TIDMCLDN
RNS Number : 3547F
Caledonia Investments PLC
07 July 2023
Caledonia Investments plc
Unaudited net asset value and portfolio update
Caledonia Investments plc (" Caledonia ") announces its
unaudited diluted net asset value per share (" NAV ") as at 30 June
2023, calculated on a cum-income basis, was 5026p. The NAV includes
an accrual for the proposed final dividend of 49.2p per share.
The NAV total return (" NAVTR ") for the three months to 30 June
2023 was 0.1%.
This announcement provides an update on Caledonia's portfolio
and should be read in conjunction with the factsheet dated 30 June
2023 and released on 7 July 2023, a copy of which is available at
www.caledonia.com .
Summary
The first quarter saw modest increases in manager valuations in
the Funds pool and strong performance from our US holdings in the
Quoted Equity portfolios. This was somewhat offset by the
strengthening of Sterling against the US dollar (2.8%) and the Euro
(2.4%).
The Quoted Equity portfolio produced a return of 3.3%, driven by
the healthy gains achieved by a number of our US holdings and
despite the adverse exchange rate impact. The Capital portfolio,
which is weighted towards US stocks with a growth orientation, was
the stronger performer. The Income portfolio, with a bias towards
UK stocks, did not progress. The Private Capital team completed the
purchase of a majority stake in the European division of AIR-serv,
a leading designer and manufacturer of air, vacuum and jet wash
machines which it provides as turn-key solutions to fuel station
forecourt operators across Western Europe. As investee companies
are revalued biannually, with the next review taking place on 30
September 2023, the -0.3% return from the Private Capital portfolio
principally reflected adverse valuation movement in our US and
European investments driven by exchange rate movements. The Funds
portfolio produced a return of -1.0% based on modest valuation
growth from many of the holdings across our maturing investments,
more than offset by the adverse impact of strengthening Sterling on
a predominantly US dollar-based portfolio.
Performance for the first three months is summarised in the
table below.
Caledonia pool per f o rmance
Net asset value - three months to 30 June 20 23
GBPm Opening Net Capital Other Closing Income Total
balance investment gains balance Return
/(disposal) /
(losses)
Quoted Equity 836.9 1.0 22.7 - 860.6 4.9 3.3%
Private Capital 824.0 142.1 (10.8) 1.1 956.4 7.9 -0.3%
Funds 873.8 30.2 (9.4) - 894.6 0.8 -1.0%
--------- ------------- ---------- -------- --------- ------- --------
Portfolio 2,534.7 173.3 2.5 1.1 2,711.6 13.6
-------
Net Cash/(debt) 221.6 (173.3) - 7.5 55.8
Accrued dividend - - - (26.7) (26.7)
Other assets 41.7 - - (3.1) 38.6
Net assets 2,798.0 - 2.5 (21.2) 2,779.3 NAVTR 0.1%
--------- ------------- ---------- -------- --------- --------
Caledonia has continued to invest and dispose of assets, in line
with our active approach to portfolio management, with a net cash
outflow of GBP166m in the first quarter of the financial year. The
most significant transaction in the period was the purchase of the
European division of AIR-serv. Caledonia invested GBP142.5m for a
99.8% equity stake, alongside the management team. The Quoted
Equity portfolio added a new holding in RELX, and refined positions
in a number of others, including reducing exposure to Oracle, one
of our most valuable public equity positions. The Funds pool saw a
modest level of fund distributions but with new fund investments,
including the purchase of secondary positions in two Decheng funds,
requiring GBP38m of funding, there was a net cash outflow of GBP30m
in the quarter.
Total liquidity remains healthy with cash of GBP56m and undrawn
bank facilities of GBP250m as at 30 June 2023. Caledonia's GBP250m
banking facilities include GBP112.5m with ING, expiring July 2025,
and GBP137.5m with RBSI, expiring in November 2027.
Caledonia Quoted Equity - Capital and Income portfolios (31% of
NAV)
The total return for the Quoted Equity pool was 3.3% over the
first three months of the year. This outcome reflected the positive
performance of the US market over the period, in contrast to small
declines in UK public equites, partially offset by exchange as
Sterling strengthened by around 3% against the US dollar.
The Capital portfolio, with its notable weighting to US stocks,
generated a total return of 4.8%. Strong gains of around US$50m
collectively were produced by our positions in Oracle, Microsoft
and Watsco. Weaker performances from Alibaba, Thermo Fisher and
Spirax Sarco offset gains across the other holdings in the
portfolio. In contrast, the Income portfolio, with its greater UK
market focus, delivered a total return of -0.8%. The US stocks
Fastenal and Watsco performed strongly, as did Sabre Insurance, but
the majority of our holdings recorded valuation declines, with
Pennon and DS Smith the most notable.
Trading activity was relatively limited, in line with our
long-term investment approach. The main activity was in the Income
portfolio, with a purchase in RELX, the global provider of
information-based analytics and decision tools. Other activity was
restricted to refining positions in existing investments, including
a sale of Oracle stock following the rapid growth in valuation
during the period.
Caledonia Private Capital (35% of NAV)
Caledonia's Private Capital added the European division of
AIR-serv to the portfolio during the quarter. The portfolio is now
comprised of significant positions in five UK centric businesses
and one private European investment company. These six investments
represent over 90% of its value. Investee companies are revalued in
March and September each year. All five UK centric businesses are
well-established, profitable, cash generative and have strong
market positions. Gearing levels are modest and March 2023
valuations were 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.
The total return on the Private Capital portfolio was -0.3% for
the first three months of the year. The return principally reflects
the adverse impact of foreign exchange on non-Sterling denominated
holdings.
Our financial services businesses, Seven Investment Management
("7IM") and Stonehage Fleming, continue to perform well with both
growing revenue and earnings, although the uncertainty in equity
markets is impacting the ability to meaningfully grow assets under
management. 7IM has maintained a strong focus on its cost base,
delivering significant savings from key service providers. The
focus at Stonehage Fleming has been on exploiting the benefits of
recent acquisitions; this is progressing well and is expected to
drive the financial performance of the business in the second half
of the year. The Cobehold portfolio continues to develop
positively, following a number of acquisitions in the second half
of last year.
Liberation Group, an inns and drinks business with a pub estate
stretching from Southwest London to Bristol and the Channel
Islands, has traded well through the early part of the year and
recorded good growth in revenue. The business has made significant
steps integrating the Cirrus Inns business. However, the trading
environment remains challenging. Whilst customer demand remains
reasonable, significant inflationary pressure across the cost base
is dampening earnings performance. The business is addressing these
issues with targeted interventions, but we anticipate progress in
profitability will be challenging throughout the year.
The European division of AIR-serv, acquired in April 2023, has
performed in line with expectations in the period.
Cooke Optics, a leading manufacturer of cinematography lenses,
has experienced weaker demand during the period reflecting the
impact of the Hollywood writers' strike and broader economic
factors. The order book for Cooke's high quality cine lenses
remains strong, but the rate of sale has slowed with a resulting
impact on earnings. The medium-term outlook remains positive, with
sales expected to pick up and earnings growth resume once the
writers' strike is resolved.
A more detailed update on trading and valuation of the principal
investee companies within the Private Capital portfolio will be
provided in Caledonia's half year results announcement in November
2023.
Caledonia Funds (32% of NAV)
The total return on the Funds portfolio was -1.0% for the first
three months of the year, including a 3% adverse impact from
exchange rate movements. The underlying performance reflects modest
valuation growth from holdings across the portfolio in both North
America and Asia, with local currency returns of around 2% in both
regions.
Caledonia's fund investments are principally in third party
managed private equity funds operating in the North America and in
Asia. 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 (14% of Funds NAV) with Aberdeen US private equity
funds, 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 (19%
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 (24% of Funds
NAV) is invested with Asia Alternatives, Axiom and Unicorn, all
fund of funds providers.
During the first three months of the year, GBP25m was invested
via drawdowns, GBP13m was invested in the secondary purchase of two
Decheng funds positions and distributions of GBP8m were received.
The level of distributions has declined compared to last year,
reflecting more challenging market conditions. We anticipate a
recovery in the level of distributions over the next six
months.
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
7 July 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 30 June
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.
The holdings have not been revalued at 30 June 2023; however,
the valuations have been updated to reflect FX movements and cash
transactions completed in the last quarter.
Caledonia Funds : the fund valuations are based on the most
recent valuations provided by the fund managers, subject to cash
movements from the valuation date. Valuations are received 60 to
180 days from the valuation date.
Caledonia Investments plc
Caledonia is a self-managed investment trust company. Our aim is
to grow net assets and dividends paid to shareholders, whilst
managing risk to avoid the permanent loss of capital. This is
achieved by investing in proven, well-managed businesses that
combine long-term growth characteristics with an ability to deliver
increasing levels of income. We hold investments in both listed and
private markets, 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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