Caledonia Inv PLC - Half-year Report

Financial highlights


6 months 




30 Sep 2018 

31 Mar 2018 


Net asset value per share total return




Net asset value per share




Net assets




Interim dividend per share







NAV per share total return of +9.8%, underpinned by strong performance across all four investment pools



Quoted and Income pools (returns of 15.0% and 7.5% respectively) benefited from buoyant markets and strengthening of the US dollar



Unquoted pool (return of 11.8%) benefited from revaluation of Choice Care Group and good progress from other portfolio companies



Funds pool (return of 12.0%) underpinned by gains from US and Asian private equity funds portfolio




Net assets reach £2bn for the first time




Interim dividend per share increased by 3.9% to 16.1 pence per share (HY17: 15.5p)




Investments of £283m, included £93m in Cooke Optics, a market leading UK based manufacturer of cine camera lenses




£154m realised, including most of Caledonia's holding in Flowserve (Quoted pool) and the disposal of its holding in Macquarie Asia New Stars fund (Funds pool)




Post period end, Caledonia's Unquoted pool invested £117m in Deep Sea Electronics and sold Choice Care Group for £99m




Cash of £67m at 30 September 2018, in addition to undrawn bank facilities of £250m


Will Wyatt, Chief Executive, commented:

"Caledonia's investment portfolio saw strong performance across all four investment pools, delivering net asset value per share total return of 9.8% and supporting an increase in the interim dividend of 3.9% to 16.1 pence per share. 

"We are pleased with the last six months' performance, despite political and economic uncertainty continuing to impact markets. However, our well-diversified portfolio is invested in good quality businesses that combine attractive long term growth prospects with the potential to support increasing income, enabling us to achieve our strategic objectives."


Caledonia's net asset value per share total return was 9.8% over the six months ended 30 September 2018, with net assets increasing to £2bn, or 3563p on a per share basis. This does not take into account the interim dividend declared by the directors of 16.1p per share at a total cost of £8.8m, an increase of 3.9% on last year's interim payment. Over the half-year, our share price rose by 4.7%, resulting in a widening of the discount between net asset value per share and share price from 19.3% to 22.1%.


Other net assets on the balance sheet of £84.0m at the period end included cash of £67.0m, following pool net investment of £128.9m, which included £92.5m invested in Cooke Optics, a UK based manufacturer of cine camera lenses. Since the end of September, we have undertaken two further substantial transactions in the Unquoted pool, the acquisition of a 98.9% equity stake in Deep Sea Electronics, a UK based manufacturer of electronic control modules for industrial applications, for £117.2m and the sale of Choice Care Group, the residential care homes operator, from which we received £99.4m, including pre-sale dividends of £7.1m. This represented a 1.9x money multiple and an IRR of 14.3% over the five years of our ownership.


We retained an ungeared balance sheet at Caledonia, although our investments, particularly in the Unquoted pool, do utilise debt in their funding structures. We have substantial undrawn bank facilities available and are able to react to opportunities as they appear. Stock markets are showing signs of nervousness with Asian, UK and US markets under pressure since the period end. Pricing in private equity markets, however, remains at elevated levels supported by substantial sums of committed, but unspent, capital. However, it is still possible to make acquisitions at acceptable prices if the vendor is seeking, for instance, a long term financial partner for the business.


Investment performance

Caledonia's strategic aims are to:



Deliver returns of between RPI +3% to +6% over the medium term and outperform the FTSE All-Share Total Return index over ten years.


Pay an increasing annual dividend.


Manage risk to avoid permanent loss of capital.


Medium term performance remains strong and ahead of our aims, albeit there is a marginal under-performance against the FTSE All-Share Total Return index over a ten year period. The table below shows our performance track record as at 30 September 2018:



6 mths 

1 year 

3 years 

5 years 

10 years 


NAV total return






Shareholder TR






RPI +3% per annum






FTSE All-Share TR












NAV total return






Retail Prices Index






Caledonia vs RPI






FTSE All-Share TR






Caledonia vs FTSE






Investment income grew by 19% compared with the first half of last year, from £19.8m to £23.6m, whilst management expenses charged to revenue increased by £0.5m, from £8.8m to £9.3m.


The board has declared an interim dividend of 16.1p per share, an increase of 3.9% on last year's equivalent. This will be paid to shareholders on 10 January 2019.


In July, we announced that, after almost ten years of service, Stephen King would be stepping down as Finance Director once his successor had been recruited. I am delighted that Tim Livett has agreed to join us from the Wellcome Trust, where he is currently Chief Financial Officer, to take over this role in the New Year. Tim's commercial, operational and investment finance experience, gained from roles at British Airways, Virgin Atlantic and, most recently, the Wellcome Trust, where his responsibilities include risk and performance oversight of Wellcome's asset management division, which manages the Trust's £23bn investment portfolio, will be of particular benefit to Caledonia. We look forward to welcoming Tim to the board and wish Stephen every success in his future career.


An increase in volatility in October 2018 has reminded investors that stock markets are not an upward only escalator. The recent rise in US interest rates led to significant movements in both equity and bond markets. The return of a real cost of capital is bound to be reflected at some stage in the pricing of assets and a reduction in liquidity. The outcome of the current Brexit negotiations, particularly if they result in a 'no-deal' exit, could also have significant further impact on equity and bond markets.

Caledonia has recently made two significant investments in the UK manufacturing sector, underlining our belief that well-managed companies, selling high quality and competitively priced products into global markets, should be able to thrive even in the current period of economic uncertainty. Our portfolio is well diversified and invested in good quality businesses that we are confident will enable us to achieve our strategic objectives.