Caledonia Investments (CLDN), a £1.9bn public and private equity fund, has declared a £100m special dividend to return over a third of the proceeds from last year’s sale of wealth manager Stonehage Fleming to its shareholders.
The £290m disposal of what was Caledonia’s largest private equity position will see shareholders get a 20p per share dividend on top of the 3.84p interim dividend, up 4.3% on last year, that the Cayzer shipping family backed investment trust also declared.
As previously announced, Caledonia has reinvested £110m of the Stonehage profits in two new private companies: Blue Diamond Garden Centres and Conquip Engineering which it said were “excellent businesses with attractive growth prospects”.
Caledonia has retained the remaining £80m for future investments.
The announcement came in half-year results showing the company made a steady underlying return of 6.3% in the six months to 30 September.
Positive returns from all three parts of the portfolio contributed to beating CPI inflation including housing costs (CPIH) of 3.6%. The Public Companies pool did best returning 12.3%, followed by 4.7% from Funds and 0.6% from Private Capital. Caledonia has 32%, 33% and 25% of its assets in these.
Caledonia’s top six holdings give an idea of its diversity. AIR-serve Europe, the UK forecourt vending machine operator, is the biggest investment at 7.4% or £226.2m of assets. It is followed by two other private investments, Cobepa, a Belgian investment company, and Butcombe Group, a Channel Islands based pubs and bars group.
Below this are its two biggest listed investments in US fags to vapes giant Philip Morris and semiconductor manufacturer Texas Instruments. A 2.6% holding in funds run by Chinese private equity manager Decheng Capital is the sixth largest investment.
Due to the wide gap between the share price and net asset value, Caledonia shareholders only saw a return of 3.1% in the half year, less than a fifth of the 16.6% return from the FTSE All-Share. Data to 6 November show Caledonia’s total shareholder return over five years including dividends has been 15%, less than a quarter of the All-Share’s 64%.
The share price discount averaged 27% in the six-month period, prompting the board to spend £38.1m on buying back the cheap shares. It said addressing the discount “remains a priority” alongside investment performance and that £136.7m of excess shares had been purchased since March 2024.
The buybacks have increased the Cayzers’ stake to 51%, well above the 30% level that would normally require the family to make an offer for the company. Caledonia has obtained shareholder approval to waive that rule.
Our view
Richard Williams, senior analyst at QuotedData, said: “Shareholders will cheer the 20p special dividend, which follows the £290m disposal of Stonehage Fleming, in what was a solid set of first half numbers for Caledonia driven by its equities portfolio. Encouragingly, the company is balancing returns to shareholders with reinvestment, committing around £110m to two new private businesses while retaining substantial liquidity. The special dividend represents a welcome acceleration of capital returns, although buybacks at the current discount arguably offer greater NAV accretion, with the £38m repurchased in the period at an average 37% discount adding 0.7% to NAV per share. Further good news on the realisations front, with continued investment performance from the equities portfolio, should ultimately have a greater bearing on narrowing the discount.”
