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Caledonia Investments achieves 54th annual increasing dividend

Caledonia Investments achieves 54th annual increasing dividend – Caledonia Investments has published results for the year ended 31 March 2021. The NAV increased by 23.6% compared to the previous year, to 4000p while the NAV total return was 25.9%. This compares to a NAV total return of -8.1% for the year ended 31 March 2020. The company achieved its 54th consecutive year of increasing its dividend, with a figure of 62.9p for the year.

The company attributed the turnaround results to strong performance from its quoted equity portfolios, which were up by 30.3% for the year, and from its US public equities. Its private capital portfolio also performed well and those companies impacted by Covid made a good recovery. Chief executive, Will Wyatt, said the trust’s diversified holdings have helped them through what has been a challenging year.

Investment income, however, for the year fell by 16% to £45m as a result of a reduction in company dividends. Meanwhile, Caledonia also suffered a loss in its sale of holding Buzz Bingo, which was particularly affected by the Government-enforced shutdown in the summer of 2020. This created a write-down for the year of £69m. Additionally, with approximately 45% of assets denominated in US dollars, the strengthening of sterling by some 11% over the year negatively impacted Caledonia’s annual return by more than six percentage points.

Extract from the chairman’s statement:

Results

The NAV total return (‘NAVTR’) for the year of 25.9% was strong and included positive returns from each part of our portfolio. The Quoted Equity pool delivered an annual return of 30.3%, aided by the rebound in global equity markets. Investee companies within the Private Capital portfolio, with the exception of Buzz Bingo, adapted well to the challenges presented by Covid-19 to produce a total return of 23.2%. The Funds portfolio delivered an annual return of 34.8%, buoyed by good underlying fund performance. We have retained a strong, largely ungeared balance sheet with total liquidity of £249m available at 31 March 2021.

Income and dividend

Total income was £45m, a reduction of 16% from the previous year. This reflects the negative impact of the pandemic on economic activity in a small number of investee companies and the change in focus of the Quoted Equity Income portfolio towards higher quality businesses with slightly lower yields. The Board is recommending a final dividend of 45.9p per share, which represents a full year dividend of 62.9p, an increase of 2.9% when compare to the previous year. While this payment is not covered by the income generated this year, the Board, cognisant of Caledonia’s significant retained earnings, believes the dividend is a crucial element of the total return for our shareholders and that it is appropriate to utilise the company’s available reserves.

It also should be noted that no dividends have been received during the year from The Liberation Group or Buzz Bingo, the only two beneficiaries of the UK Government’s job retention scheme in our portfolio.

Covid-19

The pandemic has created uncertainty and financial hardship for many people in the UK and overseas.  Caledonia responded by establishing a fund focused on assisting those employees working for investee companies negatively impacted by Covid-19. The safety and well-being of our staff, together with those working for our investee companies, have been important priorities for the board throughout this challenging period. 

In response to the pandemic, central banks have provided additional liquidity to alleviate these effects which has benefitted the portfolio as a whole. As we look forward, The Liberation Group, our remaining consumer leisure focussed business is expected to benefit from pent up demand from customers, particularly as trading restrictions ease. 

The Caledonia team has excelled in adapting to remote working, with IT colleagues ensuring systems and controls continued to function seamlessly. We continue to believe that the office has an important role to play to facilitate training and development and to ensure that Caledonia’s values and culture continue to permeate amongst new recruits. We are now working on plans, following official guidelines, to enable staff to return to the office via increased use of a hybrid working model which recognises that many have welcomed the flexibility that some home working has brought.

Board and staff

On behalf of the board I would like to thank all Caledonia staff for their outstanding response to the challenges faced over the past year. Our strong financial performance speaks for itself but this potentially understates the volatile market conditions experienced and the hard work which has been required to respond proactively to the many challenges faced.

The effectiveness of the board has been appraised in a recent external review. This review, alongside a skills analysis of current directors, will enable us to continue to refresh the board with new non-executive directors. Caledonia remains committed to increasing board diversity and this will be an important factor as we commence a search for a new audit chair to replace Stuart Bridges who is expected to retire during 2022.

Outlook

There are positive signs that vaccines will provide the answer to society being able to live with Covid-19. However, there remains a risk that new mutations of the disease will require further adaptations of both vaccines and governmental response in order to control their spread.

We continue to be confident that Caledonia’s portfolio is invested in assets that are of sufficient quality to weather most storms and enable us to achieve our purpose of growing assets and dividends over the long term. We also believe that the strength of Caledonia’s balance sheet will enable us to continue to take advantage of opportunities as they arise.

CLDN : Caledonia Investments achieves 54th annual increasing dividend

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