Caledonian Trust – Management, net current asset value and prospects

PUBLISHED: 06 Jan 2016 @ 10:30 | Comments (0) |

Caledonian Trust (LSE:CNN) was set up in 1972 by Douglas Lowe (now 78), joining Aim in 1995. He has seen many economic and property cycles, and learned patience and caution: patience in timing realisation of property value, and caution in not over-extending in property booms or panic-selling in downturns.

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While there are 200 shareholders, the Board controls over 85% of the shares, leaving 1.7 million in free float.

Douglas Lowe, a graduate of Cambridge and Harvard (MBA), is Chairman and CEO and owns 79.1% of the shares. Michael Baynham (59) is the other executive director. He graduated in law and worked as a solicitor specialising in commercial property and corporate law. He joined the company in 1989.

In 2015 nine people worked for this company costing a total of £486,000. Director remuneration was £277,000, with the executive chairman’s remuneration only £115,000. The highest paid director is Baynham on £153,000.

They run this company on a small budget (total administration expenses of £726k, about 2.3% of assets), with their eye set on the long term.

Prospects

Douglas Lowe states he is confident about the market conditions and prospects, saying that they have “considerably improved”. As a consequence they will immediately expand development activity (actually build more) and increase the sale of land with planning permission for houses.

He points out that the rate of household formation is much higher than the current house building rate, “More so in Scotland than in any other area, where only 30,560 new house starts, or 33% of the projected household increase, are expected by 2020.”

Also increased household incomes will raise demand particularly “where time, convenience, amenity and quality and status of location all become more valued”, i.e. in the commuter-belt areas where Caledonian has most of its plots.

All in all, “The long-term prospects for the housing market are very good…”

He points out that most sites were purchased at prices commensu…….

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