Final Results 31 March 2016

RNS Number : 6697Y
Caledonia Investments PLC
19 May 2016
 

Caledonia Investments plc

Final results for the year ended 31 March 2016

 

Financial highlights

 

31 Mar 2016 

31 Mar 2015 

Change 

Net asset value per share total return

2.6% 

14.2% 

 

Net asset value per share

2890p 

2906p 

-0.6% 

Net asset value

£1,644m 

£1,627m 

1.1% 

Annual dividend per share

52.6p 

50.6p 

4.0% 

 

Highlights

 

-

NAV total return 2.6% for the year ended 31 March 2016

 

 

-

Annual dividend up 4.0% to 52.6p per share, the forty-ninth consecutive annual increase

 

 

-

Continued outperformance against the FTSE All-Share over ten years

 

 

-

Volatility in the global equity markets was more than offset by the strong performance from the Unquoted and Funds pools

 

 

-

Two sizeable acquisitions in the year - Seven Investment Management for £74m and Gala Bingo for £92m, both trading in line with expectations

 

 

-

Completed sale of TGE Marine generating proceeds of £79m (3.5x multiple of money invested)

 

 

-

Year end net cash of £23m and unutilised facilities of £175m

 

Will Wyatt, Chief Executive, commented:

 

"Caledonia has reported another year of positive performance, demonstrating the continued effectiveness of our longer term investment strategy. We achieved an NAV total return of 2.6% in a year when markets fell and increased the annual dividend by 4%, the 49th consecutive year of dividend growth.

 

"Our investment strategy focuses on high quality businesses and funds providing shareholders with a balanced exposure to asset classes and markets. This has been key in our ability to maintain our outperformance of the FTSE All-Share over the long term. Markets remain volatile, however, we are confident that our investment strategy will continue to deliver its return objectives over the long term, including a sustainable growing annual dividend."

 

19 May 2016

 

 

Enquiries

Caledonia Investments plc

Tulchan Communications

Will Wyatt, Chief Executive

Peter Hewer

Stephen King, Finance Director

+44 20 7353 4200

+44 20 7802 8080

 

 

 

Chairman's and Chief Executive's report

 

Results

Caledonia delivered a positive net asset value per share total return ('NAVTR') of 2.6% for the year ended 31 March 2016, compared with 14.2% for the previous year. We do not seek to benchmark our performance over as short a period as a year, but rather our objective is to outperform the FTSE All-Share Total Return over ten years. This we have achieved over the last ten years when our NAVTR was 71.6%. Over shorter periods, we aim to produce overall annualised returns of between RPI+3% and RPI+6% and this has been delivered.

 

Background to the year in listed equities

Over the year, the FTSE All-Share Total Return fell by 3.9%, though the S&P 500 remained flat. Equity markets in both the US and Europe suffered two significant falls during the year, in August 2015 and in January 2016. The bull market in commodity related stocks is well and truly over, following sharp falls in the price of oil and gas and other basic commodities. However, markets recovered their poise within a couple of months on both occasions, as the requirement for income drove investors back into yielding equity investments. Having taken money out of the market last year, we took advantage of the market volatility during the year to make selective purchases of high quality businesses that match our Quoted pool's long term strategy.

 

Caledonia's competitive advantage in private equity markets

The private equity market is flush with capital looking to be invested. This is being provided by funds which have very significant unutilised commitments and banks which are once again offering high levels of debt but at very low rates. The result is keen competition for, and pricing of, private equity money. It is therefore vital for us to be able to differentiate ourselves from the competition in order to attract deals at sensible prices. In this regard, Caledonia has two significant advantages.

 

The first is the fact that we are a closed-ended investment trust, with a long term, supportive family shareholder, which enables us to invest for considerably longer than the majority of those who operate in unlisted markets, often for over a decade. Our main competition comes from the private equity industry, which raises money through funds and promises to deliver it back to fund holders within a designated period. This rarely allows them to invest for longer than five to seven years, whereas we have no such time constraints. If an investee company continues to perform and its management are of sufficient quality, we are able to remain as a shareholder rather than be forced by the time limits of a particular fund to have to sell our investment.

 

The second is our reputation. We strive to be fair and to work alongside management teams rather than, as is so often the case, take a view that managements work for us. We call this a 'hands with' rather than a 'hands on' approach. We believe that our established reputation for being a good partner for management teams continues to give us an advantage in the market place.

 

These characteristics have led to two interesting new investments this year, Seven Investment Management and Gala Bingo. Both companies were purchased without having to enter into an auction process, as the vendors and the managements believed that we would deliver on our promises and that we would be the right home for their businesses.

 

Investment performance

We take a longer term perspective when assessing Caledonia's investment performance. The construction of our portfolio, with its significant portion of unquoted investments and lack of correlation to any particular equity market, has led the board to measure performance by comparing Caledonia's NAVTR with the FTSE All-Share Total Return index over rolling ten year periods. History shows that a consistent performance of RPI+3% to RPI+6% will deliver a return that will outperform most markets over ten years. The table below shows a summary of performance against RPI for periods up to ten years and against the FTSE All-Share for ten years:

 

1 year 

3 years 

5 years 

10 years 

 

NAV total return

2.6 

34.9 

49.2 

71.6 

Annualised

 

 

 

 

NAV total return

2.6 

10.5 

8.3 

5.5 

Retail Prices Index

1.6 

1.6 

2.3 

3.0 

Performance against RPI

1.0 

8.9 

6.0 

2.5 

FTSE All-Share Total Return

 

 

 

4.7 

Performance against FTSE

 

 

 

0.8 

 

Income

Portfolio income for the year rose by 7.3% to £50.2m which, after expenses, fully covered the dividend for the year. We place a strong emphasis on income yield in our investment strategy, as this ensures that we purchase cash generative companies which have the ability not only to increase their capital value but also to pay growing dividends to their shareholders on an annual basis. This supports our objective of paying an increasing annual dividend to our shareholders, which we have now done for forty-nine consecutive years.

 

Expenses

Our ongoing charges ratio for the year was 1.01%, compared with 0.96% in 2015 on a like-for-like basis. The increase primarily reflected the costs of temporary office accommodation whilst our head office is being refurbished. Caledonia's business model, which includes significant investment in unquoted businesses, requires more resource than a pure quoted equity portfolio, hence we have higher costs than a typical listed fund manager. For the first time this year, we have allocated share award costs relating to our performance-based incentive schemes to capital, in line with industry practice.

 

Balance sheet and cash

At the year end, our balance sheet was ungeared with a net cash position of £22.9m, compared with net cash of £131.0m at 31 March 2015. During the year, we made investments totalling £406m and divestments of £315m, excluding purchases and sales within the Income & Growth pool. The two most substantial new investments were £74m in Seven Investment Management and £92m in Gala Bingo. We received proceeds of £79m from the sale of TGE Marine and distributions of £50m from the Capital Today China fund following further realisations of its holding in JD.com.

 

Strategy

The Cayzer family, whose ancestors built from scratch the business from which Caledonia derives its origins and who now owns some 48% of the company, takes a long term view. The stability and inter-generational time horizon of the family shareholding and other shareholders has helped to define Caledonia's strategy, which remains to seek long term capital growth combined with an increasing annual dividend. This is executed by investing in two principal markets, listed equity and private equity. The company is managed via four 'pools of capital' covering both these markets, each with an allocated amount of capital and carefully designed return targets which reflect the risk appetite of the shareholder base.

 

During the year, the board carried out a detailed review of the strategy adopted in 2011. This concluded that the strategy had delivered good returns to date and should continue to do so. It is important to re-emphasise the key tenets of this strategy:

 

Strategic aims

·      To grow capital value over the long term measured in real terms

·      To pay an increasing annual dividend, which grows at or in excess of inflation over the long term

·      To manage risk commensurate with shareholders' requirements and our investment horizon

 

Investment strategy

The portfolio is structured to deliver these strategic aims through:

·      A long term investment horizon (ten years or longer), investing in quoted and unquoted businesses and funds that accumulate value over that time period

·      A diversity of investment markets via pools that together reflect our risk/return aims

·      A sustainable and increasing annual cash yield that is a prominent part of total return and covers annual dividends and expenses

 

Performance measurement:

·      To deliver annual average total returns of between RPI+3% and RPI+6% which, based on history, should deliver performance over a ten year period in line with or above most share indices, including the FTSE All-Share

 

The board however agreed to make several minor adjustments to the strategy:

·      To make some changes to the allocation ranges of some of the pools

·      To increase the Funds pool's exposure to private equity funds in the US and Asia through further commitments and to reduce its exposure to quoted market funds in those regions

·      To reduce the Funds pool's strategic requirement for income to zero, reflecting the structure of the funds in which it invests

·      To reduce the target return for the Income & Growth pool from 10% to 7%, reflecting its required risk/return profile

 

The resultant portfolio and strategic targets at current allocations are as follows:

 

Annual return targets

Target 

Current 

 

Income 

Capital 

Total 

allocation 

allocation 

Pool

Quoted

2.5 

7.5 

10.0 

25-40 

27.3 

Income & Growth

4.5 

2.5 

7.0 

15-20 

11.8 

Unquoted

5.0 

9.0 

14.0 

35-45 

39.3 

Funds

12.5 

12.5 

15-20 

18.8 

Liquidity

 

 

 

(10)-10 

2.8 

 

Review of portfolio

The portfolio, before expenses and other net assets were taken into account, returned 4.1% for the year under review. Excluding transactions within the Income & Growth pool, we invested more than £400m during the course of the year, equivalent to some 25% of the portfolio. Of this, some 40% was attributed to the Unquoted pool, with the two sizeable acquisitions of Seven Investment Management and Gala Bingo, and 40% to the Quoted pool. Realisations totalled £315m, with TGE Marine, Capital Today China and Quintain Estates being the largest.

 

 

Value 

Invest- 

 

Other 

Value 

 

 

 

2015 

ments 

Disposals 

movements 

2016 

Income 

Return 

Pool

£m 

£m 

£m 

£m 

£m 

£m 

Quoted

447.7 

156.9 

(112.9)

(42.4)

449.3 

13.9 

(7.0)

Income & Growth

202.1 

142.6 

(135.8)

(14.8)

194.1 

8.6 

(0.4)

Unquoted

510.3 

171.5 

(88.6)

53.1 

646.3 

25.8 

15.2 

Funds

327.7 

77.6 

(113.6)

16.7 

308.4 

1.9 

5.9 

Portfolio

1,487.8 

548.6 

(450.9)

12.6 

1,598.1 

50.2 

4.1 

Other

139.1 

 

 

 

46.2 

 

 

Net assets

1,626.9 

 

 

 

1,644.3 

 

2.6 

 

The Unquoted pool produced a 15.2% return, which was commendable and included over £26m of income, an uplift of 12% over the previous year. The main driver of value was our investment in Park Holidays, where profitability increased significantly for the second consecutive year, enabling a refinancing of its bank facilities and payment of a special dividend just after the year end. The Funds pool also produced a respectable return of 5.9%, especially considering that over a third of its investments are in quoted market funds. These pools provide a good mitigation to the more volatile returns of the quoted equity markets. The Quoted pool suffered from its holding in Bristow Group falling considerably in value, though in line with the oil price. This pool, however, took advantage of the fall in equity markets in August to add several new holdings. The Income & Growth pool demonstrated its robust nature in the face of falling markets, ending the year with a broadly flat overall return. This was a particularly good effort, for which Jonathan Greig, in his first year as the manager of the fund, should take credit.

 

The changes to pool allocations have been mentioned in the strategy section above. The only pool currently outside its strategic range, some 3% below its lower range, is Income & Growth. This reflects the nature of the pool which we use, alongside cash and facilities, to provide liquidity or a store for capital as and when required. The exact timing of our larger investments and divestments from the Unquoted pool is difficult to estimate and the liquid nature of the Income & Growth pool adds to our flexibility.

 

Overview of pool performance

 

Quoted (£449m, 27% of net assets)

We invest in companies with established business models, strong balance sheets and good returns on capital and strong annual cash flows.

 

The Quoted pool produced a negative total return of 7.0% for the year. Performance was held back by falls in the share price of Bristow Group and AG Barr, in which we have large holdings. Having taken profits from Bristow a couple of years ago and with our deep knowledge of the business gathered from over 25 years as an investor, we felt comfortable in adding to our holding at an advantageous price. AG Barr suffered from poor investor sentiment whilst the sugar tax argument raged in political circles. We have owned an 8% stake in this company for many years and believe that its prospects remain good, led by an excellent management team. Other notable detractors from performance were Rolls-Royce, which we sold following several profit warnings, and Avanti Communications, in which we significantly reduced our stake in the early part of the year.

 

On the bright side, more recent additions to the portfolio, including Microsoft, Thermo Fisher Scientific, Unilever, British American Tobacco and Colgate Palmolive, all produced returns of over 20%. Quintain Estates was taken over during the year at a good premium and Hill & Smith continued to produce excellent results that translated into a strong share price performance.

 

We have been overall sellers in the quoted markets for several years, as valuations have become stretched, although the occasional market hiccup has allowed us to deploy some capital, as happened in August this year. However, we remain wary of high market levels, low investor confidence and signs that GDP growth is slowing a little.

 

Income & Growth (£194m, 12% of net assets)

We invest in a portfolio of liquid global equities that produces a reliable and increasing income stream.

 

The portfolio was repositioned earlier in the year to take a more defensive stance. With the benefit of hindsight, this proved well timed and the result for the year, a flat return, compared well with a market that retreated by 4%. The pool also returned a 4.1% dividend cash yield, which helped to underpin our overall income requirement.

 

Unquoted (£646m, 39% of net assets)

We invest in unlisted businesses requiring capital and an investor with a balance sheet who is able to provide a long term perspective. We mainly invest in majority positions.

 

The Unquoted pool returned over 15% for the year under review, including over £25m of income. Park Holidays was the outstanding performer in the pool, producing a total return of 63% over the course of the year, which included a £12m dividend. In addition, Cobehold, the Belgian investment company, produced a healthy 23% sterling return after a couple of flat years.

 

The market remains busy with plenty of businesses available for purchase, the Unquoted team reviewing over 220 during the year. We sold one business during the year, TGE Marine for £79m, and since the year end have realised our stake in Bowers & Wilkins, the premium audio equipment manufacturer, for £24m. We made two purchases during the year, Seven Investment Management ('7IM') for £74m and Gala Bingo for £92m. Both businesses fit our criteria well and have made good starts in the portfolio.

 

7IM is a fast growing wealth management company with funds under management of £10bn. The experienced management team, who started 7IM 11 years ago, were introduced to Caledonia whilst searching for replacement shareholders and we were pleased that we had the characteristics that they were looking for in a shareholder.

 

Gala Coral had been searching for a purchaser for its retail bingo business prior to its merger with Ladbrokes. The head of our Unquoted team knew the business well from earlier in his career and we were able to agree terms to buy this substantial and cash generative company, because of our ability to move quickly to close the deal.

 

Since 2011, when Caledonia's new strategy was implemented, the pool has produced an annualised return of 12.4%. Over the past three years this has increased to 17.4%. The objective of the pool is to produce consistent returns, both on capital and income accounts, without taking too much risk. The businesses that we have purchased over the past five years reflect this strategy and have the capability of producing good returns in the future.

 

Funds (£308m, 19% of net assets)

We invest in both private equity and quoted market funds, with an emphasis on providing exposure to areas of the world where we are less willing to invest directly.

 

The Funds pool return of 5.9% was respectable considering the volatile markets in Asia where we have several quoted market fund investments. We took the opportunity created by market weakness to top up several holdings, including PVAM Perlus Microcap, Arlington AVM Ranger, Macquarie Asia New Stars and NTAsian.

 

The private equity portfolio continued to perform well and we made several new commitments during the course of the year to funds in the US and Asia.

 

We received distributions of £50m from the Capital Today China fund, a large portion of which was proceeds from its sale of JD.com. This fund has produced a return of 11.7x money invested and an IRR of 47.5% so far over its ten year life. Kathy Xu, the manager, has delivered outstanding results, having backed four separate businesses that have returned over 10x the initial investment. We consider ourselves fortunate to have been a cornerstone investor in this fund.

 

Looking ahead, the Funds pool will increase its exposure to private equity funds, particularly in the US which is a mature market, and also in Asia, though at a lower rate due to the infancy of this market.

 

Dividend and discount

The company paid an interim dividend of 14.3p on 7 January 2016 and a second interim of 38.3p on 1 April 2016 making a total for the year of 52.6p, the 49th consecutive year in which the annual dividend has been raised. No final dividend is proposed. The dividend is a vital component of our return to shareholders and the strategy of the company is focused on its maintenance and steady increase. During the year, the discount of the share price to our NAV per share ranged between 12% and 26% and the share price rose marginally, from 2281p at the beginning of the year to 2285p, whereas the FTSE All-Share fell by some 7%.

 

We did not make any share buybacks during the year, but we will again seek the necessary permissions from shareholders at the AGM to buy in shares should they offer particular value.

 

Board

Robert Woods stepped down from the board in March 2016. He joined in 2011 at a time of strategic change at Caledonia and his depth of experience and wisdom was a particular source of strength for the company and management during his time on the board. We wish him well in his retirement and will miss his insights into the world of trade that stemmed from his career in shipping.

 

Outlook

We are faced with several seminal moments this year. There is a referendum on British membership of the EU and the US Presidential election, both of which have the potential to destabilise the existing order. There is a lack of fundamental confidence in GDP growth, be it in China, the US, Europe, or at home in the UK. The central bankers have utilised extreme monetary policies to stimulate economies without much effect and seemingly have few tools to bring to bear if growth deteriorates. Equity markets have witnessed a prolonged period of growth but are seemingly expensive, perhaps lacking the underlying earnings growth from companies to justify those valuations. However, investors have few alternative options, with bond yields at record lows.

 

We have invested in companies that have consistent and dependable cash flows, such that they are able to pay us annual dividends whilst continuing to grow steadily We have exposure through the listed markets to some of the world's leading brands that will continue to sell goods to consumers and businesses alike whatever the state of the economy and our unquoted portfolio compliments and diversifies the shorter term volatility of the quoted markets. This gives us confidence that we will be able to meet our shareholders' requirements for capital growth and income over the longer term, without needing to expose their capital to undue risk.

 

 

Rod Kent

Chairman

Will Wyatt

Chief Executive

 

 

Portfolio summary

 

Holdings over 1% of net assets at 31 March 2016 were as follows:

 

 

 

 

 

 

Net 

 

 

 

 

Value 

assets 

Name

Pool

Geography

Business

£m 

Park Holidays

Unquoted

UK

Caravan parks operator

150.4 

9.1 

Cobehold

Unquoted

Belgium

Investment company

111.2 

6.8 

Gala Bingo

Unquoted

UK

Bingo operator

92.3 

5.6 

Seven Investment Management

Unquoted

UK

Investment management

73.6 

4.5 

Capital Today China Growth fund

Funds

China

Private equity fund

59.2 

3.6 

The Sloane Club

Unquoted

UK

Residential club

58.8 

3.6 

Choice Care Group

Unquoted

UK

Care homes provider

54.0 

3.3 

AG Barr

Quoted

UK

Soft drinks

50.1 

3.0 

Bristow Group

Quoted

US

Helicopter services

38.6 

2.4 

British American Tobacco

Quoted/I&G

UK

Tobacco

36.6 

2.2 

Macquarie Asia New Stars fund

Funds

Asia

Quoted market fund

32.6 

2.0 

Flowserve

Quoted

US

Industrial engineering

30.0 

1.8 

Close Brothers

Quoted

UK

Financial services

29.2 

1.8 

Polar Capital

Quoted

UK

Fund manager

28.3 

1.7 

Arlington AVM Ranger fund

Funds

US

Quoted market fund

28.1 

1.7 

Latshaw Group

Unquoted

US

Manufacturing

26.7 

1.6 

Microsoft

Quoted

US

Infrastructure technology

25.9 

1.6 

Jardine Matheson

Quoted

Singapore

Industrial engineering

25.1 

1.5 

Oracle

Quoted

US

Infrastructure technology

24.5 

1.5 

Bowers & Wilkins

Unquoted

UK

Audio equipment

24.0 

1.5 

Aberdeen US PE funds

Funds

US

Funds of funds

23.0 

1.4 

Spirax Sarco

Quoted

UK

Steam engineering

22.9 

1.4 

PVAM Perlus Microcap fund

Funds

US

Quoted market fund

22.5 

1.4 

NTAsian funds

Funds

Asia

Quoted market funds

21.6 

1.3 

Union Pacific

Quoted

US

Railroad operator

20.7 

1.3 

Satellite Information Services

Unquoted

UK

Broadcasting services

20.0 

1.2 

LondonMetric Property

Quoted

UK

Property investment

18.9 

1.1 

Livingbridge funds

Funds

UK

Private equity funds

18.1 

1.1 

Hill & Smith

Quoted

UK

Infrastructure products

17.9 

1.1 

Nestlé

Quoted

Switzerland

Packaged foods

17.6 

1.1 

JF Lehman funds

Funds

US

Private equity funds

16.8 

1.0 

Other investments

 

 

 

378.9 

23.0 

Investment portfolio

 

 

 

1,598.1 

97.2 

Cash and other items [2]

 

 

 

46.2 

2.8 

Net assets

 

 

 

1,644.3 

100.0 

 

1.

Geography is based on the country of listing, country of domicile for unlisted investments and underlying regional analysis for funds.

2.

Unallocated investments totalling £11.1m are included in Cash and other items.

 

 

Pool distribution

 

Geographic distribution

 

Asset class distribution

Quoted

27% 

 

United Kingdom

55% 

 

Listed equities

39% 

Income & Growth

12% 

 

Continental Europe

11% 

 

Private companies

39% 

Unquoted

39% 

 

North America

22% 

 

Private equity funds

11% 

Funds

19% 

 

Asia

12% 

 

Quoted market funds

8% 

Cash and other items

3% 

 

 

 

 

Cash and other items

3% 

 

 

Risk management

 

Effective risk management is a key component of the company's business model and assists in ensuring that the different parts of the group operate within strategic risk parameters. The board has overall responsibility for setting and monitoring the company's risk appetite.

 

Principal risks

Mitigation

Key developments

Strategic

 

 

Risks in relation to the appropriateness of the business model to deliver long term growth in capital and income and the effective communication and delivery of the business model.

 

Strategic risks include the appropriate allocation of capital in relation to geographic, sector and currency exposures.

The company's business model and strategy are reviewed periodically, against market conditions and target returns.

 

The performance of the company and its key risks are monitored regularly by management and the board.

Caledonia reviews its investment strategy annually, taking into consideration the current and potential future investing environment and discussions with executives. The investment strategy is reviewed and approved by the board.

 

 

 

Investment

 

 

Risks in respect of specific investment and realisation decisions.

 

Investment risks include the appropriate research and due diligence of new investments and the timely execution of both investments and realisations for optimising shareholder value.

Pool managers have well-developed networks through which they attract proprietary deal flow.

 

Investment opportunities are subject to rigorous and disciplined investment appraisals and multi-stage approval processes. Target entry and exit events and prices are monitored and updated regularly, in relation to market conditions and strategic aims.

Caledonia has continued actively to recruit new members to its investment teams, and has expanded the range of tools used in the investment assessment process.

 

 

 

Market

 

 

Risk of losses in value of investments arising from sudden and significant movements in market prices, particularly in highly volatile markets.

 

Caledonia invests primarily in listed equities, private companies and equity funds. Its principal market risks are therefore equity price volatility, foreign exchange rate movements and interest rate volatility.

Market risks and sensitivities are reviewed on a weekly basis and actions taken to balance appropriately risk and return.

 

A regular review of market and investment volatility and value at risk is conducted by the board and the portfolio is realigned with strategic aims where appropriate. Reviews also consider investment concentration, currency and liquidity exposures.

An active year has seen Caledonia reinvest much of the asset value taken out of markets in 2015, taking opportunities that short term volatility and uncertainty provides to invest in strong long term businesses.

 

 

 

Liquidity

 

 

Risk that liabilities cannot be met or new investments made due to a lack of liquidity. Such risk can arise from not being able to sell an investment due to lack of a market or from not holding cash or being able to raise debt.

Detailed cash forecasting for six months ahead is updated and reviewed weekly, including the expected drawdown of capital commitments.

 

Loan facilities are maintained to provide appropriate liquidity headroom.

 

The liquidity of the portfolio is reviewed regularly.

We have continued to manage our investment process to ensure we minimise the need to access our available facilities.

 

At 31 March 2016, we had net cash of £22.9m and undrawn, committed borrowing facilities of £175m, which are in place up to April 2018.

 

 

 

Operational

 

 

Risks arising from inadequate or failed processes, people and systems or from external factors.

 

Operational risks arise from the recruitment, development and retention of staff, systems and procedures and business disruption.

Systems and control procedures are developed and reviewed regularly. They are tested, as part of the annual programme of controls assurance, to ensure effective operation.

 

Appropriate remuneration and other policies are in place to encourage the retention of key staff. Business continuity plans are maintained, using an offsite facility.

A temporary relocation of offices from Cayzer House to Stratton House was achieved, with no interruption to operations or IT systems.

 

The board has reviewed and approved our business continuity plans during the year.

 

 

 

Regulatory and legal

 

 

Risk arising from exposure to litigation or fraud and adherence to the tax and regulatory environment, as Caledonia operates across a number of jurisdictions and in an industry that has been subject to increasing regulatory oversight.

Caledonia has internal resources to consider all regulatory and tax matters as they arise. Use is made of advisers and the Association of Investment Companies, of which Caledonia is a member and on whose self-managed investment company committee it is represented. Regular training is undertaken.

There have been no significant additional regulatory requirements in the year.

 

 

 

 

 

Group statement of comprehensive income
for the year ended 31 March 2016

 

 

2016

2015

 

Revenue 

Capital 

Total 

Revenue 

Capital 

Total 

 

£m 

£m 

£m 

£m 

£m 

£m 

Revenue

 

 

 

 

 

 

Investment income

50.7 

50.7 

47.2 

47.2 

Other income

0.7 

0.7 

0.5 

0.5 

Gains and losses on fair value investments

12.5 

12.5 

179.9 

179.9 

Gains on fair value property

0.2 

0.2 

0.3 

0.3 

Total revenue

51.4 

12.7 

64.1 

47.7 

180.2 

227.9 

Management expenses

(16.2)

(7.4)

(23.6)

(14.3)

(4.6)

(18.9)

Other non-recurring expenses

(3.0)

(3.0)

(2.6)

(2.6)

Performance fees

(0.1)

(0.1)

(1.1)

(1.1)

Guarantee obligation provided

(0.7)

(0.7)

Profit before finance costs

32.2 

5.2 

37.4 

30.8 

173.8 

204.6 

Treasury interest receivable

0.2 

0.2 

0.3 

0.3 

Finance costs

(1.8)

(1.8)

(1.6)

(1.6)

Exchange movements

0.4 

0.4 

1.2 

1.2 

Profit before tax

31.0 

5.2 

36.2 

30.7 

173.8 

204.5 

Taxation

3.2 

1.7 

4.9 

2.1 

1.1 

3.2 

Profit for the year

34.2 

6.9 

41.1 

32.8 

174.9 

207.7 

Other comprehensive income items never to be reclassified to profit or loss

 

 

 

 

 

 

Actuarial gain/(loss) on defined benefit pension schemes

2.3 

2.3 

(2.7)

(2.7)

Tax on other comprehensive income

(0.6)

(0.6)

0.9 

0.9 

Total comprehensive income

34.2 

8.6 

42.8 

32.8 

173.1 

205.9 

 

 

 

 

 

 

 

Basic earnings per share

62.0p 

12.5p 

74.5p 

59.5p 

317.5p 

377.0p 

Diluted earnings per share

60.8p 

12.3p 

73.1p 

58.6p 

312.5p 

371.1p 

 

The total column of the above statement represents the group's statement of comprehensive income, prepared in accordance with IFRSs as adopted by the European Union.

 

The revenue and capital columns are supplementary to the group's statement of comprehensive income and are prepared under guidance published by the Association of Investment Companies.

 

The profit for the year and total comprehensive income for the year is attributable to equity holders of the parent.

 

 

Statement of financial position
at 31 March 2016

 

 

Group

Company

 

2016 

2015 

2016 

2015 

 

£m 

£m 

£m 

£m 

Non-current assets

 

 

 

 

Investments held at fair value through profit or loss

1,609.2 

1,498.8 

1,604.7 

1,496.2 

Investments in subsidiaries held at cost

0.8 

0.8 

Property, plant and equipment

25.7 

19.1 

Deferred tax assets

2.8 

2.4 

Employee benefits

3.2 

1.9 

Non-current assets

1,640.9 

1,522.2 

1,605.5 

1,497.0 

Current assets

 

 

 

 

Trade and other receivables

8.3 

7.3 

22.4 

5.5 

Current tax assets

2.0 

0.4 

2.3 

1.2 

Cash and cash equivalents

23.8 

140.0 

23.8 

138.7 

Current assets

34.1 

147.7 

48.5 

145.4 

Total assets

1,675.0 

1,669.9 

1,654.0 

1,642.4 

Current liabilities

 

 

 

 

Bank overdrafts

(0.9)

Trade and other payables

(14.1)

(16.0)

(7.9)

(11.7)

Employee benefits

(1.9)

(2.4)

Provisions

(9.0)

(10.4)

(9.0)

(9.0)

Current liabilities

(25.9)

(28.8)

(16.9)

(20.7)

Non-current liabilities

 

 

 

 

Interest-bearing loans and borrowings

(9.0)

Employee benefits

(4.5)

(5.0)

Deferred tax liabilities

(0.3)

(0.2)

Non-current liabilities

(4.8)

(14.2)

Total liabilities

(30.7)

(43.0)

(16.9)

(20.7)

Net assets

1,644.3 

1,626.9 

1,637.1 

1,621.7 

 

 

 

 

 

Equity

 

 

 

 

Share capital

3.2 

3.2 

3.2 

3.2 

Share premium

1.3 

1.3 

1.3 

1.3 

Capital redemption reserve

1.3 

1.3 

1.3 

1.3 

Capital reserve

1,333.7 

1,325.1 

1,335.0 

1,328.6 

Retained earnings

325.0 

313.2 

316.5 

304.5 

Own shares

(20.2)

(17.2)

(20.2)

(17.2)

Total equity

1,644.3 

1,626.9 

1,637.1 

1,621.7 

 

 

 

 

 

Undiluted net asset value per share

2944p

2952p

 

 

Diluted net asset value per share

2890p

2906p

 

 

 

The financial statements were approved by the board and authorised for issue on 19 May 2016 and were signed on its behalf by:

 

Will Wyatt

Chief Executive

Stephen King

Finance Director

 

 

Statement of changes in equity
for the year ended 31 March 2016

 

 

 

 

Capital 

 

 

 

 

 

 

 

redemp- 

 

 

 

 

 

Share 

Share 

tion 

Capital 

Retained 

Own 

Total 

 

capital 

premium 

reserve 

reserve 

earnings 

shares 

equity 

 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

Group

 

 

 

 

 

 

 

Balance at 31 March 2014

3.2 

1.3 

1.3 

1,152.6 

304.4 

(17.2)

1,445.6 

Total comprehensive income

 

 

 

 

 

 

 

Profit for the year

174.9 

32.8 

207.7 

Other comprehensive income

(1.8)

(1.8)

Total comprehensive income

173.1 

32.8 

205.9 

Transactions with owners of the company

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

Exercise of options

1.2 

1.2 

Share-based payments

3.3 

3.3 

Own shares purchased

(1.2)

(1.2)

Own shares cancelled

(0.6)

(0.6)

Dividends paid

(27.3)

(27.3)

Total transactions with owners

(0.6)

(24.0)

(24.6)

Balance at 31 March 2015

3.2 

1.3 

1.3 

1,325.1 

313.2 

(17.2)

1,626.9 

Total comprehensive income

 

 

 

 

 

 

 

Profit for the year

6.9 

34.2 

41.1 

Other comprehensive income

1.7 

1.7 

Total comprehensive income

8.6 

34.2 

42.8 

Transactions with owners of the company

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

Exercise of options

0.7 

0.7 

Share-based payments

5.8 

5.8 

Own shares purchased

(3.7)

(3.7)

Dividends paid

(28.2)

(28.2)

Total transactions with owners

(22.4)

(3.0)

(25.4)

Balance at 31 March 2016

3.2 

1.3 

1.3 

1,333.7 

325.0 

(20.2)

1,644.3 

Company

 

 

 

 

 

 

 

Balance at 31 March 2014

3.2 

1.3 

1.3 

1,154.5 

297.1 

(17.2)

1,440.2 

Profit and total comprehensive income

174.7 

31.4 

206.1 

Transactions with owners of the company

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

Exercise of options

1.2 

1.2 

Share-based payments

3.3 

3.3 

Own shares purchased

(1.2)

(1.2)

Own shares cancelled

(0.6)

(0.6)

Dividends paid

(27.3)

(27.3)

Total transactions with owners

(0.6)

(24.0)

(24.6)

Balance at 31 March 2015

3.2 

1.3 

1.3 

1,328.6 

304.5 

(17.2)

1,621.7 

Profit and total comprehensive income

6.4 

34.4 

40.8 

Transactions with owners of the company

 

 

 

 

 

 

 

Contributions by and distributions to owners

 

 

 

 

 

 

 

Exercise of options

0.7 

0.7 

Share-based payments

5.8 

5.8 

Own shares purchased

(3.7)

(3.7)

Dividends paid

(28.2)

(28.2)

Total transactions with owners

(22.4)

(3.0)

(25.4)

Balance at 31 March 2016

3.2 

1.3 

1.3 

1,335.0 

316.5 

(20.2)

1,637.1 

                 

 

 

Statement of cash flows
for the year ended 31 March 2016

 

 

Group

Company

 

2016 

2015 

2016 

2015 

 

£m 

£m 

£m 

£m 

Operating activities

 

 

 

 

Dividends received

48.3 

45.0 

48.3 

45.0 

Interest received

1.3 

3.6 

0.7 

2.6 

Cash received from customers

0.2 

0.5 

Cash paid to suppliers and employees

(20.7)

(18.8)

(28.9)

(18.2)

Taxes received

0.5 

0.3 

0.5 

0.3 

Taxes paid

(0.4)

(0.4)

Group tax relief received

2.5 

1.7 

3.3 

2.0 

Net cash flow from operating activities

31.7 

32.3 

23.5 

31.7 

Investing activities

 

 

 

 

Purchases of investments

(548.0)

(240.4)

(545.2)

(239.2)

Proceeds from disposal of investments

450.5 

372.7 

455.1 

358.7 

Purchases of property, plant and equipment

(6.6)

(0.5)

Net cash flow from/(used in) investing activities

(104.1)

131.8 

(90.1)

119.5 

Financing activities

 

 

 

 

Interest paid

(1.5)

(1.6)

(1.1)

(1.2)

Dividends paid to owners of the company

(28.2)

(27.3)

(28.2)

(27.3)

Proceeds from new borrowings

170.0 

20.0 

30.0 

Repayment of borrowings

(179.0)

(51.0)

(30.0)

(20.0)

Loan receipts from subsidiaries

7.1 

15.1 

97.6 

9.0 

Loan payments to subsidiaries

(10.1)

(11.6)

(113.6)

(7.9)

Exercise of share options

0.7 

1.2 

0.7 

1.2 

Purchase of own shares

(3.7)

(1.8)

(3.7)

(1.8)

Net cash flow used in financing activities

(44.7)

(57.0)

(48.3)

(48.0)

Net increase/(decrease) in cash and cash equivalents

(117.1)

107.1 

(114.9)

103.2 

Cash and cash equivalents at year start

140.0 

32.9 

138.7 

35.5 

Cash and cash equivalents at year end

22.9 

140.0 

23.8 

138.7 

 

 

Notes to the final results announcement

 

1. General information

Caledonia Investments plc is an investment trust company domiciled in the United Kingdom and incorporated in England in 1928, under the Companies Acts 1908 to 1917. The address of its registered office is 2nd Floor Stratton House, 5 Stratton Street, London W1J 8LA. The ordinary shares of the company are premium listed on the London Stock Exchange.

 

The financial information included in this announcement has been prepared using accounting policies consistent with International Financial Reporting Standards ('IFRSs') as adopted by the European Union.

 

In the current year the group has not adopted any new standards or interpretations.

 

2. Dividends

Amounts recognised as distributions to owners of the company in the year were as follows:

 

 

2016

2015

 

p/share 

£m 

p/share 

£m 

Final dividend for the year ended 31 March 2015 (2014)

36.8 

20.3 

35.7 

19.7 

Interim dividend for the year ended 31 March 2016 (2015)

14.3 

7.9 

13.8 

7.6 

 

51.1 

28.2 

49.5 

27.3 

 

 

 

 

 

Second interim dividend for the year ended 31 March 2016

38.3 

21.1 

 

The second interim dividend has not been included as a liability in these financial statements. This dividend was paid on 1 April 2016. The ex-dividend date was 3 March 2016.

 

For the purposes of section 1158 of the Corporation Tax Act 2010 and associated regulations, the dividends payable for the year ended 31 March 2016 are the interim and second interim dividends for that year, amounting to £29.0m (2015 - interim and final £27.9m).

 

3. Earnings per share

Basic and diluted earnings per share

The calculation of basic earnings per share of the group was based on the profit attributable to shareholders and the weighted average number of shares outstanding during the year. The calculation of diluted earnings per share included an adjustment for the effects of dilutive potential shares.

 

The profit attributable to shareholders (basic and diluted) was as follows:

 

 

2016 

2015 

 

£m 

£m 

Revenue

34.2 

32.8 

Capital

6.9 

174.9 

Total

41.1 

207.7 

 

The weighted average number of shares was as follows:

 

 

2016 

2015 

 

000's 

000's 

Issued shares at year start

55,381 

55,411 

Effect of shares cancelled

(16)

Effect of shares held by the employee share trust

(225)

(296)

Basic weighted average number of shares in the year

55,156 

55,099 

Effect of performance shares, share options and deferred bonus awards

1,035 

873 

Diluted weighted average number of shares in the year

56,191 

55,972 

 

4. Operating segments

The following is an analysis of the profit before tax for the year and assets analysed by primary operating segments:

 

 

Profit before tax

Assets

 

2016 

2015 

2016 

2015 

 

£m 

£m 

£m 

£m 

Quoted pool

(33.9)

16.9 

449.3 

447.7 

Income & Growth pool

(0.8)

21.5 

194.1 

202.1 

Unquoted pool

79.2 

87.8 

646.3 

510.3 

Funds pool

18.6 

100.1 

308.4 

327.7 

Investment portfolio

63.1 

226.3 

1,598.1 

1,487.8 

Other investments

1.0 

1.6 

11.1 

11.0 

Total revenue/investments

64.1 

227.9 

1,609.2 

1,498.8 

Cash and cash equivalents

0.2 

0.3 

22.9 

140.0 

Other items

(28.1)

(23.7)

42.9 

31.1 

Reportable total

36.2 

204.5 

1,675.0 

1,669.9 

 

5. Share-based payments

In the year to 31 March 2016, participating employees in the performance share scheme were awarded options over 214,152 shares at nil-cost (2015 - 200,722 shares).

 

Also in the year to 31 March 2016, participating employees received deferred awards over 51,328 shares (2015 - 59,229 shares). Matching awards of 51,328 shares were granted (2015 - 59,229 shares), which depend on company performance.

 

The IFRS 2 expense included in profit or loss for the year was £5.8m (2015 - £3.3m).

 

6. Provisions

During the year, the group utilised a £1.4m litigation provision, related to a claim arising from the acquisition of a subsidiary in 2013. In the prior year, the group and company recognised a £0.7m solvency guarantee provision, the group recognised a £1.4m litigation provision, related to a claim arising from the acquisition of a subsidiary in 2013, and the company released a £2.6m bank guarantee provision, related to a subsidiary's bank loan that was repaid during the year.

 

With the exception of the litigation provision, these provisions were allocated to the capital reserve. As the matters that gave rise to the provisions were expected to be resolved over the next year, all provisions were classified as current liabilities.

 

7. 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 year end and on the number of ordinary shares in issue at the year end less ordinary shares held by the Caledonia Investments plc Employee Share Trust. The group's diluted net asset value per share assumes the exercise of all outstanding in-the-money share options and the calling of performance share and deferred bonus awards.

 

 

2016

2015

 

Net 

Number 

 

Net 

Number 

 

 

assets 

of shares 

NAV 

assets 

of shares 

NAV 

 

£m 

000's 

p/share 

£m 

000's 

p/share 

Undiluted

1,623.2 

55,136 

2944 

1,626.9 

55,107 

2952 

Adjustments

0.5 

1,057 

(54)

1.2 

924 

(46)

Diluted

1,623.7 

56,193 

2890 

1,628.1 

56,031 

2906 

 

Net asset value per share is calculated in accordance with AIC guidance and, in particular, recognises dividends payable on the ex-dividend date. Net assets in 2016 are stated after deducting the second interim dividend of £21.1m, which had an ex-dividend date of 3 March 2016 and was paid on 1 April 2016.

 

8. Capital commitments

At the reporting date, the group and company had entered into unconditional commitments to limited partnerships, commitments to other investment funds and loan facilities to portfolio companies, as follows:

 

 

Group

Company

 

2016 

2015 

2016 

2015 

 

£m 

£m 

£m 

£m 

Investments

 

 

 

 

Contracted but not called

252.0 

128.9 

264.1 

128.9 

Conditionally contracted

30.6 

29.7 

30.6 

29.7 

 

282.6 

158.6 

294.7 

158.6 

 

9. Financial information

The information in this final results announcement does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006 (the 'Act'), but has been derived from the statutory accounts for the year ended 31 March 2016. The auditors have reported on those statutory accounts and their report was not qualified and did not contain statements under section 498 of the Act.

 

The statutory accounts for the year ended 31 March 2016 will be delivered to shareholders on 14 June 2016 and made available for download from the company's website on that date. Also, a copy will be delivered to the Registrar of Companies in accordance with section 441 of the Act, following approval by shareholders.

 

The statutory accounts for the year ended 31 March 2016 include a 'Directors' statement of responsibility' as follows:

 

We confirm that, to the best of our knowledge:

 

-

the group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the group

 

 

-

the strategic report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that it faces.

 

 

Signed on behalf of the board:

 

Will Wyatt

Chief Executive

19 May 2016

Stephen King

Finance Director

19 May 2016

 

 

FTSE International Limited ('FTSE') © FTSE 2016. 'FTSE®' is a trade mark 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, 2nd Floor Stratton House, 5 Stratton Street, London W1J 8LA, United Kingdom, or from its website at www.caledonia.com. Neither the contents of the company's website nor the contents of any website accessible from hyperlinks on the company's website (or any other website) is incorporated into, or forms part of, this announcement.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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