Caledonia Investments PLC
18 July 2003
CALEDONIA INVESTMENTS PLC
At the AGM held at 3:00pm today Peter Buckley, Chairman, made the following
'I would just like to highlight the key features of Caledonia's past financial
I shall start with performance. Ultimately the company must be judged on this
and it is good relative and absolute performance which creates best value for
our shareholders. Market conditions over the past three years have been as bad
as, if not worse than, any in living memory - but I am pleased to say that
Caledonia's record in this context has been outstanding. Over the short, medium
and long term which are defined as one, five and ten years, Caledonia's total
shareholder return to 30th June, being the date of our last reported net asset
value per share, has outperformed that of the FTSE All Share Index by 19, 33 and
79 per cent. Furthermore Caledonia has produced positive returns over all three
of those periods. In contrast the FTSE All Share return has been negative over
one and five years and only positive over ten years.
To put it another way, £100 invested a year ago in Caledonia shares, with the
dividend reinvested, would have grown to be worth nearly £110 by the end of
June. The same £100 invested in the average FTSE share would have reduced in
value to around £90. Over five years, the £100 in Caledonia would have grown to
over £115, whereas in the average FTSE share, the £100 would have shrunk to be
worth little more than £82. And over ten years with Caledonia, the £100
invested becomes nearly £270, which compares very favourably with £191 for the
average FTSE share.
We have also been a top quartile performer amongst our peer group, the
Association of Investment Trust Global Growth sector, over 3 months, 6 months, 1
year, 3 years, 5 years and 10 years and for 5 of the 6 periods, a top decile
Long term record of dividend increases
The annual dividend payable to shareholders has been increased for each of the
past 36 years at an annual compound rate of over 9%. We can't fully track the
comparable statistics but only a sprinkling of companies can match that record.
In saying this I am acutely conscious of the perils of hubris and I would never
suggest that we can be certain to maintain this outperformance forever but we
have managed it for some time now and we shall always strive to do our best.
One feature which underpins our progressive dividend policy is the substantial
quantum of our distributable reserves. We have taken particular care on
conversion to investment trust status to preserve these reserves for, as you
know, investment trusts are prohibited from distributing gains arising from the
realisation of investments. On conversion, our distributable reserves amounted
to some £460m, or nearly 25 times our present annual dividend distribution, and
these should give us the flexibility to maintain our policy of progressive
Strengthening of the board
I would also like to make mention of the continued strengthening of our board of
directors by the recent appointment of David Thompson as an independent
non-executive director. David joins Charles Allen-Jones and Mark Davies, who
were also appointed in the last 18 months or so, all bringing with them highly
relevant skills and backgrounds of very considerable achievement. This is also
the first year when Joe Burnett-Stuart is not with us, having retired at the end
of last December, after twelve years of very valuable service. I would like to
thank him firstly for staying on beyond his originally agreed retirement date of
this time last year - which he kindly did to provide continuity following the
untimely death of Adrian Evans - but more importantly for the outstanding
contribution which he brought to our discussions over his many years of service.
It is also just over twelve months since Tim Ingram joined us as chief
executive and he has already made a considerable and a very positive
contribution to our affairs.
Achievement of investment trust status
In particular he has led our successful transition to investment trust status
which was overwhelmingly endorsed by shareholders at an EGM on 12th February
this year. This was an entirely logical move for Caledonia to make and we were
able to take advantage of a low point in the market which minimised the cost to
shareholders. As part of the process Tim reviewed our strategy and concluded
that, although our approach should be refined, we would not alter our methods of
operation or style. Indeed it was important to us that these would not be
affected by our transition to Investment Trust status - save only to relieve us
of the burden of paying capital gains tax, which should in turn lead to better
overall returns for shareholders if we can maintain our performance. This, in
the jargon therefore, all amounts to a Win - Win situation and was resoundingly
endorsed as such at the EGM.
Share price discount to net asset value per share
Part of our strategy is to broaden Caledonia's appeal as an interesting
investment vehicle for retail investors and we have already made progress in
this respect. We have begun a programme of presentations to retail fund
managers and stockbrokers and are working on introducing an ISA wrapper
alongside our existing share savings plan. Over time, these initiatives should
help to provide a wider shareholder base and to narrow the discount of the share
price to underlying net asset value per share. On this front we are pleased to
report that a steady and meaningful reduction in the discount has already taken
place. On 30th September last year - the last record date before we announced
our conversion to IT status - the discount stood at 33.5%. At our recent
financial year end on 31st March, the discount had reduced to 29.8% and at the
30th June, when we last published our net asset value, the discount had fallen
further to 22.4%.
The recent proposals
This brings me to the unfortunate leaks in the press about the proposal from
Deutsche Bank on behalf of dissident Cayzer family shareholders to liquidate
Caledonia Investments. As you now know, we did receive a formal approach, which
we took most seriously but, after taking advice from Rothschild and Cazenove,
the board unanimously considered that the proposals were not in the best
interest of all shareholders. In view of the leaks, we formally announced this
opinion on 7th July and since then nothing has happened to cause us to change
our mind. I would only comment that it seems faintly absurd to seek to demolish
a successful business which has done so well for its shareholders. I am,
however, pleased to tell shareholders that the board of Caledonia has been
informed by The Cayzer Trust Company that it is actively seeking a resolution of
the dispute which has arisen amongst its own shareholders.
To sum up
1. Caledonia has delivered excellent performance over the short, medium and
long term against its benchmark.
2. Caledonia will have increased its annual dividends for an unbroken period
of 36 years.
3. Caledonia has recently strengthened its board by the appointment of three
new independent non-executive directors and a new chief executive.
4. Caledonia has successfully converted to investment trust status.
5. Caledonia's share price discount to its underlying net asset value per
share has reduced markedly.
Finally the board remains fully committed to its clearly documented business
strategy, which was overwhelmingly endorsed by shareholders at the EGM in
February, and will seek to continue to implement this for the benefit of all
18 July 2003
College Hill Tel: 020 7457 2020
Past performance should not be relied on as a guide to future performance.
This information is provided by RNS
The company news service from the London Stock Exchange