Widening discount negates outperformance from Caledonia

Caledonia Investments has published results for the year ended 31 March 2023. Over the period, the company generated an NAV total return of 5.5%, which compares to a 2.9% return on the All-Share Index. The dividend was increased by 4% to 67.4p. The chair’s statement makes no mention of the trust’s share price or discount [which is unacceptable given that the shares languish on a 30%+ discount. For reference, the share price at the end of March was 3390p, down from 3560p on 1 April 2022].

The trust has adopted a policy whereby half of Caledonia’s costs and normal dividend is covered by income from its investment portfolio and the remainder from net cash inflow from its Funds pool (which holds US and Asian private equity funds and funds of funds). It has also cut the income target on its private capital pool (which is predominantly invested in UK mid-market companies with equity values of between £50m and £150m) to 2.5% on cost from 5% on value. If necessary, it will dip into reserves to fund the dividend.

The next change was to alter the target asset allocation between its three pools as follows:

Over the year to 31 March 2023, the quoted equity pool returned 0.2%, the private capital pool 8.4% and the funds pool 13.3%. Returns on the quoted equity pool were impacted by the trust’s exposure to real estate investment trusts and a fall in the share price of Sabre (a specialist insurer). In the private capital pool, Liberation Group (Channel Islands/SW England pubs group representing 5% of NAV) was impacted by rising costs and weakening consumer demand. Returns on the funds pool comprised the North American and Asian-based funds achieving 21.8% and 3.6% respectively. Weak sterling was helpful.

Net cash at the year end was £221.6m and the trust has £250m of bank bacifilities available. Balanced against that are commitmnets to funds totalling £423m.

CLDN : Widening discount negates outperformance from Caledonia