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Caledonia Inv PLC (CLDN)

  Print      Mail a friend       Annual reports

Monday 17 November, 2003

Caledonia Inv PLC

Interim Results

Caledonia Investments PLC
17 November 2003

                         CALEDONIA INVESTMENTS PLC

Interim results for the six months ended 30 September 2003


>     NAV increase to 1161p (+27%) - 10% outperformance over six months

>     Long term total return increase:

      • 59% over 5 years - 60% outperformance
      • 161% over 10 years - 75% outperformance

>     AITC ranking:

      •   2 out of 22 trusts over 5 years

      •   3 out of 21 trusts over 10 years

>     8.4p per share interim dividend - 5% increase

>     £52m invested, including Eddington Capital, SVB Holdings and Melrose, and
      £43m realised

>     Share price discount to NAV narrowed from to 21.4% from 29.8%

Tim Ingram, Chief Executive of Caledonia Investments commented:

'The strong performance in our first six months since conversion to investment
trust status, demonstrates the shareholder value creation of our long term
active approach.

We are continuing to see a strong flow of good business opportunities from this
long term active approach.'

                                                                17 November 2003


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

College Hill                                     Tel: 020 7457 2020
Tony Friend
Tom Allison

                              Chairman's statement


This time last year Caledonia announced its intention to become an investment
trust with effect from 1 April 2003 and, accordingly, our results are now
presented in line with this new status. I am pleased to report that, for our
first half year to 30 September, we have continued to maintain our investment
outperformance. Net assets per share have increased by 26.9% to 1161 pence,
before an interim dividend accrual, compared with an increase of 16.8% in the
FTSE All-Share index over the same period. Our total shareholder return has
continued to outperform the benchmark FTSE All-Share Total Return index for the
five and ten years to the half year end by 60% and 75% respectively. Further
details are provided in the chief executive's report. It is also pleasing that,
in addition to outperformance against our benchmark, the company has achieved a
positive absolute total return of +59% over the five year period to 30 September
2003 when the FTSE All-Share Total Return index was in negative territory at

Our strategy, which was overwhelmingly endorsed earlier this year by
shareholders when voting on conversion, has continued to serve the company well
with a high level of activity in new and follow-on investments. We have also
made realisations where it has been judged appropriate.


As was stated in our recent annual accounts, the period under review commenced
with the company holding more than £460m of distributable reserves, which is
important in underpinning our progressive dividend policy. Accordingly, the
directors have decided to continue the trend of 36 years' of unbroken annual
dividend increases by declaring a 5% increase in the interim dividend to 8.4
pence per share at a cost of £6.0m.


I am very pleased that, as earlier announced, John May joined the company as an
executive director on 1 September 2003. He has over 25 years experience in
advising, managing and investing in both listed and unlisted companies and is
already making a significant contribution.

Sir David Kinloch, who reaches retirement age in January 2004, will relinquish
his executive duties at the end of that month and retire from the board at the
annual general meeting. I look forward to paying tribute to him in my annual

Liquidation proposals

In June this year, proposals were put to us by two companies, each chaired by
Sir John Craven, which would have resulted in the liquidation of the assets of
Caledonia. Although this would effectively have destroyed a company that has
produced good long term performance for its shareholders, the proposals were
nevertheless carefully considered by the board with advice from N M Rothschild &
Sons Ltd and Cazenove & Co Ltd. With the benefit of this advice, the board
unanimously concluded that the proposals were not in the best interests of
shareholders. These proposals were formally withdrawn on 17 October. This event
has proved an unwelcome distraction for management, incurring considerable
expense, and diverting the proper focus of creating shareholder value.


I have already made reference to Caledonia's continued performance. Whilst
markets remain volatile, short term investors will suffer heightened risk as the
timing of investment and divestment dictates their returns disproportionately.
Caledonia is a longer term investor and, over time, our approach has delivered
significant outperformance notwithstanding short term volatility. We continue to
see a good flow of investment opportunities and we believe that our long held
strategy, which was so strongly endorsed by shareholders earlier this year,
leaves us well placed to continue to deliver handsome returns.

                            Chief executive's report

Investment trust conversion

The first six months of the year -- the first period managing our affairs as an
investment trust -- has progressed well.

On 1 April 2003 we completed the process for conversion to investment trust
status with no hitches due to the hard work put in by our staff and advisers.
The tax efficiency of this status should, in future, enable us further to
enhance our performance. It is particularly pleasing to note that the timing of
this conversion was well executed, taking advantage of the low points in market
prices, thereby minimising the tax cost.


We have again outperformed our benchmarks, with our five year total shareholder
return to 30 September 2003 showing positive absolute returns of 59% while the
FTSE All-Share Total Return was negative at -1%. Over the ten year period, our
total shareholder return was 161% with the FTSE All-Share Total Return at 86%, a
75% outperformance. Equally pleasing has been our relative performance within
our sector: the Global Growth sector of investment trusts. The statistics
produced by the Association of Investment Trust Companies for the period to 30
September 2003 show that, despite our tax disadvantaged position before
conversion, we would still have ranked second (out of 22 trusts) for total
shareholder return over five years and third (out of 21 trusts) over ten years.

Since the beginning of our financial year there has been a marked recovery in
stock markets with the FTSE All-Share index increasing by nearly 17% over the
six months to 30 September 2003. We have been very well positioned for this
recovery and our net asset value per share increased by 27% to 1161p -- an
outperformance of 10%. Our shareholders' funds increased by £186m.

At the beginning of our financial year, our three largest investments, Close
Brothers, Kerzner International and British Empire Securities, together
comprised just under 39% of our assets. These three investments, with which we
have had a particularly long and close involvement, provided £116m, or 62%, of
this increase in our shareholders' funds during this period. They provide good
examples of the value of our long term and constructively active approach.


We have actively managed our portfolio and, over the first six months, have made
£52m of new and follow-on investments. New investments include £15m seed capital
in a new fund of hedge funds managed by Eddington Capital (a start up fund
management company in which we have a 50% interest), £7m in SVB Holdings (a
listed Lloyds' insurance vehicle) and £3m in Melrose Resources (a listed oil and
gas company). Over the same period we realised £43m of investments including £9m
from the sale of part of our holding in Meinl European Land, £6m on the
redemption of Offshore Logistics loan notes and £6m on the sale of part of our
holding in ICAP. Our cash resources reduced from £49m to £22m as we have become
more fully invested. We continue to have £60m of bank facilities.

Since 30 September, we have also committed to invest up to £15m in Oval, a
commercial insurance broking business, and sold more of our holding in ICAP for

On the shareholder front, we have continued our programme to present Caledonia
to the private client investor market. Presentations to private client fund
managers in several regional centres have been made. We have further improved
our communication to shareholders, including monthly publication of net asset
value per share and posting of a monthly fact sheet on our website. In addition,
we now have in place for personal investors a Caledonia share ISA which
complements the share savings plan. Through this and further initiatives, we are
hoping gradually to increase the proportion of private client investors in our
shareholder base.

The future

Over the longer term our ability to increase net asset value per share should
provide the main component of shareholder return. Nonetheless we are fully aware
of the desire of our shareholders to see a narrowing of the discount of our
share price compared with net assets per share. In our document to shareholders
in January this year, proposing our conversion to investment trust status, we
stated our belief that this conversion, together with other measures, should
have a beneficial effect on this discount. It is, therefore, pleasing to note
that whereas the discount was 29.8% at 31 March 2003 (the day before we
converted to investment trust status), as at 30 September 2003 this discount had
narrowed to 21.4%. We will continue to explore, and implement where desirable,
measures that can have a further beneficial effect on the discount.

Looking to the future, 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
distinctive performance.

                           Finance director's report

The chairman's statement and chief executive's report contain information on the
company's performance during the period under review. This report is therefore
confined to an explanation of the basis upon which the financial statements have
been prepared.

As at 1 April 2003, Caledonia had completed the substantial restructuring needed
to enable the company to comply with the requirements for authorised investment
trust status. In order to provide financial information that is comparable with
other investment trusts, presentation and accounting policy changes have been
made. Some of these changes took effect in the last annual report, and some
appear in this interim report for the first time.

Presentation and accounting policy changes

Caledonia is an investment trust company, but we are relatively unusual among
our peers because we hold trading subsidiaries as part of our investment
portfolio. Our ownership of subsidiaries requires us to prepare consolidated
financial statements, but accounting rules prevent these from reflecting the
underlying value of our subsidiaries. In order to present financial information
that shows our entire portfolio at value, and is consistent with other
investment trusts, our company balance sheet shows all investments (including
subsidiaries) at valuation and we also present a company statement of total

The company's statement of total return and the company balance sheet are
considered by the board to be the most relevant statements for reporting
performance as an investment trust company. The company balance sheet sets out
the net asset value of Caledonia in accordance with our valuation guidelines,
which are discussed in more detail below.

In order for the company's financial statements to be prepared on a basis
consistent with other investment trust companies, Caledonia changed its
accounting policy last year to hold investments in subsidiaries at valuation.
This affects the company balance sheet only.

The company statement of total return is presented in this report for the first
time. Comparatives for the six months to 30 September 2002 and the year to 31
March 2003 have been presented, but on a pro forma basis only. This is because
Caledonia was not an investment trust company during 2003 and the comparatives
have been adjusted to show the position had it been so and to exclude the effect
of the reorganisation undertaken to convert to investment trust status.

A further change in accounting policy, affecting the consolidated financial
statements only, has been made this year. In order to comply with FRS 9 and to
align the accounting between the company and consolidated balance sheets, we
have changed our policy for associates to account for them at valuation, rather
than under the equity method, as from 1 April 2003.

Valuation of investments

Caledonia's policy is to hold its investments at fair value. Quoted investments,
for which an active market exists, are valued at mid-market price. Unquoted
investments are valued in accordance with internal guidelines, which are based
on the British Venture Capital Association's ('BVCA') Guidelines.

Unquoted equity investments are valued by the directors on a number of bases
depending on the nature of each investment. Early-stage investments will
generally be valued at cost, less a provision if performance is substantially
below expectations, for one year or until the investments start to earn
significant maintainable profits. Investments earning significant maintainable
profits are generally valued using an earnings multiple, based on current year
profit after tax and an earnings multiple for a comparable quoted company or
sector average. A discount will be applied to recognise the absence of a ready
market on which the holding can be sold. The liquidity discount will normally be
30%, but may be reduced to 10% if an initial public offering or realisation is
imminent. For some asset-backed businesses, such as where there is a significant
property element, the earnings multiple method of valuation is inappropriate,
and a net realisable asset basis is applied. It may also be appropriate to use
the net realisable asset basis of valuation if this results in a higher
valuation than the earnings method, or the company is incurring losses. A third
party valuation, such as an independent valuation report or a material arm's
length transaction, will provide prima facie evidence of fair value and will
usually take precedence over other methods.

Unquoted fixed income shares and loan investments are valued at the lower of
cost or recoverable amount. Investments in unquoted funds are valued at the net
asset value of the fund, with an appropriate adjustment where the net asset
value has not been calculated in accordance with the BVCA's Guidelines.

                               Investment review


Caledonia has had a history of success with investments in financial services
and our active involvement in the development of many financial services
businesses has given us an extensive knowledge of this sector. Our weighting at
33% is greater than the FTSE All-Share index at 25% and reflects our belief in
the sector's long term prospects. Over the last six months the value of our
holdings in financial services companies has risen by 45%, compared with an
increase of 21% in this sector of the FTSE All-Share.

Close Brothers (valuation: £182m; holding: 17.6%)

Close Brothers is the largest independent quoted merchant bank in the UK and
Caledonia has been a supportive shareholder for seventeen 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. Over the last six months, the Close
Brothers' share price has risen by 47%.

Close Brothers recently reported a good set of results for its year to 31 July
2003, with earnings rising by 10%, despite a difficult market environment. The
banking activities made solid progress, with profits and the loan book up 14%
and bad debt levels unchanged. Within investment banking, corporate finance
profits doubled from 2002 due to a busy final quarter and market making profits
were up 40% on increased activity and market share. Asset management experienced
a difficult year with profits markedly down, albeit funds under management grew
by 19%.

It is encouraging that Close Brothers looks forward with considerably more
confidence than for some time.

Rathbone Brothers (valuation: £30m; holding: 11.6%)

Rathbones is a leading UK private client fund manager and trustee business.
Caledonia originally invested in the company in 1995 and has actively supported
its expansion in recent years. The Rathbones' share price has increased by 45%
since 31 March 2003.

Over its six months to 30 June 2003, Rathbones' funds under management increased
by 11% to £5.9bn, compared with a 2% increase in the FTSE 100 index, as a result
of both organic growth and new business. Although earnings were 19% lower than
the same period in the previous year, the company was profitable in every month
of the first half year, despite volatile markets affected by the Iraq war and
the SARS epidemic. This was the result of Rathbones' strong management team,
sound financial position and emphasis on good client relationships.

ISIS Asset Management (valuation: £22m; holding: 6.3%)

ISIS is a top ten UK active fund manager, with £61bn under management at 30 June
2003. Caledonia has been a significant investor in ISIS and its forerunners
since 1994 and a Caledonia director has been the chairman since 1995. Since 31
March 2003, the ISIS share price has increased by 62%.

Equity markets remained at levels well below the peaks achieved in recent years,
although some improvement had occurred by the second quarter of 2003. Although
earnings fell by 7.7% during the six months to 30 June 2003, operating margins
improved, which was a significant achievement. Also encouraging has been the
successful completion of the integration of the Royal & SunAlliance investment
management business.

ICAP (valuation: £19m; holding: 1.4%)

ICAP is the world's largest interdealer broker, providing a specialist
intermediary broking service to commercial banks, investment banks and others in
the wholesale financial markets. Caledonia's 1.4% holding arose from a much
larger stake in Exco, one of the predecessor companies of ICAP. During the
period, we sold part of our stake in ICAP for £6m, on the back of a 30% rise in
the share price over the period, and have recently sold two-thirds of our
remaining stake for £13m.

SVB Holdings (valuation: £9m; holding: 4.3%)

SVB is an Integrated Lloyd's Vehicle, a specialist insurance and reinsurance
company operating within the Lloyd's insurance market. Caledonia acquired 3.7%
of SVB through a placing in May 2003 and increased its holding to 4.3% at the
half year at a total cost of £7m. Since the half year, a further 1% has been
acquired for £2m.

SVB is currently enjoying excellent trading conditions with premium rates
continuing to rise in its core product lines. Pre-tax profits grew to £11.1m in
the six months to 30 June 2003 from £1.6m a year earlier.

Leisure and media

Caledonia has had experience of the leisure and media sector through its
involvement in the hospitality, print and broadcasting industries. Our
confidence in the long term prospects of this sector have led to a weighting
greater than the FTSE All-Share index, at 21% compared with 11%. Over the last
six months, our holdings have increased in value by 34%, compared with an
increase in the leisure and media companies in the FTSE All-Share index of 17%.

Kerzner International (valuation: £124m; holding: 20.2%)

Kerzner is a leading developer, owner and operator of luxury resort hotels and
gaming properties worldwide. Caledonia has been involved with the Kerzner
management since the 1980s and invested in Kerzner International in 1994. Over
the last six months, the Kerzner share price has risen by 57%.

Kerzner's earnings for the nine months to 30 September 2003 made good progress,
rising to $2.20, compared with $1.90 a year earlier. For the second consecutive
quarter, its flagship Atlantis resort on Paradise Island in The Bahamas reported
record levels of gross revenue and EBITDA (taking seasonality into account), as
it benefited from strong demand. Further to an announcement of an anticipated
$600m expansion on Paradise Island earlier this year, where part of the work has
already commenced, Kerzner recently announced plans to participate in the
development of a second branded Atlantis resort at The Palm, Jumeirah, in Dubai.

The Sloane Club (valuation: £25m; holding: 100%)

The Sloane Club is a residential members club, based in Chelsea. Caledonia
invested in 1993 and has since been instrumental in enabling its enlargement and

In common with the London hospitality market, The Sloane Club has suffered in
recent years from fewer overseas visitors. However, membership numbers have been
maintained and revenues for the period are similar to last year.

Radio Investments (valuation: £11m; holding: 39.4%)

Radio Investments owns and operates 23 smaller radio stations, and is a leader
of the smaller station sector. The Government has announced a planned
liberalisation of the commercial radio environment and our major stake in Radio
Investments should enable us to benefit from these changes.

Radio Investments achieved further substantial revenue growth during the period
to 30 September 2003. Revenue growth, coupled with tight cost control, is now
delivering profitable results which are expected to grow steadily in the future.

A G Barr (valuation: £11m; holding: 9.2%)

A G Barr manufactures, markets and distributes a number of branded, carbonated
soft drinks, including Irn-Bru and Orangina. Caledonia has had a long
association with the management. Over the last six months, the share price has
risen by 24%.

A G Barr's results for the six months to 26 July 2003 showed an increase in
earnings of 16% over the comparable period. Sales were boosted by the favourable
weather conditions this summer, which resulted in improved margins.

Industrial and services

Caledonia's experience in the industrial and services sector dates back many
decades, giving us the expertise to work closely with management teams. Despite
this, good opportunities in this sector have been difficult to find and, as a
result, only 15% of our investments are in this sector, compared with 20% for
our benchmark. However, we have made follow-on investments in activities where
we see value opportunities.

Paladin Resources (valuation: £32m; holding: 11.1%)

Paladin is an independent oil and gas exploration and production company with
assets in the North Sea, Indonesia, Romania and Tunisia. Caledonia developed an
association with Paladin's management team when, in the early-1990s, it
successfully developed and subsequently sold Clyde Petroleum. During the first
half of the year, Caledonia has invested £4m to acquire a further 1.8% of
Paladin. During this period, the share price rose by 23%.

Paladin reported sharply higher results for its six months ending 30 June 2003,
with turnover up 61% and earnings up 19%. The highlight of the period was the
acquisition of the Montrose/Arbroath field from BP/Amerada, which was completed
in May and is currently producing approximately 12,000 barrels of oil equivalent
per day net to Paladin, which increases its overall production by over 30%.

Offshore Logistics/Bristow (valuation: £25m; holding: 5.8%)

Offshore Logistics, together with Bristow Helicopters, is the world's largest
provider of helicopter transportation services to the oil and gas industry.
Caledonia has been associated with the offshore helicopter industry for many
years through Bristow, which became associated with Offshore Logistics in 1996.
Over the half year, the share price of Offshore Logistics has increased by 12%,
whereas the value of our overall investment has reduced by £4m due to the
redemption of $10m (£6m) of loan stock, as part of the company's debt

Earnings in the six months to 30 September 2003 were almost in line with the
same period last year, before debt restructuring costs. Improved performance in
the North American operations at better margins, together with a mixed result
from International operations, largely offset a decline in activity in the North
Sea. Offshore Logistics recently announced plans to restructure its interests in
the UK to reduce costs in an increasingly competitive environment.

Amber Industrial (valuation: £20m; holding: 100%)

Amber is a specialty chemicals business focusing on silicone compounding,
aerosol products and specialist industrial consumables.  Caledonia's investment
in Amber dates back a number of decades.

Amber's results for the half year were depressed compared with last year,
primarily due to significant redundancy costs at the Bridgwater plant, although
the benefits of the restructuring should reflect in the full year's results.
Amber has recently acquired a 68% stake in a surface coatings business that
utilises its silicones expertise and initial indications are looking very

Easybox (valuation: £15m; holding: 99.2%)

Easybox is a self-storage business currently operating in Italy and Spain.
Caledonia's involvement in Easybox arose from our backing of the management team
which had previously developed the UK self-storage market under the successful
Abacus brand. In April 2003, we increased our holding in Easybox from 49.6% when
we bought out our joint venture partner's stake for £8m.

The company recently opened a new facility in Milan with another due to open
shortly, taking the total number of units to six. All facilities are trading
well, but finding new sites for expansion remains a challenge, particularly in

Sterling Industries (valuation: £10m; holding: 100%)

Sterling is an engineering group specialising in hydraulic valves, burners for
pollution control and thermal process engineering.

Trading conditions remain difficult across the group, although the benefits of
earlier restructuring in the hydraulics division are starting to be seen in
improved results for the first six months. The burners division has recently
opened a factory in China to take advantage of the fast growing steel industry,
but continues to find trading tough for its core markets in the US and Germany.
The thermal division has also recently won two important orders for thermal

Wallem Group (valuation: £9m; holding: 74.4%)

Wallem is a Hong Kong-based shipping services group. Caledonia's investment in
Wallem was made in 1992, after a long association with the Wallem management.

Conditions in the shipping sector have improved markedly during 2003, and this
has led to better than expected results for Wallem. A continuation of improved
results is expected, although the huge increases in charter rates in 2003 may
prove unsustainable over the longer term.


Caledonia's history of property investment has gained us valuable knowledge of
this sector. We invest in both property assets and in property management teams.
Our weighting in this sector is 10%, compared with the 4% of property companies
making up the FTSE All-Share index. The weighting is somewhat misleading,
however, as most property is held through unquoted vehicles.

Quintain Estates (valuation: £28m; holding: 7.0%)

Quintain is a property investment and development company, specialising in the
more challenging financial characteristics of commercial properties. Over the
last six months, the Quintain share price has increased by 35%.

Over its year ended 31 March 2003, Quintain increased its net asset value per
share by 13%. This was driven in part by land revaluations at Greenwich and
Wembley, where Quintain has significant interests. Together, these two projects
represent one of the largest urban regeneration programmes in any major city

Buckingham Gate (valuation: £18m; holding: 100%)

30 Buckingham Gate is a seven-floor office building in the West End of London,
acquired in 2001. Caledonia occupies four floors of the property, and the
remaining space is let out. As well as being our head office, it allows us to
provide accommodation, and thereby close direct support, for some of our
start-up investments.

Edinmore Holdings (valuation: £12m; holding: 100%)

Edinmore is a property trading company, established by Caledonia in 1994, since
when it has developed an excellent reputation and benefited from the improved
property trading conditions of recent years.

Most of the property acquired last year has now been sold, and a further three
properties have been acquired for resale.

Managed general funds

Caledonia has particular expertise in identifying, supporting and encouraging
asset management teams, which we often back with an investment in the management
company as well as in the managed fund. 19% of our portfolio comprises managed
general funds, compared with the 3% of investment companies that make up the
FTSE All-Share index. This bias is partly the result of most managed funds being
structured as limited partnerships or overseas listed investment funds.

British Empire Securities (valuation: £65m; holding: 19.9%)

British Empire is a UK investment trust whose objective is to achieve capital
growth through investing in undervalued asset situations.

British Empire recently announced another year of strong performance, with net
assets per share increasing by 25.6%. Over the past three years British Empire
has beaten the major indices by some 40% and over both three and five year
periods it has been the top performing AITC Global Growth sector investment

Aberforth Partners' 1A fund (valuation: £29m; holding: 25.5%)

The Aberforth 1A fund is a limited partnership investing in undervalued smaller
UK listed companies, with the objective of maximising absolute returns.

In the 31 months since launch, the Aberforth 1A fund has achieved a 23.2%
internal rate of return, based on realised and unrealised gains and losses, and
has outperformed its benchmarks.

Polar Capital funds and manager (valuation: £25m)

The Polar Capital funds are managed by Polar Capital, a boutique fund management
business established three years ago with Caledonia's support and now managing
over $1.5bn. Caledonia's investment includes £21m in the funds and £4m for a
24.6% holding in the management company. Caledonia holds a mix of the Polar
team's top performing range of research driven equity and hedge funds covering
technology, Japan, Europe and the UK.

Eddington Capital fund and manager (valuation: £16m)

Caledonia identified and brought together the Eddington management team in April
2003, and subscribed £1m for a 50% holding in this new fund management company
specialising in fund of hedge funds products.

In September 2003, Caledonia provided £15m to seed the Eddington Triple Alpha
fund, the first to be launched by the company. Initial performance has been
commendable, and it is hoped that this is the start of much more to come.


Caledonia has maintained a cautious stance to the technology sector, in which we
currently hold 2% of our portfolio, compared with 10% in the FTSE All-Share
index. Our typical approach to this sector is to back managed technology funds.

Investment portfolio

Significant holdings

Name                                 Country            Nature of business                     Total
                                     of domicile                                                  £m       %
Close Brothers (1,2)                 UK                 Merchant banking                       181.6    21.2
Kerzner International (1,2)          Bahamas            Resorts owner/operator                 124.4    14.5
British Empire Securities and        UK                 Investment trust                        65.1     7.6
General Trust (1,2)
Paladin Resources (1)                UK                 Oil and gas                             31.5     3.7
Rathbone Brothers (1,2)              UK                 Fund management                         30.0     3.5
Aberforth Limited Partnership 1A (3) UK                 Investment fund                         29.3     3.4
Quintain Estates & Development (1)   UK                 Property holding/development            27.6     3.2
Offshore Logistics/Bristow (1,2)     USA                Helicopter services                     25.3     2.9
The Sloane Club (2)                  UK                 Residental club owner/operator          24.6     2.9
Polar Capital and funds (2,3,4)      UK/Cayman          Investment funds and manager            24.5     2.9
ISIS Asset Management (1,2)          UK                 Fund management                         21.5     2.5
Amber Industrial (2)                 UK                 Specialty chemicals                     19.8     2.3
ICAP (1)                             UK                 Interdealer broking                     19.2     2.2
Buckingham Gate (2)                  UK                 Property holding                        17.5     2.0
Eddington Capital and funds (2,3,5)  UK/Cayman          Investment funds and manager            15.8     1.8
Easybox (2)                          Luxembourg         Self storage                            14.5     1.7
Edinmore Holdings (2)                UK                 Property trading                        12.1     1.4
Radio Investments (2)                UK                 Local radio                             11.1     1.3
A G Barr (1)                         UK                 Soft drinks                             10.9     1.3
Sterling Industries (2)              UK                 Engineering                             10.0     1.2
SVB Holdings (1)                     UK                 Insurance                                9.1     1.1
Wallem (2)                           Hong Kong          Shipping services                        9.0     1.0
Close Brothers Private Equity funds  UK                 Investment funds                         8.2     1.0
Other investments                                                                               91.0    10.5

Total investments                                                                              833.6    97.1
Net liquid assets (6)                                                                           24.9     2.9

Total assets                                                                                   858.5   100.0

Dividends                                                                                      (6.0)

Amounts due to subsidiary                                                                     (10.3)

Loan notes                                                                                     (4.8)

Shareholders' funds                                                                            837.4

1.   Equity securities listed on the UK or overseas stock exchanges.
2.   Board representation.
3.   Investment committee representation.
4.   Polar Capital and funds included £3.6m for the management company and 
     £20.9m of funds. In the following sector distribution tables, the 
     management company is included in the financial sector, £13.8m of the
     funds in the managed general funds sector and £7.1m of the funds in the 
     technology sector.
5.   Eddington Capital and funds included £0.8m for the management company and 
     £15.0m of funds. In the following sector distribution tables, the 
     management company is included in the financial sector and the funds in 
     the managed general funds sector.
6.   Includes £10.6m of net liquid assets held in subsidiary holding companies, 
     which are included in investments in the company balance sheet.

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

Investment portfolio

Distribution analysis

Sector distribution
                                                                                          £m               %
Financial                                                                              275.0            32.0
Leisure and media                                                                      171.0            19.9
Industrial and services                                                                126.2            14.7
Property                                                                                81.4             9.5
Managed general funds                                                                  159.4            18.6
Technology                                                                              15.3             1.8
Others                                                                                   5.3             0.6
Net liquid assets                                                                       24.9             2.9
                                                                                       858.5           100.0

Category distribution
                                                                                          £m               %
Equities -- quoted                                                                     570.0            66.4
Equities -- unquoted                                                                   116.3            13.5
Partnerships/funds                                                                      95.9            11.2
Loans/notes                                                                             51.4             6.0
Net liquid assets                                                                       24.9             2.9
                                                                                       858.5           100.0

Geography distribution
                                                                                          £m               %
United Kingdom                                                                         644.5            75.1
Continental Europe                                                                      32.8             3.8
North America                                                                          158.6            18.5
Asia and Far East                                                                       19.0             2.2
Latin America                                                                            3.6             0.4
                                                                                       858.5           100.0
Based on country of domicile or underlying spread for funds.

Currency distribution
                                                                                          £m               %
Pounds sterling                                                                        651.5            75.9
US dollar                                                                              165.5            19.3
Euro                                                                                    28.5             3.3
Other                                                                                   13.0             1.5
                                                                                       858.5           100.0

Sector weighting against the FTSE All-Share
                                                                         Portfolio                 All-Share
                                                                            £m             %               %
Financial                                                                275.0          33.1            24.6
Leisure and media                                                        171.0          20.5            10.7
Industrial and services                                                  126.2          15.1            19.5
Property                                                                  81.4           9.8             4.2
Managed general funds                                                    159.4          19.1             2.5
Technology                                                                15.3           1.8            10.1
Others                                                                     5.3           0.6            28.4
                                                                         833.6         100.0           100.0
Based on Caledonia's grouping of the FTSE sectors.

Unaudited company statement of total return
for the six months ended 30 September 2003

                                                              Pro forma               Pro forma
                              Six mths to 30 Sep 2003  Six mths to 30 Sep 2002   Year to 31 Mar 2003
                              Revenue  Capital   Total Revenue Capital   Total Revenue Capital   Total
                                   £m       £m      £m      £m      £m      £m      £m      £m      £m
Gains/(losses) on
    Realised                       --      3.1     3.1      --     7.7     7.7      --    17.1    17.1
    Unrealised                     --    186.0   186.0      -- (172.6) (172.6)      -- (221.8) (221.8)

                                   --    189.1   189.1      -- (164.9) (164.9)      -- (204.7) (204.7)
Income from investments           7.9       --     7.9     7.8      --     7.8    20.0      --    20.0
    Management costs            (3.9)       --   (3.9)   (3.5)      --   (3.5)   (8.3)      --   (8.3)
    Corporate defence costs     (1.0)       --   (1.0)      --      --      --      --      --      --
    Restructuring costs            --       --      --   (0.3)      --   (0.3)   (4.0)      --   (4.0)

Return before finance costs       3.0    189.1   192.1     4.0 (164.9) (160.9)     7.7 (204.7) (197.0)
and tax
Interest payable and similar    (0.6)       --   (0.6)   (0.1)      --   (0.1)   (0.2)      --   (0.2)

Return before tax                 2.4    189.1   191.5     3.9 (164.9) (161.0)     7.5 (204.7) (197.2)
Tax on ordinary activities        0.7       --     0.7   (0.6)   (2.8)   (3.4)     1.5    12.5    14.0

Return attributable to            3.1    189.1   192.2     3.3 (167.7) (164.4)     9.0 (192.2) (183.2)
Dividends                       (6.0)       --   (6.0)   (5.7)      --   (5.7)  (18.8)      --  (18.8)

Transfer to reserves            (2.9)    189.1   186.2   (2.4) (167.7) (170.1)   (9.8) (192.2) (202.0)

Return per ordinary share
    Basic                        4.3p   262.5p  266.8p    4.6p -232.2p -227.6p   12.5p -266.5p -254.0p
    Adjusted                     5.7p   262.5p  268.2p    5.0p -232.2p -227.2p   18.0p -256.9p -238.9p
Dividends per ordinary share     8.4p       --    8.4p    8.0p      --    8.0p   26.0p      --   26.0p

Unaudited company balance sheet
at 30 September 2003

                                                                                       Pro forma
                                                                             30 Sep       30 Sep      31 Mar
                                                                               2003         2002        2003
                                                                                 £m           £m          £m
Fixed assets
Investments                                                                   844.2        680.3       656.4

Current assets
Debtors                                                                         9.6          2.9         5.5
Short term deposits                                                            13.2         51.1        38.9
Cash at bank and in hand                                                        0.5           --         1.4
                                                                               23.3         54.0        45.8
Creditors falling due within one year
Short term borrowings                                                         (3.3)       (12.5)       (8.6)
Other creditors                                                              (11.7)        (8.9)      (28.1)

                                                                             (15.0)       (21.4)      (36.7)

Net current assets                                                              8.3         32.6         9.1

Total assets less current liabilities                                         852.5        712.9       665.5

Creditors falling due after more than one year

Amounts due to subsidiary undertaking                                        (10.3)           --       (9.5)
Long term borrowings                                                          (4.8)        (5.0)       (4.8)
                                                                             (15.1)        (5.0)      (14.3)
Provision for liabilities and charges
Deferred taxation                                                                --       (24.8)          --

                                                                              837.4        683.1       651.2

Capital and reserves
Share capital and premium                                                       5.3          5.4         5.3
Non-distributable reserves                                                    371.5        211.5       184.1
Distributable reserves                                                        460.6        466.2       461.8

Total shareholders' funds                                                     837.4        683.1       651.2

Net asset value per ordinary share (after accrued dividend)                   1153p         941p        897p
Net asset value per ordinary share (before accrued dividend)                  1161p         949p        915p

Unaudited consolidated profit and loss account
for the six months ended 30 September 2003

                                                                             30 Sep      30 Sep      31 Mar
                                                                               2003        2002        2003
                                                                                 £m          £m          £m
Turnover                                                                       56.6        63.2       132.1

Operating loss                                                                (3.8)       (1.6)       (9.4)
Share of operating profit of associates                                          --        12.2        26.1
Amortisation of goodwill on acquisition of associates                            --          --       (0.4)

Total operating loss                                                          (3.8)        10.6        16.3
Profit on sale of operations                                                     --         2.8         4.9

Profit on ordinary activities before investment income                        (3.8)        13.4        21.2
Income from investments                                                         5.3         4.9         8.7
Interest receivable                                                             0.6         2.1         3.2
Interest payable                                                              (0.3)       (5.7)       (9.5)

Profit on ordinary activities before tax                                        1.8        14.7        23.6
Tax on profit on ordinary activities                                          (0.7)       (3.8)       (5.7)

Profit on ordinary activities after tax                                         1.1        10.9        17.9
Minority interests (equity)                                                   (0.1)       (0.2)       (0.4)

Profit for the financial year                                                   1.0        10.7        17.5
Dividends                                                                     (6.0)       (5.7)      (18.8)

Loss charged for the financial year                                           (5.0)         5.0       (1.3)

Earnings per ordinary share
    Basic and diluted                                                          1.4p       14.9p       24.2p
    Adjusted                                                                   2.8p       13.2p       28.3p
Dividends per ordinary share                                                   8.4p        8.0p       26.0p

Unaudited consolidated statement of total recognised gains and losses
for the six months ended 30 September 2003

                                                                               30 Sep       30 Sep       31 Mar
                                                                                 2003         2002         2003
                                                                                   £m           £m           £m
Gains/(losses) on investments
    Realised                                                                      3.1          7.7         17.1
    Unrealised                                                                  191.6       (52.8)       (75.7)
Exchange differences                                                            (1.0)       (16.4)       (15.9)
Share of results of associates                                                     --       (12.5)       (13.7)
Revaluation of associates on conversion to an investment trust company           14.9           --           --
Tax on sales of investments                                                        --        (2.8)          8.5
Minority interests (equity)                                                        --          0.1          0.1

Other recognised gains and losses                                               208.6       (76.7)       (79.6)
Profit for the financial year                                                     1.0         10.7         17.5

Total recognised gains and losses                                               209.6       (66.0)       (62.1)

Unaudited consolidated balance sheet
at 30 September 2003

                                                                               30 Sep       30 Sep       31 Mar
                                                                                 2003         2002         2003
                                                                                   £m           £m           £m
Fixed assets

Intangible assets                                                                 6.4          7.2          5.3
Tangible assets                                                                  85.0         66.2         59.4
Investments                                                                     745.6        543.5        544.0

                                                                                837.0        616.9        608.7
Current assets

Stocks                                                                           32.8         23.5         20.4
Debtors                                                                          29.0         26.7         32.7
Short term deposits                                                              16.1         45.4         43.9
Cash at bank and in hand                                                          7.5         24.1          4.6

                                                                                 85.4        119.7        101.6

Creditors falling due within one year

Short term borrowings                                                           (3.7)       (13.4)        (0.4)
Other creditors                                                                (38.3)       (26.9)       (47.2)

                                                                               (42.0)       (40.3)       (47.6)

Net current assets                                                               43.4         79.4         54.0

Total assets less current liabilities                                           880.4        696.3        662.7

Creditors falling due after more than one year

Long term borrowings                                                           (18.6)        (5.0)        (4.9)
Provision for liabilities and charges

Deferred taxation                                                               (1.6)       (25.8)        (1.4)

                                                                                860.2        665.5        656.4

Minority interests
Equity                                                                          (0.8)        (0.8)        (0.6)
Non-equity                                                                      (0.3)           --        (0.3)
                                                                                859.1        664.7        655.5

Capital and reserves

Share capital and premium                                                         5.3          5.4          5.3
Capital redemption reserve                                                        1.2          1.1          1.2
Revaluation reserve                                                             227.9         54.6         21.2
Profit and loss account                                                         624.7        603.6        627.8

Shareholders' funds                                                             859.1        664.7        655.5

Unaudited consolidated cash flow statement
for the six months ended 30 September 2003

                                                                               30 Sep       30 Sep       31 Mar
                                                                                 2003         2002         2003
                                                                                   £m           £m           £m
Net cash outflow from operating activities                                      (8.7)          3.2         12.4
Dividends from associates                                                         2.9          4.1          9.2
Servicing of finance                                                            (0.4)           --        (0.4)
Taxation                                                                        (1.3)        (3.6)        (6.6)
Capital expenditure and financial investment                                    (6.9)        (5.4)       (15.3)
Acquisitions and disposals                                                      (3.1)        (2.5)        (4.5)
Equity dividends paid                                                          (13.1)       (12.4)       (18.1)

                                                                               (30.6)       (16.6)       (23.3)
Management of liquid resources                                                   27.8         20.3         21.5
Financing                                                                         4.4        (3.7)        (3.5)

Increase in cash in the period                                                    1.6           --        (5.3)

Reconciliation of net cash flows to movement in net funds

                                                                               30 Sep       30 Sep       31 Mar
                                                                                 2003         2002         2003
                                                                                   £m           £m           £m
Increase in cash in the period                                                    1.6           --        (5.3)
Cash inflow from increase in debt                                               (4.4)          0.3          0.4
Cash inflow from decrease in deposits                                          (27.8)       (20.3)       (21.5)

Change in net funds resulting from cash flows                                  (30.6)       (20.0)       (26.4)
Finance leases                                                                  (0.2)           --           --
Acquisitions                                                                   (10.9)          4.8          4.6
Exchange differences                                                            (0.2)        (0.8)        (2.1)

Movement in net funds in the period                                            (41.9)       (16.0)       (23.9)
Opening balance of net funds                                                     43.2         67.1         67.1

Closing balance of net funds                                                      1.3         51.1         43.2

Analysis of changes in net funds

                                  Opening                                   Finance      Exchange       Closing
                                  balance    Cash flow    Acquisitions       leases   differences       balance
                                       £m           £m              £m           £m            £m            £m
Cash at bank and in hand              4.6          2.9             0.2           --         (0.2)           7.5
Bank overdrafts                     (0.3)        (1.3)              --           --            --         (1.6)

                                      4.3          1.6             0.2           --         (0.2)           5.9

Short term deposits                  43.9       (27.8)              --           --            --          16.1
Debt due within one year            (0.1)        (2.0)              --           --            --         (2.1)
Debt due after more than            (4.9)        (2.4)          (11.1)        (0.2)            --        (18.6)
one year

                                     43.2       (30.6)          (10.9)        (0.2)         (0.2)           1.3

                  Notes to the unaudited financial statements

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 2003 annual report, subject to a change in
accounting policy on 1 April 2003 to carry associates at valuation in the group
accounts, rather than under the equity accounting method. This policy change
arises from the change in status of the company to being an investment trust
company and ensures that associates are accounted for in the same way as our
investment portfolio as required by FRS 9. Since the change in status occurred
on 1 April 2003, the difference between the valuation and share of net assets of
associates at that date has been credited to the consolidated statement of total
recognised gains and losses for the period.

The company's comparative statements of total return are prepared on a pro forma
basis to reflect the estimated position of the company had it been an investment
trust company throughout the previous periods, excluding the effect of the
reorganisation carried out during the previous year in order to enable the
company to achieve investment trust status, although including the net costs
associated with undertaking the reorganisation.

The company's comparative balance sheet at 30 September 2002 is also prepared on
a pro forma basis, reflecting the position of the company had it reorganised
itself to be an investment trust company at that date.

The interim report was approved by the board on 17 November 2003. The results
for the year ended 31 March 2003 do not constitute the company's statutory
accounts. The statutory accounts for that period, which received an unqualified
audit report, have been filed with the Registrar of Companies.

Return per ordinary share

The company return per ordinary share was calculated on the company return
attributable to ordinary shareholders of £192.2m (September 2002 - £164.4m
deficit, March 2003 - £183.2m deficit) and the 72,033,053 (September 2002 -
72,246,072, March 2003 - 72,133,756) weighted average number of ordinary shares
in issue during the period.

The adjusted company return per ordinary share was calculated as a measure of
earnings excluding corporate defence and restructuring costs, net of related
taxation. The directors consider that this provides a more consistent indication
of underlying performance.


The interim dividend of 8.4p will be paid on 8 January 2004 to shareholders on
the register at the close of business on 5 December 2003.

Net asset value per ordinary share

The company net asset value per ordinary share was calculated on the company net
asset value of £837.4m (September 2002 - £683.1m, March 2003 - £651.2m) and the
72,613,472 (September 2002 - 72,613,472, March 2003 - 72,613,472) ordinary
shares in issue at the end of the period.

Earnings per ordinary share

Basic earnings per ordinary share was calculated on the profit for the financial
period of £1.0m (September 2002 - £10.7m, March 2003 - £17.5m) and the
72,033,053 (September 2002 - 72,246,072, March 2003 - 72,133,756) weighted
average number of ordinary shares in issue during the period. 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 year periods
was insignificant. Adjusted basic earnings per ordinary share excluded the sale
of operations, amortisation of goodwill and other items, net of tax.


Taxation charged to the profit and loss account in September 2002 and March 2003
included £2.4m and £4.5m in respect of associated companies.

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 financial statements' 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 information.

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 2003.

KPMG Audit Plc
Chartered Accountants

17 November 2003

The information in this news release does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985 (the Act). The
statutory accounts for the year ended 31 March 2003 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.

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

a d v e r t i s e m e n t