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Caledonia Inv PLC (CLDN)

  Print      Mail a friend       Annual reports

Thursday 18 November, 2004

Caledonia Inv PLC

Interim Results

Caledonia Investments PLC
18 November 2004

Caledonia Investments plc

Interim Results for the six months ended 30 September 2004

Key points
•    Outperformance against benchmark of 111% and 38% over five and ten years

•    2% outperformance of NAV against FTSE All-Share over six months; NAV 
     increased by 5.2% to 1349p

•    Top AITC share price total return rankings:
     • 1st of 24 trusts over five years
     • 4th of 22 trusts over ten years

•    Total return attributable to shareholders of £36.5m

•    4% increase in interim dividend to 8.7p

•    £83m invested and £145m realised

•    Payment of elective special dividend and capital reduction

Tim Ingram, Chief Executive, commented:

'We are continuing to see a strong flow of good business opportunities where our
long term active approach is valued and can create outperformance. By carefully
selecting the right opportunities where there are strong management teams, by
continuing our active involvement with investee companies and through divesting
when appropriate, we seek to maintain our successful performance record.'

                                                                18 November 2004

  Caledonia Investments plc                       020 7457 2020 (today)
      Tim Ingram, Chief Executive                 020 7802 8080 (thereafter)
      Jonathan Cartwright, Finance Director

  College Hill                                    020 7457 2020
      Tony Friend
      Richard Pearson

Chairman's statement


I am pleased to be able to report further progress by Caledonia in the first
half of its second year as an investment trust company. Net assets per share
increased by 5.2% to 1349 pence, compared with an increase of 3.4% for the FTSE
All-Share index. Our longer term performance over five and ten years continues
to show handsome outperformance against the company's benchmarks, as detailed in
the chief executive's report.


The directors have declared an interim dividend of 8.7 pence per ordinary share,
an increase of 3.6%, in line with our policy of seeking to maintain a
progressive annual dividend.

Share price

It is most encouraging to note that, over the past few weeks, there has been a
welcome further narrowing of our share price discount to net asset value per
share. At 31 October, this amounted to some 13% compared with 30% on 31 March
2003, the day before our conversion to investment trust status, and 21% on 31
March 2004. Whilst our share price is ultimately not within our control, we have
made strenuous efforts to widen the appeal of our shares, in particular to
encourage wider retail ownership.

Elective special dividend

During the half year, we gave effect to the elective special dividend and
reduction of capital that had been proposed to resolve the long running dispute
amongst the shareholders of Caledonia's largest shareholder, The Cayzer Trust
Company, which had been damaging Caledonia's business. Under these proposals,
all shareholders were offered the opportunity to receive an elective special
dividend on up to two-ninths of their shareholdings, of an amount based on an
18% discount to the company's net asset value per share, with subsequent
cancellation of those shares on which the dividend was paid. I am pleased to
report that, putting aside Cayzer Trust, which had undertaken in advance to take
up its full entitlement in order to facilitate the buy-out of its dissident
shareholders, and Hermes, which we expected to participate given its previous
public support for the break-up of Caledonia, the shares cancelled in respect of
the other shareholders who elected to receive the special dividend amounted to
only 1% of our overall share capital. This outcome enabled us to put an end to
the misplaced and destabilising attempts by a small handful of shareholders to
liquidate Caledonia by returning £88m, or less than 10% of our shareholders'
funds. We were most encouraged by this support for our business model.


Tim Ingram, in his chief executive's report, gives details of the changes and
momentum within our investment portfolio, but we still attach considerable
importance to our longer term approach to investment. However, we have taken the
opportunity within the six months under review to reduce our shareholdings in
both Close Brothers and Kerzner International. The large weighting which both
these holdings represented in our portfolio has been brought about by the
relative success of both these investments, but notwithstanding the reduction in
shareholders' funds resulting from payment of the elective special dividend, by
the end of September, both residual shareholdings represented reduced


The economic outlook is distinctly mixed. In the UK, the politicians will be
wooing the electorate ahead of the forthcoming election, with the usual
consequences. In the USA, we have seen a return of the Republican Party, which
should augur well for the economy. However, underlying economic fault lines both
here, with large rises in government spending, often unproductive and
unsustainable without further tax increases, and in the USA, with ever
increasing deficits, do pose some threats to the more recent market stability.
On a more positive note, the continuing growth in China and India offers the
longer term prospect of a re-allocation of global economic balance. We shall
keep these issues in mind in the context of our longer term investment approach.
We continue to identify an encouraging number of opportunities, which experience
suggests do not always conform to world economic trends. Such opportunities can,
if carefully chosen, still deliver value against the trend and we shall
endeavour to maintain our successful track record.

Peter Buckley

Chief executive's report


The first six months of our financial year have seen uncertain market conditions
against a background of markedly higher oil prices, increasing instability in
Iraq and a trend of increasing interest rates. Although we have continued to
make changes to our portfolio, we have maintained a cautious approach and at the
end of the period we had no bank borrowings on Caledonia's company balance


The successful application of our consistent long term approach has again
resulted in us outperforming our benchmarks. Our five year total shareholder
return to 30 September 2004 showed a positive absolute return of 104%, while the
FTSE All-Share Total Return was negative at -7%. Over the ten year period, our
total shareholder return of 145% showed a 38% outperformance against the FTSE
All-Share Total Return. When looking at our performance, we also compare our
relative returns within our sector, the Global Growth section of investment
trusts. According to the statistics produced by the Association of Investment
Trust Companies for the period to 30 September 2004, in terms of share price
total return for our sector, we ranked first (out of 24 trusts) over five years
and fourth (out of 22 trusts) over ten years.

Over the 18 months since our conversion to investment trust status, on 1 April
2003, net asset value ('NAV') per share has increased by 47.4% to 1349p,
representing an outperformance of 16.5% when compared to the FTSE All-Share

Special dividend and capital reduction

In June this year, shareholders voted in favour of the proposal mentioned in the
chairman's statement for a partial return of funds by way of an elective special
dividend and reduction of capital. Elections were received for the special
dividend, which amounted to 1047.07p per share, on 8,407,676 ordinary shares,
representing about 11.6% of the issued ordinary share capital. A total of £88m
was then paid to the electing shareholders at the beginning of July and the
8,407,676 shares were cancelled. As the special dividend was set at an 18%
discount to NAV per share, this exercise resulted in an increase in NAV per
share of 2.3% for the remaining shares.

On 22 July, Caledonia purchased 100,000 of its shares at a price of 1015p per
share and is holding these shares in treasury.


In the first six months of our financial year, we have made £83m of new and
follow-on investments. New investments included €30m (£20m) in Cobepa, an
unquoted Belgian investment company specialising in Benelux investments, and
£11m in Incisive Media, a UK quoted publisher of business information. In
addition, follow-on investments included a further £12m in Oval, an unquoted
commercial lines insurance broking business, and £8m in Tribal Group, a UK
quoted support services company. Over the same period, we realised £145m of
investments, including £57m from the sale of part of our holding in Close
Brothers, a UK quoted merchant bank, £34m from the sale of part of our stake in
Kerzner International, owner and operator of international resort hotels and
gaming establishments, and £14m from the sale of all of our shareholding in
Radio Investments, an unquoted owner of regional radio stations in the UK.

As a result of the special dividend mentioned above and this portfolio activity,
by the end of September Caledonia was fully invested but with no bank borrowings
on its company balance sheet. This we believe to be an appropriate position for
us in present market conditions. Nonetheless, we are presently maintaining £70m
of medium term committed bank facilities. These facilities, representing just
over 8% of our net assets as at 30 September 2004, enable us to continue to be
able to take advantage of new investment opportunities without necessarily
requiring immediate divestment elsewhere.

The future

As we have previously stated, we believe that our focused efforts to grow NAV
per share, while maintaining our progressive dividend policy, best provides for
the financial aims of our shareholders. Nonetheless, we are fully aware of the
desire of our shareholders to see a further narrowing of the discount of our
share price to NAV per share. We are continuing to follow measures that can have
a beneficial effect on this discount.

Our initiatives to increase the appeal of our shares to retail shareholders are
producing good results, and the percentage of our shareholder register owned by
private shareholders is increasing. Since 1 November 2004, our shares have also
been listed on the Stock Exchange in New Zealand, where UK incorporated
investment trusts currently offer a more tax efficient means of investment for
New Zealand resident individuals, compared with other collective investment

We are continuing to see a strong flow of good business opportunities where our
long term active approach is valued and can create outperformance. By carefully
selecting the right opportunities where there are strong management teams, by
continuing our active involvement with investee companies and through divesting
when appropriate, we seek to maintain our successful performance record.

Tim Ingram
Chief executive

Finance director's report

The chairman's statement and the chief executive's report contain information on
the company's performance during the period under review. My report sets out the
basis upon which the interim accounts have been prepared and contains
information on the basis of valuation of our investments. In addition, my report
addresses the company's cash position and includes a comment on the introduction
of International Financial Reporting Standards.

Basis of presentation of interim accounts

Caledonia is an investment trust company, but we are relatively unusual in
holding trading subsidiaries as part of our investment portfolio. Our ownership
of subsidiaries requires us to prepare consolidated accounts, but the accounting
rules prevent us from including subsidiaries in the consolidated accounts at
valuation. The consolidated balance sheet would not, therefore, give a
presentation of our investment portfolio consistent with other investment
trusts. However, the company balance sheet does allow us to show the entire
portfolio (including subsidiaries) at valuation and is, therefore, considered to
be the most relevant statement in presenting our financial position. Consistent
with the presentation of other investment trusts, we also present a company
statement of total return.

As Caledonia has been an investment trust company since 1 April 2003, the
comparatives included in this interim report fully reflect this status.

Valuation of investments

Caledonia's policy is to hold investments, including subsidiaries, at fair
value. Quoted investments, for which an active market exists, are valued at
mid-market price. Unquoted investment valuations are based on the British
Venture Capital Association Guidelines.

Cash flow and gearing

The company's net funds reduced to £1.3m at 30 September 2004, from £34.0m at 31
March 2004, as we became fully invested over the period. Cash outflows included
investment purchases of £85.9m, ordinary dividend payments of £13.4m and the
payment of an elective special dividend, as described in the chief executive's
report, of £88.0m. Investment sales totalled £151.4m, including £57.1m realised
from the reduction in our holding in Close Brothers and £33.6m on the sale of
shares in Kerzner International.

In March 2004, the company's committed bank facilities were increased from £60m
to £210m in contemplation of the payment of the elective special dividend.
Maximum drawings under the facilities totalled £40m and, subsequent to the
payment of the elective special dividend in July 2004, the company's committed
facilities were reduced to £70m, with an additional £10m overdraft facility. All
drawings have now been repaid.

The difference between company and group net funds reflects the financing within
trading subsidiaries, together with intra-group transactions. At 30 September
2004, aggregate borrowings by subsidiary investments totalled £38.1m, including
euro borrowings of €19.5m (£13.4m), out of total facilities of £51.9m.

International Financial Reporting Standards

The requirement for Caledonia to adopt International Financial Reporting
Standards ('IFRS'), commencing with the year ending 31 March 2006, is a process
of major change, for which we have established a project team working in
conjunction with the external auditors and other technical advisers. The
principal differences between IFRS and UK GAAP have been identified and they are
expected to result in some change in reported net asset values. In addition,
investment trust companies are awaiting detailed guidance on how to present
their financial statements under IFRS.

The first accounts to reflect the adoption of IFRS will be the interim report
for the six months ended 30 September 2005. This interim report will include
comparative figures adjusted in accordance with IFRS, together with the required
restatement of the 31 March 2005 balance sheet.

We are committed to ensuring compliance with all material aspects of IFRS and
action is being taken to establish the accounting policies, systems and
reporting changes that will be required to be implemented.

Jonathan Cartwright
Finance director

Investment review

Close Brothers valuation: £124.6m; holding: 12.5%

Close Brothers is the largest independent quoted merchant bank in the UK and
Caledonia has been a supportive shareholder for eighteen years. The success of
this investment, due in no small part to its sound management, has resulted in
it being our largest investment by value at 30 September 2004 even after the
recent reduction of some 30% in our holding realising £57m.

For its year to 31 July 2004, Close Brothers reported excellent results. Profits
before tax and goodwill amortisation rose 39%, with good organic growth from the
banking business and markedly higher results from investment banking. The latter
included greatly improved profits from market-making, profits almost doubled
from corporate finance and profits more than doubled from asset management. This
outstanding progress was balanced by a more cautious note on the near term
outlook, but our confidence in the longer term potential of their strong
business model is undimmed.

Rathbone Brothers valuation: £32.0m; holding: 11.3%

Rathbones is a leading provider of discretionary fund management and wealth
management services for private clients and trustees, with offices in the UK,
Channel Islands, Switzerland and the British Virgin Islands.

For the six months to 30 June 2004, Rathbones reported significantly improved
results, reflecting the growth in funds under management that has been achieved
in recent years. Total funds under management increased over the half year by
2.9% to £7.0bn, compared with a fall in the FTSE 100 Index of 0.3% over the same
period, and funds under management in Rathbone Unit Trusts increased by 34.7%
over the period from £481m to £648m. Earnings per share, before goodwill
amortisation, rose to 23.03p, a 26.6% increase compared with 2003.

F&C Asset Management valuation: £20.7m; holding: 6.2%

Caledonia had been a significant shareholder in ISIS Asset Management for some
ten years when ISIS announced a merger in July 2004 with F&C to create the UK's
fourth largest asset management business, thereby achieving its stated strategic
aim to become a top five player.

Following the merger, which completed on 11 October 2004, our shareholding in
the enlarged business, renamed F&C Asset Management, has been diluted to 1.9%
and Caledonia no longer has representation on the board of the company.

The merger will create a stronger group with complementary geographical and
product ranges and scope to reduce significantly the cost base of the enlarged
business. It is anticipated to be significantly earnings enhancing in 2006, the
first full year following the merger. The transaction was well received by the

Marketform valuation: £15.1m; holding: 26.8%

Marketform is an unquoted Lloyd's insurance business, in which its management
has a substantial stake. Marketform manages the business of a consortium of
medical malpractice underwriters on a fee and profit commission basis and
participates in the consortium through its own syndicate. It also provides
general liability and professional indemnity insurance, all outside the USA.

In autumn 2003, Caledonia became a significant minority shareholder through an
investment of £15m in equity and convertible loan notes and has two
representatives on the board. Results have been in line with expectations, with
premium rates generally firm and expected to remain so.

Oval Financial Holdings valuation: £15.0m; holding: 34.0%

UK commercial insurance broking is a fragmented industry with many participants.
Oval was formed to build a national brand, while retaining the value of local
relationships, by bringing together some of the best of the regional broking
businesses, using cash and Oval's shares. Caledonia has participated in Oval by
subscribing a total of £15m for ordinary shares and convertible loan stock and
has two representatives on the board.

Oval has acquired RP Hodson, a substantial commercial broking and financial
services business based in Wakefield and London, and Bland Bankart, a leading
commercial broker with offices in Leicester, Nottingham, Birmingham and Luton.
Further acquisitions are planned and the full year's trading results are
expected to be in line with the company's budget.

SVB Holdings valuation: £9.0m; holding: 5.3%

SVB is a listed Lloyd's insurance business, underwriting speciality liability
lines as well as shorter tail business. Caledonia acquired 5.3% of the equity
for £9.1m and subscribed for £4.9m of convertible bonds last year, with the aim
of backing SVB's new management team and participating in the improved market
for insurance premiums prevailing since 11 September 2001.

Having withdrawn from the US casualty treaty reinsurance market, SVB has this
year added substantially to reserves at syndicate level in respect of business
written in that market between 1997 and 2000 by the previous management. In
addition, in September 2004, SVB made a provision of £103m at consolidated level
to cover the possibility of further deterioration on the discontinued book. The
share price has fallen since we invested, but SVB's current trading continues to
be profitable, in spite of the severe hurricane season, and earnings from
current trading are expected in due course to outweigh losses on the
discontinued book.

Polar Capital valuation: £21.9m (including funds); holding: 24.6%

Polar Capital is a research driven fund management business, managing $0.7bn in
hedge funds and $1.5bn in long-only funds. Caledonia co-founded Polar Capital in
2001, and has invested in a number of its funds. During the half year, Polar
Capital repaid £1m of subordinated loan notes, initially provided by Caledonia
for regulatory capital.

Polar Capital has had a good six months, consolidating on the strong growth in
the early part of 2004. Many of the funds launched last year are now closed to
new subscriptions for the time being. The European Market Neutral fund, which
has been incubated since spring, is starting to show solid performance and will
be marketed to potential investors over the next six months. Over the summer,
Polar Capital recruited a new team to offer an Asia ex-Japan fund, which has now
been launched.

Eddington Capital valuation: £16.5m (including funds); holding: 50.0%

Eddington Capital was co-founded by Caledonia in 2003 as a specialist manager of
high return fund of hedge funds products and launched its Triple Alpha fund on 1
September 2003, seeded by Caledonia.

In its first six months, the Triple Alpha fund returned 15% net of all fees.
Many hedge fund strategies subsequently suffered their worst six month period on
record and, as a result, Eddington's valuation gain over its full first year was
only up 5%. History suggests that such challenging conditions are unlikely to
persist, and are typically followed by a strong recovery. We remain optimistic
that significantly better net annual returns can be achieved in the medium to
long term.

Leisure and media

Kerzner International valuation: £113.4m; holding: 12.8%

Kerzner International ('KI') is a leading developer, owner and operator of
luxury resort hotels and gaming properties worldwide. Caledonia was a founder
shareholder in 1994. In July 2004, Caledonia reduced its holding in KI by
selling 1.3m shares at $47.50 per share, whilst retaining some 4.5m shares
(13%), as part of a transaction which allowed Istithmar, a company owned by the
Government of Dubai, to acquire a 13% holding in KI. Istithmar is KI's partner
in building a new $1.1bn 'Atlantis' resort on The Palm, Jumeirah in Dubai. KI
recently announced plans to build a resort casino in Morocco and, subject to
enactment of the gambling bill, three in the UK, one of which will be in the
Millennium Dome.

Adjusted earnings per share for the nine months to 30 September 2004 amounting
to $2.24 were ahead of $2.20 for the comparable period last year. The
adjustments do not include the short term business interruption effect,
estimated at 20 cents per share, associated with the recent hurricanes near to
Paradise Island in The Bahamas. Prior to this interruption, results from
Atlantis, Paradise Island had been good and bookings have since recovered very
strongly. Further investment by KI, directly or indirectly through joint
ventures, of up to $1bn is planned or underway at Paradise Island.

A G Barr valuation: £13.0m; holding: 9.4%

Caledonia has been a long term shareholder and supporter of A G Barr, which
manufactures, markets and distributes a range of carbonated soft drinks,
including the well known brands of Irn-Bru and Tizer, as well as natural juices
and mineral water.

A G Barr recently announced good interim results for the six months to 31 July
2004. In competitive markets, A G Barr was able to grow market share for its
leading brands and report marginally higher revenues. With costs well
controlled, profitability grew by 10% and the interim dividend was increased by
9%. A G Barr will continue to invest in improving its supply chain efficiency
and is confident of its future prospects. The shares rose by 8% over the period
under review.

Incisive Media valuation: £9.8m; holding: 8.8%

Incisive Media is one of the UK's foremost specialist providers of business
information. Through leading magazines, consultancy, conferences and
exhibitions, websites and a variety of other platforms, it serves a number of
business sectors, especially in retail and wholesale financial markets.
Caledonia acquired a 6.4% stake in Incisive Media through supporting a
fundraising in April 2004 to finance the acquisition of a specialist private
equity publishing business and further purchases of shares were made during the
period. Caledonia is represented on the company's board.

Incisive Media has a strong management team owning significant equity and has
grown its business successfully since its flotation in December 2000 through a
balance of acquisitions, investment in new activities and organic growth in
revenues. It recently announced record interim results and places emphasis upon
delivering consistent growth in earnings per share, achieved through increased
revenues, good cost control and the successful integration of acquired

The Sloane Club valuation: £9.2m; holding: 100%

The Sloane Club is a residential members club, based in the heart of Chelsea.
Caledonia bought the Club in 1993, which has since been enlarged and modernised.
It currently has a membership of around 3,500. A recent £1m upgrade programme
has been successfully completed.

Trading at the Club, although profitable, has been subdued due to a reduced
level of visits from overseas affiliated members and competition from heavy
discounting in the hotel sector. However, the Club is well placed to reap the
rewards of increased volumes as and when trans-Atlantic travel returns to normal
levels and the value of the dollar allows greater purchasing power.

Industrial and services

Paladin Resources valuation: £46.2m; holding: 9.4%
Paladin is an independent oil and gas exploration and production company with
assets in the North Sea, Indonesia, Romania, Tunisia and Gabon. Caledonia has
had an association with the management team from the early 1990s. During the
first half, we sold 14% of our holding in Paladin for £6.5m. Despite this, the
strength of Paladin's share price has seen the company rise to be the fourth
largest investment in our portfolio.

Paladin reported strong results for the half year to 30 June 2004 with a 9%
increase in production driving an increase in turnover to £134.1m. The 7%
increase in the interim dividend is also welcome. Paladin announced significant
further investment in its North Sea assets alongside the award of a 50% interest
in and operatorship of five blocks in Norway. A new $600m credit facility
underpins this investment and gives headroom to fund further acquisitions.

Offshore Logistics valuation: £25.7m; holding: 5.7%
Offshore Logistics, in association with Bristow, is the world's largest provider
of helicopter transportation services to the oil and gas industry. Caledonia's
original investment was in Bristow Helicopters, which formed an association with
Offshore Logistics, a NYSE listed company, in 1996.

Over the six months to 30 September 2004, Offshore Logistics' share price
increased by almost 50% to $34.42 on robust performance and the strong sentiment
underpinning the international oil price. The company reported net income of
$1.34 per diluted share for the same period, compared with $0.74 for the
comparative period, as the benefits of substantial cost reductions and some rate
adjustments on contract pricing assisted margins. The company is well positioned
to take advantage of high levels of activity stimulated by continuing demand for
drilling and production support from its principal oil industry customers.

Wallem Group valuation: £16.4m; holding: 74.4%
Wallem is a maritime services group based in Hong Kong. Caledonia has been a
shareholder of Wallem for over 12 years and has board representation. Wallem has
been performing very strongly in buoyant shipping markets. It has grown the
number of ships under management, improved the profitability of its shipping
agency division significantly and recorded very good profits from its
shipbroking activities. It finished its year to 30 September 2004 strongly and
ahead of budget.

Wallem has also expanded its operations in South Asia and Europe and announced
in August a joint venture agency operation, Pen-Wallem, in Shanghai with China's
national shipping agency. These moves position Wallem well to take full
advantage of continuing growth in trade in the Asian region. Whilst there must
be some caution about the sustainability of high charter rates, Wallem has
entered its new financial year in very good shape. As a result of the above
factors, the valuation of our investment in Wallem has increased by around 50%.

Melrose Resources valuation: £15.3m; holding: 6.7%
We built our stake in Melrose Resources, a UK listed oil and gas exploration and
production company operating in Bulgaria, Egypt and the USA, over the last year
and maintained our holding at 6.7% by participating in its recent placing and
open offer, at a cost of £1.0m.

Melrose had a busy and successful first half of 2004. Turnover increased by 125%
to £7.9m and earnings per share were 1.99p, against a loss of 0.98p in the
previous year. The Galata field in Bulgaria came on stream and there was
significant increase in reserves through development drilling in Egypt.
Production increased 170% to an average of 3,148 barrels of oil equivalent per
day ('boepd') over the six months to 30 June 2004, although the actual daily
production rate increased to over 13,000 boepd. During the period, Melrose
raised a total of £24.6m to fund working capital and to repay non-project debt.

Amber Industrial valuation: £13.0m; holding: 100%
Amber is a speciality chemicals business, focusing on the compounded silicones
and specialist industrial consumables markets. In the early summer, Amber
concluded the successful sale of its aerosol business and, as a result of the
sale, relocated its group headquarters and UK silicones operation to a new site.
The new UK silicones operation is now up and running and generally trading has
been good across the whole group, which has resulted in Amber being slightly
ahead of budget at the half year.

Easybox valuation: £11.9m; holding: 99.2%
Easybox is a self storage business currently operating four facilities in Italy
and two in Spain, which we established in 2000, following the opportune disposal
of our investment in Abacus, which we built into a leading UK self storage

Easybox's existing facilities continue to make steady progress, although
acquiring new sites has been slower than anticipated, but the company remains
hopeful that further sites will be secured before the year end.

Sterling Industries valuation: £10.0m; holding: 100%
Sterling Industries is an engineering company comprised of three core
businesses, Sterling Hydraulics, Bloom Engineering and Process Combustion
Corporation ('PCC').

Sterling Hydraulics is a manufacturer of hydraulic valves and manifold blocks
primarily for the off-highway machinery market. The company has enjoyed strong
growth in the past six months, benefiting from high commodity prices which, in
turn, drive demand for mining machinery. Bloom and PCC both operate in the
specialist thermal engineering markets. High steel prices in the US, where steel
mills are being worked flat out, have yet to benefit Bloom. Bloom's European
market remains difficult, though PCC has won some significant projects to add to
its encouragingly strong order book.

Tribal Group valuation: £9.0m; holding: 7.3%
Tribal is a UK listed leading provider of consultancy and professional support
services, predominantly operating in the UK public sector, with particular
emphasis on education, local government and health. We were previously a
shareholder in Tribal, but divested in 2001. We have recently again been
building a significant stake in the company, taking advantage of weakness in the
share price.

The public sector markets in which Tribal operates accounted for over £240bn of
spending in 2003/04, with substantial committed increases over the next three
years. Expenditure on consultancy services by the public sector has tripled
since 2000 and more than doubled to £2.15bn between 2002 and 2003. Tribal is
well positioned to benefit from this growth.


Quintain Estates & Development valuation: £41.2m; holding: 7.0%
Quintain is a property development company, with a proven track record,
specialising in commercial properties. Two of Quintain's projects are at the
Greenwich Peninsular and Wembley, which, combined, make one of the largest urban
regeneration programmes in the UK.

The share price of Quintain has shown steady growth, driven largely by the
progress of the Wembley project, and has recently received a further boost by
the announcement of the proposal for a new casino at Wembley, in a joint venture
with Caesars Entertainment, one of the world's leading gaming companies.

Edinmore valuation: £11.6m; holding: 100%
Edinmore is a wholly-owned property trading and investment company, with a
profit sharing arrangement with the management. Edinmore has established an
excellent reputation, which attracts many potentially interesting opportunities.

Most of the existing trading stock at Edinmore has been sold successfully.
Edinmore continues to look at new trading opportunities, but is currently
cautious of a slowing property market.

Savills valuation: £9.9m; holding: 3.8%
Savills is a listed property agency and advisory business operating in the UK,
continental Europe and the Far East, in which we have built our stake over the
last two years. One of Caledonia's directors is a non-executive director of
Savills, and our investment in the company complements our other activities in
the property sector.

For the first six months to 30 June 2004, Savills' turnover grew by 22% and
pre-tax profits increased by 54% as a result of strong performance in the
commercial and residential market in the UK and overseas.

Buckingham Gate valuation: £9.3m; holding: 100%
Buckingham Gate owns the freehold of the seven-floor, 42,000 sq ft office
property at 30 Buckingham Gate, London. The property houses Caledonia's
headquarters and the remaining space is let out, some to investee companies.

The decline in the London Victoria office property market of recent years
appears to have been arrested and property values have remained steady.

Managed general funds

British Empire Securities valuation: £84.3m; holding: 19.7%
British Empire is a UK investment trust whose objective is to achieve capital
growth from a focused portfolio of investments, particularly in companies whose
share prices stand at a discount to estimated underlying net asset values.
Caledonia has been a significant shareholder for over ten years and is
represented on the board.

In the year to 30 September 2004, British Empire significantly outperformed its
benchmark indices, thus reinforcing its long term record of strong performance.
Net asset value on a total return basis rose 25.2% and there was a 30.2%
increase in British Empire's share price, reflecting a narrowing of its
discount. British Empire has been the top performing AITC Global Growth sector
investment trust over one and five year periods to September 2004 on a net asset
value total return basis.

Aberforth LP fund valuation: £33.0m; holding: 25.5%
This Aberforth managed limited partnership fund has a remit to acquire
significant shareholdings in smaller UK listed companies and to work with the
management of those companies to release latent value.

Having drawn down Caledonia's full commitment of £25m by 31 March 2003, almost
£11.5m had been repaid by 30 September 2004 as a result of underlying
realisations, leaving a £13.5m net investment in the fund, valued at £33.0m. The
IRR, net of management costs and expenses, calculated on limited partners'
interests since the fund's launch totalled 29% per annum, based upon both
realised and unrealised gains and losses. Since launch, the fund has shown a
unitised total return of 133% compared with a fall of 12.2% in the FTSE
All-Share index.

Cobepa valuation: £22.7m; holding: 9.9%
Compagnie Benelux Paribas SA ('Cobepa') is a Belgian investment company that was
listed until taken private by BNP Paribas in 2000. In 2004, Caledonia formed
part of a consortium established to back the management team to purchase Cobepa
from BNP Paribas.

Cobepa has an attractive portfolio of both listed and unlisted investments
valued at €449m as at 30 June 2004, the largest being a 30% holding in Dicobel,
the parent company of Autoglass. The investment rationale behind Cobepa is to
make €20-50m investments in sectors where the management team have particular
expertise (industrial, financial services, retail and distribution, food and
beverages). It will take either minority stakes (alongside family or financial
investors) or majority stakes where the investment is structured as a leveraged
buy out. The fund is likely to concentrate its efforts in Benelux, Holland and

Significant holdings
                             Equity    Country of                                          of total
Name                        holding    incorporation  Nature of business          Total      assets
                                  %                                                  £m           %
Close Brothers 1,2             12.5    UK             Merchant banking          124.6         14.5
Kerzner International 1,2      12.8    Bahamas        Resorts owner/operator     113.4        13.2
British Empire Securities      19.7    UK             Investment trust            84.3         9.8
Paladin Resources 1             9.4    UK             Oil and gas exploration     46.2         5.4
Quintain Estates &              7.0    UK             Property holding/           41.2         4.8
Development 1                                         development
Aberforth LP fund 3            25.5    UK             Investment fund             33.0         3.9
Rathbone Brothers 1,2          11.3    UK             Fund management             32.0         3.7
Offshore Logistics 1,2          5.7    USA            Helicopter services         25.7         3.0
Cobepa 2                        9.9    Belgium        Investment fund             22.7         2.6
Polar Capital and funds        24.6    UK/Cayman      Fund management and         21.9         2.6
2,3,4                                                 funds
F&C Asset Management 1,2        6.2    UK             Fund management             20.7         2.4
Eddington Capital and          50.0    UK/Cayman      Fund management and         16.5         1.9
funds 2,3,5                                           funds
Wallem 2                       74.4    Cayman         Shipping services           16.4         1.9
Melrose Resources 1             6.7    UK             Oil and gas exploration     15.3         1.8
Marketform 2                   26.8    UK             Insurance services          15.1         1.8
Oval 2                         34.0    UK             Insurance services          15.0         1.7
Amber Industrial 2            100.0    UK             Speciality chemicals        13.0         1.5
A G Barr 1                      9.4    UK             Soft drinks                 13.0         1.5
Easybox 2                      99.2    Luxembourg     Self storage                11.9         1.4
Edinmore 2                    100.0    UK             Property trading            11.6         1.4
Sterling Industries 2         100.0    UK             Engineering                 10.0         1.2
Savills 1,2                     3.8    UK             Property agency              9.9         1.2
Incisive Media 1,2              8.8    UK             Publishing                   9.8         1.1
Buckingham Gate 2             100.0    UK             Property holding             9.3         1.1
The Sloane Club 2             100.0    UK             Residental club owner/       9.2         1.1
Tribal Group 1                  7.3    UK             Support services             9.0         1.0
SVB Holdings 1,2                5.3    UK             Insurance                    9.0         1.0
Other investments                                                                102.1        11.9
Total investments                                                                861.8       100.4
Net liquid liabilities                                                            (3.7)       (0.4)
Net assets                                                                       858.1       100.0
Dividend accrual                                                                  (5.5)
Shareholders' funds                                                              852.6

1.  Equity securities listed on the UK or overseas stock exchanges.
2.  Board representation.
3.  Advisory committee representation.
4.  Included £6.2m for the management company and £15.7m of funds.
5.  Included £0.7m for the management company and £15.8m of funds.

The table above shows all holdings representing 1% or more of total assets.

Portfolio distributions

                                                                                   £m             %
Financial                                                                       231.5          27.0
Leisure and media                                                               146.6          17.1
Industrial and services                                                         167.2          19.5
Property                                                                         92.2          10.7
Managed general funds                                                           209.9          24.5
Other                                                                            10.7           1.2
                                                                                858.1         100.0

                                                                                   £m             %
Equities - quoted                                                               578.5          67.4
Equities - unquoted                                                             126.3          14.7
Loans and fixed income                                                          100.4          11.7
Private equity LPs                                                               20.5           2.4
Hedge and other funds                                                            32.4           3.8
                                                                                858.1         100.0

                                                                                   £m             %
United Kingdom                                                                  619.5          72.2
Continental Europe                                                               48.8           5.7
North America                                                                   167.3          19.5
Asia and Far East                                                                20.7           2.4
Latin America                                                                     1.8           0.2
                                                                                858.1         100.0

Based on country of domicile or underlying spread for funds.

                                                                                   £m             %
Pounds sterling                                                                 724.1          84.4
US dollar                                                                        76.7           8.9
Euro                                                                             39.0           4.6
Other                                                                            18.3           2.1
                                                                                858.1         100.0
Based on currency of investment, net of currency hedges.

Sector weighting against the FTSE All-Share
                                                             Portfolio     Portfolio          FTSE
                                                                    £m             %             %
Financial                                                        231.5          27.0          24.4
Leisure and media                                                146.6          17.1          11.1
Industrial and services                                          167.2          19.5          22.1
Property                                                          92.2          10.7           4.5
Managed general funds                                            209.9          24.5           2.4
Other                                                             10.7           1.2          35.5
                                                                 858.1         100.0         100.0

Based on Caledonia's grouping of the FTSE industry sectors.

Unaudited company statement of total return
For the six months ended 30 September 2004

                          Six months to 30 Sep    Six months to 30 Sep      Year to 31 Mar 2004
                                  2004                    2003
                         Revenue Capital   Total Revenue Capital   Total  Revenue  Capital   Total
                              £m      £m      £m      £m      £m      £m       £m       £m      £m
Gains/(losses) on
    Realised                  -    62.2    62.2       -     3.1     3.1        -     20.1    20.1
    Unrealised                -   (27.1)  (27.1)      -   186.0   186.0        -    254.2   254.2
                              -    35.1    35.1       -   189.1   189.1        -    274.3   274.3
Income                      7.2       -     7.2     7.9       -     7.9     21.5        -    21.5
Administrative expenses    (4.9)      -    (4.9)   (3.9)      -    (3.9)    (9.1)       -    (9.1)
Costs of settlement        (0.4)      -    (0.4)   (1.0)      -    (1.0)    (2.5)       -    (2.5)
Return before finance
costs and tax               1.9    35.1    37.0     3.0   189.1   192.1      9.9    274.3   284.2
Interest payable           (0.6)      -    (0.6)   (0.6)      -    (0.6)    (1.0)       -    (1.0)
Return before tax           1.3    35.1    36.4     2.4   189.1   191.5      8.9    274.3   283.2
Tax on ordinary             0.9    (0.8)    0.1     0.7       -     0.7        -     (0.4)   (0.4)
Return attributable to
shareholders                2.2    34.3    36.5     3.1   189.1   192.2      8.9    273.9   282.8

Return per ordinary
    Basic                   3.2p   50.7p   53.9p    4.3p  262.5p  266.8p    12.3p   379.2p  391.5p
    Diluted                 3.2p   50.5p   53.7p    4.3p  262.5p  266.8p    12.3p   378.4p  390.7p

Company reconciliation of movement in shareholders' funds
                                                                            Restated     Restated
                                                                 30 Sep       30 Sep       31 Mar
                                                                   2004         2003         2004
                                                                     £m           £m           £m
Revenue return                                                      2.2          3.1          8.9
Capital return                                                     34.3        189.1        273.9
Total return                                                       36.5        192.2        282.8
Dividends                                                          (5.5)        (6.0)       (19.4)
Elective special dividend                                         (88.0)           -            -
Purchase of own shares                                             (1.0)           -            -
Employee share trust                                               (0.1)        (0.2)        (0.4)
Movement in the year                                              (58.1)       186.0        263.0
Opening balance                                                   910.7        647.7        647.7
Closing balance                                                   852.6        833.7        910.7

Dividends per ordinary share                                        8.7p         8.4p        27.0p

Unaudited company balance sheet
At 30 September 2004
                                                                             Restated     Restated
                                                                  30 Sep       30 Sep       31 Mar
                                                                    2004         2003         2004
                                                                      £m           £m           £m
Fixed assets
Investments                                                       861.8        840.5        893.0
Current assets
Debtors                                                             7.2          9.6         12.4
Short term deposits                                                 0.3         13.2         32.8
Cash at bank and in hand                                            2.3          0.5          6.0
                                                                    9.8         23.3         51.2
Creditors falling due within one year
Short term borrowings                                                 -         (3.3)            -
Other creditors                                                   (19.0)       (11.7)       (18.5)
                                                                  (19.0)       (15.0)       (18.5)
Net current liabilities                                            (9.2)         8.3         32.7
Total assets less current liabilities                             852.6        848.8        925.7
Creditors falling due after more than one year
Long term borrowings                                                  -         (4.8)        (4.8)
Amounts due to subsidiary undertaking                                 -        (10.3)       (10.2)
                                                                      -        (15.1)       (15.0)
Net assets                                                        852.6        833.7        910.7

Capital and reserves
Share capital and premium                                           4.9          5.3          5.3
Non-distributable reserves                                        488.3        367.8        454.1
Distributable reserves                                            359.4        460.6        451.3
Total shareholders' funds                                         852.6        833.7        910.7

Net asset value per ordinary share
    Before accrued dividend                                        1349p        1165p        1282p
    After accrued dividend                                         1340p        1156p        1263p

Unaudited consolidated profit and loss account
For the six months ended 30 September 2004
                                                                 30 Sep       30 Sep       31 Mar
                                                                   2004         2003         2004
                                                                     £m           £m           £m
Turnover                                                           56.4         56.6        125.8
Operating loss                                                     (4.5)        (3.8)       (11.4)
Income from investments                                             6.4          5.3         17.3
Interest receivable                                                 0.5          0.6          1.1
Interest payable                                                   (1.2)        (0.3)        (0.8)
Profit on ordinary activities before tax                            1.2          1.8          6.2
Tax on profit on ordinary activities                                0.1         (0.7)        (2.2)
Profit on ordinary activities after tax                             1.3          1.1          4.0
Minority interests (equity)                                        (0.1)        (0.1)        (0.1)
Profit for the financial year                                       1.2          1.0          3.9
Dividends                                                          (5.5)        (6.0)       (19.4)
Loss charged for the financial year                                (4.3)        (5.0)       (15.5)

Earnings per ordinary share - basic and diluted                     1.8p         1.4p         5.4p
Dividends per ordinary share                                        8.7p         8.4p        27.0p

Unaudited consolidated statement of total recognised gains and losses
For the six months ended 30 September 2004
                                                                 30 Sep       30 Sep       31 Mar
                                                                   2004         2003         2004
                                                                     £m           £m           £m
Gains/(losses) on investments
    Realised                                                       62.2          3.1         21.3
    Unrealised                                                    (28.0)       206.5        249.1
Exchange differences                                                0.8         (1.0)        (3.7)
Tax on sales of investments                                        (1.1)           -         (0.4)
Minority interests (equity)                                           -            -         (0.1)
Other recognised gains and losses                                  33.9        208.6        266.2
Profit for the financial year                                       1.2          1.0          3.9
Total recognised gains and losses                                  35.1        209.6        270.1

Unaudited consolidated balance sheet
At 30 September 2004
                                                                                  Restated      Restated
                                                                      30 Sep        30 Sep        31 Mar
                                                                        2004          2003          2004
                                                                          £m            £m            £m
Fixed assets
Intangible assets                                                        4.7           6.4           4.9
Tangible assets                                                         82.4          85.0          84.1
Investments                                                            803.3         741.9         831.0
                                                                       890.4         833.3         920.0
Current assets
Stocks                                                                  26.0          32.8          26.4
Debtors                                                                 31.7          29.0          36.6
Short term deposits                                                      1.3          16.1          40.2
Cash at bank and in hand                                                10.0           7.5          14.6
                                                                        69.0          85.4         117.8
Creditors falling due within one year
Short term borrowings                                                   (1.4)         (3.7)         (4.3)
Other creditors                                                        (39.8)        (38.3)        (50.0)
                                                                       (41.2)        (42.0)        (54.3)
Net current assets                                                      27.8          43.4          63.5
Total assets less current liabilities                                  918.2         876.7         983.5
Creditors falling due after more than one year
Long term borrowings                                                   (36.7)        (18.6)        (42.3)
Provision for liabilities and charges
Deferred taxation                                                       (1.1)         (1.6)         (1.5)
                                                                       880.4         856.5         939.7
Minority interests
Equity                                                                  (0.6)         (0.8)         (0.8)
Non-equity                                                              (0.3)         (0.3)         (0.3)
                                                                       879.5         855.4         938.6

Capital and reserves
Share capital and premium                                                4.9           5.3           5.3
Capital redemption reserve                                               1.2           1.2           1.2
Revaluation reserve                                                    241.7         227.9         270.7
Profit and loss account                                                631.7         621.0         661.4
Shareholders' funds                                                    879.5         855.4         938.6

Unaudited company and consolidated cash flows
For the six months ended 30 September 2004
                                               Company                        Group
                                                                             Restated  Restated
                                       30 Sep    30 Sep    31 Mar    30 Sep    30 Sep    31 Mar
                                         2004      2003      2004      2004      2003      2004
                                           £m        £m        £m        £m        £m        £m
Net cash outflow from
operating activities                     3.9      (1.4)      3.1       8.2      (5.8)     (0.2)
Servicing of finance                    (0.6)     (0.6)     (1.0)     (1.3)     (0.4)     (0.8)
Taxation                                 0.9      (0.7)     (1.3)     (1.1)     (1.3)     (1.8)
Capital expenditure                        -         -         -       0.4      (3.0)     (6.2)
Investment purchased                   (85.9)    (76.3)   (129.8)    (83.3)    (44.2)    (96.1)
Investment sold                        151.4      70.8     155.2     144.5      40.0     108.6
Acquisitions and disposals                 -         -         -       0.1      (3.1)     (8.6)
Equity dividends paid                  (13.4)    (13.1)    (19.1)    (13.4)    (13.1)    (19.1)
                                        56.3     (21.3)      7.1      54.1     (30.9)    (24.2)
Management of liquid resources          32.5      25.7       6.1      38.9      27.8       3.7
Financing                               (4.4)        -         -      (6.8)      4.7      27.2
Elective special dividend              (88.0)        -         -     (88.0)        -         -
Increase in cash in the period          (3.6)      4.4      13.2      (1.8)      1.6       6.7

Reconciliation of net cash flows to movement in net funds

                                                   Company                       Group
                                           30 Sep    30 Sep    31 Mar    30 Sep    30 Sep   31 Mar
                                             2004      2003      2004      2004      2003     2004
                                               £m        £m        £m        £m        £m       £m
Increase in cash in the period              (3.6)      4.4      13.2      (1.8)      1.6      6.7
Cash outflow from decrease in debt           3.4         -         -       6.0      (4.4)   (27.1)
Cash inflow from decrease in deposits      (32.5)    (25.7)     (6.1)    (38.9)    (27.8)    (3.7)
Change in net funds
resulting from cash flows                  (32.7)    (21.3)      7.1     (34.7)    (30.6)   (24.1)
Finance leases                                 -         -         -         -      (0.2)       -
Acquisitions                                   -         -         -         -     (10.9)   (10.4)
Exchange differences                           -         -         -      (0.3)     (0.2)    (0.5)
Movement in net funds
in the period                              (32.7)    (21.3)      7.1     (35.0)    (41.9)   (35.0)
Opening balance of net funds                34.0      26.9      26.9       8.2      43.2     43.2
Closing balance of net funds                 1.3       5.6      34.0     (26.8)      1.3      8.2

Notes to the unaudited accounts

Basis of preparation and issue of interim report
The interim report is unaudited and has been prepared on the basis of the
accounting policies set out in the 2004 annual report, subject to a change in
accounting policy to deduct the consideration paid for the shares held by the
Caledonia Investments plc Employee Share Trust from shareholders' funds, rather
than including the shares held as an asset of the company, in accordance with
UITF Abstract 38 'Accounting for ESOP trusts'. Comparative figures have been
restated in accordance with this new policy, the effect of which has been to
reduce company and consolidated shareholders' funds by £3.7m at 30 September
2003 and £3.9m at 31 March 2004.

The interim report was approved by the board on 18 November 2004.

Return per ordinary share
The company return per ordinary share was calculated on the company return
attributable to ordinary shareholders of £36.5m (September 2003 - £192.2m, March
2004 - £282.8m) and the 67.730m (September 2003 - 72.033m, March 2004 - 72.235m)
weighted average number of ordinary shares in issue during the period, excluding
shares held by the Caledonia Investments plc Employee Share Trust and a
subsidiary and shares held in treasury.

Interim dividend
The interim dividend of 8.7p per share will be paid on 6 January 2005 to
shareholders on the register at the close of business on 10 December 2004.

Net asset value per ordinary share
The company net asset value per ordinary share was calculated on the company net
asset value of £852.6m (September 2003 - £833.7m, March 2004 - £910.7m) and the
63.596m (September 2003 - 72.106m, March 2004 - 72.089m) ordinary shares in
issue at the end of the period, excluding shares held by the Caledonia
Investments plc Employee Share Trust and shares held in treasury.

Earnings per ordinary share
Basic earnings per ordinary share were calculated on the profit for the
financial period of £1.2m (September 2003 - £1.0m, March 2004 - £3.9m) and the
67.730m (September 2003 - 72.033m, March 2004 - 72.235m) weighted average number
of ordinary shares in issue during the period, excluding shares held by the
Caledonia Investments plc Employee Share Trust and a subsidiary and shares held
in treasury. The dilution in the earnings arising from the dilutive potential
ordinary shares under the company's share option schemes in respect of the
current and prior periods was insignificant.

Independent review report by KPMG Audit Plc
to Caledonia Investments plc

We have been engaged by the company to review the financial information set out
between the heading 'Unaudited company statement of total return' and the end of
the section 'Notes to the unaudited accounts' and we have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial

This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company for
our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be

Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.

Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2004.

KPMG Audit Plc
Chartered Accountants

18 November 2004

The information in this news release does not constitute statutory accounts
within the meaning of Schedule 240 of the Companies Act 1985 (the Act). The
statutory accounts for the year ended 31 March 2004 have been delivered to the
Registrar of Companies in England and Wales in accordance with Section 242 of
the Act. The auditor has reported on those accounts; the report was unqualified
and did not contain a statement under Section 237(2) or (3) of the Act.

Copies of this statement are available at the company's registered office,
Cayzer House, 30 Buckingham Gate, London SW1E 6NN, England.

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