Caledonia Investments plc
Cayzer House
30 Buckingham Gate
London SW1E 6NN
+44 20 7802 8080
tel
+44 20 7802 8090
fax
email enquiries@caledonia.com
web www.caledonia.com
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Year ended 31 March 2013
Annual report 2013
www.caledonia.com
Who we are
Caledonia Investments is a self-managed investment trust company with
net assets of £1.3bn. We can trace our history to the shipping empire
established by Sir Charles Cayzer in 1878. We continue to enjoy the backing
of the Cayzer family, who own some 48% and remain actively involved in
the management of the company. The support of the Cayzer family enables
Caledonia to maintain a long term investment horizon.
What we do
Our business is to deliver long term growth in shareholder capital and
income by investing in a range of asset classes in various sectors and regions.
How we invest
Our business model has been successfully developed, evolved and deployed
over many years to deliver long term growth in capital and a growing annual
dividend to shareholders. We identify and invest in value opportunities
in well managed, long term businesses and funds, both listed and private.
Our investment portfolio is divided into ‘pools’ of capital – Quoted,
Unquoted, Funds and Income & Growth – with specialist investment
executives responsible for each. Our priority is the origination and execution
of investments in high quality companies that make annual payments to
shareholders, run by strong management teams.
Caledonia Investments plc Annual report 2013 81
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300 (calls cost 10p per minute
including VAT, plus network extras)
+44 20 8639 3399 if calling from overseas
Computershare Investor Services Ltd
Private Bag 92119
Victoria Street West
Auckland 1142
New Zealand
Tel: +64 9 488 8777
Brokers
J.P.Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Winterflood Securities Ltd
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
First NZ Capital Securities
PO Box 3394
Level 14, HP Tower
171 Featherston Street
Wellington
New Zealand
Solicitors
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
Directors and advisers
Chairman
2
Roderick D Kent
Executive directors
William P Wyatt (Chief Executive)
Stephen A King (Finance Director)
Jamie M B Cayzer-Colvin
Non-executive directors
1,2,3,4
1,2,3,4
Charles M Allen-Jones (Senior Independent)
1
Stuart J Bridges
The Hon Charles W Cayzer
1,2
Richard Goblet d’Alviella
Charles H Gregson
1,2,3,4
David G F Thompson
Robert B Woods CBE
1. Member of the Audit Committee
2. Member of the Nomination Committee
3. Member of the Remuneration Committee
4. Member of the Governance Committee
Associate directors
2,3,4
Graeme P Denison
Charles H Edwards
Sally D Flanagan
Jonathan R Hale
Duncan E Johnson
Mathew S D Masters
Sheena D McNeill
Stephen J Mitchell
Paul M Whiteley
Secretary
Graeme P Denison
Registered office
Cayzer House
30 Buckingham Gate
London SW1E 6NN
Registered number
Registered in England no 235481
Auditor
KPMG Audit Plc
15 Canada Square
Canary Wharf
London E14 5GL
Overview
1 Company highlights
2 Portfolio summary
Chairman and
3
Chief Executive’s report
Investment review
Business review
6
22 Business model
24 Strategic priorities
26 Financial review
28 Risk management
30 Corporate responsibility
31 Valuation methodology
Governance
32 Board of directors
34 Directors’ report
37 Directors’ statement
of responsibility
38 Corporate governance
report
43 Directors’ remuneration
Financial statements
51 Independent
auditor’s report
52 Financial statements
Other information
80 Information for investors
81 Directors and advisers
report
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Caledonia Investments plc Annual report 2013 1
Company highlights
• Net asset value per share total return of 18.9%
• Annual dividend per share up 10.0% to 47.2p
NAV total return growth over ten years
Results summary
31 March
2013
31 March
2012
Change
%
Net asset value
NAV per share
Annual dividend per share
Discount
£1,299m £1,134m
1977p
42.9p
24.8%
2299p
47.2p
20.0%
14.5
16.3
10.0
4.8
%
225
150
75
0
Caledonia
FTSE All-Share
03/03
03/05
03/07
03/09
03/11
03/13
TSR growth over ten years
Performance
NAV total return
Total shareholder return
Dividend growth
1 year
%
18.9
27.6
10.0
5 years
%
10 years
%
17.1
0.7
45.2
201.7
256.5
81.5
%
300
200
100
0
Caledonia
FTSE All-Share
03/03
03/05
03/07
03/09
03/11
03/13
Annual dividends over 46 years
Pools
Quoted
Unquoted
Funds
Income & Growth
Portfolio
Value
£m
Total return
%
517.2
348.1
166.8
162.0
1,194.1
24.6
17.7
7.7
23.7
19.9
p
60
40
20
0
Annual dividend
RPI (rebased)
1967
1973
1983
1993
2003
2013
References to net asset value (‘NAV’) refer to the company statement of financial position, rather than that of the group, as the directors consider this to be the most appropriate measure of
performance. NAV per share was calculated on a diluted, cum income basis.
Source: Caledonia Investments plc and FTSE International Limited (‘FTSE’) © FTSE 2013. ‘FTSE®’ is a trade mark of the London Stock Exchange Group companies and is used by FTSE
International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or
omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.
Overview 2 Annual report 2013 Caledonia Investments plc
Portfolio summary
Holdings over 1% of net assets at 31 March 2013 were as follows:
Name
Bristow Group
Cobehold
Close Brothers
AG Barr
Avanti Communications
Oval
Quintain Estates
LondonMetric Property
Sterling Industries
Capital Today China
The Sloane Club
Pool
1
Geography
Business
Quoted
US
Helicopter services
Unquoted
Belgium
Investment company
Quoted
Quoted
Quoted
Unquoted
Quoted
Quoted
Unquoted
UK
UK
UK
UK
UK
UK
UK
Financial services
Soft drinks
Satellite communications
Insurance broking
Property services
Property investment
Engineering
Funds
China
Private equity fund
Unquoted
UK
UK
Residential club
Broadcasting services
Satellite Information Services
Unquoted
Dewan Housing Finance
Quoted
India
Housing finance
Unquoted
Quoted
Unquoted
Funds
US
UK
UK
US
Manufacturing
Fund manager
Audio equipment
Public equity fund
Unquoted
Germany
LNG engineering
Quoted
Unquoted
Unquoted
Funds
Quoted
Funds
UK
UK
UK
France
Ireland
UK
Steam engineering
Specialty chemicals
Property investment
Private equity funds
Oil and gas producer
Private equity fund
Latshaw Group
Polar Capital
Bowers & Wilkins
Perlus Microcap
TGE Marine
Spirax Sarco
Amber Chemicals
Buckingham Gate
Pragma Capital funds
Petroceltic International
Nova Springboard
Other investments
2
Investment portfolio
Cash and other items
Net assets
1. Geography is based on the country of listing, country of domicile for unlisted investments and underlying regional analysis for funds.
2. Excludes £11.5m of unallocated investments.
Value
£m
105.7
91.6
86.7
51.5
47.2
37.8
36.7
35.5
30.7
29.2
28.8
28.5
27.8
27.5
24.1
24.0
22.2
17.5
17.3
15.2
14.6
14.3
13.7
12.9
Net
assets
%
8.1
7.1
6.7
4.0
3.6
2.9
2.8
2.7
2.4
2.3
2.2
2.2
2.1
2.1
1.9
1.8
1.7
1.3
1.3
1.2
1.1
1.1
1.1
1.0
353.1
1,194.1
104.7
27.2
91.9
8.1
1,298.8
100.0
Caledonia Investments plc Annual report 2013 3
Chairman and Chief Executive’s report
Results
We are pleased to report a successful year for the
company, which has delivered strong performance built
on the strategic initiatives implemented over the past
three years. Net asset value (‘NAV’) per share total return
increased by 19%, driven by gains across our investment
portfolio and a growing income stream. The board is
recommending an overall dividend for the year of 47.2p
per share, an increase of 10% over last year reflecting
greater income generation following the portfolio
rebalancing. This has enabled us to increase the dividend
by 34% over the last three years and the current year’s
dividend will represent the forty-sixth consecutive annual
increase for shareholders.
The year has seen considerable changes, with a reduction
in exposure to a single company or sector, an improvement
in portfolio liquidity and the inclusion of a greater
proportion of mature income generating assets. We have
a £96m cash reserve to take advantage of new investment
opportunities and to provide downside protection. The
sale of subscale investments and the increased emphasis
on income, combined with an increasing move away from
reliance on the UK market and economy, has reshaped our
portfolio. This has been achieved without relinquishing
Caledonia’s core values, namely to take the longer view
and to select and support good management teams.
Caledonia offers a distinctive proposition for its
shareholders, compared with other investment trusts.
We have the Cayzer family as a large shareholder, holding
some 48% of the shares, and members of the family fulfil
key management roles. We therefore seek to manage
wealth on a generational time scale. We also seek to pay
a consistently rising dividend.
This long term view influences the shape of the
investment portfolio. Some 38% of our assets are invested
in unquoted situations, which require a longer investment
horizon, but which we believe will, when well selected,
produce a higher overall return than most quoted
investments. In addition, we are able to take a longer term
view of some of the rapidly growing markets in the world,
such as Asia, which, despite their greater short term
Performance
volatility, will grow faster over time.
In view of the above, the board has decided to cease using
a one-year benchmark to measure progress. Except by
coincidence, Caledonia’s portfolio will not perform in the
short term close to or in line with the FTSE All-Share index
or any other index. What is relevant is that over the last
ten years (a period which also coincides with our status
as an investment trust), our NAV total return (i.e. capital
plus dividends reinvested) has increased by 202%,
outperforming the FTSE All-Share Total Return index,
which increased by 175%. We consider this to be an
appropriate index against which to compare Caledonia
over the longer term, although we will keep this under
review as our portfolio becomes increasingly international.
Our relative performance over the last five years has not
been so good, although this timeframe includes the
tumultuous events of the Global Financial Crisis (‘GFC’), in
the aftermath of which we have undergone a rebalancing
Income
of the investment portfolio and its risk profile.
Income is a core feature of our long term investment
proposition. During the year, £38m was derived from the
portfolio, a 13% increase, representing a portfolio yield of
3.3%. It is our intention to maintain this structural level
Cash
of income in the future.
By taking advantage of rising markets, we have built up
a cash reserve of £96m, which represented 7% of net
assets at the year end, from a position of net debt of £37m
at the beginning of the year. In the volatile climate we
are currently experiencing, we believe that cash is an
important part of asset allocation, as this provides us
with both downside protection and the flexibility to react
quickly. In addition, we have recently renewed our
committed five year bank facilities, although we have
reduced the overall facility amount from £100m to £75m
in view of our current cash position. These facilities
remain undrawn and, together with our surplus cash,
provide substantial resources to deploy opportunistically
when targeted investments come within our identified
value range. We feel that this is the correct way to be
positioned, despite the allure of cheap long term debt
currently on offer. Some of our portfolio companies have
their own debt, which we monitor regularly. Such debt is
generally kept at prudent levels and is substantially lower
Portfolio
than three years ago.
The top ten investments in total account for 43% of net
assets. This year has demonstrated the value of holding
long term positions in high quality, established companies,
with the top ten holdings contributing significantly
to performance. However, the portfolio is now more
liquid and less concentrated than in recent times, as we
have sold down some of our larger holdings. Cobehold,
our second largest investment, is itself an investment
company and has a diversified portfolio of 15
predominantly European holdings.
Our investment portfolio provides shareholders with
a well-balanced spread of exposures to differing
geographies. Of note is the increase in our US exposure,
now at 16% compared with 7% three years ago, a trend
we intend to continue. There will always be a substantial
part of the portfolio invested in the UK, as our home
marketplace dictates that the UK is our main source of
deal flow, particularly in unlisted companies. When we
analyse the portfolio by geography of revenue generation,
we estimate that our exposure to sterling is about 45%,
18% to the euro and 15% to the US dollar, with the Asian
currencies making up the bulk of the remainder.
Overview
4 Annual report 2013 Caledonia Investments plc
Chairman and Chief Executive’s report
continued
Investment and divestment activity
We invested £142m during the course of the year,
including £29m of new capital in the Income & Growth
pool, as we continued to build its position within the
overall portfolio in order to gain further exposure to
global businesses with strong and growing dividends.
It is notable that the Income & Growth pool has itself
outperformed the FTSE All-Share index over the two years
since its formation. We made one significant acquisition
in the Unquoted pool during the year, a portfolio of five
US industrial businesses, an investment totalling $42m
(£27m). We made several new commitments to private
equity funds, in particular to give us diversified exposure
to geographies where we are less willing to invest directly.
We took advantage of the run up in stock markets in the
second half of the financial year to sell over half of our
holding in Close Brothers, the UK based merchant bank.
This has reduced our holding from 13% of net assets last
year to a more balanced 7%, in line with our strategic
target for individual investment exposure. We completed
the sale of our stake in Celerant Consulting from the
Unquoted pool, realising £46m (including £11m of accrued
loan interest), an excellent 2.5x return on cost. In addition,
we sold the remainder of our holding in British Empire
Securities for £49m, which has been a good investment
for shareholders, returning over nine times the capital
invested over a 21 year period. Overall, £310m was
Overview of pool performance
realised from investment sales during the year.
We moved during the year to managing the portfolio
in four pools, integrating the Asia and Property pools
with the remaining four. This has removed the sector
and geographic overlap and completes the strategic
realignment of our investments into pools of capital
clearly defined by investment type.
Overall, the increase in net assets was driven by a
particularly strong performance from our listed
investments in Caledonia’s traditional Quoted pool and
our more recently established Income & Growth pool,
which both had a total return in excess of 20% over
the year.
Pool
Value
2012
£m
Invest-
ments
£m
Disposals
£m
Change
in value
£m
Value
2013
£m
Income
£m
11.4 (151.2) 104.9 517.2
39.4 348.1
46.2
11.3 166.8
14.3
Quoted
552.1
Unquoted 311.7
Funds
209.6
Income &
5.0
Growth
Portfolio 1,184.0 141.6 (309.6) 178.1 1,194.1 37.7
16.0
14.8
1.9
(49.2)
(68.4)
22.5 162.0
110.6
(40.8)
69.7
Total
return
%
24.6
17.7
7.7
23.7
19.9
Quoted (£517m, 40% of net assets)
We look to invest in companies over the long term with
established business models, strong balance sheets and good
returns on capital and invested equity.
There were notably strong performances by Bristow
Group, AG Barr and Close Brothers, as well as from some
of the newer investments such as Weir Group, Spirax Sarco
and Jardine Matheson. Bristow has grown significantly
in value over the year and is now the largest holding in
the portfolio. It is continuing to expand its business
geographically and recently won the search and rescue
contract from the UK Government covering the coastline
of the UK that, after an initial transition period, will
involve a $2.5bn, ten year contract utilising 22 helicopters
and hundreds of personnel. Markets finally gave Close
Brothers the rating it undoubtedly deserves, being one of
the very few banks to have come through the GFC with a
clean bill of health. It has continued to grow its lending
book profitably without taking undue risks, and we took
advantage of this rise in valuation to sell over £100m of
shares during the period and to reduce the size of this
investment in relation to the portfolio. AG Barr, the maker
of carbonated drinks such as Irn-Bru, enjoyed another
year of strong underlying growth whilst attempting to
consummate a merger with Britvic, which has been
referred to the Competition Commission. London &
Stamford and Metric Properties, both property companies,
finalised their merger which leaves the combined
company, LondonMetric, well capitalised and with greater
depth of management. Quintain Estates enjoyed a welcome
narrowing of its discount to NAV after attracting an Asian
joint venture partner to finance the building of its
Unquoted (£348m, 27% of net assets)
Greenwich Peninsula site.
We look to invest in unlisted businesses requiring capital
and an investor with a balance sheet to support a long term
perspective. We invest in both minority and majority positions.
The Unquoted pool achieved a total return of 18%,
helped by the realisation of our investment in Celerant
Consulting. This exit was matched by an investment in
a group of US industrial companies, the Latshaw Group,
that is performing ahead of our expectations. We have
been actively reviewing other potential acquisitions and
continue to see a strong flow of potential investments,
several of which are proprietorial in nature. We hope
to secure at least one of these for the portfolio in the
current financial year.
The remainder of the portfolio has solid growth prospects.
The pool’s management team has worked hard during the
year with the portfolio to increase profitability, which has
occasionally required more finely balanced decisions such
as leadership change or a move to a realisation strategy.
We anticipate further M&A activity during the current
year, which may result in the sale of one or two holdings.
Caledonia Investments plc Annual report 2013 5
Funds (£167m, 13% of net assets)
We invest in both private and public equity funds, with an
emphasis on providing exposure to areas of the world where
we are less willing to invest directly.
The Funds pool completed the sale of British Empire
Securities during the year. Several new commitments were
made to private equity funds in the US and Asia although,
overall, distributions exceeded drawdowns. We also hold
interests in funds that invest in quoted securities, utilising
specialist knowledge to gain exposure to areas of the
world where it is more difficult for Caledonia to invest
directly. The largest of these is Perlus, a US micro-cap
Income & Growth (£162m, 12% of net assets)
value investor, which had another strong year.
The portfolio is comprised of shares in 42 international
businesses, which provide a reliable and growing dividend.
Cash flow returns to shareholders are prioritised in the
invested businesses.
The Income & Growth pool’s performance in the year
was excellent, achieving a total return of 24%. This is a
creditable result considering the pool’s 5% yield target
though, of course, markets are being given impetus from
investors hungry for income. The pool provides Caledonia
with both a diversity of income and, more importantly,
exposure to successful businesses that operate on a global
scale. We added a net £29m of capital to the portfolio
during the year and anticipate adding to the pool again
during the current year as it approaches its target size
Share buy-backs
of 15% to 20% of NAV.
We continued our share buy-back policy during the year,
buying and cancelling 1.1m shares, about 2% of the
issued share capital, at a cost of £18m. With the discount
still around 20%, this represented good value for all
shareholders and we will once again seek the necessary
shareholder approvals at the forthcoming AGM to
Dividend
continue with these buy-backs for a further year.
The board is recommending shareholder approval of a
final dividend of 34.3p, an increase of 10%, which would
result in an equivalent increase in the total dividend for
the year from 42.9p to 47.2p per share. This would be the
forty-sixth consecutive year of increases in our annual
dividend and a rise of 34% over the last three years.
Board
The final dividend will be paid on 8 August 2013.
The non-executive side of the board has seen several
changes over the year.
Rod Kent took over from James Loudon as Chairman after
the AGM in July 2012. James became Chairman in 2008
amidst difficult circumstances and steered the company
and its subsequently appointed Chief Executive with great
wisdom throughout the period of his Chairmanship.
Mark Davies, who had served as a non-executive director
on the board for ten years, stood down in December 2012,
at which time Charles Cayzer also moved to a non-
executive role. Stuart Bridges, who is the Chief Financial
Officer of Hiscox, was appointed as a non-executive
director in January 2013. He will take over as Chairman
of the Audit Committee from David Thompson, who will
retire from the board at the AGM in July, having served as
a non-executive director for ten years. We thank him and
Mark Davies for their contributions on a wide range of
issues over the years.
On the executive side, the directors are supported by
an impressive team of associate directors, who have
executed the new strategy well and performed cohesively
as a management team. We thank them, and all our staff,
Outlook
for their efforts and success during the year.
Economic growth in developed markets is proving to be
slower than governments would like, but in response
central banks globally are cutting rates to historically low
levels to stimulate growth, though with modest success.
Thus a degree of stability has been created to allow time
to deal with structural problems. Unprecedented printing
of money via quantitative easing (‘QE’) allied with
competitive currency devaluations is causing equity
markets to rise and bond yields to fall, creating a wealth
effect. Bond market valuations look stretched and equities
have now recovered to be fair value, or modestly above
in some cases. This leaves little room for disappointment
by companies if economic growth does not pick up as we
enter 2014. Central bank initiatives via QE are driving
holders of cash to reinvest in risk assets due to negligible
bank interest rates, which leave markets vulnerable to the
eventual withdrawal of QE stimulus. Inflation remains
the key risk that could derail current stimulus efforts,
though is probably some way off. Markets are responding
positively to policy initiatives at the current time, but
clearly remain vulnerable to the efforts of previously
untested economic tools unless economic growth gains
traction in the coming year.
The actions we have taken over the last three years
have ensured that we have a balanced portfolio
tailored to our shareholders’ requirements to
deliver long term outperformance in the current
macroeconomic environment.
Rod Kent
Chairman
Will Wyatt
Chief Executive
Overview 6 Annual report 2013 Caledonia Investments plc
Investment review
Over the year, our investment portfolio
delivered a total return of 20%.
Over the last three years, we have
rebalanced our portfolio substantially,
increasing diversification, increasing
yield, increasing liquidity, reducing
concentration and reducing the number
of subscale investments.
The year ended 31 March 2013 saw world economies
recovering at different speeds, with the Eurozone in the
slow lane, the US in the middle and the emerging markets
in the fast lane. The UK and US equity markets are now
back to their pre-global financial crisis levels, fuelled by
quantitative easing. The Cyprus crisis showed that more
Portfolio movement
needs to be done to resolve the Eurozone’s debt problems.
At the beginning of the year, the value of our investment
portfolio (including derivatives) was £1,184.0m.
After £178.1m of portfolio gains, offset by £168.0m of
net realisations, this increased to £1,194.1m at the year
end. The following chart illustrates the components
of this movement:
Movement in the investment portfolio
£m
1,400
1,200
1,000
800
Opening
balance
Investments
Realisations
Gains/losses
and other
Closing
balance
During the year, we made further progress in rebalancing
our portfolio. In particular, we realised part of our holding
in Close Brothers for £101.3m, to reduce our exposure,
and all of our holding in British Empire Securities for
£48.5m. In the Unquoted pool, we realised our stake in
Celerant Consulting for £46.0m and invested £27.2m in the
Pools
Latshaw Group portfolio of US manufacturing businesses.
The following chart shows the distribution of net assets
between the managed pools of capital.
Pool distribution
Quoted
Unquoted
Funds
Income & Growth
Cash and other
2013
40%
2012
49%
27%
13%
12%
8%
27%
18%
10%
-4%
The significant reduction in the Quoted and Funds pools
and increase the Income & Growth pool and cash over
the year reflected the efforts in reducing our investment
concentration risk and repaying debt, increasing the
liquidity to invest in new opportunities.
Caledonia Investments plc Annual report 2013 7
Investments
Portfolio returns
Total portfolio investments during the year were £141.6m
(2012 – £247.8m), summarised as follows:
Name
Pool
New investments
Latshaw Group
Asia Alternatives fund
Axiom Asia fund
Follow-on investments
Easybox
Spirax Sarco
Income & Growth pool
Other follow-on investments
Total portfolio investments
Unquoted
Funds
Funds
Unquoted
Quoted
Income & Growth
Cost
£m
27.2
2.3
0.1
29.6
15.0
5.5
69.6
21.9
112.0
141.6
The Latshaw Group investment of £27.2m represented
a portfolio of five manufacturing business in the US.
The Asia Alternatives and Axiom Asia fund investments
were the initial drawdowns against commitments of $20m
and $5m respectively. The £15.0m follow-on investment
in Easybox replaced third party debt with equity.
The £69.6m invested through the Income & Growth pool
represented both an increased allocation of cash to the
pool of £28.9m and changing holdings within the pool.
This portfolio contained 42 companies at 31 March 2013
(down from 47 at the previous year end), in a range of
sectors across the globe, with not more than £5.0m
Realisations
invested in any one company.
As part of our strategic realignment, we have focused
on both rebalancing our investment pools of capital
and at the same time reducing the number of subscale
investments. We wholly or partially sold a total of 17
investments during the year, with proceeds totalling
£249.2m, excluding fund distributions and Income &
Growth pool sales.
Total proceeds from portfolio realisations (including
derivatives) during the year totalled £309.6m
(2012 – £129.7m), summarised as follows:
Name
Pool
Close Brothers
British Empire Securities
Celerant Consulting
Alok Industries
Tribal Group
Serica Energy
Bioquell
Capital Today China Fund II
Income & Growth pool
Other realisations
Total portfolio realisations
Quoted
Funds
Unquoted
Quoted
Quoted
Quoted
Quoted
Funds
Income & Growth
Proceeds
£m
101.3
48.5
46.0
10.3
8.3
7.0
6.9
5.9
40.8
34.6
309.6
The total return on our investment portfolio over the year
was 19.9%. The following table highlights the principal
contributors to this performance:
Gain or
(loss)
£m
Total
return
£m
Total
return
%
Income
£m
Name
Close Brothers
Bristow Group
Celerant Consulting
AG Barr
Quintain Estates
Polar Capital
Cobehold
Avanti Communications
Amber Chemicals
Easybox
Dewan Housing Finance
Income & Growth pool
Other investments
Total portfolio returns
33.9
32.8
27.1
14.9
15.4
7.5
5.9
7.4
5.9
(7.4)
(14.4)
22.5
24.9
176.4
5.7
1.0
–
1.7
–
1.0
1.7
–
–
–
0.6
5.0
21.0
37.7
39.6
33.8
27.1
16.6
15.4
8.5
7.6
7.4
5.9
(7.4)
(13.8)
27.5
45.9
214.1
32.7
46.7
255.9
43.9
72.1
46.5
9.3
18.5
59.0
-100.0
-46.7
23.7
35.7
19.9
The overall performance primarily arose from strong
market performances of our top listed investments,
including Close Brothers, Bristow Group, AG Barr, Quintain
Estates and Polar Capital. Celerant Consulting delivered a
gain of £27.1m as a result of the sale to Hitachi Consulting.
India-based Dewan Housing Finance fell substantially over
the year, despite good results and a successfully completed
Portfolio analysis
merger with First Blue Home Finance.
Geography
The following chart shows the distribution of net assets
between regions. The basis of this analysis is the country
of listing, country of residence for unlisted investments
and underlying regional analysis for funds.
Geographic distribution
United Kingdom
Continental Europe
North America
Asia
Other countries
2013 2012
56%
57%
15%
16%
10%
3%
16%
11%
14%
2%
The investment in Latshaw Group and the significant rise
in the value of our Bristow Group holding increased the
proportion of net assets in North America. Similarly, the
realisation of our holding in Alok Industries and the
decline in the value of Dewan/First Blue has reduced the
proportion in Asia.
Business review
8 Annual report 2013 Caledonia Investments plc
Investment review
continued
Asset class
Risk/return
The following chart shows the distribution of net assets
by asset class. Listed securities represented 54% of
net assets at the year end and unlisted investments
(companies and funds) in total accounted for 38%.
Asset class distribution
Listed equities
2013 2012
54%
62%
Private companies
25%
27%
Private equity funds
11%
Public equity funds
Cash and other
2%
8%
9%
2%
–
The increase in cash and reduction in listed equities
principally reflected the realisation of Close Brothers,
British Empire Securities and other investments during
Currency
the year.
The following chart analyses net assets by currency
exposure, based on the currency in which securities are
denominated or traded, net of any currency hedges.
Currency exposure
Pound sterling
US dollar
Euro
2013 2012
62%
71%
20%
15%
10%
3%
Other currencies
8%
11%
Over the year, the principal change was the decrease
in our exposure to pound sterling and increase in our
euro exposure. This resulted from the realisation of
predominantly UK listed equities, and the closing-out of
a forward currency contract to hedge a euro denominated
investment. We also increased our exposure to the
US dollar, as a result of further investment in the US
and rising equity values in that market.
Over the last three years, we have restructured the
portfolio to improve the risk/return profile.
The following chart illustrates the risk/return of the
company against the FTSE All-Share, calculated using
the Sharpe ratio methodology. Our risk/return ratio has
shown a marked improvement over the last two years
as the portfolio has been rebalanced in line with our
strategic aims.
Risk/return over three years
Caledonia
FTSE All-Share
4
2
0
-2
03/10
03/11
03/12
03/13
Liquidity
Also over the last three years, we have sought to improve
our liquidity, providing both risk mitigation and an
increased flexibility to invest in opportunistic markets.
The following chart illustrates the amount of cash we
can raise readily as a percentage of net assets, within six
months, based on our cash holding and the trading days
for listed securities:
Liquidity
31 March 2013
31 March 2010
%
75
50
25
0
0
1
2
3
4
5
6
Months
Caledonia Investments plc Annual report 2013 9
Long term performance
Caledonia aims to outperform the FTSE All-Share
Total Return index over the longer term. Over ten years,
our NAV per share total return has outperformed this
index by 26.4%.
The chart below illustrates the components of return
contributing to this ten year outperformance.
NAV total return performance over ten years
350
250
150
50
At 31 Mar
2003
FTSE
return
Capital
excess
Income
shortfall
Other
At 31 Mar
2013
350
The main component of this outperformance was our net
gains on investments outperforming the benchmark gains
over the period.
250
On the other hand, the yield on our investments was below
that on the FTSE All-Share constituents. We have been
150
addressing this by investing in higher yielding securities
through our Income & Growth pool and focusing more on
50
income when making investments through other pools.
Business review 10 Annual report 2013 Caledonia Investments plc
continued
Investment review
Quoted pool
The Quoted pool is comprised of
significant investments in listed equities.
We look to back good management
teams who run their companies
along prudent financial lines but with
ambition for good returns.
total return over the year
40% of NAV at 31 March 2013
+24.6%
The Quoted pool contains significant and long term
holdings in well managed companies. These investments
typically offer substance, brand, intellectual property and
strong market position. We target opportunities that have
a good record of return on capital employed. In common
with the wider Caledonia philosophy, we look to back good
management teams who run their companies along
prudent financial lines but with ambition for good returns.
The pool started the year with investments valued at
£552.1m and ended the year with a value of £517.2m,
after £139.8m of net realisations, principally £101.3m
from the sale of part of our holding in Close Brothers –
taking advantage of its recently strengthening share price.
Including £16.0m of income, the Quoted pool achieved a
total return of 24.6%.
A number of strong performances contributed to the
Quoted pool gains totalling £104.9m, notably from Close
Brothers, Bristow Group, Quintain Estates and Polar
Capital. Overall, the pool investments significantly
outperformed the FTSE All-Share index over the year.
After reducing the holding in Close Brothers, Bristow
Group is now the largest investment in the pool. Bristow
continues to expand its business and recently won the
UK coastline search and rescue contract, worth $2.5bn
over ten years.
Top investments
Name
Business
Geography
First
invested
Equity
held
%
Residual
cost
£m
US
Bristow Group
UK
Close Brothers
UK
AG Barr
UK
Avanti Communications
UK
Quintain Estates
UK
LondonMetric Property
India
Dewan Housing Finance
UK
Polar Capital
UK
Spirax Sarco
Petroceltic International
Ireland
The table above shows pool holdings of over 1% of the company’s net assets at 31 March 2013.
Helicopter services
Financial services
Soft drinks
Satellite communications
Property services
Property investment
Housing finance
Fund manager
Steam engineering
Oil and gas producer
1991
1987
1977
2005
1994
2007
2005
2001
2011
2003
6.6
5.6
8.1
13.7
10.6
5.3
11.0
9.7
0.8
4.7
36.8
18.1
1.1
42.9
62.4
34.1
31.8
0.6
11.9
28.1
Income/(expense)
recognised in the year
Capital
Revenue
£m
£m
1.0
5.7
1.7
–
–
2.3
0.6
1.0
0.2
1.0
32.8
33.9
14.9
7.4
15.4
(1.5)
(14.4)
7.5
3.9
(0.8)
Pool
%
20.4
16.8
10.0
9.1
7.1
6.9
5.4
4.7
3.4
2.6
Value
£m
105.7
86.7
51.5
47.2
36.7
35.5
27.8
24.1
17.3
13.7
Caledonia Investments plc Annual report 2013 11
Bristow Group
Bristow is now the world’s largest provider of
helicopter transportation services and is quoted
on the NYSE. Caledonia initially invested in
Bristow in the UK in 1991. Bristow merged with
the US-based Offshore Logistics in 1996, which
globalised its services. Caledonia retains a long
term interest in the combined operations.
Bristow recently won the UK search and rescue
contract, worth $2.5bn over ten years.
Year end 31 March
2012
2011
Revenue
Profit before tax
Net assets
$1,341.8m $1,232.8m
$142.5m
$1,521.8m $1,518.8m
$140.4m
Close Brothers
Close Brothers is a UK listed specialist
financial services group, making loans, trading
securities and providing advice and investment
management services. The underlying business
performed well in 2012, after taking account of
the exceptional restructuring charges in 2011,
as it exited from non-core activities.
Year end 31 July
2012
2011
Revenue
Profit before tax
Net assets
£531.7m
£134.9m
£769.8m
£548.5m
£78.5m
£728.3m
AG Barr
Founded in 1875, AG Barr is the largest
manufacturer of soft drinks in the UK. Based in
Scotland, the company is particularly notable
for the manufacture of Irn-Bru. The company
continues to report growth and to build its
brands. AG Barr is listed in the UK.
Year end 26/28 January
2013
2012
Revenue
Profit before tax
Net assets
£237.6m
£31.8m
£130.6m
£222.9m
£35.4m
£127.0m
Business review 12 Annual report 2013 Caledonia Investments plc
continued
Investment review
Quoted pool
LondonMetric Property
London & Stamford Property merged with
Metric Property in January 2013 to form
LondonMetric Property, a UK REIT investing
in commercial and residential property,
principally in the UK.
Year end 31 March
2012
2011
Revenue
Profit before tax
Net assets
£42.2m
£7.7m
£639.3m
£41.8m
£56.8m
£673.7m
Avanti Communications
Avanti Communications is an AIM listed
company supplying satellite broadband services
to telecoms companies across Europe, Africa
and the Middle East. Avanti launched its second
satellite in August 2012, with a third currently
being built. The company is now starting to
build its revenue.
Year end 30 June
2012
2011
Revenue
Profit before tax
Net assets
£12.5m
-£16.0m
£269.6m
£5.5m
-£12.7m
£207.4m
Quintain Estates
Quintain Estates is a UK listed property
company comprising fund management,
investment and urban regeneration businesses,
with notable development projects at Wembley
City and Greenwich Peninsula. The company
has increased property under management to
£2.2bn, renegotiated its debt and formed a joint
venture to develop the Greenwich Peninsula.
Year end 31 March
2012
2011
Revenue
Profit before tax
Net assets
£45.4m
-£43.5m
£572.0m
£46.9m
-£48.1m
£598.6m
Caledonia Investments plc Annual report 2013 13
Dewan Housing Finance
Dewan Housing Finance is an Indian listed
company providing house financing to lower
and middle income purchasers. Dewan recently
completed its merger with First Blue Home
Finance, purchased in 2011, after obtaining
Indian court approval. The business continues
to make progress with revenue up by some 70%.
Year end 31 March
2012
2011
Revenue
Profit before tax
Net assets
Rs24.7bn
Rs4.0bn
Rs20.3bn
Rs14.5bn
Rs3.4bn
Rs15.5bn
Polar Capital
Polar Capital is an AIM listed investment
manager, offering a range of geographical and
sector funds. Caledonia provided initial capital
for this business in 2001, which has now grown
to 85 employees and $7.2bn under management.
Year end 31 March
2012
2011
Revenue
Profit before tax
Net assets
£39.9m
£9.6m
£46.6m
£39.1m
£9.2m
£43.4m
Spirax Sarco
Spirax Sarco supplies engineered solutions
for the design, maintenance and operation
of industrial and commercial steam systems
and also manufactures peristaltic pumps.
Year end 31 December
2012
2011
Revenue
Profit before tax
Net assets
£661.7m
£127.7m
£436.5m
£650.0m
£132.3m
£400.1m
Business review 14 Annual report 2013 Caledonia Investments plc
continued
Investment review
Unquoted pool
The Unquoted pool contains significant
minority and majority holdings in
private companies. The pool makes
£20m to £50m investments in
businesses operating within attractive
markets, supporting double-digit
operating margins and led by sound
management teams.
total return over the year
27% of NAV at 31 March 2013
+17.7%
Opening value
Investments
Realisations
Revaluation of holdings
Closing value
Investment income
£m
311.7
46.2
(49.2)
39.4
348.1
14.8
Changes made in the recent past positively impacted
returns generally across the portfolio. At Oval, the
regional insurance broker where we hold a significant
minority stake, the new management team has bedded
down well, with Oval enjoying its best year ever in 2012.
We have lifted our holding value for Oval at the year end,
as well as acquiring a small number of additional
ordinary shares during the year.
Top investments
Name
Business
Geography
Investment company
Insurance broking
Engineering
Residential club
Cobehold
Oval
Sterling Industries
The Sloane Club
Satellite Information Services Broadcasting services
Latshaw Group
Bowers & Wilkins
TGE Marine
Amber Chemicals
Buckingham Gate
The table above shows pool holdings of over 1% of the company’s net assets at 31 March 2013.
Manufacturing
Audio equipment
LNG engineering
Specialty chemicals
Property investment
Belgium
UK
UK
UK
UK
US
UK
Germany
UK
UK
The liquefied gas markets in which TGE Marine operates
continue to evolve attractively for the business with TGE
Marine ending the year with a strong forward order book.
Amber Chemicals, our wholly owned specialty silicone
group of companies, enjoyed an exceptional year as it
grew trading EBITDA by 43% and, as a result, we have
lifted our holding value for Amber at the year end.
Brookshire Capital, the property investor, continues to
expand, increasing gross assets to £20.6m over the course
of the year. The team focuses on acquiring and enhancing
light industrial and warehousing property in the UK.
Cobehold, our largest investment in the Unquoted pool,
made solid progress, generating a paid yield of £1.7m,
as well as an uplift in net asset value of 9%.
In December 2012, we exited our investment in Celerant
Consulting, when the business was sold to Hitachi
Consulting. We were delighted that the sale resulted in
Caledonia realising a significant gain of 2.5x on our
investment cost.
As well as the follow-on portfolio investments outlined
above, we made a significant new investment of £27.2m
in five US manufacturing companies previously owned
by Latshaw Enterprises. The businesses are based in
Kansas and California in the US, as well as Juarez, Mexico.
Each is a niche manufacturer enjoying strong margins
and generating significant cash flow, supporting a paid
yield from year one to Caledonia. The businesses have
traded well since the acquisition was completed in
September 2012.
Our investment criteria and Caledonia’s longer term
unquoted investment proposition is becoming
increasingly well know within the UK market. This has
resulted in us reviewing over 230 unquoted investment
opportunities in the year. Many of these remain live
and we would hope to make new investments over the
course of the current year.
First
invested
2004
2003
1989
1991
2005
2012
2011
2006
1947
2000
Equity
held
%
Residual
cost
£m
10.2
25.4
100.0
100.0
22.5
20.0
49.9
100.0
100.0
35.3
42.5
5.3
24.1
16.7
27.2
24.1
9.9
14.5
13.0
Value
£m
91.6
37.8
30.7
28.8
28.5
27.5
24.0
17.5
15.2
14.6
Income/(expense)
recognised in the year
Capital
Revenue
£m
£m
1.7
1.4
3.0
3.0
3.4
–
0.6
1.4
–
–
5.9
3.0
1.7
(0.1)
(1.3)
0.3
–
1.3
5.9
2.0
Pool
%
26.3
10.8
8.8
8.2
8.2
7.9
6.9
5.0
4.4
4.2
Caledonia Investments plc Annual report 2013 15
Cobehold
Cobehold is a Belgian investment company, with
a history dating back to 1957. It seeks to invest
in companies with long term growth prospects
throughout Europe and its shareholder base of
family-backed investors gives it the flexibility to
take a longer term approach.
Year end 31 December
2012
2011
Net assets
€1,270.2m €1,148.2m
Oval
Oval is a leading provider of insurance broking
and financial services in the UK. It has created
a national group by acquiring some of the
UK’s best regional companies, with excellent
reputations in their areas, strong relationships
with providers and sector-leading specialists
on their teams.
Year end 31 May
2012
2011
Revenue
EBITDA
Profit before tax
Net assets
£101.8m
£13.1m
-£1.4m
£31.9m
£96.3m
£12.5m
-£1.5m
£38.8m
Sterling Industries
Sterling Industries is an international
engineering business, specialising in the
global supply of combustion and heat transfer
technology and services. It designs and
manufactures custom engineered burners and
ancillary equipment, bespoke specialised
combustion systems and heat exchangers and
flare services to process industries worldwide.
Year end 31 March
2013
2012
Revenue
EBITDA
Profit before tax
Net assets
£65.9m
£8.3m
£7.0m
£23.9m
£65.1m
£8.7m
£7.4m
£22.3m
Business review 16 Annual report 2013 Caledonia Investments plc
continued
Investment review
Unquoted pool
The Sloane Club
The Sloane Club is a premium residential club
situated in central London. Along with 138
bedrooms and 32 serviced apartments, it offers
a restaurant and private event facilities.
Year end 31 March
2013
2012
Revenue
EBITDA
Profit before tax
Net assets
£8.3m
£3.4m
£2.3m
£2.8m
£8.1m
£3.4m
£2.3m
£2.3m
Satellite Information Services
Satellite Information Services is a long-
established media business focusing on
television production, broadcasting and
the provision of live pictures and data via
satellite. It is the foremost supplier of
television programming and data services
to the UK and Irish betting industries.
Year end 31 March
2012
2011
Revenue
EBITDA
Profit before tax
Net assets
£239.6m
£50.0m
£25.3m
£55.5m
£255.6m
£32.7m
£13.5m
£49.1m
Latshaw Group
Latshaw Group comprises five US engineering
businesses financed by Caledonia and managed
by Nova Capital. The companies employ more
than 450 people in five locations and operate in
a number of sectors, including plastic injection
moulding, custom wire and cable products and
gauging tools.
Year end 31 December
Net assets
2012
$42.1m
Caledonia Investments plc Annual report 2013 17
Bowers & Wilkins
Bowers & Wilkins is a global, premium audio
manufacturer headquartered in Worthing,
West Sussex. The business produces a range
of loud speakers for the premium audiophile
market as well as a series of market leading
products based around the Apple ecosystem,
the most well-known of which is the iconic
Zeppelin docking station.
Year end 30 September
2011
2010
Revenue
EBITDA
Profit before tax
Net assets
£133.3m
£18.7m
£11.1m
£27.7m
£114.5m
£13.0m
£6.5m
£21.0m
TGE Marine
TGE Marine is a Germany-based provider of
engineering services for the design and supply
of liquid gas carriers and offshore units,
providing marine gas handling and storage
systems as well as vessel designs to shipyards
across Europe, Asia and South America.
Year end 30 June
2012
2011
Revenue
EBITDA
Profit before tax
Net assets
€55.7m
€7.7m
€7.8m
€18.0m
€35.1m
€6.4m
€6.0m
€14.7m
Amber Chemicals
Amber Chemicals is a specialty silicones
chemical group, developing diverse products
for niche markets. The company is currently
focused on the electronics, photovoltaic, solar,
automotive, moulding, personal care and
chemical processing industries.
Year end 31 March
2013
2012
Revenue
EBITDA (adjusted)
Profit before tax
Net assets
£28.6m
£3.3m
-£2.2m
£7.4m
£25.2m
£2.3m
–
£5.3m
Business review 18 Annual report 2013 Caledonia Investments plc
continued
Investment review
Funds pool
The Funds pool comprises investments
in mainly private and public equity
collective investment vehicles, structured
through companies, limited partnerships
and open-ended funds.
Our aim in using funds is to provide broad
exposure to areas of the world where we
are less willing to invest directly.
total return over the year
13% of NAV at 31 March 2013
+7.7%
The Funds pool contains investments in private and
public equity funds in the UK, Europe, US and Asia.
Investment through funds enables us to broaden our
geographic and sector spread, by taking advantage of
managers’ specialist knowledge.
The Funds pool started the year at £209.6m and ended
at £166.8m, after net realisations of £54.1m. Overall,
the total return was 7.7%.
Realisations of £68.4m included £48.5m from the sale
of our entire holding in British Empire Securities and
the sale of our capital in and commitment to one of the
Capital Today China funds. We made commitments to
two new Asia private equity funds – Asia Alternatives
and Axiom Asia – and made initial contributions under
these commitments.
At the year end, our fund commitments amounted
to some £60.2m. The following chart shows the
geographical spread of our fund investments and
outstanding commitments.
Fund investments and commitments
North America
Asia
United Kingdom
Continental Europe
2013
32%
31%
29%
8%
Top investments
Name
Business
Geography
China
Capital Today China
US
Perlus Microcap
France
Pragma Capital funds
Nova Springboard
UK
The table above shows pool holdings of over 1% of the company’s net assets at 31 March 2013.
Private equity fund
Public equity fund
Private equity funds
Private equity fund
Residual
cost
£m
1.7
16.5
14.1
3.2
Value
£m
29.2
22.2
14.3
12.9
Pool
%
17.5
13.3
8.6
7.8
Income/(expense)
recognised in the year
Capital
Revenue
£m
£m
–
–
–
–
4.9
2.7
0.1
0.5
First
invested
2006
2010
2003
2006
Capital Today China
The China Growth fund is managed by Capital
Today and provides growth capital to medium-
sized Chinese companies. Capital Today focuses
on the consumer retail and internet sectors.
The particular success of JingDong 360 has led
to a further significant increase in the valuation
of the fund.
Year end 31 December
2012
2011
Net assets
$770.8m
$697.1m
Perlus Microcap
Perlus Microcap is a fund investing in US
microcap equities, managed by UK-based Perlus
Investment Management.
Year end 31 December
2012
2011
Net assets
$68.8m
$62.1m
Caledonia Investments plc Annual report 2013 19
Pragma Capital funds
This investment comprises two private
equity funds managed by Pragma Capital,
investing principally in majority or significant
minority operations, alongside management
teams with a strong entrepreneurial mind-set.
Year end 31 December
2012
2011
Net assets
€272.6m
€290.5m
Business review 20 Annual report 2013 Caledonia Investments plc
continued
Investment review
Income & Growth pool
The Income & Growth pool comprises
a geographical and sector balanced
portfolio of investments in 42
international blue chip businesses,
which provide an above average dividend
record and organic growth potential.
total return over the year
12% of NAV at 31 March 2013
+23.7%
The Income & Growth pool comprises a geographical
and sector balanced portfolio of 42 investments in
global blue chip companies with strong balance sheets,
above average returns and demonstrable histories
of creating shareholder value. All investments are
carefully researched and organic growth potential
in tandem with an above average dividend record are
the key considerations.
The Income & Growth pool commenced in March 2011
and grew to £110.6m at the end of last year and £162.0m
at this year end. The increase in value resulted from
both £28.9m of net investment over the year and gains
of £22.5m. Having made our investment selection,
we generally hold these for the long term, but keep global
markets and individual investments under review and
rebalance when necessary.
The pool invests in global equities. Over the year,
the portfolio has seen a rebalancing towards Europe
and North America.
Geographic distribution
United Kingdom
Continental Europe
North America
Asia Paci(cid:2)ic
Latin America
2013 2012
25%
26%
21%
26%
22%
6%
16%
22%
31%
5%
The top ten investments in the pool at 31 March 2013
were as follows:
Name
Pfizer
Standard Life
Nestlé
Zurich Insurance
SSE
Philip Morris
Amcor
GlaxoSmithKline
Spectra Energy
Starwood Property
Country
US
UK
Switzerland
Switzerland
UK
US
Australia
UK
US
US
Value
£m
Weight
%
5.3
5.3
5.2
5.1
5.1
5.1
5.1
4.9
4.9
4.9
3.3
3.3
3.2
3.2
3.1
3.1
3.1
3.0
3.0
3.0
Caledonia Investments plc Annual report 2013 21
The Income & Growth pool comprises
a geographical and sector balanced
portfolio of investments in 42 international
blue chip businesses.
Business review 22 Annual report 2013 Caledonia Investments plc
Business model
Our primary focus is to manage wealth
over the long term through a portfolio
structured prudently to balance risk
and return.
We aim to deliver long term growth in
capital and a growing annual dividend
to shareholders. As well as listed
investments, our portfolio contains a
significant proportion of unquoted
investments at various stages of maturity
and vintage (both through direct
minority and majority holdings and
through private equity funds) and we
therefore measure our performance
against the FTSE All-Share on a total
return basis over ten years.
Investment principles
The principles we apply in building and financing our
portfolio include:
●●
●●
●●
●●
●●
We allocate our capital predominantly amongst quoted
equities, private companies (equities and debt) and
funds. We identify a strategic allocation to each of
these classes commensurate with our overall risk and
return objectives.
At least 50% of the value of the investment portfolio
will normally be held in quoted equities. In addition,
we may use derivatives to hedge risk exposures to
movements in markets and currencies.
We look to achieve a diverse investment portfolio by
asset class, industry sector, geography and currency.
Overall exposures in each case are actively monitored
and managed by our executive management, under
the supervision of the board. The portfolio is further
diversified through our fund investment portfolio
and the selection of external fund managers with
clear mandates.
We look to mitigate concentration risk by limiting the
value of an investment in any one company to less than
10% of our net asset value and will look for appropriate
market opportunities to realise and recycle value
throughout the portfolio to achieve this in an
appropriate timeframe.
We maintain borrowing facilities primarily to provide
additional temporary liquidity between buying and
selling investments. We would not expect gearing at
any time to exceed 10% of net assets.
Pool structure
We manage our investment portfolio in four distinct
‘pools’ of capital, which facilitates delegated accountability
and responsibility to specialist investment executives.
The Quoted pool focuses on midcap companies,
identifying opportunities to build meaningful minority
positions in long term value businesses.
The Unquoted pool takes direct minority and majority
stakes in private companies, where an opportunity exists
to partner a strong management team with growth
capital, without the traditional restrictions of short term
private equity financing. We take a board seat in all
significant private company investments.
The Funds pool contains investments in UK, European,
North American and Asian private and public equity funds
and, in particular, provides diversified overseas reach in
areas where our investment model would make direct
investing more difficult to manage.
The Income & Growth pool provides low market risk
exposure to global ‘mega cap’ companies offering
capital growth potential and high dividend expectations.
This pool provides both a reliable platform for our
overall income requirements and a source of liquidity.
Caledonia Investments plc Annual report 2013 23
Investment process
Our investment process is built on a disciplined series of
steps, building on Caledonia’s reputation and the
experience of our investment team. The process looks to
identify long term value through each stage, including
sourcing opportunities and initial reviews, through due
diligence, approval and deal execution. The performance
of each investment is subject to a formal review process
Attract preferential deal flow
involving monthly and quarterly reporting. Both
individual investments and the investment portfolio as
a whole are periodically measured against a number of
risk control metrics, including concentration, liquidity,
volatility and sector and geographical diversity. In
addition, we are often represented on the boards of our
substantial listed and private company investments,
where we have a significant holding.
Identify best opportunities
Make significant investments
Our reputation, network of deal
originators and family tradition enables
us to access premium investment
opportunities not always available to
others. This derives from both tracking
quality management teams in proven
businesses and through the contacts we
make through our extensive board
representation network.
We adopt a disciplined process of
research and due diligence to identify
value opportunities in well-managed,
long term businesses with established
business models and strong cash flows.
Such opportunities are typically not
reliant on leverage for returns and offer
long term growth potential.
We invest directly in both listed and
unlisted opportunities around the
world. Our minimum investment size
is £10m and we are willing to invest
between £20m and £50m for significant
equity interests in companies.
Attract
preferential
deal flow
Develop
business
network
Identify
best
opportunities
The Caledonia team
At its heart, our investment
process is focused on
recruiting and retaining high
quality investment executives
to maintain deal flow and
investment continuity, who
understand and are able
to execute Caledonia’s
investment philosophy.
Manage
and control
risk
Make
significant
investments
Manage
and support
investees
Develop business network
Monitor and risk control
Manage and support investees
Maintaining our reputation as a
supportive and constructively involved
long term investor enables us to develop
our network of contacts, who will give
us priority consideration when new deal
opportunities arise.
Individual investments and the
investment portfolio as a whole are
monitored for risk against our strategic
objectives. Consideration is given to
concentration exposure, volatility
levels, liquidity and geographical and
industry sector diversity.
We manage our investments as pools
of capital, focusing ownership and
responsibility on our executive team.
Where we take a board seat, we can
both actively monitor the development
of our investment and contribute long
term support and governance.
Business review 24 Annual report 2013 Caledonia Investments plc
Strategic priorities
Following a strategic review conducted
in 2010 and set out in our 2011 annual
report, we identified a number of
priorities for our business model.
We believe the performance we have
seen in the current year has been built
on the strategic priorities implemented
over the past three years, which position
the portfolio to achieve longer term
performance.
Increase overall portfolio yield
We have rebalanced the portfolio towards our strategic
total return objective through a combination of growing
annual income and longer term capital gain. An Income &
Growth pool of capital has been developed over the last
two years and now totals £162m. This targets global
mega-cap companies providing consistent and sustainable
above average dividend growth. The target for this pool of
capital is to yield at least 5% gross. In addition, we have
refined our overall portfolio to ensure a greater
proportion of our investments generate income and have
increased the overall portfolio yield to 3.3% in 2013,
Reduce the number of subscale investments
from 2.8% in 2010.
We have progressively reduced the number of subscale
investments, where we consider the management time,
monitoring effort and risk is not likely to be matched by
the returns. Overall, our portfolio holdings have reduced
from 75 in 2010 to 60 in 2013 (the Income & Growth pool
Reduce concentration risk
being considered as one holding).
We have rebalanced the portfolio and reduced single
investment and portfolio concentration risk. The chart
below shows that, at 31 March 2013, a greater number of
investments comprise each percentage level of portfolio
value, compared with 2010.
Portfolio concentration
2013
2010
%
100
75
50
25
0
0
10
20
30
40
50
60
70
80
90
100
Number of investments
Most significantly, during the current year we reduced
our holding in what was our largest investment, Close
Brothers, from 13.1% of NAV (£154m) in 2012 to 6.7% of
NAV (£87m) in 2013. This has been done gradually and
opportunistically to maximise value.
Caledonia Investments plc Annual report 2013 25
Increase liquidity
Refine portfolio management
The investment portfolio has been refined during the
current year to four pools of capital, each headed by a
dedicated and experienced investment executive.
Throughout the process of rebalancing the portfolio,
we have increased liquidity. This has been reflected in
both an increased net cash balance of £96m at 31 March
2013, from a position of net debt at 31 March 2012, and
a significant improvement in the market liquidity of the
managed portfolio, based on daily traded volumes.
The high liquidity of the newly established Income &
Growth pool (£162m of net asset value at 31 March 2013)
has been a contributor to this, as has the reduction in
subscale investments. We believe that the current level
of portfolio liquidity provides both risk reduction in
today’s more volatile markets and the flexibility to take
advantage of market pricing opportunities to build stakes
in targeted investments.
In addition, we have recently completed the refinancing of
our banking facilities with a total of £75m available under
five year revolving credit facilities from a combination of
RBS and ING.
Business review 26 Annual report 2013 Caledonia Investments plc
Financial review
Net asset value increased over the year to £1,298.8m, from
£1,134.0m. The following chart analyses this increase:
Movement in net asset value
£m
1,400
1,300
1,200
1,100
Opening
NAV
Revenue
return
Capital
return
Dividends
Other
Closing
NAV
Company total return
The company seeks to generate total return from both
revenue earnings, net of expenses, and capital growth.
For the year ended 31 March 2013, the total return
was £206.8m (2012 – £93.2m loss), of which £28.1m
(2012 – £23.0m) derived from revenue and £178.7m
Company revenue performance
(2012 – £116.2m loss) from capital.
Investment income in the year of £39.4m was 18.3%
higher than last year’s income of £33.3m. The Income &
Growth pool contributed £2.2m more income than in
2012 and all other pools made significant contributions.
The underlying investment income represented a net yield
Company capital performance
on the portfolio of 3.3%, compared with 2.8% last year.
Net gains on investments and derivatives totalled
£174.9m (2012 – £119.0m loss). The principal gains were
£33.9m from Close Brothers, £32.8m from Bristow Group
and £27.1m from Celerant Consulting. These gains more
than offset investment losses, including £14.4m from
Dewan Housing Finance (including the merged First Blue
Home Finance).
Listed investments contributed £127.0m to the valuation
gains, and unlisted investments (including unallocated
investments) contributed £47.9m. Listed investments
increased in value at a greater rate than unlisted in the
year, due to the rapid rise in equity markets towards
the end of the year, which often sees a lag effect on our
unquoted portfolio, reflecting prudent valuation principles.
Movement in investment portfolio value
£m
1,400
1,300
1,200
1,100
Opening
balance
Listed net
gains
Unlisted
net gains
Net
realisations
Closing
balance
The company maintains a prudent valuation approach
to investments. Internal valuations of investments are
conducted in accordance with the IPEV Guidelines.
Adjustments are normally made to earnings benchmark
multiples – generally of around 30% – to account for points
of difference between the comparator and the company
being valued, including relative liquidity. Unlisted property
and fund investments are based on external valuations.
The following chart shows the source of valuations across
the portfolio:
Portfolio by valuation source
Quoted price
External fund manager
External property valuer
Directors’ valuation
58%
23%
5%
14%
Company expenses
Caledonia allocates all expenses, other than transaction
costs, to revenue. Our on-going charges ratio for the
year was 1.14% (2012 – 1.02%), compared with the
Investment Trust Global Growth sector average of 1.02%
(2012 – 1.04%). We calculate our on-going charges ratio
on an industry standard basis, comprising published
management expenses over the monthly average NAV,
to aid comparability.
Overall, the company’s revenue column expenses were
higher than last year at £13.2m (2012 – £11.8m). This
primarily reflected an increase in the National Insurance
Dividend
on share-based payments and pension expenses.
We recognise that a reliable source of growing dividends
is an important part of shareholder total return and
have extended to 46 years our record of growing annual
dividends, as well as increasing significantly the final
dividend to reflect our confidence in achieving an
increased underlying yield element to our portfolio return.
Caledonia Investments plc Annual report 2013 27
We paid an interim dividend of 12.9p per share on
10 January 2013 and have proposed a final dividend of
34.3p per share. The total dividend for the year of 47.2p
is an increase of 10.0% on last year.
The dividend for the year totalling £26.4m was covered
by the year’s revenue earnings of £28.1m.
If approved, the final dividend will be payable on 8 August
2013 to holders of shares on the register on 12 July 2013.
Consolidated results
The ex-dividend date will be 10 July 2013.
The company has recently renewed its bank facilities.
It now has committed facilities of £75m in place at the
year end, expiring in April 2018, and has strong covenant
cover. Caledonia uses these facilities as short term
bridging to facilitate the efficient transition from one
investment to another.
Subsidiaries had borrowings totalling £51.8m at 31 March
2013 (2012 – £60.5m) to finance operations. Caledonia
provided guarantees and letters of comfort in respect of
Treasury management
£41.0m (2012 – £56.7m) of these borrowings.
The consolidated results differ from the company results
in incorporating the group’s share of the earnings and net
assets of subsidiaries and joint ventures, as opposed to
their investment returns and fair values. The consolidated
Cash flows, liquidity and facilities
diluted earnings per share was 352.3p (2012 – 171.2p loss).
During the year, we moved from opening net settlement
of £36.6m to net cash of £96.5m, principally through
settlement of net realisations from our investment
portfolio of £148.4m.
The total cash movement over the year of £133.1m was
analysed by investment pool as follows:
Net cash movement by pool
The Treasury department provides a central service
to group companies and conducts its operations in
accordance with clearly defined guidelines and policies,
which have been reviewed and approved by the board.
Treasury transactions are only undertaken as a
consequence of underlying commercial transactions or
exposures and do not seek to take active risk positions.
It is Treasury’s role to ensure that the group has sufficient
available funds to meet its needs in the foreseeable future.
£m
180
120
60
0
-60
Quoted
Unquoted
Funds
Income
& Growth
Other
Company record
2004
2005
2006
2007
Profit/
(loss) for
the year
£m
282.8
171.4
349.4
136.1
Diluted
earnings
per share
p
390.7
260.3
549.2
226.9
Annual
dividend
p
27.0
28.2
29.6
31.1
Net
assets
£m
915
978
1,307
1,323
Diluted
NAV per
share
p
1265
1531
2044
2258
Share
price
p
1017
1367
1980
2066
Rolling ten years
Total
shareholder
return
FTSE
All-Share
Total Return
138.5
229.7
302.0
302.9
94.4
118.4
123.4
109.2
2008
2009
2010
2011
2012
2013
Prior to 2005, profits, earnings and net assets were prepared in accordance with UK GAAP. To aid comparability, pre-2005 results have been adjusted to exclude accrued dividends. Also, NAVs
per share prior to 2006 were prepared on an undiluted basis and have been restated on a diluted basis.
(76.0)
(564.1)
539.6
145.1
(161.8)
361.9
(43.9)
(325.5)
312.4
84.1
(93.2)
206.8
228.5
146.4
196.7
171.5
118.9
256.5
1,252
906
1,182
1,259
1,134
1,299
2155
1559
2034
2165
1977
2299
2050
1289
1625
1725
1486
1840
32.5
33.8
35.3
37.1
42.9
47.2
41.4
(6.4)
29.7
58.0
65.5
175.3
Business review 28 Annual report 2013 Caledonia Investments plc
Risk management
Effective risk management is a key
component of the company’s business
model and assists in ensuring that the
different parts of the group operate
within acceptable risk parameters.
The board has overall responsibility for
setting and monitoring the level of risk
the company is prepared to accept.
Principal risks
Strategic
Risks in relation to the appropriateness of the business
model to deliver long term growth in capital and income
and the effective communication and delivery of the
business model.
Strategic risks include the appropriate allocation of
capital in relation to geographic, sector and currency
exposures.
Investment
Risks in respect of specific investment and realisation
decisions.
Investment risks include the appropriate research
and due diligence of new investments and the timely
execution of investment realisations for optimal
shareholder value.
Market
Risk of losses in investments arising from movements
in market prices, particularly in highly volatile markets.
Caledonia invests primarily in listed equities, private
companies and equity funds. Its principal market
risks are therefore equity price volatility, foreign
exchange rate movements and interest rate volatility.
An explanation of these risks, along with sensitivities,
is included in note 21 to these accounts.
Liquidity
Risk that liabilities cannot be met or new investments
made due to a lack of liquidity. Such risk can arise
from not being able to sell an investment due to lack
of a market or from not holding cash or being able to
raise debt.
Operational
Risks arising from inadequate or failed processes,
people and systems or from external factors.
Operational risks include recruiting, retaining and
developing staff, appropriate systems and procedures,
business disruption, exposure to litigation or fraud and
adherence to the tax and regulatory environment.
Caledonia Investments plc Annual report 2013 29
Mitigation
Key developments
The company’s business model and strategy are
reviewed periodically, against market conditions
and target returns.
The performance of the company and its key risks are
monitored regularly by management and the board.
Borrowing levels and facilities require board approval
and are carefully monitored and reported.
Pool managers have well-developed networks through
which they attract proprietary deal flow.
Investment opportunities are subject to rigorous and
disciplined investment appraisals and multi-stage
approval processes. Target entry and exit events and
prices are monitored and updated regularly, in relation
to market conditions and strategic aims.
Market risks and sensitivities are reviewed on a weekly
basis and actions taken to balance appropriately risk
and return.
A regular review of market and investment volatility and
value at risk is conducted by the board and the portfolio
is realigned with strategic aims where appropriate.
Reviews also consider investment concentration,
currency and liquidity exposures.
Detailed cash forecasting for six months in advance is
updated and reviewed weekly, including the expected
drawdown of capital commitments.
Listed portfolio liquidity is reviewed regularly.
Loan facilities are maintained to provide appropriate
liquidity headroom.
●●
●●
●●
●●
●●
●●
●●
●●
●●
The portfolio was restructured during the year from
six to four pools of capital, resulting in simplified
reporting and responsibility structures.
A new financial communications agency was appointed
to assist in communication of the company’s business
model, strategy and performance.
The company has continued to strengthen its internal
resources to ensure appropriate and specific skills
exist to undertake due diligence processes.
The investment appraisal and approval process has
been standardised to ensure consistent quality and
enable comparison between opportunities.
The company has introduced internal risk/return
reporting to help identify changes in the portfolio
risk profile.
Scenario reviews are undertaken to assess the impact
of alternative asset allocation and whether it would
better meet the company’s aims.
The company has realised investments over the year
to build a cash balance amounting to £96m at the
year end.
The borrowing facilities were renegotiated for a
further five years, although reduced to £75m from
the previous level of £100m.
Systems and control procedures are developed and
reviewed regularly. They are tested, as part of the
annual programme of controls assurance, to ensure
effective operation.
A controls assurance programme has been developed,
with the Risk Manager reviewing and testing
key controls and procedures and reporting to the
Audit Committee.
Appropriate remuneration and other policies are in
place to encourage the retention of key staff. Business
continuity plans are maintained, using an offsite facility.
Business review
30 Annual report 2013 Caledonia Investments plc
Corporate responsibility
Caledonia considers the impact of its business in the
Marketplace
following areas:
As an investment company, we are committed to a long
term investment strategy and to maintaining effective
relationships with those companies in which we invest.
We often hold a board seat in our significant investments
and use this to maintain a close relationship with
managements of those companies. Additionally, we hold
frequent meetings with managements and review internal
documents, such as management accounts and reports.
We also make considered use of our voting rights.
As a consequence of our involved investment style,
we would expect to vote in line with management
recommendations, but are prepared to abstain or vote
against recommendations where we consider they
are not in the interests of our shareholders.
We continue to meet with our shareholders and listen
Workplace
to any concerns they may have.
Caledonia has in place a set of polices intended to protect
employees from unlawful discrimination, offer them a
working environment where they have a right to be
treated fairly, with consideration and respect, and support
high standards of conduct and performance. These
policies assist in ensuring that the company meets
applicable health and safety standards and treats disabled
employees in accordance with its statutory obligations.
These policies are communicated to employees by way
of a staff handbook provided at the time of joining, with
periodic updates thereafter.
In addition to a grievance procedure, which allows
employees to raise concerns either formally or informally,
there are formal whistleblowing arrangements in place,
which enable members of staff to raise any issue of
concern regarding possible impropriety in the conduct of
the company’s business, confidentially and independently
of line management.
A formal performance appraisal process, through which
employees may be set objectives on an annual basis and
their achievement against those objectives assessed at
the end of the year, is intended to ensure that employees
have a clear view of their performance and the ability to
develop their potential within the company through
additional training where necessary. Together with team
meetings and company-wide briefings, this provides staff
with the opportunity to be closely involved in the success
Community
of the business.
Caledonia encourages employees to support local
voluntary organisations and charitable causes and
provides matched sponsorship to their fundraising
activities. This and other charitable donations made at the
company’s own initiation in the year amounted to £57,000.
Donations comprised £25,000 to support prisoner
rehabilitation, £20,000 for sea cadets and seafarers and
£12,000 for a number of medical and welfare charities.
The company also supports the work of the Royal
Horticultural Society and contributions to the RHS’s
campaigns to promote gardening, through sponsorship
of the RHS Chelsea Flower Show Charity Gala Preview,
Environment
amounted to £100,000 in the year.
Caledonia’s environmental impact is limited. However, any
measures taken to reduce this impact demonstrate the
company’s commitment to improve the environment and
can have direct benefits through reductions in costs for
energy and consumables. A number of measures have
been and will be taken in this area:
●●
●●
●●
encouragement of the use of electronic communications
to save paper, printing consumables and energy
usage of video-conferencing and telephone conference
calls rather than travelling to meetings
recycling of office waste, used paper and other
consumables.
Caledonia Investments plc Annual report 2013 31
Valuation methodology
Maintainable earnings balance reliability and relevance.
Generally, the latest historical accounts are used unless
reliable forecast results for the current year are available.
Earnings are adjusted where appropriate for exceptional
or non-recurring items and an average of more than one
year’s earnings may be used to estimate maintainable
earnings for cyclical or volatile businesses.
Net assets
The net assets methodology is likely to be appropriate
for a business whose value derives mainly from the
underlying value of its assets rather than its earnings,
such as a property holding company or an investment
business. It may also be appropriate for a business that is
not making an adequate return on assets and for which a
greater value can be realised by liquidating the business
and selling its assets. A third party valuation may be used
Fund interests
to give the fair value of a certain asset or group of assets.
Fund interests refer to participations in arrangements
to create a designated pool of capital to invest in a wider
range of assets than is feasible for an individual investor
and to share the costs and benefits.
Open-ended funds, including investment companies with
variable capital, typically report regular net asset values,
which usually provide a reliable basis to estimate fair
value. If the price reported by the fund is not available at
the reporting date, the latest available price is used and
may be adjusted to take account of changes or events to
the reporting date.
Closed-ended funds include unlisted investment
companies and limited partnerships. For these
investments, the fair value estimate is based on a
summation of the estimated fair value of the underlying
investments. Fund manager valuation reports may be
used where there is evidence that the valuation is derived
using fair value principles and may be adjusted to take
account of changes or events to the reporting date.
Adjustment may also be necessary for features of the fund
agreement not captured in the valuation report, such as
Other investments
performance fees or carried interest.
Other investments include preference shares, loan notes
or facilities, options, warrants and treasury instruments
that are not publicly traded and do not form part of an
investment in an unlisted company. For such investments,
appropriate valuation techniques are adopted and used
consistently.
Investments are measured at the directors’ estimate of
fair value at the reporting date, in accordance with IAS 39
‘Financial Instruments: Recognition and Measurement’.
Fair value is the amount for which an asset could be
exchanged between knowledgeable, willing parties in an
Publicly traded securities
arm’s length transaction.
Investments listed in an active market are valued at
their bid price on the reporting date. When a bid price
is unavailable, the price of the most recent transaction
Unlisted companies
will normally be used.
Unlisted company investments are valued by applying
an appropriate valuation technique, which makes
maximum use of market-based information, is consistent
with models generally used by market participants and is
applied consistently from period to period, except where
a change would result in a better estimation of fair value.
The value of an unlisted company investment is generally
crystallised through the sale or flotation of the entire
business, rather than the sale of an individual instrument.
Therefore, the estimation of fair value is based on the
assumed realisation of the underlying business at the
reporting date, based on the International Private Equity
and Venture Capital Valuation Guidelines (December
2012). Recognition is given to the uncertainties inherent
in estimating the fair value of unlisted companies and
appropriate caution is applied in exercising judgments
and making the necessary estimates.
Enterprise value is normally determined using one of
the following valuation methodologies:
Price of recent investment
Where the investment being valued was recently
acquired or a recent transaction has taken place, its
cost or transaction price will generally provide a good
indication of fair value. This methodology is likely to
be appropriate only for a limited period after the date
of the relevant transaction.
Multiples
This methodology involves the application of an earnings
multiple to the maintainable earnings of the business
and is likely to be appropriate for an investment in an
established business with an identifiable stream of
continuing earnings.
The earnings multiple used is determined by reference to
market-based multiples appropriate for the business and
correlating to the period and calculation of earnings of the
company being valued. The aim is to identify comparator
companies that are similar in terms of risk and growth
prospects to the company being valued. Earnings
multiples are adjusted for points of difference between
the comparator and the company being valued where
appropriate, including the ability of Caledonia to effect
change in the company and risks associated with holding
an unlisted share.
Business review 32 Annual report 2013 Caledonia Investments plc
1
2
3
4
5
6
1 Rod Kent
3 Stephen King
5 Charles Allen-Jones
Finance Director
He joined Caledonia in 2009 as
Finance Director. He is currently a
non-executive director and Chairman
of the Audit Committees of Bristow
Group and TT Electronics. He was
Group Finance Director of De La Rue
from 2003 to 2009 and, prior to that,
Group Finance Director of Midland
Electricity. He is a Fellow of the
Institute of Chartered Accountants
4 Jamie Cayzer-Colvin
in England and Wales. Age 52.
Executive Director
He joined the Caledonia group in
1995, initially working at its Amber
specialty chemicals subsidiary before
becoming an investment executive
at Caledonia’s head office in 1999.
He was appointed an associate
director in 2002 and a director in
2005. He is Chairman of The
Henderson Smaller Companies
Investment Trust and a non-executive
director of India Capital Growth Fund
and Polar Capital Holdings. Age 48.
Chairman
Appointed a non-executive director
of Caledonia in 2011 and Chairman
in 2012, he is also Chairman of the
Nomination Committee. He was
Managing Director of Close Brothers
Group for 28 years until 2002 and
then a non-executive director and
later Chairman from 2006 until 2008.
His non-executive roles have included
the Chairmanships of M&G Group,
Bradford & Bingley and BT Pension
Trustees, Senior Independent Director
of Whitbread and a Governor of the
Wellcome Trust. He is currently a
non-executive director of Grosvenor
Group and Chairman of the Trustees
2 Will Wyatt
of Calthorpe Estates. Age 65.
Chief Executive
He joined the Caledonia group in 1997
from Close Brothers Corporate
Finance, working at Sterling Industries
before transferring to Caledonia’s
head office in 1999 as an investment
executive. He was appointed an
associate director in 2002, a director
in 2005 and Chief Executive in 2010.
He is Chairman of the supervisory
board of TGE Marine and of Sterling
Industries and a non-executive
director of Avanti Communications
Group, Cobehold, Real Estate Investors
and Terrace Hill. Age 45.
Senior Independent Non-Executive
Director
Appointed a non-executive director
of Caledonia in 2001, he is Chairman
of the Governance Committee and a
member of the Audit, Nomination and
Remuneration Committees. He was a
partner of the international law firm,
Linklaters, for 33 years, including five
years as Senior Partner until his
retirement in 2001. He is currently a
non-executive director of Hongkong
Land Holdings and Jardine Strategic
Holdings and Vice-Chairman of the
Council of the Royal College of Art.
6 Stuart Bridges
Age 73.
Non-Executive Director
Appointed a non-executive director
of Caledonia in January 2013, he is
a member of the Audit Committee.
A chartered accountant, he has been
Chief Financial Officer of Hiscox, the
international specialist insurer, since
1999, prior to which he held positions
in various financial services
companies in the UK and US, including
Henderson Global Investors. He is a
member of the audit committee of the
Institute of Chartered Accountants in
England and Wales and of the
Prudential Financial and Taxation
Committee of the Association of
British Insurers. Age 52.
Board of directors Caledonia Investments plc Annual report 2013 33
11
7
8
9
10
7 The Hon Charles Cayzer
9 Charles Gregson
11 Robert Woods CBE
Non-Executive Director
Appointed a non-executive director of
Caledonia in 2009, he is Chairman of
the Remuneration Committee and a
member of the Audit, Governance and
Nomination Committees. He spent his
business career at United Business
Media and its predecessor companies
in a number of divisional and head
office roles and is now Chairman of
ICAP, CPPGroup and St James’s Place.
10 David Thompson
Age 66.
Non-Executive Director
Appointed a non-executive director
of Caledonia in 2003, he is Chairman
of the Audit Committee and a member
of the Governance, Nomination and
Remuneration Committees. He is
currently Chairman of Marston’s,
having served as its Managing
Director from 1986 to 2001, and is
also Chief Executive of Anglia
Maltings (Holdings). Age 58.
Non-Executive Director
Appointed a non-executive director
of Caledonia in 2011, he is a member
of the Governance, Nomination and
Remuneration Committees. He spent
most of his business career at P&O
Steam Navigation Company, joining
its main board in 1996 before serving
as its Chief Executive from 2004 until
its takeover by DP World in 2006.
He was a non-executive director of
Cathay Pacific Airways from 2006 to
2010 and is currently Chairman of
P&O Ferries, Southampton Container
Terminal and Tilbury Container
Services and a non-executive director
of John Swire & Sons. He is also
Chairman of the Mission to Seafarers
and was awarded the CBE in 2003.
Age 66.
Non-Executive Director
Having gained experience of
merchant banking, commercial
banking and corporate and project
finance with Baring Brothers,
Cayzer Irvine and Cayzer Ltd, he was
appointed an executive director of
Caledonia in 1985, becoming non-
executive in December 2012. He is
Chairman of The Sloane Club, Senior
Independent Non-Executive Director
of LondonMetric Property and a
non-executive director of Eredene
Capital and Quintain Estates &
8 Richard Goblet d’Alviella
Development. Age 56.
Non-Executive Director
A Belgian national, he was appointed
a non-executive director of Caledonia
in 2005 and is a member of the Audit
and Nomination Committees. He is
Executive Chairman of Sofina, a
quoted Belgian financial holding
company, where he has been a board
member since 1982, prior to which he
was a managing director of the Paine
Webber Group with a background
in international investment banking
in London and New York. He is a
non-executive director of Group
Danone and Eurazeo, in which Sofina
has interests. Age 64.
Governance 34 Annual report 2013 Caledonia Investments plc
Directors’ report
The directors present their report and accounts for the year
ended 31 March 2013. The Chairman and Chief Executive’s
report, Investment of Financial reviews, the Directors’
remuneration report and the Corporate governance report
Principal activities and results
form part of this report.
Caledonia is an investment trust company. A review of the
activities of the company, together with the results for the year,
is given in the Chairman and Chief Executive’s report and the
Investment and Financial Reviews, which should be regarded as
part of this report. There have been no significant changes in the
activities of the company’s operating subsidiaries during the year,
which principally comprised engineering, chemicals, property,
support services, leisure, financial services and investment.
The company has been approved by Her Majesty’s Revenue and
Customs (‘HMRC’) as an investment trust company for all
relevant financial periods up to 31 March 2012. New tax rules
for investment trust companies were introduced for accounting
periods beginning on or after 1 January 2012, under which
continuing approval may be granted by HMRC, subject to
on-going compliance with the required eligibility conditions.
HMRC have confirmed Caledonia’s status as an investment trust
company from 1 April 2012 and the directors are of the opinion
that, since that date, the company has satisfied the eligibility
conditions for continued approval under section 1158 of the
Dividends
Corporation Tax Act 2010 and associated regulations.
An interim dividend of 12.9p per share (2012 – 11.7p) was paid
on 10 January 2013 and the board has proposed that a final
dividend of 34.3p per share (2012 – 31.2p) be paid on 8 August
2013. This will result in total dividends for the year of 47.2p per
Annual general meeting
share (2012 – 42.9p).
The eighty-fourth annual general meeting of the company will be
held at Cayzer House, 30 Buckingham Gate, London SW1E 6NN on
Wednesday, 24 July 2013 at 11.30 am. The notice of the annual
general meeting and details of all of the resolutions to be put to
shareholders are set out in a separate circular sent to
Directors and their interests
shareholders at the same time as this annual report.
The directors of the company are shown on pages 32 and 33.
All of the directors served throughout the year, other than
Mr S J Bridges, who was appointed on 1 January 2013.
Mr J R H Loudon and Mr M E T Davies also served as directors
until their retirements from the board on 25 July 2012 and
31 December 2012 respectively.
The interests of the directors and their families in the ordinary
share capital of the company as at 31 March 2013 were as follows:
Non-beneficial
1
2012
No
Beneficial
2013
No
1
2012
No
650
–
–
1,015,920 1,014,920
650
408,498 408,498
7,500
–
40,892
–
610
3,000
–
15,273
–
40,892
–
610
3,000
2,000
R D Kent
2
W P Wyatt
S A King
J M B Cayzer-Colvin
C M Allen-Jones
S J Bridges
2
Hon C W Cayzer
R Goblet d’Alviella
C H Gregson
D G F Thompson
R B Woods
2013
No
–
19,093
–
7,053
–
–
18,985
–
–
3,000
–
–
19,093
–
7,053
–
–
23,985
–
–
3,000
–
1. Or date of appointment, if later.
2.
Mr Wyatt’s beneficial interests included 6,485 shares (2012 – 11,845 shares) in which The
Hon C W Cayzer had a non-beneficial interest and 920,000 shares (2012 – 914,000) held by
The Dunchurch Lodge Stud Company, a private family company controlled by Mr Wyatt and
certain of his connected persons. The Hon C W Cayzer’s non-beneficial interests included
12,500 shares (2012 – 12,500 shares) in which Mr Wyatt also had a non-beneficial interest.
There have been no changes in the directors’ interests shown
above notified up to the date of this report.
Details of the directors’ options to acquire ordinary shares in the
company and awards over ordinary shares under the company’s
performance share scheme and deferred bonus plans as at
31 March 2013 are set out in the Directors’ remuneration report
Directors’ indemnity
on pages 43 to 50.
Each of the directors has the benefit, under the company’s
articles of association, of an indemnity, to the extent permitted by
the Companies Act 2006, against any liability incurred by him for
negligence, default, breach of duty or breach of trust in relation to
Share capital structure
the affairs of the company.
The company has two classes of share capital – ordinary shares
of 5p each and deferred ordinary shares of 5p each.
The holders of the ordinary shares are entitled to receive
dividends as declared from time to time and are entitled to one
vote per share at meetings of the company. All voting rights are
however suspended in respect of any of the company’s shares
that are held in treasury or by group companies.
The deferred ordinary shares carry no voting rights and are not
redeemable. They carry the right to a fixed cumulative preference
dividend of 1% per annum (exclusive of any associated tax credit)
of the nominal value of such deferred ordinary shares, being
0.05p per share, or £4,000 in aggregate, for all such shares
currently in issue. The company is required to pay the dividend
to the extent that it has distributable profits. On a winding-up or
other return of capital, the deferred ordinary shares carry the
right to the payment of the amount paid up on such shares only
after holders of the ordinary shares have received the sum of
£100,000 in respect of each ordinary share. All of the deferred
ordinary shares are held by Sterling Industries PLC, a wholly-
owned subsidiary of Caledonia.
At 31 March 2013, 56,222,028 ordinary shares and 8,000,000
deferred ordinary shares were in issue. The ordinary shares
therefore represented approximately 88%, and the deferred
ordinary shares approximately 12%, of the total issued share
capital by nominal value. Of the ordinary shares in issue at
31 March 2013, 3,000 shares were held by a group company.
As stated above, all voting rights are suspended on these shares.
During the year, the company purchased and cancelled
1,136,773 ordinary shares at a total cost of £18.0m. Since the
year end, an additional 121,011 ordinary shares have been
purchased and cancelled at a total cost of £2.2m. The company’s
issued share capital after these transactions, as at 29 May 2013,
being the latest practicable date prior to signature of these
accounts, was 56,101,017 ordinary shares and 8,000,000
deferred ordinary shares.
Caledonia Investments plc Annual report 2013 35
Restrictions on the transfer of shares
Appointment and removal of directors and the articles
of association
There are no specific restrictions on the transfer of the company’s
shares, although the articles of association contain provisions
whereby the directors may refuse to register a transfer of a
certificated share which is not fully paid, provided that such
refusal does not prevent dealings in the share from taking place
on an open and proper basis. The directors may also refuse to
register the transfer of a certificated share unless it is (a) lodged,
duly stamped, at the registered office or at such other place as
the directors may appoint, accompanied by the certificate for the
shares to which it relates and such other evidence as the directors
may reasonably require to show the right of the transferor to
make the transfer; (b) in respect of only one class of shares; and
(c) in favour of not more than four transferees.
The directors may refuse to register a transfer of shares if a
shareholder has not supplied information to the company in
default of a request duly served under section 793 of the
Companies Act 2006 and such shares represent at least 0.25%
Substantial interests
of the class of shares concerned.
As at 31 March 2013, the following had notified the company
that they held 3% or more of the voting rights of the company:
Number
of voting
rights
The Cayzer Trust Company Ltd
1
Rebelco S.A.
1. Rebelco S.A. is a wholly-owned subsidiary of Sofina S.A.
19,608,252
2,847,344
Percentage
of voting
rights
34.9%
5.1%
There have been no changes in the substantial interests notified
Employee share trust
to the company up to the date of this report.
The Caledonia Investments plc Employee Share Trust acquires
and holds ordinary shares in the company for subsequent
transfer to employees exercising options under the company’s
executive share option schemes and under the performance
share scheme or calling for awards vesting under the company’s
deferred bonus plans. The voting rights of shares held by the
trust are exercisable by the independent trustee. The trustee
has also waived all dividends payable in respect of the ordinary
shares held by the trust, except to the extent of 0.0001% of
such dividends. At 31 March 2013, the trust held 342,183
Restrictions on voting rights
ordinary shares.
The directors may direct that a shareholder shall not be entitled
to attend and vote either personally or by proxy or exercise
any other right conferred by membership in relation to general
meetings of the company in respect of some or all of the shares
held by him, if he or any person with an interest in such shares
has been duly served with a notice under section 793 of the
Companies Act 2006 and is in default for the prescribed period
in supplying to the company the information required or, in
purported compliance with such a notice, has made a statement
Agreements which may restrict the transfer of shares
which is false or inadequate in a material particular.
or exercise of voting rights
The company is not aware of any arrangements which may
restrict the transfer of any of its shares or the exercise of any
voting rights.
The appointment and removal of directors is governed by the
company’s articles of association and prevailing company law.
The articles of association provide that at every annual general
meeting one-third of the directors, or if not a multiple of three,
the number nearest to one-third, shall retire by rotation and
therefore be required to seek re-election by shareholders.
New directors may be appointed by the board, but are subject to
election by shareholders at the next annual general meeting of
the company following their appointment. However, to comply
with the provisions of The UK Corporate Governance Code, the
company requires that all directors should be subject to annual
election by shareholders. Shareholders may also appoint new
directors by ordinary resolution. The articles of association
limit the number of directors to not less than two and not more
than twelve, unless the shareholders resolve otherwise.
A director may be removed from office if requested to resign
by not less than three-quarters of the other directors or by an
ordinary resolution of the shareholders.
Any amendment of the articles of association requires the
Authority to allot and purchase shares
approval of shareholders by a special resolution.
At the annual general meeting of the company held on 25 July
2012, shareholders granted to the directors authority to allot
ordinary shares up to a nominal amount of £954,305,
representing approximately one-third of the ordinary share
capital then in issue, with authority to allot additional ordinary
shares up to a nominal value of £954,305, representing
approximately a further one-third of the issued ordinary share
capital then in issue, by way of pre-emptive rights issues only,
in accordance with guidance issued by the Association of British
Insurers. The directors were further authorised to issue ordinary
shares up to a nominal amount of £143,145 other than pro rata to
existing ordinary shareholders. These authorities last until
25 October 2013 or, if earlier, the conclusion of the next annual
general meeting.
At the annual general meeting held on 25 July 2012, shareholders
also granted authority for the company to make market
purchases of up to 5,725,830 of its own ordinary shares, being
approximately 10% of the ordinary share capital then in issue,
at a price not more than the higher of (a) 5% greater than the
average of the middle market quotations for such ordinary shares
during the five business days preceding any such purchase; and
(b) the higher of (i) the price of the last independent trade in such
ordinary shares; and (ii) the highest current independent bid
relating thereto on the trading venue where the purchase is
carried out, nor at a price less than 5p, being the nominal value
of an ordinary share. This authority lasts until 25 October 2013
or, if earlier, the conclusion of the next annual general meeting.
At the same time, shareholders who were not members of the
Cayzer family concert party (‘Cayzer Concert Party’) gave their
approval for a waiver by the Panel on Takeovers and Mergers
of the obligation that could arise on the Cayzer Concert Party
under Rule 9 of the City Code on Takeovers and Mergers to make
a general offer for Caledonia on the implementation by the
company of the above authority to purchase its own shares. The
approval was subject to the maximum percentage of voting rights
in which the Cayzer Concert Party is interested not exceeding
49.9% as a result of purchases by the company. This waiver
expires on 25 October 2013 or, if earlier, the conclusion of the
next annual general meeting.
Governance 36 Annual report 2013 Caledonia Investments plc
Directors’ report
continued
Change of control rights
Going concern
The company’s and group’s business activities, together with
the factors likely to affect its future development, performance
and position are set out in the Chairman and Chief Executive’s
report on pages 3 to 5 and the Investment review on pages 6 to 9.
The financial position of the company and group, its cash flows,
liquidity position and borrowing facilities are described in the
Financial review on pages 26 and 27. In addition, note 21 to the
financial statements includes the company’s and group’s
objectives, policies and processes for managing capital, financial
risk management objectives, details of financial instruments and
hedging activities, and exposures to currency risk, interest rate
risk, price risk, credit risk and liquidity risk.
The company and group have cash resources and committed
bank facilities available to meet existing and new investment
commitments. As a consequence, the directors believe that
the company and group are well placed to manage business
risks successfully.
The directors have a reasonable expectation that the company
and group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue
to adopt the going concern basis in preparing the annual report
Auditor
and accounts.
KPMG Audit Plc has advised the board that it has instigated an
orderly wind down of its business and has therefore requested
that the audit of the Caledonia group in future be undertaken
by its parent entity KPMG LLP. Resolutions will therefore be
proposed at the annual general meeting to appoint KPMG LLP
as auditor of the company in place of KPMG Audit Plc and to
authorise the directors to agree the auditor’s remuneration.
A description of how the Audit Committee ensures the objectivity
and independence of the auditor is set out on page 39 within the
Corporate governance report.
The directors who held office at the date of approval of this
Directors’ report confirm that, so far as each is aware, there is
no relevant audit information of which the company’s auditor is
unaware and each director has taken all the steps that he ought
to have taken as a director to make himself aware of any relevant
audit information and to establish that the company’s auditor is
aware of that information.
By order of the board
Graeme Denison
Secretary
30 May 2013
Registered office:
Cayzer House, 30 Buckingham Gate, London SW1E 6NN
Registered in England no 235481
There are no special control rights in relation to the
company’s shares.
Options granted under the company’s executive share option
schemes, awards made under its performance share scheme and
awards made under its deferred bonus plans may become
exercisable or vest as a result of a change of control, although the
number of shares comprised in those options or awards may be
reduced. The service contracts of certain directors and associate
directors also contain provisions whereby a liquidated sum is
payable by the company in the event of termination within one
year following a change of control. Any such liquidated sum
would be equivalent to no more than one year’s total
Customers and suppliers
emoluments.
The group’s policy in relation to all of its suppliers is to settle the
terms of payment when agreeing the terms of the transaction.
The group will abide by those terms on condition that it is
satisfied that the supplier has provided the goods or services in
accordance with the agreed terms and conditions. The group
Statement of directors’ responsibilities in respect of the annual
does not follow any code or statement on payment practice.
report and the financial statements
The directors are responsible for preparing the annual report
and the group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare group and parent
company financial statements for each financial year. Under that
law they are required to prepare the group financial statements
in accordance with IFRSs as adopted by the EU and applicable law
and have elected to prepare the parent company financial
statements on the same basis.
Under company law, the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and parent company and
of their profit or loss for that period. In preparing each of the
group and parent company financial statements, the directors
are required to:
●●
●●
●●
●●
select suitable accounting policies and then apply them
consistently
make judgements and estimates that are reasonable and
prudent
state whether they have been prepared in accordance with
IFRSs as adopted by the EU
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
parent company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with
the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Directors’ report, Directors’
remuneration report and Corporate governance report that
comply with that law and those regulations.
Caledonia Investments plc Annual report 2013 37
Directors’ statement of responsibility
●●
We confirm that, to the best of our knowledge:
the financial statements, prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation
taken as a whole
●●
the management report, which is incorporated into the
Directors’ report, includes a fair review of the development and
performance of the business and the position of the company
and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and
uncertainties they face.
Signed on behalf of the board by:
Will Wyatt
Chief Executive
30 May 2013
Stephen King
Finance Director
30 May 2013
Governance 38 Annual report 2013 Caledonia Investments plc
Corporate governance report
Statement of compliance
The board recognises the importance of good corporate
governance and this report describes how the company has
complied with The UK Corporate Governance Code issued in
June 2010.
Shareholders registered on the company’s New Zealand branch
register should note that the principles of good corporate
governance set out in The UK Corporate Governance Code may
differ materially from the New Zealand Exchange Ltd’s corporate
governance rules and the principles of its Corporate Governance
Best Practice Code.
A copy of The UK Corporate Governance Code is available on the
website of the Financial Reporting Council at www.frc.org.uk/
our-work/publications/corporate-governance/the-uk-corporate-
The board
governance-code.aspx.
Overall responsibility and operation
The board as a whole is collectively responsible for the success
of the company and for supervising its affairs. It sets the
company’s strategy, ensures that the necessary financial and
human resources are in place to enable the company to meet its
objectives and reviews management performance. It also sets the
company’s values and standards and ensures that its obligations
to its shareholders and others are understood and met. It aims
to provide leadership of the company within a framework of
prudent and effective controls, which enables risk to be assessed
and appropriately managed.
To assist its operation, the board has adopted a Schedule of
Authorities which sets out those matters which it specifically
reserves for its own decision and those which are delegated to
board committees and to executive management. Matters
reserved for the board’s own decision include the following:
●●
●●
●●
●●
●●
●●
●●
●●
●●
the appointment and removal of directors of the company,
as prescribed by the company’s articles of association,
and of certain senior executive positions
the terms of reference of board committees and the
membership thereof
the company’s strategy
annual budgets
the company’s systems of risk management and
internal control
treasury policies, banking counterparties and counterparty
exposure limits
policy on executive directors’ remuneration and terms of
appointment of non-executive directors
significant capital transactions
charitable donations and political donations.
The roles of the Chairman and the Chief Executive are separated
and clearly defined in the Schedule of Authorities. The Chairman
is primarily responsible for the leadership of the board and for
ensuring that it carries out its role effectively and the Chief
Executive for the implementation of the board’s strategy and
policies and the management of the company’s activities, other
than those matters specifically reserved to the board. The
Schedule of Authorities is reviewed annually by the board.
All directors receive detailed papers in advance of board
meetings to enable them to discharge their duties and also have
unlimited access to senior management should further
information be required. Presentations by senior executives of
investee companies and external economic commentators may
also be arranged periodically to enable the board, and the
non-executive directors in particular, to gain a closer
understanding of some of the company’s significant investments
and to assess macroeconomic trends which may affect the
company’s business and strategy.
Appointment, induction and training
The company complies with the recommendation of The UK
Corporate Governance Code that all directors of FTSE 350
companies should be subject to annual election by shareholders.
On appointment, new directors are offered induction and
training considered appropriate by the board and subsequently
as necessary, and the annual performance evaluation of the
board encompasses the identification of any individual training
needs of board members so that these can be reviewed with the
Chairman. The directors receive briefings at board meetings
on regulatory and other issues relevant to the company and its
business sector and, in addition, may attend external courses
to assist in their professional development.
Board composition
The biographies of the directors appear on pages 32 and 33.
The board currently comprises eleven directors. Excluding the
Chairman, three of the directors are executive and seven are
non-executive. The board considers all of the non-executive
directors to be independent, other than The Hon C W Cayzer, who
was an executive director until 3 December 2012. In assessing
Mr Goblet d’Alviella’s independence, the board took account of
his position as Executive Chairman of Sofina S.A., whose
wholly-owned subsidiary, Rebelco S.A., has a 5.1% shareholding
in Caledonia. Mr Goblet d’Alviella’s position at Sofina has not
given rise to any conflicts of interest and his circumstances very
much accord with the importance that Caledonia attaches to its
own executives having board positions at, or close contact with,
investee companies. Mr Allen-Jones and Mr Thompson have both
served as non-executive directors for more than nine years. The
board has specifically considered each of these non-executive
directors’ independence in the context of The UK Corporate
Governance Code and does not believe that their status is
compromised simply by length of service. Rather, the experience,
character and conduct of each director are the board’s
determinants of their independence. Mr Thompson will in any
event be retiring from the board at the annual general meeting
on 24 July 2013.
Board committees
The board has delegated certain specific areas of responsibility
to the following standing committees: the Nomination
Committee, the Remuneration Committee, the Audit Committee,
and the Governance Committee.
The terms of reference of each committee are reviewed
annually and are available on the company’s website. The current
membership of these committees is noted on page 81. The
membership of these committees has remained unchanged
throughout the year, other than that Mr Bridges was appointed a
member of the Audit Committee on joining the board on 1 January
2013 and Mr Goblet d’Alviella was appointed a member of the
Nomination Committee on 19 September 2012, at which time
Mr Kent also ceased to be a member of the Governance Committee.
Mr Gregson assumed the chairmanship of the Remuneration
Committee from Mr Davies on 21 November 2012, prior to the
latter’s retirement from the board on 31 December 2012.
Nomination Committee
The Nomination Committee, chaired by Mr Kent, is responsible
for the regular review of the structure, size and composition
(including the skills, knowledge, experience and diversity)
of the board and for giving consideration to succession planning
for directors and, if requested by the board, for other senior
executives. It is responsible for identifying, using external search
consultants where necessary, candidates to fill board vacancies as
and when they arise, for making recommendations to the board in
Caledonia Investments plc Annual report 2013 39
relation thereto and for keeping under review the leadership
needs of the company, both executive and non-executive.
The Nomination Committee also reviews the time required of the
non-executive directors and ensures that they receive formal
letters of appointment setting out clearly what is expected of
them in terms of time commitment, committee service and
involvement outside board meetings.
●●
The Nomination Committee met five times during the year and
the principal business undertaken included:
●●
●●
●●
●●
●●
the recommendation to the board that Mr Kent be appointed
Chairman following the retirement of Mr Loudon
consideration of, and a recommendation to the board
regarding, the independence of Mr Thompson in the context
of his having served more than nine years as a director
a formal review of the size and composition of the board
following the 2012 annual board performance evaluation
consideration of the contributions of the non-executive
directors seeking election or re-election at the 2012 annual
general meeting, prior to giving recommendations for their
elections or re-elections
the conduct of a search for an additional independent non-
executive director, concluding with the recommendation to
the board that Mr Bridges be appointed
recommendations to the board on changes to the chairmanship
or membership of the Audit, Governance, Nomination and
Remuneration Committees, as detailed above.
The Nomination Committee engaged Odgers Berndtson to assist
in the search for an additional independent non-executive
director, which culminated in the appointment of Mr Bridges.
Odgers Berndtson has no other connection with the company.
Remuneration Committee
The Remuneration Committee, chaired by Mr Gregson, is
responsible for the review of executive remuneration policy.
Within that policy, the Remuneration Committee determines the
remuneration packages of executive directors and reviews those
of other senior executives and also determines the fee of the
Chairman. It is also responsible for the design of, and grant of
awards under, the company’s share incentive schemes and for
the determination of the policy for, and scope of, pension
arrangements, service agreements, termination payments and
compensation commitments for executive directors and, if
requested by the board, for other senior executives.
The Remuneration Committee met four times during the year.
The business undertaken by the Remuneration Committee
included:
●●
●●
●●
●●
●●
●●
the approval of bonus awards for the year ended 31 March
2012 for executive directors and other senior executives
the determination of the fee payable to Mr Kent on his
appointment as Chairman
the approval of the 2012 Directors’ remuneration report
the grant of awards under the 2011 performance share scheme
and 2011 deferred bonus plan
the approval of the terms of the termination of The Hon
C W Cayzer’s service agreement
Audit Committee
The Audit Committee, chaired by Mr Thompson, is responsible
for the monitoring of the integrity of the financial statements of
the company and any announcements relating to the company’s
financial performance and for reviewing any significant financial
reporting judgements contained therein. It also reviews the
company’s systems of internal control and risk management
procedures and considers annually whether an internal audit
function is required. The Audit Committee believes that, in the
context of the company’s business as an investment trust
company, the key issues on which it has to satisfy itself are the
integrity of the application of the company’s policy for the
valuation of its investments, particularly those which are
unlisted, and the robustness of the company’s risk management
and internal controls.
The valuations of the company’s unlisted investments are subject
to formal six monthly reviews by the Valuation Committee.
The Audit Committee then selects a number of valuations for
specific review. Risks facing the company are analysed under
four broad headings – business risk, investment risk, financial
risk and controls assurance. Business risk is monitored through
a risk dashboard which identifies key operational, market and
strategic risks, the controls and monitoring procedures in
place to mitigate them and any outstanding actions required.
Measurement of investment risk focuses on volatility risk and
concentration risk, including an assessment of value at risk of the
investment portfolio and movements since the previous report.
Financial risk is monitored through analysis of performance
risk, currency risk, liquidity risk, investment gearing risk and
dividend cover. A controls assurance programme, undertaken
by the Risk Manager, provides a rolling audit of the company’s
key operational systems and procedures. Reports on risk
are presented to the Audit Committee and the board every
six months. It is the Audit Committee’s current opinion that, in
view of these control processes, the size of the entities controlled
by Caledonia and the relatively straightforward control
considerations in relation to other investments, a separate
internal audit function is not necessary.
It is also the Audit Committee’s responsibility to review and
monitor the independence and objectivity of the external auditor
and the effectiveness of the audit process and to develop and
implement a policy on the engagement of the external auditor to
supply non-audit services. In this regard, the Audit Committee
has approved a schedule of specific non-audit activities which
may not be undertaken by the external auditor, within the broad
principles that the external auditor should not audit its own
work, should not make management decisions on behalf of the
company, should not be put into the role of advocate for the
company and that no mutuality of interest should be created
between the company and the external auditor. The Audit
Committee believes that, by applying these principles, the
objectivity and independence of the auditor is maintained,
notwithstanding that non-audit work may be undertaken. The
Audit Committee considers the appointment, re-appointment or
removal of the external auditor and makes recommendations to
the board where necessary in relation to these matters. The Audit
Committee is also responsible for the company’s formal whistle
blowing arrangements, whereby members of staff may raise any
issues of concern regarding possible impropriety in the conduct
of the company’s business and whereby any such concerns are
properly investigated and appropriate action taken.
the determination of the fee of the Chairman and basic salaries
for the executive directors and review of salaries for other
senior executives for the year ending 31 March 2014.
Further information on the company’s executive remuneration
policy and the work of the Remuneration Committee is included
in the Directors’ remuneration report set out on pages 43 to 50.
The UK Corporate Governance Code recommends that at
least one member of the Audit Committee should have recent
and relevant financial experience and the Financial Conduct
Authority’s Disclosure Rules and Transparency Rules similarly
require that one member should have competence in accounting
and/or auditing. Mr Bridges is a chartered accountant and, as
Chief Financial Officer of Hiscox and a member of the audit
Governance 40 Annual report 2013 Caledonia Investments plc
Corporate governance report
continued
committee of the Institute of Chartered Accountants in England
and Wales and of the Prudential Financial and Taxation
Committee of the Association of British Insurers, has, in the
opinion of the Audit Committee, the relevant financial experience
and competence specified by The UK Corporate Governance Code
and the Disclosure Rules and Transparency Rules. The Audit
Committee also considers that Mr Allen-Jones has met these
requirements given his extensive involvement in financial
transactions as a corporate lawyer and that he was previously a
member of the Financial Reporting Council and the Financial
Reporting Review Panel.
The Audit Committee held three meetings during the year, each
of which included a discussion with the auditor without any of
the executive directors present. During the year, the business
undertaken by the Audit Committee included:
●●
●●
●●
●●
●●
●●
●●
●●
●●
●●
scrutiny of valuations of unlisted investments selected by
the Audit Committee following the half-year and full-year
Valuation Committee meetings
consideration of the reports from the external auditor
concerning its audit of the 2012 annual financial statements
of the company and its review of the 2012 half-year report
consideration of the financial disclosures contained in the
2012 annual and half-year reports to shareholders and
financial reporting issues for the 2012 annual report
a review of the company’s policy for the allocation of expenses
between revenue and capital
consideration of financial reporting issues relating to the 2013
annual report and the scope of the 2013 annual audit, including
agreement with the external auditor on the key areas of focus
the review of six monthly reports from the company’s
Finance Director and Risk Manager on business risks and
controls assurance
consideration of financial reporting issues relating to the
2013 annual report and the need or otherwise for an internal
audit function
a review of the independence and objectivity of the external
auditor, including a review of the audit and non-audit fees for
services provided to the group
an evaluation of the performance of the Audit Committee itself
including a review of its role and responsibilities
assurance of the company’s compliance with the requirements
for approval as an investment trust.
Governance Committee
The Governance Committee, chaired by Mr Allen-Jones, keeps
under review corporate governance issues relating to the
company and is responsible for the monitoring and review of the
ability of each director to act in the interests of shareholders
as a whole and to exercise independence of judgement free from
relationships or circumstances which are likely to, or could
appear to, affect his judgement. The Governance Committee
also reviews conflict or potential conflict situations relating to
directors which may require the prior authorisation of the board
under the Companies Act 2006 and makes recommendations
to the board as to whether such conflict or potential conflict
situations should be authorised and, if so, whether any conditions,
such as duration or scope of the authority, should be attached.
The Governance Committee reviews annually all authorisations
previously granted by the board to ensure that they remain
appropriate. If the Governance Committee believes that a director
may be subject to a conflict of interest which may prejudice his
ability to exercise independence of judgement, it may make such
recommendations to the board as it may think fit, including that
the director abstains from participating in any decision of the
board or any of its committees on the matter concerned.
●●
The Governance Committee met three times during the year,
and the principal matters it considered included:
●●
●●
●●
●●
the review and approval of the Corporate governance report
for the year ended 31 March 2012
the review of potential conflict situations notified by directors
in accordance with the Companies Act 2006 and the making of
recommendations to the board in relation thereto
consideration of the influence of the Cayzer Concert Party on
Caledonia’s board and whether it was in the general interest
of the non-Cayzer Concert Party shareholders, with the
conclusion that it was
approval of the terms of the proposed sale of the Ocean Dial
group to a joint venture comprising a majority third party
investor and Ocean Dial’s management
approval of the terms of the proposed sale of certain artworks
and memorabilia owned by Caledonia, the total value of which
has been assessed by three external valuers at some £0.5m,
at fair market value, to the Cayzer Family Archive, a charitable
foundation established to preserve an historical archive of the
Cayzer family and its heritage in shipping.
Attendance at board and board committee meetings
The following table identifies the number of board and
committee meetings held in the year to 31 March 2013 and
the attendance record of individual directors.
Board Nomination Remuneration
Audit Governance
Committees
Number of meetings
Attendance by
2
R D Kent
W P Wyatt
S A King
J M B Cayzer-Colvin
C M Allen-Jones
3
S J Bridges
Hon C W Cayzer
4
R Goblet d’Alviella
C H Gregson
D G F Thompson
R B Woods
5
J R H Loudon
6
M E T Davies
1. Scheduled board meetings.
2.
1
8
8
8
8
8
7
2
7
8
8
8
8
3
6
5
5
–
–
–
4
–
–
1
3
4
3
2
5
4
–
–
–
–
4
–
–
–
4
4
4
–
3
3
–
–
–
–
3
–
–
3
3
3
–
–
–
3
1
–
–
–
3
–
–
–
3
3
–
–
2
4.
3.
Mr Kent was only a member of the Governance Committee for one of its meetings
during the year.
Mr Bridges was appointed as a director on 1 January 2013 and attended all board meetings
held after that date, although was unable to attend the one meeting of the Audit Committee
held after his appointment.
Mr Goblet d’Alviella was appointed a member of the Nomination Committee on
19 September 2012 and attended all meetings of this committee held after that date.
Mr Loudon retired from the board on 25 July 2012 but attended all meetings of the
board and the Nomination Committee held prior to that date.
Mr Davies retired from the board on 31 December 2012 but attended all meetings
of the board and the Governance, Nomination and Remuneration Committees held
prior to that date.
Other committees
5.
6.
Various other committees have been established with
responsibility for specific areas of the company’s activities, other
than matters reserved to the board as a whole, as follows:
Administrative Committee
The Administrative Committee of the board has been established
to deal with administrative matters of a routine nature requiring
board approval or matters which are reserved for the board, but
for which full board approval has already been given in principle.
Caledonia Investments plc Annual report 2013 41
The Administrative Committee meets when required and is
comprised of any two directors.
Executive Committee
The Executive Committee meets when required and is
responsible for matters relating to the day to day management
of the company’s business, other than where delegated to other
committees. It is chaired by the Chief Executive and attended by
the Chairman, the executive directors, the heads of the pools of
capital and the Company Secretary.
Investment Management Committee
The Investment Management Committee meets weekly and
considers matters relating to the company’s investment portfolio
and monitors the company’s cash requirements and its net asset
value per share performance. The Investment Management
Committee is chaired by the Chief Executive and is attended
by the entire investment team, the Company Secretary and the
Deputy Company Secretary.
Investment Approvals Committee
The Investment Approvals Committee considers and formally
approves new investments and proposed realisations. This
committee meets when required, is chaired by the Chief Executive
and is attended by the Chairman, the executive directors, the
heads of the pools of capital and the Company Secretary.
Compliance Committee
The Compliance Committee meets weekly to monitor the
company’s on-going compliance with the requirements for
investment trust status and to approve all investment activity
from an investment trust compliance perspective. It also
monitors the potential impact of legal and regulatory
developments. The Compliance Committee is chaired by the
Company Secretary and attended by the Finance Director, the
group heads of tax, treasury and finance, the Group Financial
Controller/Risk Manager and the Deputy Company Secretary.
Valuation Committee
The Valuation Committee formally reviews valuations of all of the
company’s unquoted investments at each half-year and full-year.
It is chaired by the Chief Executive and attended by the Finance
Director, the head of finance, the Chairman of the Audit
Board performance evaluation
Committee and observed by representatives from KPMG Audit Plc.
The board conducts an annual formal evaluation of its
performance and that of its committees and individual directors.
For the year ended 31 March 2013, the evaluation of the board as
a whole and of its committees was led by the Chairman and was
conducted by inviting individual board members to complete
questionnaires regarding the operation and effectiveness of
the board as a whole and of its committees, the responses from
which were collated by the Company Secretary and discussed.
The evaluation of the performance of the Chairman was led by
the Senior Independent Non-Executive Director and involved
individual private discussions with all other members of the
board on his performance, the results of which were then
considered by the non-executive directors, without the Chairman
present. The performance of the non-executive directors was
reviewed by the Chairman, the Chief Executive and the Senior
Independent Non-Executive Director, with the Senior
Independent Non-Executive Director absent in respect of his
own performance appraisal. The evaluation of the performance
of the Chief Executive was undertaken by the Chairman and the
non-executive directors. The performance of the other executive
directors was reviewed by the Chairman, Chief Executive
and non-executive directors and the performance of all of the
executive directors was also separately considered by the
Remuneration Committee as part of the annual executive salary
review process.
The results of the evaluation of the board as a whole and of its
committees for the year ended 31 March 2013 were presented
in a report to the board. No material points of concern arose
from the evaluation process, although it was considered that
greater visibility of investment opportunities in the pipeline and
those which had been rejected after detailed appraisal would
be informative for the non-executive directors. Non-executive
directors were also encouraged to attend occasionally the
meetings of the Investment Management Committee and
Investment Approvals Committee in order to see at first hand
the dynamics of the company’s investment processes. The
Nomination Committee reviewed the size, structure and
Directors’ conflicts of interest
composition of the board in the light of the report to the board.
Each director has a duty under the Companies Act 2006 to avoid a
situation where he has, or could have, a direct or indirect interest
which conflicts, or may possibly conflict, with the company’s
interests. The Companies Act 2006 however allows directors of
public companies to authorise conflicts and potential conflicts
where the articles of association contain a provision to this effect.
The Companies Act 2006 also allows the articles to contain other
provisions for dealing with directors’ conflicts of interest to
avoid a breach of duty.
There are safeguards in the company’s articles which apply when
the directors decide whether to authorise a conflict or potential
conflict of interest. First, only independent directors, being those
who have no interest in the matter being considered, are able to
take the relevant decision and, second, in taking the decision,
the directors must act in a way which they consider, in good
faith, will be most likely to promote the success of the company.
The directors are able to impose time limits or conditions when
giving authorisations if they think this is appropriate.
The board has adopted procedures to address the requirements
of the Companies Act 2006 in relation to directors’ conflicts
of interest. Each director is required to declare any potential
conflict situation which may relate to him or his connected
persons. If necessary, these are reviewed by the Governance
Committee (with each member taking no part in the
consideration of his own declaration, if relevant), which then
puts forward recommendations to the board as to whether these
situations should be authorised and, if so, whether any conditions
to such authority should be attached. The board then considers
and, if appropriate, approves these recommendations, again with
each director taking no part in relation to his own potential
conflict situations.
Each board meeting includes a standing agenda item on conflicts
of interest to ensure that directors disclose any new potential
conflict situation. These are then reviewed, if necessary also
by the Governance Committee, and authorised by the board
as appropriate. A register of directors’ conflicts of interest is
maintained by the Company Secretary and reviewed annually
Internal control
by the Governance Committee.
The board has responsibility for risk management and internal
control, although the detailed review is delegated to the Audit
Committee. The system of internal control is designed to identify,
assess and mitigate risk. The board confirms that the system of
internal control operated by the group accords with the Turnbull
Guidance 2005, has been in place throughout the year and up to
the date of approval of these financial statements and has been
reviewed by the board.
The board monitors risk by reviewing and discussing a risk
report, compiled by the Risk Manager after consultation with
the Investment Management Committee and approved by the
Finance Director. This report is formally presented to the
board every six months, with quarterly updates as required.
Governance 42 Annual report 2013 Caledonia Investments plc
Corporate governance report
continued
Financial performance is measured and reported weekly.
Performance statistics are reported monthly to the board. Income
and expenses are monitored by the board against an approved
annual budget and regularly updated forecasts. Valuations of
unlisted investments are subject to a rigorous six monthly review
process undertaken by the Valuation Committee and selected
valuations are then reviewed by the Audit Committee. All
members of the board are provided with a copy of the valuations
and supporting materials for all of the unquoted investments.
All new investment activity and proposed disposals are subject
to formal approval by the Investment Approvals Committee.
Since the year end, the directors have concluded their annual
review of the operation and effectiveness of the group’s system
of internal control. No material control failings or weaknesses
Relations with shareholders
were identified.
The company welcomes dialogue with investors in order to
achieve a mutual understanding of objectives. The Chief
Executive and the Finance Director regularly hold meetings with
institutional investors, private client stockbrokers and fund
managers. The Senior Independent Non-Executive Director is
also available to attend some of these meetings. Any views put
forward by shareholders are reported back to the board, which
periodically also receives presentations from Caledonia’s brokers
on shareholder feedback and the general market perception
of the company. In addition, the annual general meeting provides
a forum for shareholders to meet the directors, both formally
and informally.
The Chairmen of all of the board’s committees will be available to
answer questions at the annual general meeting.
The report focuses on four distinct areas – investment risk,
financial risk, business risk and controls assurance. Business risk
is reviewed in greater detail through the maintenance of a risk
dashboard. This details the principal risks facing the group,
after consultation with executives, and describes the impact,
likelihood and mitigation procedures put in place. Completed
actions are noted and updates clearly identified. Each risk is
given a target score and an actual risk factor assessed on its
likelihood and impact in order to give an indication of the level
of a particular risk on an on-going basis.
Caledonia’s system of internal controls is typical of an investment
company, with segregation of duties surrounding the processing
and approval of financial data and payments. Internal reporting
is structured to provide management with the key information
for quick and effective decision making. External reporting is
extensively reviewed before release. Committee review of
investment activity ensures transactions are in accordance with
strategy, meet internal guidelines and do not give rise to any
unforeseen issues. A controls assurance programme has been
operational and has reviewed and reported on a number of
internal control procedures.
Subsidiaries and key investments, defined as those investments
in which Caledonia is the principal investor, maintain their own
risk registers, which are reviewed by the relevant investment
manager. All these investments are within the Unquoted pool,
which has recruited additional resource to increase supervision.
All of the company’s investments are reviewed at least annually –
significant investments by the board and the smaller portfolio
holdings by the Investment Management Committee. These
reports include an update on the risks facing the investment and
how these are being managed. The Risk Manager produces
reports for the Audit Committee on specific risk areas as and
when requested.
New tax rules for investment trust companies were introduced
for accounting periods beginning on or after 1 January 2012,
which provide for continuing approval subject to satisfaction
of on-going eligibility conditions. The Compliance Committee
monitors compliance with these rules and updates the board
as appropriate.
Caledonia Investments plc Annual report 2013 43
Directors’ remuneration report
This report has been prepared in accordance with Part 15 of the
Companies Act 2006 and related regulations. The statements
below on directors’ remuneration and emoluments, deferred
share awards, pensions, share options, performance share scheme
The Remuneration Committee
awards and payment to a former director, have been audited.
The Remuneration Committee is a standing committee of the
board whose current members are Mr Gregson (Chairman),
Mr Allen-Jones, Mr Thompson and Mr Woods, all of whom served
throughout the year. Mr Davies also served as Chairman or a
member of the committee until his retirement from the board
on 31 December 2012.
The Remuneration Committee, whose written terms of reference
are published on the company’s website, has been established
for the following purposes:
●●
to determine and agree with the board the framework and
broad policy for the remuneration of the executive directors
and such other members of the executive management as it is
requested by the board to consider and to review the on-going
appropriateness and relevance of the remuneration policy
to approve the design of, and determine targets for, any
performance related pay schemes operated by the company
and to approve the total annual payments made under
such schemes
to review the design of all share incentive plans for approval
by the board and shareholders and, for any such plans, to
determine each year whether awards will be made and, if so,
the overall amount of such awards, the individual awards
to executive directors and other senior executives and the
performance targets to be used
within the terms of the agreed policy, to determine the total
individual remuneration packages of each executive director
and, if requested by the board, other senior executives,
including, where appropriate, bonuses, incentive payments,
share options and other awards
to determine the policy for, and scope of, pension
arrangements, service agreements, termination payments
and compensation commitments for executive directors and,
if requested by the board, other senior executives
●●
●●
●●
●●
●●
to review and assess annually the remuneration trends
across the group.
The Remuneration Committee also determines the fees of
the Chairman.
During the year, the Remuneration Committee received advice
from Freshfields Bruckhaus Deringer, who are the company’s
main legal advisers, in relation to various employment related
matters. The Remuneration Committee also consulted with the
Chairman and the Chief Executive in relation to the remuneration
of the executive directors and internal support was provided to
Remuneration policy for executive directors
the Remuneration Committee by the Company Secretary.
●●
The Remuneration Committee has adopted a remuneration
policy with the following objectives:
remuneration packages for executive directors should be
linked to the company’s long term performance and in line
with its business strategy
performance related remuneration should seek to align
the interests of the executive directors with those of
the shareholders
●●
●●
a significant portion of the executive directors’ remuneration
packages should be linked to the performance of the company
●●
remuneration packages for the executive directors should be
competitive, but not excessive, in terms of market practice, in
order to attract, retain and motivate executive directors of the
quality needed to manage and grow the company successfully.
In order to align further the interests of the executive directors
with those of shareholders, the Remuneration Committee has
adopted guidelines for minimum shareholdings which executive
directors will be expected to attain over a reasonable period of
time. For these purposes, shareholdings include the value to
executive directors, net of associated income tax and national
insurance, of options granted under the company’s executive
share option schemes and awards granted under its performance
share scheme for which the performance targets have been met
and also bonuses deferred into shares, both compulsorily and
voluntarily, under the company’s deferred bonus plans. For the
Chief Executive, the minimum guideline shareholding has been
set at a value of 200% of basic salary and for other executive
directors 150% of basic salary. The current shareholdings of all
of the executive directors meet these guidelines, other than of
Mr King, who joined the company in December 2009 and has yet
to attain the minimum shareholding.
In determining executive directors’ remuneration, consideration
is given to matters specific to the company, such as the
performance of its net asset value (‘NAV’) per share on a total
return basis, both in absolute terms and as measured against
external benchmarks, to the experience and performance of
individual directors and to their areas of responsibility. The
Remuneration Committee also gives consideration to a report
prepared by the Company Secretary on pay and employment
conditions through the Caledonia group, although, given that
Caledonia’s trading subsidiaries operate in a number of diverse
industries and geographical locations using both skilled and
unskilled workforces, the executive directors’ pay is principally
set by the Remuneration Committee in the context of that of
Caledonia’s head office staff. Comparable external market data
is also taken into account as a point of reference to determine
appropriate remuneration packages for specific roles.
In July 2012, the Department of Business, Innovation and Skills
announced new proposals which will grant shareholders of UK
incorporated listed companies enhanced rights and greater
transparency in relation to directors’ remuneration. Final
regulations have yet to be published, but it is expected that the
new regime will apply for directors’ remuneration reports for
financial years ending after 1 October 2013. Under the new
regime, companies will have to publish a forward looking report
on pay policy, which will be subject to a binding shareholder vote.
The Remuneration Committee will be reviewing Caledonia’s
policies on directors’ pay in the light of the new requirements and
will present its policy report for approval of shareholders at the
Policy on individual components of executive directors’
2014 annual general meeting.
remuneration
Basic salary
Basic salary is determined by the Remuneration Committee by
reference to the experience and responsibilities of the director
concerned and taking into account external market research.
The company’s policy is to pay salaries and other benefits which
are competitive, but not excessive, in relation to the marketplace.
Benefits
The company provides a range of benefits, including cash
allowances in lieu of company cars, life insurance, permanent
health insurance and private medical cover.
Bonus
The company operates a discretionary annual bonus scheme
for executive directors, which takes into account both the
performance of individual directors and the performance of the
Governance 44 Annual report 2013 Caledonia Investments plc
Directors’ remuneration report
continued
company. At the determination of the Remuneration Committee,
and subject to the compulsory deferral provisions of the
company’s deferred bonus plans, bonuses may either be paid in
cash or as employer contributions to registered pension schemes.
The maximum potential bonus that may currently be awarded
is 100% of basic salary. For the Chief Executive and the Finance
Director, a maximum of 50% of basic salary is determined by
reference to the company’s performance and 50% by reference to
individual performance. For executive directors responsible for a
specific pool of capital, a significant proportion of bonus is linked
to the performance and objectives of their individual pool. For
these directors, the maximum potential bonus of 100% of basic
salary is determined as to 25% by reference to the company’s
performance, 60% to pool performance and objectives and 15%
to individual performance. In all cases, the company performance
related element of bonus is determined by reference to the
performance of the company’s diluted NAV per share on a total
return basis compared with that of the FTSE All-Share Total
Return index over the financial year. Bonus payments commence
if the performance of the company’s NAV per share matches that
of the FTSE All-Share index, increasing incrementally to the
maximum entitlement payable if NAV per share outperforms the
FTSE All-Share index by 6% or more. Pool performance is
measured by reference to pool specific benchmark indices and
objectives and individual performance by reference to personal
objectives set at the start of the financial year, including
non-financial measures such as marketing of the company, team
leadership and promotion of Caledonia’s corporate culture both
internally and externally.
In view of the board’s decision, as described in the Chairman
and Chief Executive’s report, to cease using the FTSE All-Share
Total Return index as a one-year benchmark to measure
performance, for the financial year ending 31 March 2014 and
future years, the Remuneration Committee intends to change
the existing bonus arrangements by adopting the relative
performance of the company’s diluted NAV per share on a total
return basis against the Retail Prices Index (‘RPI’) as the measure
of the company performance related element. For the year
ending 31 March 2014, bonus payments will commence if the
performance of the company’s NAV per share matches that of
RPI, increasing incrementally to the maximum entitlement
payable if NAV per share outperforms RPI by 7% or more.
On this basis, executives will be rewarded to the extent that they
deliver positive real returns for shareholders. The Remuneration
Committee will review the rate of increase in RPI at the start
of each subsequent financial year and may adjust the level of
outperformance required for the incremental and maximum
bonus payments, if appropriate, in order to ensure that they
remain a fair measure of performance.
All bonus payments are subject to the overriding discretion of
the Remuneration Committee, which may reduce the amount of
bonus payable, for example where NAV per share has reduced
over the financial year, or increase it, for example if the amount
produced by a formulaic calculation does not represent a fair
reflection of an executive’s performance or to take account of
factors such as portfolio income or overall market conditions.
In exceptional circumstances, the Remuneration Committee
may also award bonuses outside the terms of the annual bonus
scheme. No bonus payments are pensionable.
Deferral of bonus
The company’s bonus arrangements are designed to align the
interests of directors with those of shareholders and to encourage
retention by requiring, in the Remuneration Committee’s
absolute discretion, that a proportion of any bonus paid to a
director is compulsorily invested in shares under the company’s
deferred bonus plans. The Remuneration Committee’s current
policy is that any annual bonus paid, the amount of which is above
50% of a director’s basic salary for the financial year to which the
bonus relates, must be so compulsorily invested. Shares derived
from the compulsory deferral of bonus are matched on a one for
one basis, the vesting of which is subject to the satisfaction of
performance conditions over a period of three years.
In addition, the deferred bonus plans entitle directors to convert
voluntarily a proportion of any remaining cash bonus to an
entitlement to shares. The Remuneration Committee’s current
policy is that up to half of any bonus not subject to compulsory
deferral may be voluntarily converted into shares. The shares
awarded for voluntary bonus deferral are also eligible for
matching, on a one for one basis, the vesting of which is subject to
the satisfaction of performance conditions over a period of three
years. Further details of the company’s deferred bonus plans and
awards made to executive directors thereunder are set out on
pages 46 and 47.
Pensions
The company’s policy on pensions is to pay a fixed percentage
of basic salary as employer contributions into either the
Caledonia Group Personal Pension Plan (‘GPPP’) or other
personal pension arrangements established by individual
directors or, alternatively, a cash supplement in lieu of all or part
of their pension contributions. If the cash supplement is chosen,
the fixed percentage is reduced by such amount as is necessary
to ensure that the cash payment is cost neutral for the company
after taking into account the company’s National Insurance
contributions. The percentage of basic salary for the year
ended 31 March 2013 was 22.5% for Mr Wyatt and 17.5% for
Mr Cayzer-Colvin and Mr King.
For the portion of the year for which he was an executive director,
The Hon C W Cayzer was an active member of the Caledonia
Pension Scheme, a defined benefits scheme which is now closed
to new members. The scheme provides a pension of up to
two-thirds of final pensionable salary on retirement dependent
on length of service and age and also provides dependants’
pensions. The Hon C W Cayzer was a non-contributory member
of the scheme and, on becoming a non-executive director, became
a deferred member.
It is the company’s policy that any future executive directors
recruited from outside the company will be funded to operate
their own pension arrangements or offered participation in the
GPPP and that the company will not offer participation in any
defined benefit arrangements.
Share option and performance share schemes
A key objective of the company’s remuneration policy is to
motivate executive directors to deliver long term shareholder
value. The Remuneration Committee believes that this is
best achieved through the grant of share based awards,
receivable only if demanding performance conditions are
met. Such awards are considered to be a key element of the
remuneration package, alongside annual salary, annual bonus
and the deferred bonus plans.
In 2011, the Remuneration Committee introduced a new
executive performance share scheme to replace the existing
executive share option scheme which was established in 2005.
Under the 2011 performance share scheme, participants are
awarded nil-cost options over shares, rather than options based
on the current market value of those shares. The maximum value
of nil-cost options that may be granted in any year is 200% of
basic salary, although the Remuneration Committee’s general
policy is to grant awards of no more than 125% of basic salary.
Caledonia Investments plc Annual report 2013 45
Further details of the company’s executive share option schemes
and the 2011 performance share scheme and awards made to
Policy on executive directors’ service contracts
executive directors thereunder are set out on pages 47 to 49.
The company is entitled to terminate the Chairman’s or a
non-executive director’s appointment at any time without
Performance graphs
compensation.
It is the policy of the company that no executive director should
be offered a service contract that cannot be terminated on
more than one year’s notice or which contains provision for
predetermined compensation in excess of one year’s total
emoluments. All existing directors’ service contracts comply
with this policy. The Remuneration Committee has regard to
compensation commitments and believes that these are best
addressed by restricting the term of the contract. In the event
of a termination, the Remuneration Committee would consider all
the relevant factors and circumstances and seek a just solution.
It is the Remuneration Committee’s intention that all future
executive directors’ service contracts should include provisions
enabling the company to reduce compensation payments in the
event that the director takes up alternative employment within
Policy on external non-executive directorships held by
the notice period to which such payments relate.
executive directors
It is the company’s policy to allow executive directors to hold
external non-executive directorships unrelated to the company’s
business, provided that the time commitment required is not
material. Normally the company will retain any fees arising from
such non-executive directorships, but may permit the executive
director to retain fees in certain circumstances. Details of any
such fees retained by executive directors are disclosed in the
Policy on the Chairman’s and non-executive directors’ terms
statement on directors’ emoluments below.
of appointment and remuneration
It is the company’s policy that the Chairman and the non-
executive directors should be appointed for fixed periods of no
more than three years (from the next annual general meeting
following initial appointment in the case of new appointments)
and that re-appointment at the end of such periods should not
be automatic.
The Chairman receives an annual fee determined by the
Remuneration Committee but does not receive any other
emoluments. Non-executive directors are paid an annual fee
determined by the board within the overall limit contained in
the articles of association, but do not receive any other benefits
from the company. For the year ended 31 March 2013, the fee for
the Chairman was £167,670. The basic fee for the non-executive
directors was £36,250 and additionally fees of £5,100 and
£4,450 respectively were paid to the Chairmen of the Audit and
Remuneration Committees and £2,100 and £1,450 respectively
to the other members of those committees. A further £4,650
was paid to Mr Allen-Jones for his roles as Senior Independent
Non-Executive Director and Chairman of the Governance
Committee. These fees have not been changed for the financial
year ending 31 March 2014.
Non-executive directors may also be paid additional fees agreed
by the board where they have performed services that, in the
opinion of the board, are over and above their normal duties.
The graphs below show the company’s total shareholder return
(‘TSR’) against that of the FTSE All-Share Total Return index for
the five and ten financial years ending on 31 March 2013. TSR has
been calculated assuming that all dividends are reinvested on
their ex-dividend date. The FTSE All-Share Total Return index
has been chosen as it is the benchmark by which the company
TSR growth over (cid:19)ive years
measures its delivery of shareholder value over the longer term.
Caledonia TSR
FTSE All-Share TR
150
125
100
75
50
2008
2009
2010
2011
2012
2013
TSR growth over ten years
Caledonia TSR
FTSE All-Share TR
400
300
200
100
2003
2005
2007
2009
2011
2013
Statement on directors’ remuneration (audited)
Total remuneration of the directors was as follows:
Emoluments
Gains on exercise of share options
2013
£’000
2012
£’000
3,134
52
3,186
2,439
–
2,439
Governance
46 Annual report 2013 Caledonia Investments plc
Directors’ remuneration report
continued
Statement on directors’ emoluments (audited)
The emoluments of individual directors were as follows:
Fees and
salaries
£’000
Benefits
£’000
Cash
bonus
£’000
Deferred
1
shares
£’000
Comp-
ensation
for loss
of office
£’000
Name
R D Kent
W P Wyatt
J M B Cayzer-
Colvin
S A King
C M Allen-Jones
2
S J Bridges
Hon C W
3
Cayzer
R Goblet
d’Alviella
C H Gregson
D G F Thompson
R B Woods
4
J R H Loudon
5
M E T Davies
Former director
126
480
288
340
44
10
225
38
41
43
38
53
31
–
18
18
4
–
–
14
–
–
–
–
–
–
Total
2013
£’000
126
978
594
684
44
10
Total
2012
£’000
18
485
298
434
45
–
–
240
144
170
–
–
–
240
144
170
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
215
454
298
–
–
–
–
–
–
38
41
43
38
53
31
38
40
42
16
168
41
516
215 3,134 2,439
1,757
54
554
554
1.
2.
3.
Deferred shares, forming part of the bonus, comprise amounts compulsorily and
voluntarily deferred under the company’s deferred bonus plan, which are satisfied in
shares shortly after the announcement of the company’s final results for the particular year,
as described below.
Mr Bridges was appointed a director on 1 January 2013. His non-executive director’s fee is
paid to Hiscox Underwriting Group Services Ltd.
The emoluments shown above for The Hon C W Cayzer include his salary and benefits as an
executive director until 3 December 2012 and thereafter his fee as a non-executive director.
His fees and salary also include £19,762 paid by a subsidiary undertaking in respect of his
services as Chairman of the Sloane Club from 4 December 2012.
4. Mr Loudon retired as a director on 25 July 2012.
5. Mr Davies retired as a director on 31 December 2012.
In addition to the amounts shown in the table above, Messrs
Wyatt, Cayzer-Colvin and King respectively were paid amounts
of £63,233, £11,066 and £52,345 (2012 – £65,209, £17,906 and
£50,821 respectively) in lieu of contributions to their money
purchase pension arrangements as described in the statement
on directors’ pensions below.
During the year, Mr King held external non-executive
directorships of The Weir Group (of which he ceased to be a
director on 9 May 2012) and TT Electronics and Mr Cayzer-Colvin
of The Henderson Smaller Companies Investment Trust, which
were unrelated to the company’s business and where it had
been agreed that they could retain the fees arising therefrom.
Mr King received fees from The Weir Group of £6,462 (2012 –
£60,000) and from TT Electronics of £44,916 (2012 – £16,707).
Mr Cayzer-Colvin received fees from The Henderson Smaller
Companies Investment Trust of £28,000 (2012 – £10,485),
of which £4,500 was used to purchase shares in that company.
The Hon C W Cayzer was employed by Caledonia Group
Services Ltd, a wholly-owned subsidiary of the company, under
a service agreement dated 11 June 2002 until 3 December 2012,
at which point his service agreement was terminated and he
became a non-executive director. Under his service agreement,
he was entitled to twelve months’ notice of termination, of which
he worked under notice from 24 May 2012 to 3 December 2012
and, for the balance of the twelve month period, received an
amount of £215,265 as a contractual payment in lieu of notice and
waiver of statutory claims. Also in accordance with his service
agreement, he received a credit of additional pensionable service
in the Caledonia Pension Scheme for the period in respect of
which he received the payment in lieu of notice, at a cost to the
company of £51,000. The Remuneration Committee further
agreed to the reimbursement of his legal fees of £3,900.
The treatment of The Hon C W Cayzer’s share plan entitlements
on the termination of his service agreement is set out below.
As part of the arrangements for the termination of his service
agreement, the Remuneration Committee also agreed that
The Hon C W Cayzer should be entitled to benefit personally from
non-executive directors’ fees paid by certain investee companies
of which he is a director (being LondonMetric Property, Quintain
Estates & Development, Eredene Capital and General Practice
Investment Corporation) and which had previously been retained
by Caledonia. Such fees amounted to approximately £146,000
per annum at the date of termination. It was also agreed that
The Hon C W Cayzer should receive from the termination date a
fee of £60,000 per annum in respect of his services as Chairman
Directors’ deferred share awards
of the Sloane Club.
The deferred shares column in the table of directors’ emoluments
shows the amount of shares to be compulsorily and/or
voluntarily deferred into shares under the company’s 2011
deferred bonus plan. The number of shares awarded for both the
compulsory and voluntary deferral of bonus is determined by
reference to the market value of a share at the time the award
is made, which occurs shortly after the announcement of the
company’s results for the financial year to which the bonus
relates (or following the occurrence of exceptional circumstances
justifying the making of awards). In both cases, the number of
shares is set on a pre-tax basis, as the shares will be subject to
income tax and National Insurance on release. Matching shares
are awarded in respect of compulsory and voluntary deferral of
bonus on a one for one basis.
Compulsorily deferred share awards
The shares comprised in a compulsory deferral will normally
only vest, together with an amount equal to the dividends that
would have accrued on those shares, if the director remains an
employee of the Caledonia group for a three year period
commencing on the first day of the financial year in which the
award is made. The vesting of these shares is not subject to a
further performance condition.
Voluntarily deferred share awards
The shares comprised in a voluntary deferral are not subject to
a performance condition and will vest, together with an amount
equal to the dividends that would have accrued on those shares,
at the earlier of three years from the first day of the financial year
in which the award is made or the date the director ceases to be
an employee of the Caledonia group for any reason.
Matching share awards
The vesting of matching shares under the 2011 deferred bonus
plan is dependent on the company’s performance over the three
financial years, starting with the year in which the award was
made, by reference to two separate performance conditions, both
of which relate to the performance of Caledonia’s diluted NAV per
share on a total return basis. For two-thirds of the matching
shares awarded, the performance of diluted NAV per share on a
total return basis is compared against the FTSE All-Share Total
Return index over the three year period and, for the other
one-third, the comparison is against the FTSE Actuaries UK
Index-linked Gilts (all stocks) Total Return index. In each case,
vesting of matching shares is on a graduated basis, commencing
with 10% vesting on the achievement of 0.5% outperformance of
the relevant index, rising on a straight line basis to 100% vesting
on 3.5% outperformance of the relevant index. For the purposes
of calculating the performance measures, an average of the
figures for the company’s NAV per share and the two benchmark
indices published daily over the three months prior to the start
and end of the performance period is used to reduce volatility.
Caledonia Investments plc Annual report 2013 47
There will be no re-testing of the performance conditions under
the 2011 deferred bonus plan.
The reasons why the Remuneration Committee has chosen the
above performance conditions for the 2011 deferred bonus plan
are set out below in the statement on directors’ performance
share scheme awards. The Remuneration Committee may
amend the performance targets if events occur that would
make the amended target a fairer measure of performance and
provided that any amended target is no more difficult to satisfy.
In addition, the Remuneration Committee will also have the
ability to impose different performance targets in the future,
provided that any targets that are imposed are no less
demanding than those described above. Any such amended or
different performance targets will be described in the directors’
remuneration report for the relevant year.
Deferred share awards held as at 31 March 2013 by directors who
served during the year are shown in the table below. In relation to
The Hon C W Cayzer’s deferred share awards, the Remuneration
Committee determined in relation to the termination of his
executive service agreement with effect from 3 December 2012
that, based on the measurement of the performance targets since
the grant date to that date, all of the matching shares granted to
him on 26 May 2011 should lapse. The Remuneration Committee
also determined that The Hon C W Cayzer’s compulsory award
granted on 26 May 2011 should vest immediately and therefore
he has a right to call for these in the twelve months following the
termination of his service agreement.
There have been no changes in directors’ deferred share awards
up to the date of this report.
Name
Award type
Award date
W P Wyatt
Compulsory 26.05.11
26.05.11
Matching
J M B Cayzer-Colvin Compulsory 26.05.11
26.05.11
Matching
S A King
Compulsory 26.05.11
26.05.11
Matching
Hon C W Cayzer
Compulsory 26.05.11
26.05.11
Matching
Number of shares
Opening
balance Awarded
Called
Lapsed
Closing
balance
Market
price at
award
Market
price at
call
Value at call
2013
£’000
2012
£’000 Vesting date
4,235
4,235
8,470
2,335
2,335
4,670
3,222
3,222
6,444
1,557
1,557
3,114
22,698
–
–
–
–
–
–
–
–
–
–
–
–
–
4,235 1734p
4,235 1734p
8,470
2,335 1734p
2,335 1734p
4,670
3,222 1734p
3,222 1734p
6,444
1,557 1734p
– 1734p
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– (1,557)
– (1,557)
1,557
– (1,557) 21,141
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
01.04.14
01.04.14
01.04.14
01.04.14
01.04.14
01.04.14
03.12.12
–
–
–
–
–
1. The Hon C W Cayzer ceased executive service on 3 December 2012.
Statement on directors’ pensions (audited)
Mr Wyatt has established his own money purchase pension
arrangements into which the company made employer
contributions of £35,979 (2012 – £30,196) and in addition to
which he elected to receive cash in lieu of pension contributions
of £63,233 (2012 – £65,209). Mr King elected to receive his entire
pension entitlement by way of cash payments in lieu of pension
contributions of £52,345 (2012 – £50,821). Mr Cayzer-Colvin has
also established his own money purchase pension arrangements
into which the company made employer contributions of £37,778
(2012 - £28,527) in addition to which he elected to receive cash
payments in lieu of pension of £11,066 (2012 – £17,906).
Pension benefits accrued by The Hon C W Cayzer during the year
under the company’s defined benefit scheme were as follows:
1.
2.
3.
4.
The accrued pension shown in row (a) was the amount which would be paid at normal
retirement age, ignoring any revaluation. The Hon C W Cayzer left active service on
3 December 2012 and was granted a service credit in respect of the period for which
he received a payment in lieu of notice.
The transfer value was the present value of the accrued pension and associated
benefits at the relevant date. Transfer values were calculated using the transfer value
basis as determined by the trustees of the Caledonia Pension Scheme, based on
The Hon C W Cayzer’s accrued pension at the date he left active service but with
reference to market conditions at 31 March 2013 and in accordance with regulations
7 to 7E of the Occupational Pension Schemes (Transfer Values) Regulations 1996.
The transfer value shown in row (d) represented the value of the increase in accrued
pension (net of CPI inflation) during the year, as set out in row (c).
The change in transfer value over the year shown in row (g) (calculated as row (e) less row
(f)) reflected the impact on transfer values of factors beyond the control of the company
and the directors, such as movements in stock markets. Disclosed changes in value may
therefore be subject to a large degree of volatility and may even be negative. In particular,
the Caledonia Pension Scheme’s transfer value assumptions have been updated to allow
for changes in market conditions. The transfer value at 31 March 2013 would have been
approximately 3% to 4% lower using the transfer value assumptions at 31 March 2012.
Statement on directors’ share options (audited)
Accrued pension at 31 March 2013
Increase in accrued pension during the year
Increase in accrued pension during the year,
net of inflation
Transfer value of increase in accrued
pension over the year, net of inflation
Transfer value of accrued pension
at 31 March 2013
Transfer value of accrued pension
at 31 March 2012
Change in transfer value over the year
£
170,417
10,731
6,292
93,919
2,980,793
2,622,399
358,394
a
b
c
d
e
f
g
The company currently has two executive share option schemes –
a 1998 scheme under which option grants were made from
1998 to 2004 and a 2005 scheme under which option grants
were made from 2005 to 2010. No further option grants have
been made under these schemes as all share-based long term
incentives for 2011 onwards were awarded under the
performance share scheme introduced in July 2011.
Under the terms of both executive share option schemes, options
may be exercised between three and ten years after the date of
grant, although only one-third of the shares comprised in an
option may be exercised after three years from grant, with the
remaining two-thirds becoming exercisable six years after grant.
Options may only be exercised if performance targets are met.
Governance
48 Annual report 2013 Caledonia Investments plc
Directors’ remuneration report
continued
The performance targets for all of the outstanding options under
the 1998 and 2005 schemes have been tested.
The performance targets have been met for all outstanding
options shown in the table below granted up to 2009. The options
granted in 2010 have failed to achieve their performance targets
and accordingly have lapsed in their entirety.
As at 31 March 2013, the market price of the company’s shares
was 1840p (2012 – 1485p) and the range during the year was
1237p to 1840p.
Options to acquire ordinary shares in the company held as at
31 March 2013, by those directors who served during the year
and gains on the exercise of share options were as shown in the
following table.
Name
W P Wyatt
Grant date
05.07.02
20.11.03
26.05.04
19.08.05
01.06.06
29.05.09
21.05.10
J M B Cayzer-Colvin 19.08.05
01.06.06
29.05.09
21.05.10
S A King
21.05.10
Hon C W Cayzer
19.08.05
01.06.06
29.05.09
21.05.10
Opening
balance
6,000
9,000
9,500
13,290
6,789
12,707
33,936
91,222
13,290
6,789
12,707
26,179
58,965
30,959
30,959
18,035
8,387
12,707
26,179
65,308
246,454
Number of options
Gains on exercise
Granted
Exercised
Lapsed
Closing
balance
Exercise
price
2013
£’000
2012
£’000
Exercisable
from date
Expiry date
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6,000)
–
–
–
–
–
–
(6,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,000
–
9,500
– 13,290
–
6,789
– 12,707
(33,936)
–
(33,936) 51,286
– 13,290
–
6,789
– 12,707
–
(26,179)
(26,179) 32,786
–
(30,959)
–
(30,959)
– 18,035
–
8,387
– 12,707
–
(26,179)
(26,179) 39,129
(6,000) (117,253) 123,201
782.5p
945p
1055p
1580p
1878p
1446p
1547p
1580p
1878p
1446p
1547p
1547p
1580p
1878p
1446p
1547p
52
–
–
–
–
–
–
52
–
–
–
–
–
–
–
–
–
–
–
–
52
20.11.06 20.11.13
26.05.07 26.05.14
19.08.08 19.08.15
01.06.09 01.06.16
29.05.12 29.05.19
19.08.08 19.08.15
01.06.09 01.06.16
29.05.12 29.05.19
19.08.08 03.12.13
01.06.09 03.12.13
29.05.12 03.12.13
–
–
–
–
–
1. The Hon C W Cayzer ceased executive service on 3 December 2012.
In respect of the termination of The Hon C W Cayzer’s service
agreement, the Remuneration Committee exercised its discretion
under the 2005 executive share option scheme such that all of the
outstanding share options granted to him up to 2009, which had
satisfied their performance targets prior to the termination date
(being an aggregate of 39,129 shares), would become fully
exercisable for a period of one year following the termination
date. The Remuneration Committee further agreed that the
options granted to The Hon C W Cayzer in 2010 should vest to the
extent that they satisfied the performance targets at the end of
their normal three year performance measurement period, and
any vested options should then be exercisable within one year
from the date on which the performance targets calculations
were determined. As stated above, the performance targets for
the options granted in 2010 were tested as at 31 March 2013 and
were not achieved. Accordingly, the options over 26,179 shares
granted to The Hon C W Cayzer on 21 May 2010 have lapsed.
There have been no changes in directors’ options to acquire
Statement on directors’ performance share scheme awards
ordinary shares up to the date of this report.
(audited)
In July 2011, a new performance share scheme was introduced to
replace the existing 2005 executive share option scheme. Under
the performance share scheme, participants are awarded nil-cost
options over shares, rather than options based on the current
market value of those shares.
Nil-cost options awarded under the 2011 performance share
scheme are subject to performance targets related to the
company’s diluted NAV per share on a total return basis
measured against a benchmark index. For two-thirds of the
shares comprised in an award, the benchmark is the FTSE
All-Share Total Return index and, for the remaining one-third,
the benchmark is the FTSE Actuaries UK Index-linked Gilts
(all stocks) Total Return index. In each case, the performance
period is a period of three financial years commencing with the
financial year in which the awards are granted. Awards vest
on a graduated basis, with 10% vesting on 0.5% outperformance
of the relevant benchmark, rising on a straight line basis to
maximum vesting on 3.5% outperformance of the relevant
benchmark. There is no re-testing of either performance target
and, to the extent that a performance target is not met, the
relevant award will lapse. For the purposes of calculating the
performance measures, an average of the figures for the
company’s NAV per share and the two benchmark indices
published daily over the three months prior to the start and
end of the performance period is used to reduce volatility.
To the extent that a performance target is met, awards may be
exercised between the date of vesting and the tenth anniversary
of the date of grant, except that only two-thirds of the shares that
have vested may normally be exercisable after three years from
grant, with the remaining one-third normally becoming
Caledonia Investments plc Annual report 2013 49
exercisable five years after grant. On exercise, the participant
will also receive an amount equal to the dividends that would
have accrued on the shares comprised in the award during the
relevant three or five year period.
For future performance share scheme awards, the Remuneration
Committee proposes to extend the performance measurement
period for a significant proportion of the shares comprised in
an award by revising the application of the existing benchmark
indices and exercise periods described above as follows.
For one-third of the shares comprised in an award, performance
will be measured against the FTSE Actuaries UK Index-linked
Gilts (all stocks) Total Return index over a period of three
financial years commencing with the financial year in which
the award is granted. Shares that vest as a result of the
performance measurement will become exercisable immediately.
For the remaining two-thirds of shares comprised in the award,
performance will be measured against the FTSE All-Share Total
Return index over a period of five financial years commencing
with the financial year in which the award is granted. Shares that
vest as a result of that performance measurement will also then
become exercisable immediately. In each case, awards will vest
on the same graduated basis as currently applies.
In order not to disadvantage performance share scheme
participants by the immediate adoption of the proposed changes
to the performance measurement and vesting periods (which will
involve a longer vesting period for a proportion of each award),
the Remuneration Committee will adopt transitional
arrangements whereby, for the current financial year and the
financial year commencing 1 April 2014, one-half of the shares
comprised in an award will be measured against the FTSE
Actuaries UK Index-linked Gilts (all stocks) Total Return index
over three years and the other half will be measured against the
FTSE All-Share Total Return index over five years, with shares
that vest in each case then becoming immediately exercisable.
The revised performance measurement and exercise periods as
described above will then be adopted for financial years
commencing 1 April 2015 onwards.
For both the 2011 performance share scheme and the 2011
deferred bonus plan, the Remuneration Committee has chosen
the FTSE All-Share Total Return index as a performance
condition as it believes that this is the best way to incentivise
executives to deliver continued strong NAV per share total return
performance. This underpins Caledonia’s objective of achieving
total shareholder return in excess of the FTSE All-Share
Total Return index. The FTSE Actuaries UK Index-linked Gilts
(all stocks) Total Return index has also been chosen as a
performance measure for both of the 2011 long term incentive
plans as the Remuneration Committee regards it as reflective
of the company’s aim to provide a long term store of wealth for
its shareholders. The Remuneration Committee believes that
these targets are significantly challenging and would reward
executives for delivering superior performance. It also considers
that the revised performance measurement and vesting periods
that it is proposing to adopt for the performance share scheme
for the 2015 and subsequent financial years, in particular the
lengthened performance measurement period for the majority
of the shares comprised in an award, are better aligned to
Caledonia’s longer term investment horizon and to the delivery
of the business objectives stated above.
The Remuneration Committee may amend the performance
targets if events occur that would make the amended targets a
fairer measure of performance and provided that any amended
targets are no more difficult to satisfy. The Remuneration
Committee will also have the ability to impose different
performance targets in the future, provided that any targets
imposed are no less demanding than described above. Any such
amended or different performance targets will be described in
the directors’ remuneration report for the relevant year.
Performance share scheme awards held as at 31 March 2013
by directors who served during the year are shown below.
In relation to the termination of The Hon C W Cayzer’s service
agreement, the Remuneration Committee agreed that the
performance share awards granted to him in 2011 should be
preserved until the end of their normal three year performance
measurement period and should then vest to the extent that the
performance targets are met. Any vested awards will then be
exercisable within twelve months of the date on which the
outcomes of the performance targets are determined.
Name
Grant date
Number of nil-cost options
Opening
balance
Granted
Exercised
Lapsed
Closing
balance
Market
price at
award
Market
price at
exercise
Value at exercise
2013
£’000
2012
£’000
Exercisable
from date
Expiry date
28.05.12
W P Wyatt
J M B Cayzer-Colvin 11.08.11 22,609
11.08.11 37,682
28.05.12
–
– 47,329
37,682 47,329
–
– 28,397
22,609 28,397
–
– 33,583
26,738 33,583
–
–
109,638 109,309
1. The Hon C W Cayzer ceased executive service on 3 December 2012.
11.08.11 22,609
22,609
11.08.11 26,738
28.05.12
Hon C W Cayzer
S A King
–
–
–
–
–
–
–
–
–
–
–
–
– 37,682 1545p
– 47,329 1267p
– 85,011
– 22,609 1545p
– 28,397 1267p
– 51,006
– 26,738 1545p
– 33,583 1267p
– 60,321
– 22,609 1545p
– 22,609
– 218,947
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11.08.14 11.08.21
28.05.15 28.05.22
–
11.08.14 11.08.21
28.05.15 28.05.22
–
11.08.14 11.08.21
28.05.15 28.05.22
31.03.14 31.03.15
–
–
–
Governance 50 Annual report 2013 Caledonia Investments plc
Directors’ remuneration report
Statement on executive directors’ service contracts and the
Chairman’s and non-executive directors’ letters of appointment
continued
Executive directors have service contracts with Caledonia Group
Services Ltd, a wholly-owned subsidiary of the company, details
of which are summarised below:
Name
Date of contract Notice period
Unexpired term
W P Wyatt
02.06.05
J M B Cayzer-Colvin 19.04.05
S A King
19.11.09
12 months Rolling 12 months
12 months Rolling 12 months
12 months Rolling 12 months
Directors’ service contracts contain provisions whereby the
company may, in its discretion, terminate the contract without
notice and make a lump sum payment in lieu of notice and
(other than in the case of Mr King’s service contract) whereby a
liquidated sum is payable in the event of termination within one
year following a change of control. Any such payment in lieu of
notice or liquidated sum would be equivalent to no more than one
year’s total emoluments. Mr King’s service contract contains
provisions whereby, as an alternative to the payment of a lump
sum in lieu of notice, the company may elect to pay the equivalent
amount in equal monthly instalments, such instalments to be
reduced by 50% of one-twelfth of the basic salary in excess of
£20,000 per annum that Mr King receives from any alternative
employment that he takes up during the notice period.
The Chairman and the non-executive directors do not have
service contracts, but are appointed under letters of appointment
which provide for termination without notice or compensation.
Executive directors’ service contracts and the Chairman’s and
non-executive directors’ letters of appointment are available for
Payment to a former director (audited)
inspection at the registered office of the company.
Shortly after the year end, the company made a payment of
£25,000 to Mr T C W Ingram, who retired as Caledonia’s Chief
Executive in July 2010, in recognition of assistance and advice he
provided to the company regarding its holding in Alok Industries
and the disposal thereof.
The directors’ remuneration report was approved by the board
on 30 May 2013 and signed on its behalf by:
Charles Gregson
Chairman of the Remuneration Committee
Caledonia Investments plc Annual report 2013 51
Independent auditor’s report
to the members of Caledonia Investments plc
Opinion on other matters prescribed by the Companies Act 2006
We have audited the financial statements of Caledonia
Investments plc for the year ended 31 March 2013 set out on
pages 52 to 79. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (‘IFRSs’) as adopted by the EU.
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the
company’s members, as a body, for our audit work, for this report,
Respective responsibilities of directors and auditor
or for the opinions we have formed.
●●
In our opinion:
the part of the Directors’ remuneration report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and
the information given in the Directors’ report for the financial
year for which the financial statements are prepared is
consistent with the financial statements; and
●●
●●
information given in the Corporate governance statement
set out on pages 38 to 42 with respect to internal control and
risk management systems in relation to financial reporting
processes and about share capital structures is consistent
with the financial statements.
Matters on which we are required to report by exception
As explained more fully in the directors’ responsibilities
statement set out on page 36, the directors are responsible for
the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit,
and express an opinion on, the financial statements in accordance
with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the
Scope of the audit of the financial statements
Auditing Practices Board’s Ethical Standards for Auditors.
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at
Opinion on financial statements
www.frc.org.uk/auditscopeukprivate.
●●
In our opinion:
the financial statements give a true and fair view of the state of
the group’s and of the parent company’s affairs as at 31 March
2013 and of the group’s and the parent company’s profit for the
year then ended;
We have nothing to report in respect of the following:
●●
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements and the part of the
Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law
are not made; or
●●
●●
●●
we have not received all the information and explanations we
require for our audit.
●●
Under the Listing Rules we are required to review:
●●
the directors’ statement, set out on page 36, in relation to
going concern;
the financial statements have been properly prepared in
accordance with IFRSs as adopted by the EU; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
as regards the group financial statements, Article 4 of the
IAS Regulation.
the part of the Corporate governance report on pages 38 to 42
relating to the company’s compliance with the nine provisions
of the UK Corporate Governance Code specified for our review;
and
●●
certain elements of the report to shareholders by the board on
directors’ remuneration.
Jonathan Mills (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
30 May 2013
●●
●●
Financial statements 52 Annual report 2013 Caledonia Investments plc
Company statement of comprehensive income
for the year ended 31 March 2013
Revenue
Investment income
Gains and losses on fair value investments
Total revenue
Gains and losses on derivatives
Management expenses
Guarantee obligations provided
Profit/(loss) before finance costs
Guarantee obligations released
Treasury interest receivable
Finance costs
Profit/(loss) before tax
Exchange movements
Profit/(loss) and total
Taxation
comprehensive income for the year
Basic earnings per share
Diluted earnings per share
1
8
2
20
20
3
4
5
7
7
Note
Revenue
£m
2013
Capital
£m
–
178.0
(3.1)
174.9
(0.7)
(2.1)
5.1
177.2
–
–
–
177.2
1.5
Total
£m
Revenue
£m
39.4
178.0
(3.1)
214.3
(13.9)
(2.1)
5.1
203.4
0.6
(1.7)
(0.4)
201.9
4.9
33.3
–
–
33.3
(11.8)
–
–
21.5
0.8
(0.6)
(0.7)
21.0
2.0
2012
Capital
£m
–
(123.4)
4.4
(119.0)
(0.6)
(7.0)
10.0
(116.6)
–
–
–
(116.6)
0.4
Total
£m
33.3
(123.4)
4.4
(85.7)
(12.4)
(7.0)
10.0
(95.1)
0.8
(0.6)
(0.7)
(95.6)
2.4
39.4
–
–
39.4
(13.2)
–
–
26.2
0.6
(1.7)
(0.4)
24.7
3.4
28.1
178.7
206.8
23.0
(116.2)
(93.2)
49.7p
49.2p
316.0p
312.7p
365.7p
361.9p
39.9p
39.7p
-201.7p
-201.7p
-161.8p
-161.8p
The total column of the above statement represents the company’s statement of comprehensive income, prepared in accordance with
IFRSs as adopted by the European Union.
The revenue and capital columns are supplementary to the company’s statement of comprehensive income and are prepared under
guidance published by the Association of Investment Companies.
The accounting policies and notes to the financial statements on pages 59 to 79 are an integral part of these financial statements.
Caledonia Investments plc Annual report 2013 53
Company statement of financial position
at 31 March 2013
Non-current assets
Investments held at fair value through profit or loss
Investments in subsidiaries held at cost
Non-current assets
Current assets
Derivative financial instruments
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current assets
Current liabilities
Trade and other payables
Provisions
Current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Total liabilities
Non-current liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Capital reserve
Retained earnings
Total equity
Own shares
Undiluted net asset value per share
Diluted net asset value per share
Note
8
8
15
5
16
18
20
17
22
22
22
22
22
22
7
7
2013
£m
2012
£m
1,204.8
0.8
1,205.6
–
11.9
2.1
96.5
110.5
1,316.1
(4.4)
(12.9)
(17.3)
–
–
(17.3)
1,298.8
3.2
1.3
1.3
1,015.1
294.9
(17.0)
1,298.8
2324p
2299p
1,180.7
0.8
1,181.5
2.5
8.0
0.9
8.4
19.8
1,201.3
(6.4)
(15.9)
(22.3)
(45.0)
(45.0)
(67.3)
1,134.0
3.2
1.3
1.3
854.3
290.6
(16.7)
1,134.0
1989p
1977p
The financial statements on pages 52 to 79 were approved by the board and authorised for issue on 30 May 2013 and were signed
on its behalf by:
Will Wyatt
Chief Executive
Stephen King
Finance Director
The accounting policies and notes to the financial statements on pages 59 to 79 are an integral part of these financial statements.
Financial statements 54 Annual report 2013 Caledonia Investments plc
Company statement of changes in equity
for the year ended 31 March 2013
Balance at 31 March 2011
Loss and total comprehensive income
Contributions by and distributions to owners
Transactions with owners of the company
Exercise of options
Share-based payments
Own shares purchased
Own shares cancelled
Dividends paid
Total transactions with owners
Balance at 31 March 2012
Profit and total comprehensive income
Contributions by and distributions to owners
Transactions with owners of the company
Exercise of options
Share-based payments
Own shares purchased
Own shares cancelled
Dividends paid
Total transactions with owners
Balance at 31 March 2013
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Capital
reserve
£m
Retained
earnings
£m
Own
shares
£m
Total
equity
£m
3.3
–
–
–
–
(0.1)
–
(0.1)
3.2
–
–
–
–
–
–
–
3.2
1.3
–
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
1.3
1.2
–
992.8
(116.2)
288.3
23.0
(28.2) 1,258.7
(93.2)
–
–
–
–
0.1
–
0.1
1.3
–
–
–
–
(22.3)
–
(22.3)
854.3
178.7
–
–
–
–
–
–
–
–
–
(17.9)
–
(17.9)
1.3 1,015.1
–
1.1
–
–
(21.8)
(20.7)
290.6
28.1
–
1.3
–
–
(25.1)
(23.8)
294.9
0.6
0.6
1.1
–
1.3
1.3
(12.7)
9.6
(21.8)
–
(31.5)
11.5
(16.7) 1,134.0
206.8
–
0.6
–
(0.9)
–
–
(0.3)
0.6
1.3
(0.9)
(17.9)
(25.1)
(42.0)
(17.0) 1,298.8
The accounting policies and notes to the financial statements on pages 59 to 79 are an integral part of these financial statements.
Caledonia Investments plc Annual report 2013 55
Group statement of comprehensive income
for the year ended 31 March 2013
Revenue
Investment income
Gains and losses on fair value investments
Gains and losses on derivatives
Total revenue
Revenue from sales of goods and services
Investment management expenses
Trade operating expenses
Loss on disposal of operations
Gain on investment property
Profit/(loss) before finance costs
Share of results of joint ventures
Treasury interest receivable
Finance costs
Profit/(loss) before tax
Exchange movements
Profit/(loss) for the year
Taxation
Other comprehensive income
Exchange differences on translation of foreign operations
Actuarial losses on defined benefit pension schemes
Total comprehensive income
Tax on other comprehensive income
Profit/(loss) for the year attributable to
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to
Owners of the parent
Non-controlling interest
Basic earnings per share
Diluted earnings per share
Note
1
2
2
24
11
12
3
4
5
19
5
2013
£m
2012
£m
33.5
178.2
(3.2)
117.0
325.5
(13.9)
(106.7)
–
0.4
(0.6)
204.7
0.5
(3.2)
(0.2)
201.8
0.3
202.1
1.1
(4.2)
1.4
200.4
201.3
0.8
202.1
199.6
0.8
200.4
31.4
(123.3)
4.3
115.3
27.7
(12.4)
(107.1)
(1.2)
0.3
(1.0)
(93.7)
0.7
(2.4)
(0.8)
(96.2)
(2.0)
(98.2)
–
(4.9)
1.5
(101.6)
(98.6)
0.4
(98.2)
(102.0)
0.4
(101.6)
7
7
356.0p
352.3p
-171.2p
-171.2p
The accounting policies and notes to the financial statements on pages 59 to 79 are an integral part of these financial statements.
Financial statements 56 Annual report 2013 Caledonia Investments plc
Group statement of financial position
at 31 March 2013
Non-current assets
Investments held at fair value through profit or loss
Available for sale investments
Intangible assets
Property, plant and equipment
Investment property
Interests in joint ventures
Deferred tax assets
Employee benefits
Non-current assets
Current assets
Inventories
Derivative financial instruments
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current assets
Current liabilities
Interest-bearing loans and borrowings
Derivative financial instruments
Trade and other payables
Employee benefits
Current tax liabilities
Provisions
Current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Employee benefits
Deferred tax liabilities
Total liabilities
Non-current liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Retained earnings
Foreign exchange translation reserve
Equity attributable to owners of the parent
Own shares
Total equity
Non-controlling interest
Note
2013
£m
2012
£m
8
8
9
10
11
12
13
19
14
15
5
16
17
18
19
20
17
19
13
22
22
22
22
22
22
22
1,087.4
0.9
2.8
73.8
25.0
0.2
5.0
6.9
1,202.0
19.0
–
41.7
0.9
116.2
177.8
1,379.8
(0.2)
(0.2)
(25.4)
(2.5)
(0.5)
(3.9)
(32.7)
(51.6)
(17.5)
(2.2)
(71.3)
(104.0)
1,275.8
3.2
1.3
1.3
1,278.0
5.4
(17.0)
1,272.2
3.6
1,275.8
1,088.5
0.8
2.6
76.8
14.8
0.8
5.4
6.9
1,196.6
15.0
2.5
35.7
0.7
24.6
78.5
1,275.1
(20.8)
(0.1)
(25.3)
(2.3)
(1.2)
(4.1)
(53.8)
(84.7)
(15.4)
(3.1)
(103.2)
(157.0)
1,118.1
3.2
1.3
1.3
1,121.7
4.3
(16.7)
1,115.1
3.0
1,118.1
The financial statements on pages 52 to 79 were approved by the board and authorised for issue on 30 May 2013 and were signed on
its behalf by:
Will Wyatt
Chief Executive
Stephen King
Finance Director
The accounting policies and notes to the financial statements on pages 59 to 79 are an integral part of these financial statements.
Caledonia Investments plc Annual report 2013 57
Group statement of changes in equity
for the year ended 31 March 2013
Balance at 31 March 2011
Total comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income
Contributions by and distributions to owners
Transactions with owners of the company
Exercise of share options
Own shares purchased
Share-based payments
Own shares cancelled
Dividends paid
Changes in ownership interests
Total contributions and distributions
Non-controlling interest disposed
Non-controlling interest acquired
Total changes in ownership interests
Total transactions with owners
Balance at 31 March 2012
Total comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Contributions by and distributions to owners
Transactions with owners of the company
Exercise of share options
Own shares purchased
Share-based payments
Own shares cancelled
Dividends paid
Changes in ownership interests
Total contributions and distributions
Non-controlling interest acquired
Total changes in ownership interests
Total transactions with owners
Balance at 31 March 2013
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Currency
translation
reserve
£m
Own
shares
£m
Non–
controlling
interest
£m
Total
equity
£m
3.3
1.3
1.2 1,267.7
4.3
(28.2)
(0.4) 1,249.2
–
–
–
–
–
–
(0.1)
–
(0.1)
–
–
–
(0.1)
3.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
–
–
–
–
–
(98.6)
(3.4)
(102.0)
–
–
–
0.1
–
0.1
–
–
1.1
(22.3)
(21.8)
(43.0)
–
–
(1.0)
–
(1.0)
–
0.1
(44.0)
1.3 1,121.7
–
–
–
–
–
–
–
–
–
201.3
(2.8)
198.5
–
–
1.3
(17.9)
(25.1)
(41.7)
–
–
–
–
–
–
–
–
–
–
–
–
–
4.3
–
1.1
1.1
–
–
–
–
–
–
–
–
–
0.4
–
0.4
(98.2)
(3.4)
(101.6)
0.6
1.3
–
9.6
–
11.5
–
–
–
11.5
(16.7)
–
–
–
–
(0.3)
(0.3)
0.6
1.3
1.1
(12.7)
(22.1)
(31.8)
3.3
3.3
(1.0)
–
3.3
2.3
3.0
(29.5)
3.0 1,118.1
–
–
–
0.8
–
0.8
202.1
(1.7)
200.4
0.6
(0.9)
–
–
–
(0.3)
–
–
–
–
(0.4)
(0.4)
0.6
(0.9)
1.3
(17.9)
(25.5)
(42.4)
–
–
–
3.2
–
–
–
1.3
–
–
–
(0.5)
(0.5)
(42.2)
1.3 1,278.0
–
–
–
5.4
–
–
(0.3)
(17.0)
(0.3)
0.2
0.2
(0.3)
(0.2)
(42.7)
3.6 1,275.8
The accounting policies and notes to the financial statements on pages 59 to 79 are an integral part of these financial statements.
Financial statements 58 Annual report 2013 Caledonia Investments plc
Company and group statements of cash flows
for the year ended 31 March 2013
Operating activities
Dividends received
Interest received
Cash received from customers
Cash paid to suppliers and employees
Taxes received/(paid)
Group relief received
Net cash flow from operating activities
Investing activities
Purchases of investments
Proceeds from disposal of investments
Net receipts/(payments) from derivative financial instruments
Purchases of property, plant and equipment
Purchases of intangible assets
Purchases of investment property
Proceeds from disposal of joint ventures
Proceeds from disposal of investment property
Purchases of subsidiaries net of cash acquired
Loans advanced
Proceeds from disposal of subsidiaries net of cash disposed
Net cash flow from/(used in) investing activities
Financing activities
Interest paid
Dividends paid to owners of the company
Distributions paid to non-controlling interest
Proceeds from new borrowings
Repayment of borrowings
Loans from/(to) group companies
Exercise of share options
Purchase of own shares
Net increase/(decrease) in cash and cash equivalents
Net cash flow from/(used in) financing activities
Cash and cash equivalents at year start
Cash and cash equivalents at year end
Exchange movements on cash and cash equivalents
Note
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
38.9
0.8
–
(12.7)
0.4
3.8
31.2
(141.8)
290.8
(0.6)
–
–
–
–
–
–
–
–
148.4
(0.5)
(25.1)
–
–
(45.1)
(2.5)
0.6
(18.9)
(91.5)
88.1
8.4
–
96.5
30.6
1.1
–
(11.9)
(0.1)
0.7
20.4
(251.7)
129.0
1.1
–
–
–
–
–
–
(4.4)
–
(126.0)
(0.5)
(21.8)
–
45.1
–
2.5
0.6
(13.1)
12.8
(92.8)
101.2
–
8.4
31.2
0.7
120.0
(122.7)
0.5
–
29.7
(127.6)
302.2
(0.6)
(1.9)
(0.1)
(10.2)
–
0.4
(1.2)
–
–
161.0
(2.3)
(25.1)
(0.4)
7.2
(61.5)
–
0.6
(18.9)
(100.4)
90.3
24.6
1.3
116.2
27.4
0.8
116.3
(116.9)
(1.7)
–
25.9
(244.6)
126.2
1.3
(1.9)
–
(6.4)
0.9
1.4
(2.6)
(4.4)
12.9
(117.2)
(2.3)
(21.8)
(0.3)
61.5
(30.3)
–
0.6
(13.1)
(5.7)
(97.0)
121.5
0.1
24.6
11
23
24
16
The accounting policies and notes to the financial statements on pages 59 to 79 are an integral part of these financial statements.
Caledonia Investments plc Annual report 2013 59
Accounting policies
General information
Caledonia Investments plc is an investment trust company
domiciled in the United Kingdom and incorporated in England in
1928, under the Companies Acts 1908 to 1917. The address of its
registered office is Cayzer House, 30 Buckingham Gate, London
SW1E 6NN. The ordinary shares of the company are listed on the
London Stock Exchange and the New Zealand Exchange.
These financial statements were authorised for issue by the
directors on 30 May 2013.
These financial statements are presented in pound sterling
because that is the currency of the primary economic
environment in which Caledonia operates.
In the current year, the group has not adopted any new Standards
or Interpretations.
At the date of authorisation of these financial statements, the
following Standards, which have not been applied in these
financial statements, were in issue but not yet effective.
●●
●●
●●
●●
●●
●●
IFRS 10 ‘Consolidated Financial Statements’
IFRS 11 ‘Joint Arrangements’
IFRS 12 ‘Disclosures of Interests in Other Entities’
IFRS 13 ‘Fair Value Measurement’
IAS 27 ‘Separate Financial Statements’
IAS 28 ‘Investments in Associates and Joint Ventures’
The directors anticipate that the adoption of these Standards
in future periods will have no material impact on the financial
statements of the company, except to change the presentation
Significant accounting policies
of the group results.
Basis of accounting
These financial statements have been prepared in accordance
with International Financial Reporting Standards (‘IFRSs’)
as adopted for use in the EU and therefore the group financial
statements comply with Article 4 of the EU IAS Regulation. IFRSs
comprise accounting standards issued by the International
Accounting Standards Board and its predecessor body as well as
interpretations issued by the International Financial Reporting
Interpretations Committee and its predecessor body.
Caledonia is an investment trust company. However, because it
holds majority stakes and therefore has the power to control, it is
required to prepare group accounts that consolidate the results
of such investments. In order to present information that is
comparable with other investment trust companies, Caledonia
also publishes financial statements of the company, which include
investments in subsidiaries regarded as part of the company’s
investing business at fair value.
The financial statements have been prepared on an historical cost
basis, except for the revaluation of certain financial instruments
and properties. Where presentational guidance set out in the
Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts (‘SORP’)
issued by the Association of Investment Companies in January
2009 is consistent with the requirements of IFRSs as adopted
by the EU, the directors have sought to prepare the financial
statements on a basis compliant with the recommendations of
the SORP. The recommendations of the SORP have been applied
to the company, but not to the group, financial statements, as the
directors believe that it would be misleading to present a three
column income statement for the group.
Under The UK Corporate Governance Code and applicable
regulations, the directors are required to satisfy themselves that
it is reasonable to presume that the company is a going concern.
The directors have a reasonable expectation that the company
and the group have adequate resources to continue in operational
existence for the foreseeable future, as discussed in the
Directors’ report on page 36. Accordingly, they continue to adopt
the going concern basis of preparing the financial statements.
The principal accounting policies are set out below.
Foreign currency translation
Transactions in foreign currencies are recorded at the rate of
exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the reporting
date are translated to the functional currency at the foreign
exchange rate ruling at the reporting date. Foreign exchange
differences arising on translation are recognised in the statement
of comprehensive income. Non-monetary assets and liabilities
that are measured in terms of historical cost in a foreign currency
are translated to the functional currency using the exchange rate
at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value
are translated to the functional currency at foreign exchange
rates ruling at the dates the fair values were determined.
In the company financial statements, foreign exchange gains
or losses are recognised in capital or revenue reserve depending
on whether the gain or loss is of a capital or revenue nature
respectively.
Assets and liabilities of the group’s overseas operations are
measured using their functional currency, being the currency
of the primary economic environment in which they operate.
Financial statements 60 Annual report 2013 Caledonia Investments plc
Accounting policies
continued
On consolidation, the assets and liabilities of the group’s overseas
operations are translated at exchange rates prevailing on the
reporting date. Income and expense items are translated at the
average exchange rates for the period unless exchange rates
fluctuate significantly. Exchange differences arising, if any,
are classified as equity and transferred to the group’s foreign
exchange translation reserve. Such exchange differences are
recognised in the statement of comprehensive income in the
period in which the operation is sold.
Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate at the reporting date.
Investments
Investments are recognised and derecognised on a trade date
where a purchase or sale of an investment is under a contract
whose terms require delivery of the investment within the
timeframe established by the market concerned, and are initially
measured at cost, excluding transaction costs.
Investments held as part of the group’s business of investing in
financial assets are designated as measured at fair value through
profit or loss in both the consolidated financial statements and
the company financial statements. Other investments held by
subsidiaries are designated as available for sale in the
consolidated financial statements. Other investments in
subsidiaries held by the company are accounted for at cost in the
financial statements of the company.
Investments designated as held at fair value through profit or loss
or as available for sale are measured at subsequent reporting
dates at fair value. Gains and losses arising from changes in the
value of investments designated as held at fair value through
profit or loss, including foreign exchange movements, are
included in net profit or loss for the period as a capital return.
For available for sale investments, gains and losses arising from
changes in fair value are recognised in other comprehensive
income until the investment is disposed of or is determined to be
impaired, at which time the cumulative gain or loss previously
recognised in other comprehensive income is included in the net
profit or loss for the period. If, in the subsequent period, the fair
value of the available for sale investments, for which impairment
was previously recognised, increases in value, the impairment
loss is reversed through the statement of comprehensive income.
Listed investments are valued at bid price or the last traded
price when a bid price is not available. Unlisted investments are
valued using recognised valuation methodologies, based on the
International Private Equity and Venture Capital Valuations
Guidelines, which reflect the amount for which an asset could
be exchanged between knowledgeable, willing parties on an
arm’s length basis. The portfolio valuation methodology is
detailed on page 31.
Distributions from investment limited partnerships are treated
as disposal proceeds or income in accordance with the nature of
the distribution. Any surplus capital distributions after repaying
partner’s capital are treated as realised gains.
Income
Dividends receivable on equity shares are recognised as revenue
when the shareholders’ right to receive payment has been
established, normally the ex-dividend date. Where no ex-dividend
date is available, dividends receivable on or before the period end
are treated as revenue for the period. Provision is made for any
dividends not expected to be received.
The fixed returns on debt securities, loans and non-equity shares
are recognised on an effective interest rate basis, which is the
rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to that asset’s net
carrying amount.
For trading subsidiaries, revenue comprises the fair value of the
sale of goods and services, net of value added tax, rebates and
discounts and after eliminating sales within the group. Sales of
goods are recognised when goods are delivered and title has
passed. Sales of services are recognised in the accounting period
in which the services are rendered, by reference to completion of
the specific transaction, assessed on the basis of the actual service
provided as a proportion of the total services to be provided.
The company’s share of net income from limited partnerships is
recognised as revenue when received.
Where uncertainty arises over the collectability of an amount
already included in income, the uncollectible amount or the
amount in respect of which the recovery has ceased to be
probable, is recognised as an expense. When the uncertainty
over collectability is removed, normally on receipt, the income
is recognised in the statement of comprehensive income.
Expenses
All expenses are accounted for on an accrual basis. In the
company financial statements, management expenses and
performance fees are included in revenue reserves. Expenses
of acquisition of an investment designated as held at fair value
through profit or loss or expenses of an aborted acquisition or
disposal of an investment are presented as transaction costs or
deducted from the proceeds of sale as appropriate and included
in capital reserves.
Taxation
The tax expense represents the sum of tax currently payable
and deferred tax.
The tax currently payable is based on the taxable profit for the
period. Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The group’s liability for current tax is calculated using tax rates
that were applicable at the reporting date.
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted
for using the liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilised. Investment trust companies that have
approval as such under section 1159 of the Corporation Tax Act
2010 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at each
reporting date and adjusted to the extent that it is probable that
sufficient taxable profits will be available to allow all or part of
the assets to be recovered.
Caledonia Investments plc Annual report 2013 61
Dividend distribution
Dividends are recognised in the period in which they are
appropriately authorised and no longer at the discretion of the
entity. For interim dividends, this will normally mean the date
on which they are paid and, for final dividends, the date on
which they are approved in general meeting.
Pension schemes
Employee benefits
Payments to defined contribution schemes are charged as an
expense as they fall due.
For defined benefit schemes, the cost of providing benefits is
determined using the projected unit credit method, with
actuarial valuations being carried out at each reporting date.
Actuarial gains and losses are recognised in full in the period in
which they occur. They are recognised in other comprehensive
income and presented in the statement of comprehensive income.
Past service cost is recognised immediately to the extent that the
benefits are already vested and otherwise is amortised on a
straight-line basis over the average period until the benefits
become vested.
The retirement benefit obligation recognised in the statement
of financial position represents the present value of the defined
benefit obligation as adjusted for unrecognised past service cost
and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
Profit-sharing and bonus plans
contributions to the plan.
The group recognises a liability and an expense for bonuses and
profit-sharing, based on a formula that takes into consideration
the profit attributable to the company’s shareholders after
certain adjustments. The group recognises a provision where
contractually obliged or where there is a past practice that has
Share-based payments
created a constructive obligation.
The group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured
at fair value at the date of grant and the fair value is expensed on
a straight-line basis over the vesting period, based on the group’s
estimate of shares that will eventually vest.
Where employees of a subsidiary are granted rights to the
equity instruments of its parent as consideration for the services
provided to the subsidiary, the subsidiary recognises an equity
settled share-based payment transaction expense with a
corresponding increase recognised in equity representing a
contribution from the parent.
An employee share trust is used for distributing option and
performance share and deferred bonus awards to employees
under Caledonia’s share remuneration schemes. The trustee
purchases shares with money lent interest free by Caledonia
and transfers shares to participating employees on receipt of
the requisite consideration or calling of awards.
The transactions the employee share trust undertakes are
considered to be performed by the trust as an agent for
Caledonia. The transactions of the employee share trust are
included in the separate financial statements of the parent
company and, following the requirements of SIC 12, in the
consolidated financial statements as if they arose in that
company. Own shares held by the employee share trust as at the
reporting date are accounted for as if they were treasury shares.
National Insurance on share option scheme gains and performance
share and deferred bonus awards
National Insurance payable on the exercise of certain employee
share options and performance share awards at the date of
exercise and deferred bonus awards at the date of call have been
charged as an expense spread over the respective vesting
periods. The charge is based on the difference between the
market value of the underlying shares at the reporting date and
the exercise price for share options or £nil for performance share
awards and deferred bonus awards and calculated at the latest
enacted National Insurance rate.
Capital reserve
The company maintains a capital reserve. The following items
are transferred into the capital reserve from profit or loss:
●●
●●
●●
●●
gains and losses on investments held at fair value through
profit or loss
gains and losses on derivatives used to hedge the fair value
of investments
expenses and finance costs incurred directly in relation to
capital transactions
taxation on items recognised in the capital reserve.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets, other
than land or properties under construction, over their estimated
useful lives, using the straight-line method, on the following
bases:
Property
25-40 years
Plant
10-15 years
Equipment
3-8 years
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease.
The gain or loss on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the statement
of comprehensive income.
Investment property
Investment property, which is property held to earn rentals
and/or for capital appreciation, is stated at its fair value at the
reporting date. Gains and losses arising from changes in the fair
value of investment property are included in the statement of
comprehensive income for the period in which they arise.
Brands, trademarks, computer software and customer relationships
Intangible assets
Brands, trademarks, computer software and customer
relationships acquired by the group are stated at cost less
accumulated amortisation and impairment losses. Where such
items are not deemed to have an indefinite life, amortisation is
Goodwill
expensed on a straight-line basis over their estimated useful lives.
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the group’s interest in the fair value
of the identifiable assets, liabilities and contingent liabilities
of a subsidiary, associate or jointly controlled entity at the date
of acquisition.
Financial statements 62 Annual report 2013 Caledonia Investments plc
Accounting policies
continued
Goodwill is recognised as an asset and reviewed for impairment
at least annually. Any impairment is recognised immediately in
profit or loss and is not subsequently reversed.
On disposal of a subsidiary, associate or jointly controlled entity,
the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Impairment of assets
At each reporting date, the group reviews the carrying amounts
of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment
loss. If any such indication exists, an impairment loss is
recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount, if any. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, intangible assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units).
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises direct materials and, where applicable,
direct labour costs and those overheads that have been incurred
in bringing the inventories to their present location and
condition. Cost is calculated using the first-in, first-out method.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Properties that are held for sale in the ordinary course of
business or are being developed for future sale are classified
as inventories.
Receivables
Receivables do not carry any interest and are stated at their
nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash and that are
subject to an insignificant risk of changes in value.
Borrowings
Interest-bearing bank loans and overdrafts are recorded at
the fair value of proceeds received, net of direct issue costs.
Finance charges, including premiums payable on settlement
or redemption and direct issue costs, are accounted for on an
accrual basis in the statement of comprehensive income using
the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not
settled in the period in which they arise. The effective interest
method allocates the interest expense over the life of the
instrument so as to reflect a constant return on the carrying
amount of the liability.
Borrowings include a component of the company’s deferred
ordinary shares and preference shares in subsidiaries held by
third parties that fall under the definition of financial liabilities
under IAS 32.
Provisions
A provision is recognised in the statement of financial position
when the company has a present legal or constructive obligation
as a result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are measured at the directors’ best estimate of the
expenditure required to settle the obligation at the reporting
date and are discounted to present value where the effect is
material.
In the company financial statements, provisions recognised for
investments are recognised in the statement of comprehensive
income as a capital return.
Leasing
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as
Lessor
operating leases.
Rental income from operating leases is recognised on a straight-
line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset and recognised
Lessee
on a straight-line basis.
Assets held under finance leases are recognised as assets of the
group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of
the lease. The corresponding liability to the lessor is included in
the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
charges are charged directly against income.
Rentals payable under operating leases are charged to income
on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an
operating lease are also spread on a straight-line basis over the
lease term.
Share capital
Equity instruments issued by the company are recorded as the
proceeds received, net of direct issue costs.
Where any group company and the Caledonia Investments plc
Employee Share Trust purchases the company’s equity share
capital or the company buys shares into treasury, the
consideration paid, including any directly attributable
incremental costs (net of income taxes), is deducted from equity
attributable to the company’s owners until the shares are
cancelled or transferred. Where such shares are subsequently
transferred, any consideration received, net of any directly
attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the
company’s owners.
Caledonia Investments plc Annual report 2013 63
Joint ventures
A joint venture is a contractual arrangement whereby two or
more parties undertake an economic activity that is the subject
of joint control.
As Caledonia is an investment trust company, and its interests in
joint ventures are designated as held at fair value through profit
or loss, the provisions of IAS 31 ‘Interests in Joint Ventures’ do
not apply. Such interests are measured at fair value, with changes
in fair value recognised in profit or loss in the period in which
they occur. However, the provisions of IAS 31 do apply to
interests in joint ventures held by other companies in the group,
as set out below.
The results and assets and liabilities of joint ventures held by
subsidiaries are incorporated in these financial statements using
the equity method of accounting, except when classified as held
for sale. Interests in joint ventures are carried in the statement of
financial position at cost as adjusted by post-acquisition changes
in the group’s share of net assets of the joint ventures, less any
impairment in the value of individual investments. Losses of the
joint ventures in excess of the group’s interest in those joint
ventures are not recognised.
Any excess of the cost of acquisition over the group’s share of the
fair values of the identifiable net assets of the joint ventures at
the date of acquisition is recognised as goodwill. Any deficiency
in the cost of acquisition below the group’s share of the fair values
of the identifiable net assets at the date of acquisition is credited
in profit or loss in the period of acquisition.
Where a group company transacts with joint ventures of the
group, profits and losses are eliminated to the extent of the
group’s interest in the relevant joint ventures. Losses may
provide evidence of an impairment of the asset transferred,
in which case appropriate provision is made for impairment.
Derivative financial instruments
Derivatives are recognised at fair value on the date a contract
is entered into and are subsequently re-measured at their
fair value.
Hedge accounting is not applied. Changes in the fair value of
derivative financial instruments are recognised in the statement
of comprehensive income as they arise.
Operating segments
Operating segments are based on the financial information
reported to the chief operating decision maker.
Subsidiaries
Basis of consolidation
The consolidated financial statements include the financial
statements of the company and entities controlled by the
company (its subsidiaries) made up to the reporting date.
Control is achieved where the company has the power to govern
the financial and operating policies of the investee entity so
as to obtain economic benefits from its activities.
On acquisition, the identifiable assets, liabilities and contingent
liabilities of a subsidiary are measured at fair values on that
date. Any excess of the cost of acquisition over the fair values
of the identifiable net assets acquired is recognised as goodwill.
Any deficiency in the cost of acquisition below the fair values of
the identifiable net assets acquired (i.e. discount on acquisition)
is credited to the statement of comprehensive income in the
period of acquisition. The interest of non-controlling
shareholders is stated at the non-controlled proportion of the
fair values of the assets and liabilities recognised.
The results of subsidiaries acquired or disposed of during
the period are included in the consolidated statement of
comprehensive income from the effective date of acquisition
or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies
used in line with those used by the group.
All intra-group transactions, balances, income and expenses
Associates
are eliminated on consolidation.
An associate is an entity over which the group is in a position
to exercise significant influence, but not control or joint control,
through the financial and operating policy decisions of the
investee entity.
As Caledonia is an investment trust company, and its investments
held in associates are designated as held at fair value through
profit or loss, the provisions of IAS 28 ‘Investments in Associates’
do not apply. Such investments are measured at fair value, with
changes in fair value recognised in profit or loss in the period in
which they occur.
No other group company held investments in associates.
Financial statements 64 Annual report 2013 Caledonia Investments plc
Notes to the financial statements
1. Investment income
Dividends from equity shares
Listed UK
Listed non-UK
Unlisted
Subsidiaries
Interest on loan investments
Unlisted
2. Expenses
Investing operations
Management expenses
Personnel expenses
Depreciation
Auditor’s remuneration
Other administrative
expenses
Other expenses
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
14.7
6.2
8.9
7.7
1.9
39.4
16.7
4.2
7.3
3.3
1.8
33.3
14.7
6.4
9.0
–
3.4
33.5
Company
Group
2013
£m
8.4
0.1
0.2
4.5
–
13.2
2012
£m
7.7
0.1
0.1
3.8
0.1
11.8
2013
£m
8.4
0.1
0.2
4.5
–
13.2
16.7
4.3
7.5
–
2.9
31.4
2012
£m
7.7
0.1
0.1
3.8
0.1
11.8
Caledonia Group Services Ltd, a wholly-owned subsidiary,
provides management services to the company and charges for
its services on the basis of net expenses incurred. The table above
includes both an analysis of this expense and Caledonia’s own
management expenses.
Other expenses
Transaction costs
Company
Group
2013
£m
0.7
2012
£m
0.6
2013
£m
0.7
2012
£m
0.6
Transaction costs were expenses incidental to the acquisition of
investments held at fair value through profit or loss and expenses
incurred as part of aborted investment purchases or sales and
Trading operations
were allocated to the capital reserve.
Operating expenses
Cost of sales
Distribution expenses
Administrative expenses
Group
2013
£m
2012
£m
83.7
3.9
19.1
106.7
81.8
3.7
21.6
107.1
Operating expenses included the following items:
Depreciation
Amortisation
Impairment loss on goodwill
Impairment loss on customer relationships
Impairment loss on property, plant
and equipment
Direct operating expenses of investment
property that generated rental income
Operating lease rentals (note 25)
Auditor’s remuneration
Further information
Auditor’s remuneration
Fees payable to KPMG Audit Plc were as follows:
Group
2013
£m
2012
£m
4.1
0.6
–
–
1.4
0.1
1.2
0.2
4.1
1.5
0.7
1.1
–
0.1
1.2
0.2
Audit services
Company audit
Consolidation audit
Annual report
Subsidiaries’ audit
Other services
Other assurance and tax
compliance
Personnel expenses
Wages and salaries
Compulsory social
security contributions
Contributions to defined
contribution plans
Defined benefit pension
plans expense (note 19)
Increase in liability
for long service leave
Equity-settled share-based
payments (note 19)
National Insurance
on share awards
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
0.1
–
0.1
–
0.1
0.1
0.2
0.1
–
0.1
–
0.1
–
0.1
0.1
0.1
0.2
0.1
0.3
0.1
0.4
0.1
0.1
0.2
0.1
0.3
–
0.3
Company
Group
2013
£m
5.6
0.8
0.3
–
–
1.3
0.4
8.4
2012
£m
2013
£m
2012
£m
5.6
31.1
30.8
0.7
0.3
–
–
1.1
–
7.7
5.0
1.0
(1.5)
–
1.3
4.7
0.8
0.1
0.1
1.1
0.4
37.3
–
37.6
The average number of employees, including executive directors,
throughout the year was as follows:
Company
2013
No
2012
No
Group
2013
No
2012
No
Average number
of employees
44
42
767
664
Caledonia Investments plc Annual report 2013 65
3. Treasury interest receivable
Recognised in other comprehensive income
Interest on bank deposits
Other interest receivable
Guarantee fees
4. Finance costs
Interest on bank loans
and overdrafts
Loan impairments
5. Taxation
Company
Group
2013
£m
0.3
0.2
0.1
0.6
2012
£m
0.3
0.3
0.2
0.8
2013
£m
0.3
0.2
–
0.5
2012
£m
0.4
0.3
–
0.7
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
0.5
1.2
1.7
0.6
–
0.6
2.1
1.1
3.2
2.4
–
2.4
Deferred tax credit
Relating to actuarial losses on
defined benefit pension schemes
Relating to share options and
deferred bonus awards
Current tax assets
Group
2013
£m
2012
£m
1.2
0.2
1.4
1.5
–
1.5
Current tax assets of £2.1m in the company represented loss
relief surrender for settlement and £0.9m in the group (2012 –
£0.9m in the company and £0.7m in the group) represented the
amount of income taxes recoverable in respect of current and
6. Dividends
prior years that exceeded payments.
Recognised in comprehensive income
Amounts recognised as distributions to owners of the company
in the year were as follows:
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of
timing differences
Benefit of tax losses
recognised
–
(0.5)
1.0
–
–
(4.9)
–
(0.5)
(2.4)
–
1.0
(0.3)
Total tax expense/(income)
Reconciliation of effective tax expense
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
(1.7)
(3.2)
(4.9)
(1.8)
(0.1)
(1.9)
2.5
(3.8)
(1.3)
2.2
(2.0)
0.2
Final dividend for the year
ended 31 March 2012 (2011)
Interim dividend for the year
ended 31 March 2013 (2012)
2013
2012
p/share
£m
p/share
£m
31.2
17.8
26.0
15.0
12.9
44.1
7.3
25.1
11.7
37.7
6.8
21.8
0.2
1.6
1.8
2.0
Proposed final dividend
for the year ended
31 March 2013 (2012)
34.3
19.1
31.2
17.8
The proposed final dividend has not been included as a liability
in these financial statements. This dividend, if approved by
shareholders at the annual general meeting to be held on
24 July 2013, will be payable on 8 August 2013 to holders of
shares on the register on 12 July 2013. The ex-dividend date
will be 10 July 2013.
Profit/(loss) before tax
Tax at the domestic rate of
24% (2012 – 26%)
Effect of tax rate in foreign
jurisdictions
Non-deductible expenses
Utilisation of tax losses
Losses for the year
unrelieved
Non-taxable losses/(gains)
on investments
Non-taxable UK dividend
income
Tax exempt revenues
Other timing differences
Over provided in prior years
Tax Expense/(income)
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
201.9
(95.6)
201.8
(96.2)
For the purposes of section 1158 of the Corporation Tax Act 2010
and associated regulations, the dividends payable for the year
ended 31 March 2013 are the interim and final dividends for that
7. Earnings and net asset value per share
year, amounting to £26.4m (2012 – £24.6m).
Basic and diluted earnings per share
48.5
(24.9)
48.4
(25.0)
–
–
–
1.3
–
0.1
–
0.9
1.2
0.8
(0.4)
1.9
2.3
0.8
–
2.8
The calculation of basic earnings per share of the company
and of the group was based on the profit or loss attributable to
shareholders and the weighted average number of shares
outstanding during the year. The calculation of diluted earnings
per share included an adjustment for the effects of dilutive
potential shares.
The company earnings were as follows:
(42.5)
29.7
(41.0)
29.5
(5.4)
(3.6)
–
(3.2)
(4.9)
(6.4)
(1.7)
–
(0.1)
(2.4)
(3.6)
(3.5)
(0.3)
(3.8)
(0.3)
(5.5)
(1.8)
0.9
(2.0)
2.0
Revenue
Capital
2013
£m
2012
£m
2013
£m
2012
£m
Profit/(loss) for the year
28.1
23.0
178.7
(116.2)
Financial statements 66 Annual report 2013 Caledonia Investments plc
continued
Notes to the financial statements
The profit attributable to shareholders was as follows:
Company
Group
2013
£m
2012
£m
2013
£m
2012
£m
8. Investments
Company
Profit/(loss) attributable
to shareholders
(basic and diluted)
206.8
(93.2)
201.3
(98.6)
The weighted average number of shares was as follows:
Non-current investments
Investments held at fair value
through profit or loss
Investments in subsidiaries held at cost
Company
Group
2013
000’s
2012
000’s
2013
000’s
2012
000’s
2013
£m
2012
£m
1,204.8 1,180.7
0.8
1,205.6 1,181.5
0.8
Issued shares at year start
Effect of shares cancelled
Effect of shares held
in treasury
Effect of shares held by the
employee share trust
Shares held by a subsidiary
Basic weighted average
number of shares during
the year
Effect of share options and
performance share and
deferred bonus awards
Diluted weighted average
number of shares during
the year
Net asset value per share
57,359 58,795 57,359 58,795
(455)
(455)
(463)
(463)
–
(391)
–
(391)
(346)
–
(350)
–
(346)
(3)
(350)
(3)
56,550 57,599 56,547 57,596
589
303
589
303
57,139 57,902 57,136 57,899
The company’s undiluted net asset value per share is based on
the net assets of the company at the year end and on the number
of shares in issue at the year end less shares held by the Caledonia
Investments plc Employee Share Trust, shares held by a
subsidiary and shares accounted as held in treasury. The
company’s diluted net asset value per share assumes the exercise
of all outstanding in-the-money share options and the calling of
performance share and deferred bonus awards and, in the prior
year, the re-issue of shares accounted as held in treasury at the
closing mid-market price on the reporting date.
Net
assets
£m
2013
Number
of shares
000’s
NAV
p/share
Net
assets
£m
2012
Number
of shares
000’s
Undiluted
Adjustments
Diluted
1,298.8 55,880
764
1,302.0 56,644
3.2
2324 1,134.0 57,009
476
2.6
2299 1,136.6 57,485
(25)
The movements in non-current investments were as follows:
Listed
UK
£m
Listed
non-UK
£m
Unlisted
£m
Subsidiaries
£m
Total
£m
Balance at
31 March 2011
Purchases at cost
Reclassifications
Disposal proceeds
Losses on
investments
Rolled-up interest
Balance at
31 March 2012
Purchases at cost
Disposal proceeds
Gains/(losses)
on investments
Rolled-up interest
Balance at
31 March 2013
563.0
69.7
–
(60.6)
155.0
103.4
–
(25.5)
354.1
55.6
(1.1)
(33.0)
111.9 1,184.0
247.8
–
(128.6)
19.1
1.1
(9.5)
(74.8)
–
(13.5)
–
(29.7)
1.7
(5.4)
–
(123.4)
1.7
497.3
26.1
(199.1)
219.4
54.9
(44.8)
347.6
42.1
(51.4)
117.2 1,181.5
142.2
(297.9)
19.1
(2.6)
89.3
–
42.2
–
47.5
1.8
(1.0)
–
178.0
1.8
413.6
271.7
387.6
132.7 1,205.6
Rolled-up interest is the movement in the fair value of loan
Group
instruments attributable to investment income.
Investments held at fair value through profit or loss
Non-current investments
2013
£m
2012
£m
NAV
p/share
1989
(12)
1977
Listed UK securities
Listed non-UK securities
Unlisted securities
Available for sale investments
Unlisted securities
414.2
279.2
394.0
497.9
226.6
364.0
1,087.4 1,088.5
0.9
0.8
1,088.3 1,089.3
Caledonia Investments plc Annual report 2013 67
9. Intangible assets
Group
10. Property, plant and equipment
Group
Goodwill
£m
Customer
relationships
£m
Other
£m
Total
£m
Property
£m
Plant
£m
Equipment
£m
Total
£m
Cost
Balance at 31 March 2011
Acquisition of operations
Disposal of operations
Exchange movements
Balance at 31 March 2012
Acquisition of operations
Other acquisitions
Exchange movements
Balance at 31 March 2013
Amortisation and impairment
Balance at 31 March 2011
Amortisation
Impairment
Disposal of operations
Balance at 31 March 2012
Amortisation
Exchange movements
Balance at 31 March 2013
Carrying amounts
At 31 March 2011
At 31 March 2012
At 31 March 2013
35.1
0.2
(27.7)
(0.1)
7.5
–
0.1
0.2
7.8
30.7
–
0.7
(25.3)
6.1
–
0.1
6.2
4.4
1.4
1.6
13.6
0.6
(11.8)
–
2.4
0.6
–
–
3.0
10.4
1.5
1.1
(11.8)
1.2
0.6
–
1.8
3.2
1.2
1.2
1.2
–
(1.2)
–
–
–
–
–
–
1.2
–
–
(1.2)
–
–
–
–
–
–
–
49.9
0.8
(40.7)
(0.1)
9.9
0.6
0.1
0.2
10.8
42.3
1.5
1.8
(38.3)
7.3
0.6
0.1
8.0
7.6
2.6
2.8
Goodwill and customer relationships primarily relate to business
combinations. Other intangible assets included brands and
trademarks, recipes and formulae and computer software.
Impairment charge
The impairment charge for the previous year of £1.8m was
recognised in operating expenses of trading operations in
the statement of comprehensive income.
Impairment tests for goodwill
The carrying amount of goodwill was predominantly
attributable to a single cash generating unit, Amber Chemicals.
The recoverable amount of the unit has been determined
on the basis of value in use based on recent forecasts from
the unit management’s business plan.
Cost
Balance at 31 March 2011
Acquisition of operations
Other acquisitions
Disposal of operations
Other disposals
Exchange movements
Balance at 31 March 2012
Acquisition of operations
Other acquisitions
Other disposals
Exchange movements
Balance at 31 March 2013
Depreciation and impairment
Balance at 31 March 2011
Depreciation charge
Disposal of operations
Other disposals
Exchange movements
Balance at 31 March 2012
Depreciation charge
Impairment
Other disposals
Exchange movements
Balance at 31 March 2013
Carrying amounts
At 31 March 2011
At 31 March 2012
At 31 March 2013
93.7
–
0.4
–
–
(2.6)
91.5
–
0.3
–
0.8
92.6
25.0
1.8
–
–
(0.5)
26.3
1.8
1.4
–
0.3
29.8
68.7
65.2
62.8
6.1
0.4
0.9
–
(0.2)
(0.4)
6.8
0.1
1.0
(0.1)
0.4
8.2
3.3
1.2
–
(0.1)
(0.2)
4.2
1.3
–
(0.1)
0.3
5.7
2.8
2.6
2.5
14.6
0.1
0.6
(2.0)
–
(0.2)
13.1
–
0.6
(0.1)
0.2
13.8
5.0
1.2
(1.9)
–
(0.2)
4.1
1.1
–
(0.1)
0.2
5.3
9.6
9.0
8.5
114.4
0.5
1.9
(2.0)
(0.2)
(3.2)
111.4
0.1
1.9
(0.2)
1.4
114.6
33.3
4.2
(1.9)
(0.1)
(0.9)
34.6
4.2
1.4
(0.2)
0.8
40.8
81.1
76.8
73.8
Security
At 31 March 2013, properties with a carrying amount of £31.3m
(2012 – £33.0m) were subject to charges to secure bank loans
11. Investment property
(note 17).
Group
Balance at the year start
Additions
Disposals
Disposal of operations
Fair value adjustments
Balance at the year end
2013
£m
14.8
10.2
(0.4)
–
0.4
25.0
2012
£m
20.5
6.4
(1.6)
(10.8)
0.3
14.8
During the previous year an investment property was sold for
£0.4m, which had been leased out for £2,800 per annum.
Financial statements 68 Annual report 2013 Caledonia Investments plc
Notes to the financial statements
continued
The carrying value of investment property was the fair value
of the property as determined by a registered independent
appraiser, having an appropriate recognised qualification and
recent experience in the location and category of the property
being valued. Fair values were determined having regard to
recent market transactions for similar properties in the same
location. Investment property comprised commercial property
that is leased out over 10 to 20 years (note 25) and vacant
freehold land.
Security
At 31 March 2013, investment properties with a carrying value
of £18.8m (2012 – £6.0m) were subject to charges to secure bank
12. Interests in joint ventures
loans (note 17).
The group had the following interests in joint ventures:
Moredun LP
Willmoreton Properties Ltd
Country of
domicile
UK
UK
Ownership
2013
%
33
50
2012
%
33
50
The group’s share of post-acquisition total recognised profit or
loss in the above joint ventures for the year ended 31 March 2013
was £0.6m loss (2012 – £1.0m loss).
Summarised financial information of joint ventures was
as follows:
Assets
£m
Liabilities
£m
Equity
£m
Revenue
£m
Loss
£m
2013
Moredun LP
Willmoreton
Properties Ltd
2012
Moredun LP
Willmoreton
Properties Ltd
3.5
(3.2)
0.1
–
0.3
0.1
0.4
(1.8)
–
–
5.3
(3.2)
2.1
1.6
(2.0)
0.1
5.4
–
(3.2)
0.1
2.2
0.4
2.0
(0.7)
(2.7)
13. Deferred tax assets and liabilities
Company
Movement in temporary differences during the year
Unrecognised deferred tax assets
Deferred tax assets were not recognised in respect of the
following items:
Tax losses
2013
£m
2.2
2012
£m
1.8
A deferred tax asset was not recognised in respect of the tax
losses because it was not probable that future taxable profits
would be available against which the company could utilise
Group
the benefits.
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities were attributable to the
following:
2013
Employee benefits
Other items
2012
Employee benefits
Tax losses
Other items
Assets
£m
Liabilities
£m
Net
£m
4.3
0.7
5.0
4.6
0.5
0.3
5.4
(1.1)
(1.1)
(2.2)
(1.7)
–
(1.4)
(3.1)
3.2
(0.4)
2.8
2.9
0.5
(1.1)
2.3
Unrecognised deferred tax assets
Deferred tax assets were not recognised in respect of the
following items:
Tax losses
2013
£m
6.6
2012
£m
7.3
A deferred tax asset was not recognised in respect of the tax
losses because it was not probable that future taxable profit would
be available against which the group could utilise the benefits.
Movement in temporary differences during the year
Balance
at year
start
£m
Compre-
hensive
income
£m
Other comprehensive
income
Taxation
£m
Exchange
movement
£m
Disposed
in the year
£m
Balance
at year end
£m
2013
Investments
2012
Investments
Balance
at year
start
£m
Compre–
hensive
income
£m
Balance
at year
end
£m
–
–
(0.5)
0.5
–
–
2013
Employee
benefits
Tax losses
Other items
2012
Investments
Employee
benefits
Tax losses
Other items
2.9
0.5
(1.1)
2.3
(1.2)
(0.5)
0.7
(1.0)
1.4
–
–
1.4
(0.5)
0.5
–
2.3
2.1
(1.2)
2.7
(0.9)
(1.6)
0.2
(1.8)
1.5
–
–
1.5
0.1
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
(0.1)
(0.1)
3.2
–
(0.4)
2.8
–
2.9
0.5
(1.1)
2.3
Caledonia Investments plc Annual report 2013 69
14. Inventories
19. Employee benefits
Raw materials and consumables
Work in progress
Finished goods
Properties held for sale
Group
2013
£m
5.8
1.2
2.7
9.3
19.0
2012
£m
4.8
1.5
2.5
6.2
15.0
Non-current assets
Defined benefit pension asset
Current liabilities
Short term compensated absences
Profit-sharing bonus
Security
At 31 March 2013, properties held for sale with a carrying value
of £1.6m (2012 – £1.4m) were subject to charges to secure bank
15. Trade and other receivables
loans (note 17).
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
Non-current liabilities
Defined benefit pension obligations
National Insurance on share options and
performance share and deferred bonus awards
Profit-sharing bonus
Liability for long term service leave
Total employee liabilities
Defined benefit pension obligations
Trade receivables and
prepayments
Other receivables
16. Net cash and cash equivalents
8.8
3.1
11.9
3.8
4.2
8.0
38.6
3.1
41.7
31.5
4.2
35.7
The group makes contributions to four (2012 – four) plans
in the UK and US that provide pension benefits for employees.
Group
Company
Group
2013
£m
2012
£m
2013
£m
Bank balances
Short term deposits
Cash and cash equivalents
17. Interest-bearing loans and borrowings
0.2
96.3
96.5
2.6
5.8
8.4
19.9
96.3
116.2
Present value of funded obligations
Fair value of plan assets
Present value of net obligations
2013
£m
2012
£m
82.9
(78.8)
4.1
73.3
(69.0)
4.3
Changes in the present value of defined benefit obligations were
as follows:
2012
£m
18.8
5.8
24.6
Non-current liabilities
Secured bank loans
Unsecured loans
Cumulative
preference shares
Current liabilities
Current portion
of secured loans
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
–
–
–
–
–
–
–
45.0
–
45.0
31.6
19.9
0.1
51.6
3.5
81.1
0.1
84.7
–
–
0.2
0.2
20.8
20.8
Balance at year start
Service cost
Interest cost
Actuarial loss
Actual benefit payments
Settlement/curtailment
Exchange movements
Balance at year end
Group
2013
£m
73.3
1.1
3.3
8.4
(2.2)
(2.0)
1.0
82.9
Changes in the fair value of plan assets were as follows:
Group
2013
£m
2012
£m
6.9
6.9
(0.5)
(2.0)
(2.5)
(0.5)
(1.8)
(2.3)
(11.0)
(11.2)
(0.5)
(5.3)
(0.7)
(17.5)
(20.0)
(0.2)
(3.3)
(0.7)
(15.4)
(17.7)
2012
£m
69.1
0.9
3.5
2.1
(2.3)
–
–
73.3
2012
£m
64.4
4.3
(2.8)
5.3
(2.3)
0.1
69.0
Group
2013
£m
69.0
3.9
4.2
3.2
(2.2)
0.7
78.8
Group bank loans of £31.8m (2012 – £24.3m) were secured by a
charge over certain properties and receivables of the group
18. Trade and other payables
(notes 10, 11 and 14).
Trade payables
Non-trade payables and
accrued expenses
Company
Group
2013
£m
–
4.4
4.4
2012
£m
–
6.4
6.4
2013
£m
9.7
15.7
25.4
2012
£m
8.8
16.5
25.3
Balance at year start
Expected return on assets
Actuarial gain/(loss)
Employer contributions
Actual benefit payments
Exchange movements
Balance at year end
Financial statements
70 Annual report 2013 Caledonia Investments plc
Notes to the financial statements
continued
Amounts recognised in the statement of comprehensive income
were as follows:
Current service cost
Interest on obligations
Expected return on plan assets
Settlement/curtailment
Group
2013
£m
1.1
3.3
(3.9)
(2.0)
(1.5)
2012
£m
0.9
3.5
(4.3)
–
0.1
The expense was recognised in the following lines in the
statement of comprehensive income:
Operating expenses of trading activities
Group
2013
£m
(1.5)
2012
£m
0.1
Amounts recognised in other comprehensive income were as
follows:
Actuarial losses in the year
Cumulative actuarial losses
Group
2013
£m
4.2
16.5
2012
£m
4.9
12.3
An analysis of plan assets and expected returns at the end of the
year (expressed as weighted averages) was as follows:
Plan assets
Equities
Bonds
Other assets
Expected returns
Equities
Bonds
Other assets
Group
2013
£m
2012
£m
46.1
15.4
17.3
78.8
%
7.0
4.0
3.4
5.6
39.9
14.6
14.5
69.0
%
7.0
4.0
3.4
5.6
Principal actuarial assumptions at the reporting date (expressed
as weighted averages) were as follows:
Discount rate at year end
Future salary increases
Future pension increases
Price inflation
Group
2013
%
4.4
4.6
3.4
3.2
2012
%
4.6
4.5
3.4
3.1
The main changes in 2013 relating to pension and other post-
retirement obligations concerned the Bloom Inc Pension Plan
which was frozen to further benefit from 31 March 2013, giving
rise to a £2.1m curtailment gain in the year.
In 2012, the main changes were to the Sterling Industries Pension
Scheme. The UK Government announced in July 2010 that
inflation as measured by the Consumer Price Index (‘CPI’) rather
than the Retail Prices Index (‘RPI’) would be used to determine
future statutory pension increases for private sector pension
schemes. As CPI inflation is generally lower than RPI inflation,
the anticipated lower pension payments reduced the defined
benefit obligation by around £0.7m in 2012, following a reduction
of £0.2m when the change was applied to members in the
Caledonia and Amber schemes in 2011.
Mortality rates are assumed to follow the Self-Administered
Pension Schemes ‘Series 1’ light tables applicable to each
member’s year of birth, projected to calendar year 2009 in line
with medium cohort improvements. Allowance has also been
made for further improvements in line with medium cohort
improvement rates with a minimum improvement of 1.5% pa.
Life expectancy on retirement in normal health is assumed to be
27.5 years for males and 28.7 years for females who are currently
62 years of age.
Expected contributions to group post-employment benefit plans
for the year ending 31 March 2014 were £2.7m (2013 – £3.2m).
Amounts for the current and previous four years were as follows:
2009
£m
2010
£m
2012
£m
2013
£m
2011
£m
Group
Present value of
defined benefit
obligations
Fair value of
plan assets
Deficit in the plan
Experience
adjustment on
plan liabilities
Experience
adjustment on
plan assets
Share-based payments
82.9
(78.8)
4.1
(0.3)
73.3
69.1
67.9
56.5
(69.0)
4.3
(64.4)
4.7
(60.0)
7.9
(47.4)
9.1
(1.5)
(0.8)
(0.1)
(2.1)
4.2
(2.8)
1.0
14.5
(16.3)
The company currently has two executive share option schemes,
a 1998 scheme and a 2005 scheme. These schemes entitle senior
employees to purchase shares in the company at the market price
of the shares at the date of grant and on similar terms, subject to
service and company performance criteria. Under the terms of
the schemes, options may be exercised between three and ten
years after the date of grant, although only one-third of the
options may be exercised after three years from grant, with the
remaining two-thirds becoming exercisable six years after grant.
A number of grants have been made under these schemes.
At the 2011 annual general meeting, shareholders approved a
new performance share scheme to replace the existing share
option scheme as the means of delivering long term incentive
awards to senior executives. The performance share scheme
entitles senior executives to receive options over the company’s
shares which are exercisable at nil-cost, subject to service and
performance conditions. The nil-cost option awards may be
exercised between three and ten years after the date of grant,
although only two-thirds of the awards may be exercised after
three years, with the remaining one-third becoming exercisable
five years after grant. Initial grants of awards under this scheme
were made in 2011.
Caledonia Investments plc Annual report 2013 71
8. Three years of service and two-thirds vest if NAV total return
outperforms the FTSE All-Share Total Return and/or
one-third vests if NAV total return outperforms the FTSE
Actuaries UK Index-linked Gilts (all stocks) Total Return, in
each case with vesting increasing on a straight-line basis from
10% to 100% on outperformance of 0.5% to 3.5%.
All share options and performance share awards have a life of ten
years and all deferred bonus awards have a life of four years.
The number and weighted average exercise prices of share
options were as follows:
2013
2012
Weighted
average
exercise
price
p/share
1512
1503
1547
1487
Weighted
average
exercise
price
p/share
1503
1545
1461
1512
Number
of options
000’s
605
(113)
(221)
271
Number
of options
000’s
815
(38)
(172)
605
Outstanding at the year start
Exercised during the year
Lapsed during the year
Outstanding at the year end
The options outstanding at 31 March 2013 have an exercise
price in the range of 945p to 1878p and a weighted average
contractual life of ten years.
The fair value of services received in return for performance
share scheme and deferred awards granted was measured
indirectly, by reference to the share price at the date of grant.
Under the schemes, share options were granted with service and
non-market performance conditions. Such conditions were not
taken into account in the fair value measurement of the services
received at the dates of grant. There were no market conditions
associated with the share option grants.
The fair value of services received in return for deferred share
awards was measured directly, by reference to the fair value of
services received during the period. This was based on the
amount of annual bonus that was compulsorily and voluntarily
deferred in accordance with the rules of the company’s deferred
bonus plan.
Employee expenses/(credits) were as follows:
Company
Years ended 31 March
Share options granted in 2006
Share options granted in 2007
Share options granted in 2010
Share options granted in 2011
Performance share awards
granted in 2012
Performance share awards
granted in 2013
Deferred bonus awards for 2008
Deferred bonus awards for 2010
Deferred bonus awards for 2011
2013
£m
(0.1)
(0.1)
0.1
(0.4)
2012
£m
–
–
(0.1)
0.2
Group
2013
£m
(0.1)
(0.1)
0.1
(0.4)
2012
£m
–
–
(0.1)
0.2
0.9
0.5
0.9
0.5
0.7
–
–
0.2
1.3
–
0.2
0.1
0.2
1.1
0.7
–
–
0.2
1.3
–
0.2
0.1
0.2
1.1
The company also has two deferred bonus plans, a 2005 plan
and a 2011 plan, under which senior employees compulsorily
defer part of their annual bonus, being any bonus in excess of
50% of their basic salary for the bonus year, into shares and may
voluntarily defer up to 50% of their remaining cash bonus into
shares. The company will match the number of shares comprised
in both compulsory and voluntary deferral, subject to service
and company performance criteria.
The terms and conditions of the grants outstanding as at
31 March 2013 were as follows, whereby all grants are settled
by physical delivery of shares:
Grant date
Entitlement
Vesting
conditions
Number
of shares
Share options
20.11.03
26.05.04
19.08.05
01.06.06
29.05.09
Option grant to senior staff Note 1
Option grant to senior staff Note 2
Option grant to senior staff Note 3
Option grant to senior staff Note 3
Option grant to senior staff Note 3
Performance share scheme awards
11.08.11
28.05.12
Award grant to senior staff
Award grant to senior staff
Deferred bonus awards to senior staff
21.05.10
26.05.11
26.05.11
26.05.11
28.05.12
28.05.12
Voluntary award
Compulsory award
Voluntary award
Matching shares
Voluntary award
Matching shares
Note 4
Note 4
Note 5
Note 7
Note 5
Note 6
Note 5
Note 8
21,100
19,300
82,074
42,379
106,353
271,206
226,462
273,648
500,110
2,762
14,112
2,335
14,890
680
680
35,459
Vesting conditions are as follows:
1. Three/six years of service and NAV outperforms RPI by 9% or
NAV outperforms FTSE All-Share.
2. Three/six years of service and 50% vests if NAV outperforms
RPI by 9% and/or 50% vests if NAV outperforms FTSE
All-Share.
3. Three/six years of service and 50% vests if NAV outperforms
RPI by 9% and/or 50% vests if NAV outperforms FTSE
All-Share by 3%.
4. Three/five years of service and two-thirds vest if NAV total
return outperforms the FTSE All-Share Total Return and/or
one-third vests if NAV total return outperforms the FTSE
Actuaries UK Index-linked Gilts (all stocks) Total Return, in
each case with vesting increasing on a straight-line basis from
10% to 100% on outperformance of 0.5% to 3.5%.
5. Three years of service or earlier termination of employment.
6. Three years of service and 50% vests if NAV outperforms RPI
by 9% and/or 50% vests if NAV outperforms FTSE All-Share
by 3%.
7. Three years of service.
Financial statements 72 Annual report 2013 Caledonia Investments plc
Notes to the financial statements
20. Provisions
continued
Balance at the year start
Bank guarantee provisions
Released during the year
Increased during the year
Other provisions
Decreased during the year
Balance at the year end
Current liabilities
Company
2013
£m
2012
£m
15.9
18.9
(5.1)
2.1
(10.0)
7.0
–
12.9
12.9
–
15.9
15.9
Group
2013
£m
4.1
–
–
(0.2)
3.9
3.9
2012
£m
4.1
–
–
–
4.1
4.1
During the year, the company recognised a £2.1m solvency
guarantee provision and released a £5.1m provision related to
bank guarantees provided for subsidiary borrowings. In the prior
year, £3.0m of net bank guarantee provisions were released.
These provisions have been allocated to the capital reserve.
Other provisions in the group related to environmental and
warranty claims. Provisions are based on an estimate of the
expenditure to be incurred as a result of past events. The matters
that gave rise to the provisions were expected to be resolved over
21. Financial instruments
the next year.
As the majority of financial instruments are carried at fair
value, with fair value changes recognised in the statement of
comprehensive income, all changes in market conditions will
directly affect reported portfolio returns.
Price risk is managed by constructing a diversified portfolio
of instruments traded on various markets and hedging
where appropriate.
The exposures of listed and unlisted equity investments,
equity linked bonds and funds were as follows:
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
Investments held at fair
value through profit or loss 1,147.4 1,120.3 1,047.6 1,031.8
The following table details the sensitivity to a 10% variation in
equity prices. The sensitivity analysis includes all equity and
fund investments held at fair value through profit or loss and
adjusts their valuation at the year end for a 10% change in value.
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
Increase in prices
Decrease in prices
114.7
(114.7)
112.0
(112.0)
104.8
(104.8)
103.2
(103.2)
Financial instruments comprise securities and other
investments, cash balances, borrowings and receivables and
payables that arise from operations. The investment portfolio
includes listed and unlisted equity investments, debt instruments
and investments in funds that are intended to be held for the long
Risk analysis
term.
The sensitivity to equity and fund investments has increased
during the year due to the market movement in the year.
In management’s opinion, the sensitivity analysis is
unrepresentative of the inherent price risk as the year end
exposure does not reflect the exposure throughout the year
as a whole.
The main types of financial risk to which the group is exposed are
market risk, credit risk and liquidity risk.
The nature and extent of the financial instruments outstanding
at the reporting date and the risk management policies employed
are discussed below.
Market risk
Market risk embodies the potential for both losses and gains and
includes price risk, currency risk and fair value interest rate risk.
The strategy for managing market risk is driven by the
investment objective, which is to outperform the FTSE All-Share
Total Return index over ten years. Investments are made in
a range of instruments, including listed and unlisted equities,
debt and non-equity investment funds, in a range of sectors
and regions.
Details of the investment portfolio at the reporting date are
shown on pages 2 and 6 to 21.
Price risk
Price risk may affect the value of listed and unlisted investments
as a result of changes in market prices (other than arising from
interest rate risk or currency risk), whether caused by factors
specific to an individual investment, its issuer or factors affecting
all instruments traded in the market.
Currency risk
Investments in financial instruments and other transactions may
be denominated in currencies other than the functional currency.
Consequently, there is exposure to the risk that the exchange
rate of the functional currency may change relative to other
currencies in a manner that has an adverse effect on the value of
that portion of assets and liabilities denominated in currencies
other than the functional currency.
The company’s non-functional currency denominated
investments and gains/losses thereon are reviewed regularly
by the directors and the currency risk is managed by the
directors with the overall asset allocation strategies and risk.
At 31 March 2012, the company and group had a euro forward
currency contract hedging a euro denominated investment
which was fully closed out in 2013.
The fair values of the monetary items that have foreign currency
exposure were as follows:
Cash and cash equivalents
Trade and other receivables
Company
Group
2013
£m
0.2
3.1
2012
£m
2.3
4.2
2013
£m
0.6
5.4
2012
£m
2.6
6.1
Caledonia Investments plc Annual report 2013 73
The following table details the sensitivity to a 10% variation
in exchange rates. This level of change is considered to be
reasonable, based on observation of market conditions and
historic trends. The sensitivity analysis includes all foreign
denominated debt investments.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment.
A credit policy is in place and exposure to credit risk is
regularly monitored.
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
At 31 March 2013, the financial assets exposed to credit risk
were as follows:
Sterling depreciates
(weakens)
Sterling appreciates
(strengthens)
0.3
0.5
0.5
0.7
(0.2)
(0.4)
(0.4)
(0.6)
The exposure to foreign currency has decreased during the year
due to the decrease in foreign cash and cash equivalent balances
and decrease in foreign trade and other receivables.
Interest rate risk
Interest rate movements may affect the fair value of investments
in fixed interest securities and the level of income receivable
from fixed income securities and cash at bank and on deposit.
The company and group held fixed rate, interest-bearing financial
assets, with maturity of up to five years, cash at bank and term
deposits, with the term to maturity of up to three months, and
floating rate, interest-bearing financial assets. The group also
had floating rate, interest-bearing borrowings.
The exposure to interest rate risk on financial assets and
liabilities was as follows:
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
Fixed rate
Investments in debt
instruments
Interest-bearing loans and
borrowings
Floating rate
Investments in debt
instruments
Cash and cash equivalents
Interest-bearing loans and
borrowings
11.4
15.0
7.6
24.4
–
–
(9.2)
(2.7)
46.8
96.5
46.2
8.4
32.2
116.2
32.3
24.6
–
(45.0)
(42.6)
(102.8)
The sensitivity analysis below has been determined based on
the exposure to interest rates at the reporting date from a 50
basis point change taking place at the beginning of the financial
year and held constant throughout the year. This level of change
is considered to be reasonable, based on observation of market
conditions and historic trends.
Decrease in interest rates
Increase in interest rates
Company
Group
2013
£m
0.2
(0.2)
2012
£m
0.7
(0.7)
2013
£m
0.1
(0.1)
2012
£m
1.1
(1.1)
Investments in debt
instruments
Operating and other
receivables
Derivatives
Cash and cash equivalents
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
59.3
63.3
40.9
58.8
11.9
–
96.5
167.7
8.0
2.5
8.4
82.2
41.7
–
116.2
198.8
35.7
2.5
24.6
121.6
Prior to making investments in debt instruments, management
has in place a process of review that includes an evaluation of
a potential investee company’s ability to service and repay its
debt. Management reviews the financial position of investee
companies, including their continuing ability to service and repay
debt, on a regular basis.
The exposure to credit risk on operating and other receivables
is mitigated by performing credit evaluations on investee
companies as part of the due diligence process.
Credit risk arising on money market funds and cash and cash
equivalents is mitigated by spreading investments and deposits
across a number of approved counterparties in accordance with
board policy. These are either investment grade banks with a
credit rating of ‘AA3’ or ‘AA-’ or higher, as determined by the
ratings agencies, Moody’s and Fitch, or banks specifically
approved by the board. These credit ratings are reviewed
regularly.
All transactions in listed securities are settled on contract terms
using approved brokers. The risk of default is considered
minimal, as delivery of securities sold is only made once the
broker has received payment. Payment is made on a purchase
once the securities have been received by the broker. The trade
will fail if either party fails to meet their obligations. Listed
security trades are settled through HSBC Global Custody.
There were no significant concentrations of credit risk to
Fair value
counterparties at 31 March 2013 (2012 – £nil).
Most of the financial instruments are carried at fair value in the
statement of financial position. Usually, the fair value of the
financial instruments can be reliably determined within a
reasonable range of estimates. For certain other financial
instruments, specifically operating and other receivables and
payables, the carrying amounts approximate fair value due to the
immediate or short term nature of these financial instruments.
The principal methods and assumptions used in estimating the
Liquidity risk
fair value of investments are disclosed on page 31.
The company and group’s sensitivity to interest rates has
decreased in the year due to the reduction in variable rate
borrowings and increase in cash and cash equivalents.
Liquidity risk arises as a result of the possibility that the
company may not be able to meet its obligations as they fall due.
Financial statements
74 Annual report 2013 Caledonia Investments plc
Notes to the financial statements
continued
The corporate treasury function provides services to the
company and group, coordinating access to domestic financial
markets for both borrowing and depositing. Group companies
access local financial markets when this is more favourable, in
liaison with the corporate treasury function. Executive
management monitors the group’s liquidity on a weekly basis.
The following table shows the group’s exposure to gross liquidity
risks, based on the undiscounted contractual maturities of the
financial liabilities:
Fair value hierarchy
The company’s valuation methodology is disclosed on page 31.
The table below analyses financial instruments held at fair value
according to the subjectivity of the valuation method, using the
following hierarchy:
Level 1
Level 2
Quoted prices (unadjusted) in active markets for
identical assets.
Inputs other than quoted prices included within Level 1
that are directly or indirectly observable.
Discount
£m
Net total
£m
Level 3
Inputs for the asset that are not based on observable
market data.
Up to
1 year
£m
1 to
5 years
£m
Over
5 years
£m
1.7
0.3
–
2.0
21.4
1.3
38.0
20.1
–
58.1
4.0
82.4
0.6
–
0.1
0.7
–
–
2013
Secured bank loans
Unsecured loans
Cumulative
preference shares
2012
Secured bank loans
Unsecured loans
Cumulative
preference shares
(8.5)
(0.5)
–
(9.0)
(1.1)
(2.6)
31.8
19.9
0.1
51.8
24.3
81.1
–
(3.7)
0.1
105.5
0.1
0.1
Capital management policies and procedures
–
86.4
–
22.7
●●
The company’s capital management objectives are:
●●
to ensure that it will be able to continue as a going concern
to maximise the income and capital return to its shareholders
principally through the use of equity capital, although the
company will maintain appropriate borrowing facilities, to be
used for short term working capital or bridging finance,
currently £75m (2012 – £100m).
The company’s total capital at 31 March 2013 was £1,298.8m
(2012 – £1,134.0m) comprising equity share capital and reserves.
The company was ungeared at the year end (2012 – 4% geared).
●●
The board monitors and reviews the broad structure of the
company’s capital on an on-going basis. This review includes:
●●
●●
the planned level of gearing, which takes into account planned
investment activity
the possible buy-back of equity shares for holding in treasury
or cancellation, which takes account of the discount of the
share price to net asset value per share
the annual dividend policy.
The company’s objectives, policies and processes for managing
capital are unchanged from the preceding year.
●●
The company is subject to the following externally imposed
capital requirements:
●●
as a public limited company, the company is required to have
a minimum issued share capital of £50,000
to maintain its approval as an investment trust company, the
company is required to comply with the provisions of section
1158 of the Corporation Tax Act 2010 as amended by the
Investment Trust (Approved Company) (Tax) Regulations 2011.
The company has complied with these requirements, which are
unchanged since the previous year end.
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
Investments held at fair value
Level 1
Level 2
Level 3
685.3
42.9
476.6
724.5
19.1
344.9
1,204.8 1,180.7 1,087.4 1,088.5
693.4
10.3
383.7
716.7
48.9
415.1
Available for sale investments
Level 2
Derivatives
Level 2
–
–
–
0.9
0.8
2.5
–
2.5
In the year, an investment with a value of £3.2m was transferred
from Level 2 to Level 3 as a result of there no longer being any
observable market data.
Movement in Level 3 financial instruments was as follows:
Balance at the year start
Reclassifications
Purchases
Disposal proceeds
Gains and losses on
investments sold in the year
Gains and losses on
investments held at
the year end
Balance at the year end
22. Capital and reserves
Company
Group
2013
£m
2012
£m
2013
£m
2012
£m
415.1
3.2
60.5
(52.4)
403.5
–
69.1
(32.6)
344.9
3.2
42.7
(61.9)
340.2
–
55.6
(29.1)
24.6
(73.2)
26.1
(36.8)
25.6
476.6
48.3
415.1
28.7
383.7
15.0
344.9
Share capital and share premium
Ordinary
shares
£m
Deferred
ordinary
shares
£m
Share
premium
£m
Balance at 31 March 2011
Shares cancelled
Balance at 31 March 2012
and 2013
2.9
(0.1)
2.8
0.4
–
0.4
1.3
–
1.3
Total
£m
4.6
(0.1)
4.5
Caledonia Investments plc Annual report 2013 75
The number of fully paid shares in issue was as follows:
Group
Ordinary shares
2013
000’s
2012
000’s
Deferred
ordinary shares
2013
000’s
2012
000’s
Balance at the year start
Shares cancelled
Balance at the year end
57,359 58,795
(1,137)
(1,436)
56,222 57,359
8,000
–
8,000
8,000
–
8,000
The company has also outstanding share options and
performance share scheme and deferred bonus awards (note 19).
As at 31 March 2013, the issued share capital of the company
comprised 56,222,028 ordinary shares (2012 – 58,358,801) and
8,000,000 deferred ordinary shares (2012 – 8,000,000). The
ordinary and deferred ordinary shares have a nominal value of
5p each.
The holders of the ordinary shares are entitled to receive
dividends as declared from time to time and are entitled to one
vote per share at meetings of the company. In respect of the
company’s ordinary shares that are held by the group, all voting
rights are suspended.
The deferred ordinary shares carry no voting rights and are not
redeemable. They carry the right to a fixed cumulative preference
dividend of 1% per annum (exclusive of any associated tax credit)
of the nominal value of such deferred ordinary shares, being
0.05p per share, or £4,000 in aggregate, for all such shares
currently in issue. The company is required to pay the dividend
to the extent that it has distributable profits. On a winding-up or
other return of capital, the deferred ordinary shares carry the
right to the payment of the amount paid up on such shares only
after holders of the ordinary shares have received the sum of
£100,000 in respect of each such ordinary share. All of the
deferred ordinary shares are held by Sterling Industries PLC,
Capital redemption reserve
a wholly-owned subsidiary of Caledonia.
The capital redemption reserve comprises the nominal value of
those shares purchased by the company out of its own profits and
cancelled. At 31 March 2013, the capital redemption reserve was
£1.3m (2012 – £1.3m and 2011 – £1.2m). 1,125,273 shares were
Reserves
cancelled in the year (2012 – 1,435,980) shares.
Company
Capital reserve
2013
£m
2012
£m
Revenue reserve
2012
£m
2013
£m
Total comprehensive
income
Share-based payments
Own shares cancelled
Dividends to shareholders
Balance at the year start
Balance at the year end
178.7
–
(17.9)
–
160.8
854.3
1,015.1
(116.2)
–
(22.3)
–
(138.5)
992.8
854.3
28.1
1.3
–
(25.1)
4.3
290.6
294.9
23.0
1.1
–
(21.8)
2.3
288.3
290.6
Balance at 31 March 2011
Total comprehensive income
Non-controlling interest disposed
Non-controlling interest acquired
Own shares cancelled
Share-based payments
Dividends paid
Balance at 31 March 2012
Total comprehensive income
Non-controlling interest acquired
Own shares cancelled
Share-based payments
Dividends paid
Balance at 31 March 2013
Translation
reserve
£m
Retained
earnings
£m
Non-
controlling
interest
£m
–
–
–
–
–
–
4.3 1,267.7
(102.0)
–
(1.0)
(22.3)
1.1
(21.8)
4.3 1,121.7
198.5
1.1
–
(0.5)
(17.9)
–
–
1.3
(25.1)
–
5.4 1,278.0
(0.4)
0.4
3.3
–
–
–
(0.3)
3.0
0.8
0.2
–
–
(0.4)
3.6
The foreign exchange translation reserve comprised all foreign
exchange differences arising from the translation of the financial
statements of foreign operations that were not integral to the
operations of the group.
Own shares
Balance at the year start
Additions
Shares cancelled
Disposals
Balance at the year end
Company
Group
2013
£m
16.7
0.9
–
(0.6)
17.0
2012
£m
28.2
0.7
(9.6)
(2.6)
16.7
2013
£m
16.7
0.9
–
(0.6)
17.0
2012
£m
28.2
0.7
(9.6)
(2.6)
16.7
Company
The company own shares reserve represents the net cost to the
employee share trust of acquiring shares to satisfy employee
share options, performance share awards and deferred bonus
awards and the cost of shares in Caledonia purchased in the
market and held in treasury in the prior year.
Group
The group own shares reserve also included Caledonia‘s shares
held by a subsidiary company.
Financial statements 76 Annual report 2013 Caledonia Investments plc
Notes to the financial statements
23. Acquisition of subsidiaries
25. Operating leases
Leases as lessee
continued
During the year, the group acquired subsidiaries for an aggregate
consideration of £0.9m (2012 – £3.4m). The group also paid
deferred consideration of £0.4m (2012 – £0.8m) for the purchase
of a US subsidiary in 2009 and £0.1m (2012 – £0.2m) for a
non-controlling interest acquired in 2011.
The aggregate net assets of subsidiaries acquired in the year
were as follows:
Intangible assets
Investments held at fair value through profit
or loss
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Net assets acquired
Goodwill
Fair value of investment held
Non-controlling interests acquired
Deferred consideration
Consideration
Satisfied by
Cash
Cash and cash equivalents acquired
Net cash outflow arising on acquisition
Cash consideration
24. Disposal of subsidiaries
2013
£m
0.6
–
0.1
1.0
1.3
0.1
(2.0)
–
1.1
–
–
(0.2)
0.5
1.4
1.4
(0.1)
2012
£m
0.6
0.8
0.5
0.5
1.1
1.8
(0.9)
(0.1)
4.3
0.2
(1.1)
–
1.0
4.4
4.4
(1.8)
1.3
2.6
The aggregate net assets of subsidiaries sold were as follows:
Goodwill
Property, plant and equipment
Investment property
Deferred tax assets
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and borrowings
Trade and other payables
Current tax liabilities
Non-controlling interest disposed
Loss on disposal
Total consideration
Net cash inflow arising on disposal
Cash and cash equivalents received
Cash and cash equivalents sold
2013
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2012
£m
2.4
0.1
10.8
0.1
1.5
1.2
(2.4)
(1.6)
(0.1)
12.0
3.3
(1.2)
14.1
14.1
(1.2)
12.9
Non-cancellable operating lease rentals were payable as follows:
Less than one year
Between one and five years
More than five years
Group
2013
£m
1.6
4.7
14.6
20.9
2012
£m
1.2
3.4
11.0
15.6
The group leases properties and various items of equipment
under operating leases. None of the leases included contingent
rentals.
During the year, £1.2m (2012 – £1.2m) was recognised as an
expense in the statement of comprehensive income in respect
Leases as lessor
of operating leases.
The group leases out its investment property under operating
leases (note 11). The future minimum lease receipts under
non-cancellable leases were as follows:
Less than one year
Between one and five years
More than five years
Group
2013
£m
2.9
8.6
6.8
18.3
2012
£m
2.5
6.2
5.5
14.2
During the year, £2.6m (2012 – £2.0m) was recognised as income
in the statement of comprehensive income in respect of operating
26. Capital commitments
leases.
At the reporting date, the company and group had entered
into unconditional commitments to limited partnerships,
commitments to other investment funds and loan facilities to
portfolio companies, as follows:
Investments
Contracted but not called
Conditionally contracted
Company
Group
2013
£m
2012
£m
2013
£m
2012
£m
59.2
19.7
78.9
67.5
12.9
80.4
59.2
19.7
78.9
67.5
12.9
80.4
At the reporting date, the company had entered into a non-
discretionary share buy-back arrangement with Winterflood
Securities to acquire its own shares for cancellation, within
certain parameters, up to a limit of £20m. The arrangement
terminated on 29 May 2013.
Caledonia Investments plc Annual report 2013 77
27. Contingencies
Other related party transactions
The company has provided guarantees capped at £6.5m,
£3.7m and £5.0m to the trustees of the Caledonia Pension
Scheme, the Sterling Industries Pension Scheme and the Amber
Industrial Holdings PLC Pension & Life Assurance Scheme
respectively in respect of the liabilities of the participating
employers of those schemes.
In addition, the company guaranteed a €1.75m (£1.5m) loan
by an associated company to a fellow investor. Security was
received over shares in the associated company.
At 31 March 2013, there was no material litigation outstanding
28. Related parties
against the company or any of its subsidiary undertakings.
Identity of related parties
The company and group had a related party relationship with its
subsidiaries (note 30), associates (note 31), joint ventures (note
Transactions with key management personnel
12) and with its key management personnel, being its directors.
Certain directors of the company and their immediate relatives
had significant influence in The Cayzer Trust Company Ltd, which
held 34.9% of the voting shares of the company as at 31 March
2013 (2012 – 34.2%).
In addition to their salaries, the group provided non-cash and
post-employment benefits to directors and executive officers.
Details of directors’ pension benefits are set out on page 47 in
the Directors’ remuneration report.
The key management personnel compensation was as follows:
Short term employee
benefits
Post-employment benefits
Termination benefits
Equity compensation
benefits
Company
2013
£m
2012
£m
Group
2013
£m
2012
£m
2.5
0.2
0.2
0.6
3.5
2.0
0.2
0.4
0.8
3.4
2.5
0.2
0.2
0.6
3.5
2.0
0.2
0.4
0.8
3.4
Total remuneration of directors is included in ’Personnel
expenses’ (note 2).
During the year, the group invoiced and received £0.1m (2012 –
£0.1m) in rent and administration fees from The Cayzer Trust
Company Ltd.
Subsidiaries
Intra-group transactions are eliminated on consolidation and
are not reported in the group accounts. Transactions between
the company and its subsidiaries were as follows:
2013
2012
Amount of
transactions
£m
Balance
at year end
£m
Amount of
transactions
£m
Balance
at year end
£m
Comprehensive income items
Guarantee fees receivable
Dividends receivable on
equity shares
Capital distributions
receivable
Management fees payable
Taxation
Financial position items
Investments purchased
Equity subscribed
Capital contributions
Loans advanced
Loans repaid/(received)
Guarantees
0.1
7.7
1.3
(12.3)
2.5
0.3
15.0
3.8
(1.3)
2.5
(6.9)
–
–
–
(2.3)
–
–
–
–
19.0
–
(77.7)
0.2
3.3
1.1
(11.0)
1.2
–
5.6
11.1
(13.3)
(2.5)
19.1
0.1
–
–
(1.0)
0.5
–
–
–
20.3
(2.5)
(70.8)
Associates and joint ventures
Transactions between the company and group and associates and
joint ventures were as follows:
2013
2012
Amount of
transactions
£m
Balance
at year end
£m
Amount of
transactions
£m
Balance
at year end
£m
Company
Dividends receivable on
equity shares
Interest receivable on loan
securities
Equity contributed
Loans advanced
Other group companies
Directors’ fees receivable
Investments purchased
5.6
–
3.8
–
1.9
–
(8.4)
0.3
–
–
–
42.3
0.1
–
1.9
16.7
(6.8)
0.3
4.5
–
–
50.7
0.1
–
Financial statements 78 Annual report 2013 Caledonia Investments plc
Notes to the financial statements
29. Operating segments
Geographical segments
continued
The chief operating decision maker has been identified as the
Executive Committee, which reviews the company’s internal
reporting in order to assess performance and allocate resources.
Management has determined the operating segments based on
these reports.
In presenting information on the basis of geographical segments,
segment revenue is based on the geographical location of
customers and segment assets are based on the geographical
location of the assets.
UK
£m
US
£m
Other
£m
Total
£m
The performance of operating segments is assessed on a measure
of company total revenue, principally comprising gains and losses
on investments and derivatives hedging those investments and
investment income. Reportable profit or loss is after ‘Treasury
income’ and ‘Other items’, which comprise management and
other expenses and provisions. Reportable assets equate to the
company’s net asset value. Cash and cash equivalents and other
items are not identifiable operating segments.
2013
Revenue
Non-current assets
2012
Revenue
Non-current assets
187.2
62.3
(45.2)
52.3
94.9
4.4
57.1
4.2
43.4
35.1
325.5
101.8
15.8
38.5
27.7
95.0
Reportable results and assets view subsidiaries and joint
ventures as investments held at fair value and include liabilities
of the company. To reconcile to group profit or loss and total
assets ‘Eliminations’ comprise the difference between the
aggregate fair value and total assets of subsidiaries and joint
ventures and the company’s liabilities.
During the year, investments previously in the Asia and Property
pools were reallocated to the Quoted, Unquoted and Funds pools.
‘Other investments’ comprise subsidiaries not managed as part of
the investment portfolio.
Profit or loss
before tax
2013
£m
2012
£m
Assets
2013
£m
2012
£m
Quoted pool
Unquoted pool
Funds pool
Income & Growth pool
Investment portfolio
Other investments
Total revenue/investments
Cash and cash equivalents
Other items
Reportable total
Eliminations
Group total
120.9
52.8
12.9
27.5
214.1
0.2
214.3
0.6
(13.0)
201.9
(0.1)
201.8
–
(59.5)
(22.5)
(9.0)
5.3
552.1
517.2
311.7
348.1
209.6
166.8
110.6
162.0
(85.7) 1,194.1 1,184.0
–
11.5
(85.7) 1,205.6 1,184.0
8.4
96.5
0.8
(10.7)
(58.4)
(3.3)
(95.6) 1,298.8 1,134.0
141.1
81.0
(96.2) 1,379.8 1,275.1
(0.6)
Non-current assets exclude financial instruments, deferred tax
Major clients
and employee benefit assets.
The group is reliant on a number of investments accounting for
more than 10% of the group revenues, which included gains and
30. Group entities
losses on investments.
Significant subsidiaries were as follows:
Name
Country of
domicile
Shares held
Ownership
2012
%
2013
%
Ordinary 100 100
UK
Amber 2010 Ltd
Ordinary 100 100
UK
Amber Chemical Co Ltd
80 80
Capital
UK
Brookshire Capital LLP
Ordinary 100 100
Buckingham Gate Ltd
UK
Ordinary 100 100
Caledonia CCIL Distribution Ltd UK
Ordinary 100 100
Caledonia Group Services Ltd
UK
Ordinary 100 100
Caledonia Sloane Gardens Ltd UK
UK
Caledonia Treasury Ltd
Ordinary 100 100
Luxembourg Ordinary 100 100
Easybox Sarl
UK
Edinmore Holdings Ltd
Edinmore Investments Four Ltd UK
Ocean Dial Group Ltd
UK
Ocean Dial Gateway to India Ltd Mauritius
Sloane Club Management Ltd
Sloane Club Properties LLP
Sterling Industries PLC
UK
UK
UK
Preference 100
Ordinary 100 100
Ordinary 100 100
Ordinary 100 100
Ordinary
94
Ordinary 100 100
Capital
Ordinary 100 100
Preference 80 80
100
A complete list of investments in subsidiaries will be submitted
with the company’s annual return to the Registrar of Companies.
Caledonia Investments plc Annual report 2013 79
31. Interests in associates
32. Accounting estimates and judgements
Key sources of estimation uncertainty
Fair values of financial instruments
Many of the group’s financial instruments are measured at fair
value in the statement of financial position and it is usually
possible to determine their fair values within a reasonable range
of estimates.
For the majority of the group’s financial instruments, quoted
market prices are readily available. However, certain financial
instruments, such as unlisted securities, are fair valued using
valuation techniques, including reference to the current fair
values of instruments that are substantially the same (subject to
appropriate adjustments).
Fair value estimates are made at a specific point in time, based
on market conditions and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgement (e.g. interest
rates, volatility, estimated cash flows) and therefore cannot be
determined with precision.
The company is an investment trust company and, accordingly,
does not equity account for associates, which are designated as
investments held at fair value through profit or loss.
Significant associates of the company were as follows:
Name
Country of
domicile
Shares held
Ownership
2012
%
2013
%
UK
UK
UK
UK
20
22
21
24
B&W Group Ltd
Empresaria Group plc
Eredene Capital plc
General Practice Investment
Corp Ltd
India Capital Growth Fund Ltd
Guernsey Ordinary
Marwadi Shares & Finance Ltd
Ordinary
India
Omniport Holdings Ltd
Ordinary
UK
Ordinary
Oval Ltd
UK
Ordinary
UK
Real Estate Investors PLC
Ordinary
Satellite Information Services Ltd UK
Ordinary
UK
Seven Publishing Group Ltd
UK
TCL Holdings Ltd
Ordinary
Germany Ordinary
TGE Marine AG
20
Preferred
23
Ordinary
22
Ordinary
Ordinary
24
Preference 100 100
24
32
39
24
30
23
29
50
50
24
32
39
24
28
23
29
50
50
A complete list of investments in associates will be submitted
with the company’s annual return to the Registrar of Companies.
Aggregated amounts relating to associates, extracted on a 100%
basis, were as follows:
Assets
Liabilities
Equity
Revenues
Profit/(loss)
2013
£m
2012
£m
991.0
(584.5)
406.5
740.8
33.0
950.8
(622.0)
328.8
912.5
(9.8)
Financial statements
80 Annual report 2013 Caledonia Investments plc
Information for investors
Dividends, change of address and other shareholder services
UK registered shareholders
Shareholders on the UK register who wish to have dividends
paid directly into a UK bank account, rather than by cheque to
their registered address, can complete a mandate form for this
purpose. Mandates may be obtained from Capita Registrars.
Where dividends are paid directly into shareholders’ bank
accounts, dividend tax vouchers are sent directly to shareholders’
registered addresses.
Capita Registrars also offer an international payments service
whereby overseas shareholders registered on the UK register
may convert their dividend payments into a chosen currency
and receive payment either in the form of a currency draft or
by a direct payment into an overseas bank account. Details of
the currencies available under the service and how to apply,
including the terms and conditions, are available on-line at
international.capitaregistrars.com or an application
pack can be requested by telephone on +44 20 8639 3405
(from outside the UK) or 0871 664 0385 (from within the UK,
calls cost 10p per minute including VAT, plus network extras)
between 9.00am and 5.30pm, UK time.
Communications with shareholders are mailed to the address
held on the share register. In the event of a change of address or
other amendment, shareholders on the UK register should notify
Capita Registrars, under the signature of the registered holder,
or where there is more than one registered holder, under the
signature of the first named holder.
Post and telephone contact details for Capita Registrars are
shown on the opposite page. Capita Registrars also provide an
online facility to enable shareholders to manage securely their
shareholdings via the internet. By registering to use the facility,
shareholders can access a range of online services, including
viewing shareholding details, transaction and dividend histories,
change of address and bank mandate and use of the online proxy
voting service. The online facility is available at www.
capitashareportal.com.
Capita Registrars also offer a share dealing service and dividend
reinvestment plan for existing shareholders. The share dealing
service is available online at www.capitadeal.com or by telephone
on 0871 664 0384 (calls cost 10p per minute including VAT,
plus network extras, with lines open Monday to Friday 8.00am
to 4.30pm).
The dividend reinvestment plan provides a convenient way for
shareholders to build up their shareholdings by using cash
dividends to buy more shares in the company. An application
form for the dividend reinvestment plan is available online at
www.capitashareportal.com or by telephone from Capita IRG
Trustees Ltd on 0871 664 0381 (calls cost 10p per minute
including VAT, plus network extras, or +44 20 8639 3402 if
calling from overseas). In each case, lines are open from Monday
to Friday 8.30am to 5.30pm. Alternatively, an application form
can be requested by email from shares@capitaregistrars.com.
New Zealand registered shareholders
Shareholders on the New Zealand register may arrange to
receive their dividends by direct credit to a specified New
Zealand bank account. New Zealand registered shareholders
should contact Computershare Investor Services if they wish
to set up such an arrangement.
Shareholders on the New Zealand register should also notify
Computershare Investor Services if they have changed their
address, but where there is more than one registered holder,
all holders should sign the notification.
The contact details for Computershare Investor Services are
shown on the opposite page. New Zealand registered
shareholders may also change their addresses, update payment
instructions and view their shareholdings, including
transactions, online at www.investorcentre.com/nz. General
enquiries can be directed to enquiry@computershare.co.nz.
It will assist Computershare Investor Services if the CSN or
Caledonia Investments ISA
shareholder number is quoted in any communication with them.
The Caledonia Investments Individual Savings Account (‘ISA’) is a
tax efficient savings account that allows participants to invest up
to an annual amount of £11,520 (for the tax year ending 5 April
2014). Lump sum payments or regular monthly deposits can be
made into the ISA. Details of the ISA are available on Caledonia’s
Caledonia Investments Share Savings Scheme
website or by request from the company.
The Caledonia Investments Share Savings Scheme is a plan that
aims to provide a simple and flexible way for investors to
purchase shares in Caledonia. Lump sum payments or regular
monthly deposits can be made into the Share Savings Scheme.
Details of the Share Savings Scheme are available on Caledonia’s
PEPs and ISAs
website or by request from the company.
Caledonia’s shares can be treated as qualifying investments for
Share prices
the purposes of the PEP and ISA rules.
The company’s ordinary shares are listed on the London Stock
Exchange under the SEDOL code of 0163992 or TIDM code of
CLDN. Prices are published daily in the Financial Times under
the ‘Investment Companies’ heading and in other leading
newspapers and can also be viewed on the company’s website
at www.caledonia.com.
The company’s ordinary shares are also listed on the New
Zealand Exchange under the security code of CDN. Shareholders
in New Zealand are able to trade their shares locally and receive
dividends in New Zealand dollars.
Monthly net asset value
The ISIN code for Caledonia’s ordinary shares is GB0001639920.
The company releases a net asset value announcement and
publishes a fact sheet shortly after each month end. These can be
found on the company’s website at www.caledonia.com.
Who we are
Caledonia Investments is a self-managed investment trust company with
net assets of £1.3bn. We can trace our history to the shipping empire
established by Sir Charles Cayzer in 1878. We continue to enjoy the backing
of the Cayzer family, who own some 48% and remain actively involved in
the management of the company. The support of the Cayzer family enables
Caledonia to maintain a long term investment horizon.
What we do
Our business is to deliver long term growth in shareholder capital and
income by investing in a range of asset classes in various sectors and regions.
How we invest
Our business model has been successfully developed, evolved and deployed
over many years to deliver long term growth in capital and a growing annual
dividend to shareholders. We identify and invest in value opportunities
in well managed, long term businesses and funds, both listed and private.
Our investment portfolio is divided into ‘pools’ of capital – Quoted,
Unquoted, Funds and Income & Growth – with specialist investment
executives responsible for each. Our priority is the origination and execution
of investments in high quality companies that make annual payments to
shareholders, run by strong management teams.
Caledonia Investments plc Annual report 2013 81
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300 (calls cost 10p per minute
including VAT, plus network extras)
+44 20 8639 3399 if calling from overseas
Computershare Investor Services Ltd
Private Bag 92119
Victoria Street West
Auckland 1142
New Zealand
Tel: +64 9 488 8777
Brokers
J.P.Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Winterflood Securities Ltd
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
First NZ Capital Securities
PO Box 3394
Level 14, HP Tower
171 Featherston Street
Wellington
New Zealand
Solicitors
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
Directors and advisers
Chairman
2
Roderick D Kent
Executive directors
William P Wyatt (Chief Executive)
Stephen A King (Finance Director)
Jamie M B Cayzer-Colvin
Non-executive directors
1,2,3,4
1,2,3,4
Charles M Allen-Jones (Senior Independent)
1
Stuart J Bridges
The Hon Charles W Cayzer
1,2
Richard Goblet d’Alviella
Charles H Gregson
1,2,3,4
David G F Thompson
Robert B Woods CBE
1. Member of the Audit Committee
2. Member of the Nomination Committee
3. Member of the Remuneration Committee
4. Member of the Governance Committee
Associate directors
2,3,4
Graeme P Denison
Charles H Edwards
Sally D Flanagan
Jonathan R Hale
Duncan E Johnson
Mathew S D Masters
Sheena D McNeill
Stephen J Mitchell
Paul M Whiteley
Secretary
Graeme P Denison
Registered office
Cayzer House
30 Buckingham Gate
London SW1E 6NN
Registered number
Registered in England no 235481
Auditor
KPMG Audit Plc
15 Canada Square
Canary Wharf
London E14 5GL
Overview
1 Company highlights
2 Portfolio summary
Chairman and
3
Chief Executive’s report
Investment review
Business review
6
22 Business model
24 Strategic priorities
26 Financial review
28 Risk management
30 Corporate responsibility
31 Valuation methodology
Governance
32 Board of directors
34 Directors’ report
37 Directors’ statement
of responsibility
38 Corporate governance
report
43 Directors’ remuneration
Financial statements
51 Independent
auditor’s report
52 Financial statements
Other information
80 Information for investors
81 Directors and advisers
report
TT-COC-002228
This report has been printed in the UK by Royle Corporate Print. Under the framework of ISO 14001, Royle takes a structured approach to measure,
improve and audit their environmental status on an ongoing basis. The main areas targeted for continual reduction arise from the use of solvents, energy
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All inks used are vegetable based. This paper is environmentally-friendly ECF (elemental chlorine free), wood free and with a high content of selected
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Page 13 Polar Capital image copyright © Martin Hartley, page 15 Sterling Industries image copyright © David Gold.
Designed and produced by The College. www.the-college.com
Caledonia Investments plc
Cayzer House
30 Buckingham Gate
London SW1E 6NN
+44 20 7802 8080
tel
+44 20 7802 8090
fax
email enquiries@caledonia.com
web www.caledonia.com
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Year ended 31 March 2013
Annual report 2013
www.caledonia.com