TIDMCLDN
RNS Number : 0705L
Caledonia Investments PLC
08 January 2021
Caledonia Investments plc
Unaudited net asset value and portfolio update
Caledonia Investments plc (" Caledonia ") announces its
unaudited diluted net asset value per share (" NAV ") as at 31
December 2020, calculated on a cum-income basis, was 3571p.
The NAV total return (" NAVTR ") for the nine months to 31
December 2020 was 12.4%. A final dividend of 44.5p per ordinary
share for year ended 31 March 2020 was paid to shareholders on 6
August 2020; an interim dividend of 17.0p per ordinary share for
the current year was paid on 7 January 2021.
This announcement provides an update on Caledonia's portfolio
and should be read in conjunction with the factsheet dated 31
December 2020 and released on 8 January 2021, a copy of which is
available at www.caledonia.com .
Summary
As seen at the half year, the strong NAVTR performance continued
to be driven by the Quoted Equity and Funds pools, with year to
date returns of 28.5% and 17.9% respectively despite the
performance of both pools being adversely affected by Sterling's
recent strengthening against the US dollar. The Quoted Equity pool
continued to produce excellent returns benefitting from underlying
portfolio positioning and the recovery in global public equity
markets. The underlying performance of the Funds pool, particularly
the Asian funds, together with the reassessment of the Covid-19
impact based on updated valuations from fund managers, generated
strong gains. The performance of the Private Capital portfolio was
broadly flat: the businesses are revalued biannually with the next
review taking place on 31 March 2021. Performance for the first
nine months of the year is summarised in the table below.
Caledonia has continued to invest, in line with an active
approach to portfolio management, with a net cash outflow of
GBP131m in the nine month period. Businesses within the Private
Capital pool have been supported with GBP87m of capital for
acquisitions and, in one case, as part of a recapitalisation. The
Funds pool experienced increased drawdowns in the first half of the
year as fund managers generated liquidity to address the potential
impact of Covid-19. However, fund distributions picked up markedly
over the last quarter reflecting an increase in merger and
acquisition and IPO activity resulting in net investment of GBP27m
in the period.
Total liquidity remains satisfactory with GBP233m available as
at 31 December 2020, comprising GBP17m of net debt and GBP190m of
undrawn committed bank facilities. Caledonia's GBP250m banking
facilities include GBP137.5m expiring in May 2025, with the balance
of GBP112.5m expiring in July 2022.
Caledonia pool per f o rmance
Net asset value - nine months to 31 December 20 20
GBPm Opening Net Capital Other Closing Income Total
balance investment gains balance Return
/(disposal) /
(losses)
Quoted Equity 574.0 (13.5) 146.0 - 706.5 13.9 28.5%
Private Capital 611.3 90.4 (9.7) - 692.0 12.7 0.5%
Funds 450.1 27.1 76.7 - 553.9 5.6 17.9%
--------- ------------- ---------- ------- --------- ------- --------
Portfolio 1,635.4 104.0 213.0 - 1,952.4 32.2
-------
Net Cash/(debt) 114.7 (104.0) - (27.2) (16.5)
Interim Dividend - - - (9.3) (9.3)
Other assets 37.2 - - 19.4 56.6
Net assets 1,787.3 - 213.0 (17.1) 1,983.2 NAVTR 12.4%
--------- ------------- ---------- ------- --------- --------
(Net Cash - Other: includes final dividend for the year ended 31
March 2020 of GBP24.4m paid on 6 August 2020)
Caledonia's March 2020 NAV incorporated additional discounts
within the valuations of both the Private Capital and Funds
portfolios to account for the potential impact of Covid-19. As the
operating environment and trading outlook has become clearer,
valuations have returned to a more standard approach. The biannual
valuation of the Private Capital businesses at end September 2020
reverted to a normalised earnings multiple basis for most investee
companies. The most recent managers' NAV were used for the
valuation of the Funds portfolio.
Caledonia Quoted Equity - Capital and Income portfolios (36% of
NAV)
The total return on the Quoted Equity portfolio was 28.5% over
the first nine months of the year. This very strong performance
reflected the notable rebound in global equity markets and
considered stock selection within both the Capital and Income
portfolios, delivering total returns of 33.7% and 14.7%
respectively. The performance of US public equities in both
portfolios was particularly important, driving a significant
element of the returns over the period. On a calendar year basis,
the Capital portfolio returned 18.6% and the Income portfolio 0%.
In comparison, the total returns of the FTSE All-Share and the MSCI
World Index (GBP) were -13.2% and 12.3% respectively.
Trading activity has been relatively limited, in line with our
long-term investment approach. In the Capital portfolio, the
position in Waters Corporation, a laboratory instrument and
software company, was sold in December, having delivered good
returns over a four year holding period. The development of the
Income portfolio has continued with new positions established in
consumer goods business Reckitt Benckiser and in Fortis Inc, a
North American utilities business, together with the disposal of
holdings in Direct Line and Tritax Big Box. Other activity was
restricted to refining positions in existing investments.
Caledonia Private Capital (35% of NAV)
Caledonia's Private Capital portfolio includes significant
positions in six UK based businesses and one private European
investment company. These seven investments represent over 90% of
the value of the Private Capital portfolio. Investee companies are
revalued in March and September each year.
The industrial and financial services businesses have adapted
well to the new Covid-19 trading and operating environment and
continue to trade strongly. In contrast, the two consumer facing
businesses, Buzz Bingo and Liberation Group, have been more
directly impacted. The investment in Cobehold continues to perform
well. The total return on the portfolio was 0.5% for the first nine
months of the year. The positive return achieved across most of the
portfolio was largely offset by the capital loss of GBP46m
sustained from the financial restructuring of Buzz Bingo. The only
notable movement from the valuations at the end of September 2020
relates to an investment of GBP36m into Liberation Group to
facilitate an acquisition, as covered below.
As noted at the half year, Buzz Bingo, the UK's biggest
omni-channel bingo business, completed a company voluntary
arrangement process and financial restructuring in August 2020 to
protect the long-term prospects of the business. A phased reopening
of its retail venues was completed in the summer, with the business
trading ahead of plan. However, the introduction of the Covid-19
tier system led to a significant number of retail venues closing in
England and Scotland in the latter part of 2020. All venues closed
in January in response to national lockdowns. The online business (
www.buzzbingo.com ), which expects to benefit from the latest
restrictions, continues to grow player numbers and operate on a
break-even basis. The valuation of Buzz Bingo at 31 December is
GBP22m.
Liberation Group, a pub, restaurant and drinks business with
operations in the Channel Islands and the South West of the UK
traded well through the summer period as Covid-19 restrictions were
eased. Weekly revenues picked up strongly and were often in line
with, or ahead of, the prior year. However, the introduction of the
English Covid-19 tier system caused some closures in the UK estate
and from early December and following a rise in cases on the
island, all pubs and restaurants in Jersey were closed. Venues in
Guernsey remain open and the distribution business in the Channel
Islands continues to trade strongly. The recently announced
lockdown in England will have an adverse impact although trading is
generally weakest in January and February. The business has
significant cash resources and will manage the cost base tightly
over the next few months.
Caledonia invested an additional GBP36m of new equity into
Liberation Group in November to support the acquisition of a
substantial portfolio of pubs from Wadworth and various value
accretive capital investment projects across the enlarged estate.
This reflects our confidence in the long-term prospects of the
business.
A more detailed update on trading and valuation of all investee
companies within the Private Capital portfolio will be provided in
Caledonia's full year results announcement in May 2021.
Caledonia Funds (28% of NAV)
The total return on the Funds portfolio was 17.9% for the first
nine months of the year. This reflects underlying fund performance,
reverting to basing valuations on managers' NAV, without the need
to reflect the Covid-19 impact as was the case in March 2020, and
the impact of exchange on these US dollar based assets. Updated
valuations dated 30 September 2020, amounting to 83% of the Funds'
NAV have been included: the holdings in Aberdeen US private equity
funds (17% of Funds NAV) remain at the manager's 30 June 2020
valuation.
Caledonia's fund investments are principally in third party
managed private equity funds operating in the US and in Asia. The
feedback from the fund managers is one of gradual improvement since
the end of March. The majority of the underlying business
investments are performing well, in line with, or ahead of
pre-Covid plans, with only a small number suffering a notable
decline in trading. In general, the Asian fund investments have
performed well with good underlying returns, most notably for
businesses with a technology or healthcare focus. In contrast, US
funds show a more diverse performance mix. Whilst there are some
good performers, several funds show underlying valuation reductions
which reflect the impact of Covid-19 and the sector mix of the
investee businesses. All of US and Asian funds are denominated in
US dollars. Over the nine months to 31 December 2020, Sterling has
strengthened by 10% compared to the US dollar, creating a
significant headwind to the positive returns from this
portfolio.
During the first nine months of the year, GBP86m was invested
and distributions of GBP59m were received. The recent pick up in
distributions is notable, with 69% of the year to date
distributions received in the last three months.
Company contacts
Caledonia Investments plc +44 20 7802 8080
Will Wyatt,
Chief Executive
Tim Livett,
Chief Financial Officer
Media contacts
Tulchan Communications +44 20 7353 4200
Tom Murray
caledonia@tulchangroup.com
8 January 2021
Notes
Valuation approach and methodology
The valuation approach utilised for each asset portfolio is
summarised below.
Caledonia Quoted Equity : all listed companies are valued based
on the closing bid price on the relevant exchange as at 31 December
2020.
Caledonia Private Capital : the holdings are valued biannually,
on a normalised EBITDA x market multiple basis where appropriate
(in line with the latest IPEV guidelines). This approach was
applied to the majority of the portfolio at 30 September 2020, with
the following amendment:
-- Trading in the current year has been impacted by Covid-19
for a number of businesses in the portfolio. Valuations
would use normalised LTM EBITDA as a key input under standard
circumstances; however, historic and forecast earnings
information has been used at this time in order to address
this issue and provide a more balanced view of valuation.
The holdings have not been revalued at 31 December 2020;
however, the valuations have been updated to reflect cash
transactions completed in the last quarter.
Caledonia Funds : the fund valuations are based on the most
recent valuations provided by the fund managers, subject to cash
movements from the valuation date. Valuations are received 60 to
180 days from the valuation date. This approach has been applied
for 31 December 2020 valuations in contrast to the year ended 31
March 2020 when a Covid-19 adjustment was applied to December 2019
fund managers' NAVs in light of the uncertainty created by the
Covid-19 pandemic.
Caledonia Investments plc
Caledonia is a self-managed investment trust company. Its aim is
to grow net assets and dividends paid to shareholders, whilst
managing risk to avoid the permanent loss of capital. This is
achieved by investing in proven, well-managed businesses that
combine long term growth characteristics with an ability to deliver
increasing levels of income. Investments are held in both listed
and private markets, a range of sectors and, particularly through
the fund investments, with a global reach.
For additional information on Caledonia, please visit
www.caledonia.com .
END
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