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Caledonia sticking to its strategy

Caledonia delivered a positive net asset value per share total return of 2.6% for the year ended 31 March 2016, compared with 14.2% for the previous year. Over the year, the FTSE All-Share Total Return fell by 3.9%, though the S&P 500 remained flat. The Chairman emphasises though that they do not seek to benchmark performance over as short a period as a year, but rather aim to outperform the FTSE All-Share Total Return over ten years. Over the last ten years their NAV total return was 71.6% or 5.5% annualised, ahead of the FTSE All-Share Index total return which generated an annualised return of 4.7%. The dividend was raised by 4% to 52.6p.

During the year, the board carried out a detailed review of the strategy adopted in 2011. This concluded that the strategy had delivered good returns to date and should continue to do so. To re-emphasise the key tenets of this strategy:

  • To grow capital value over the long term measured in real terms
  • To pay an increasing annual dividend, which grows at or in excess of inflation over the long term
  • To manage risk commensurate with shareholders’ requirements and their investment horizon

The portfolio is structured to deliver these strategic aims through:

  • A long term investment horizon (ten years or longer), investing in quoted and unquoted businesses and funds that accumulate value over that time period
  • A diversity of investment markets via pools that together reflect our risk/return aims
  • A sustainable and increasing annual cash yield that is a prominent part of total return and covers annual dividends and expenses

They aim to deliver annual average total returns of between RPI+3% and RPI+6% which, based on history, should deliver performance over a ten year period in line with or above most share indices, including the FTSE All-Share

The board agreed to make several minor adjustments to the strategy:

  • To make some changes to the allocation ranges of some of the pools
  • To increase the Funds pool’s exposure to private equity funds in the US and Asia through further commitments and to reduce its exposure to quoted market funds in those regions
  • To reduce the Funds pool’s strategic requirement for income to zero, reflecting the structure of the funds in which it invests
  • To reduce the target return for the Income & Growth pool from 10% to 7%, reflecting its required risk/return profile

At the year end, the balance sheet was ungeared with a net cash position of GBP22.9m, compared with net cash of GBP131.0m at 31 March 2015. During the year, Caledonia made investments totalling GBP406m and divestments of GBP315m, excluding purchases and sales within the Income & Growth pool. The two most substantial new investments were GBP74m in Seven Investment Management and GBP92m in Gala Bingo. They received proceeds of GBP79m from the sale of TGE Marine and distributions of GBP50m from the Capital Today China fund following further realisations of its holding in JD.com.

CLDN :  Caledonia sticking to its strategy

 

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