Caledonia Investments H2 Earnings Call Highlights

Key Points

• Caledonia Investments reported a 5.4% net asset value total return for the year, but shareholder return was -7.1% as the share price discount to NAV widened sharply amid market volatility and foreign exchange pressure.
• The company increased its annual dividend by 4.4% to £0.0768 per share, marking 59 consecutive years of progressive dividend growth, and also announced board changes with Will Wyatt set to become chair.
• Performance was mixed across the portfolio: public companies returned 1.2%, private capital returned 13.1% boosted by the planned sale of Stonehage Fleming, and the funds portfolio gained 7.1% in local currency, with Asia showing improved IPO activity.

Caledonia Investments LON: CLDN reported a 5.4% net asset value total return for the year ended March 31, 2026, as positive contributions from all three of its investment pools were offset in part by market volatility, foreign exchange movements and a widening share price discount to NAV.

Chief Executive Officer Mat Masters said the year “once again demonstrated the strength of Caledonia’s distinctive model and long-term investment approach,” citing a diversified portfolio, disciplined capital deployment and a strong balance sheet. The company’s NAV rose to £3.0 billion, according to Chief Financial Officer Rob Memmott, with £2.8 billion invested across listed companies, private companies and funds.

Despite the NAV gain, Caledonia’s total shareholder return was negative 7.1% for the year. Masters said the company’s shares traded at an average discount to NAV of 34% during the year, widening to 43.4% by year-end after weaker markets in March. Memmott said the discount had recovered to 37% during April but continued to “fundamentally undervalue” the portfolio, track record and prospects.

Dividend Raised as Board Changes Announced

Caledonia proposed a final dividend of £0.04 per share, bringing the total annual dividend to £0.0768 per share, up 4.4% from the prior year. Memmott said the final dividend would be paid on Aug. 6, 2026. The increase extends Caledonia’s record of progressive dividends to 59 consecutive years, with management citing an annual growth rate of about 5% over that period.

Masters also announced two board changes. Will Wyatt has been appointed to succeed David Stewart as chair. Masters noted that Wyatt previously led Caledonia as chief executive for more than a decade before becoming a non-executive director in 2022 and is a member of the Cayzer family. Charles Cayzer, after more than four decades of service, has decided not to stand for re-election at the annual general meeting.

Public Companies Portfolio Posts Modest Return

Caledonia’s public companies portfolio, a focused group of roughly 30 listed equity holdings, delivered a 1.2% total return for the year. Masters described the approach as investing for the long term in “high-quality compounding businesses” after extensive research, often during market selloffs.

During April 2025 market weakness following President Trump’s “Liberation Day” announcement, Caledonia deployed £24 million into Charles Schwab, a U.S.-listed brokerage business it had been monitoring since 2017. The company also initiated positions in Cintas and Paychex, which Masters said Caledonia had followed for several years.

Masters highlighted Oracle as an example of both opportunity and volatility around artificial intelligence-related investments. Caledonia realized £65 million from the position after Oracle shares rose sharply in September following a positive trading update. Masters said Caledonia made a 96.3% return on the position during the year, compared with the stock’s 2.4% return. Since first investing £35 million in 2014, Caledonia has received £112 million through top-slicing and dividends, with the remaining position held in NAV at £42 million, representing a 4.4-times money multiple and a 19% annualized return.

In response to an analyst question from Anthony Latham of Peel Hunt about the listed equity strategy, Masters said Caledonia remained “very happy” with the approach, despite year-end selloffs in each of the past two years. He said the team handled Oracle’s volatility well by reducing the position after the share price rise.

Private Capital Lifted by Stonehage Fleming Sale

The private capital pool delivered a 13.1% return for the year. The largest development was the agreed sale of Stonehage Fleming to Corient Private Wealth. Caledonia invested £90 million alongside Stonehage Fleming’s founding partners in 2019 and expects proceeds of about £290 million when the transaction completes, equal to 3.2 times cost.

Masters said Stonehage Fleming was an example of Caledonia’s “partnership-led approach” to backing management teams over the long term. In the Q&A session, he said the business had developed well and became strategically attractive to buyers. Corient approached Caledonia, and Masters said the sale “made sense in the context of everything in and around the business.”

AIR-serv also contributed to private capital returns, delivering a 23.8% return as it expanded into Portugal and Austria. The business paid a £24.5 million dividend to Caledonia while continuing to invest in its estate. Masters described AIR-serv as the type of business Caledonia seeks to back: “high quality, well-led, and able to generate cash returns today while building for the future.”

Memmott said that after the Stonehage Fleming sale, private capital would represent 23% of Caledonia’s NAV, below the company’s strategic allocation range of 25% to 35%. He said Caledonia intends to deploy a meaningful share of the proceeds into new private capital companies but emphasized there is no pressure to invest.

Funds Portfolio Shows Improvement in Asia

Caledonia’s funds pool had NAV of £941 million across 82 funds managed by 46 managers, with exposure to about 600 underlying businesses. Memmott said 62% of the pool is focused on North American lower mid-market buyouts, while 38% is invested in Asia.

The funds pool produced a 7.1% annual return in local currency and 4.9% in sterling. Asian funds generated a 7.7% local-currency return, reflecting improved execution as well as a better IPO and fundraising environment. North American funds returned 6.8% in local currency, supported by trading performance in underlying companies.

In the Q&A session, Masters said six companies in the Asia portfolio successfully completed IPOs during the year, with two more IPOs after year-end and five companies in the process of filing. He cautioned that the companies are relatively small and that Caledonia is often locked up for 12 months after IPOs, meaning realizations can take time. In North America, Masters said underlying company performance remained strong, though visibility and the cadence of exits remained subdued.

Balance Sheet, Buybacks and Capital Allocation

Caledonia ended the year with £90 million in cash and an undrawn £325 million revolving credit facility. Memmott said the company renewed the facility on May 13, with £150 million maturing in five years and £175 million maturing in three years. He said the balance sheet had no structural leverage.

The company allocated £34.6 million to share buybacks during the year, bringing total buybacks since March 2024 to £100 million. Memmott said the buybacks delivered 9.72 pence of NAV per share accretion, or 1.8%. He said buybacks would continue to be considered, particularly where the shares trade at a wide discount, but would be balanced against investing in the portfolio.

Memmott also said foreign exchange reduced NAV by £22.4 million, or 0.7%, during the year. Caledonia’s assets are 53% domiciled in U.S. dollars and 38% in sterling.

Masters said uncertainty is likely to remain a feature of markets in the year ahead, but said Caledonia is positioned to continue pursuing long-term value creation through NAV growth, shareholder returns and its progressive dividend policy.

About Caledonia Investments LON: CLDN

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.

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