------------------------------------ --------- --------- -------
Total equity 2,876.1 2,781.5 2,798.0
------------------------------------------------------ --------- --------- -------
Undiluted net asset value per share 5286p 5120p 5150p
Diluted net asset value per share 5203p 5039p 5068p
------------------------------------------------------ --------- --------- -------
Condensed group statement of changes in equity
for the six months ended 30 September 2023
Capital
redemp-
Share Share tion Capital Retained Own Total
capital premium reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Six months ended 30 September 2023
(Unaudited)
Balance at 1 April 2023 3.1 3.1 1.4 2,555.4 247.4 (10.6) 2,798.0
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income
Profit for the period - - - 83.0 21.3 - 104.3
Other comprehensive income - - - - - - -
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income - - - 83.0 21.3 - 104.3
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Transactions with owners of the
company
Contributions by and distributions
to owners
Share-based payments - - - - 3.6 - 3.6
Transfer of shares to employees - - - - (5.7) 5.7 -
Own shares purchased - - - - - (3.1) (3.1)
Dividends paid - - - - (26.7) - (26.7)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total transactions with owners - - - - (28.8) 2.6 (26.2)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Balance at 30 September 2023 3.1 3.1 1.4 2,638.4 239.9 (8.0) 2,876.1
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Six months ended 30 September 2022
(Unaudited)
Balance at 1 April 2022 3.1 3.1 1.4 2,527.0 263.2 (13.3) 2,782.7
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income
Profit for the period - - - 102.5 18.1 - 120.6
Other comprehensive income - - - (0.6) - - (0.6)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income - - - 101.9 18.1 - 120.0
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Transactions with owners of the
company
Contributions by and distributions
to owners
Share-based payments - - - - 2.9 - 2.9
Transfer of shares to employees - - - - (6.2) 6.2 -
Own shares purchased - - - - - (3.5) (3.5)
Dividends paid - - - (95.0) (25.6) - (120.6)
Total transactions with owners - - - (95.0) (28.9) 2.7 (121.2)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Balance at 30 September 2022 3.1 3.1 1.4 2,533.9 252.4 (10.6) 2,781.5
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Six months ended 30 September 2022
(Unaudited)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Year ended 31 March 2023 (Audited)
Balance at 1 April 2022 3.1 3.1 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 3.1 1.4 2,555.4 247.4 (10.6) 2,798.0
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Condensed group statement of cash flows
for the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months 6 months Year
30 Sep 30 Sep 31 Mar
2023 2022 2023
GBPm GBPm GBPm
-------------------------------------------------- --------- --------- -------
Operating activities
Dividends received 30.8 24.6 41.6
Interest received 2.4 2.3 6.5
Cash received from customers 0.4 0.4 2.6
Cash paid to suppliers and employees (14.2) (14.3) (25.3)
Taxes received - - 0.1
Group tax relief received - 0.5 2.0
Group tax relief paid (0.8) - -
Net cash flow from operating activities 18.6 13.5 27.5
-------------------------------------------------- --------- --------- -------
Investing activities
Purchases of investments (253.1) (98.1) (468.1)
Proceeds from disposal of investments 241.1 111.5 192.1
Purchases of property, plant and equipment (0.3) (0.1) (0.3)
-------------------------------------------------- --------- --------- -------
Net cash flow (used in)/from investing activities (12.3) 13.3 (276.3)
-------------------------------------------------- --------- --------- -------
Financing activities
Interest paid (7.0) (1.1) (2.2)
Dividends paid to owners of the company (26.7) (120.6) (130.5)
Proceeds from bank borrowings 35.0 - -
Proceeds from group borrowings - - 266.0
Repayment of group borrowings (211.2) - -
Purchases of own shares (3.1) (3.5) (4.0)
-------------------------------------------------- --------- --------- -------
Net cash flow (used in)/from financing activities (213.0) (125.2) 129.3
-------------------------------------------------- --------- --------- -------
Net decrease in cash and cash equivalents (206.7) (98.4) (119.5)
Cash and cash equivalents at period start 221.6 341.1 341.1
-------------------------------------------------- --------- --------- -------
Cash and cash equivalents at period end 14.9 242.7 221.6
-------------------------------------------------- --------- --------- -------
Notes to the condensed financial statements
1. General information
Caledonia Investments plc is an investment trust company
registered in England and Wales with company number 00235481. 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.
This condensed set of financial statements was approved for
issue on 20 November 2023 and is unaudited.
The information for the period ended 30 September 2023 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for the year
ended 31 March 2023 has been delivered to the Registrar of
Companies. The auditor's report on those accounts was not
qualified, did not draw attention to any matters by way of emphasis
of matter and did not contain a statement under section 498(2) and
(3) of the Companies Act 2006.
2. Accounting policies
Basis of accounting
This condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting and should be
read in conjunction with the annual financial statements for the
year ended 31 March 2023, which were prepared in accordance with
IFRSs adopted by the United Kingdom.
This condensed set of financial statements has been prepared in
accordance with the recommendations of the Statement of Recommended
Practice issued by the Association of Investment Companies.
Adopted IFRSs
The accounting policies adopted in the preparation of the
condensed consolidated financial statements are consistent with
those followed in the preparation of the group's annual report for
the year ended 31 March 2023, except for the mandatory amendments
that had an effective date prior to the start of the six-month
period. None of the mandatory amendments had an impact on the
reported financial position or performance of the group. The
changes in accounting policies will also be reflected in the
group's consolidated financial statements for the year ending 31
March 2024.
The group classifies assets as held-for-sale under IFRS 5
(Non-current assets held for sale and discontinued operations)
where it judges they meet the relevant criteria. This policy has
been applied in the current accounting period (see note 11).
A number of new amendments to standards and interpretations will
be effective for periods beginning on or after 1 April 2024. The
group plans to apply these amendments in the reporting period in
which they become effective.
Basis of consolidation
In accordance with the IFRS 10/IAS 28 investment entity
amendments to apply the investment entities exemption, the
consolidated financial statements include the financial statements
of the company and service entities controlled by the company made
up to the reporting date. All other investments in controlled
entities are accounted as held at fair value through profit or
loss.
Going concern
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 30 September 2023 the group holds GBP880m of liquid investment
assets, GBP15m of cash and has access to GBP215m of undrawn
committed banking facilities, of which GBP92.5m expires in July
2025 and GBP122.5m expires in November 2027.
The group has conducted an interim going concern assessment
which considered future cash flows, including drawdown of all
outstanding private equity fund commitments, availability of liquid
assets and debt facilities, and banking covenant requirements over
at least 12 months from the date of approval of these financial
statements. In making this assessment, several stress scenarios
were considered to reflect the increasingly uncertain economic
outlook, addressing the risks of foreign exchange appreciation,
investment income decline, a decline in distributions from private
equity funds, a delay in known Private Capital pool disposal and
market price reduction . A final scenario considered the cumulative
impact of all variables.
Under these scenarios the group would have a range of mitigating
actions available to it, including sale of liquid assets and usage
of banking facilities. In all scenarios the group would have
sufficient cash reserves to enable it 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
Private Equity Funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
interim financial statements and therefore have been prepared on a
going concern basis.
Changes in accounting policies
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority and IAS 34, this condensed set of
financial statements has been prepared applying the accounting
policies and presentation that were applied in the preparation of
the company's published consolidated financial statements for the
year ended 31 March 2023.
Judgements and estimates
In preparing these interim financial statements, management has
made judgements, estimates and assumptions that affected the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense.
The significant judgements made by management in applying the
group's accounting policies and the key sources of estimation
uncertainty were the same as those applied to the consolidated
financial statements for the year ended 31 March 2023.
3. Dividends
Amounts recognised as distributions to owners of the company in
the period were as follows:
6 months 6 months Year
30 Sep 30 Sep 31 Mar
2023 2022 2023
GBPm GBPm GBPm
---------------------------------------------------------------------------------- -------- -------- ------
Final dividend for the year ended 31 March 2023 of 49.2p per share (2022 - 47.3p) 26.7 25.6 25.6
Special dividend for the year ended 31 March 2022 of 175.0p per share - 95.0 95.0
Interim dividend for the year ended 31 March 2023 of 18.2p per share - - 9.9
---------------------------------------------------------------------------------- -------- -------- ------
26.7 120.6 130.5
---------------------------------------------------------------------------------- -------- -------- ------
The directors have declared an interim dividend for the year
ending 31 March 2024 of 18.93p per share, totalling GBP10.3m, which
has not been included as a liability in this condensed set of
financial statements. This dividend will be payable on 4 January
2024 to holders of shares on the register on 1 December 2023. The
ex-dividend date will be 30 November 2023. The deadline for
elections under the dividend reinvestment plan offered by Link
Group will be the close of business on 12 December 2023.
4. Share capital
During the period, the company's Employee Share Trust sold
178,801 shares for GBPnil and purchased 90,158 shares for GBP3.1m
relating to the exercise of performance share and deferred bonus
awards.
In the six months ended 30 September 2022, the company's
Employee Share Trust sold 201,529 shares for GBPnil and purchased
93,198 shares for GBP3.5m relating to the exercise of performance
share and deferred bonus awards.
In the year ended 31 March 2023, the Employee Share Trust sold
221,581 shares for GBPnil and purchased 106,898 shares for GBP4.0m
relating to the exercise of performance share and deferred bonus
awards.
5. Net asset value per share
The group's undiluted net asset value per share is based on the
net assets of the group at the period end and on the number of
shares in issue at the period end less shares held by The Caledonia
Investments plc Employee Share Trust. The group's diluted net asset
value per share assumes the calling of performance share and
deferred bonus awards for nil consideration.
6. Operating segments
The chief operating decision maker has been identified as the
Chief Executive Officer, supported by the Investment Committee, who
reviews the company's internal reporting to assess performance and
allocate resources. Management has determined the operating
segments based on these reports.
The performance of operating segments is assessed on a measure
of group total revenue, principally comprising gains and losses on
investments and investment income. Reportable profit or loss is
after treasury income and 'Other items', which comprise management
and other expenses. Reportable assets equate to the group's total
assets. 'Cash' and 'Other items' are not identifiable operating
segments.
'Other'-portfolio investments' comprise subsidiaries and other
investments not managed as part of the investment portfolio.
Profit before tax Total assets
6 months 6 months Year
30 Sep 30 Sep 31 Mar 30 Sep 30 Sep 31 Mar
2023 2022 2023 2023 2022 2023
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- -------- ------ ------ ------ ------
Quoted Equity 24 (79) 1 865 744 837
Private Capital* 56 49 65 1,027 819 824
Funds 41 176 104 963 953 874
-------------------------- -------- -------- ------ ------ ------ ------
Portfolio investments 121 146 170 2,855 2,516 2,535
Other investments 2 (14) 7 50 (37) 260
-------------------------- -------- -------- ------ ------ ------ ------
Total revenue/investments 123 132 177 2,905 2,479 2,795
Cash and cash equivalents - 2 4 15 243 221
Other items (17) (14) (32) 87 89 79
-------------------------- -------- -------- ------ ------ ------ ------
Reportable total 106 120 149 3,007 2,811 3,095
-------------------------- -------- -------- ------ ------ ------ ------
*Private Capital investment in 7IM was classified as an asset
held for sale at 30 September 2023.
7. Related parties
Caledonia Investments plc repaid GBP211.2m to Caledonia US
Investments Ltd, a wholly-owned subsidiary of Caledonia, and
received a distribution of GBP212.1m from Caledonia US Investments
Ltd in the period.
Caledonia Group Services Ltd, a wholly-owned subsidiary of
Caledonia Investments plc, provides management services to the
company. During the six months ended 30 September 2023, GBP16.4m
was charged to the company for these services (30 September 2022:
GBP13.5m and 31 March 2023: GBP29.9m).
There were no other changes in the transactions or arrangements
with related parties as described in the company's annual report
for the year ended 31 March 2023 that have had a material effect on
the results or the financial position of the company or of the
group in the six months ended 30 September 2023.
8. Capital commitments
At 30 September 2023, the group had undrawn fund and other
commitments totalling GBP427.4m (30 September 2022: GBP339.0m and
31 March 2023: GBP422.6m). These commitments could, in theory, be
called upon simultaneously at any time. Although this is unlikely,
the going concern assessment has modelled this scenario and in such
circumstances the group would be able to meet all of these
liabilities.
9. Fair value hierarchy
The company measures fair values using the following fair value
hierarchy, reflecting the significance of the inputs used in making
the measurements:
Level Quoted prices (unadjusted) in active markets for identical
1 assets.
Level Inputs other than quoted prices included within Level 1 that
2 are directly or indirectly observable.
Level Inputs for the asset that are not based on observable market
3 data.
The table below analyses financial instruments held at fair
value according to level in the fair value hierarchy into which the
fair value measurement is categorised:
30 Sep 30 Sep 31 Mar
2023 2022 2023
GBPm GBPm GBPm
-------------------------------------------- ------- ------- -------
Investments held at fair value
Level 1 865.0 744.1 836.9
Level 2 5.1 5.3 4.8
Level 3 2,034.9 1,729.9 1,953.2
-------------------------------------------- ------- ------- -------
2,905.0 2,479.3 2,794.9
------------------------------------------- ------- ------- -------
The following table shows a reconciliation from the opening
balances to the closing balances for fair value measurements in
Level 3 of the fair value hierarchy:
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2023 2022 2023
GBPm GBPm GBPm
-------------------------------------------- ------- ------- -------
Balance at the period start 1,953.2 1,549.1 1,549.1
Purchases 226.5 69.7 413.5
Realisation proceeds (223.3) (81.3) (162.8)
Gains and losses on investments sold in the
period 5.0 15.2 126.7
Gains and losses on investments held at the
period end 71.4 175.3 27.3
Accrued income 2.1 1.9 (0.6)
-------------------------------------------- ------- ------- -------
Balance at the period end 2,034.9 1,729.9 1,953.2
-------------------------------------------- ------- ------- -------
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 funds 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 pool),
totalling GBP1,027.1m (31 March 2023: GBP824.0m), valuation
techniques using a range of internally and externally developed
unobservable inputs are used to estimate fair value. Valuation
techniques make maximum use of market inputs, including reference
to the current fair values of comparator businesses that are
substantially the same (subject to appropriate adjustments). For
each asset, a range of valuation methods are considered and methods
judged most appropriate are used, taking into consideration the
quantity and quality of data points available. Methods include
inter alia: consideration of indicative offers from third parties,
applying an earnings multiple to the maintainable earnings of a
business, and net assets, sometimes employing third-party net asset
valuations.
For private equity fund investments (unlisted Private Equity
Funds pool), totalling GBP958.0m (31 March 2023: GBP869.0m) held
through externally managed fund vehicles, the estimated fair value
is based on the most recent valuation provided by the external
manager, usually received within 3-6 months of the relevant
valuation date. As at 30 September 2023, the majority of the
valuations included in these financial statements were based
principally on the 30 June 2023 managers' NAVs. Where required,
valuations are adjusted for investments and distributions between
valuation date and reporting date. These valuations depend upon the
reasonableness of the fair value estimation made by third-party
managers, whose approach is assessed by Caledonia through a
combination of initial due diligence, on-going analytical
monitoring and review of financial reporting.
At 30 September 2023
Description/Category Valuation Fair value Unobservable Weighted Input Change in
method input average input sensitivity valuation
GBPm +/- +/- GBPm
--------------------- --------------- ---------- --------------- -------------- --------------- --------------
Internally developed
Private companies
Large Earnings 302.0 EBITDA multiple 13.9x 10.0% +35.0/-33.0
Medium Earnings 137.6 EBITDA multiple 10.0x 10.0% +10.5/-11.7
Small Earnings 17.7 EBITDA multiple 4.6x 15.0% +1.4/-1.4
Transaction price 391.0 Multiple 1 3-5% +14.8/-14.8
Manager valuation Net assets 178.8 Multiple 1 0.1x +17.9/-17.9
--------------------- --------------- ---------- --------------- -------------- --------------- --------------
1,027.1 +79.6/-78.8
Non-pool companies 49.8
-------------------------------------- ---------- --------------- -------------- --------------- --------------
Total internal 1,076.9
Externally developed
Private equity funds
Adjusted
Net asset value Manager NAV 958.0 Multiple 1 5.0% 47.9 / (47.9)
--------------------- --------------- ---------- --------------- -------------- --------------- --------------
2,034.9 +127.5/-126.7
------------------------------------- ---------- --------------- -------------- --------------- --------------
The principal changes during the half-year were the change in
valuation method used to value 7IM and BioAgilytix. 7IM, an
investment manager, is valued at an agreed transaction price and
was previously valued on an EBITDA multiple. BioAgilytix, which
operates bioanalytical testing, is valued on an EBITDA multiple
(included in the 'Large, earnings' category above) and was
previously valued on a net assets basis.
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.
At 31 March 2023
Description/Category Valuation Fair value Unobservable Weighted Input Change in
method input average input sensitivity valuation
GBPm +/- +/- GBPm
--------------------- --------------- ---------- --------------- -------------- --------------- --------------
Internally developed
Private companies
Large Earnings 460.6 EBITDA multiple 13.9x 10.0% +39.6/-55.5
Medium Earnings 160.6 EBITDA multiple 11.1x 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 funds
Adjusted
Net asset value Manager NAV 869.0 Multiple 1x 5.0% +/-43.5
--------------------- --------------- ---------- --------------- -------------- --------------- --------------
1,953.2 +119.2/-135.1
------------------------------------- ---------- --------------- -------------- --------------- --------------
Private company (Private Capital) assets have been disaggregated
into categories as follows:
-- Assets in the large, earnings based category have an Enterprise
Value of >GBP150m, and benefit from a reasonable number of
comparative data points, as well as having sufficient size
to make their earnings reliable and predictable.
-- Assets in the medium, earnings based category have an Enterprise
Value of GBP50-GBP150m, with a more limited universe of comparable
businesses available.
-- Assets in the smaller, earnings based category have an Enterprise
value of <GBP50m. Their smaller size results in fewer data
points due to a lack of available listed comparators, and
makes them generally more vulnerable than larger assets to
changes in economic conditions.
-- Manager valuations are used for assets where the net asset
method is employed.
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 (unlisted Funds Pool investments) 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 also comprise a diversity of sector and
geographical exposure, reducing concentration risk. 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.
10. Share-based payments
The group operates performance share schemes and a deferred
bonus plan. Details of these schemes were disclosed in the annual
report 2023 and the basis of measuring fair value was consistent
with those disclosures.
During the six months ended 30 September 2023, awards over
192,384 shares were issued under the performance share scheme (30
September 2022: 167,633 shares and 31 March 2023: 172,802 shares).
Compulsory deferred bonus awards over 1,976 shares were also
granted (30 September 2022 and 31 March 2023: 39,500 shares).
Expenses in respect of share-based payments in the period were
GBP3.9m (30 September 2022: GBP3.1m and 31 March 2023:
GBP7.4m).
11. Asset held for sale
In September 2023, Caledonia agreed terms for the sale of a
majority stake in 7IM, a vertically integrated retail wealth
management business, to Ontario Teachers' Pension Plan Board. The
transaction is subject to change in control approval by the
Financial Conduct Authority and is expected to complete by early
2024. Cash proceeds of c.GBP255m, are expected net of transaction
expenses. The valuation at the end of September of GBP248m reflects
expected cash proceeds less a 3% discount to equity value in
recognition of the very limited degree of transaction execution
risk. To reflect this transaction, this asset was disclosed as held
for sale on the condensed group statement of financial position as
at 30 September 2023.
Glossary of terms and alternative performance measures
Alternative performance measure ("APM'")
APMs are not prescribed by accounting standards but are industry
specific performance measures which help users of the annual
accounts and financial statements to better interpret and
understand performance.
NAV Total Return ("NAVTR")
NAVTR is a measure of how the NAV per share has performed over a
period, considering both capital returns and dividends paid to
shareholders. NAVTR is calculated as the increase in NAV per share
between the beginning and end of the period, plus accretion from
the assumed dividend reinvestment in the period. We use this
measure as it enables comparisons to be drawn against an investment
index in order to benchmark performance and the calculation follows
the method prescribed by the Association of Investment Companies
('AIC').
FTSE International Limited ('FTSE') (c) FTSE 2023. 'FTSE(R)' is
a trademark of the London Stock Exchange Group companies and is
used by FTSE International Limited under licence. All rights in the
FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors.
Neither FTSE nor its licensors accept any liability for any errors
or omissions in the FTSE indices and/or FTSE ratings or underlying
data. No further distribution of FTSE Data is permitted without
FTSE's express written consent.
END
Copies of this statement are available at the company's
registered office, Cayzer House, 30 Buckingham Gate, London SW1E
6NN, United Kingdom, or from its website at www.caledonia.com.
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END
IR BIBDBGBDDGXG
(END) Dow Jones Newswires
November 21, 2023 02:00 ET (07:00 GMT)
Caledonia Investments (LSE:CLDN)
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De Abr 2024 a May 2024
Caledonia Investments (LSE:CLDN)
Gráfica de Acción Histórica
De May 2023 a May 2024
