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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Caledonia Investments Plc | LSE:CLDN | London | Ordinary Share | GB0001639920 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3,545.00 | 3,545.00 | 3,550.00 | 3,555.00 | 3,535.00 | 3,555.00 | 97,040 | 16:23:09 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | 183M | 142.9M | 2.6117 | 13.57 | 1.94B |
From Apr 2019 to Apr 2024
TIDMCLDN
RNS Number : 2481G
Caledonia Investments PLC
24 November 2020
Caledonia Investments plc
Half-year results for the six months ended 30 September 2020
Financial highlights
Hot Features
Premium
6 months Year
30 Sep 2020 31 Mar 2020 Change
Net asset value per share total return +10.4% --8.1%
Net asset value per share 3527p 3236p +9.0%
Net assets GBP1,960m GBP1,787m +9.6%
Interim dividend per share 17.0p 16.6p +2.4%
Highlights
- +10.4% NAV total return for the six months.
- Caledonia Quoted Equity returned 22.2%, benefitting from a notable
rebound in global equity markets and careful stock selection.
- Caledonia Private Capital returned 1.0%, with most investee businesses
adapting well to the new Covid--19 environment and trading strongly.
However, the resulting positive returns were largely offset by
the adverse valuation impact resulting from the restructuring
required for Buzz Bingo.
- Caledonia Funds returned 15.7%, with good underlying performance
from the Asian funds. The valuations have reverted to manager
NAVs, which now incorporate the impact of Covid--19, removing
the need for adjustment that existed at the end of March.
- Progressive dividend maintained, with the interim increased by
2.4% to 17.0p per share.
- Portfolio investments totalling GBP125m: GBP58m into our Funds
pool's private equity funds programme and GBP49m into Private
Capital investments, including GBP27m of new equity in Buzz Bingo
and GBP15m in Seven Investment Management to finance its acquisition
of Partners Wealth Management.
- Portfolio realisations totalling GBP27m included GBP14m from
fund distributions and redemptions.
- Good liquidity position, with GBP8m of cash plus undrawn facilities
of GBP235m at 30 September 2020.
Will Wyatt, Chief Executive, commented:
"A diverse portfolio of high-quality investments is central to our long-term approach. The pressures of 2020 have shown the benefits of this strategy, which has helped to mitigate the worst effects of the Covid-19 pandemic and largely protected shareholders' capital from much of the volatility seen elsewhere. We remain active managers and over the last six months we have continued to make portfolio investments and to invest in our Private Capital companies.
"The environment clearly remains uncertain. However, our strong balance sheet and liquidity position will enable us to take advantage of the opportunities we see and support our strategy of growing net assets and dividends over the long-term."
24 November 2020
Enquiries
Caledonia Investments plc Tulchan Communications Will Wyatt (Chief Executive), Tim Livett Tom Murray (Chief Financial Officer) +44 20 7802 8080 +44 20 7353 4200
Management report
Results
Caledonia's NAV total return for the six months to 30 September 2020 was 10.4%. NAV per share increased 9.0% to 3527p and net assets at 30 September 2020 were GBP1,959.6m. Income for the half year fell by 34% to GBP15.7m and there was GBP7m of net debt at the period end, reflecting cash of GBP8m and a draw of GBP15m on the committed facilities of GBP250m. The directors remain committed to a progressive dividend and have declared an interim dividend of 17.0p per share, an increase of 2.4% compared with the previous year.
The NAV total return was driven by a 22.2% return from the Quoted Equity pool and a 15.7% return from the Funds pool. The performance of the Quoted Equity pool built on the previous year, where careful stock selection had protected shareholders from the steep falls in world stock markets, which subsequently recovered thanks to intervention by governments and central banks. The Quoted Equity portfolios captured these gains and, to the credit of the managers, now have a track record that has outperformed the S&P 500, but without as much volatility. The performance of the Funds pool reflected the reversion to using manager NAVs, compared with the application of an adjustment at March to reflect the potential Covid-19 impact. The Private Capital portfolio returned 1.0%, a creditable performance in the exceptional circumstances created by the Covid-19 pandemic and particularly considering the impact on the investee companies exposed to the consumer leisure sector. Income is likely to be below the levels of last year, as businesses limit pay--outs to protect liquidity. Further commentary on the performance of each pool and the assets therein, can be found below.
The table below shows Caledonia's performance track record to 30 September 2020:
6 months 1 year 3 years 5 years 10 years
% % % % %
------------------------------------- -------- ------ ------- ------- --------
NAV total return 10.4 (3.3) 12.6 43.7 107.8
Annualised
NAV total return (3.3) 4.0 7.5 7.6
Retail Prices Index 1.1 2.3 2.5 2.7
NAVTR vs RPI (4.4) 1.7 5.0 4.9
FTSE All-Share Total Return (16.6) (3.2) 3.5 5.1
NAVTR vs FTSE All-Share Total Return 13.3 7.2 4.0 2.5
------------------------------------- -------- ------ ------- ------- --------
The composition of the portfolio has helped to protect shareholder's capital from the volatility seen in public equity markets. The diversity of the portfolio has mitigated the worst effects of the pandemic to date, by providing shareholders with exposure to businesses in differing geographies and industries. However, the portfolio will not be immune to damage caused by further lockdowns, including those currently in force in the UK and Continental Europe.
Caledonia invested GBP125m during the six-month period, principally split between the Funds pool (GBP58m) and the Private Capital pool (GBP49m). GBP27m was realised and GBP16m of investment income was generated.
Asset allocation
Net assets allocation Return
Strategic Sep 2020 Mar 2020 target
% % % %
---------------- --------- -------- -------- ------
Quoted Equity 35-50 35.7 32.1 9.0
Private Capital 35-45 33.5 34.2 14.0
Funds 20-25 29.0 25.2 12.5
Cash and other +/-10 1.8 8.5
---------------- --------- -------- -------- ------
Pool performance
31 Mar Invest- Realis- Gains/ Accrued 30 Sep
2020 ments ations losses income 2020 Income Return
GBPm GBPm GBPm GBPm GBPm GBPm GBPm %
---------------------- ------- ------- ------- ------ ------- ------- ------ ------
Quoted Equity 574.0 18.3 (11.5) 118.0 - 698.8 9.2 22.2
Private Capital 611.3 48.5 (1.4) (0.4) (0.9) 657.1 6.4 1.0
Funds 450.1 57.8 (14.4) 74.5 - 568.0 0.1 15.7
---------------------- ------- ------- ------- ------ ------- ------- ------ ------
Portfolio investments 1,635.4 124.6 (27.3) 192.1 (0.9) 1,923.9 15.7 12.7
Other investments 21.3 - 5.5 2.6 - 29.4 -
---------------------- ------- ------- ------- ------ ------- ------- ------ ------
Total investments 1,656.7 124.6 (21.8) 194.7 (0.9) 1,953.3 15.7 12.7
Cash and other 130.6 6.3
---------------------- ------- ------- ------- ------ ------- ------- ------ ------
Net assets 1,787.3 1,959.6 10.4
---------------------- ------- ------- ------- ------ ------- ------- ------ ------
1. Other investments comprised legacy investments and cash and receivables
in subsidiary investment entities.
2. Returns for investments are calculated using the Modified Dietz
methodology and the overall return is Caledonia's NAVTR.
3. The Private Capital valuation at 30 September 2020 included GBP7.6m
of accrued income (31 March 2020 - GBP8.5m).
Caledonia Quoted Equity - Capital and Income portfolios (36% of NAV)
The total return of the Quoted Equity portfolio was 22.2% over the first half of the year. This strong performance reflected a notable rebound in global public equity markets and careful stock selection within both the Capital and Income portfolios. The total returns were 26.2% and 11.1% respectively, building on the performance for the year to 31 March 2020 during which both portfolios proved resilient, falling by just 0.3% compared with the falls in the FTSE All-Share of 18.5% and the S&P 500 of 9.9%. The ability to protect capital in falling markets yet benefit from their rebound is what all fund managers aspire to. Credit must go to the team whose strategy has been tested in the most extreme circumstances and has proven to be market beating.
Trading activity during the period was limited. The development of the Income portfolio continued with the addition of a position in Fortis Inc, a North American utilities business, and the disposal of the holding in Tritax Big Box. Other activity was restricted to refining positions in existing investments, in line with Caledonia's strategy of owning high quality companies that compound their earnings over the long term.
Caledonia Private Capital (33% of NAV)
The diverse Private Capital portfolio includes significant positions in six UK based businesses and one private European investment company. These seven investments represent over 90% of its value. The portfolio generated a total return of 1.0% during the first half of the year. The industrial and financial services businesses have adapted nimbly to the new Covid-19 trading environment and the investment in Cobehold continues to perform well. The impact of the pandemic on the two consumer facing businesses, Buzz Bingo and Liberation Group, has been felt more acutely. The teams at both companies have worked tirelessly running their businesses under enormous pressure.
Buzz Bingo, the UK's biggest omni-channel bingo business, completed a company voluntary arrangement ("CVA") process in August 2020 to protect the long-term prospects of the business, leading to the closure of 26 clubs and, regrettably, associated redundancies. Caledonia participated in the CVA process with the provision of GBP22m in new equity, having contributed an initial GBP5m in the spring. The business commenced the phased reopening of its retail venues from early August, with trading post reopening ahead of expectations. The online business (www.buzzbingo.com) has remained profitable on a monthly basis and continues to grow player numbers. All bingo clubs, except for a small number in Scotland, have closed for the duration of the second lockdown, which commenced on 5 November 2020. The valuation at 30 September of GBP22.0m was down 46% from 31 March 2020.
Liberation Group, a pub, restaurant and drinks business with operations in the Channel Islands and South West England, gradually reopened its pub estate from the middle of June. Out of 104 pubs, 95 were opened and have traded well through the summer, with weekly revenues building to levels close to, or in some cases ahead of, those achieved in 2019. The UK brewery operated throughout the period, supporting trade and growing online sales. The wholesale businesses in Jersey and Guernsey remained open and traded strongly. Although Liberation's 32 UK mainland pubs were required to close again on 4 November for the duration of the recent second lockdown, the Channel Islands' pub estate, as well as both breweries and distribution businesses, remain open for business as usual. The valuation at 30 September of GBP59.8m was up 18% from March 2020. In November 2020, Caledonia committed up to GBP36.5m of new equity to support Liberation's acquisition of a substantial portfolio of pubs from Wadworth and various value accretive capital projects across the enlarged estate.
Seven Investment Management ("7IM"), the retail investment manager, has traded well during the period. Assets under management ("AUM") have grown to GBP14.8bn, ahead of the January 2020 position, due to market performance and positive fund inflows. 7IM's range of funds continue to perform strongly, with core funds in the first and second quartiles over one and three years compared to their peers. At the end of September, 7IM completed the acquisition of Partners Wealth Management, a high net worth financial planning business. The valuation at 30 September of GBP104.1m was up 23% from March 2020.
Deep Sea Electronics ("DSE"), the industry-leading manufacturer of genset and ATS control modules, battery chargers and power supplies, has remained operational throughout the period. DSE has traded well, continuing to be strongly cash generative. Opportunities for organic growth and bolt-on acquisitions are being actively explored. The valuation at 30 September of GBP131.6m was up 7% from March 2020.
Cooke Optics, a leading manufacturer of cinematography lenses, has been adversely impacted by the Covid--19 pandemic. In April, Cooke temporarily closed its facilities to develop a safe working environment for employees, before quickly returning to full capacity. Filming activity has been restricted across most geographies. However, the business remains profitable with a healthy order book and, with long-term demand for high quality content expected to remain strong, is well placed to respond as demand recovers. The valuation at 30 September of GBP78.5m was up 4% from March 2020.
Stonehage Fleming, the international family office, continues to trade strongly, adhering to local working practices across the jurisdictions in which it operates. Activity levels remain high along with AUM increasing by 11% since March 2020 to GBP12.5bn. In July 2020, Stonehage Fleming successfully acquired Cavendish Asset Management in an all-share transaction, adding a further GBP1bn of AUM. The valuation at 30 September of GBP101.7m was up 14% from March 2020.
Cobepa, the Belgian based investment company, owns a diverse portfolio of private global investments. The trading results of the businesses in its high-quality portfolio have proven resilient during the pandemic. The valuation of Cobehold, the holding company of Cobepa, reflected this more positive outlook and a review of the impact of Covid-19 resulted in a valuation at 30 September of GBP105.5m, up 8% from March 2020.
Caledonia Funds (29% of NAV)
The total return from the Funds pool was 15.7% over the first half of the year. This reflected underlying fund performance and reassessment of valuations. Fund valuations amounting to 84% of the pool's total value were based on manager NAVs at 30 June 2020 and the remaining 16% comprised the Aberdeen US private equity funds of funds, for which the manager's NAVs at 31 March 2020 were the latest available. All fund valuations showed evidence that the impact of the Covid--19 pandemic had been considered.
Caledonia's fund investments are principally in third party managed private equity funds operating in the US and in Asia. Regular contact is maintained with the fund managers to understand the performance of their investee businesses. The insight they provide has been one of gradually improving performance over the six-month period, with the majority of businesses progressing in line with their pre-Covid-19 plans and relatively few suffering a significant decline in trading. Asian fund investments have performed well, showing modest growth over the period and notable gains for healthcare related businesses. In contrast, US funds show some underlying valuation reductions which reflect the continuing impact of Covid-19 and the sector mix within the investee businesses. During the first half of the year, GBP57.8m was invested and distributions of GBP14.4m were received.
Fund investments
Geography Category
North America 53% Private equity 63%
Funds of private equity
Asia 44% funds 35%
United Kingdom 3% Quoted market 2%
---------------- --- ----------------------- ---
Dividend
The board has declared an interim dividend of 17.0p per share, an increase of 2.4% on last year's interim, at a total value of GBP9.3m. This will be paid to shareholders on 7 January 2021.
Outlook
Caledonia's geographically diverse portfolio of both listed, fund and privately owned assets is managed with the long term in mind. The Covid-19 pandemic presents formidable challenges to all businesses, in particular those operating in the consumer leisure sectors, although our portfolio is invested in high quality companies, which are well led and financed to be able to withstand this particularly difficult period. Whilst it is not clear how long the pandemic will continue to cause disruption, Caledonia's strong balance sheet and access to committed facilities continue to provide comfort that the company remains well placed to achieve its aims.
Portfolio summary
Holdings of 1% or more of net assets at 30 September 2020 were as follows:
Net
Value assets
Name Pool Geography Business GBPm %
------------------------- ---------------- ---------- --------------------------- ------- ------
Deep Sea Electronics Private Capital UK Control systems 131.6 6.7
Cobehold Private Capital Belgium Investment company 105.5 5.4
Seven Investment
Management Private Capital Jersey Investment management 104.1 5.3
Stonehage Fleming Private Capital Guernsey Family office services 101.7 5.2
Aberdeen US PE funds Funds US Funds of funds 90.4 4.6
Cooke Optics Private Capital UK Cine lens manufacturer 78.5 4.0
Axiom Asia funds Funds Asia Funds of funds 62.9 3.2
Liberation Group Private Capital Jersey Pubs and restaurants 59.8 3.1
Watsco Quoted Equity US Ventilation products 48.4 2.5
Microsoft Quoted Equity US Software 48.2 2.5
Oracle Quoted Equity US Infrastructure technology 44.0 2.2
Charter Communications Quoted Equity US Cable telecommunications 43.9 2.2
Texas Instruments Quoted Equity US Semiconductor manufacturer 43.5 2.2
Thermo Fisher Scientific Quoted Equity US Biotechnology development 37.1 1.9
Asia Alternatives
funds Funds Asia Funds of funds 36.9 1.9
British American
Tobacco Quoted Equity UK Tobacco 36.2 1.8
Spirax Sarco Quoted Equity UK Steam engineering 35.4 1.8
Stonepeak funds Funds UK Infrastructure funds 35.1 1.8
JF Lehman funds Funds US Private equity funds 33.4 1.7
Unilever Quoted Equity UK Consumer goods 33.2 1.7
Fastenal Quoted Equity US Fasteners 31.4 1.6
Bioanalytical testing
BioAgilytix Private Capital US services 26.7 1.4
Becton Dickinson Quoted Equity US Medical technology 26.3 1.3
Polar Capital Quoted Equity UK Fund manager 25.7 1.3
Hill & Smith Quoted Equity UK Infrastructure products 25.6 1.3
PAG Asia funds Funds Asia Private equity fund 25.5 1.3
Centeroak funds Funds US Private equity funds 23.8 1.2
Decheng funds Funds Asia Private equity funds 22.5 1.2
Buzz Bingo Private Capital UK Bingo operator 22.0 1.1
AG Barr Quoted Equity UK Soft drinks 22.0 1.1
Croda International Quoted Equity UK Speciality chemicals 21.0 1.1
Other investments 441.6 22.6
Portfolio investments 1,923.9 98.2
Other investments 29.4 1.5
Cash and other 6.3 0.3
------------------------------------------------------------------------------------ ------- ------
Net assets 1,959.6 100.0
------------------------------------------------------------------------------------ ------- ------
1. Geography is based on the country of listing, country of domicile
for unlisted investments and underlying regional analysis for
funds.
Change in pool investments value Pool distribution
Sep Mar
GBPm 2020 2020
------------------------- ---------- ------------------------ ---- ----
Opening balance 1,635.4 Quoted Equity 36% 32%
Investments 124.6 Private Capital 33% 35%
Realisations (27.3) Funds 29% 25%
Gains/losses 192.1 Cash and other 2% 8%
------------------------ ---- ----
Accrued income (0.9)
------------------------- ----------
Closing balance 1,923.9
------------------------- ----------
Geographic distribution Asset class distribution
Sep Mar Sep Mar
2020 2020 2020 2020
------------------------- ---- ---- ------------------------ ---- ----
United Kingdom 29% 30% Listed equities 36% 32%
Channel Islands 14% 13% Private companies 33% 34%
Europe 7% 7% Private equity funds 29% 25%
North America 35% 30% Quoted market funds - 1%
Asia 13% 12% Cash and other 2% 8%
------------------------ ---- ----
Cash and other 2% 8%
------------------------- ---- ----
Currency distribution
Sep Mar
2020 2020
------------------------- ---- ----
Pound sterling 44% 69%
US dollar 48% 26%
Euro 6% 4%
Other currencies 2% 1%
------------------------- ---- ----
1. The geographic distribution is based on the country of listing,
country of domicile for unlisted investments and underlying regional
analysis for funds.
2. The asset class and currency distributions are based on the category
and denomination of the securities held. These do not look through
to the underlying exposures, which may be different.
Risks and uncertainties
Caledonia has a risk management framework that provides a structured process for identifying, assessing and managing risks associated with the company's business objectives and strategy.
The principal risks and uncertainties faced by the company are set out in the strategic report section of Caledonia's annual report 2020. External risks arise from political, legal, regulatory and economic changes. Strategic risks arise from the conception, design and implementation of the company's business model. Investment risks arise from specific investment and realisation decisions. Market risks arise from equity price volatility, foreign exchange rate movements and interest rate volatility. Treasury and funding risks arise from counterparties, uncertainty in market prices and rates and liquidity availability. Operational risks arise from potentially inadequate or failed controls, processes, people or systems. The company is also mindful of the uncertainties related to the effects of Brexit.
The emerging risks arising from the Covid-19 pandemic were also noted in the annual report 2020; whilst this remains a major issue, action has been taken during the first half of the year to mitigate a number of the risks identified and Caledonia has remained fully operational.
The principal risks and uncertainties identified in the annual report 2020, including uncertainties related to the effects of Brexit, remain unchanged and each of them has the potential to affect the company's results during the remainder of the year ending 31 March 2021.
Caledonia actively monitors key risk factors, including portfolio concentration, liquidity and volatility, and aims to manage risk by:
- diversifying the portfolio by sector and geography
- ensuring access to relevant information from investee companies, particularly in the case
of unquoted investments through board representation
- managing cash and borrowings to ensure that liquidity is available to meet investment and
operating needs
- reducing counterparty risk by limiting maximum aggregate exposures.
Going concern
The factors likely to affect the company's ability to continue as a going concern were set out in the annual report 2020. As at 30 September 2020, there have been no significant changes to these factors. Having reviewed the company's forecasts and other relevant evidence, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-year condensed financial statements.
The directors have completed a detailed financial forecast alongside severe but plausible scenario-based downside stress-testing, including the impact of negative investment performance, a decline in dividend income received from investment portfolios, additional funding required for the private capital businesses and the impact of all Fund pool commitments being called in the next twelve months. Consideration of the risks arising from the Covid-19 pandemic have been included within this assessment. The board regularly assesses the amount of capital that the group holds to cover its principal risks, including the amounts that may be required under a range of adverse planning scenarios, including those set out above, and has determined that the group has adequate access to resources to enable it to meet its obligations and to continue in operational existence for the foreseeable future.
The directors have considered the impact of the emergence and spread of Covid--19 and potential implications on the future of the group. Whilst there are significant wider market uncertainties, which may impact portfolio company investments via, for example, funding risk and commercial development risk, the directors do not believe this will significantly impact the liquidity of the group over the next 12 months. Accordingly, the directors have adopted the going concern basis in preparing these half-yearly results.
Directors' responsibility statement
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted
by the European Union;
- the interim management report includes a fair review of the
information required by:
- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules
, being an indication of important events that have occurred
during the first six months of the financial year and their
impact on the condensed set of financial statements and a
description of the principal risks and uncertainties for the
remaining six months of the financial year;
- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules
, being related parties transactions that have taken place
in the first six months of the current financial year and
that have materially affected the financial position or performance
of the entity during that period and any changes in the related
party transactions described in the last annual report that
could do so.
Signed on behalf of the board
Will Wyatt, Chief Executive
23 November 2020
Independent review report
to Caledonia Investments plc
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2020 which comprises the condensed group statement of comprehensive income, the condensed group statement of financial position, the condensed group statement of changes in equity and the condensed group statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2020 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
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 DTR of the UK FCA. 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.
Thomas Brown
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London E14 5GL
23 November 2020
Condensed group statement of comprehensive income
for the six months ended 30 September 2020
Six months 30 Sep Six months 30 Sep Year 31 Mar 2020
2020 2019
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- -------
Revenue
Investment income 15.7 - 15.7 23.9 - 23.9 53.4 - 53.4
Other income 0.1 - 0.1 0.1 - 0.1 - - -
Net gains and losses
on fair value investments - 194.7 194.7 - 92.8 92.8 - (206.3) (206.3)
Net gains and losses
on fair value property - (0.4) (0.4) - - - - - -
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- -------
Total revenue 15.8 194.3 210.1 24.0 92.8 116.8 53.4 (206.3) (152.9)
Management expenses (9.3) (3.4) (12.7) (9.5) (6.0) (15.5) (17.2) 0.6 (16.6)
Profit/(loss) before
finance costs 6.5 190.9 197.4 14.5 86.8 101.3 36.2 (205.7) (169.5)
Treasury interest
receivable 0.1 - 0.1 0.3 - 0.3 0.6 - 0.6
Finance costs (1.3) - (1.3) (1.1) - (1.1) (2.1) - (2.1)
Exchange movements (0.4) - (0.4) 0.2 - 0.2 (0.9) - (0.9)
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- -------
Profit/(loss) before
tax 4.9 190.9 195.8 13.9 86.8 100.7 33.8 (205.7) (171.9)
Taxation (0.2) 0.1 (0.1) 0.8 (0.1) 0.7 0.8 (1.8) (1.0)
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- -------
Profit/(loss) for
the period 4.7 191.0 195.7 14.7 86.7 101.4 34.6 (207.5) (172.9)
Other comprehensive
income items never
to be reclassified
to
profit or loss
Re-measurement
of defined benefit
pension schemes - 0.4 0.4 - - - - 1.1 1.1
Tax on other comprehensive
income - (0.5) (0.5) - - - - (0.7) (0.7)
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- -------
Total comprehensive
income 4.7 190.9 195.6 14.7 86.7 101.4 34.6 (207.1) (172.5)
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- -------
Basic earnings
per share 8.6p 348.0p 356.6p 26.8p 157.8p 184.6p 63.1p -378.1p -315.0p
Diluted earnings
per share 8.4p 344.0p 352.4p 26.2p 154.7p 180.9p 62.6p -378.1p -315.0p
--------------------------- ------- ------- ------ ------- ------- ------ ------- ------- -------
The total column of the above statement represents the condensed group statement of comprehensive income, prepared in accordance with IFRSs as adopted by the European Union.
The revenue and capital columns are supplementary to the condensed group statement of comprehensive income and are prepared under guidance published by the Association of Investment Companies.
The profit for the period and total comprehensive income for the period is attributable to equity holders of the parent.
Condensed group statement of financial position
at 30 September 2020
30 Sep 30 Sep 31 Mar
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------------------ ------- ------- -------
Non-current assets
Investments held at fair value through profit or loss 1,953.3 2,043.5 1,656.7
Investments in subsidiaries held at cost - - -
Investment property 9.7 7.6 8.7
Property, plant and equipment 27.6 28.2 28.0
Deferred tax assets 0.2 3.8 1.0
Employee benefits 5.2 2.5 5.1
------------------------------------------------------ ------- ------- -------
Non-current assets 1,996.0 2,085.6 1,699.5
------------------------------------------------------ ------- ------- -------
Current assets
Trade and other receivables 5.6 20.3 6.6
Current tax assets 2.8 2.4 2.6
Cash and cash equivalents 7.8 11.3 114.7
------------------------------------------------------ ------- ------- -------
Current assets 16.2 34.0 123.9
------------------------------------------------------ ------- ------- -------
Total assets 2,012.2 2,119.6 1,823.4
------------------------------------------------------ ------- ------- -------
Current liabilities
Interest-bearing loans and borrowings - (5.0) -
Trade and other payables (31.2) (29.2) (30.0)
Employee benefits (1.3) (1.3) (0.9)
------------------------------------------------------ ------- ------- -------
Current liabilities (32.5) (35.5) (30.9)
------------------------------------------------------ ------- ------- -------
Non-current liabilities
Interest-bearing loans and borrowings (15.0) - -
Employee benefits (5.1) (7.6) (5.2)
Non-current liabilities (20.1) (7.6) (5.2)
------------------------------------------------------ ------- ------- -------
Total liabilities (52.6) (43.1) (36.1) ------------------------------------------------------ ------- ------- ------- Net assets 1,959.6 2,076.5 1,787.3 ------------------------------------------------------ ------- ------- ------- Equity Share capital 3.2 3.2 3.2 Share premium 1.3 1.3 1.3 Capital redemption reserve 1.3 1.3 1.3 Capital reserve 1,732.2 1,835.1 1,541.3 Retained earnings 235.5 285.8 255.5 Own shares (13.9) (50.2) (15.3) ------------------------------------------------------ ------- ------- ------- Total equity 1,959.6 2,076.5 1,787.3 ------------------------------------------------------ ------- ------- ------- Undiluted net asset value per share 3571p 3787p 3259p Diluted net asset value per share 3527p 3712p 3236p ------------------------------------------------------ ------- ------- -------
Condensed group statement of changes in equity
for the six months ended 30 September 2020
Capital
redemp-
Share Share tion Capital Retained Own Total
capital premium reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Six months ended 30 September
2020
Balance at 1 April 2020 3.2 1.3 1.3 1,541.3 255.5 (15.3) 1,787.3
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income
Profit for the period - - - 191.0 4.7 - 195.7
Other comprehensive income - - - (0.1) - - (0.1)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income - - - 190.9 4.7 - 195.6
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Transactions with owners of
the company
Contributions by and distributions
to owners
Share-based payments - - - - 2.5 - 2.5
Transfer of shares to option
holders - - - - (2.8) 2.8 -
Own shares purchased - - - - - (1.4) (1.4)
Dividends paid - - - - (24.4) - (24.4)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total transactions with owners - - - - (24.7) 1.4 (23.3)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Balance at 30 September 2020 3.2 1.3 1.3 1,732.2 235.5 (13.9) 1,959.6
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Six months ended 30 September
2019
Balance at 1 April 2019 3.2 1.3 1.3 1,748.4 292.4 (44.6) 2,002.0
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income
Profit and total comprehensive
income - - - 86.7 14.7 - 101.4
Transactions with owners of
the company
Contributions by and distributions
to owners
Share-based payments - - - - 2.4 - 2.4
Own shares purchased - - - - - (5.6) (5.6)
Dividends paid - - - - (23.7) - (23.7)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total transactions with owners - - - - (21.3) (5.6) (26.9)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Balance at 30 September 2019 3.2 1.3 1.3 1,835.1 285.8 (50.2) 2,076.5
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Year ended 31 March 2020
Balance at 1 April 2019 3.2 1.3 1.3 1,748.4 292.4 (44.6) 2,002.0
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income
Loss for the year - - - (207.5) 34.6 - (172.9)
Other comprehensive income - - - 0.4 - - 0.4
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total comprehensive income - - - (207.1) 34.6 - (172.5)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Transactions with owners of
the company
Contributions by and distributions
to owners
Share-based payments - - - - (1.5) - (1.5)
Transfer of shares to option
holders - - - - (37.2) 37.2 -
Own shares purchased - - - - - (7.9) (7.9)
Dividends paid - - - - (32.8) - (32.8)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Total transactions with owners - - - - (71.5) 29.3 (42.2)
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Balance at 31 March 2020 3.2 1.3 1.3 1,541.3 255.5 (15.3) 1,787.3
----------------------------------- ------- ------- ------- ------- -------- ------ -------
Condensed group statement of cash flows
for the six months ended 30 September 2020
6 months 6 months Year
30 Sep 30 Sep 31 Mar
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------------------- -------- -------- -------
Operating activities
Dividends received 16.3 22.1 48.8
Interest received 0.1 1.0 1.7
Cash received from customers 0.1 0.1 -
Cash paid to suppliers and employees (10.6) (14.3) (23.3)
Taxes received 0.1 - 0.2
Taxes paid - (0.1) (0.1)
Group tax relief received 0.1 3.7 3.7
Group tax relief paid - - (0.1)
----------------------------------------------------- -------- -------- -------
Net cash flow from operating activities 6.1 12.5 30.9
----------------------------------------------------- -------- -------- -------
Investing activities
Purchases of investments (124.6) (193.4) (383.1)
Proceeds from disposal of investments 25.7 103.9 397.2
Purchases of property, plant and equipment (1.6) (1.3) (2.7)
----------------------------------------------------- -------- -------- -------
Net cash flow from/(used in) investing activities (100.5) (90.8) 11.4
----------------------------------------------------- -------- -------- -------
Financing activities
Interest paid (1.6) (0.9) (1.7)
Dividends paid to owners of the company (24.4) (23.7) (32.8)
Proceeds from bank borrowing 15.0 10.0 10.0
Repayments of bank borrowing - (5.0) (10.0)
Loan receipts from subsidiaries - 2.5 2.5
Loan payments to subsidiaries (0.1) - -
Purchases of own shares (1.4) (5.6) (7.9)
----------------------------------------------------- -------- -------- -------
Net cash flow used in financing activities (12.5) (22.7) (39.9)
----------------------------------------------------- -------- -------- -------
Net increase/(decrease) in cash and cash equivalents (106.9) (101.0) 2.4
Cash and cash equivalents at period start 114.7 112.3 112.3
----------------------------------------------------- -------- -------- -------
Cash and cash equivalents at period end 7.8 11.3 114.7
----------------------------------------------------- -------- -------- -------
Notes to the condensed financial statements
1. General information
Caledonia Investments plc is an investment trust company registered in England and Wales with company number 00235481. The address of its registered office is Cayzer House, 30 Buckingham Gate, London SW1E 6NN. The ordinary shares of the company are premium listed on the London Stock Exchange.
This condensed set of financial statements was approved for issue on 23 November 2020 and is unaudited.
The information for the period ended 30 September 2020 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 March 2020 has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not draw attention to any matters by way of emphasis of matter and did not contain a statement under section 498(2) and (3) of the Companies Act 2006.
2. Accounting policies
Basis of accounting
This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the annual financial statements for the year ended 31 March 2020, which were prepared in accordance with IFRSs as adopted by the European Union.
This condensed set of financial statements has been prepared in accordance with the recommendations of the Statement of Recommended Practice issued by the Association of Investment Companies.
Adopted IFRSs
The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the group's annual report for the year ended 31 March 2020, except for the mandatory amendments that had an effective date prior to the start of the six-month period. None of the mandatory amendments had an impact on the reported financial position or performance of the group. The changes in accounting policies will also be reflected in the group's consolidated financial statements for the year ending 31 March 2021.
A number of new standards and amendments to standards and interpretations will be effective for periods beginning on or after 1 April 2021. These new standards are not applicable to these financial statements and they are not expected to have an impact when they become effective. The group plans to apply these standards and amendments in the reporting period in which they become effective.
Basis of consolidation
In accordance with the IFRS 10/IAS 28 amendments to apply the investment entities exemption, the consolidated financial statements include the financial statements of the company and service entities controlled by the company made up to the reporting date. All other investments in controlled entities are accounted as held at fair value through profit or loss.
Going concern
The directors have considered the impact of the emergence and spread of Covid--19 and potential implications on the future of the group. Whilst there are significant wider market uncertainties which may impact portfolio company investments via, for example, funding risk and commercial development risk, the Group does not believe this will significantly impact the liquidity of the group over the next 12 months. Accordingly, the directors have adopted the going concern basis in preparing these half-yearly results.
The directors have completed a detailed financial forecast alongside severe but plausible scenario-based downside stress-testing, including the impact of negative investment performance, a decline in dividend income received from investment portfolios, additional funding required for the private capital businesses and the impact of all Fund pool commitments being called in the next twelve months. Consideration of the risks arising from the Covid-19 pandemic have been included within this assessment. The board regularly assesses the amount of capital that the group holds to cover its principal risks, including the amounts that may be required under a range of adverse planning scenarios, including those set out above, and has determined that the group has adequate access to resources to enable it to meet its obligations and to continue in operational existence for the foreseeable future.
The directors have considered the impact of the emergence and spread of Covid--19 and potential implications on the future of the group. Whilst there are significant wider market uncertainties, which may impact portfolio company investments via, for example, funding risk and commercial development risk, the directors do not believe this will significantly impact the liquidity of the group over the next 12 months.
Accordingly, the directors have adopted the going concern basis in preparing these half-yearly results.
Changes in accounting policies
As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, this condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 March 2020.
Judgements and estimates
In preparing these interim financial statements, management has made judgements, estimates and assumptions that affected the application of accounting policies and the reported amounts of assets and liabilities, income and expense.
The significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 March 2020.
3. Dividends
Amounts recognised as distributions to owners of the company in the period were as follows:
6 months 6 months Year
30 Sep 30 Sep 31 Mar
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------------------------------------------- -------- -------- ------
Final dividend for the year ended 31 March 2020 of 44.5p per share (2019 - 43.2p) 24.4 23.7 23.7
Interim dividend for the year ended 31 March 2020 of 16.6p per share - - 9.1
---------------------------------------------------------------------------------- -------- -------- ------
24.4 23.7 32.8
---------------------------------------------------------------------------------- -------- -------- ------
The directors have declared an interim dividend for the year ending 31 March 2021 of 17.0p per share, totalling GBP9.3m, which has not been included as a liability in this condensed set of financial statements. This dividend will be payable on 7 January 2021 to holders of shares on the register on 4 December 2020. The ex-dividend date will be 3 December 2020.
The deadline for elections under the dividend reinvestment plan offered by Link Asset Services will be the close of business on 18 December 2020.
4. Share capital
During the period, The Caledonia Investments plc Employee Share Trust sold 96,909 shares for GBPnil and purchased 53,533 shares for GBP1.4m relating to the calling of performance share and deferred bonus awards.
In the six months ended 30 September 2019, the Employee Share Trust sold 90,844 shares for GBPnil and purchased 85,009 shares for GBP2.6m relating to the calling of performance share and deferred bonus awards. The Employee Share Trust also purchased 100,000 shares from The Cayzer Trust Company Ltd for GBP3.0m.
In the year ended 31 March 2020, the Employee Share Trust sold 168,087 shares for GBPnil and purchased 158,637 shares for GBP4.9m relating to the calling of performance share and deferred bonus awards. The Employee Share Trust also purchased 100,000 shares from The Cayzer Trust Company Ltd for GBP3.0m.
5. Net asset value per share
The group's undiluted net asset value per share is based on the net assets of the group at the period end and on the number of shares in issue at the period end less shares held by The Caledonia Investments plc Employee Share Trust. The group's diluted net asset value per share assumes the calling of performance share and deferred bonus awards for nil consideration.
6. Operating segments
The chief operating decision maker has been identified as the Executive Committee, which reviews the company's internal reporting to assess performance and allocate resources. Management has determined the operating segments based on these reports.
The performance of operating segments is assessed on a measure of group total revenue, principally comprising gains and losses on investments and investment income. Reportable profit or loss is after treasury income and 'Other items', which comprise management and other expenses. Reportable assets equate to the group's total assets. 'Cash' and 'Other items' are not identifiable operating segments.
'Non-portfolio investments' comprise subsidiaries and other investments not managed as part of the investment portfolio.
Profit before tax Total assets
6 months 6 months Year
30 Sep 30 Sep 31 Mar 30 Sep 30 Sep 31 Mar
2020 2019 2020 2020 2019 2020
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- -------- ------- ------- ------- -------
Quoted Equity 127.2 53.1 (1.7) 698.8 692.7 574.0
Private Capital 6.0 10.5 (128.5) 657.1 765.1 611.3
Funds 74.6 54.3 (13.6) 568.0 553.2 450.1
-------------------------- -------- -------- ------- ------- ------- -------
Portfolio investments 207.8 117.9 (143.8) 1,923.9 2,011.0 1,635.4
Other investments 2.6 (1.2) (9.1) 29.4 32.5 21.3
-------------------------- -------- -------- ------- ------- ------- -------
Total revenue/investments 210.4 116.7 (152.9) 1,953.3 2,043.5 1,656.7
Cash and cash equivalents 0.1 0.3 0.6 7.8 11.3 114.7
Other items (14.7) (16.3) (19.6) 51.1 64.8 52.0
-------------------------- -------- -------- ------- ------- ------- -------
Reportable total 195.8 100.7 (171.9) 2,012.2 2,119.6 1,823.4
-------------------------- -------- -------- ------- ------- ------- -------
7. Related parties
Caledonia Group Services Ltd, a wholly owned subsidiary of Caledonia Investments plc, provides management services to the company. During the six months ended 30 September 2020, GBP12.5m was charged to the company for these services (30 September 2019 - GBP13.1m and 31 March 2020 - GBP15.6m).
There were no other changes in the transactions or arrangements with related parties as described in the company's annual report for the year ended 31 March 2020 that have had a material effect on the results or the financial position of the company or of the group in the six months ended 30 September 2020.
8. Capital commitments
At 30 September 2020, the group had undrawn fund and other commitments totalling GBP369.6m (30 September 2019 - GBP405.8m and 31 March 2020 - GBP380.8m).
9. Fair value hierarchy
The company measures fair values using the following fair value hierarchy, reflecting the significance of the inputs used in making the measurements:
Level Quoted prices (unadjusted) in active markets for identical 1 assets. Level Inputs other than quoted prices included within Level 1 that 2 are directly or indirectly observable. Level Inputs for the asset that are not based on observable market 3 data.
The table below analyses financial instruments held at fair value according to level in the fair value hierarchy into which the fair value measurement is categorised:
30 Sep 30 Sep 31 Mar
2020 2019 2020
GBPm GBPm GBPm
-------------------------------- ------- ------- -------
Investments held at fair value
Level 1 704.3 692.7 577.6
Level 2 6.9 64.9 1.3
Level 3 1,242.1 1,285.9 1,077.8
-------------------------------- ------- ------- -------
1,953.3 2,043.5 1,656.7
------------------------------- ------- ------- -------
The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy:
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------- ------- ------- -------
Balance at the period start 1,077.8 1,092.1 1,092.1
Transfer from Level 2 - - 7.8
Transfer to Level 1 - - (7.1)
Purchases 106.3 184.2 238.2
Realisation proceeds (14.5) (43.2) (86.1)
Gains and losses on investments sold in the
period (34.0) 8.7 24.0
Gains and losses on investments held at the
period end 107.4 41.4 (195.6)
Accrued income (0.9) 2.7 4.5
-------------------------------------------- ------- ------- -------
Balance at the period end 1,242.1 1,285.9 1,077.8
-------------------------------------------- ------- ------- -------
The table below sets out information about significant unobservable inputs used at 30 September 2020 in measuring financial instruments categorised as Level 3 in the fair value hierarchy:
Description Change
Weighted Input in
Valuation technique Fair value average sensitivity valuation
Unobservable input GBPm input +/- +/- GBPm
-------------------------- ---------- -------- ----------- ---------
Internally developed
Private capital companies
Earnings - very high risk 22.0
EBITDA multiple 2.1 25% 18.9
Earnings - high risk 169.6
EBITDA multiple 11.7 20% 43.7
Earnings - medium risk 223.7
EBITDA multiple 8.2 15% 35.7
Earnings - low risk 101.7
EBITDA multiple 11.6 10% 9.5
Net assets 140.1 5% 7.0
657.1 114.8
-------------------------- ---------- -------- ----------- ---------
Other companies
Net assets 29.1 5% 1.4
29.1 1.4
-------------------------- ---------- -------- ----------- ---------
Externally developed
Fund interests
Private equity 357.4 5% 17.8
Funds of funds 198.5 2% 4.0
555.9 21.8
-------------------------- ---------- -------- ----------- ---------
1,242.1 138.0
-------------------------- ---------- -------- ----------- ---------
Private capital companies
Significant unobservable inputs were identified and developed as follows:
-- EBITDA multiples represent amounts that market participants
would use when pricing the investments. EBITDA multiples are
selected from comparable public companies based on geographic
location, industry, size, target markets and other factors that
management considers to be reasonable. The traded multiples
for the comparable companies are determined by dividing the
enterprise value of the company by its earnings before interest,
tax, depreciation and amortisation, or are derived from reported
mergers and acquisitions transactions involving comparable companies.
EBITDA multiples were adjusted to reflect points of difference
between the comparators and the company being valued. EBITDA
multiples ranged from 4 to 16 (31 March 2020 - 5 to 12), weighted
average 6.7 (31 March 2020 - 8.4).
Valuation inputs normally comprise a blend of historic transaction multiples and maintainable earnings derived from the last 12 months EBITDA results. Whilst the 30 September 2020 quoted multiples should reflect the Covid-19 impact, historic multiples for transactions over six months ago will not. In contrast, the results used to derive maintainable earnings included historic, current year and forward-looking metrics; the derived EBITDA includes the impact of Covid-19 on financial performance.
Taking into account the above factors, the directors have concluded that valuations developed from the EBITDA multiples at 30 September 2020, but excluding historic transaction multiples, and maintainable earnings based on trading as described above should give the best estimate of fair value in most cases.
At 31 March 2020, the directors conducted a portfolio risk analysis to assess the potential impact of Covid--19 on the Private Capital investments, which remains relevant. The review examined company and sector specific vulnerabilities as well as considering operating leverage and liquidity. This analysis has been revised to reflect the position at 30 September 2020. Investments are classified into four groups, as shown below:
Valuation Valuation
Investment Risk weighting technique GBPm
---------------------------- --------------- ----------- ---------
Deep Sea Electronics Medium Earnings 131.6
Cobehold Medium Net assets 105.5
Seven Investment Management Medium Earnings 104.1
Stonehage Fleming Low Earnings 101.7
Cooke Optics Medium Earnings 78.5
Liberation High Earnings 59.8
BioAgilytix Medium Earnings 26.7
Buzz Bingo Very high Earnings 22.0
Other investments High 28.2
---------------------------- ---------------------------- ---------
657.1
-------------------------------------------------------- ---------
The risk weightings were derived from a matrix analysing the severity of people, supply chain, financial, operational, travel and regulatory risks of a short-term value loss and/or significant business interruption applied to each portfolio company. The risk weightings for Seven Investment Management and for Cooke Optics have both been revised downwards to medium, from a rating of high at 31 March 2020. In both cases, the businesses and their markets have adapted well to operating within the constraints caused by the Covid-19 pandemic.
There are two businesses within the Private Capital portfolio that have been rated high and very high.
Liberation operates pub, restaurant, brewing and drinks distribution businesses in the Channel Islands and South West England. It had been impacted by Covid--19, with the closure of pubs for a significant period, but the vast majority were subsequently re-opened and traded well, with revenues close to prior year levels. However, the high-risk weighting reflects the uncertainty of further restrictions, such as the new rules introduced in England in November, although the Channel Islands remain unaffected at present.
The Buzz Bingo business completed a company voluntary arrangement process in August 2020 to protect the long-term prospects of the business. The business undertook a phased re-opening of its retail venues from early August and trading to date has been ahead of expectations. However, the business is dependent on these venues remaining open and trading well. The increased Covid--19 related restrictions announced in early November led to the closure of all the venues in England, supporting the very high-risk weighting assigned to this business.
Although the directors believe that the estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. This is especially true considering the Covid-19 pandemic. Thus, the presentation of a 'valuation range' has become more prevalent.
In the summary table above, the Private Company investments have been shown categorised by their risk weighting and the sensitivities shown in the Level 3 table of significant unobservable inputs give an indication of the effect of changing one or more of the assumptions used in developing the EBITDA multiple to reasonably possible alternative assumptions.
The EBITDA multiples are directly linked to the future earnings potential of the business and will therefore include standard areas such as market demand and competitive activity, but also areas more directly linked to the current Covid-19 pandemic, such as the duration of social distancing measures and their potential impacts and the availability, extent and timing of sources of cash, including compliance with banking covenants or reliance on those covenants being waived. The impact of these assumptions is reflected in the risk weighting and, thus, a progressive scale of sensitivities from 10% to 25% has been applied.
Non-pool companies
Other (non-pool) companies comprise principally cash or group company receivables held in subsidiary investment entities. These are valued at net assets. A sensitivity of 10% has been applied to recognise the judgements in developing the valuations.
Private equity fund interests
Valuation of the private equity fund interests are based on the managers' NAVs. Managers' NAVs apply valuation techniques consistent with IFRS and are normally subject to annual audit. However, managers' NAVs are usually published quarterly, two to four months after the quarter end. Consequently, the fund valuations included in these financial statements were mainly based on the 30 June 2020 managers' NAVs (84% of funds NAV) with the balance based on 31 March 2020 managers' NAV (16% of funds NAV). Managers' NAVs have been reviewed for clear indications that they have taken into account the economic impact of Covid-19.
At 31 March 2020, fund valuations were based principally on 31 December 2019 managers' NAV, which would not have been expected to include the economic impact of Covid-19. Therefore, the directors determined that a regional, market-based adjustment should be applied to the managers' NAVs in estimating fair value at the reporting date. No such adjustment was considered necessary at 30 September 2020.
The sensitivities shown in the table give an indication of the effect of changing the NAV multiple to reasonably possible alternative assumptions. A higher sensitivity has been applied to the private equity funds, as these will normally be less diversified than funds of funds.
10. Investment property
Freehold property
GBPm
------------------------------- -----------------
Valuation at 31 March 2020 8.7
Additions 1.3
Revaluation (0.3)
Valuation at 30 September 2020 9.7
------------------------------- -----------------
At 30 September 2020, the group held one property classified as investment property, comprising that part of its head office building currently being redeveloped for lease to a third party.
The fair value of the investment property was estimated by the directors, based on a March 2020 valuation report prepared by Tuckerman, an external, independent property valuer, holding recognised and relevant professional qualifications and with recent experience in the location and category of the property being valued. The March 2020 valuation conformed to the Royal Institution of Chartered Surveyors ("RICS"') Valuation Professional Standards. Fees paid to the valuer are based on a fixed price contract.
As the property is currently being redeveloped, it was valued on the basis of its development potential, considering the gross development value of the completed scheme based upon assumptions of capital value, rental value and yields that would be created through the implementation of the development. Deduction is then made for anticipated costs to complete, before arriving at a valuation.
The investment property held by the group is classified as Level 3.
Market Range
value Valuation Key unobservable (weighted
Property GBPm technique inputs average)
------------------------ ------ ----------- ------------------ -----------
Buckingham Gate, London 9.7 Residual Construction costs GBP2.8m
Rent per sq ft GBP37-GBP73
development pa (GBP67)
value Rent-free period 2.5 years
Capitalisation
rate 4.5%
Purchaser's costs 6.8%
------------------------ ------ ----------- ------------------ -----------
9.7
------------------------ ------ ----------- ------------------ -----------
The table below sets out information about significant unobservable inputs used at 30 September 2020 in measuring Investment property categorised as Level 3 in the fair value hierarchy:
Description Change
Weighted Input in
Valuation technique average sensitivity valuation
Unobservable input input +/- +/- GBPm
--------------------- -------- ----------- ---------
Externally developed
Property valuation
Construction costs GBP2.8m 10% 0.3
Capitalisation rate 4.5% 0.25% -0.5/+1.1
Rent per sq ft GBP67 5% 0.6
---------------------- -------- ----------- ---------
-0.3/+0.8
--------------------- -------- ----------- ---------
The above inputs are interdependent and partially determined by market conditions. The impact on the valuation could be mitigated by the inter-relationship between these inputs.
11. Share-based payments
The group operates performance share schemes and deferred bonus plans. Details of these schemes were disclosed in the annual report 2020 and the basis of measuring fair value was consistent with those disclosures.
During the six months ended 30 September 2020, awards over 273,597 shares were issued under the performance share scheme (30 September 2019 and 31 March 2020 - 239,138 shares). Compulsory deferred bonus awards over 5,229 shares were also granted (30 September 2019 and 31 March 2020 - 44,930 shares).
Expenses in respect of share-based payments in the period were GBP2.9m (30 September 2019 - GBP2.7m and 31 March 2020 - GBP2.4m credit).
12. Subsequent events
On 5 November 2020, Caledonia committed to invest up to GBP36.5m for new equity in Liberation Group, to support its acquisition of a substantial portfolio of pubs from Wadworth and various value accretive capital projects across the enlarged estate.
FTSE International Limited ('FTSE') (c) FTSE 2020. 'FTSE(R)' is a trademark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent.
END
Copies of this statement are available at the company's registered office, Cayzer House, 30 Buckingham Gate, London SW1E 6NN, United Kingdom, or from its website at www.caledonia.com.
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END
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