Caledonia Investments H1 2027 Earnings Results & Report

Caledonia Investments EPS Results

• Actual EPS: GBX 2.50
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Caledonia Investments Revenue Results

• Actual Revenue: £22.40 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Caledonia is a FTSE 250 self-managed investment trust company with a long track record of delivering consistent returns and progressive annual dividend payments to shareholders. Our aim is to generate long-term compounding real returns that outperform inflation by 3%-6% over the medium to long term, and the FTSE All-Share index over 10 years. We are a long-term investor and hold investments in both listed and private markets across three pools: Public Companies, Private Capital and Funds. Each has a strategic allocation of capital, investment strategy and target return. We buy to hold, investing in high quality companies with strong market positions and fundamentals, alongside investments in private equity funds with track records of success. The result is a well-balanced diversified portfolio of investments with a global reach.

Caledonia Investments H1 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Caledonia delivered a 5.4% NAV total return for the half-year, with all three investment pools contributing to growth. Its 10-year annualized return was 9.1%, at the top end of its inflation-plus-3% to 6% target range.
• Positive Sentiment: The sale of Stonehage Fleming generated £290 million, a 3.2x money multiple and a 33% uplift to its March 2025 carrying value. Caledonia reinvested about £110 million in Blue Diamond Garden Centres and Conquip Engineering, citing their growth prospects and management teams.
• Positive Sentiment: Shareholders will receive a 20p-per-share special dividend alongside the 3.84p interim dividend, funded in part by the Stonehage Fleming proceeds. The company also said it can continue share buybacks at the first-half pace, while retaining capacity for new investments.
• Neutral Sentiment: Public Companies returned 12.3% and the Funds pool returned 4.7% in sterling, while Private Capital gained 0.6%. Asia was strong, but subdued private-equity exit activity left the North American funds portfolio flat over the period.
• Negative Sentiment: Cooke Optics remains loss-making, with demand for its established lenses weak and new products slow to scale; Caledonia described the business as being in a precarious position. It wrote the investment down to £5 million and said its focus is on cash management, product development and assessing options to preserve value.

Presentation

[Operator]

Good morning, everyone, and thank you for joining us today for Caledonia Investments PLC half-year results presentation. The presentation will commence shortly. A copy of the presentation slides is also available to download from the results center on Caledonia's website, www.caledonia.com. After the presentation, we will conduct a Q&A session. If you wish to ask a question, you will be able to do so either through the Zoom webinar link provided separately or by submitting written questions using the Ask a Question button on the Spark Live webcast page. Please note that this call is being live-streamed to a webcast for a wider audience and will be recorded. I would now like to hand over the call to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead.

[Mat Masters, CEO at Caledonia Investments]

Hello, I am Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our half-year ended 30th of September 2026. We have had a positive first half, delivering a NAV total return of 5.4%, with all three investment pools contributing to growth. Over 10 years, we have delivered an annualized NAV total return of 9.1% at the top end of our target range of inflation plus 3% to 6%. That reflects the strength of our model, proactive portfolio management, and backing good businesses. A standout development was the completion of the sale of Stonehage Fleming. We received GBP 290 million, delivering a 3.2 times money multiple and a 33% uplift to the March 2025 carrying value. A great result, demonstrating the significant value within our private assets and the benefits of our long-term partnership with management.

[Mat Masters, CEO at Caledonia Investments]

We have also put capital back to work, investing approximately GBP 110 million in Blue Diamond Garden Centres and Conquip Engineering, both excellent businesses with attractive growth prospects where we believe our capital and support can make a real difference. We have a strong balance sheet and the financial capacity to pursue further investment opportunities. From time to time, following significant realizations, we may pay special dividends after balancing investment opportunities and liquidity requirements. In keeping with this approach, alongside our interim dividend of 3.84 pence per share, today, we are pleased to announce a special dividend of 20 pence per share, representing an additional dividend return of 5% of market cap to all shareholders.

[Mat Masters, CEO at Caledonia Investments]

This special dividend, on one hand, provides the ability to distribute some of the proceeds from occasional significant realizations, and on the other hand, provides a mechanism to do this in a way that treats all shareholders equally. A way of looking at it is that we are returning proceeds at par. It complements our progressive ordinary dividend, which we have increased for the last 59 years, and continued share buybacks, reflecting our commitment to delivering long-term shareholder value. This slide shows how our NAV total return has developed over the last decade. The orange line represents inflation plus 3%, the lower end of our target range. As you can see, progress has not been a straight line. There have been periods of market weakness, particularly in 2020, but taking a longer view helps put those movements into perspective.

[Mat Masters, CEO at Caledonia Investments]

Over 10 years, our annualized NAV total return has exceeded inflation by 5.5%, towards the top end of our target range. Before we get into the portfolio, let me update you on two team changes. Today, we are announcing that Jamie Cayzer-Colvin will step down as head of funds from January 2027. He will remain an executive director and investment committee member and support the funds team through 2027. Eloise Fox and Min Ong, who run our North America and Asia portfolios respectively, will lead the pool. Jamie has made a huge contribution to Caledonia, both as head of funds and more broadly as a member of the leadership team, and we look forward to him continuing to do so. We have also previously announced that Theo Tizard, who has been a valued member of Caledonia since 2017, will succeed Tom Leader as head of Private Capital in December.

[Mat Masters, CEO at Caledonia Investments]

We thank Tom for his significant contribution and leadership. On to the first of our investment pools, Public Companies. We have GBP 980 million invested in around 30 high-quality businesses. The approach is straightforward: really understand the fundamentals, buy well, and then hold for the long term. Our permanent capital gives us the patience to wait for attractive opportunities and the conviction to invest when they arise. The pool delivered a return of 12.3% over the six months, with a strong recovery following market weakness in March. We continue to manage positions proactively, investing GBP 32 million and realizing GBP 102 million, giving a net realization of GBP 70 million. The pool has delivered 9.5% a year over 10 years, with the capital pool returning 11.6%. That demonstrates the benefits of owning good companies over time. On to Private Capital.

[Mat Masters, CEO at Caledonia Investments]

This is where we partner with management teams, mainly in U.K. mid-market businesses, to help them grow over the long term. We now have approximately GBP 760 million invested across nine companies. We look for control positions or a preferred minority where we can be influential, and we sit on the board. We invest from our permanent balance sheet, so there is no fixed timetable for an exit. We can focus on what is right for each business while remaining conservative on debt, typically around 2x-2.5x EBITDA. The pool delivered a modest return of 0.6% over the six months. Positive contributions from AIR-serv Europe, Cobepa, and the remaining gains on Stonehage Fleming were largely offset by a reduction in the valuation of Cooke Optics, where demand for its established cinematography lenses remains weak. Our two new investments are also held at cost.

[Mat Masters, CEO at Caledonia Investments]

We completed the sale of Stonehage Fleming during the period. Most of that gain was recognized in the previous financial year. A great result, demonstrating the value of our long-term partnership with management. We have been putting capital back to work, investing approximately GBP 110 million in two fantastic businesses, Blue Diamond and Conquip, both exactly the type of businesses we like, and let me take you through why. First, Blue Diamond, the largest garden center operator in the U.K. and Channel Islands, where we invested GBP 60 million in July for a stake of around 18%. The business is led exceptionally well by Simon Burke and Alan Roper. It operates 54 garden centers, combining gardening with home and leisure retail, food, and hospitality, really a portfolio of businesses under one roof.

[Mat Masters, CEO at Caledonia Investments]

What attracted us was the combination of a market-leading business and an excellent management team with an exceptional track record. Since 2013, revenue has grown by around 17% a year and EBITDA by 21% through both acquisitions and improvements to the existing centers. It is a highly cash-generative business operating in a large, fragmented market with further opportunities to grow. Our role is to support the team in pursuing those opportunities, which we are very excited about. Of our initial GBP 60 million investment, GBP 40 million provides growth capital, with the balance providing liquidity to existing shareholders. We have also agreed a framework for up to a further GBP 40 million of investment over five years, subject to agreed conditions. This is exactly the kind of partnership we look for, backing a proven management team with the capital and time to build on what they have already achieved.

[Mat Masters, CEO at Caledonia Investments]

Our second new investment is Conquip Engineering. We invested GBP 50 million in August for a 61% stake. Conquip designs, manufactures, sells, and hires specialist equipment used across infrastructure, utilities, energy, and construction. Its products support customers on complex projects, with the business operating through a network of nine regional locations. What attracted us was the quality of its products and solutions, a strong management team led by Dan and George Critchley, and an excellent track record. These are the foundations we look for when backing a business for the long term. Our majority position allows us to play an active role, bringing both capital and support to the business. As with Blue Diamond, we can give the team time to pursue the opportunities ahead without a fixed deadline for an exit.

[Mat Masters, CEO at Caledonia Investments]

There are clear opportunities to support further growth, expanding the rental fleet, developing new products, and pursuing selective acquisitions. We look forward to working closely with management as they deliver those plans. The bubble chart plots realized IRR against uplift to carrying value for our major realizations. You can see Stonehage Fleming there with a 33% uplift. Since 2012, we have generated GBP 1.4 billion of proceeds, returning around GBP 700 million of net cash, with realized investments delivering an excellent 17% IRR and a 2x multiple on cost. With that, I will now hand over to Rob to talk through our funds pool and the financials.

[Rob Memmott, CFO at Caledonia Investments]

Thank you, Mat. Good morning, everybody. I am Rob Memmott, CFO. Our funds pool partners with managers to provide access to two significant market opportunities. These funds tend not to market in Europe, meaning we are often the only European investor, a real differentiator. The pool NAV of GBP 998 million is a diverse portfolio invested in some 83 funds by 46 managers and in more than 600 underlying businesses. 60% of the NAV is focused on the North American lower mid-market buyouts. Typically, the first institutional investor into relatively small, often owner-managed businesses that are profitable and cash-generative. The playbook is to transform the companies by strengthening the management team, improving operational efficiency, growing sales by product and geography, both organically and through bolt-on acquisitions. These improved companies with greater scale provide feed to mid-market private equity. It is a very pure form of capitalism.

[Rob Memmott, CFO at Caledonia Investments]

The remaining 40% is invested in Asia, where we target two mega trends. The first is focused on domestic consumption and supply chains, fueled by the aging population, growing middle class, and tech adoption. The second is world-leading innovation, where we invest in government-supported new technologies. The pool has delivered a solid return of 12.2% per annum over a 10-year period. We are pleased that in Asia, the improved IPO and fundraising environment that we experienced over the second half of last year has continued. This has led to an excellent return of 13.3% for the six months in local currency. The North American portfolio is predominantly focused on U.S. domestic end markets. With durable revenue streams, the underlying businesses continue to make good operational progress. However, the subdued exit activity, which has been experienced across the private equity market, has limited the number of uplifts from realizations.

[Rob Memmott, CFO at Caledonia Investments]

This has left returns flat over the period. Overall, the pool produced a six-monthly return of 5.5% in local currency, of 4.7% in sterling. To the numbers. During the period, our NAV total return was 5.4%, growing our NAV to GBP 3.1 billion, of which GBP 2.7 billion is invested in a diversified portfolio of listed and privately held companies and funds that have global reach. We have received the GBP 290 million of proceeds from Stonehage Fleming and reinvested in the portfolio, including Blue Diamond and Conquip. Our balance sheet remains strong with cash of GBP 277 million, and this enables us to pay the special dividend, enhancing dividend returns to all shareholders. The special dividend of 20p per share, along with our interim of 3.84p per share, will be paid to shareholders on the 6th of January 2027. Now to my beloved waterfall chart.

[Rob Memmott, CFO at Caledonia Investments]

This chart shows the movement in NAV over the period. We started the year at GBP 3 billion. The portfolio return of GBP 161 million includes the negative impact of foreign exchange. We then deduct management expenses of GBP 18 million. There is then the cash return to shareholders, GBP 38 million allocated to share buybacks, and GBP 20 million for the prior year final dividend, resulting in a closing NAV of GBP 3.1 billion. We have a robust balance sheet with no structural leverage.

[Rob Memmott, CFO at Caledonia Investments]

Walking you through the cash movements, we started the year with GBP 90 million, and net GBP 239 million was realized from the portfolio. The investment income from our assets was GBP 27 million, and we have consumed GBP 20 million in the cash cost of management expenses. Next is the payment of the prior year final divi, GBP 20 million, and GBP 38 million allocated to share buybacks, resulting in that closing cash position of GBP 277 million.

[Rob Memmott, CFO at Caledonia Investments]

The discount recovered from its position at the end of March of 43%-36%, which has improved total shareholder returns during the period. But we continue to believe this fundamentally undervalues the quality of the portfolio, our track record, and prospects. Overall, we have a prudent capital allocation policy to investments, our progressive ordinary dividend, and when appropriate, share buybacks and special dividends. Special dividends are not a new component of returns from Caledonia, with specials being paid in 2022 and 2017, enabled by a confluence of factors. We completed the sale of Stonehage Fleming, receiving GBP 290 million of proceeds. At the year end, we said that we will want to deploy a meaningful share of the proceeds into new Private Capital companies. We have done so with the investments into two great businesses, Blue Diamond and Conquip.

[Rob Memmott, CFO at Caledonia Investments]

Alongside other investment activity, we increased the pacing of share buybacks, deploying GBP 38 million, accreting NAV per share by 4.3p. At the end of the period, we still had cash on balance sheet of GBP 277 million. We feel it is therefore appropriate, in addition to increasing our interim dividend to 3.84p, to pay a special dividend of 20p per share, being approximately 5% of our market capitalization, and enhancing dividend returns for all shareholders. I will now pass back to Mat.

[Mat Masters, CEO at Caledonia Investments]

Thank you, Rob. To close, in a world where there is continued uncertainty, we have made positive progress in the first half, with all three investment pools contributing to NAV growth. This demonstrates the resilience of our model, investing in high-quality companies with strong fundamentals. Our permanent capital allows us to be patient, support management teams, and give good businesses time to grow. Our strong balance sheet gives us the flexibility to pursue those opportunities selectively, while producing returns to shareholders through dividends and share buybacks. The sale of Stonehage Fleming, our two new investments, and the special dividend demonstrate that approach in practice, realizing value, reinvesting for future growth, and sharing the proceeds with shareholders. We remain focused on compounding NAV over time, maintaining our progressive ordinary dividend, and addressing the discount so that shareholders can benefit from the value we create. Thank you for your time.

[Mat Masters, CEO at Caledonia Investments]

We will now take your questions.

[Rob Memmott, CFO at Caledonia Investments]

Morning, everybody, and thank you for joining us today. We will begin by taking questions from the analysts, and then we will take questions from the webcast. Where questions cover similar themes, we will group those together and address them collectively. If we are unable to get to your question during the session, we will be sure to follow up with you via email shortly after the event. I will now pass over to the moderator to assemble the queue.

[Operator]

Participants who have joined via Spark Live can submit questions in written format via the webcast page by clicking the Ask a Question button. If you have dialed into the call and wish to ask a question, please use the raised hand function at the bottom of your Zoom screen. If you are dialing in via phone, you can raise your hand using star nine and unmute yourself by pressing star six. We will pause for just a moment to allow this to assemble the queue. Okay, there are currently no questions on Zoom, so I will pass over to Rob to cover the written questions. Please go ahead.

[Rob Memmott, CFO at Caledonia Investments]

Great. Thank you. We have had a few questions coming in about Cooke Optics. Obviously, we are disappointed to further write down that asset. Just by way of background, such that everybody is familiar, the business was heavily affected by the Hollywood writers and actors strike in 2023. The sort of improvement in the film production activity has not translated into a recovery of demand for the established lenses. The rental houses are continuing to use effectively their existing supply of equipment before committing to new purchases. There has been some good interest in the new products which the business has developed, but they are slow to build scale, and there has been some challenges with the supply chain sort of related to, I guess, the sort of geopolitical sort of challenges at the moment.

[Rob Memmott, CFO at Caledonia Investments]

We have restructured the cost base, but the business still remains in a pretty precarious position with loss-making, and it has fallen well short of our expectations. Our current focus is absolutely on managing cash closely, working on the new product development, and assessing the sort of options to bring best value for Caledonia. Recognize that is a bit of an uncertain sort of response to the question, but it is a pretty difficult position. We have now written the asset down to GBP 5 million, so a very sort of small number within our NAV, and clearly, at GBP 5 million, then we would not expect it to impair performance in the future.

[Rob Memmott, CFO at Caledonia Investments]

We have had a couple of questions from people who sort of rightly referred to the sort of discount still being significantly higher than certainly where we feel that it should be, and whether we had considered a tender offer, and whether the sort of tender offer would be a better use of capital. I think first of all, the addressing of the discount on a sustained basis can only be driven by investment performance, clear communication, and then disciplined capital allocation, which, as you know, includes share buybacks for us. We have considered a tender offer, and the tender offer is an acceptable way to allow shareholders who want to leave to exit. Tender at a 20% or a 15% discount would mean paying more per share than we are currently paying with the current buyback program, and that generates less NAV accretion for continuing shareholders.

[Rob Memmott, CFO at Caledonia Investments]

We're obviously balancing that, the need for capital within the organization. We believe that paying a special dividend strikes the right balance. It returns capital to all shareholders on a consistent basis, and we're able to do that whilst funding investment in the portfolio, plus increasing the pacing of the share buybacks, which we've done in the period. You'll see that we've invested GBP 38 million. We actually invested GBP 35 million for the full financial year in the prior year, and that level of pacing, we can continue at that rate whilst paying the special and also investing in the portfolio. We've had a question which relates to, will we carry on with share buybacks?

[Rob Memmott, CFO at Caledonia Investments]

I've addressed that in the last part of that question, whereby we will continue with share buybacks that are accretive to NAV per share, and everybody can make, all continuing shareholders can make progress. We did GBP 38 million in the first half, and that level of pacing, we can certainly continue to afford as part of our capital allocation plans. I think we've got a question that's coming in from Ewan at Numis on the live Q&A. If we can enable that, please.

[Operator]

Yep. Ewan Lovett-Turner from Deutsche Numis, please unmute your line and go ahead.

[Ewan Lovett-Turner, Analyst at Deutsche Numis]

Yeah, thanks. Probably a couple of things. Cooke, I'm just wondering if you could add whether you would commit any further capital, and then just with the team changes, whether you're expecting any changes the way that you do things within those pools, would be interesting. Thanks.

[Rob Memmott, CFO at Caledonia Investments]

Thanks, Ewan. In terms of committing further capital, we have a commitment to the management team to fund the restructuring of the business and to support the new product development, and that's really as far as I want to say at the present time. Mat, why don't you talk through the people changes?

[Mat Masters, CEO at Caledonia Investments]

Yeah, certainly. We've already announced that Tom Leader was stepping down and Theo Tizard is taking over, and there are no planned changes to what Private Capital are up to. That's a straight handover of the baton. In the Funds pool, with Jamie stepping back from running the team, it's different in that he's leaving the team, and Min Ong and Eloise Fox will effectively report directly into me. Min runs the Asian funds and Eloise runs the American funds. They'll carry on with their strategies as they are doing, so there are no other further changes planned at this stage.

[Ewan Lovett-Turner, Analyst at Deutsche Numis]

Okay, thanks. Just on the opportunity set, given returning capital, does that give an indication that you're not seeing the deal flow you'd like, or pricing isn't there?

[Rob Memmott, CFO at Caledonia Investments]

No, I don't think so. I mean, I think, we said at the year-end that we wanted to redeploy a meaningful portion of capital into Private Capital, which we've done with those two investments. We can continue to appraise other investment activity. Therefore, it's very much a balance in terms of the strength of the balance sheet, where we currently are, and sharing a bit of that upside from the disposal of Stonehage Fleming with continuing shareholders.

[Ewan Lovett-Turner, Analyst at Deutsche Numis]

Thanks.

[Rob Memmott, CFO at Caledonia Investments]

Thank you. I think there are no further questions that have come through. Thank you, everybody, for your time today, and I will pass over to the moderator to close out the call. Thank you.

[Operator]

Thank you very much. That concludes today's session. You may now disconnect.

Participants

Executives

• Mat Masters, CEO
• Rob Memmott, CFO

Analysts

• Ewan Lovett-Turner, Analyst at Deutsche Numis