Annual Report 2021
Year ended 31 March 2021
Introduction
Welcome to Caledonia
Group overview
Performance highlights
Chairman’s statement
Chief Executive’s report
1
1
2
3
4
6
10 Our business model
14 Section 172 statement
18 Covid-19
20 Business review
Investment review
22
26 Quoted Equity
30 Private Capital
34 Funds
38 Financial review
42 Valuation methodology
45 Going concern and viability
46 Risk management
50 Sustainability
56 Directors’ report
58 Board of directors
60 Corporate governance report
64 Nomination Committee report
65 Audit Committee report
69 Governance Committee report
70 Directors’ remuneration report
87 Other governance matters
91 Responsibility statements
Independent auditor’s report
92 Financial statements
94
102 Financial statements
106 Significant accounting policies
111 Notes to the financial statements
130 Other information
130 Company performance record
130 Glossary of terms and alternative performance measures
132 Information for investors
Image theme
Looking to the future and identifying new opportunities.
Welcome to Caledonia
Caledonia is a self-managed investment trust company with net assets of £2.2bn.
Our purpose is to grow net assets and dividends paid to shareholders over the long
term, whilst managing risk to avoid permanent loss of capital. We achieve this
by investing in proven well-managed businesses that combine long-term growth
characteristics with, in many cases, an ability to deliver increasing levels of income.
We hold investments in both listed and private markets, a range of sectors and,
particularly through our fund investments, we have a global reach. The success
of this strategy can be seen in the performance of Caledonia’s NAV per share total
return measured against the FTSE All-Share since 1987 and a record of 54 years
of increasing annual dividends.
NAV total return growth since 1987
1900
Caledonia NAV TR
FTSE All-Share TR
1996
2001
2006
2011
2016
2021
1600
1300
1000
700
400
100
1987
Find out more
www.caledonia.com
Sources: Caledonia Investments
plc and FTSE International Limited
(‘FTSE’) © FTSE 2021. ‘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.
1
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Group overview
Caledonia is a self-
managed investment
trust company with net
assets of £2.2bn. We hold
investments in both listed
and private markets,
covering a range of sectors
and, particularly through
our fund investments,
All data as at 31 March 2021.
we have global reach.
Group NAV
(31 March 2020 £1,787m)
£2,225m
Quoted Equity
Private Capital
Funds
Other
£716m
£827m
£637m
£45m
Top 10 investments
1 Deep Sea Electronics
2 Liberation Group
3 Seven Investment Management
4 Stonehage Fleming
5 Cobehold
6 Cooke Optics
7 Aberdeen US PE funds
8 Axiom Asia funds
9 Texas Instruments
10 Watsco
Quoted Equity
Further detail
Private Capital
Further detail
Funds
Further detail
Turn to page 26
Turn to page 30
Turn to page 34
Strategic asset allocation
Strategic asset allocation
Strategic asset allocation
35-45%
Majority and significant minority
holdings in private companies,
focusing principally on established
UK businesses, led by sound
management teams, where our
target investment size of £25m
to £125m provides a meaningful
Target 14% total return and
presence and growth capital.
5% yield
20-30%
Private equity funds and fund of
funds providing a broad exposure
to areas of the world where it would
prove more difficult for Caledonia to
invest directly, predominantly
Target 12.5% total return
in North America and Asia.
35-50%
Two concentrated portfolios of
listed equities, pursuing capital
Capital portfolio:
and income strategies.
Mature, well-
managed companies with significant
presence in their market space and
where assets consistently produce
Target 10% total annual
strong returns on capital.
return with no income
constraint
Income portfolio:
Mature, long-term
companies with business models
that are both resilient and have the
capacity and management culture
Target 7% total annual
to pay sustainable dividends.
return and 3.5% yield
2
Caledonia Investments plc Annual Report 2021
For the year ended 31 March 2021
Performance highlights
» Net asset value per share total return of 25.9%
» Annual dividend per share up 2.9% to 62.9p
» 54th consecutive year of annual dividend increases
Results summary
31 March
2021
31 March
2020
Change
%
NAV total return
NAV per share
Net assets
25.9%
4000p
-8.1%
3236p
£2,225m
£1,787m
Annual dividend per share
62.9p
61.1p
23.6
24.5
2.9
Performance summary
1 year
%
3 years
%
5 years
%
10 years
%
NAV total return
Annualised:
NAV total return
Total shareholder return
FTSE All-Share total return
25.9
28.2
53.4
129.2
25.9
11.0
26.7
8.6
2.0
3.2
8.9
5.5
6.3
8.6
7.1
6.0
Pools – annualised returns Value
£m
1 year
return %
3 years
return %
5 years
return %
Quoted Equity
Private Capital
Funds
Cash and other
Net assets
30.3
23.2
34.8
14.2
4.0
14.6
12.1
7.4
14.9
716
827
637
45
2,225
25.9
8.6
8.9
3
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Chairman’s statement
David Stewart
Chairman
Caledonia’s long-term approach
to investment has produced strong
returns this year from each part of
the portfolio. These results support
our commitment to a progressive
approach to the dividend.
The NAV total return for the year of 25.9% was strong and
Results
included positive returns from each part of our portfolio.
The Quoted Equity pool delivered an annual return of
30.3%, aided by the rebound in global equity markets.
Investee companies within the Private Capital portfolio,
with the exception of Buzz Bingo, adapted well to the
challenges presented by Covid-19 to produce a total return
of 23.2%. The Funds portfolio delivered an annual return
of 34.8%, buoyed by good underlying fund performance.
We have retained a strong, largely ungeared balance sheet
with total liquidity of £249m available at 31 March 2021.
Total income was £45m which is a reduction of 16%
Income and dividend
from the previous year. This reflects the negative impact
of the pandemic on economic activity in a small number
of investee companies and the change in focus of the
Quoted Equity Income portfolio towards higher quality
businesses with slightly lower yields. The board is
recommending a final dividend of 45.9p per share,
which represents a full year dividend of 62.9p, an increase
of 2.9% when compared to the previous year. While this
payment is not covered by the income generated this year,
the board, cognisant of Caledonia’s significant retained
earnings, believes the dividend is a crucial element of the
total return for our shareholders and that it is appropriate
to utilise the company’s available reserves.
It should also be noted that no dividends have been
received from Liberation Group or Buzz Bingo, both
beneficiaries of the UK Government’s job retention
scheme during the year.
4
Caledonia Investments plc Annual Report 2021 The AGM is an important part of our shareholder
AGM
communications programme and our intention is to always
hold a physical meeting where we are able to and when
it is considered safe to do so for members of the board,
shareholders and staff. At the time of writing, we are
unsure if UK Government restrictions related to the
Covid-19 pandemic will be lifted after 21 June. It is possible
that some restrictions may remain after this date. We are
also aware that some shareholders will be understandably
wary of travelling to our office for the meeting, assuming
that attendance is permitted. In light of this uncertainty,
we have made arrangements for shareholders to be able
to follow this year’s AGM proceedings remotely, online.
Further details regarding the final arrangements will be
communicated to shareholders separately.
There are positive signs that vaccines will provide the
Outlook
answer to society being able to live with Covid-19.
However, there remains a risk that new variants of the
virus will require further adaptations of both vaccines and
governmental response in order to control their spread.
We continue to be confident that Caledonia’s portfolio
is invested in assets that are of sufficient quality to weather
most storms to enable us to achieve our purpose of
growing assets and dividends over the long term. We also
believe that the strength of Caledonia’s balance sheet will
enable us to take advantage of opportunities as they arise.
David Stewart
Chairman
The pandemic has created uncertainty and financial
Covid-19
hardship for many people in the UK and overseas.
Caledonia responded by establishing a fund focused
on assisting those employees working for investee
companies negatively impacted by Covid-19. The safety
and well-being of our staff, together with those working
for our investee companies, have been important priorities
for the board throughout this challenging period.
In response to the pandemic, central banks have provided
additional liquidity to alleviate these effects which has
benefitted the portfolio as a whole. As we look forward,
Liberation Group, our remaining consumer leisure
focussed business, is expected to benefit from pent
up demand from customers, particularly as trading
restrictions ease.
The Caledonia team has excelled in adapting to remote
working, with IT colleagues ensuring systems and controls
continued to function seamlessly. We continue to believe
that the office has an important role to play to facilitate
training and development and to ensure that Caledonia’s
values and culture continue to permeate amongst new
recruits. We are now working on plans, following official
guidelines, to enable staff to return to the office via
increased use of a hybrid working model which recognises
that many have welcomed the flexibility that some home
working has brought.
On behalf of the board I would like to thank all Caledonia
Board and staff
staff for their outstanding response to the challenges
faced over the past year. Our strong financial performance
speaks for itself but this disguises the volatile market
conditions experienced and the hard work required
to respond proactively to the many challenges faced.
The effectiveness of the board has been appraised in
a recent external review which is described more fully
on page 61. This review, alongside a skills analysis of
current directors, will enable us to continue to refresh
the board with new non-executive directors. Caledonia
remains committed to increasing board diversity and this
will be an important factor as we commence a search for
a new audit chair to replace Stuart Bridges who is
expected to retire during 2022.
The Chairman’s statement on pages 4 to 5, the Chief Executive’s
report on pages 6 to 9 and additional reports on pages 10 to 55
comprise the Strategic report of the company. The Strategic report
was approved by the board on 26 May 2021 and signed by Mr Wyatt
on its behalf.
5
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Chief Executive’s report
Caledonia’s purpose is to grow net assets and dividends
Purpose
paid to shareholders over the long term, whilst managing
risk to avoid permanent loss of capital.
The rapid recovery of markets from the sharp falls
Results for the year
witnessed towards the end of our previous financial year
provided a supportive backdrop to these results. NAV total
return for the year was 25.9% which included positive
results from each part of our portfolio. The strength
derived from the diversified holdings in listed equities,
directly owned private companies and funds, helped
to mitigate the effect of the pandemic. Overall, our
investments responded positively to the impact of
Covid-19 on the operating environment to deliver good
growth in revenues and earnings. The companies with a
technology or healthcare focus have witnessed particularly
high levels of demand for their products and services,
leading to marked uplifts in growth, profits and valuations.
There were two notable adverse impacts on investment
returns for the year. Caledonia supported an initial financial
restructure of one of the Private Capital portfolio
businesses, Buzz Bingo, which was particularly affected
by the enforced shutdown in the summer of 2020, before
choosing not to participate in a further fundraising in
March 2021. This resulted in the sale of our interest for
a nominal sum as previously announced, creating a
write-down in the year of £69m. In addition, with
approximately 45% of our assets denominated in US
dollars, the strengthening of Sterling by some 11% over
the year negatively impacted our annual return by more
than six percentage points.
Investment income in the year fell by 16% to £45m, the
result of a reduction in dividends received from portfolio
companies and from the Quoted Equity Income portfolio.
The revenue account of our income statement reflected
this fall in income, with the pre-tax profit for the year
down by 34% to £22m. Total pre-tax profit of £456m
was recorded for the year, dominated by net gains
on investments of £437m (prior year £206m loss).
Maintaining a strong balance sheet remains a key
component of strategy giving the flexibility to support
our portfolio (especially the illiquid assets) without being
forced to sell at a time not of our choosing. Caledonia’s
balance sheet remains strong, with minimal gearing and
access to bank facilities of £250m. At the year end there
was a net debt position of £1m, consisting of £15m of
drawn facilities and a cash balance of £14m. New or
follow-on investments of £246m were made during
the year alongside divestments totalling £138m.
Will Wyatt
Chief Executive
Our diversified holdings in listed
equities, directly owned private
companies and funds have performed
well over the last year. We remain
confident that the portfolio is
invested in quality businesses that
can deal well with a challenging
and uncertain environment.
6
Caledonia Investments plc Annual Report 2021 Caledonia aims to grow NAVTR by 3-6% ahead of inflation
Investment performance
over the short-term, leading to results over the long-term
that exceed the FTSE All-Share index. We incentivise the
management and the investment teams in line with these
objectives on an absolute, rather than a relative, return
basis. The table below shows our investment performance
over one, three, five and ten years. Performance of 8-9%
per annum over three, five and ten year period is ahead
of the short-term target and long-term performance
remains satisfactory and within the target range,
significantly outperforming the FTSE All-Share index.
Years to 31 March
NAVTR
FTSE All-Share
NAVTR v FTSE All-Share TR
Annualised
NAVTR
RPI
NAVTR v RPI
FTSE All-Share TR
NAVTR v FTSE All-Share TR
1 year
%
25.9
26.7
-0.8
25.9
1.6
+24.3
3 years
%
28.2
9.9
+18.3
5 years
%
53.4
35.7
+17.7
10 years
%
129.2
79.0
+50.2
8.6
2.2
+6.4
8.9
2.6
+6.3
6.3
+2.6
8.6
2.5
+6.1
6.0
+2.6
The investment portfolio consists of the following three
Strategy and allocation
pools of capital:
Pool name
Quoted Equity
Private Capital
Funds
Cash and other
Net assets
2021
%
32.2
37.2
28.6
2.0
100
Strategic
allocation
%
35-50
35-45
20-30
+/-10
2020
%
32.1
34.2
25.2
8.5
100
The strategic allocation ranges shown in the table
above are a guide to ensure that the portfolio remains
proportionately balanced. During the year, the top end
of the range allocated to the Funds pool was increased
by 5% to 30%.
The table below summarises the pool targets and
strategic allocation:
Pool name
Caledonia
Quoted Equity
Description
Capital strategy
Income strategy
Caledonia
Private Capital
Caledonia
Funds
Majority and minority
investments
predominantly in UK
mid-market
companies with equity
values of between
£25m and £125m
US and Asian private
equity funds and
funds of funds
Return requirements
10% total return,
no yield target
7% total return,
3.5% yield (on
cost)
14% total return
5% yield
Strategic
allocation
30-50%
35-45%
12.5% total return
20-30%
Pool performance
Years to 31 March
Pool name
Quoted Equity
Capital portfolio
Income portfolio
Private Capital
Funds
Portfolio
1 year
%
3 years
%
5 years
%
10 years
%
30.3
35.9
17.5
23.2
34.8
30.0
48.9
66.6
16.3
12.5
50.6
36.0
76.7
108.2
23.0
42.6
100.3
69.7
139.7
178.3
n/a
153.7
247.4
166.4
Caledonia Quoted Equity
The total return of the Quoted Equity portfolio was
30.3% for the year. This strong performance reflected
the significant rebound in global public equity markets
and considered stock selection within both the Capital
and Income portfolios, which delivered total returns of
35.9% and 17.5% respectively. The performance of the
US public equities in both portfolios was particularly
notable and was responsible for the majority of the
returns. As can be seen in the table above, the three
and five year performance of the Capital portfolio has
been outstanding, with comparative five year return
from the S&P500 of 116% and FTSE100 of 32%.
Trading activity over the year has been limited, in line
with our long-term investment approach. In the Capital
portfolio Waters Corporation, a laboratory and software
company, was the single significant disposal, alongside
reduced positions in a small number of other holdings.
The evolution of the Income portfolio has included
developing new positions in Fortis Inc, a North American
utilities business, and in international consumer business
Reckitt Benckiser and the sale of our holdings in Direct Line
and Tritax Big Box.
7
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
The financial services businesses, Seven Investment
Management (‘7IM’) and Stonehage Fleming, have
developed well during the year. Both businesses have
seen strong growth in the level of assets under
management achieved through a mix of fund performance,
fund inflows and acquisitions which has resulted in good
trading performances. 7IM acquired Partners Wealth
Management, a high net worth financial planning business,
at the end of September, and Stonehage Fleming acquired
Cavendish Asset Management in July 2020.
Deep Sea Electronics (‘DSE’) and Cooke Optics (‘Cooke’),
our industrial businesses, have traded successfully through
the year. The performance of DSE has been particularly
strong, with good growth, product development and
cash generation. The control technology developed by
DSE should have wide applications in the development
of mixed source power provision, providing further
growth opportunities. Performance at Cooke improved
in the second half of the year due to better operational
planning and controls, new senior appointments and an
uplift in demand as film related activity returned to more
normal levels.
The market for private businesses remains buoyant,
and we regularly receive offers for our businesses from
interested parties there being three such approaches
of note in the past year. These conversations often lead
nowhere but can develop into a process which might
conclude in a sale of a business. The insight gained from
these indicative offers are incorporated into our valuation
process and can lead to a situation where the range
of reasonable fair value estimates for a given asset can
be significant. The private equity industry has raised
a substantial amount of capital to deploy and we
anticipate further mergers and acquisitions in the future.
Chief Executive’s report (continued)
Caledonia Private Capital
Caledonia’s Private Capital portfolio includes significant
positions in five UK businesses and one private European
investment company. These six investments represent
over 90% of its value. The portfolio recovered strongly
and generated a total return of 23.2% for the year,
including the absorption of the write-down of £69m
relating to the holding in Buzz Bingo. The industrial and
financial services businesses have adapted well to the
Covid-19 environment and have been trading strongly.
The impact of the pandemic has been felt more acutely
by Liberation Group and, prior to disposal, Buzz Bingo.
The investment in Cobehold and its diverse portfolio
continues to perform well.
The holding in Buzz Bingo, the UK’s biggest omni-channel
bingo business, was sold for a nominal sum in March 2021
after a very challenging year. In summer 2020, following
a period of retail club closures caused by the Government’s
response to the Covid-19 pandemic, the business
successfully completed a company voluntary arrangement.
Retail trading post re-opening was good but renewed
opening restrictions through the late autumn and winter
periods resulted in further significant losses which led Buzz
Bingo to review its funding options once again. Caledonia,
having carefully assessed the available investment
opportunity, chose not to participate in the resulting
funding round and we disposed of our interest. Lessons
have been learnt from this disappointing outcome
particularly in regard to the scale of business that we invest
in and the structuring of debt within investee companies.
Liberation Group, a pub, restaurant and drinks business
with operations predominantly in the Channel Islands
and the South West of the UK has been heavily impacted
by Covid-19 restrictions. While the business traded well
through the summer and autumn periods, it has suffered
further pandemic related closures of its pubs and
restaurants over recent months. However, the UK brewery
has operated throughout the period, supporting trade
and growing online sales. The wholesale businesses in
Jersey and Guernsey also remained open and traded
strongly. In November 2020, Caledonia invested £36m
of new equity to support the acquisition of a substantial
portfolio of pubs from Wadworth, complementing existing
UK sites, and various value accretive capital projects across
the enlarged estate. This investment, backed by the strong
trading performance last summer, reflects our confidence
in the long-term prospects for the business.
8
Caledonia Investments plc Annual Report 2021 Caledonia Funds
The total return on the Funds portfolio was 34.8% for
the year. This reflects good underlying fund performance,
which reverted to valuations based on managers’ NAV,
without the need to reflect the potential Covid-19 impact
as was the case in March 2020. Caledonia’s valuation policy
is to utilise the latest valuations reported by managers of
the funds in which it is invested.
Our fund investments are principally in third party
managed private equity funds operating in the US and
Asia. The feedback from the fund managers is currently
positive, with a clear majority of the investee businesses
progressing in line with, or ahead of, internal plans.
The level of transactional activity picked up strongly
in the second half of the year with several successful
exits delivered through trade sales or IPOs. Over the year,
Sterling has strengthened by 11% compared to the US
dollar, creating a significant headwind to the positive
returns from this portfolio.
The strategy for the Funds portfolio involves committing
around US$100m per annum to new fund opportunities.
During the year, £109m was invested and distributions
of £87m were received. There was a notable pick up in
distributions as we progressed through the year, with 84%
of the distributions received in the second half of the year.
Covid-19 has had a major impact on our businesses and
Covid-19
the people who work within them. We have made every
effort to keep our staff safe, motivated and able to fulfil
their roles effectively despite the challenges they have
faced from lockdowns, social distancing and remote
working. We have deployed technology to allow staff
to work effectively from home with business meetings
and events held virtually.
We have equally been aware of the impact on the
employees of our investee companies. The Caledonia
Fund was established in spring 2020 to support employees
of these business suffering financial hardship due to the
pandemic. This fund has supported staff particularly
at Buzz Bingo and Liberation Group, the two businesses
most adversely affected by lockdown regulations over
the past year.
As a long-term investor our aim is to identify companies
Responsible Investment
that can generate sustainable growth. We believe that
responsible investment and business success go hand
in hand. We also understand that environmental, social
and governance (‘ESG’) factors are important to our
shareholders and broader stakeholders. Historically
our stewardship activities have focused primarily on
governance matters. Our intent is to build on this engaged
approach by fully incorporating ESG matters into our
investment decision making and monitoring processes;
we aim to progress this area over the coming year.
The outlook for our financial year ending 31 March 2022
Outlook
is dependent on the continued management of the
Covid-19 pandemic and its economic impact around the
world. The response by central banks has been fulsome
and timely, ensuring that there has been sufficient liquidity
in the financial system to allow its continued operation.
A consequence might be increased volatility on any signs
that this largesse might be tempered. We also remain
appropriately cautious that the valuations of assets
remain elevated. There are also nascent risks associated
with higher inflation as pent up demand potentially
exceeds supply and the effects of broken global supply
chains and increasing domestic protectionism become
more prevalent.
The majority of our assets are in a good position
to withstand this challenging period of continuing
uncertainty. We will maintain our considered approach
to new investment opportunities and protect our strong
balance sheet. We believe that the portfolio is well placed
to achieve our aims of growing net assets and dividends
paid to shareholders over the long-term.
Will Wyatt
Chief Executive
The Chairman’s statement on pages 4 to 5, the Chief Executive’s
report on pages 6 to 9 and additional reports on pages 10 to 55
comprise the Strategic report of the company. The Strategic report
was approved by the board on 26 May 2021 and signed by Mr Wyatt
on its behalf.
9
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Our business model
Caledonia is a self-managed investment trust company. We invest in proven, well-
managed businesses that combine long-term growth characteristics with, in many
cases, an ability to deliver increasing levels of income. We utilise our resources and
relationships to identify opportunities, apply a disciplined investment process and
robust risk management to deliver long-term capital growth and increasing annual
dividends for our shareholders.
Our strategic aims
Our business
Grow net asset value
Grow capital value and income over the long-
term, creating an increasing store of generational
wealth for shareholders. We invest in companies
with long-term growth potential and an ability
to deliver increasing levels of income.
Pay increasing dividends
Pay an annual dividend, which grows at or ahead
of inflation over the long-term. We consider the
ability to generate income sustainably as we
select our portfolio companies.
Manage risk
Manage risk in a manner consistent with long-
term wealth generation. We manage the risk
of permanent loss of capital by diversifying
our interests and avoiding excessively risky
investments.
Exploit our strong balance sheet
We aim to maintain sufficient cash, liquid assets
and committed facilities to cover our liabilities and
commitments, ensuring a resilient balance sheet.
We invest our own capital, although we may use
modest amounts of debt to manage liquidity,
should the need arise.
10
Quoted Equity
Capital portfolio
Income portfolio
Private Capital
Deep Sea Electronics
Liberation Group
Further information
Turn to page 26
Seven Investment Management
Stonehage Fleming
Cobehold
Cooke Optics
BioAgilytix
Funds
North American funds
Asian funds
Further information
Turn to page 30
Further information
Turn to page 34
Caledonia Investments plc Annual Report 2021
We identify and invest in companies that meet our investment goals and risk appetite.
We organise our portfolio into three pools, each with a strategic allocation of capital,
investment strategy and return targets, with an overall balance to provide a long-
term, risk-mitigated return in line with our strategic objectives.
Our operational
approach
Our differentiation
Our investment
methodology
Culture and values
We are defined by a collection of
values that set us apart and shape our
approach to every aspect of investing:
insightful, supportive, responsible,
considered and long-term.
The Caledonia team
We aim to recruit and retain high quality
investment executives to maintain deal
flow and investment continuity, who
understand and can execute Caledonia’s
investment philosophy.
Further information
Turn to pages 20, 56 and 92.
Corporate governance
We recognise the value of good
corporate governance and have
structured the business accordingly,
with a view to delivering long-term
sustainable success.
Further information
Turn to page 60
Risk management
Effective risk management is a key
component of our approach and assists
in ensuring that the different parts of
the group operate within strategic risk
parameters.
Further information
Turn to page 46
Responsible investment
We are committed to building
businesses for the long-term. To this
end, we consider the ESG impact of
the investments we make and own.
Further information
Turn to page 50
Business network
Our reputation as a supportive and
constructively involved long-term
investor enables us to develop our
network of effective business contacts.
This network enables us to identify
opportunities and carry out due
diligence, as well as being invaluable
to the management of our investee
companies.
Strong balance sheet
Our strong balance sheet, with no
permanent corporate debt, allows
us the flexibility to invest in both
private equity and quoted opportunities
over longer (ten year) timeframes,
significantly reducing the investment
cycle risk.
Reputation
Caledonia’s heritage can be traced back
to the shipping empire established by Sir
Charles Cayzer in 1878 and still benefits
from the backing of the Cayzer family.
Caledonia has been an investment
company since 1987, with investment
trust status since 2003.
Investment process
Our investment process is at the heart
of creating investment returns and
is tailored to the nature and risk of
each asset group. Investment
opportunities are identified through
our business network and company
research. An initial review will identify
opportunities with characteristics which
meet our strategic risk/return appetite.
Extensive and ongoing business and
financial due diligence is conducted,
often using independent advisers,
before a final investment decision
is made. Investments are subject to
a formal executive approval process
and continuous performance
monitoring and risk reviews.
Board approval is required for all
investments and disposals over £20m.
Investment risk
management
We consider the following key risk areas:
» Strategic investment allocation
» Investment timing
» Portfolio construction
» Liquidity
» Sector exposures
» Geographic exposures
» Environment, social and governance
» Resources and relationships
» Reputation
» Investee leverage
» Regulation
11
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Our business model (continued)
We measure our performance against four strategic objectives using key performance
indicators which provide an assessment over time and against relevant benchmarks.
Strategic objectives
Key performance indicators
Generate total returns that
outperform the Retail Prices Index
(‘RPI’) by at least 3% over the
medium and longer term
NAVTR
RPI + 3%
Annualised over
5 years
Annualised over
10 years
8.9%
5.6%
8.6%
5.5%
Generate total returns that
outperform the FTSE All-Share
index over ten years
NAVTR
TSR
FTSE All-Share TR
Dividend per share 62.9p
Annualised growth over:
1 year
5 years
10 years
NAV per share 4000p
Annualised growth over:
1 year
5 years
10 years
Pay annual dividends increasing by
RPI or more over the longer-term
Manage investment risk effectively
for long-term wealth creation
12
Annualised over
10 years
8.6%
7.1%
6.0%
2.9%
3.6%
3.9%
23.6%
6.7%
7.3%
Caledonia Investments plc Annual Report 2021
Further information on the definition and calculation of the performance measures referred to below can be found on
Performance measures
pages 130 and 131.
Performance trend
Metric
NAVTR annualised 10 year rolling performance
14%
14%
14%
12%
12%
14%
12%
10%
10%
12%
10%
8%
8%
10%
8%
6%
6%
8%
6%
4%
4%
6%
4%
2%
2%
4%
2%
0%
0%
2%
0%
0%
Mar 11
Mar 11
Mar 11
Mar 13
Mar 13
Mar 13
Mar 15
Mar 15
Mar 15
Mar 11
Mar 13
TSR annualised 10 year rolling performance
Mar 15
RPI +3% to RPI +6%
RPI +3% to RPI +6%
RPI +3% to RPI +6%
Caledonia NAVTR
Caledonia NAVTR
Caledonia NAVTR
RPI +3% to RPI +6%
Caledonia NAVTR
Mar 17
Mar 17
Mar 17
Mar 17
Mar 19
Mar 19
Mar 19
Mar 19
Mar 21
Mar 21
Mar 21
Mar 21
16%
16%
14%
16%
14%
12%
14%
16%
12%
10%
12%
14%
10%
8%
10%
12%
8%
6%
8%
10%
6%
4%
6%
8%
4%
2%
4%
6%
2%
0%
2%
4%
0%
0%
2%
0%
Mar 11
Mar 11
Mar 11
Mar 11
Caledonia NAVTR
Caledonia NAVTR
Caledonia NAVTR
Caledonia TSR
Caledonia TSR
Caledonia TSR
FTSE All Share TR
FTSE All Share TR
FTSE All Share TR
Caledonia NAVTR
Caledonia TSR
FTSE All Share TR
Mar 13
Mar 13
Mar 13
Mar 13
Mar 15
Mar 15
Mar 15
Mar 15
Mar 17
Mar 17
Mar 17
Mar 17
Mar 19
Mar 19
Mar 19
Mar 19
Mar 21
Mar 21
Mar 21
Mar 21
Annual dividend/share over 10 years (p)
70
70
60
70
60
70
50
60
50
60
40
50
40
50
30
40
30
40
20
30
20
30
10
20
10
20
-
10
-
10
-
-
2012
2012
2012
2012
2013
2013
2013
2013
2014
2014
2014
2014
2015
2015
2015
2015
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
2020
2020
2020
2020
2021
2021
2021
2021
4500
4500
NAV/share over 10 years (p)
4000
4500
4000
3500
4000
4500
3500
3000
3500
4000
3000
2500
3000
3500
2500
2000
2500
3000
2000
1500
2000
2500
1500
1000
1500
2000
1000
500
1000
1500
500
0
500
1000
0
0
500
2013
2013
2013
2014
2014
2014
2012
2012
2012
0
2012
2013
2014
2015
2015
2015
2015
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
2020
2020
2020
2020
2021
2021
2021
2021
Net asset value total return (‘NAVTR’)
NAVTR is a measure of how the net asset value
(‘NAV’) per share has performed over a period,
taking account of both capital returns and dividends
paid to shareholders. NAVTR is calculated as the
increase in NAV per share plus the accretion from
assumed dividend reinvestment over the period,
detailed in note 17 of the financial statements.
Total shareholder return (‘TSR’)
TSR measures the return to our shareholders through
the movement in the share price and assumed
reinvestment of dividends paid during the year.
Annual dividend
Annual dividend is the per share amount payable to
shareholders out of profits for the year, excluding any
special dividends.
NAV per share
NAV per share is a measure of the value of the company
per share, calculated by dividing net assets by the
number of shares in issue, adjusting for shares held
by the employee share trust and for dilution by the
exercise of share awards, detailed in note 17 of the
financial statements.
13
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Section 172 statement
How we engage with stakeholders and make decisions
Section 172 of the Companies Act 2006 (the ‘Act’) requires
each of our board directors, individually and collectively,
to act in the way they consider, in good faith, would most
likely promote the long-term success of the company for
the benefit of its members as a whole. In doing this they
are required to have regard, amongst other relevant
matters, to the:
(a) likely consequences of any decisions in the long term
(b) interests of the company’s employees
(c) need to foster the company’s business relationships
with suppliers, customers and others
(d) impact of the company’s operations on the
community and environment
(e) desirability of the company maintaining a reputation
for high standards of business conduct
(f)
need to act fairly as between members of the
company.
In discharging their duties each director will seek
to balance the interests, views and expectations of
Caledonia’s stakeholders, whilst recognising that every
decision the board makes will not necessarily result in
a positive outcome for all. However, the board’s aim is
to make sure that decisions are consistent and predictable.
In so doing it seeks to deliver Caledonia’s purpose to grow
net assets and dividends paid to shareholders over the
long-term, whilst managing risk to avoid permanent loss
of capital.
In this section, we describe each of our key stakeholder
groups, their importance and how we engaged with them
during the year. Also provided are examples of the ways
in which the board considered the interests of these
stakeholders and had regard to the matters set out in
section 172(a) to (f) of the Act when making its decisions.
Further details on how the board operates can also be
found in the governance section of this report on page 60
and at www.caledonia.com.
Key Stakeholder
Shareholders
Shareholders
Importance
provide Caledonia’s
permanent capital
and it is for their
benefit that the
directors are required
to promote the
company’s success.
Employees
Building a team
of engaged and
experienced
employees who share
our values and culture
is central to delivering
Caledonia’s purpose.
Our Chief Executive and Chief Financial Officer hold regular meetings with institutional
How we engage
investors, private client stockbrokers and fund managers. The Chairman and other non-
executive directors are also available to attend these meetings, if requested. Any views
put forward by shareholders and analysts are reported back to the board, with periodical
presentations from the company’s brokers on shareholder feedback and general market
perception of the company. In addition, the company releases monthly NAV announcements
and half-year and annual reports which keep shareholders apprised of performance.
We launched a new website during the year in response to a third party review
of shareholder communications which included surveys of stakeholder groups.
Our new website has significantly enhanced the provision of up to date information
to our shareholders.
A closed annual general meeting was held in 2020, with shareholders given the opportunity
to ask questions of the board in advance. Arrangements have been made for shareholders
to listen to this year’s annual general meeting live online and to submit questions to the
board both before and during the meeting.
Further details on relations with controlling shareholders can be found on page 63.
Caledonia has a small number of employees enabling regular formal and informal access
to board directors, irrespective of seniority. Remote working in response to the Covid-19
pandemic made this more challenging during the year. In response, more frequent colleague
involvement in board and committee meetings was instigated. The board has been kept
regularly updated on steps taken by management to increase the frequency of staff
interactions, including via the use of virtual conferencing technology.
Formal periodic reports on staff-related matters, including any instances of concerns
or grievances raised and suggestions received for improvements to workplace culture,
assist the board in understanding the views of employees.
The board believes that these arrangements, which are not one of the suggested methods
for workforce engagement set out in the UK Corporate Governance Code, remain effective.
Further details on our workplace can be found on page 52.
14
Caledonia Investments plc Annual Report 2021 Key Stakeholder
Investee
companies and
private equity
funds
Our investee
Importance
companies, both public
and private, and private
equity funds provide
the source of returns to
our shareholders.
Our focus remains on long term careful stewardship to create value for our shareholders.
How we engage
Decision making is supported by comprehensive regular reporting to the board.
Quoted Equity
We use engagement with management teams, company announcements, in-house
and third party research to closely monitor the performance of companies within both
the Income and Capital portfolios. We make considered use of our voting rights.
Further details on our stewardship activities can be found on page 50.
Suppliers
Community
We value long term
supplier relationships
built on transparency,
reliability and quality to
support our investment
activities.
We have increased
our commitment to
the community during
the year as part of our
ESG activities and in
response to the impact
of Covid-19 on investee
companies and their
stakeholders.
Private Capital
Caledonia employees serve as non-executive directors on the boards of portfolio
companies in which the company holds a significant investment, providing oversight
and helping to ensure that the board is kept apprised of key developments and the views
of their stakeholders.
The frequency of board updates regarding investee companies was increased during the
year in response to the Covid-19 pandemic, particularly for Buzz Bingo and The Liberation
Group which both operate in the consumer leisure sector and were particularly adversely
impacted by Government imposed trading restrictions.
Whilst the pandemic prevented the board’s periodic site visits and the annual conference
and dinner with the management of companies within the portfolio during the year,
technology was used to share deep dive reviews for The Liberation Group, Stonehage
Fleming, Seven Investment Management and Deep Sea Electronics. In addition,
a programme of regular presentations from the leadership of investee companies
was introduced to provide directors with additional insight to assist with decision making.
Funds
Alongside proactive monitoring of fund performance, we are represented by employees
on numerous advisory committees established by the managers of the funds in which
we invest.
We operate clear payment practices to ensure fair and prompt payment for goods and
services. Whilst we are not a signatory of the UK Prompt Payment Code, we pay more than
95% of our supplier invoices within 30 days and benefit from good relationships built with
suppliers who share our values.
Charitable giving
As part of our response to Covid-19, we created The Caledonia Fund to provide grants
to eligible applicants who are closely connected with our investee companies and face
financial hardship due to the pandemic. Around £260,000 was provided during the year to
support those in need due to bereavement, rent arrears, council tax and other household
and living expenses. We subsequently established our ongoing commitment to the wider
community, by founding a registered charity to focus our future charitable giving.
Diversity and inclusion
Caledonia has partnered with #10,000BlackInterns, an initiative designed to help transform
the horizons and prospects of young black people in the UK, offering paid work experience
during summer 2021.
Further details on our community activities can be found on page 52.
15
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Section 172 statement (continued)
How stakeholder interests have influenced decision making
The safety and well-being of Caledonia’s employees, whilst ensuring they had access to the right
The board’s response to the Covid-19 pandemic
tools and technology to support secure remote working, has been central to the board’s thinking
throughout the pandemic. The board and its committees have considered, amongst many other
matters, steps to further augment cyber resilience, plans for continued investment in cloud-based
technologies and systems, measures to support mental health and enhanced parental
leave policies.
Throughout the year, the Private Capital team has worked extensively with investee companies
to assist them in the management of the operational and financial issues which have arisen from
the pandemic, including new ways of working in response to Government regulations, ensuring
liquidity and addressing supply chain issues.
The Covid-19 crisis and the severe restrictions imposed by the Government on leisure sector
Buzz Bingo
businesses led to Buzz Bingo’s retail clubs being unable to trade for much of the financial year.
Buzz was refinanced in the summer of 2020 as part of a company voluntary arrangement,
in which Caledonia invested £22m. However, the third national lockdown resulted in a further
requirement for new capital. The board carefully assessed the available investment opportunity,
choosing not to participate in the fundraising and therefore decided to sell its shareholding in
Buzz Bingo to Intermediate Capital Group for a nominal amount. This decision considered a number
of stakeholder interests, including our shareholders and Buzz Bingo’s lenders, employees and wider
stakeholder group.
We established a charitable foundation to assist employees of investee companies who were most
acutely impacted by the pandemic, particularly those at Buzz Bingo.
Further details on Caledonia’s
response to the Covid-19 pandemic
Turn to page 18
Further details on Buzz Bingo
Turn to page 30
In making its decisions regarding the 2020 final dividend and 2021 interim dividend the board
Dividends
considered our shareholders’ expectations, the net revenue generated by the company and the
capacity of the company to pay dividends out of free cashflow, taking into account future dividend
liquidity requirements and availability.
Further details on dividends
Turn to page 41
16
Caledonia Investments plc Annual Report 2021
We conduct all of our business
honestly and ethically. We act
professionally, fairly and with
integrity in all our dealings –
wherever we operate.
17
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Covid-19
Covid-19 has had a major impact
on people and businesses across
the globe since early 2020. When
we reported our 2020 results in
May last year there was significant
uncertainty surrounding the likely
impact of the pandemic and the
risk it posed to both health
and economics.
After a very difficult year, there are early signs of a return
to some form of normality following the huge global effort
to develop and distribute effective vaccines. However,
many parts of the world are still suffering significant
infection rates and deaths, and vigilance to new variants
of the virus remains critical. The global economy has
benefited from unprecedented levels of intervention
from governments and central banks to provide support
to individuals and businesses throughout the pandemic.
Caledonia is invested in a wide variety of businesses with
each impacted differently by Covid-19. We have closely
monitored and responded to issues as they have arisen.
We continue to monitor information released by
governments, regulatory bodies and health organisations
in the jurisdictions where we invest.
We have attempted to keep our employees safe,
People and operations
motivated and able to fulfil their roles effectively despite
the challenges they have faced from lockdowns, social
distancing and remote working. Our office in London
has been closed or partially open in response to changing
regulation and guidance. New methods of working,
facilitated by technology, have allowed our staff to
work effectively from home, communicating with
colleagues by video and sharing information seamlessly
within a secure IT environment. Business meetings and
events have largely been held virtually and all international
travel has ceased until we are advised these activities
can safely resume.
We have prioritised keeping colleagues informed and
engaged with regular updates from management and
team leaders. We have taken steps to address the adverse
impact on our people that the changing work environment
might present including:
» a flexible work from home approach, facilitated through
the latest technology
» the provision of enhanced employee support,
mental health advice and guidance by an
experienced professional
» measures to encourage appropriate work/life
balance through initiatives such as streamed
group exercise classes
» frequent team events.
18
Caledonia Investments plc Annual Report 2021 Members of Caledonia’s investment teams continue
to interact regularly with the businesses and funds in
which we are invested, reviewing performance and
developments in line with normal business practice.
Remote working and associated technology investment
has enabled the board and its key committees to continue
to hold regular and effective meetings. There has been
limited impact on our ability to engage in quality debate
and facilitate informed decision making.
Our ability to successfully operate remotely has been
Technology
dependent on robust technology. The performance
of Caledonia’s systems is closely monitored to ensure
continuity of services and has been highly resilient,
particularly given the increased demands created by
remote working. Members of our experienced IT team
have provided additional equipment and training to
support colleagues in their transition to the new operating
model and to ensure that they continue to be able to
perform their roles to a high standard. Cyber security
remains a very high priority with several new initiatives
introduced during the year to augment existing protection
measures alongside training and awareness programmes
to provide everyone with the ability to identify threats
and drive continuous improvement.
Caledonia maintains a conservative balance sheet
Liquidity
structure which has proved beneficial through a period
of global uncertainty. During the year, we renewed our
long-term banking facilities of £137.5m with RBSI for a
period of five years through to May 2025. We have an
additional facility of £112.5m in place with ING. Net debt
was £1m as at 31 March 2021. The value of our liquid
assets, principally public quoted equity holdings, grew
strongly during the year to £716m as at 31 March 2021.
Future commitments are primarily to private equity funds
and remain at a level that does not create any stress to our
corporate liquidity position.
We have supported our investee businesses with
additional capital during the year predominantly to
fund strategic acquisitions and, in the case of Buzz Bingo,
to support a financial restructuring.
At 31 March 2020 we amended our standard valuation
Valuation approach
approach to address the uncertainty and potential adverse
impact of the Covid-19 pandemic. This involved specific
adjustments to the value of each business within the
Private Capital portfolio, in line with their individual
circumstances. In the case of our fund investments,
where managers’ valuations generally reflected the pre
Covid-19 position at 31 December 2019, we assessed
the potential impact from the pandemic in each fund’s
portfolios and adjusted manager valuations in line with
relevant geographic public market indices.
Over the last year, the impact of Covid-19 on the
businesses within our Private Capital and private equity
fund portfolios has become considerably clearer. This
has enabled us to revert to our standard valuation
approach at 31 March 2021 for both asset groups.
The Private Capital investment team worked closely
Private Capital portfolio
with the boards and management teams of our investee
businesses to address the range of operational and
financial issues that have arisen during the pandemic
including compliance with new regulations, employee
health and safety, liquidity, supply chain issues and
financial planning.
The majority of the businesses have adapted well to
the new Covid-19 operating environment and delivered
improved performance through the second half of the
year. However, one of our businesses, Buzz Bingo, was
severely impacted by the successive Government imposed
trading restrictions. Caledonia supported a financial
restructuring of the business in summer 2020 but was
unable to agree suitable terms for a further investment in
early 2021, ahead of the business re-opening following the
most recent lockdown. Caledonia sold its shareholding for
a nominal sum in March 2021. Further details can be found
on page 30.
The Caledonia Fund was established in spring 2020 to
The Caledonia Fund
support employees at investee companies suffering
financial hardship due to the onset of the pandemic.
This has been funded by Caledonia and by a contribution
by our largest shareholder, The Cayzer Trust Company.
During the year the focus of the fund has been on
supporting employees at those companies where the
business could not function normally, principally due
to lockdown regulations, and management have needed
to utilise the Government backed furlough scheme.
This fund has therefore primarily benefited employees
at Buzz Bingo and Liberation Group. The fund has
supported over 300 individuals and granted awards
of £0.26m.
19
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Through our extensive network of contacts,
we identify and select companies with
strong fundamentals and great potential.
We maintain effective and constructive
relationships with the people, companies
and funds in which we invest.
Insightful
& supportive
20
Caledonia Investments plc Annual Report 2021 Business
review
22
26
30
34
38
42
45
46
50
Investment review
Quoted Equity
Private Capital
Funds
Financial review
Valuation methodology
Going concern and viability
Risk management
Sustainability
21
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Investment review
Performance and analysis
All parts of the portfolio delivered
strong returns, reflecting the
rebound in global equity markets
and robust performance of the
businesses in which we are invested.
NAV total return for the year ended 31 March 2021
Performance
was 25.9% (2020: -8.1%). This represents a marked
performance recovery across the portfolio from the
adverse impact of Covid-19, which affected returns
significantly in prior year, plus strong returns from most
assets in the portfolio. Over the medium and longer-term,
Caledonia’s NAV total return has been in the range of 8%
to 9% on an annualised basis, comfortably outperforming
the FTSE All-Share over all these periods.
Total cumulative return (%)
Caledonia NAVTR
FTSE All-share TR
NAVTR v FTSE All-Share TR
1 year
25.9
26.7
-0.8
3 years
28.2
9.9
+18.3
5 years
53.4
35.7
+17.7
10 years
129.2
79.0
+50.2
Annualised returns (%)
Caledonia NAVTR
FTSE All-share
NAVTR v FTSE All-Share
1 year
25.9
26.7
-0.8
3 years
8.6
3.2
+5.4
5 years
8.9
6.3
+2.6
10 years
8.6
6.0
+2.6
Group performance was driven by strong returns from
each pool within the portfolio. The Quoted Equity pool
delivered an annual return of 30.3%, reflecting the
rebound in global equity markets and focus on high quality
companies. Private Capital investee companies, with the
exception of Buzz Bingo, adapted to the challenges of
Covid-19 with impressive performance in the second
half of the year to produce a return of 23.2% for the year,
inclusive of a full write-down of the investment of Buzz
Bingo. The Funds pool delivered an annual return of 34.8%
following the release of the adjustment made in March
2020 to account for the potential impact of Covid-19,
and good underlying results, particularly from Asian funds.
22
Caledonia Investments plc Annual Report 2021 Annualised investment pool returns
35%
30%
25%
20%
15%
10%
5%
0%
During the year £109.1m of investments were made into
Investment activity
the Funds pool, continuing an ongoing programme of
drawdown commitments. £98.4m was invested into
our Private Capital businesses, in support of strategic
acquisitions and ongoing management of the impact
of Covid-19. Investments into the Quoted Equity pool
predominantly relate to increasing positions in income-
yielding companies.
Total pools’ realisations in the year totalled £142.5m,
with the Funds pool contributing the largest proportion,
with strong realisations achieved by some of our US-
focused funds, which have reached a mature stage.
Investment income for the year was down 16.5% at
£44.6m driven by the repositioning of the Quoted Equity
Income portfolio towards lower yielding, more robust
businesses, a slight reduction in dividends from a small
number of Quoted Equity holdings and reducing dividend
pay-outs from some Private Capital holdings, where
profitability was impacted by the Covid-19 pandemic.
Income in the year includes £4.0m from non-pool assets
in relation to amounts received in a subsidiary
investment entity.
Quoted Equity
Private Capital
Funds
1 year
3 years
5 years
10 years
Pool
Quoted Equity
Private Capital
Funds
Total pools
Non-pool3
Total investments
Net cash/(debt)
Other net assets
Net assets
Investments
£
Realisations
£
Accrued
income2
£
Gains/
(losses)
£
37.9
98.4
109.1
245.4
0.9
246.3
(52.7)
(2.5)
(87.3)
(142.5)
4.1
(138.4)
–
(7.6)
–
(7.6)
–
(7.6)
156.9
127.2
165.2
449.3
(12.3)
437.0
March
2020
£
574.0
611.3
450.1
1,635.4
21.3
1,656.7
114.7
15.9
1,787.3
Income
£
Return1
%
30.3
23.2
34.8
30.0
17.1
22.8
0.7
40.6
4.0
44.6
March
2021
£
716.1
826.8
637.1
2,180.0
14.0
2,194.0
(0.8)
32.1
2,225.3
1. Returns for investments are calculated using the Modified Dietz methodology.
2. Private Capital valuations at 31 March 2021 included accrued income of £0.9m (2020 - £8.5m).
3. Non-pool investments comprise legacy investments, and cash and receivables in subsidiary investment entities.
23
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Investment review (continued)
The following chart shows the distribution of net assets at
Geography
31 March 2021 between regions. The basis of this analysis
is the country of listing for quoted securities, country of
residence for unlisted investments and underlying regional
analysis for funds.
The following chart shows the distribution of net assets at
Asset class
31 March 2021 by asset class. Listed securities represented
32% of net assets at the year end and unlisted investments
(direct investments and funds) accounted for 66%, with
growth in the unlisted investments during the year.
Geography by region
Asset class
United Kingdom
Channel Islands
Europe
North America
Asia
Cash and other
29%
17%
6%
34%
12%
2%
Listed equities
Private companies
Private equity funds
Cash and other
32%
38%
28%
2%
Over the year there has been an increase in exposure to
North American assets and a reduction in cash, following
a period of investment.
The periodic sale of large direct unlisted investments
can cause shorter term changes in the above distribution
of asset classes.
At the end of the year, non-UK investments accounted
for 69% of net assets (including net cash). However,
much of our investment is in multinational companies.
The following chart estimates geographic analysis at
31 March 2021 by revenue generation: this
demonstrates a highly diverse geographic exposure
across our investments.
The following chart analyses net assets at 31 March 2021
Currency
by currency exposure, based on the currencies in which
investments or cash and other assets are denominated
or traded. During the year, Sterling strengthened by 11%
against the US dollar, negatively impacting the annual
return by more than six percentage points.
Geography by revenue generation
Currency exposure
United Kingdom
Europe
North America
Asia
Other countries
Cash and other
20%
17%
33%
23%
5%
2%
Pound sterling
US dollar
Euro
Other currencies
47%
45%
6%
2%
24
Caledonia Investments plc Annual Report 2021 Holdings over 1% of net assets at 31 March 2021 were as follows:
Investments summary
Pool
Private Capital
Private Capital
Private Capital
Private Capital
Private Capital
Funds
Private Capital
Funds
Quoted Equity
Quoted Equity
Quoted Equity
Quoted Equity
Quoted Equity
Funds
Funds
Quoted Equity
Quoted Equity
Quoted Equity
Quoted Equity
Quoted Equity
Quoted Equity
Funds
Funds
Funds
Quoted Equity
Private Capital
Quoted Equity
Funds
Quoted Equity
Quoted Equity
Geography1
UK
Jersey
Jersey
Guernsey
Belgium
US
UK
Asia
US
US
US
US
US
US
Asia
UK
UK
UK
US
US
UK
US
Asia/US
Asia
UK
US
US
Asia
UK
UK
Business
Control systems
Pubs & restaurants
Investment management
Family office services
Investment company
Funds of funds
Cine lens manufacturer
Funds of funds
Semiconductors
Ventilation products
Software
Software
Cable communications
Private equity funds
Funds of funds
Tobacco & Vaping
Steam engineering
Fund manager
Pharma & life science services
Industrial supplies
Infrastructure
Private equity funds
Private equity funds
Private equity funds
Consumer goods
Bioanalytical testing
Medical technology
Private equity funds
Drinks manufacturing
Chemicals
Name
Deep Sea Electronics
Liberation Group
Seven Investment Management
Stonehage Fleming
Cobehold
Aberdeen US PE funds
Cooke Optics
Axiom Asia funds
Texas Instruments
Watsco
Microsoft
Oracle
Charter Communications
Stonepeak funds
Asia Alternatives funds
British American Tobacco
Spirax-Sarco
Polar Capital
Thermo Fisher Scientific
Fastenal
Hill & Smith
JF Lehman funds
Decheng funds
LYFE fund
Unilever
BioAgilytix
Becton Dickinson
PAG Asia fund
AG Barr
Croda International
Other investments
Investment portfolio
Non-pool investments
Cash and other
Net assets
Value
£m
193.0
127.7
126.4
115.5
112.3
98.2
95.6
72.5
54.0
50.8
50.6
48.4
40.7
39.8
39.1
36.2
34.0
33.6
33.2
32.8
31.6
30.8
30.3
28.4
28.2
26.2
25.7
25.6
22.1
21.4
475.3
2,180.0
14.0
31.3
2,225.3
1. Geography is based on the country of listing, country of domicile for unlisted investments and underlying regional analysis for funds.
Net
assets
%
8.7
5.7
5.7
5.2
5.0
4.4
4.3
3.3
2.4
2.3
2.3
2.2
1.8
1.8
1.8
1.6
1.5
1.5
1.5
1.5
1.4
1.4
1.4
1.3
1.3
1.2
1.2
1.2
1.0
1.0
21.1
98.0
0.6
1.4
100.0
25
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Quoted Equity
We believe you build wealth by
owning companies, not trading
them on the stock market. Focused
on ‘co-owning’ companies that are
built on solid foundations and
generate cash, we target businesses
that we understand and that can
deliver good returns on capital.
Annualised returns (%)
Capital portfolio
Income portfolio
Quoted Equity
1 year
35.9
17.5
30.3
3 years
18.6
5.2
14.2
5 years
15.8
10 years
10.8
4.2
12.1
6.2
9.1
Geography by region
Sector
United Kingdom
Europe
North America
42%
4%
54%
Basic materials
Consumer staples
Financials
Healthcare
Industrials
Real estate
Technology
Telecommunications
Utilities
16%
20%
7%
8%
15%
2%
21%
6%
5%
The Quoted Equity pool provides Caledonia with exposure
Rationale
to a concentrated portfolio of high-quality companies
that are suitable for long-term ownership. We look for
long-term ownership because we aim for the companies
that drive returns rather than trading. The qualities we
look for include a strong market position, good and
sustainable returns on capital and capable management
closely aligned with long-term investors. We look for
a combination of factors that make it much more likely
than not that long-term ownership will be rewarded.
Caledonia invests its own balance sheet and so our
strategy does not have to contend with subscriptions
or redemptions. This structure enables us to introduce
and redeem capital when markets provide good
opportunities for us. Our thoughtful approach allows us to
introduce capital into the portfolio with a margin of safety
around each investment, which cumulatively provides
protection against the inevitable poor investment.
The portfolio of around 25-30 stocks serves two strategies,
Capital and Income. There are five stocks that feature in
both portfolios. The Income portfolio aims to deliver an
initial yield on invested cost of 3.5%, with the dividend
per share from these holdings growing ahead of inflation.
The Capital portfolio has no dividend target, is
unconstrained and, as a consequence, aims to
produce higher returns over time.
The portfolio is managed by a single team, with the
same thinking and operational discipline used across
both portfolios.
During the year the Quoted Equity pool produced a total
Performance
return of 30.3%, with the Capital and Income strategies
returning 35.9% and 17.5% respectively. In addition to
the impact of the pandemic on business performance,
almost all stocks have benefited from an increased
rating or valuation as governments have provided
unprecedented monetary and fiscal support. It would
be fair to expect this positive impact to reverse as these
supportive measures are withdrawn. Our portfolio
managers are very focused on ensuring that the
companies we invest in have good pricing power in
order to be able to contend with anticipated
inflationary pressures.
26
Caledonia Investments plc Annual Report 2021 “The Quoted Equity portfolio is a risk
managed, concentrated collection
of high quality companies which
we can hold for long periods of time.
We always invest with a margin of
safety, using general stock market
volatility for entry points and to make
sure we are being careful with our
Mathew Masters
shareholders’ money.”
Head of Caledonia Quoted Equity
Quoted Equity
Find out more
of net assets at
31 March 2021
32%
www.caledonia.com/quot
27
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Quoted Equity (continued)
Capital portfolio
The Capital portfolio delivered a 35.9% total return during
Performance
the year to March 2021 (2020: 1.3%). The stock market has
staged a strong recovery from the Covid-19 induced low
during March 2020 and this recovery, albeit somewhat
abated by Sterling’s recovery, has driven very healthy
returns in the market and the portfolio. The portfolio
showed good resilience going into the Covid-19 downturn
and so it is perhaps useful to look at the combined return
for the two years to 31 March 2021 which was 37.2%,
compared to 4.4% for the FTSE All-Share and 31% for the
MSCI World Index. These comparisons are included to
provide some context for short term performance, the
portfolio is highly concentrated with just 18 holdings and
so is not managed with any benchmark in mind.
The impact of Covid-19 on the economy and the markets
was profound and has had varying impacts on the
companies within the portfolio. The data included below
provides the one year and two year returns to 31 March
2021, which provides visibility on how these companies
have been impacted and performed through the
pandemic. Companies including Microsoft (+37%, +93%),
Charter Communications (+27%, +68%) and Thermo Fisher
Scientific (+49%, +58%) were notable beneficiaries of the
increased adoption of technology and flexible working,
as well as the massive scientific and healthcare effort to
deal with Covid-19. Other holdings became unexpected
beneficiaries due to the strength of their business model
and market position including Watsco (+53%, +85%), Texas
Instruments (+74%, +78%), Spirax Sarco’s pumps business
Watson Marlow (+44%, +63%) and Fastenal (+50% = only
held for 1 year). These companies represented just under
45% of the portfolio at the start of the year and their
performance through the pandemic has proven to be
very beneficial for overall portfolio performance.
Those that fared less well include AG Barr (+3%, -38%)
whose impulse business suffered during Covid-19
lockdowns and Hill & Smith whose roads and galvanising
businesses were also impacted during this period,
although overall return remained strong (+55%, +22%).
In keeping with our long-term buy and hold approach,
Investment activity
activity in the year was minimal. We sold our position in
Waters Corporation, a US based analytical technologies
company, because we concluded that its valuation became
too high for our perception of its medium-term growth
prospects and it did not possess the level of key qualities
we increasingly demand of our holdings.
£m
424.6
3.6
(35.0)
137.5
530.7
10.0
Opening value
Investments
Realisations
Valuation gains/losses
Closing value
Investment income
Annualised pool returns
40%
35%
30%
25%
20%
15%
10%
5%
0%
Significant pool investments
1 year
3 years
5 years
10 years
Name
Microsoft
Oracle
Charter Communications
Texas Instruments
Watsco
Spirax-Sarco
Polar Capital
Thermo Fisher Scientific
Hill & Smith
Becton Dickinson
British American Tobacco
Fastenal
AG Barr
Croda International
Other investments
28
Business
Software
Software
Cable communications
Semiconductors
Ventilation products
Steam engineering
Fund manager
Pharma and life sciences services
Materials
Medical technology
Tobacco & vaping
Industrial supplies
Drinks manufacturing
Chemicals
Geography
US
US
US
US
US
UK
UK
US
UK
US
UK
US
UK
UK
First
invested
2014
2014
2017
2018
2017
2011
2001
2015
1999
2015
2015
2020
1977
2019
Value
£m
50.6
48.4
40.7
39.3
36.9
34.0
33.6
33.2
31.6
25.7
24.1
23.5
22.1
21.4
65.6
530.7
Pool
%
9.5
9.1
7.7
7.4
7.0
6.4
6.3
6.3
6.0
4.8
4.5
4.4
4.2
4.0
12.4
100.0
Return
%
37.3
32.4
27.1
74.3
53.2
44.1
97.4
49.1
55.1
-3.7
9.8
49.4
2.8
51.6
Caledonia Investments plc Annual Report 2021 Income portfolio
In a similar manner to the Capital portfolio, the Income
Performance
portfolio was largely influenced by the recovery in
markets and delivered total return of 17.5%. The
management and strategy of the portfolio was changed
in the previous financial year, leading to significant
portfolio changes (only six of the original twenty holdings
remain). The return of 13.7% over the two years to 31
March 2021 reflects a period of major change.
The re-positioning of the portfolio has nearly been
Investment activity
completed following the sale of Direct Line and Tritax Big
Box and introduction of Fortis, a North American gas and
electricity utility, and Reckitt Benckiser, a consumer goods
company, taking place during the year. The portfolio now
has sixteen holdings, and we remain focused on investing
in more companies as and when markets provide an
attractive entry opportunity.
The change to the strategy, which reduced the yield
requirement and now measures current yield against
invested cost, but with a firm eye on dividend growth,
has enabled the quality and, by extension, defensiveness
of the portfolio to improve. The benefit of moving to a
yield on cost approach is that we can be patient and wait
for market disruptions to provide well priced investment
opportunities and not be forced to sell these carefully
acquired holdings on recovery just because the
percentage yield reduces. The ability to hold onto these
investments has enabled us to improve and maintain the
quality of the portfolio. To illustrate this point, over 80%
of the current Income portfolio either maintained or
increased their dividends during the year.
The strongest performing stocks were mainly purchased
during the Covid-19 sell-off, when high quality stocks
were re-priced and, consequently became eligible for
the Income portfolio. These included Texas Instruments,
Watsco, Diageo and Fastenal. There was some weaker
performance from Sabre, whose UK car insurance
business was disrupted by the lockdowns, and some
share price weakness with our UK utilities investments
as the market rewarded more cyclical opportunities.
Significant pool investments
Name
Reckitt Benckiser
Texas Instruments
Watsco
Fortis
Sabre Insurance
Pennon
Unilever
British American Tobacco
SGS
National Grid
Diageo
DS Smith
Other investments
Business
Consumer goods
Semiconductors
Ventilation products
Utilities
Motor insurance
Waste management
Consumer goods
Tobacco & vaping
Testing & certification
Electricity
Alcoholic drinks
Packaging
£m
149.4
34.3
(17.7)
19.4
185.4
7.1
Opening value
Investments
Realisations
Valuation gains/losses
Closing value
Investment income
Annualised pool returns
20%
15%
10%
5%
0%
1 year
3 years
5 years
10 years
Geography
UK
US
US
US
UK
UK
UK
UK
Europe
UK
UK
UK
First
invested
2020
2018
2017
2020
2017
2015
2015
2015
2020
2015
2020
2018
Value
£m
15.1
14.6
13.9
13.5
13.3
13.1
13.1
12.0
11.9
11.3
10.7
10.5
32.4
185.4
Pool
%
8.1
7.9
7.5
7.3
7.2
7.1
7.1
6.5
6.4
6.1
5.8
5.7
17.3
100.0
Return
%
7.4
74.3
53.2
6.8
-7.0
-6.9
3.3
8.5
14.4
-3.6
21.6
48.1
29
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Private Capital
Concentrating on mid-market
companies, we take a long-term
approach that is focused on
delivering enduring value in
the shape of strong capital growth
and a current yield throughout
the business cycle.
Annualised returns (%)
Private Capital
1 year
23.2
3 years
4.0
5 years
7.4
10 years
9.8
The Private Capital pool comprises a small number of
Rationale
direct holdings in private companies, predominantly in the
UK mid-market. We focus on cash generative businesses
with strong growth potential. Unlike many private equity
investors, we are not constrained by set timeframes or
exit dates, which allows us to take a longer term approach
to managing and realising value from these investments.
During the year the Private Capital pool produced a return
Performance and activity
of 23.2%, which includes a full write-down of Buzz Bingo.
Our investment in Buzz Bingo, the UK’s largest omni-
channel bingo business, was sold for a nominal sum in
March 2021 after a very challenging year. In summer 2020,
following a period of retail club closures caused by the
Government’s response to the Covid-19 pandemic,
the business successfully completed a company voluntary
arrangement. Retail trading post re-opening was good
but renewed opening restrictions through the late autumn
and winter periods resulted in further significant losses
which led Buzz Bingo to review its funding options once
again. Caledonia, having carefully assessed the available
investment opportunity, chose not to participate in
the resulting funding round and disposed of its interest
for a nominal sum. This created a write-down in the
year of £69m.
Liberation Group, a pub, restaurant and drinks business
with operations in the Channel Islands and South West
England, has also experienced a rolling cycle of shut-downs
and re-openings throughout the year in response to
relevant policies in each territory. While the business
traded well through the summer and autumn periods,
it has suffered further pandemic related closures of its
pubs over recent months. However, the UK brewery has
operated throughout the period, supporting trade and
growing online sales. The wholesale businesses in Jersey
and Guernsey also remained open and traded strongly.
In November 2020, Caledonia invested £36m of new
equity to support Liberation’s acquisition of a substantial
portfolio of pubs from Wadworth, complementing the
existing UK estate, and various value accretive capital
projects across the enlarged estate. This investment,
backed by the strong trading performance last summer,
reflects our confidence in the long term prospects for
the business. The investment made a return of 65.3%
in the year, which partially reflects the removal of some
uncertainty in relation to Covid-19 impacts which were
factored into the valuation process of this investment
in the previous financial year.
30
Caledonia Investments plc Annual Report 2021 “Working side by side with our
portfolio companies, we provide
the enduring capital and enduring
support that will generate growth
and value for stakeholders now and
Duncan Johnson
over the longer term.”
Head of Caledonia Private Capital
Private Capital
Find out more
of net assets at
31 March 2021
37%
www.caledonia.com/pcap
31
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Private Capital (continued)
32
Caledonia Investments plc Annual Report 2021 Seven Investment Management (‘7IM’), the retail
investment manager, has traded well in the period,
growing its assets under management (‘AUM’) due to
market performance and positive fund inflows. 7IM’s
product range continues to perform well with core funds
ranked in the first and second quartiles over one and three
years. In September 2020 7IM completed the acquisition
of Partners Wealth Management (‘PWM’) and Find a
Wealth Manager. The integration of PWM into the wider
business is proceeding successfully. The investment
returned 29.4% in the year.
Deep Sea Electronics (‘DSE’), the industry-leading
manufacturer of genset and ATS control modules,
battery chargers and power supplies, remained
operational throughout the year. DSE has traded well
and paid Caledonia a dividend of £9.1m. The control
technology developed by DSE should have wide
applications in the development of mixed source power-
provision, providing further growth opportunities.
The investment returned 65.2% in the year.
Cooke Optics, a leading manufacturer of cinematography
lenses, was initially adversely impacted by the Covid-19
pandemic, temporarily closing its facilities in April 2020
to develop a safe working environment for employees
before returning to full capacity. During the second half
of the year the business has performed ahead of budget.
Although filming activity has been restricted across many
geographies the business remains profitable, and with
long-term demand for high-quality content expected
to remain strong, is well placed to respond as demand
recovers. The investment returned 23% in the year.
Stonehage Fleming, the international family office,
continues to trade strongly, adhering to local working
practices across the jurisdictions in which it operates.
Activity levels were high along with strong growth in AUM.
In July 2020, Stonehage Fleming successfully acquired
Cavendish Asset Management in an all-share transaction,
adding a further £1bn of AUM, the integration of which
has been successfully completed. The investment returned
30% in the year.
Cobepa, the Belgian based investment company, owns a
diverse portfolio of private global investments. The trading
results of the businesses in its high-quality portfolio have
proven resilient during the pandemic, and the year has
seen a number of successful realisations including Gen II,
a leading provider of alternative asset fund administration
services. The valuation of Cobehold, the holding company
of Cobepa, reflected this more positive outlook and this
has driven an investment return in the year of 17.9%.
£m
611.3
98.4
(2.5)
127.2
(7.6)
826.8
22.8
Opening value
Investments
Realisations
Valuation gains/losses
Accrued income
Closing value
Investment income
40%Annualised pool returns
25%
20%
15%
10%
5%
0%
1 year
3 years
5 years
10 years
Significant pool investments
Name
Deep Sea Electronics
Liberation Group
Seven Investment Management
Stonehage Fleming
Cobehold
Cooke Optics
Other investments
Business
Control systems
Pubs & restaurants
Investment management
Family office services
Investment company
Cine lens manufacturer
Geography
UK
Jersey
Jersey
Guernsey
Belgium
UK
First
invested
2018
2016
2015
2019
2004
2018
Value
£m
193.0
127.7
126.4
115.5
112.3
95.6
56.3
826.8
Pool
%
23.3
15.4
15.3
14.0
13.6
11.6
6.8
100.0
Return
%
65.2
65.3
29.4
30.0
17.9
23.0
23.2
33
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Funds
We seek diversified fund holdings
in private capital that provide
long-term and consistent returns
in geographic markets that
counterbalance our quoted equity
and UK-centric private capital
investments.
Annualised returns (%)
Funds
1 year
34.8
3 years
14.6
5 years
14.9
10 years
13.3
Fund type
Geography by region
Private equity funds
Funds of PE funds
Quoted market funds
63%
36%
1%
United Kingdom
North America
Asia
2%
55%
43%
The Funds pool comprises investments into private equity
Rationale
funds and funds of private equity funds. The funds we
select are concentrated within North America and Asia,
providing indirect exposure to geographies, sectors and
business growth profiles which are difficult to access
directly. North American fund investments focus on
buyout funds in the lower to upper mid-market. Asian
fund investments focus on venture and growth in non-
cyclical, new economy sectors, which are set to benefit
from wider demographic trends, for example, healthcare
and technology. The Funds pool as at 31 March 2021
is well diversified, representing 56 funds managed by
37 managers.
During the year the Funds pool produced a return of
Performance
34.8%. Notable contributors to the year’s performance
were two of our fund of funds, Aberdeen US PE funds
and Axiom Asia, which constituted 15.4% and 11.4% of
the total Funds pool value, at 31 March 2021, respectively.
Aberdeen US PE funds generated returns of 40.5%.
Aberdeen’s funds invest in a diverse range of lower
mid-market US businesses. The year included successful
exits from businesses specialising in heating, ventilation
and air conditioning repair and maintenance, glass
manufacturing and remote access solutions. Recent
investments have included commitments to holdings
in B2B business services, and hospice and palliative care.
Axiom Asia achieved returns of 32.0%. Axiom’s funds
invest in businesses across Asia including China, Australia,
Japan and South Korea. Funds include underlying holdings
in technology, media, and telecommunications, retail,
consumer, media and technology and healthcare.
34
Caledonia Investments plc Annual Report 2021 “Caledonia has developed
relationships with some of the
world’s most talented investment
managers and, through careful fund
selection, has enabled access to
Jamie Cayzer-Colvin
excellent investment returns.”
Head of Caledonia Funds
Funds
Find out more
of net assets at
31 March 2021
29%
www.caledonia.com/funds
35
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Funds (continued)
36
Caledonia Investments plc Annual Report 2021 During the year the best fund performance was seen in
the mature funds of the portfolio. These funds are in the
process of realising value from their portfolios by selling
their invested companies. Strong public market valuations
and an all-time high amount of uninvested private equity
capital has driven up the value of these private companies,
and managers have sought to capitalise on this
opportunity. China healthcare venture and growth
funds have also been notable for their good performance.
This was due to the particular strength of the Chinese
healthcare market and the reduced impact of Covid-19,
in China, due to lessons they had learnt during the SARS
outbreak in 2003. The Funds pool’s younger funds were
typically the poorer performers during the year. This was
due to investments being held at cost and the funds
suffering from a negative impact to NAV due to fees
and transaction costs. This negative performance should,
with time, recover.
Many of the underlying businesses held within the Funds
pool faced uncertainty in the spring of 2020 as a result of
the global pandemic. The adjustment to fund NAVs made
in March 2020 to factor in the potential impact of Covid-19
was reversed on 30 September 2020.
The group invested £109m over the year across 32 funds.
Investment Activity
During the year we committed $115m (£83m) to eight
new funds, encompassing North American lower mid-
market funds and funds investing in the Asia region
including an emphasis on healthcare and technology. Total
undrawn commitments at the year-end were £284.9m.
Significant pool investments
Name
Aberdeen US PE funds
Axiom Asia funds
Stonepeak funds
Asia Alternatives funds
JF Lehman funds
Decheng funds
LYFE fund
PAG Asia fund
Other investments
Business
Funds of funds
Funds of funds
Private equity funds
Funds of funds
Private equity funds
Private equity funds
Private equity funds
Private equity funds
The largest distributions in the year came from North
American funds CenterOak Partners (£17.6m) and JF
Lehman (£11.1m). The CenterOak distributions included
profitable exits from residential and automotive services
companies. JF Lehman distributions related to the merger
and re-financing of two waste control businesses.
£m
450.1
109.1
(87.3)
165.2
637.1
0.7
Opening value
Investments
Realisations
Valuation gains/losses
Closing value
Investment income
Annualised pool returns
35%
30%
25%
20%
15%
10%
5%
0%
1 year
3 years
5 years
10 years
Geography
US
Asia
US
Asia
US
Asia/US
Asia
Asia
First
invested
2013
2012
2015
2012
2011
2015
2017
2015
Value
£m
98.2
72.5
39.8
39.1
30.8
30.3
28.4
25.6
272.4
637.1
Pool
%
15.4
11.4
6.2
6.1
4.8
4.8
4.5
4.0
42.8
100.00
Return
%
40.5
32.0
34.0
24.2
38.7
69.9
59.6
18.8
34.8
37
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Financial review
Tim Livett
Chief Financial Officer
Caledonia’s net assets are significantly
exposed to global equity markets.
The current year has seen a strong
recovery from the low point in March
2020 in the early stages of the
Covid-19 pandemic. Almost all of
our assets have benefitted from the
recovery, with the majority adapting
their business models successfully to
operate in the post Covid-19
environment.
The unprecedented levels of government and central
bank support for economies around the globe has been
key to the recovery and therefore there remains some
uncertainty as to the impact of the inevitable reduction
in this support in the future.
worldwide markets and asset classes is designed to
manage risk. After management expenses and non-pool
investments, comprising subsidiary investment entities
holding cash and receivables, the overall return was 25.9%,
compared with the FTSE All-Share total return of 26.7%.
Our balanced exposure to
Caledonia’s net assets increased to £2,225.3m at 31 March
2021, from £1,787.3m at the start of the year, largely due
to strong capital gains across the portfolio as businesses
recovered from the impact of the Covid-19 pandemic and
returned to growth. In addition, with approximately 45%
of the investment assets denominated in US dollars, the
strengthening of Sterling by 11% over the year negatively
impacted the annual return by £113m or more than six
percentage points.
Change in net assets
£m
2,250
2,150
2,050
1,950
1,850
1,750
Opening
balance
Revenue
return
Capital
return
Annual
dividend
Other
Closing
balance
The company seeks to generate total profits from both
Total comprehensive income
investment income and capital growth. For the year ended
31 March 2021, the total comprehensive income was
£467.6m (2020 – £172.5 loss), of which £29.8m (2020 –
£34.6m) derived from income and £437.8m (2020 –
£207.1m loss) from capital.
38
Caledonia Investments plc Annual Report 2021
Revenue performance
Income statement
Investment & other income
Net gains/(loss) on investments
Management expenses
Net finance costs
Exchange movements
Profit/(loss) before tax
Total comprehensive income
Investment and other income in the year of £44.7m was
16% lower than last year’s £53.4m. Dividend income from
the holdings in the Quoted Equity Income portfolio fell
to £7.1m from £12.3m in the prior year; this reduction
reflected the change in approach and lower yield target
for the Income portfolio, as announced last year, a lower
level of average capital invested as the portfolio
transitioned to higher quality stocks and some individual
dividend reductions or deferrals for businesses impacted
severely by the Covid-19 pandemic. Dividend income from
the Private Capital businesses of £22.8m was £5.8m lower
than the prior year. The dividend from Cooke Optics was
down £6.0m reflecting trading performance following a
period of closure and weak demand, and SIS delivered
no dividend, in contrast to the rest of the investee
businesses which delivered dividends at a similar level to
the prior year. Investment and other income represented
a net yield on monthly average investment assets of 2.3%,
compared with 2.8% last year.
Overall, the company’s revenue management expenses
were 10% higher than last year at £18.9m (2020 – £17.2m).
This reflected an increase in personnel expenses of £2.1m:
the dominant factor being annual bonus payments where
the level of profit recorded in 2021, being significantly
higher than in the prior year, had a direct impact. Other
costs reduced as business travel activity was curtailed and
offices were closed due to Covid-19 related restrictions.
Fees and recharges also declined following a decision
to waive charges for a temporary period to the Private
Capital investee businesses.
Total return derived from income and shown in the
revenue column was £29.8m, this includes a taxation
credit of £7.4m relating to the use of tax losses for group
relief; last year’s comparative figure was £34.6m.
£m Revenue
44.7
–
(18.9)
(2.6)
(0.8)
22.4
29.8
2021
Capital
0.8
440.2
(7.6)
–
–
433.4
437.8
Total
45.5
440.2
(26.5)
(2.6)
(0.8)
455.8
467.6
Revenue
53.4
–
(17.2)
(1.5)
(0.9)
33.8
34.6
2020
Capital
–
(206.3)
0.6
–
–
(205.7)
(207.1)
Total
53.4
(206.3)
(16.6)
(1.5)
(0.9)
(171.9)
(172.5)
Valuation net gains on investments totalled £440.2m (2020
Capital performance
– £206.3m loss). Overall, our investment structure
continued to provide a degree of diversification, but all
areas of the portfolio recorded strong gains over the year:
Quoted Equity investments recorded a net valuation gain
of £156.9m, Funds investments a net gain of £165.2m
and Private Capital investments a net gain of £127.2m.
The gain of £156.9m on Quoted Equity investments
reflected the significant rebound in global public equity
markets and considered stock selection within both the
Capital and Income portfolios. The performance of the
US public equities in both portfolios was particularly
notable and was responsible for the majority of the gains.
The underlying capital gains in the private equity funds
portfolio were strong throughout the year. However,
the headline gains were also aided by the release of the
Covid-19 adjustment included in March 2020 of £86.1m,
as fund managers’ valuations factored the pandemic
impact into their assessments, but were adversely
impacted by the 11% strengthening of Sterling against
the US dollar, in a portfolio principally comprising US
dollar assets.
The Private Capital investments were profoundly affected
by the Covid-19 pandemic and resulting restrictions
on movement: the valuation reduction in March 2020
reflected the adverse impact. The valuation gain of £127m
in the year to 31 March 2021 included the full write-down
of our holding in Buzz Bingo (£69m), which was sold for a
nominal sum. Gains of £180m were recognised across the
other businesses with major contributions from DSE (gain
of £70m), Liberation Group (gain of £39m), Stonehage
Fleming (gain of £26m) and Seven Investment
Management (gain of £23m): all the businesses have
adjusted successfully to operating under new regimes
and are progressing well, both from a growth and
profitability perspective.
39
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Financial review (continued)
Change in pool investments value
£m
2,200
2,100
2,000
1,900
1,800
1,700
1,600
Opening
balance
Quoted
Equity
Private
Capital
Funds
Net
investment
Closing
balance
The company’s capital management expenses were £7.6m
(2020 – £0.6m credit), an increase of £8.2m year on year.
This primarily reflected an increase in personnel expenses:
£7.3m in the year compared with £3.4m credit in 2020,
reflecting the significantly higher levels of expected vesting
of the performance share awards in a year of strong
investment returns compared to the losses of the previous
year. Transaction costs of £0.3m (2020 – £2.8m) were
incurred, mainly linked to due diligence work on new
private equity fund investments, compared to the prior
year costs incurred in the acquisition of the minority stake
in Stonehage Fleming.
Total return derived from capital was a gain of £437.8m
(2020 – £207.1m loss). The movement is dominated by
the move from capital losses on investments last year of
£206.3m to gains of £440.2m in the current year.
The company maintains a considered valuation approach
Valuation
to all investments, applying care in exercising judgement
and making the necessary estimates. Our valuation
methodology is described on pages 42 to 44. Earnings
multiples are normally used for valuing unquoted
companies with an established business and an identifiable
stream of continuing earnings. Specific adjustments are
made to multiples, where applicable, to account for points
of difference between the comparators and the company
being valued, including the risk a purchaser might perceive
in buying a company in a state of change. Although the
price of recent investment generally provides a good
indication of fair value for a limited period after the date
of the relevant transaction, for recently acquired
investments, earnings multiple models will be developed
and calibrated to the transaction price. Unlisted fund
investments are based on managers’ NAV, which in turn
uses recognised valuation techniques.
40
The Covid-19 pandemic introduced an increased level
of uncertainty into the process of valuing private assets
held at the end of March 2020. In response, our valuation
methodology for unquoted companies and for fund
interests was enhanced to address this issue: this is
described on pages 43 and 44. Our approach to valuing
private assets at the end of March 2021 has reverted to
a more standard approach as a greater understanding
of the impact of the pandemic on our businesses and
investments has been developed.
The following chart summarises the source of valuations
across the portfolio, illustrating that 68% of the portfolio
value is subject to either market prices or independent
external valuation:
Pool assets by valuation method
Quoted price
Fund NAV
Earnings
Net assets
33%
35%
26%
6%
Caledonia allocates expenses between revenue and capital
Expenses
in accordance with guidance from the Association of
Investment Companies and broader market practice.
In addition to transaction costs, share-based payment
expenses are allocated to capital. Caledonia’s share-based
compensation is directly linked to investment performance
and is therefore properly viewed as an expense against
gains on investments included in capital.
Caledonia’s ongoing charges methodology reflects the
purpose of the calculation as a measure of the ongoing
costs of running funds in the absence of any purchases
or sales of investments and assumes that markets remain
static throughout the period. In particular, costs relating
to compensation schemes that are directly linked to
investment performance are excluded.
Our ongoing charges ratio for the year was 0.98%
(2020 – 0.85%). The ongoing charges ratio is calculated
on an industry standard basis, comprising published
management expenses over the monthly average net
assets; full details of the calculation are provided on page
131. The costs of underlying funds are not included in the
company’s ongoing charges. It should be noted that the
principal difference between ongoing charges and MiFID II
charges, included in our Key Information Document, is that
the latter includes the underlying costs of managing our
fund interests.
Caledonia Investments plc Annual Report 2021 At 31 March 2021, the company had borrowings of £15m
and a further £235m of undrawn committed facilities;
the total facilities comprised £112.5m from ING Group
expiring in July 2022 and £137.5m from RBSI, including
£25m in our treasury subsidiary. The RBSI facilities were
renewed in May 2020 for a five-year term. In addition,
the company had £25.9m of undrawn overdraft
facilities, together providing total available liquid
facilities of £275.9m.
Our treasury department provides a central service
Treasury management
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 the treasury function’s role to ensure that the group
has sufficient available funds to meet its needs in the
foreseeable future.
The underlying assets held within the investment pools
create a foreign currency exposure for the group: around
53% of the assets are non-sterling denominated. This risk
is fully recognised by the business and normally no action
is taken to reduce this exposure. However, during the prior
year there was a marked decline in the value of Sterling
and action was taken to reduce the level of exposure to
movements in Sterling against the US dollar and the euro.
This was achieved through the use of vanilla forward
contracts: these arrangements were phased out in
April 2020, as currencies started to stabilise.
Tim Livett
Chief Financial Officer
26 May 2021
We recognise that a reliable source of growing dividends
Dividend
is an important part of shareholder total return over both
the short and longer terms and have extended our record
of growing annual dividends to 54 consecutive years.
We paid an interim dividend of 17.0p per share on
7 January 2021 and have proposed a final dividend of
45.9p. The total annual dividend for the year of 62.9p
is an increase of 2.9% on last year.
Including the proposed final dividend, the dividends to
be paid for the year ended 31 March 2021 total £34.5m;
net revenue for the year is £29.3m, with the uncovered
element of the dividend being funded from historic
retained earnings.
Over the year we invested into private equity funds and
Cash flows, liquidity and facilities
into the Private Capital businesses, supporting acquisitions
by Liberation Group and Seven Investment Management
plus the financial restructuring of Buzz Bingo, and made
net realisations from quoted equity holdings; closing the
year with £14.2m of cash (2020 – £114.7m) and bank
borrowings of £15m (2020 – nil).
This movement was broadly accounted for by £240.2m
paid for investment purchases and dividends paid in the
year totalling £33.7m, offset by £142.7m received from
realisations and £27.8m generated by operating activities.
A further £15m of outflows on financing and fixed assets
was covered by £15m of bank borrowing.
The total cash flows over the year were analysed by pool
as follows:
Net cash movement by pool
£m
40
20
0
-20
-40
-60
-80
Quoted
Equity
Private
Capital
Funds
Dividend
Other
41
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Valuation methods
Enterprise value is normally determined using one of the
following valuation methodologies:
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.
Maintainable earnings are assessed using the latest
available financial data. Earnings and balance sheet data
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.
The earnings multiple used is most commonly earnings
before interest, tax, depreciation and amortisation
(‘EBITDA’) and is determined by reference to market-based
multiples appropriate for the business. Where possible,
an average of several appropriate market multiples will
be used. The aim is to identify comparator companies
that are similar in terms of risk and growth prospects to
the company being valued. The transaction multiples of
similar comparator unquoted companies may also be
considered in determining the earnings multiple.
Multiples of comparable companies may be adjusted
individually or in aggregate to reflect points of difference
between the comparators and the company being valued,
with reference to the risk profile and earnings growth
prospects that underpin the earnings multiple. Risk arises
from a range of factors, including the nature of the
company’s operations, markets, competitive position,
quality of management and employees and capital
structure. Other reasons for adjustment may include
the size and diversity of the entity, the rate of growth
of earnings, reliance on key employees, diversity of
products and customer base and the level of borrowing.
Adjustment will also be considered to the extent that a
prospective acquirer would take account of additional risks
associated with holding an unquoted share, including their
ability to drive a realisation at will.
Valuation methodology
Investments are measured at the directors’ estimate of fair
value at the reporting date, in accordance with IFRS 13 Fair
Value Measurement. Fair value is the price that would be
received to sell an asset in an orderly transaction between
market participants at the measurement date.
Listed investments in an active market are valued based
Publicly traded securities
on the closing bid price on the relevant exchange on the
reporting date. When a bid price is unavailable, the price
of the most recent transaction will normally be used.
Unquoted company investments are valued by applying
Unquoted companies
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 unquoted 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 entire enterprise at the
reporting date. Recognition is given to the uncertainties
inherent in estimating the fair value of unquoted
companies and appropriate caution is applied in exercising
judgments and in making the necessary estimates.
Caledonia’s valuation methodology for unquoted
companies is derived from the International Private Equity
and Venture Capital Valuation Guidelines (December
2018), applying the following steps:
determine the enterprise value using an appropriate
valuation technique
adjust the enterprise value for factors that a market
participant would take into account, such as surplus
assets, excess liabilities and other contingencies
deduct the value of instruments ranking ahead
of those held to derive the attributable value
apportion the attributable value between the
remaining financial instruments
allocate the amounts derived according to the
holding in each financial instrument.
1.
2.
3.
4.
5.
42
Caledonia Investments plc Annual Report 2021 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 ongoing 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 to give the fair
value of a certain asset or group of assets, most commonly
property assets.
Indicative offers
We regularly receive indications of interest from potential
acquirers for our private capital assets either as part of a
structured sale process or in the form of a direct approach.
Where we judge it appropriate, the insight gained from
such approaches is incorporated into the data sets used
in arriving at valuations. Where there is an offer from
credible buyer or buyers, and there is an intention to
advance discussions, our practice is to consider fair values
derived from an indicative enterprise value based on offers
received with an appropriate discount applied. Discounts
aim to reflect the unique uncertainty associated with the
execution of each transaction, and are normally in a range
of 5-20%.
Calibration and backtesting
When the price of an initial investment is deemed fair
value (which is generally the case if the investment
is considered an orderly transaction), the valuation
techniques that are expected to be used to estimate
fair value in the future are calibrated by using market
inputs at the date the investment was made. Calibration
validates that the valuation techniques using
contemporaneous market inputs will generate fair value
at inception and therefore give confidence that
subsequent valuations using updated market inputs
will generate fair value at each future measurement date.
Backtesting enables the valuer to understand any
substantive differences that legitimately occur between
the exit price and the previous fair value assessment,
by applying the information known at exit to the previous
valuation technique. Backtesting is used to help refine
the valuation process.
Fund interests refer to participations in externally
Fund interests
managed investment vehicles that invest in a wider
range of assets than is feasible for an individual investor
to value separately.
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, if material.
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 NAV’) attributable to the investor.
Fund NAV 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. Fund NAV reports are normally
received some time after the reporting date, typically two
or three months, but sometimes up to six months. The
latest available fund NAV will normally provide the basis of
a fair value estimate, adjusted for subsequent investments
and realisations and other factors resulting from the time
elapsing between the fund NAV and reporting dates.
Adjustment may also be necessary for features of the
fund agreement not captured in the valuation report,
such as performance fees or carried interest.
If a decision has been made to sell the fund interest or
portion thereof, the expected sales price would normally
provide the best estimate of fair value.
Other investments include preference shares, loan notes
Other investments
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.
The Covid-19 pandemic created a significant degree of
Valuation impact of Covid-19 pandemic
uncertainty: our valuation methodology for unquoted
companies and for fund interests was enhanced for
valuations as at 31 March 2020 to address this issue.
Our approach was consistent with the International Private
Equity and Venture Capital Special Valuation Guidance
issued at the end of March 2020.
We have continued to review our approach to the
valuation of these assets over the year to 31 March 2021.
The approach for our unquoted companies has reverted
to our standard approach amended to consider earnings
over a broader range of periods to provide an appropriate
assessment of maintainable earnings. The valuations of our
fund interests have reverted to those provided by our fund
managers, subject to the normal cash movements.
43
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Fund interests
The standard valuation methodology is to utilise the most
recent valuations by the fund managers, subject to cash
movements from the valuation date. Fund valuations are
received 60-180 days after the reporting date. At 31 March
2020, this timing difference resulted in the fund manager
valuations excluding the potentially negative impact of
the Covid-19 pandemic. This issue was addressed by
introducing an adjustment: this took account of the sector
and geography of the underlying fund investments.
The adjustment considered the potential impact of
the Covid-19 pandemic on different industry sectors
and utilised relevant market indices to assess valuation
impact by region.
Valuations have been updated regularly during the year
by the fund managers, in line with normal practice.
These valuations now fully incorporate the impact of the
Covid-19 pandemic on the underlying fund investments
and the adjustment included as at 31 March 2020 is no
longer required. The impact of removing this adjustment
is detailed on page 39.
Valuation methodology (continued)
Unquoted companies
The standard valuation methodology is based principally
on the application of an earnings multiple to the
maintainable earnings of the business to derive the
enterprise value, followed by suitable adjustments to
derive the value of the underlying financial instruments.
The principles of this approach were maintained for
valuations as at 31 March 2020, with amendments to
address the following two key issues: earnings multiple
and net debt impact, described below.
In the cases where public markets provide high quality,
comparative earnings multiples, which are relevant to
the investments within the Private Capital portfolio, these
were used in the valuation process. However, in certain
cases suitable earnings multiple information was not
readily available and an alternative approach was utilised,
by applying a further adjustment to the ordinary equity
valuation based on the anticipated severity of the Covid-19
impact on the individual business.
In cases where businesses were very severely impacted
by Government-imposed restrictions, such as the leisure
and hospitality sector, there was a potential impact on net
debt, arising from the need to fund ongoing business costs
during a period when trading activity was largely
suspended. An adjustment to reflect cash outflow during
the anticipated period of closure was made for the
businesses operating in this sector.
Valuations as at 31 March 2021 have reverted to deriving
an enterprise value through the application of an earnings
multiple to the maintainable earnings of the business.
Our standard approach would be to use the latest
available financial data to derive maintainable earnings.
The earnings for many businesses recorded in the last
twelve months have been impacted by the Covid-19
pandemic; therefore, maintainable earnings have been
assessed by considering earnings of historic periods,
budgets, plus current and future year forecasts in order
to establish a suitable range to be used in the valuation
process. In a similar manner, a range of earnings multiples
derived from both trading and transaction comparable
businesses have been used in valuing each investee
company providing additional depth to the overall
valuation approach.
44
Caledonia Investments plc Annual Report 2021 Going concern and viability
The review of going concern and viability was considered
Going concern and viability
and approved by the board, following full scrutiny by
the Audit Committee; the review considered the key risks
to the group, their potential financial impact and
mitigating actions.
A number of scenarios were considered to stress test
the robustness of the group’s position to adverse events.
The scenarios were developed from a detailed three-year
financial plan produced in January 2021 which sought to
incorporate the potential impact of Covid-19 on future
trading and performance.
The board has undertaken an assessment of the
Going concern
appropriateness of preparing its financial statements on
a going concern basis, taking into consideration future
cash flows, undrawn banking facilities of £235m and
readily realisable assets of £730m as part of a wider
process in connection with its viability assessment. It has
concluded that the group has sufficient cash, other liquid
resources and committed bank facilities to meet existing
and new investment commitments.
The directors have a reasonable expectation that the
group has adequate resources to continue in operational
existence for a period of at least 12 months from the date
of approval of the financial statements. Accordingly, they
continue to consider it appropriate to adopt the going
concern basis in preparing the financial statements.
The directors have assessed the viability of the group over
Viability statement
the three years to May 2024. The directors determined
that a three-year period to May 2024 is an appropriate
period for which to provide this statement given the
group’s long-term investment objective, the resilience
demonstrated by the stress testing and the relatively
low working capital requirements of the group.
The viability assessment takes into account the group’s
position, its investment strategy and the potential impact
of the relevant risks set out in this strategic report,
including those arising from the Covid-19 pandemic.
In making this statement, the board is satisfied that the
group operates an effective risk management process
and confirms that it has conducted a robust assessment
of the principal and emerging risks facing the group.
This includes those that would threaten its strategic
objectives, its business as usual state, its business model
and its future performance, solvency or liquidity. Based
on this assessment, the directors have a reasonable
expectation that the group will be able to continue in
operation and meet its liabilities as they fall due over
the period to May 2024.
In making this assessment, the directors took comfort
from the results of stress tests that considered the impact
of severe market downturn scenarios. The initial downside
scenario considered the impact of significantly weaker
trading which reduced investment income by 20% in each
year of the full three year period, deferred the receipt of
distributions from our private equity fund investments
by between 20% and 30% in the first two years, factored
in an adverse short-term market correction to the pricing
of our public equity holdings by 10% and assumed further
investment into the Private Capital businesses to support
them through any challenging trading periods. In addition,
a further test was overlaid on the first, which assessed the
impact of a full call of our outstanding private equity fund
commitments at any point during the three-year period,
creating a number of discrete scenarios. In all cases,
we were able to demonstrate the strength of the group’s
financial position and, in particular, its ability to settle
projected liabilities as they fall due even under extremely
adverse circumstances.
45
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Risk management and its governance is the responsibility
Caledonia risk governance and structure
of the board, with the executive given the task of
managing an effective and transparent process to ensure
emerging and principal risks are identified, documented,
assessed and, where appropriate, mitigated. The board
sets the risk appetite within the business model and this
is communicated through the executive to all those with
managerial responsibilities. Risks emanate from all parts
of the business and are considered by all executives as part
of their work, from origination of investments to ongoing
monitoring and portfolio management.
The Audit Committee assesses and monitors the
risk management processes and structure and
specifically reviews the controls assurance programme.
This programme identifies key mitigating controls, tests
their operation and reports on compliance and
effectiveness. This, together with the audit findings report
received from the external auditor and best practice
guidance from other advisers, provides input to the board
as a whole on the status of the risk management process.
Caledonia manages and reports risk through two primary
Risk management reporting
areas of focus – an overall business risk dashboard and
a portfolio investment risk report.
The business risk dashboard considers the wider business
environment of the group, including business continuity
planning, IT and cyber security risks, regulatory risks and
financial control risks. Caledonia manages business risk
through a number of integrated processes to provide risk
visibility to both the executive team and the wider board.
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 strategic risk
parameters. The board has
overall responsibility for setting
and monitoring the company’s
risk appetite.
Board of directors
Risk management leadership
Audit Committee
Review and monitor the risk
management process
Chief Financial Officer
Risk reporting and
controls assurance
programme
Best practice guidance
Investment executives
Risk management as a key
element of the investment process
Investee management
Risk identification
and mitigation
46
Caledonia Investments plc Annual Report 2021 Business and operational risks are formally identified
Caledonia risk management process
and assessed through a risk dashboard, capturing the
most significant business risks facing Caledonia and
documenting the actions required to achieve an
acceptable level of risk. The business risk dashboard
considers strategic risks, operational risks, market risks,
liquidity risks and regulatory risks and is reported to the
Audit Committee and the board half yearly. These risks
are described in more detail on the following pages.
There was a notable decrease in market and liquidity risk
during the year, reflecting the reduction in uncertainty
surrounding the potential impact of Covid-19 when
compared to March 2020. However, despite our robust
mitigating actions, we have maintained the elevated level
of operational risk arising from the pandemic due to the
current UK Government restrictions and the possibility
of further restrictions being imposed in the future.
An investment risk report, specifically focusing on the
more technical areas of investment portfolio risk in
relation to Caledonia’s investment strategy is considered
by the board half yearly and includes such risks as
investment volatility, value at risk, diversification, liquidity
and concentration.
Over the past year, the Audit Committee regularly
Covid-19 pandemic risk management
monitored the emerging risks arising from the Covid-19
pandemic and the mitigating actions taken by the business.
The Committee considered actions to address financial
risks arising from market volatility, liquidity and highly
exposed Private Capital businesses, particularly those
operating in the consumer leisure sector. In addition, the
operational risks associated with staff safety, operational
integrity and IT systems, with a particular focus on cyber
security, were all reviewed to ensure robust mitigation
plans were in place and operating effectively.
The board continues to monitor progress on this issue,
receiving regular updates, with pandemic risk incorporated
into the corporate risk framework. The business has been
able to conduct its activity fully despite all staff working
remotely for much of the year. Key business control
processes have continued to operate effectively
throughout. Plans to operate a permanent hybrid model
of office and homeworking are being developed and will
be subject to risk review.
Set risk
appetite
Report and
feedback
Identify and
document
Monitor
and improve
Score impact
and likelihood
Set target
and mitigate
47
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Risk management (continued)
Principal risks
Risk management and mitigation
Key developments
Risks in relation to the appropriateness of the business model to deliver long-term
growth in capital and income.
Strategic
Strategic risks include the allocation of capital between public and private equity,
and in relation to geography, sector, currency, yield, liquidity, ESG factors and
climate change.
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.
Risks in respect of specific investment and realisation decisions.
Investment
Investment risks include the appropriate research and due diligence of new
investments and the timely execution of both investments and realisations
for optimising value.
Investment opportunities are subject to rigorous appraisal and a multi-
stage approval process. Investment managers have well-developed
networks through which they attract proprietary deal flow.
Target entry and exit events and prices are monitored and updated
regularly, in relation to market conditions and strategic aims.
Movement in
risk status in
year to
31 March 2021
Approach to ESG and climate change under development, with commitment to fully integrate into corporate strategy in the current
Quoted Equity strategy for Income portfolio implemented with emphasis on yield quality; partially complete and continuing in the current
financial year.
financial year.
Private Capital focus is now principally on driving value creation from existing portfolio of businesses.
Annual net cash requirement for Funds pool diminishes as the portfolio matures.
Quoted Equity pool has developed a “quality matrix” to guide robust investment decision making and ongoing monitoring.
ESG and climate change considerations will be factored explicitly into investment decision making and monitoring in the current financial year.
Funds portfolio commitment level supports detailed due diligence of existing and potential managers, supporting robust manager selection.
Risk of losses in value of investments arising from sudden and significant
movements in market prices, particularly in highly volatile markets.
Market
Caledonia’s principal market risks are therefore equity price volatility, foreign
exchange rate movements and interest rate volatility. An explanation of these risks
is included in note 22.
Market risks and sensitivities are reviewed weekly with actions taken,
where appropriate, to balance risk and return.
A regular review of market and portfolio volatility is conducted by
the board. Reviews also consider investment concentration, currency
exposure and portfolio liquidity.
Quoted Equity pool operates a structured approach to market price movements; purchases only made when target stocks are in the correct
price range and systematic reductions made to holdings when prices rise above target levels.
Foreign exchange exposure reduced using hedging contracts in the second half of last year, which were then closed in March 2020. Balance
sheet currently fully exposed to foreign exchange movement with use of hedging under periodic review in line with market movements.
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
Liquidity
or from not holding cash or being able to raise debt.
Detailed cash forecasting for six months ahead is updated and reviewed
weekly, including the expected drawdown of capital commitments.
Loan facilities are maintained to provide appropriate liquidity headroom.
The liquidity of the portfolio is reviewed regularly.
Significantly improved three year financial planning in place providing a more robust liquidity outlook.
Committed banking facilities of £250m in place. Overdraft facilities renewed with RBSI and HSBC renewal underway.
Short term capital requirements for Private Capital pool largely removed following decision to principally focus on existing portfolio businesses.
Strong performance of Quoted Equity portfolios provides increased level of highly liquid assets.
Risks arising from inadequate or failed processes, people and systems or from
external factors.
Operational
Operational risks arise from the recruitment, development and retention of staff,
systems and procedures and business disruption.
Systems and control procedures are developed and reviewed regularly.
They are tested to ensure effective operation.
Appropriate remuneration and other policies are in place to facilitate
the retention of key staff. Business continuity plans are maintained and
updated as the business evolves, and in response to emerging threats.
Full review of approach to cyber security and technology undertaken using third party expertise. Limited areas for further improvements
identified and implemented to mitigate risk of malicious threats.
Business cyber security group established to raise awareness and champion new processes to limit vulnerabilities.
Enhanced cyber security training and testing regime deployed to all staff.
Programme of work underway to upgrade / replace key back office business systems to provide enhanced functionality and management
information.
Successful recruitment of senior staff into the finance team.
Operational risk arising from staff sickness and other restrictions adversely
impacting critical business operations.
Global pandemic (Covid-19)
Investment risk due to limitations on earnings growth and NAV performance from
key investments, coupled with erosion of market confidence.
Operational risk mitigated by robust IT contingency planning, secure
remote working and careful adherence to the latest Government guidance.
Increased frequency of investment reviews, particularly Private Capital
businesses, to identify, assess and address pandemic related risks.
Remote, secure working swiftly introduced, supported with effective technology.
Staff welfare and ongoing communication prioritised.
Additional operational and financial support provided, as needed, for Private Capital businesses.
Liquidity further enhanced to provide increased flexibility to respond to market conditions.
N/A
Risk arising from exposure to litigation or fraud or failure to adhere to the tax and
regulatory environment. Caledonia operates across a number of jurisdictions and
Regulatory and legal
in an industry that has been subject to increasing regulatory oversight.
Caledonia has internal resources to consider regulatory and tax matters
as they arise: with professional advisers engaged where necessary
to supplement internal knowledge in specialised areas.
Approach to ESG and climate change, subject to ongoing development, to be integrated into corporate strategy in the current financial year.
Health and safety protocols developed and implemented for Covid-19 working in line with evolving Government guidance.
Caledonia is a member of the Association of Investment Companies
and operates in line with industry standards.
Regular staff training.
Risk arising from a failure to reach a trade agreement with the EU adds cost to UK
trade and negatively impacts economic growth.
EU/UK trade
Potential volatility to public equity and foreign exchange markets due to uncertainty
surrounding a trade agreement and its potential impact.
Continued monitoring of performance of directly held unquoted
investments and business model exposure to potential EU/UK
trade arrangements.
Continued monitoring of public equity and foreign exchange market
in response to EU/UK trade negotiations.
Private Capital businesses have adapted supply chain activity successfully to address new trading arrangements, without any significant
adverse impact.
No change required to head office operations.
Continued monitoring of the potential impact of further EU/UK trade negotiations on our public equities and our Private Capital businesses.
48
Caledonia Investments plc Annual Report 2021
Principal risks
growth in capital and income.
Strategic
climate change.
Risks in relation to the appropriateness of the business model to deliver long-term
The company’s business model and strategy are reviewed periodically,
against market conditions and target returns.
Strategic risks include the allocation of capital between public and private equity,
The performance of the company and its key risks are monitored regularly
and in relation to geography, sector, currency, yield, liquidity, ESG factors and
by management and the board.
Risks in respect of specific investment and realisation decisions.
Investment risks include the appropriate research and due diligence of new
Investment
investments and the timely execution of both investments and realisations
for optimising value.
Investment opportunities are subject to rigorous appraisal and a multi-
stage approval process. Investment managers have well-developed
networks through which they attract proprietary deal flow.
Target entry and exit events and prices are monitored and updated
regularly, in relation to market conditions and strategic aims.
Risk management and mitigation
Key developments
Movement in
risk status in
year to
31 March 2021
Approach to ESG and climate change under development, with commitment to fully integrate into corporate strategy in the current
financial year.
Quoted Equity strategy for Income portfolio implemented with emphasis on yield quality; partially complete and continuing in the current
financial year.
Private Capital focus is now principally on driving value creation from existing portfolio of businesses.
Annual net cash requirement for Funds pool diminishes as the portfolio matures.
Quoted Equity pool has developed a “quality matrix” to guide robust investment decision making and ongoing monitoring.
ESG and climate change considerations will be factored explicitly into investment decision making and monitoring in the current financial year.
Funds portfolio commitment level supports detailed due diligence of existing and potential managers, supporting robust manager selection.
Risk of losses in value of investments arising from sudden and significant
Market risks and sensitivities are reviewed weekly with actions taken,
movements in market prices, particularly in highly volatile markets.
where appropriate, to balance risk and return.
Market
Caledonia’s principal market risks are therefore equity price volatility, foreign
A regular review of market and portfolio volatility is conducted by
exchange rate movements and interest rate volatility. An explanation of these risks
the board. Reviews also consider investment concentration, currency
is included in note 22.
exposure and portfolio liquidity.
Quoted Equity pool operates a structured approach to market price movements; purchases only made when target stocks are in the correct
price range and systematic reductions made to holdings when prices rise above target levels.
Foreign exchange exposure reduced using hedging contracts in the second half of last year, which were then closed in March 2020. Balance
sheet currently fully exposed to foreign exchange movement with use of hedging under periodic review in line with market movements.
Risk that liabilities cannot be met or new investments made due to a lack of liquidity.
Detailed cash forecasting for six months ahead is updated and reviewed
Such risk can arise from not being able to sell an investment due to lack of a market
weekly, including the expected drawdown of capital commitments.
Liquidity
or from not holding cash or being able to raise debt.
Loan facilities are maintained to provide appropriate liquidity headroom.
The liquidity of the portfolio is reviewed regularly.
Significantly improved three year financial planning in place providing a more robust liquidity outlook.
Committed banking facilities of £250m in place. Overdraft facilities renewed with RBSI and HSBC renewal underway.
Short term capital requirements for Private Capital pool largely removed following decision to principally focus on existing portfolio businesses.
Strong performance of Quoted Equity portfolios provides increased level of highly liquid assets.
Risks arising from inadequate or failed processes, people and systems or from
Systems and control procedures are developed and reviewed regularly.
They are tested to ensure effective operation.
Full review of approach to cyber security and technology undertaken using third party expertise. Limited areas for further improvements
identified and implemented to mitigate risk of malicious threats.
Operational risks arise from the recruitment, development and retention of staff,
Appropriate remuneration and other policies are in place to facilitate
Business cyber security group established to raise awareness and champion new processes to limit vulnerabilities.
Enhanced cyber security training and testing regime deployed to all staff.
Programme of work underway to upgrade / replace key back office business systems to provide enhanced functionality and management
information.
Successful recruitment of senior staff into the finance team.
external factors.
Operational
systems and procedures and business disruption.
the retention of key staff. Business continuity plans are maintained and
updated as the business evolves, and in response to emerging threats.
Operational risk arising from staff sickness and other restrictions adversely
Operational risk mitigated by robust IT contingency planning, secure
Remote, secure working swiftly introduced, supported with effective technology.
impacting critical business operations.
Global pandemic (Covid-19)
remote working and careful adherence to the latest Government guidance.
Investment risk due to limitations on earnings growth and NAV performance from
Increased frequency of investment reviews, particularly Private Capital
key investments, coupled with erosion of market confidence.
businesses, to identify, assess and address pandemic related risks.
Staff welfare and ongoing communication prioritised.
Additional operational and financial support provided, as needed, for Private Capital businesses.
Liquidity further enhanced to provide increased flexibility to respond to market conditions.
N/A
Risk arising from exposure to litigation or fraud or failure to adhere to the tax and
Caledonia has internal resources to consider regulatory and tax matters
regulatory environment. Caledonia operates across a number of jurisdictions and
as they arise: with professional advisers engaged where necessary
in an industry that has been subject to increasing regulatory oversight.
to supplement internal knowledge in specialised areas.
Regulatory and legal
Approach to ESG and climate change, subject to ongoing development, to be integrated into corporate strategy in the current financial year.
Health and safety protocols developed and implemented for Covid-19 working in line with evolving Government guidance.
Caledonia is a member of the Association of Investment Companies
and operates in line with industry standards.
Regular staff training.
Risk arising from a failure to reach a trade agreement with the EU adds cost to UK
Continued monitoring of performance of directly held unquoted
trade and negatively impacts economic growth.
EU/UK trade
Potential volatility to public equity and foreign exchange markets due to uncertainty
trade arrangements.
investments and business model exposure to potential EU/UK
surrounding a trade agreement and its potential impact.
Continued monitoring of public equity and foreign exchange market
in response to EU/UK trade negotiations.
Private Capital businesses have adapted supply chain activity successfully to address new trading arrangements, without any significant
adverse impact.
No change required to head office operations.
Continued monitoring of the potential impact of further EU/UK trade negotiations on our public equities and our Private Capital businesses.
49
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Sustainability
We are committed to building our
business for the long term. To this
end, we consider the sustainability
of the investments we make and
aim to operate our business in
a sustainable manner.
We look at sustainability through two lenses; first,
Introduction
we consider the relevant factors as we make
investment decisions and monitor the performance of
our investments, and second, we consider how we
sustainably manage our own business. The following
sections provide further information on our approach.
As an investment company, our purpose is to grow
Our investments
capital value and income over the long term, creating
an increasing store of generational wealth for our
shareholders. We invest in companies with a long-term
view and are committed to building and maintaining
effective relationships with those companies in which
we invest.
As a long-term investor our aim is to identify companies
that can generate sustainable growth. We believe that
responsible investment and business success go hand
in hand, and we plan to fully embed consideration of
environmental, social and governance (‘ESG’) factors in
all stages of our investment journey. Caledonia is
committed to investing in businesses which will grow,
provide employment and generate economic benefit in
an environmentally and socially responsible way, both
during and after our ownership. Responsible investment
requires analysis, judgement and mitigation of risk. We aim
to invest in companies and funds that take a responsible
approach towards the environment and society, built on
high governance standards. Historically our stewardship
activities have focused primarily on governance matters
most notably in our majority owned investee businesses
We invest in a very broad
range of companies across
many sectors including
healthcare and control
systems.
50
Caledonia Investments plc Annual Report 2021 which we seek to operate in line with industry best
practice. However, we plan to build on this approach
by fully incorporating ESG matters into our investment
decision making to ensure that a broader spectrum of
issues that are important to us are formally evaluated
alongside other key criteria. We will expect our investment
managers to consider these issues fully in proposing new
additions to our portfolio holdings.
Private Capital
We invest in established businesses, across a range of
sectors, that have robust operating margins, strong
management teams and good growth opportunities.
Where these businesses operate in regulated sectors,
we monitor compliance and the maintenance of
positive working relationships with the relevant
regulatory authorities.
We know that ESG considerations are important to our
shareholders and broader stakeholders and intend to
make further progress during the current year. Over the
past year we have been considering our future approach
to responsible investment to augment our existing
stewardship activities. We have developed the first draft
of our ESG policy which has been debated by the board.
We have appointed an experienced consultant to support
us with further development of this policy, together with
the formulation of a comprehensive implementation
plan to fully integrate ESG considerations into our
investment decision making, ongoing monitoring and
reporting processes.
The UK Stewardship Code (the ‘Code’), published by the
Financial Reporting Council, aims to enhance the quality
of engagement between asset managers and the
companies in which they invest. We aim to operate in
compliance with the Code, noting that due to our relatively
small scale, in terms of overall assets and individual
positions in public companies, we do not currently
report publicly on our stewardship and voting activities.
However, we do plan to keep this under review.
We continue to meet with our shareholders and listen to
any concerns they may have.
Quoted Equity
We aim to invest in global businesses with recognised
brands, intellectual property and strong market positions,
that have a good track record of delivering returns.
Our approach means that we do not generally invest
in capital intensive businesses or any companies involved
in the extraction and production of coal, oil or natural gas.
We also tend to avoid industries that may be exposed to
burdensome regulation or litigation.
We make considered use of our voting rights and
vote all our stock ahead of all shareholder meetings.
As a consequence of our involved investment style,
we expect to vote in line with management
recommendations but are prepared to abstain or vote
against resolutions where we consider they are not in
the interests of our own shareholders.
We introduce a high standard of corporate governance
into these businesses, generally with an independent,
experienced non-executive chairman and formal audit
and remuneration committees to support the board.
Our Private Capital team take non-executive roles in
these businesses and use their positions to maintain
close relationships with the management teams.
Additionally, we hold frequent meetings with management
which cover a wide range of subjects, including ESG
matters, and regularly review performance.
Funds
We invest into a broad range of private equity funds across
a range of sectors in North America and Asia. We expect
managers to consider all factors, including ESG matters,
when seeking to maximise returns while taking account
of the associated risks.
Taskforce on Climate-Related Financial Disclosures
We recognise the importance of communicating both
financial and non-financial ESG performance clearly to
our stakeholders. We have considered our approach to
the recommendations of the Taskforce on Climate-Related
Financial Disclosures (‘TCFD’) and will provide a full set of
disclosures in next year’s annual report. Set out below is
high level information on how we currently incorporate
climate-related risks and opportunities into each of the
four TCFD pillars.
Governance
The board is responsible for the development, approval
and implementation of our approach to responsible
investment and our ESG policy, which is currently under
development. Day to day accountability for sustainability
matters, including climate-change related issues, rests with
the management and, in particular, the Chief Executive.
Strategy
Our strategic aims are to grow capital value and income
over the long-term for our shareholders, whilst managing
risk to avoid permanent loss of capital. We invest in both
public and private equity markets. We anticipate that
our final ESG policy will set out the integrated approach
we intend to take for each of the asset classes in which
we invest.
51
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Equality, diversity and inclusion
We believe that a diverse workforce will create the
optimum environment in which our business will thrive
and grow.
We are committed to creating an inclusive environment
where our employees can develop and contribute fully.
In formulating and implementing our employment and
recruitment policies, we ensure that they are at all times
compliant with all relevant UK legislation. Recruitment,
development and promotion are based solely on suitability
for the role. We will not discriminate on the basis of
gender, sexual orientation, age, race, nationality, disability
or political or religious belief.
The table below provides the gender split at different
levels within our business.
Board
Senior managers
All employees and board
Male
number
7
14
34
Male
%
78
70
51
Female
number
2
6
32
Female
%
22
30
48
Also set out below is the gender split across our
investment and support staff, excluding non-executive
directors.
Investment staff
Support staff
Male
%
70
40
Female
%
30
60
Caledonia operates a flatter management structure than
is often found in many other companies. Consequently,
58% of direct reports to members of our Executive
Committee are female.
Caledonia has provided internship opportunities on an
informal basis for many years. In summer 2021, a more
formal internship programme will be introduced with
the support of an independent facilitator. This year up
to six interns, under the #10,000BlackInterns initiative,
which seeks to help transform the horizons and prospects
of young black people in the UK, will join the business
for three weeks to learn more about Caledonia and the
investment management industry. We expect to repeat
the internship programme in future years as part of our
commitment to diversity and inclusion.
Sustainability (continued)
Risk management
We make a small number of new investments each
year and have the flexibility to screen out investment
opportunities which are overly exposed to climate-related
or other risks. We monitor all relevant portfolio risks,
including climate-related risks and changing behaviours
in response to climate change. We will continue to develop
our governance and risk management framework to
ensure that sustainability-related risks and opportunities
are identified, considered and appropriately addressed.
Targets
We have yet to develop metrics and targets for the
performance of both our investment portfolio and
our business on ESG matters, including those related to
climate change. We would expect these will be identified
as our ESG policy is finalised. We do report greenhouse
gas (‘GHG’) emissions information for our business.
Caledonia has in place a set of policies intended to protect
Our business
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
and 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. Responsibility for whistleblowing
procedures rests with the board, in line with the 2018
edition of the UK Corporate Governance Code.
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
of the business.
During the year we made enhancements to parental leave
policies and health and well-being support.
52
Caledonia Investments plc Annual Report 2021 53
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Sustainability (continued)
54
Caledonia Investments plc Annual Report 2021 Charitable activity
In March 2020, we established the Caledonia Fund to
provide grants to eligible applicants who were closely
connected with our investee companies and faced
financial hardship due to the Covid-19 pandemic.
The fund supported many individuals, particularly
those working for our consumer-facing businesses,
Buzz Bingo and Liberation Group, which were more
severely impacted by the pandemic and Government
imposed trading restrictions.
We have now established The Caledonia Investments
Charitable Foundation to focus Caledonia’s future
charitable activity. This charity will support a small
number of causes relevant to Caledonia’s activities.
Caledonia’s direct environmental impact is limited.
Environment
The main source of carbon emissions has historically
been through air travel, required as our investments
are global and have necessitated regular meeting with
managers, largely in Asia and the US. In the year to
31 March 2021 this almost totally ceased as Covid-19
prevented international travel, and therefore led to a
dramatic reduction in our carbon emissions. It is notable
that the increased use of online technology, particularly
video conferencing, has mitigated the impact of travel
restrictions. However, we believe that face to face
discussion is important in building long-term relationships
with managers and businesses and, whilst international
travel may not be required at the same levels as seen
prior to the pandemic, we do anticipate a return to some
travel in the future in order to support good investment
decision making.
Caledonia operates from its refurbished Buckingham
Gate property. This new office continues to offer
lower electrical consumption due to more modern
electrical and mechanical plant. The building and
associated IT infrastructure has been designed with
a number of features which should have a positive
environmental impact:
» fully equipped kitchen and conference room facilities
allowing us to host meetings, lunches and dinners,
reducing the need for travel
» modern audio-visual systems fitted in all conference
rooms reducing the need for our staff to travel to
attend meetings
» technology to enable staff to work from home,
thus removing the need for the daily commute
» recycling and waste sorting strongly encouraged and
facilitated by split waste disposal units throughout
the building.
This approach is mirrored in our newly completed adjacent
building in Buckingham Gate. This building is expected
to be occupied by tenants on a long-term lease.
Greenhouse gas emissions
Caledonia’s carbon emissions have been calculated in
accordance with the regulations within the Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018, which
implement the Government’s policy on Streamlined
Energy and Carbon Reporting.
The sources of GHG emissions shown in the table below
are from the companies included in the consolidated
financial statements. We are not required to report any
emissions from companies that are not included in our
consolidated financial statements.
Operational scope
Scope 1
(direct emissions)
Scope 2
(indirect emissions)
Scope 3
(indirect emissions)
Total
Source of GHG emissions
» Combustion of fuel and operation
of facilities
» Air conditioning refrigerant loss
» Company car use
» Electricity purchased for own use
» Business travel
Key performance indicator Scope 1, 2 and 3 normalised to full
time employee equivalent
GHG
emissions in
2021
19
GHG
emissions in
2020 Unit
24 Tonnes CO2e
Quantity/
power
used
2021
93
1
Quantity/
power
used
2020 Unit
100
2
Kilowatt-hours (k)
Litres fuel (k)
47
7
73
1
57 Tonnes CO2e
199
224 Kilowatt-hours (k)
371 Tonnes CO2e
3
144 Litres fuel (k)
452
8 Tonnes CO2e
per FTE
285
4
4.7
0.1
324
146
5.4
2.4
Kilowatt-hours (k)
Litres fuel (k)
Kilowatt-hours (k)
per FTE
Litres fuel (k)
per FTE
55
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction We invest from our own balance sheet,
which allows us to be flexible and also
means that our own and our shareholders’
interests are absolutely aligned.
Flexible
& responsible
56
Caledonia Investments plc Annual Report 2021 Directors’
report
58
60
64
65
69
70
87
91
Board of directors
Corporate governance report
Nomination Committee report
Audit Committee report
Governance Committee report
Directors’ remuneration report
Other governance matters
Responsibility statements
57
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Board of directors
1
1
David Stewart
Chairman
David Stewart
Chairman
N R
2
1
Will Wyatt
Chairman
David Stewart
Chief Executive
N
Tim Livett
Chairman
David Stewart
Chief Financial Officer
3
1
Jamie Cayzer-Colvin
Chairman
David Stewart
Executive Director
4
1
5
1
Stuart Bridges
Chairman
David Stewart
Independent
A G N
Non-Executive Director
David Stewart
Tim Livett
1
Appointed a non-executive director of Caledonia in 2015 and
Chairman
Chairman in 2017, David is also Chairman of the Nomination
Committee and a member of the Remuneration Committee.
Having begun his career at Swire Pacific in 1981, he joined James
Capel in 1986 and then Fidelity Investments in 1994, where he was
Head of Emerging Markets and subsequently European President.
From 2005 until 2013, he was Chief Executive Officer of Odey Asset
Management before assuming a non-executive director role until
2014. He is a director and co-founder of IMM Associates, Chairman
of Hermes Investment Management and a non-executive director
of Marathon Asset Management.
David brings to the board extensive experience of international
business and asset management in the UK, Asia and emerging
markets, which enable him to provide effective leadership of
Caledonia’s board and valuable insight and advice in relation to
the company’s global portfolio.
Will Wyatt
2
Will joined the Caledonia group in 1997 from Close Brothers
Chief Executive
Corporate Finance, working at Sterling Industries before transferring
to Caledonia’s head office in 1999 as an investment executive.
He was appointed a director in 2005 and Chief Executive in 2010
and is also a member of the Nomination Committee. He has held
board positions at numerous Caledonia investee companies and
is currently a non-executive director of Cobehold. He is also a
non-executive director of Real Estate Investors, a trustee of the
Rank Foundation and Chairman of Newmarket Racecourses.
3
Tim was appointed as Caledonia’s Chief Financial Officer in March
Chief Financial Officer
2019, joining from the Wellcome Trust, where he had been Chief
Financial Officer since 2014. Prior to this position, he worked for
Virgin Atlantic for ten years, initially as Finance Director and then
as Chief Financial Officer, having previously held senior financial
positions at Hudson Global Resources and British Airways. He is
also a non-executive director of Premier Marinas Holdings.
Tim brings to the board extensive commercial and financial
experience, together with knowledge gained from his
responsibilities for risk and performance oversight of
Wellcome Trust’s asset management division.
Jamie Cayzer-Colvin
4
Jamie joined the Caledonia group in 1995, initially working at
Executive Director
its Amber speciality chemicals subsidiary before becoming an
investment executive at Caledonia’s head office in 1999. He was
appointed a director in 2005 and is currently a member of the
advisory committees of a number of Caledonia’s fund investments.
He is also Chairman of The Henderson Smaller Companies
Investment Trust, the RHS Pension Scheme and Heritage of London
Trust and is a non-executive director of Polar Capital Holdings and
Polar Capital Funds.
Jamie brings to the board broad senior management experience
and investment expertise and he specifically contributes to the
long-term sustainable success of the company through his
leadership of Caledonia’s funds investment strategy.
Will brings to the board corporate finance and investment expertise,
broad senior management experience and team leadership skills,
which enable him to provide effective leadership of Caledonia’s
management team in executing the board’s strategy.
5
Stuart Bridges
Appointed a non-executive director of Caledonia in 2013, Stuart is
Independent Non-Executive Director
Chairman of the Audit Committee and a member of the Governance
and Nomination Committees. A chartered accountant, he has held
positions in various financial services companies in the UK and US,
including Henderson Global Investors. He served as Chief Financial
Officer of Hiscox for some 16 years before holding the same role
at Nex Group and Control Risks. He is currently Chief Financial
Officer of Inigo Limited and a non-executive director of UIL Limited.
Stuart brings to the board a wide knowledge of both the insurance
and investment markets, as well as financial oversight expertise,
the latter being particularly valuable to Caledonia in terms of his
contribution to the board as Chairman of the Audit Committee.
58
Caledonia Investments plc Annual Report 2021
6
1
The Hon Charles Cayzer
Chairman
David Stewart
Non-Executive Director
N
7
1
Guy Davison
Chairman
David Stewart
Senior Independent
A G N
Non-Executive Director
8
1
Claire Fitzalan Howard
Chairman
David Stewart
Independent Non-
R N
Executive Director
9
1
Shonaid Jemmett-Page
Chairman
David Stewart
Independent
A G N R
Non-Executive Director
Committee
membership key
Audit
A
G
N
R
Governance
Nomination
Remuneration
Committee chair
The Hon Charles Cayzer
Claire Fitzalan Howard
6
Having gained experience of merchant banking, commercial banking
Non-Executive Director
and corporate and project finance with Baring Brothers, Cayzer
Irvine and Cayzer Ltd, Charles was appointed an executive director
of Caledonia in 1985, becoming non-executive in 2012, and is also
a member of the Nomination Committee. During his period as
an executive director of Caledonia, he was responsible for a large
number of investment acquisitions and disposals and served on
the boards of many investee companies, mostly in the property
and hotels sectors. He is currently Chairman of The Cayzer Trust
Company and the Bedford Estates.
8
Appointed a non-executive director of Caledonia in July 2019, Claire
Independent Non-Executive Director
is a member of the Remuneration and Nomination Committees.
She spent five years at Kleinwort Benson before joining Gauntlet
Insurance Services, a privately-owned insurance broking company
specialising in high net worth clients, where she had an executive
role until 1996 and served as a non-executive director between
2004 and 2019. Claire is a non-executive director of Schroders plc
and is involved in a number of charitable trusts and foundations,
including as a director of the Schroder Charity Trust and as a trustee
of the Schroder Foundation.
Charles brings to the board extensive knowledge of the commercial
property sector and broad commercial management experience,
which enable him to provide insight and constructive challenge
across the breadth of Caledonia’s investment activities.
Claire brings to the board her experience in both the financial
services and charitable sectors, as well as a deep experience of
public and private businesses with significant family shareholdings.
Guy Davison
7
Appointed a non-executive director of Caledonia in January 2018,
Senior Independent Non-Executive Director
Guy is Chairman of the Governance Committee and is a member
of the Audit and Nomination Committees. After qualifying as a
chartered accountant, he spent four years at Larpent Newton
before joining Cinven, the leading international private equity firm,
in 1988 as a founding partner, remaining with the firm until his
retirement in January 2017. During that time, he was central to
the development of the business from the time of its buy-out from
British Coal in 1995 to an international operation which today has
offices throughout Europe and North America. During his 29 years
at Cinven, he represented the firm as chairman or non-executive
director at some 25 of its portfolio companies. He also serves on
the board of Ascot Authority (Holdings) Limited.
Guy brings to the board over 30 years’ knowledge and experience
of private equity investing, both in the UK and Europe, which is of
particular benefit to Caledonia’s board and its Private Capital team
in evaluating new unquoted investment opportunities and
managing its existing unquoted portfolio.
Shonaid Jemmett-Page
9
Appointed a non-executive director of Caledonia in 2015, Shonaid
Independent Non-Executive Director
is Chairman of the Remuneration Committee and a member of the
Audit, Governance and Nomination Committees. She spent the first
20 years of her career at KPMG in London and Tokyo, rising to the
position of Partner, Financial Services. In 2001, she moved to
Unilever, where she was Senior Vice President, Finance and
Information for Asia, based in Singapore, before returning to the UK
as Finance Director for Unilever’s global non-food business. In 2009,
she joined CDC Group as Chief Operating Officer, a position she held
until 2012. Since then, she has focused on non-executive
appointments and is currently Chairman of Greencoat UK Wind
and Cordiant Digital Infrastructure and a non-executive director
of QinetiQ Group plc and Clearbank Limited.
Shonaid brings to the board extensive financial oversight and
international business experience, in particular in the Far East,
which enable her to provide valuable insight and advice to the
board, both in terms of its general decision-taking and through
her committee memberships. As Chairman of the Remuneration
Committee, she ensures that senior executive remuneration
supports Caledonia’s overall strategy and business model
in delivering long-term increases in capital and income
for shareholders.
59
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Corporate governance report
The board considers that the company has complied with the
Statement of compliance
UK Corporate Governance Code (‘Code’) issued in July 2018 for
the duration of the reporting period.
A copy of the Code is available on the website of the Financial
Reporting Council at www.frc.org.uk.
Overall responsibility and operation
The board
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 defines the company’s
purpose and culture and sets the company’s values and standards
to ensure that its obligations to its shareholders and other
stakeholders 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 formal schedule
that 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:
» responsibility for the company’s strategy, values and culture
» approval of the company’s half-year and full-year results and
annual report
» approval of the company’s dividend policy and dividend
distributions
» the appointment, re-appointment and removal of the
external auditor
» the appointment and removal of directors of the company,
as prescribed by the company’s articles of association, and of
certain other executives, including the Company Secretary
» the terms of reference of board committees and the membership
thereof
» directors’ remuneration and terms of appointment
» annual budgets
» the company’s systems of risk management and internal
control, including procedures for detection of fraud and
prevention of bribery
» responsibility for the company’s arrangements to enable
its employees to raise any matters of concern
» treasury policies, banking counterparties and counterparty
exposure limits
» significant capital transactions
» political donations.
Caledonia recognises the value of
good corporate governance to deliver
long-term sustainable success.
The board held eight scheduled meetings during the year and an
Membership and attendance
additional three meetings were called at short notice. Attendance
of the directors was as follows:
Director
D C Stewart
W P Wyatt
T J Livett
J M B Cayzer-Colvin
S J Bridges1
Hon C W Cayzer2
G B Davison
C L Fitzalan Howard
S C R Jemmett-Page
Meetings
attended
11
11
11
11
10
10
11
11
11
Meetings
eligible
to attend
11
11
11
11
11
11
11
11
11
1. Mr Bridges was unable to attend one board meeting, which was called at
short notice when he had a pre-existing commitment.
2. The Hon C W Cayzer was unable to attend one meeting due to a hospital
appointment.
60
Caledonia Investments plc Annual Report 2021 The board conducts an annual evaluation of its performance
Board performance evaluation
and that of its committees and, in accordance with best practice,
engages an independent third party facilitator to assist in this
process every three years. For its 2021 evaluation, the board
engaged an external consultant, The Effective Board LLP (‘TEB’),
to undertake a review of the performance of the board, its
committees and the Chairman. TEB has no other connection
with the company.
TEB’s board performance evaluation was conducted through
a structured interview process with directors, the Company
Secretary and the heads of the pools of capital. TEB presented
its findings in a report to the board and provided feedback on
the performance of the Chairman directly to the Senior
Independent Director.
TEB’s overall conclusion was that Caledonia’s board demonstrated
a high degree of effectiveness. Recommendations for further
improvement included:
» strategy development and mechanisms to monitor its successful
implementation
» enhanced oversight of the employee appraisal process and
further formalisation of processes to obtain employee feedback
» potential further improvements to Nomination Committee
processes.
The roles of the Chairman, Chief Executive and the Senior
Independent Director are separated and clearly defined in
separate statements of responsibilities. The Chairman is primarily
responsible for the leadership of the board to ensure that it carries
out its role effectively and for succession planning. The Chief
Executive is responsible for the implementation of the board’s
strategy, policies and the management of the company’s activities,
other than those matters specifically reserved to the board.
The Senior Independent Director is responsible for providing a
sounding board for the Chairman and, if necessary, to serve as
an intermediary for the other directors and shareholders.
The matters reserved for the board and the statements of
responsibilities of the Chairman, the Chief Executive and the
Senior Independent Director are reviewed by the board annually
and published on the company’s website.
Appointment, induction and training
The company complies with the recommendation of the 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. The annual performance evaluation of the board
encompasses the identification of any individual training needs
of board members so that, if necessary, these can be reviewed by
the Chairman with the directors concerned. 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 58 and 59.
The board currently comprises nine directors. Excluding the
Chairman, three of the directors are executive and five 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 prior to becoming non-executive.
Mrs Jemmett-Page was Caledonia’s audit partner at KPMG Audit
Plc from November 1995 to March 2001. The board does not
consider that this affects her independence given the length of
time that has elapsed since this role ended and also the fact that
none of the current board members, other than The Hon C W
Cayzer, were in post whilst she was audit partner.
Board committees
The board has delegated certain specific areas of responsibility
to the following standing committees – the Nomination
Committee, the Audit Committee, the Governance Committee
and the Remuneration Committee. Further details of the work of
each of these committees and their membership during the year
are set out on pages 64 to 86.
The terms of reference of each committee are reviewed annually
and are available on the company’s website.
61
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Corporate governance report (continued)
Details in respect of the company’s key stakeholders, together with
Key stakeholders, engagement and board decision making
commentary on how the directors addressed the matters set out
in section 172(1)(a) to (f) of the Companies Act 2006 as they made
decisions during the year, are set out in the section 172 statement
on pages 14 to 16.
Each director has a duty under the Companies Act 2006 to avoid a
Directors’ conflicts of interest
situation where he or she 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 new director on appointment is required to declare any
potential conflict situations, which may relate to him or her, or his
or her connected persons. These are reviewed by the board and,
if necessary, also by the Governance Committee, which then
considers whether these situations should be authorised and,
if so, whether any conditions to such authority should be attached.
Each board meeting includes a standing agenda item on conflicts
of interest to ensure that all directors disclose any new potential
conflict situations. These are then reviewed, again if necessary
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 is reviewed annually
by the Governance Committee.
Other committees
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:
» 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 to the board,
but for which board approval has already been given in principle.
The Administrative Committee meets when required and
comprises any two directors.
» 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
the committees. It is chaired by the Chief Executive and other
members comprise the executive directors, the heads of
the pools of capital and the Company Secretary.
» The Investment Management Committee ordinarily meets
fortnightly, although during the year the frequency of meetings
was increased in response to the impact of the Covid-19
pandemic. It considers matters relating to the company’s
investment portfolio and monitors the company’s cash
requirements and its net asset value per share total return
performance. The committee is chaired by the Chief Executive
and other members comprise the entire investment team, the
Chief Financial Officer, the Company Secretary and the Deputy
Company Secretary.
» 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 other members comprise the executive directors,
the heads of the pools of capital and the Company Secretary.
The Chairman is also invited to attend meetings.
» The Compliance Committee meets regularly to monitor the
company’s ongoing 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, tax and regulatory
developments. The Compliance Committee is chaired by the
Company Secretary and other members comprise the Chief
Financial Officer and the Heads of Tax, Treasury and Financial
Control.
» The Valuation Committee formally reviews valuations of all of
the company’s investments at each half-year and full-year. It is
chaired by the Chief Executive and other members comprise
the Chief Financial Officer, the Head of Financial Control and
the Chairman of the Audit Committee. The meetings are
observed by representatives from KPMG LLP and, as part of
transition planning, BDO LLP attended the most recent meeting.
62
Caledonia Investments plc Annual Report 2021 As at 26 May 2021, being the latest practicable date prior to the
Relations with controlling shareholders
publication of this annual report, the Cayzer family concert party
(‘Cayzer Concert Party’) held 48.4% of Caledonia’s voting rights.
Under the Financial Conduct Authority’s Listing Rules, where
a premium listed company has a controlling shareholder or
shareholders (being a person or persons acting in concert who
exercise or control 30% or more of the company’s voting rights),
the company is required to enter into a written and legally binding
agreement which is intended to ensure that the controlling
shareholder undertakes to comply with certain independence
provisions, namely that:
» transactions and arrangements with the controlling shareholder
(and/or any of its associates) will be conducted at arm’s length
and on normal commercial terms
» neither the controlling shareholder nor any of its associates
will take any action that would have the effect of preventing
the listed company from complying with its obligations under
the Listing Rules
» neither the controlling shareholder nor any of its associates
will propose or procure the proposal of a shareholder resolution
which is intended or appears to be intended to circumvent the
proper application of the Listing Rules.
The board confirms that agreements specified under the Listing
Rules as described above (which were required to be in place by
17 November 2014) were entered into by the company on 30
October 2014 with The Cayzer Trust Company Limited (‘Cayzer
Trust’) and separately with the Trustee of The Caledonia
Investments plc Employee Share Trust (‘Employee Share Trust’),
which is deemed by The Panel on Takeovers and Mergers to form
part of the Cayzer Concert Party, and remain in place. Under the
terms of its agreement, Cayzer Trust has undertaken to procure
the compliance with the independence provisions of all of the
other members of the Cayzer Concert Party, other than the
Employee Share Trust.
The board confirms that, during the period under review and up
to 26 May 2021, being the latest practicable date prior to the
publication of this annual report:
» the company has complied with the independence provisions
included in the agreements with Cayzer Trust and the Employee
Share Trust
» so far as the company is aware, the independence provisions
included in the agreements have been complied with by Cayzer
Trust and the Employee Share Trust
» so far as the company is aware, the procurement obligation
included in the agreement with Cayzer Trust has been complied
with by that company.
David Stewart
Chairman of the board
26 May 2021
The table below highlights where key content can be located
elsewhere in this annual report to enable shareholders to
evaluate how the company has applied the principles set
out in the UK Corporate Governance Code.
Board leadership and company purpose
Chairman’s statement
Chief Executive’s report
Section 172 statement
Performance measures
Sustainability
Key stakeholders
Division of responsibilities
The board
Board committees
Membership and attendance
Composition, succession and evaluation
Board of directors
Board composition
Board performance evaluation
Nomination Committee report
Audit, risk and internal control
Audit Committee report
Risk management
Remuneration
Annual statement by the Chairman of the
Remuneration Committee
Remuneration policy
Annual report on directors’ remuneration
Page
4
6
14
12
50
14
60
61
60
58
61
61
64
65
46
70
72
79
63
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Nomination Committee report
The Nomination Committee is focused
on evaluating the directors and
examining the skills and attributes
needed of board members. It is also
responsible for identifying suitable
candidates for new director positions
and succession planning.
The membership and attendance record of the Nomination
Membership and attendance
Committee during the year was as follows:
D C Stewart (Chairman)
S J Bridges
Hon C W Cayzer
G B Davison
C L Fitzalan Howard
S C R Jemmett-Page
W P Wyatt
Meetings
attended
2
2
2
2
2
2
2
Meetings
eligible
to attend
2
2
2
2
2
2
2
Further information on the Nomination
Committee’s terms of reference
www.caledonia.com
64
The Nomination Committee 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 relation thereto and for keeping
under review the leadership needs of the company, both executive
and non-executive.
The 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 board’s policy on diversity and inclusion is to seek to appoint
Diversity and inclusion
the best qualified person to a particular role, be it at board level or
within the company, regardless of gender or other diversity criteria.
It has not therefore adopted any measurable diversity objectives.
The Committee is however mindful of the debate around
improving diversity and inclusion, together with the targets set
by The Hampton-Alexander Review and, more recently, The Parker
Review. It therefore continues to take positive steps to improve
board diversity alongside its succession planning activities.
This will remain an area of continued focus during the search for
a successor to Mr Bridges, who will reach nine years of service
as an independent non-executive director in 2022.
External search consultants are expected to make every effort
to put forward diverse candidates for new board positions.
Whilst appointments will continue to be made primarily on merit
and against objective criteria, it remains the Committee’s intention
that the diversity of representation on Caledonia’s board will
continue to increase over time.
Gender data analysis in respect of the board and Caledonia more
broadly is provided on page 52.
The Nomination Committee met twice during the year and the
Work of the Nomination Committee
work undertaken included:
» consideration of the structure, size and composition of the board
as a whole in light of the 2020 board performance evaluation and
also of the balance of skills, knowledge and experience of
individual directors
» consideration of the contributions and effectiveness of the
non-executive directors seeking re-election at the 2020 annual
general meeting, prior to giving recommendations to the board
and shareholders for their re-elections
» the renewal of the Chairman’s letter of appointment.
David Stewart
Chairman of the Nomination Committee
26 May 2021
Caledonia Investments plc Annual Report 2021
Audit Committee report
The Audit Committee plays a
significant role in ensuring that the
company’s financial statements are
properly prepared and the system of
controls that is in place is effective
and appropriate.
The membership and attendance record of the Audit Committee
Membership and attendance
during the year was as follows:
S J Bridges (Chairman)
G B Davison
S C R Jemmett-Page
Meetings
attended
4
4
4
Meetings
eligible
to attend
4
4
4
The Audit Committee is responsible for monitoring the integrity
of the financial statements of the company and for reviewing
any significant financial reporting judgements they contain,
together with associated announcements. In addition, it oversees
the relationship with the external auditor. It also reviews the
company’s systems of internal control and risk management and
considers annually whether an internal audit function is required.
The Audit Committee, comprised exclusively of independent
non-executive directors with significant financial experience,
met four times in the year ended 31 March 2021, in April, May and
November 2020 and in March 2021. After the year end, it met in
May 2021 in respect of matters relating to the 2021 annual report.
The Chief Executive, the Chief Financial Officer, the Company
Secretary and members of the finance team attended all meetings
of the Audit Committee. The company’s external auditor, KPMG
LLP (‘KPMG’) also attended all meetings, except for the meeting
held in April 2020 at which the company’s audit tender was
discussed. Members of the Audit Committee held a separate
discussion with KPMG’s audit partner at the end of each meeting
he attended without management present. Other board members
and/or senior executives may also attend meetings at the invitation
of the Audit Committee Chairman.
The Audit Committee undertook the following activities in the
Work of the Audit Committee
discharge of its responsibilities.
Financial statements
The focus of meetings in May and November 2020 was the 2020
annual report and financial statements and the 2021 half-year
results respectively, including evaluation of the going concern
statement and, in the case of the annual report, the company’s
viability statement.
In November 2020 the Audit Committee considered feedback
from the Financial Reporting Council’s (‘FRC’) Conduct Committee
following its routine review of the company’s 2020 annual report.
The FRC’s material finding was in respect of alternative
performance measures (‘APMs’), specifically how the company’s
ongoing charges ratio had been calculated. Whilst a methodology
for the calculation had been disclosed in the company’s 2020
annual report, the FRC was unable to compute the ongoing charges
ratio using numbers from the financial statements. The Audit
Committee therefore undertook to ensure that the 2021 annual
report would provide an appropriate reconciliation where the basis
of computing an APM could not be immediately derived from the
financial statements. The FRC’s review was based on the company’s
2020 annual report and did not benefit from detailed knowledge
of Caledonia or an understanding of the underlying transactions
entered into. It was, however, conducted by FRC staff who have
an understanding of the relevant legal and accounting framework.
This review provides no assurance that the company’s annual
report was correct in all material respects; the FRC’s role is not
to verify the information provided but to consider compliance
with reporting requirements.
65
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Audit Committee report (continued)
The March 2021 meeting considered the audit planning for the
2021 annual report.
In its May 2021 meeting, the Audit Committee reviewed the form
and content of the 2021 annual report and financial statements,
together with the enhanced disclosure in respect of APMs in
response to the feedback the company had received from the FRC.
In conducting its review, the Audit Committee considered reports
prepared by management and the external auditor. These reports
provided an analytical review of the financial statements,
comparing the current to prior year financial position and results,
and detailed the judgements and sources of estimation uncertainty
involved in applying the accounting policies to the financial
statements. The Audit Committee also noted that there were
no new accounting standards applicable for the current year.
In addition, the Audit Committee considered reports prepared
by management to support the going concern and viability
statements. The Audit Committee recommended the 2021
annual report to the board.
The significant issue the Audit Committee considered in relation
to the 2021 financial statements was the valuation of unlisted
investments. The key inputs into the valuation of Private Capital
businesses were debated, recognising the unusual nature of trading
during the year and the broad range of factors impacting market
multiples utilised in the valuation process. An update of private
equity fund valuations was also considered. In relation to these
financial statements, the Audit Committee also considered the
going concern and viability statements and, as requested by the
board, compliance with the annual report’s ‘fair, balanced and
understandable’ provisions of the UK Corporate Governance Code.
Unlisted valuations
The Audit Committee recognises that unlisted investments are
a significant component of the financial statements and that their
valuation is subject to considerable judgement and uncertainty.
The Chairman of the Audit Committee attended the Valuation
Committee meetings (along with the external auditor) and
reported to the Audit Committee on the quality of the review,
adherence to the company’s valuation policy, consistency of
valuation methodologies over time and the approach to assessing
any ongoing impact of the Covid-19 pandemic on the valuations.
Going concern and viability
The directors are required to make a statement in the annual
report as to Caledonia’s longer-term viability. The Audit Committee
provides advice to the board on the form and content of this
statement, including the underlying assumptions. The Audit
Committee evaluated a report from management setting out its
view of Caledonia’s longer-term viability and the content of the
proposed viability statement. This report was based on the group’s
base case of forecast liquidity over three years to May 2024,
developed from a corporate financial plan which sought to
incorporate the ongoing impact from Covid-19. The base case
was subject to two stress tests. The first stress test reflected
weaker trading across the portfolio with a 20% reduction in
investment income, a reduction in the level of distributions from
fund investments by 20% to 30% in the first two years of the plan,
additional capital outflows into unlisted companies and an adverse
market correction which reduced the pricing of public equity
holdings by 10%. The second stress test built on the first and
included the early settlement of fund commitments. The three-
year period was chosen as it provided a reasonable degree of
certainty, based on the company’s expected activities.
Taking into account the assessment of the group’s stress testing
results, the Audit Committee agreed to recommend the viability
statement and three-year viability period to the board for approval.
The outcome of this activity led the Audit Committee to
recommend to the board to make the statement on page 45.
Fair, balanced and understandable statement
The Audit Committee reviewed the draft annual report and, taken
as a whole, considered it to be fair, balanced and understandable.
To assist in reaching this view, the Audit Committee considered
a report prepared by management highlighting the positive and
negative statements included in the annual report to ensure that
they fairly reflected the results for the year. The Audit Committee
recommended to the board that the statement of directors’
responsibilities in respect of the annual report and the financial
statements, set out on page 91, should be signed accordingly.
66
Caledonia Investments plc Annual Report 2021 Internal control
The board of directors is responsible for the company’s system
of internal control and for reviewing its effectiveness. The system
is designed to manage rather than eliminate the risk of failure to
achieve business objectives and can only provide reasonable and
not absolute assurance against material misstatement or loss.
The Audit Committee reviewed the effectiveness of the internal
control environment and the structure in place to resolve identified
weaknesses. The Audit Committee agreed the control review work
plan for the next three financial years at its November 2020
meeting and the introduction of more standardised reporting.
During the year, the Audit Committee reviewed reports on internal
controls, including a review of the company’s expenses system and
associated processes, and in respect of the control environment
of investee companies within the Private Capital pool. It also
considered key performance indicators used to manage
Caledonia’s information technology assets and facilitate ongoing
monitoring of associated risk controls and received a
comprehensive presentation in respect of cyber security
following the completion of a third party review of controls.
The Audit Committee also reviewed the Business Risk Report
prepared by management identifying the principle business risks
impacting the company, together with the mitigating controls
in operation and actions identified for continuous improvement.
Internal audit
As the company does not have an internal audit function, the Audit
Committee considers annually whether there is a need for one.
The company is an investment trust and manages its non-
consolidated subsidiaries as other private company investments,
expecting them to operate their own risk management processes.
The company closely monitors its control environment, including
the uncertainty and impact associated with Brexit and the Covid-19
pandemic, and those of its private company investments. The Audit
Committee recommended to the board that an internal audit
function was not required.
Audit effectiveness
Audit quality is reviewed continuously throughout the year by both
the Chief Financial Officer and Audit Committee. The focus is
centred on the following:
» the quality and seniority of the auditor’s staff
» the appropriateness of the planned audit methodology as applied
to Caledonia’s business activity
» the level of challenge and quality of reporting to the Audit
Committee.
The effectiveness of the audit is also monitored throughout the
year using several measures, including but not limited to:
» a review and approval of the scope of the planned audit
» the planned implementation of improvements following
appropriate post audit reviews
» the monitoring of the independence of the external auditor
» a review of any FRC Audit Quality Review Report for KPMG’s audit
of the company.
Non-audit work
To safeguard the auditor’s independence and objectivity, the Audit
Committee maintains 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. As a result of the
rigorous review by the Audit Committee on non-audit services
carried out by KPMG, there is limited reliance on the auditor’s
internal independence controls.
The Audit Committee has in place a policy for the provision of
non-audit services, meeting the requirements of the 2018 revision
of the UK Corporate Governance Code and the FRC’s Revised
Ethical Standard.
Certain non-audit services are prohibited and permitted services
are subject to approval by the Chief Financial Officer and Audit
Committee. Total fees payable for non-audit work carried out by
the company’s auditor are subject to limits. For the financial year
ended 31 March 2021, the total fees for non-audit services were
£47,330, the vast majority of which related to KPMG’s independent
review of the company’s half year report.
67
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Following completion of the evaluation, which was weighted in
favour of audit quality, the Audit Committee recommended two
firms to the board with a stated preference for BDO. The Audit
Committee believed that BDO’s services were better aligned to
the Company’s overall requirements, with slightly more partner
time expected when compared to the other firms. In addition,
BDO was potentially a more appropriate independent audit firm
for a number of investee companies, with an expectation that
some may transition to the firm over time.
KPMG continued in its role as external auditor for the 2021 financial
year. BDO has commenced its transition planning activities,
which were reviewed by the Audit Committee at the March
2021 meeting. BDO is shadowing KPMG during the 2021 audit
and is undertaking a comprehensive knowledge gathering exercise.
Appointment of BDO as auditor
Resolutions to appoint BDO LLP as auditor and to authorise the
directors, acting through the Audit Committee, to determine the
auditor’s remuneration will be proposed at the annual general
meeting on 21 July 2021.
During the year, the Chairman of the Audit Committee met
Private meetings
separately and privately with the Chief Financial Officer and KPMG.
This report has been prepared in compliance with the Competition
Statement of compliance
and Markets Authority Order 2014 on statutory audit services for
large companies.
Stuart Bridges
Chairman of the Audit Committee
26 May 2021
Audit Committee report (continued)
Auditor
KPMG Audit Plc was appointed auditor, replacing Deloitte, in 2011
and was replaced by KPMG LLP in 2013. The lead audit partner
is required to rotate every five years – this was done in 2016 –
and other key audit engagement partners every seven years.
No contractual obligations restrict the Audit Committee’s choice
of external auditor.
During the year, the Audit Committee managed a competitive audit
tender process utilising the FRC’s best practice guidance. The Audit
Committee, cognisant of regulatory guidance issued last year which
highlighted the ongoing strain of the Covid-19 pandemic on the
audit profession, sought to remain flexible in its approach to both
timetable and decision making.
The goal of the audit tender process was to appoint an audit firm
that would provide the company with the highest quality, most
effective and efficient audit. The agreed process included:
» invitations to tender issued to five firms based on the findings
and conclusions of the public reports on UK audit firms published
by the FRC
» a pre-selection stage, led by the Chairman of the Audit
Committee with input from the Chief Financial Officer, during
which the potential audit partners from the five long listed audit
firms, including the incumbent firm KPMG, participated in
informal meetings
» the submission of written proposal documentation by each
of three short listed audit firms
» formal presentations and question and answer sessions from
each short listed firm, attended by all Audit Committee
members, the Chief Financial Officer and other senior staff,
initially conducted on a fee blind basis
» a decision by the Audit Committee to recommend the
appointment of BDO LLP (‘BDO’) to the board.
Objective evaluation criteria considered by the Audit Committee
included:
» quality, capability and continuity
» understanding of the business and industry
» service approach and transition arrangements
» resolution of technical issues
» relevant expertise
» quality assurance
» added value over and above the audit itself
» approach to independence and conflicts of interest
» value for money.
68
Caledonia Investments plc Annual Report 2021 Governance Committee report
The Governance Committee monitors
and reviews the ability of each
director to act in the interests of
shareholders as a whole and to
exercise independence of judgement.
The membership and attendance record of the Governance
Membership and attendance
Committee during the year was as follows:
G B Davison (Chairman)
S J Bridges
S C R Jemmett-Page
Meetings
attended
2
2
2
Meetings
eligible
to attend
2
2
2
The Governance Committee 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 or her 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 or her 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 twice during the year and the
Work of the Governance Committee
principal matters it considered were:
» the review and approval of the Corporate governance
and Governance Committee reports for the year ended
31 March 2020
» the influence of the Cayzer family concert party (‘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
» the review and approval, on behalf of the board, of the
statements of compliance with the independence provisions
of the Listing Rules relating to premium listed companies with
controlling shareholders
» a review of the agreements, described on page 63, entered into
by the company on 30 October 2014 with The Cayzer Trust
Company Limited and separately with the Trustee of The
Caledonia Investments plc Employee Share Trust, which is
deemed by The Panel on Takeovers and Mergers to form part
of the Cayzer Concert Party
» 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.
Guy Davison
Chairman of the Governance Committee
26 May 2021
69
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Directors’ remuneration report
Annual statement by the Chairman of the Remuneration Committee
On behalf of the board, I am pleased to introduce Caledonia’s
Directors’ remuneration report for the year ended 31 March 2021.
The Remuneration Committee ensures
that remuneration arrangements
remain closely aligned to Caledonia’s
business model and strategy, the
ultimate aim of which is to grow the
company’s net assets and dividends
paid to shareholders in real terms over
the long term, whilst managing risk to
avoid permanent loss of capital.
The membership and attendance record of the Remuneration
Membership and attendance
Committee during the year was as follows:
S C R Jemmett-Page (Chairman)
C L Fitzalan Howard
D C Stewart
Meetings
attended
3
3
3
Meetings
eligible
to attend
3
3
3
The Companies Act 2006 requires the company’s auditor to report
to the shareholders on certain parts of the Directors’ remuneration
report and to state whether, in its opinion, those parts of the
report have been properly prepared in accordance with the Large
and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The parts of the Annual report
on directors’ remuneration that have been audited are indicated
in the report. The Annual statement by the Chairman of the
Remuneration Committee and the Remuneration policy are
not subject to audit.
Our current remuneration policy was approved by shareholders
Remuneration policy
in 2020 with over 99% of votes cast in favour. Approval followed
consultation with Caledonia’s largest shareholders and investor
bodies regarding our proposed policy refinements. The principal
elements of the approved policy are reproduced on pages 72 to
78 for ease of reference. No changes to the policy are proposed
this year.
We remain committed to ensuring that our remuneration
framework supports our overall strategy and business model,
the ultimate aim of which is to grow the company’s net assets
and dividends paid to shareholders over the long term,
whilst managing risk to avoid permanent loss of capital.
The Committee is cognisant of debate within the investor
community around executive pay and regularly monitors evolving
best practice. We have once again given careful consideration
to the guidance issued by investors and investor bodies on the
management of remuneration during the Covid-19 pandemic.
Caledonia has a small number of employees based in a single
location. This enables us to consider their detailed terms and
conditions when setting director remuneration, including recent
enhancements to parental leave policies and mental health
support following the move to remote working. Regular reporting
to the board also provides us with wide ranging staff analysis
including attrition rates, promotion decisions and training and
development. We proactively review gender pay gap analysis to
ensure Caledonia maintains equal pay for work of equal value.
Jamie Cayzer-Colvin has specific responsibility for the Funds pool
with underlying funds predominantly using US dollars as their
functional currency. The Committee concluded that the
performance of the Funds pool should therefore be measured
using the functional currency of the underlying funds. This change
applied to his annual bonus for the 2021 financial year and for new
awards made under the terms of the performance share plan from
2020 onwards.
Notwithstanding that Caledonia is not legally required to do so,
we have once again reported pay ratio information in relation
to the Chief Executive in accordance with The Companies
(Miscellaneous Reporting) Regulations 2018. This information
is set out on pages 84 to 85.
70
Caledonia Investments plc Annual Report 2021 The annual report on directors’ remuneration set out on pages
Remuneration for the year ended 31 March 2021
79 to 86 describes in detail how our remuneration policy has
been applied for the year ended 31 March 2021. I would,
however, like to highlight the following points.
Annual bonus
Caledonia delivered net asset value per share total return (‘NAVTR’)
for the year of 25.9%, outperforming the increase in the Retail
Prices Index (‘RPI’), taken for bonus purposes as the higher of actual
RPI over the bonus year or 3.0%. This triggered the maximum
bonus in respect of company performance. Due to the permanent
loss of capital associated with the disposal of Buzz Bingo for a
nominal sum in March 2021, the Committee concluded that Will
Wyatt’s bonus should be reduced by 15% and that the bonuses
of Tim Livett and Jamie Cayzer-Colvin should be reduced by 10%.
The Funds pool achieved a total return over the year of 49.1% on
a constant currency basis which, for Jamie Cayzer-Colvin, was also
above the return needed to achieve the maximum pay-out for that
element of his bonus. After assessing their individual performance
and, for Jamie Cayzer-Colvin, the attainment of pool objectives,
the Remuneration Committee awarded overall bonuses to Will
Wyatt, Tim Livett and Jamie Cayzer-Colvin of 85%, 90% and 90%
of basic salary respectively. In each case, any bonus over 50% of
basic salary is being deferred into shares for a period of three years.
Performance share scheme awards
The performance share scheme awards granted in 2016
(measured over five years) and the first one-third of the awards
granted in 2018 (measured over three years) reached the end
of their performance periods in March this year. In each case,
the awards were measured by reference to Caledonia’s annualised
NAVTR over the relevant periods, which was 8.9% for the 2016
awards and 8.6% for the 2018 awards, giving vesting levels of 89%
and 86% respectively. The Funds pool’s annualised total return
(relevant for 60% of Jamie Cayzer-Colvin’s awards) for the five and
three year periods was 14.9% and 14.6%, meaning that 100% of
this portion of his 2016 and 2018 awards vested. Further details
of the vesting scales for these awards can be found on pages 79
and 80. The Remuneration Committee considers that these
performance outcomes are appropriate.
The remaining two-thirds of the 2018 performance share scheme
awards will be tested in March 2023.
Looking ahead to the 2022 financial year, Tim Livett’s and Jamie
Remuneration for the year ending 31 March 2022
Cayzer-Colvin’s basic salaries have been increased with effect from
1 April 2021 by 1.5%, broadly in line with inflation, which was the
same as the standard increase given to all of the company’s staff.
Will Wyatt has not received any pay increase. The Chairman’s and
the non-executive directors’ fees have also not been changed.
We plan to make performance share plan awards following the
release of our 2021 full year results in line with our normal grant
cycle. These awards will be subject to the same performance
measures used for the 2020 award grants, which are summarised
in the notes to the remuneration policy table on page 75.
Compulsory deferred bonus awards for Will Wyatt, Tim Livett
and Jamie Cayzer-Colvin for the bonus received in excess of 50%
of base salary will also be made at the same time.
Shonaid Jemmett-Page
Chairman of the Remuneration Committee
26 May 2021
The Committee has sought to address each of the following
six factors set out in the UK Corporate Governance Code
when determining remuneration policy and practice:
Clarity – our policy is understood by directors and senior
management and has been clearly articulated to shareholders
and investor bodies.
Simplicity – we believe the current remuneration structure
is simple and have sought to avoid complex structures which
may have the potential to deliver unintended outcomes.
Risk – our policy and approach to target setting seeks to
discourage inappropriate risk-taking. We have also embedded
malus and clawback provisions where appropriate.
Predictability – incentive arrangements are clearly set out
and are subject to individual participation caps.
Proportionality – there is a clear link between the outcome
of individual awards, delivery of Caledonia’s strategy and
long-term performance.
Alignment to culture – pay and policies are cascaded to
Caledonia staff and are consistent with Caledonia’s purpose,
values and strategy.
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Directors’ remuneration report (continued)
Remuneration policy
Set out below are the material elements of the directors’
Introduction
remuneration policy approved by shareholders at the annual general
meeting held on 29 July 2020. This policy came into effect from that
date and will apply until a revised remuneration policy is approved by
shareholders, which will be proposed at the annual general meeting
in 2023.
There have been no changes to the current policy since its
Implementation of the policy
implementation and the extracts included below are for information
only and to provide context for the 2021 Annual report on directors’
remuneration which follows. References to share awards held by
executive directors at the date of approval of the policy which have
since been exercised have been removed and it has also been noted
where share awards have met their performance targets since the
implementation date. Executive directors’ salary and service contract
information has also been updated.
The full directors’ remuneration policy is contained on pages 52 to
60 of the company’s annual report 2020, which is available in the
‘Results & reports’ section of Caledonia’s website at
www.caledonia.com.
Under the current statutory regime, a company may only make a
remuneration payment to a director or a payment for loss of office
if it is consistent with the most recently approved remuneration
policy or, if not, an amendment to the policy to allow the payment
is separately approved by shareholders. The Remuneration
Committee considers that an effective remuneration policy needs
to be sufficiently flexible to take account of future changes in the
company’s business environment, and in remuneration practice
generally. In framing its policy, the Remuneration Committee has
therefore sought to combine a level of breadth and flexibility to
enable it to react to changed circumstances without the need for a
specific shareholder approval, whilst at the same time incorporating
sufficient detail and transparency to enable shareholders to
understand how it will operate in different scenarios and feel
comfortable that payments made under it are justified. Components
of remuneration where the Remuneration Committee wishes to
retain a level of discretion are identified in the relevant sections of
the policy. The Remuneration Committee may also make minor
amendments to the remuneration policy to aid its operation or
implementation without seeking shareholder approval, for example
to take account of a change in legislation or for regulatory, exchange
control, tax or administrative purposes, provided that any such
change is not to the material advantage of the directors.
The policy is essentially forward looking in nature. In view of the
Legacy arrangements
long-term nature of the company’s remuneration structures -
including obligations under service contracts, pension arrangements
and incentive schemes - a substantial number of pre-existing
obligations will remain outstanding at the time that the new policy
is approved, including obligations that are ‘grandfathered’ by virtue
of being in force at 27 June 2012 or which were incurred under the
previous remuneration policies approved by shareholders at the
2014 and 2017 annual general meetings. It is the company’s policy
to honour in full any pre-existing obligations that have been entered
into prior to the effective date of this policy.
The key objectives of the Remuneration Committee in setting
Objectives
the company’s remuneration policy are as follows:
» remuneration of executive directors should be linked to the
company’s long-term performance and its business strategy
» performance related remuneration should seek to align the
interests of executive directors with those of the shareholders
» a significant proportion of executive directors’ remuneration
should be linked to the performance of the company and only
receivable if demanding performance targets are achieved
» remuneration packages for 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.
Executive directors
Remuneration structure
The table below sets out Caledonia’s policy in relation to each component of executive director remuneration, with further explanations in
the notes that follow.
Salary (fixed pay)
Purpose and link
to strategic objectives
Operation
Opportunity and recovery or
withholding provisions
Performance
measurement framework
72
To support the recruitment and retention of executive directors of the calibre required to manage and
grow the company successfully.
Reviewed annually.
The basic salaries of the executive directors for the 2021 financial year were: W P Wyatt: £540,000; T J
Livett: £384,400; J M B Cayzer-Colvin: £343,700.
Salary increases are normally awarded by reference to any increase in the cost of living, but may take into
account other factors such as external market positioning, change in the scope of the individual’s
responsibilities or level of experience, development in the role and levels of pay elsewhere in the company.
Year-on-year increases in basic salaries will not exceed inflation by more than 5%, other than in exceptional
circumstances or where there is a change in role or responsibilities.
No recovery or withholding provisions.
Not applicable.
Caledonia Investments plc Annual Report 2021 Benefits (fixed pay)
Purpose and link
to strategic objectives
Operation
Opportunity and recovery or
withholding provisions
To provide a range of benefits alongside basic salary to recruit and retain high calibre executive directors.
Executive directors are provided with family private medical insurance cover, death-in-service insurance,
and permanent health insurance and, in the case of Mr Wyatt and Mr Cayzer-Colvin, a legacy cash
allowance in lieu of a company car. They are also entitled to receive minor benefits that are available to
other Caledonia staff.
The executive directors are also covered by the company’s directors’ and officers’ liability insurance policy
and have the benefit of an indemnity under the company’s articles of association.
Where there is a valid business reason for doing so, the company may pay for the cost of spouses or
partners accompanying directors on business trips and reimburse directors for hotel accommodation
and travel expenses (including payment of any tax thereon). Executive directors are also eligible to receive
other minor benefits and expenses payments (again including payment of any tax thereon).
A taxable benefits package that is competitive with the marketplace.
The value of taxable benefits provided, other than ad hoc items incurred in connection with Caledonia’s
business that may be deemed taxable benefits such as travel and other expenses, will not in aggregate
exceed 10% of basic salary.
Performance
measurement framework
No recovery or withholding provisions.
Not applicable.
Short-term incentives (variable pay)
Purpose and link
to strategic objectives
Operation
To reward performance on an annual basis against key financial, operational and individual objectives.
Discretionary annual bonus scheme and deferred bonus plan under which a proportion of bonus may be
compulsorily deferred into shares.
Opportunity and recovery or
withholding provisions
Bonus is not pensionable.
The maximum potential bonus is 100% of basic salary. Any bonus over 50% of basic salary is compulsorily
deferred into shares for a period of three years.
Participants will also receive an amount or additional number of shares equal to the value of the dividends
that would have accrued on the shares during the deferral period.
All bonus payments are subject to the overriding discretion of the Remuneration Committee, which also
retains discretion to amend the proportions of bonus subject to compulsory deferral or not to require any
deferral.
In order to be entitled to an annual bonus, an executive director must normally be in the group’s
employment and not under notice of termination (either given or received) at the time the bonus is paid.
The Remuneration Committee has the right to cancel or reduce any cash bonus or deferred bonus shares
granted after the effective date of this policy which have not yet been paid or vested, in the circumstances
described under long-term incentives below.
The Remuneration Committee also has the right to recover all or part of cash bonus paid or deferred
bonus shares and dividend shares or equivalent amounts awarded after the effective date of this policy
within the two years following date of payment or vesting as applicable, in the circumstances described
under long-term incentives below.
By reference to a combination of company performance against external benchmarks and individual
performance against personal objectives. Executive directors with responsibility for pools of capital will
have a proportion of bonus determined by reference to pool performance and objectives.
Performance
measurement framework
73
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Directors’ remuneration report (continued)
Remuneration policy
Long-term incentives (variable pay)
Purpose and link
to strategic objectives
To motivate executive directors to deliver long-term shareholder value, thereby aligning the interests of
management with those of shareholders.
To encourage long-term retention of key executives.
A performance share scheme under which participants are awarded nil-cost options over the company’s
shares.
The maximum value of nil-cost options that may be granted in any year under the performance share
scheme rules is 200% of basic salary, although the company’s policy is to grant annual awards of no more
than 150% of basic salary.
On exercise of nil-cost options, participants will also receive an amount or additional number of shares
equal to the value of the dividends that would have accrued on the shares during the relevant
performance measurement period.
A post-vesting holding period of two years will apply to the one-third of awards, on an after-tax basis, for
which performance is measured over three years. The remaining two-thirds of awards will be subject to
performance over five years.
The Remuneration Committee has the right to cancel or reduce long-term incentive awards which have
not yet vested, in the event of a material misstatement of the company’s financial results, miscalculation
of a participant’s entitlement, individual misconduct or an event resulting in material loss or reputational
damage to the company or any member of the group. In respect of awards granted after 10 May 2018,
the Remuneration Committee may, acting fairly and reasonably, reduce the level of vesting to take
account of any matter which it considers appropriate including the broader performance of the company,
the shareholder experience and the conduct of the participant. The Remuneration Committee also has
the right, in respect of awards granted after 20 July 2017, to recover all or part of the value of long-term
incentive awards and dividend equivalents received within two years of the date that such awards vested
and became exercisable, in the event of a material miscalculation of a participant’s entitlement, a material
misstatement or restatement of the company’s financial results for the years to which the performance
periods relate, or material personal misconduct that would justify summary dismissal, result in significant
reputational damage to the company, have a material adverse effect on the company’s financial position,
or reflect a significant failure of the company’s risk management or control. In the event of a change of
control before the expiry of the performance measurement period of a long-term incentive award, the
vesting level of the award will be determined by the Remuneration Committee based on the extent to
which the Remuneration Committee considers that the performance targets have been achieved and
vested shares will then be scaled down to reflect the shortened measurement period. The Remuneration
Committee may modify such vesting levels if it considers that the performance target would be met to
a greater or lesser degree at the testing date and/or if the application of time pro rating would be
inappropriate in the circumstances.
For executive directors who are not directly responsible for a pool of capital, nil-cost options awarded
under the performance share scheme are subject to the performance of the company’s annualised diluted
net asset value per share total return (‘NAVTR’) measured over three or five years. For executive directors
directly responsible for a pool of capital, the nil-cost options are subject to a combination of the
performance of the company’s annualised NAVTR as above and the annualised total returns achieved
by the relevant pool for which he or she is responsible, again measured over three or five years.
The rules of the scheme provide discretion to the Remuneration Committee to amend the performance
targets or impose different performance targets and to determine the appropriate proportion of any
award subject to each performance measure.
Operation
Opportunity and recovery or
withholding provisions
Performance
measurement framework
74
Caledonia Investments plc Annual Report 2021 Pension related benefits (fixed pay)
Purpose and link
to strategic objectives
Operation
Opportunity and recovery or
withholding provisions
To provide a means of retirement saving as part of a range of benefits alongside basic salary to recruit and
retain high calibre executive directors.
Executive directors are offered defined contribution funding, based on a percentage of salary,
to a personal pension scheme or a cash salary supplement (or a combination of both) at their choice.
The percentage of basic salary for executive directors, consistent with all Caledonia’s staff, is 15%.
If a director chooses to take a cash supplement in lieu of some or all of his or her pension entitlement,
the payment is reduced by such amount as is necessary to make the cash supplement cost neutral for
the company after taking into account National Insurance contributions.
The Remuneration Committee will retain the discretion to increase the percentage of salary relating to
pension benefits from time to time in line with market conditions, up to a maximum of 30% of basic salary,
provided that the rates for executive directors remain aligned with those for other staff.
Performance
measurement framework
No recovery or withholding provisions.
Not applicable.
Notes to the policy table
1. Performance measures and targets
Annual bonus
For the Chief Executive and the Chief Financial Officer, a maximum of 50%
of bonus is determined by reference to company performance and 50%
by reference to individual performance objectives. For executive directors
responsible for a specific pool of capital, 25% of bonus is determined by
reference to the company’s performance, 25% to pool performance, 35%
to pool objectives and 15% to individual performance objectives. In all
cases, the company performance element is determined by reference
to the relative performance of the company’s NAVTR against RPI, with RPI
taken as the higher of actual RPI over the bonus year or 3%, being broadly
in line with its historic long-term average. Bonus payments for this
element commence with a 10% pay-out if NAVTR matches RPI, increasing
incrementally to the maximum entitlement payable if outperformance of
7% or more is achieved. Pool performance is judged by the Remuneration
Committee by reference to the return achieved by the pool against a set
target return and by objectives such as deal flow and delivery of portfolio
strategy. Individual performance is assessed by reference to personal
objectives set at the start of the year, including non-financial measures
such as risk management, marketing of the company, team leadership,
management skills and promotion of Caledonia’s corporate culture and
profile both internally and externally.
The Remuneration Committee retains discretion to amend or adopt
alternative annual bonus targets in order to achieve better alignment
with the company’s strategic objectives.
Compulsory deferral of bonus
Deferred bonus plan
Shares comprised in a compulsory deferral will normally only vest 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.
Long-term incentive plans
Performance share scheme
For nil-cost options granted to Mr Wyatt and Mr Livett, awards will vest on
a graduated basis, with vesting commencing at 10% on the achievement
of an annualised NAVTR of 3%, rising incrementally to 100% vesting on
achievement of an annualised NAVTR of 10%, measured over three and
five years. For Mr Cayzer-Colvin, who is head of the Funds pool, 60% of his
performance share scheme awards will be measured against the annualised
total returns achieved by the Funds pool, measured over three and five
years. Awards will similarly vest on a graduated basis, with vesting
commencing at 10% on achievement of an annualised Funds pool total
return of 6%, rising incrementally to 100% vesting on achievement of an
annualised total return of 13.5%. The remaining 40% of Mr Cayzer-Colvin’s
performance share scheme awards will be measured against Caledonia’s
annualised NAVTR as above.
One-third of nil-cost options granted will be measured over three years
and two-thirds over five years. In all cases, shares that vest will become
immediately exercisable and will lapse if not exercised within ten years
of grant.
Rationale for choice of performance measures for the short and
long-term incentive plans
The Remuneration Committee has chosen NAVTR as the basis of
performance measurement for the company for both its short-term and
long-term incentive arrangements as it regards this as the best indicator
of the success or failure of management decisions in terms of creating
value for the company.
For the company performance element of the annual bonus scheme, the
board has taken the view that benchmarking against a stock market index
or indices over a short period is not relevant given Caledonia’s long-term
investment horizon and the nature of its portfolio. The Remuneration
Committee has therefore instead chosen RPI, subject to a minimum of 3%,
as the comparator, as on this basis executives will only be rewarded to the
extent that they are able to deliver positive real returns for shareholders.
The Remuneration Committee will review the rate of increase in RPI at the
start of each financial year and may adjust the level of outperformance
required for the incremental and maximum bonus payments in order to
ensure that they remain a fair measure of performance.
For awards under the performance share scheme, the Remuneration
Committee has chosen Caledonia’s annualised NAVTR as the performance
measurement, as it believes that this is the most effective method of
aligning directors’ rewards with the long-term strategic objective of the
company of delivering annualised returns over rolling ten-year periods
of between RPI+3% and RPI+6%. For Mr Cayzer-Colvin, the Remuneration
Committee believes that a significant proportion of his variable pay should
be weighted towards the annualised total return performance of the
Funds pool of capital for which he is responsible and has therefore
determined that 60% of his performance share scheme awards should
be tested by reference to this.
The targets for each component of the long-term incentive plans have
been set by the Remuneration Committee with the aim of delivering
increasing reward for greater outperformance. The Remuneration
Committee keeps these measures and the levels at which incremental
and maximum entitlements are earned under review in order to ensure
that they remain sufficiently challenging and aligned with the company’s
strategy and key performance indicators.
75
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Directors’ remuneration report (continued)
Remuneration policy
2. New components introduced into the new remuneration policy
There were no new components included in the above policy table which
were not a part of the remuneration policy previously operated for
executive directors by the company.
3. Changes to components included in the previous remuneration policy
The only changes to the previous remuneration policy table were (i) the
introduction of a post-vesting holding period of two years for the
one-third of performance share scheme awards (on an after-tax basis) for
which performance is measured over three years, (ii) the provision for the
Committee to decide whether dividend equivalents due on performance
share scheme and deferred bonus plan awards should be paid in shares in
place of cash, and (iii) the Remuneration Committee’s power to reduce the
vesting level of certain performance share scheme awards based on broad
considerations.
In addition, the remuneration policy, introduced (i) Remuneration
Committee discretion to reassess good leaver treatment for performance
share scheme participants should circumstances change after the date
they leave but prior to awards vesting, and (ii) a post-cessation
shareholding requirement of two years, with the Committee retaining
discretion to override the arrangement, for example, for regulatory
reasons, on compassionate grounds or where an executive experiences
financial hardship.
4. How the remuneration policy for executive directors relates to
remuneration of Caledonia group employees generally
Caledonia’s executive directors’ remuneration packages tend to be higher
than those of other group employees, but also include a higher proportion
of variable pay.
Chairman and non-executive directors
The table below sets out each component of the Chairman’s and the non-executive directors’ remuneration and the approach taken by
the company in relation thereto.
Component
Chairman’s and
non-executive
directors’ fees
Approach
The Chairman’s fee is determined by the Remuneration Committee and the non-executive directors’ fees
are set by the board. These are reviewed periodically taking into account the responsibilities and time
commitments required and non-executive director fee levels generally.
The Chairman receives an annual fee, which includes his basic non-executive director’s fee, but does not
receive any other remuneration.
Non-executive directors receive basic fees, which are subject to an aggregate annual limit for non-
executive directors’ ordinary remuneration contained in the articles of association, currently £350,000.
It is intended that this cap, which has not been changed for some time, be increased to £600,000 as part
of proposed amendments to the articles of association at this year’s annual general meeting. In addition,
special fees are paid for the chairmanship and membership of the Audit and Remuneration Committees
and also for the role of Senior Independent Non-Executive Director and Chairman of the Governance
Committee.
The fees of the Chairman and the non-executive directors on implementation of the policy for the 2021
financial year were as follows:
Chairman
£150,000
Basic non-executive director’s fee
£39,900
Audit Committee chairman
£5,600
Audit Committee member
£2,300
Remuneration Committee chairman £4,900
Remuneration Committee member £1,600
£5,100
Senior Independent Director/
Governance Committee chairman
Exceptionally, non-executive directors may receive fees from subsidiary companies for services provided
to them. Fees for services provided to subsidiary companies are set and reviewed by the boards of those
companies, but will not exceed £100,000 per annum in aggregate for any non-executive director.
The Chairman and the non-executive directors are all covered under the company’s directors’ and
officers’ liability insurance policy and have the benefit of an indemnity under the company’s articles
of association. The Chairman is also provided with an office and secretarial support.
The company may, where appropriate, pay for the cost of spouses or partners accompanying non-
executive directors on trips where there is a business reason for doing so and reimburse non-executive
directors for hotel accommodation and travel expenses (in each case including payment of any tax
thereon).
Additional fees payable
for services to other
group companies
Other benefits
Executive directors
Remuneration policy for new appointments
In the case of the appointment of a new executive director,
the Remuneration Committee would typically seek to align the
remuneration package with the above remuneration policy.
The Remuneration Committee however retains the discretion to
make special remuneration commitments on the appointment of a
new executive director, including the use of awards made under
Rule 9.4.2 of the Listing Rules, if such were necessary to ensure
the recruitment of a candidate. In doing so, the Remuneration
Committee would take into consideration all relevant factors,
including, but not limited to, overall quantum, type of remuneration
offered and comparability with the packages of other Caledonia
senior executives and the total variable pay would not exceed
the maxima stated in the policy table for executive director
remuneration above.
76
Caledonia Investments plc Annual Report 2021
The Remuneration Committee may in addition make bonus
commitments or share awards on the appointment of an external
candidate to compensate for remuneration arrangements forfeited
on leaving a previous employer, taking into account factors such as
any performance conditions attached to these awards, the form in
which they were granted, for example cash or shares, and the time
over which they would have vested. The aim would be to ensure
that replacement awards would be made on no greater than a
comparable basis.
In order to attract and retain suitable executives, the Remuneration
Committee retains discretion, in exceptional circumstances, to
offer service contracts with up to an initial 24 month notice period,
which then reduces to 12 months at the end of this initial period.
If it considers it appropriate, the Remuneration Committee may
also offer a lower salary initially, but with a series of increases to
achieve the desired salary positioning over a period of time, as the
individual develops into the role.
If a new appointment is the result of an internal promotion, the
Remuneration Committee would expect to honour any pre-
existing contractual arrangements or benefits package agreed
with the relevant individual. In the event that a new director resides
overseas, the Remuneration Committee may agree a reasonable
relocation package and tax equalisation arrangements.
In recruiting any new executive director, the Remuneration
Committee would apply the overall policy objective that executive
directors’ remuneration should be competitive, but not excessive.
In the event that the Remuneration Committee agreed that it was
necessary for special commitments or sign-on arrangements to be
offered to secure the recruitment of a new executive director, an
explanation of why these were required and details thereof would
be announced at the time of appointment.
Chairman and non-executive directors
Terms for the appointment of any new Chairman or non-executive
director would also be determined by the Remuneration
Committee or the board within the above remuneration policy.
Executive directors’ service contracts and the Chairman’s
Executive directors
and non-executive directors’ letters of appointment
Executive directors have service contracts with Caledonia Group
Services Ltd, a wholly-owned subsidiary of the company, details of
which are summarised below:
W P Wyatt
T J Livett
J M B Cayzer-Colvin
Date of
contract
2 Jun 2005
14 Nov 2018
19 Apr 2005
Notice period
for company
and director Unexpired term
12 months
12 months
12 months
12 months
12 months
12 months
If notice is served by either party, the director can continue
to receive basic salary, benefits and pension payments for the
duration of the notice period, during which time the company may
require the individual to continue to fulfil his current duties or may
assign a period of gardening leave. Alternatively, the company may,
in its discretion, terminate the contract without notice and make
a lump sum payment in lieu of notice. This lump sum would include
an amount equivalent to the basic salary and benefits (based on
a fixed percentage of salary specified in the service contract) for
the unexpired period of notice to which the payment relates.
Mr Wyatt’s and Mr Cayzer-Colvin’s service contracts provide that
an amount equivalent to 80% of the average of the annual bonuses
paid for the previous three financial years would also be included
in the payment in lieu of notice. Mr Wyatt’s and Mr Cayzer-Colvin’s
service contracts also include provisions whereby a liquidated sum
is payable in the event of termination within one year following
a change of control. The payment would be calculated on the
same basis as a payment in lieu of notice, except that an amount
equivalent to 100% of the average of the annual bonuses paid
for the previous three financial years would be included.
Mr Livett’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 Livett
receives from any alternative employment that he takes up during
the notice period.
Executive directors’ service contracts may be terminated without
notice and without any further payment (other than in respect of
amounts due at the date of termination) on the occurrence of
certain events such as gross misconduct.
Chairman and non-executive directors
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.
Inspection
Executive directors’ service contracts and the Chairman’s and
non-executive directors’ letters of appointment are available
for inspection at the registered office of the company.
Policy on external non-executive directorships held by
It is the company’s policy to allow executive directors to hold
executive directors
non-executive directorships unrelated to the company’s business
to broaden their commercial experience, provided that the time
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 on a case-by-case basis.
Details of any fees from external non-executive directorships
retained by executive directors are disclosed in the Annual report
on directors’ remuneration.
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Directors’ remuneration report (continued)
Remuneration policy
Executive directors
Policy on payments for loss of office
It is the policy of the company that, other than in exceptional
circumstances on recruitment as stated above, no executive
director should be offered a service contract that requires more
than one year’s notice of termination or which contains provision
for predetermined compensation in excess of one year’s total
emoluments. In the event of a termination, the Remuneration
Committee will consider a director’s past performance and the
circumstances of the departure in exercising any discretions
relating to the arrangements for loss of office, including contractual
obligations, prevailing best practice, the reason for the departure
and any transition or handover required.
The termination provisions in executive directors’ current service
contracts are described above in the section on executive
directors’ service contracts. 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 the notice period. However,
if a new director is appointed internally, the Remuneration
Committee would expect to honour any existing contractual
arrangements agreed with the relevant individual before he or
she becomes a director.
In applying the company’s right to make a lump sum payment
in lieu of notice, the Remuneration Committee would normally
expect to pro rate the lump sum for the unexpired period of notice
to which the payment relates. In appropriate circumstances, the
Remuneration Committee may make a payment in respect of the
full twelve months’ notice period, even if the director works under
notice for part of it.
The company’s annual bonus scheme provides that an employee
must be in the group’s employment and not under notice of
termination (either given or received) in order to be entitled to
receive a bonus for the relevant financial year. The Remuneration
Committee would expect to apply this principle to executive
director terminations, but retains discretion to make bonus
payments on termination if it believes it appropriate to do so.
If any bonus payment is made, the Remuneration Committee
also retains discretion as to whether it will require any part of the
bonus to be deferred into shares under the deferred bonus plan.
Executive directors would also be entitled under their service
contracts to be paid on termination for any accrued, but untaken,
holiday entitlement. The Remuneration Committee may, where it
considers it appropriate in the circumstances, make payments for
loss of statutory rights or waiver thereof and a contribution
towards legal and outplacement fees. The Remuneration
Committee may also make a payment to ensure that any
restrictive covenants remain enforceable.
Where the director holds unvested awards under the company’s
long-term incentive schemes, the Remuneration Committee may
exercise its discretions as to vesting in accordance with the relevant
scheme rules. In good leaver circumstances, for example where
cessation of employment is by reason of death, retirement, injury,
disability, ill-health, redundancy, or such other reason as the
Remuneration Committee may decide, the Remuneration
78
Committee will normally determine the level of vesting based on
the attainment of the performance targets, either at the time of
cessation or at the normal test date if permitted by the scheme
rules, but in the case of the former may decrease or increase the
level of vesting if the Remuneration Committee considers that the
targets would have been met to a lesser or greater extent at the
end of the performance period. The number of shares that vest
will normally be reduced to reflect the proportion of the
performance period that the director was in employment,
although the Remuneration Committee has discretion not to scale
down the number of shares if it believes it appropriate in the
circumstances. Awards made following the approval of this policy
will provide the Remuneration Committee with the discretion to
assess good leaver treatment for participants should circumstances
change after the date they leave but prior to vesting.
Following termination, the Remuneration Committee may agree
to pay a director consultancy fees and continue insurance related
benefits until the end of the insurance policy period. The
company’s directors’ and officers’ liability insurance policy also
provides for a six-year period of run-off cover for former directors.
In limited circumstances, the company may permit a director to
remain in employment after ceasing to be a director for a limited
period to allow time for an effective handover or for a successor
to be appointed.
Chairman and non-executive directors
The Chairman and the non-executive directors have no entitlement
to any compensation on termination of their appointments,
although they would have the benefit of run-off cover under the
directors’ and officers’ liability insurance policy as described above.
However, in appropriate circumstances they may receive de
minimis retirement gifts from the company.
In order to align the interests of executive directors with those of
Executive directors’ minimum shareholding guidelines
shareholders, the Remuneration Committee has adopted guidelines
for minimum shareholdings, which executive directors will be
expected to attain through the retention of all post-tax share
awards vesting under the company’s long-term incentive plans
until the minimum shareholding is met. For these purposes,
shareholdings include those of connected persons and also the
value, net of any exercise costs, income tax and National Insurance
contributions, of unexercised awards granted under its performance
share scheme for which the performance targets have been met.
Also included are bonuses deferred compulsorily under the
company’s deferred bonus plan, again net of income tax and
National Insurance contributions.
A post-cessation shareholding requirement for executive directors
of two years has been implemented, with the Committee retaining
discretion to override this arrangement, for example, for regulatory
reasons, on compassionate grounds or where an executive
experiences financial hardship.
For the Chief Executive, the minimum guideline shareholding has
been set at 200% of basic salary and for other executive directors
150% of basic salary.
Caledonia Investments plc Annual Report 2021 Annual report on directors’ remuneration
The following report sets out details and explanations of remuneration paid to directors over the financial year to 31 March 2021 and
describes how Caledonia’s remuneration policy will be implemented for the 2022 financial year.
Executive directors
Single total figure of remuneration for each director (audited)
The table below provides an analysis of total remuneration of each executive director for the financial year ended 31 March 2021 and
a comparison with the previous financial year.
Fixed remuneration and benefits
Salary
Taxable benefits1
Pension related benefits
Total fixed remuneration
Variable remuneration
Short term Incentives2
Long term Incentives3
Total variable remuneration
Total
W P Wyatt
2021
£’000
2020
£’000
T J Livett
2021
£’000
2020
£’000
540
23
71
634
459
735
1,194
1,828
540
20
71
631
–
174
174
805
384
7
51
442
346
–
346
788
375
5
49
429
–
–
–
429
J M B Cayzer-Colvin
2021
£’000
344
22
45
411
309
482
791
1,202
2020
£’000
335
21
44
400
–
174
174
574
1. Taxable benefits
Taxable benefits principally comprise private medical insurance cover,
a small Christmas supplement paid to all Caledonia staff and business
related expense reimbursements which are deemed by HMRC to be
taxable. Mr Wyatt’s and Mr Cayzer-Colvin’s taxable benefits also included
a cash allowance of £15,024 in lieu of a company car.
In addition to taxable benefits, other non-taxable benefits were provided
to executive directors, including death-in-service insurance (4x basic
salary), permanent health and income protection insurance, directors’
and officers’ liability insurance and certain other benefits of minor value
provided to all of Caledonia’s staff.
2. Short-term incentives
In accordance with the Company’s remuneration policy, the following
amounts included in the short term incentives column will be compulsorily
deferred via the deferred bonus plan, for a period of three years in the
form of nil-cost options:
2021
W P Wyatt
T J Livett
J M B Cayzer-Colvin
2020
W P Wyatt
T J Livett
J M B Cayzer-Colvin
Compulsorily
deferred
£’000
189
154
137
Compulsorily
deferred
£’000
–
–
–
Cash
£’000
270
192
172
Cash
£’000
–
–
–
Total
£’000
459
346
309
Total
£’000
–
–
–
For Mr Wyatt and Mr Livett, a maximum of 50% of bonus was determined
by reference to company performance and 50% by reference to individual
performance objectives. For Mr Cayzer-Colvin, who has specific responsibility
for the Funds pool of capital, 25% of his bonus was determined by reference
to the company’s performance, 25% to his pool’s performance, 35% to his
pool’s objectives and 15% to individual performance objectives. For the 2021
financial year, the company performance element was determined by
reference to the relative performance of the company’s NAV per share
total return (‘NAVTR’) against the Retail Prices Index (‘RPI’), which for bonus
purposes was taken as 3%, or actual RPI if greater, with bonus payments for
this element commencing with a 10% pay-out if the company’s NAVTR
matched RPI, increasing incrementally to the maximum entitlement payable
if outperformance of 7% or more was achieved. Mr Cayzer-Colvin’s pool
performance was assessed by reference to the return achieved by the Funds
pool over the year on a constant currency basis, with payments commencing
on achievement of a total return of 6%, rising to a maximum pay-out against
a total return of 13.5%, and pool objectives, by measures such as increasing
Caledonia’s knowledge of the Asian and US fund universe, ensuring Caledonia
remains positioned with managers raising new funds, refining and executing
the Funds pool strategy and cash flow. Individual performance for each
executive director was assessed by reference to personal objectives set
at the start of the year, including non-financial measures such as risk
management, marketing of the company, team leadership, management
skills, systems and controls enhancements, improvements to reporting, team
development and promotion of Caledonia’s corporate culture and image
both internally and externally.
The company’s NAVTR was 25.9% over the year against an increase in RPI
(for bonus purposes) of 3%, giving a 100% payment for company
performance. Notwithstanding the strong performance of the company
overall, the Remuneration Committee concluded that the bonuses of the
executive directors in respect of company performance should reflect the
permanent loss of capital associated with the disposal of Buzz Bingo and
accordingly reduced the payment to Mr Wyatt for this element to 35% and
to Mr Livett and Mr Cayzer-Colvin to 40% and 15% respectively.
The Funds pool’s return over the year was 49.1% on a constant currency basis
(34.8% on a Sterling basis), giving a payment of 100% for Mr Cayzer-Colvin
for this element. In assessing Mr Cayzer-Colvin’s achievement of his pool
objectives, the Remuneration Committee took account of the fact that
Caledonia remains well known in its target funds sectors in both the US and
Asia and continues to be offered participation in new fund launches even
when oversubscribed by existing limited partners. It also noted the good
progress being made in implementing the strategy of increasing the pool’s
focus on private equity funds and the reduction in quoted market fund
exposures and concluded that Mr Cayzer-Colvin should be awarded the full
bonus of 35% salary for attainment of pool objectives. It further decided that
Mr Cayzer-Colvin’s team leadership and general contribution in executive
decision taking merited a bonus of 15% of salary for individual performance.
In terms of Mr Wyatt’s and Mr Livett’s individual performance, the
Remuneration Committee assessed aspects such as shareholder
engagement, execution of the board’s strategy, enhancements made to
systems and controls, improved reporting, management of the executive
team and peer group liaison and analysis. Mr Wyatt and Mr Livett were each
considered to have met their personal objectives for the year in full. The total
bonuses awarded to Mr Wyatt, Mr Livett and Mr Cayzer-Colvin for the year
were therefore determined as follows:
W P Wyatt
Award
%
Max
%
T J Livett
Award
%
Max
%
J M B Cayzer-Colvin
Max
%
Award
%
Performance
Company
Pool
Objectives
Pool
Individual
Total
35
n/a
n/a
50
85
50
n/a
n/a
50
100
40
n/a
50
n/a
n/a
50
90
n/a
50
100
15
25
35
15
90
25
25
35
15
100
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Directors’ remuneration report (continued)
Annual report on directors’ remuneration
3. Long-term incentives
The long-term incentive awards where performance measurement periods
ended during the year were the two-thirds of the awards granted in 2016
under the performance share scheme and one-third of the awards granted
under that scheme in 2018. All such awards were nil-cost options.
Chairman and non-executive directors
Fees and other remuneration paid to the Chairman and the
non-executive directors during the year ended 31 March 2021 and
the previous year were as follows:
The 2016 and 2018 performance share scheme awards for Mr Wyatt were
measured by reference to Caledonia’s annualised NAVTR performance over
five and three years. Vesting was on a graduated basis, commencing at 10%
on achievement of an annualised NAVTR of 3%, rising incrementally to 100%
vesting on an annualised NAVTR of 10%. For Mr Cayzer-Colvin, 40% of these
awards were measured against Caledonia’s annualised NAVTR as above,
and 60% by reference to the annualised total return achieved by the Funds
pool over the performance measurement period, with graduated vesting
commencing at 10% on achievement of an annualised total return of 6%,
rising incrementally to 100% vesting on achievement of an annualised total
return of 13.5%.
For the 2016 performance share scheme awards measured over the five
years to 31 March 2021, Caledonia’s annualised NAVTR over the period
was 8.9%, resulting in 89% vesting. For Mr Cayzer-Colvin’s award measured
by reference to his pool’s performance, the Funds pool delivered an
annualised total return of 14.9% over the period, resulting in 100% vesting.
For the 2018 performance share scheme awards measured over the three
years to 31 March 2021, Caledonia’s annualised NAVTR over the period
was 8.6%, resulting in 86% vesting. For Mr Cayzer-Colvin’s award measured
by reference to his pool’s performance, the Funds pool delivered an
annualised total return of 14.6% over the period, resulting in 100% vesting.
Fees
2021
£’000
150
46
45
47
–
42
47
2020
£’000
150
46
42
46
16
29
46
Taxable
expenses6
2021
£’000
–
–
–
–7
–
–
–
2020
£’000
–
–
–
–
–
–
–
Total8
2021
£’000
150
46
45
48
–
42
47
2020
£’000
150
46
42
46
16
29
46
D C Stewart
S J Bridges
Hon C W Cayzer1
G B Davison2
C H Gregson3
C L Fitzalan Howard4
S C R Jemmett-Page5
1. The Hon C W Cayzer receives an additional fee of £5,000 per annum,
effective from 22 October 2019, in respect of his services as a trustee
of the Caledonia Pension Scheme.
2. Mr Davison was appointed as senior independent director on 24 July 2019.
3. Mr Gregson retired as a director on 24 July 2019.
4. Mrs Fitzalan Howard was appointed as a director on 22 July 2019.
5. Mrs Jemmett-Page was appointed as chairman of the Remuneration
Committee on 24 July 2019.
The awards granted in 2016, following performance testing, vested on
26 May 2021. The awards granted in 2018, also following performance
testing, will vest on 30 May 2021. The values, as reflected in the 2021
long term incentives column above, are calculated using the three-month
average share price to 31 March 2021 of 2741p, together with the value of
dividends that will have accrued on the shares at vesting. The overall value
of the long-term incentives shown in the table above are therefore analysed
as follows:
6. Taxable expenses include expense reimbursements relating to travel,
accommodation and subsistence in connection with board and committee
attendance during the year which are deemed by HMRC to be taxable in
the UK. Amounts are the grossed-up cost of UK tax paid by the company.
Non-taxable expense reimbursements have not been included in the table.
7. Mr G B Davison incurred a taxable expense during the year in connection
with travel to a meeting with a total cost, including tax, of £225.
8. Due to rounding, individual columns do not necessarily add up to the
total column.
The Chairman and the non-executive directors did not receive any
taxable benefits, short-term incentives, long-term incentives or
pension related benefits.
Defined contribution
Total pension entitlements (audited)
Pension benefits paid to executive directors during the year, either
as contributions to personal pension arrangements or as cash
supplements, were as follows:
Pension
contribution
2021
£
–
–
Cash
supplement
2021
£
2020
2020
2020
£
£
£
– 71,178 71,178 71,178 71,178
49,429 50,668 49,429
– 50,668
2021
£
Total
–
– 45,303 44,189 45,303 44,189
W P Wyatt
T J Livett
J M B Cayzer-
Colvin
Defined benefit
On 26 April 2017, The Hon C W Cayzer reached his retirement age
of 60 and now receives an annual pension under the Caledonia
Pension Scheme, a final salary defined benefit scheme.
Estimated
value of
long-term
incentive
awards at
vesting
£
664,693
435,901
Value of
dividend
equivalents
at vesting
£
70,061
45,816
Estimated
total
at vestinga
£
734,753
481,717
W P Wyatt
J M B Cayzer-Colvin
a Due to rounding, the individual columns do not necessarily add up to the
total column.
The estimated value attributable to share price appreciation since grant
in 2016 and 2018, based on the three-month average share price to 31
March 2021, was £53,062 for Mr Wyatt and £34,583 for Mr Cayzer-Colvin.
No discretion was exercised by the Remuneration Committee in respect of
share price appreciation.
The 2020 figures shown in the long-term incentives and total rows in
the single total figure table on page 79 have been restated to replace
estimated values for performance share scheme awards included in last
year’s report. The estimated values, which included dividend equivalents,
were £183,359 for Mr Wyatt and £183,219 for Mr Cayzer-Colvin.
The restated figures, which reflect the values on the vesting dates,
were as follows:
Value of
long-term
incentive
awards at
vesting
£
150,274a
150,785b
Value of
dividend
equivalents
at vesting
£
24,178
23,018
Total
at vesting
£
174,452
173,803
W P Wyatt
J M B Cayzer-Colvin
a 5,602 shares granted in 2015 vested on 26 June 2020. The mid closing
price was 2682.5p per share.
b 5,126 shares granted in 2015 vested on 26 June and 504 shares granted
in 2017 vested on 21 July 2020. The mid closing prices were 2682.5p and
2635p respectively.
80
Caledonia Investments plc Annual Report 2021
The table below sets out the awards made to each executive director during the year under the company’s performance share scheme.
Scheme interests awarded during the financial year (audited)
No awards were made under the deferred bonus plan.
Scheme
W P Wyatt
Performance Share Scheme
Total scheme interests awarded
T J Livett
Performance Share Scheme
Total scheme interests awarded
J M B Cayzer-Colvin
Performance Share Scheme
Total scheme interests awarded
Type of award
Basis of award
Face
value of
award
£’000
Date of
grant
Nil-cost option 150% of salary
04.08.20
Nil-cost option 150% of salary
04.08.20
Nil-cost option 150% of salary
04.08.20
810
810
577
577
516
516
Share
price at
grant
2640p
2640p
2640p
Shares
comprised
in award1
number
Receivable if
minimum
performance
achieved2
%
End of
performance
period
30,682
30,682
21,841
21,841
19,528
19,528
10
31.03.25
10
31.03.25
10
31.03.25
1. The number of shares comprised in the awards under the performance share scheme was determined by reference to the company’s share price at the time
that the awards were made.
2. The performance targets for awards under the performance share scheme are set out under the statement of directors’ share scheme interests on page 83.
The table below sets out details of external directorships held by
External directorships
executive directors where it had been agreed that they could retain
the fees arising therefrom.
Mr King, formerly Caledonia’s Finance Director, ceased
Payments to past directors (audited)
employment with the Caledonia group and resigned from
the board on 30 November 2018.
Name
T J Livett
J M B Cayzer-Colvin
Position
Non-executive director,
Premier Marinas Holdings
Non-executive Chairman,
The Henderson Smaller
Companies Investment Trust
Fees
2021
£’000
37.5
2020
£’000
37.5
35.0
34.5
Mr King exercised all of the vested 2015 performance share
scheme award over 2,915 shares on 22 July 2020, which was
subject to performance testing as at 31 March 2020 and vested
on 26 June 2020, at a total pre-tax value of £89,902, including
£12,581 in respect of dividend equivalents.
Mr King’s pro-rated entitlements to performance share scheme
awards made in 2016 and 2018 were subject to performance
testing as at 31 March 2021. 5,987 shares awarded in 2016
and 1,367 shares awarded in 2018 will vest on 26 and 30 May
2021 respectively.
81
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Directors’ remuneration report (continued)
Annual report on directors’ remuneration
There were no payments made for loss of office during the year,
Payments for loss of office (audited)
other than to Mr King as disclosed under ‘Payments to past
directors’ above.
Directors’ shareholdings
The interests of the directors who served during the year and their
connected persons in the ordinary share capital of the company as
at 31 March 2021 (or date of cessation in the case of Mr Gregson)
were as follows:
Statement of directors’ shareholdings and scheme
Executive directors’ minimum shareholding guidelines
interests (audited)
Executive directors’ minimum shareholding guidelines are set out
on page 78. Both Mr Wyatt and Mr Cayzer-Colvin have attained the
minimum guideline shareholding as at 31 March 2021. Mr Livett
joined the company in 2019 and has therefore yet to begin building
a shareholding. The values of the relevant shareholdings of each
executive director as at 31 March 2021, calculated by reference
to Caledonia’s closing share price on that date of 2645p, and the
percentage level by which the value of the minimum guideline
shareholding has been achieved were as follows:
D C Stewart
W P Wyatt2
T J Livett3
J M B Cayzer-Colvin2
S J Bridges
Hon C W Cayzer2
G B Davison
C L Fitzalan Howard4
C H Gregson
S C R Jemmett-Page
Beneficial
Non-beneficial
2021
number
4,072
20201
number
4,072
1,149,317 1,143,715
–
374,320
5,309
41,092
8,100
–
1,610
1,000
–
374,913
5,309
41,092
8,100
2,000
n/a
1,000
2021
number
–
80,038
–
150,273
–
15,500
–
–
–
–
2020
number
–
80,038
–
121,942
–
15,500
–
–
–
–
W P Wyatt
T J Livett
J M B Cayzer-Colvin
Value of
shareholding
£m
30.7
–
10.1
Attainment
of guideline
%
2846
–
1967
1. Or date of cessation, if earlier. Mr Gregson retired as a director on 24 July
2019
2. Mr Wyatt’s beneficial interests included 1,009,898 shares (2020
– 1,004,296 shares) held by The Dunchurch Lodge Stud Company, a
private family company controlled by Mr Wyatt and certain of his
connected persons, and 1,000 shares in which The Hon C W Cayzer had a
non-beneficial interest (2020 – 1,000 shares). His non-beneficial interests
included 14,500 shares (2020 – 14,500 shares) in which The Hon C W
Cayzer also held a non-beneficial interest. The Hon C W Cayzer’s beneficial
interests included 5,200 shares (2020 – 5,200 shares) in which Mr Wyatt
and Mr Cayzer-Colvin had non-beneficial interests.
3. Mr Livett was appointed as a director with effect from 12 March 2019.
4. Mrs Fitzalan Howard was appointed as a director on 22 July 2019.
There have been no changes in the directors’ interests shown
above notified up to the date of this report.
82
Caledonia Investments plc Annual Report 2021 Directors’ share scheme interests
The interests of directors as at 31 March 2021 in the share-based incentive schemes operated by the company are set out in the following table.
W P Wyatt
Performance share scheme awards
Granted 26.05.16 (nil-cost)
Granted 21.07.17 (nil-cost)
Granted 30.05.18 (nil-cost)
Granted 30.05.19 (nil-cost)
Granted 04.08.20 (nil-cost)
Performance share scheme total
Deferred bonus plan – compulsory awards4
Granted 30.05.19 (nil-cost)
Deferred bonus plan total
Total share scheme interests
Share price
at date
of award
Unvested
with
performance
conditions1
Unvested
without
performance
conditions2
Vested
but un-
exercised3
2422p
2837p
2705p
2910p
2640p
2910p
–
18,488
19,963
27,835
30,682
96,968
–
–
96,968
–
–
8,585
–
–
8,585
7,560
7,560
16,145
15,665
–
–
–
–
15,665
–
–
15,665
Total
15,665
18,488
28,548
27,835
30,682
121,218
7,560
7,560
128,778
During the year, Mr Wyatt exercised performance share scheme awards over a total of 5,602 shares at a pre-tax gain of £150,274 plus an additional sum of £24,178
in respect of dividend equivalents.
T J Livett
J M B Cayzer-Colvin
Performance share scheme awards
Granted 30.05.19 (nil-cost)
Granted 04.08.20 (nil-cost)
Performance share scheme total
Total share scheme interests
Performance share scheme awards
Granted 26.05.16 (nil-cost)
Granted 21.07.17 (nil-cost)
Granted 30.05.18 (nil-cost)
Granted 30.05.19 (nil-cost)
Granted 04.08.20 (nil-cost)
Performance share scheme total
Deferred bonus plan – compulsory awards4
Granted 30.05.19 (nil-cost)
Deferred bonus plan total
Total share scheme interests
2910p
2640p
2422p
2837p
2705p
2910p
2640p
2910p
19,330
21,841
41,171
41,171
–
11,200
12,088
17,280
19,528
60,096
–
–
60,096
–
–
–
–
–
–
5,706
–
–
5,706
5,619
5,619
11,325
–
–
–
–
10,197
–
–
–
–
10,197
–
–
10,197
19,330
21,841
41,171
41,171
10,197
11,200
17,794
17,280
19,528
75,999
5,619
5,619
81,618
During the year, Mr Cayzer-Colvin exercised performance share scheme awards over a total of 5,630 shares at a pre-tax gain of £150,785 plus an additional
sum of £23,018 in respect of dividend equivalents.
Other exercise conditions
2. Performance share scheme
Nil-cost options that vest following the three or five year performance
testing become immediately exercisable on the third or fifth anniversary
of grant, as applicable.
3. Vested but unexercised
Shares vested but unexercised represent those awards that are immediately
exercisable without any conditions.
4. Deferred bonus plan
Compulsory awards under the deferred bonus plan normally vest 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.
1. Performance conditions
Performance share scheme
Of the awards shown as unvested with performance conditions, for nil-cost
options granted to Mr Wyatt and Mr Livett on 21 July 2017, 30 May 2018,
30 May 2019 and 4 August 2020, shares will vest on a graduated basis, with
vesting commencing at 10% if the company achieves an annualised NAVTR
of 3%, rising incrementally to 100% vesting on achievement of an
annualised NAVTR of 10%. For Mr Cayzer-Colvin, who is head of the Funds
pool, 60% of his performance share scheme awards granted on these dates
will be measured against the annualised total returns achieved by the Funds
pool. Awards will similarly vest on a graduated basis, with vesting
commencing at 10% on achievement of an annualised Funds pool total
return of 6%, rising incrementally to 100% vesting on achievement of an
annualised total return of 13.5%. The remaining 40% of Mr Cayzer-Colvin’s
performance share scheme awards for these grants will be measured
against Caledonia’s NAVTR as above. The relevant performance conditions
will be tested over three years for one-third of the shares comprised in an
award and over five years for the remaining two-thirds of the shares
comprised in an award.
The nil-cost options granted on 26 May 2016, shown as vested but
unexercised, were performance tested against their relevant target as at
31 March 2021 and achieved a vesting level of 89% for those measured
against Caledonia’s NAVTR. The proportion of Mr Cayzer-Colvin’s nil-cost
options awarded at that date measured against the Funds pool’s return
achieved a 100% vesting level. The one-third of the shares comprised in
the nil-cost options granted on 30 May 2018, shown as unvested without
performance conditions, subject to three-year performance testing was
tested as at 31 March 2021 and achieved a vesting level of 86% for those
measured against Caledonia’s NAVTR. The proportion of Mr Cayzer-Colvin’s
nil-cost options measured against the Funds pool’s total return achieved
a 100% vesting level.
83
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Directors’ remuneration report (continued)
Annual report on directors’ remuneration
Performance graph of total shareholder return and table
The graph below shows the company’s total shareholder return
of Chief Executive’s total remuneration
(‘TSR’) against that of the FTSE All-Share Total Return index for
the ten financial years ending on 31 March 2021. TSR has been
calculated assuming that all dividends are reinvested on their
ex-dividend dates. The FTSE All-Share Total Return index has been
chosen as it is the benchmark by which the company measures
its delivery of value over the longer term.
TSR growth over ten years
Caledonia TSR
FTSE All-Share TR
240
200
160
120
80
40
2011
2013
2015
2017
2019
2021
The table below shows the total remuneration received by the
Chief Executive in each of the ten years to 31 March 2021,
prepared on the same basis as in the single total figure in the table
on page 79, and the percentage of the maximum potential short
and long-term incentives received in those years.
Years ended
31 March
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Chief Executive
W P Wyatt
W P Wyatt
W P Wyatt
W P Wyatt
W P Wyatt
W P Wyatt
W P Wyatt
W P Wyatt
W P Wyatt
W P Wyatt
Incentives vested
as a percentage
of maximum
Total
remuneration
£’000
585
1,077
1,196
2,285
1,648
1,799
1,795
1,864
8051
1,828
Short-term
%
–
100.0
100.0
100.0
45.0
100.0
40.0
90.7
–
85
Long-
term %
50.0
–
10.1
100.0
100.0
85.0
84.7
94.7
20.9
87.9
1. Restated from last year’s single total figure table to reflect the
company’s share price on the vesting date of the 2015 performance
share scheme award.
The following table shows the percentage change in the basic
Percentage change in remuneration of directors
salary/fees, value of taxable benefits and short-term incentives
paid to directors in the year to 31 March 2021 against the previous
financial year, compared with the average percentage changes in
those components of pay of Caledonia’s other staff, excluding
directors, on a per capita basis.
The per capita percentage increase in basic salary for staff shown
in the table is higher than the standard award of 2.5% from 1 April
2020 due to the effect of non-standard increases awarded for
promotions, increased responsibilities or other such adjustments.
The Chief Executive did not receive an increase in basic salary for
the 2021 financial year. Increases in non-executive fees relate to
84
changes in responsibilities made in 2019 or, in the case of Mrs
Fitzalan Howard, her first full year as a director since appointment.
The average per capita percentage change for staff taxable
benefits increased over the year principally due to changes in
benefit cover for certain staff members under the company’s
private medical insurance plan. Mr Wyatt, Mr Livett and Mr
Cayzer-Colvin were awarded bonuses of 85%, 90% and 90%
respectively based on company performance and individual
objectives, compared with no bonus in the previous financial year.
Certain of Caledonia’s staff were awarded bonuses of varying levels
in each year depending on company performance, investment pool
performance (where relevant) and individual performance.
Executive directors
W P Wyatt
T J Livett
J M B Cayzer-Colvin
Chairman and
non-executive directors
D C Stewart
S J Bridges
Hon C W Cayzer
G B Davison
C L Fitzalan Howard
S C R Jemmett-Page
Staff per capita
(excluding directors)
Basic
salary/
fees
%
Taxable
benefits/
expenses
%
Short-term
incentives
%
–
2.5
2.5
–
–
6.6
3.5
43.8
2.2
7.4
12.9
23.6
6.2
–
–
–
100
–
–
5.2
100
100
100
n/a
n/a
n/a
n/a
n/a
n/a
157.5
Pay ratio information in relation to the total remuneration
With less than 250 UK employees, Caledonia is not required
of the Chief Executive
to disclose Chief Executive to employee pay ratios under The
Companies (Miscellaneous Reporting) Regulations 2018. However,
as recommended by the Investment Association, the
Remuneration Committee has decided voluntarily to publish
the information below. The ratios compare the total remuneration
of the Chief Executive, as set out on page 79, against the lower
quartile, median and upper quartile total remuneration of the
company’s employees as at 31 March 2021. This disclosure will
build up over time to cover a rolling ten year period.
A significant proportion of the Chief Executive’s total earnings
potential is comprised of share-based incentives, which are linked
to Caledonia’s performance and share price movement over the
longer term. This will inevitably lead to an element of volatility in
the year on year total remuneration of the Chief Executive and
consequently variations in the ratios, as some employees do not
participate in the long-term incentive scheme or participate at
lower levels. As the majority of awards under the scheme vest over
five years, participants will only build up equivalent annual vesting
to the Chief Executive over this period of time, which may further
distort the comparison.
In order to provide further context, the table includes ratios based
on basic salary only to demonstrate over time that the underlying
pay structures do not show a divergent trend between the Chief
Executive’s pay and that of employees generally and also that
employees are paid fairly.
Caledonia Investments plc Annual Report 2021 Year
2019
2020
2021
Pay ratios
P25
(lower
quartile)
32:1
13:1
14:1
12:1
30:1
12:1
P50
(median)
13:1
6:1
9:1
7:1
15:1
7:1
Methodology
Option A
Salary only
Option A
Salary only
Option A
Salary only
P75
(upper
quartile) Basis
5:1 Total remuneration (£’000)
4:1 Salary only (£’000)
4:1 Total remuneration (£’000)
4:1 Salary only (£’000)
6:1 Total remuneration (£’000)
4:1 Salary only (£’000)
Remuneration values
Chief
Executive
1,864
540
814
540
1,828
540
P25
(lower
quartile)
58
42
57
46
61
46
P50
(median)
140
88
94
73
122
78
P75
(upper
quartile)
403
150
217
144
329
138
1. The employees at the lower, median and upper quartiles were determined
3. To determine full time equivalent earnings, joiners during the year are
as at 31 March in the relevant year.
2. ‘Option A’ methodology, as set out in The Companies (Miscellaneous
Reporting) Regulations 2018, which requires determination of the total
full-time equivalent earnings of all UK employees for the relevant financial
year, has been used as this is considered the most statistically accurate
under the reporting regulations.
assumed to have worked for the full year with salary, benefits and bonus
pro-rated accordingly. Reduced hours employees similarly have been
assumed to have worked on a full-time basis. No adjustments have been
made to the value of share-based incentives that vested during the year
for relevant employees, other than that awards held by reduced hours
employees have been recalculated to reflect the number of shares that
would have been granted based on the full-time equivalent salary of the
participant at the time of grant.
The graph below shows the personnel expenses for the year of
Relative importance of spend on pay
group companies consolidated under IFRS 10, compared with
amounts distributed to Caledonia’s shareholders by way of
dividends and share purchases.
Relative importance of spend on pay
£m
40
20
0
2021
2020
-13.8%
£35.1m
£40.7m
£92.8m
209.8%
£18.9m
£6.1m
£38.2m
Personnel expenses
Dividends/share purchases
Statement of implementation of remuneration policy in
The company expects to operate the remuneration policy as
the 2022 financial year
described on pages 72 to 78 without any changes in the financial
year ending 31 March 2022.
Basic salaries of executive directors
In respect of the 2022 financial year, the Remuneration Committee
has awarded an inflation-based increase in basic salary of 1.5%
to Mr Livett and Mr Cayzer-Colvin, in line with the general staff
increase. Mr Wyatt has not received a pay increase and therefore
the executive directors’ salaries for the 2022 financial year are
as follows:
W P Wyatt
T J Livett
J M B Cayzer-Colvin
Salary for year to
31 March
2022
£
540,000
390,250
349,000
31 March
2021
£
540,000
384,400
343,700
Chairman’s and non-executive directors’ fees
The Chairman’s and the non-executive directors’ fees have not
been increased for the 2022 financial year and therefore remain
as follows:
Chairman
Non-executive director basic fee
Chairman of the Audit Committee
Member of the Audit Committee
Chairman of the Remuneration Committee
Member of the Remuneration Committee
Senior Independent Director/Chairman of the
Governance Committee
Fees for years
to 31 March
2021 and 2022
£
150,000
39,900
5,600
2,300
4,900
1,600
5,100
Annual bonus scheme and long-term incentive schemes
No changes to the performance metrics of the company’s annual
bonus or long-term incentive schemes are anticipated for the
2022 financial year.
Approach
The Remuneration Committee will keep the implementation of the
remuneration policy under review in order to take account of any
changes in the company’s business environment and remuneration
practice generally, but with the overall aim of ensuring that
Caledonia’s remuneration arrangements continue to support
the company’s strategy and deliver long-term shareholder value
by attracting and retaining talent and rewarding executives
appropriately in the light of the company’s performance.
85
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Directors’ remuneration report (continued)
Annual report on directors’ remuneration
At the annual general meeting of the company held on 29 July
Statement of voting at general meetings
2020, the votes lodged for the resolutions relating to directors’
remuneration and the remuneration policy were as follows:
To approve the 2020 Directors’ remuneration
report (other than the directors’
remuneration policy)
Votes in favour
Votes against
Total votes cast
Votes withheld
To approve the remuneration policy
Votes in favour
Votes against
Total votes cast
Votes withheld
Number
%
35,002,062
50,238
35,052,300
17,321
Number
34,981,912
67,692
35,049,604
20,016
99.9
0.1
%
99.8
0.2
This report was approved by the board on 26 May 2021 and signed
on its behalf by:
Shonaid Jemmett-Page
Chairman of the Remuneration Committee
Consideration by the directors of matters relating to
The current members of the Remuneration Committee are
directors’ remuneration
Shonaid Jemmett-Page (Chairman), David Stewart and Claire
Fitzalan Howard.
During the year, the Remuneration Committee received advice
from Freshfields Bruckhaus Deringer LLP, the company’s main
legal advisers, in relation to the preparation of the directors’
remuneration report and share plans. Willis Towers Watson,
appointed by the Committee following a formal selection process,
provides independent remuneration advice where required.
No advice was provided by Willis Towers Watson during the year.
Willis Towers Watson is a member of the Remuneration Consultants
Group (the professional body for remuneration consultants) and
adheres to its code of conduct. It also provides actuarial advice and
consultancy in relation to the Caledonia Pension Scheme and
group life assurance arrangements via a separate team. It has no
connection with individual directors. Fees incurred are charged
on the basis of each firm’s standard terms of business. The
Committee assesses the performance of its advisers annually,
the associated level of fees and reviews the quality of advice
provided to ensure that it is objective and independent of any
support provided to management.
The Remuneration Committee also consulted with the Chief
Executive in relation to the remuneration of the executive directors
and other senior executives and internal support was provided
to the Remuneration Committee by the Company Secretary.
No executive participates in discussions in respect of their own
remuneration. Given the composition of the Remuneration
Committee and this requirement, we are comfortable that
no conflicts are arising in respect of decision-making by the
Remuneration Committee.
86
Caledonia Investments plc Annual Report 2021 Other governance matters
The registered office of the company is at: Cayzer House, 30
Registered office and number
Buckingham Gate, London SW1E 6NN. The company is registered
in England under number 235481.
The company’s policy is to pay an increasing annual dividend per
Dividend policy
share in real terms, which it has now done for 54 consecutive years.
In addition, the company may supplement the annual dividend
with special dividends when the board considers it appropriate,
for example if the company has surplus cash reserves in excess
of its strategic investment plans.
The board aims for the annual dividend to be fully covered by
net revenue for the relevant financial year in a period of normal
trading. The company has available distributable reserves of
£1,988m, broadly equivalent to 54 years’ payment of the current
annual dividend, which may be used to smooth a net revenue
shortfall in any particular year.
An interim dividend of 17p per share (2020 – 16.6p) was paid on
2021 dividend distributions
7 January 2021 and the board has recommended a final dividend
of 45.9p per share (2020 – 44.5p), giving total annual dividends for
the year of 62.9p per share (2020 – 61.1p).
The company has two classes of share capital – ordinary shares
Share capital structure
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 Ltd, a wholly-owned subsidiary of Caledonia.
At 31 March 2021, 55,373,734 ordinary shares and 8,000,000
deferred ordinary shares were in issue. The ordinary shares
therefore represented approximately 87% and the deferred
ordinary shares approximately 13% of the total issued share capital
by nominal value. Of the ordinary shares in issue at 31 March 2021,
3,000 shares were held by a group company. As stated above,
all voting rights are suspended on these shares. The company
did not purchase any of its ordinary shares during the year and
accordingly the company’s issued share capital as at 26 May 2021,
being the latest practicable date prior to signature of these
accounts, was 55,373,734 ordinary shares and 8,000,000
deferred ordinary shares.
There are no specific restrictions on the transfer of the company’s
Restrictions on the transfer of shares
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%
of the class of shares concerned.
As at 31 March 2021, the company had received formal
Substantial interests
notifications of the following holdings in its ordinary shares in
accordance with the requirements of the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules (‘DTRs’):
The Cayzer Trust Company Ltd
Number of
voting rights
19,372,364
Percentage
of voting
rights
34.98%
There have been no changes in the interests notified to the
company pursuant to the DTRs up to the date of this report.
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Other governance matters (continued)
The Caledonia Investments plc Employee Share Trust acquires and
Employee Share Trust
holds ordinary shares in the company for subsequent transfer to
employees exercising options under the company’s performance
share scheme or calling for awards vesting under the company’s
deferred bonus plan. The voting rights of shares held by the trust
are exercisable by the independent trustee. The trust is financed
by an interest free loan facility from Caledonia and the trustee has
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 2021, the trust held 491,716 ordinary shares,
representing 0.89% of the total issued voting share capital.
The directors may direct that a shareholder shall not be entitled to
Restrictions on voting rights
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 them,
if they 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 which is false or
inadequate in a material particular.
Agreements which may restrict the transfer of shares or
The company is not aware of any arrangements which may restrict
exercise of voting rights
the transfer of any of its shares or the exercise of any voting rights.
At the annual general meeting of the company held on 29 July
Authority to allot and purchase shares
2020, shareholders granted to the directors authority to allot
ordinary shares up to a nominal amount of £922,895, 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 £922,895, representing approximately a further one-third
of the ordinary share capital then in issue, by way of pre-emptive
rights issues only, in accordance with guidance issued at that time
by the Investment Association. The directors were further
authorised to issue ordinary shares up to a nominal amount of
£138,434 other than pro-rata to existing ordinary shareholders.
These authorities last until 29 October 2021 or, if earlier, the
conclusion of the next annual general meeting.
At the annual general meeting held on 29 July 2020, shareholders
also granted authority for the company to make market purchases
of up to 5,537,730 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 29 October 2021 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 29 October 2021 or, if earlier,
the conclusion of the next annual general meeting.
Due to the level of the shareholding of the Cayzer Concert Party
and the maximum percentage of voting rights permitted to be held
by it under the Rule 9 waiver, the board has only limited scope to
utilise the authority to purchase the company’s shares. It will
however consider using the authority when it considers it in the
company’s and shareholders’ best interests to do so, for example
when it believes that the shares represent good value in terms of
the level of the discount to net asset value, and taking into account
anticipated future cash requirements.
There are no special control rights in relation to the
Change of control rights
company’s shares.
Options granted under the company’s performance share
scheme and awards made under its deferred bonus plan 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 other senior executives 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.
Further details of these change of control rights are set out in
the Directors’ remuneration report.
88
Caledonia Investments plc Annual Report 2021 Caledonia has been accepted as an approved investment trust by
Investment trust status
HM Revenue & Customs, subject to continuing to meet eligibility
conditions. The directors are of the opinion that the company has
conducted its affairs in a manner which will satisfy the conditions
for continued approval as an investment trust under section 1158
of the Corporation Tax Act 2010.
The ninety first annual general meeting of the company will be held
Annual general meeting
at Cayzer House, 30 Buckingham Gate, London SW1E 6NN on
Wednesday, 21 July 2021 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 published at the
same time as this annual report.
A special resolution to adopt new articles of association will be
Articles of association
considered by shareholders at the 2021 annual general meeting.
The group’s policy in relation to all of its suppliers is to settle the
Customers and suppliers
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 does not follow
any code or statement on payment practice.
There were no post balance sheet events.
Post balance sheet events
The directors of the company are shown on pages 58 and 59.
Directors
All of the directors served throughout the year.
The reports on pages 58 to 91 comprise the Directors’ report of
the company. The Directors’ report was approved by the board
on 26 May 2021 and signed on its behalf by:
Each of the directors has the benefit, under the company’s articles
Directors’ indemnity
of association, of an indemnity, to the extent permitted by the
Companies Act 2006, against any liability incurred by him or her
for negligence, default, breach of duty or breach of trust in relation
to the affairs of the company.
Richard Webster
Company Secretary
The appointment and removal of directors is governed by the
Appointment and removal of directors
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.
In accordance with the Financial Conduct Authority’s Listing Rules,
the election of those directors determined by the board to be
independent under the UK Corporate Governance Code must be
subject to the approval of both all shareholders of the company
and separately those shareholders who are not controlling
shareholders, being the Cayzer Concert Party.
89
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Other governance matters (continued)
To comply with Listing Rule 9.8.4 C, the following table provides references to where relevant information required to be disclosed under
Cross references to information required to be disclosed by Listing Rule 9.8.4 R.
Listing Rule 9.8.4 R can be found.
Listing Rule
9.8.4 R (12)
9.8.6 R (13)
9.8.4 R (14)(a)
Required information
Details of any arrangement under which a shareholder has waived or
agreed to waive any dividends.
Location
Other governance matters – page 88.
Waiver of all dividends by the trustee of
The Caledonia Investments plc
Employee Share Trust, except to the
extent of 0.0001% of such dividends.
Where a shareholder has agreed to waive future dividends, details of such
waiver together with those relating to dividends which are payable during
the period under review.
As above.
A statement made by the board that the listed company has entered into
an agreement with a controlling shareholder under Listing Rule 9.2.2 AD
R (1).
Corporate governance report – page
63. Relations with controlling
shareholders.
9.8.4 R (14)(c)
A statement made by the board that:
As above.
1. the listed company has complied with the independence provisions
included in any agreement with a controlling shareholder entered into
under Listing Rule 9.2.2 AD R (1)
2. so far as the listed company is aware, the independence provisions
included in any agreement with a controlling shareholder entered into
under Listing Rule 9.2.2 AD R (1) have been complied with during the
period under review by the controlling shareholder or any of its
associates
3. so far as the listed company is aware, the procurement obligation (as set
out in Listing Rule 9.2.2 B R (2)(a)) included in any agreement entered into
under Listing Rule 9.2.2 AD R (1) has been complied with during the
period under review by a controlling shareholder.
90
Caledonia Investments plc Annual Report 2021 Responsibility statements
Statement of directors’ responsibilities in respect of the
The directors are responsible for preparing the annual report,
annual report and the financial statements
the Directors’ remuneration report and the group and
company financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law, the directors have prepared
the group and parent company financial statements in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 (the ‘Act’) and applicable
law. In addition, the group financial statements are required under
the Disclosure Guidance and Transparency Rules to be prepared
in accordance with International Financial Reporting Standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies
to the European Union (‘EU IFRSs’).
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 the company and of
the profit or loss of the group for that period. In preparing these
financial statements, the directors are required to:
» select suitable accounting policies and then apply them
consistently
» make judgements and estimates that are reasonable, relevant
and reliable
» state whether international accounting standards in accordance
with the Act have been followed in the group and parent
company financial statements
» state whether EU IFRSs have been followed in the group financial
statements
» assess the group and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern
» prepare the financial statements on the going concern basis
unless they intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but to
do so.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the company and the group and enable
them to ensure that the financial statements and the Directors’
remuneration report comply with the Act. They are also responsible
for any internal control they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and safeguarding
the assets of the company and the group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for preparing a strategic report,
directors’ report, directors’ remuneration report and corporate
governance statement that complies with law and regulation.
The directors are also responsible for the maintenance and integrity
of the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The directors consider that the annual report and accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group’s
performance and position, business model and strategy.
Each of the persons who is a director at the date of approval of this
Disclosure of information to auditors
report confirms that:
1. so far as the director is aware, there is no relevant information of
which the company’s auditor is unaware
2. the director has taken all steps that he or she ought to have taken
as a director in order to make himself or herself aware of any
relevant audit information and to establish that the company’s
auditor is aware of that information.
This confirmation is given, and should be interpreted, in accordance
with the provisions of section 418 of the Companies Act 2006.
Responsibility statements under the Disclosure Guidance
and Transparency Rules and the UK Corporate
Each of the directors, whose names and functions are listed on
Governance Code
pages 58 and 59 confirm that, to the best of their knowledge:
1. the group and parent company financial statements, which
have been prepared in accordance with applicable accounting
standards, 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
2. the Strategic report contained on pages 4 to 55 and Directors’
report contained on pages 58 to 91 include 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 that it faces.
Signed on behalf of the board by:
Will Wyatt
Chief Executive
Tim Livett
Chief Financial Officer
26 May 2021
26 May 2021
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Our independence and reputation enables
us to take the long term view, which is key
to our goal of building a store of wealth
and delivering steady and rising income
for our shareholders.
Considered
& long-term
92
Caledonia Investments plc Annual Report 2021 Financial
statements
94
102
106
111
Independent auditor’s report
Financial statements
Significant accounting policies
Notes to the financial statements
Other information
130
130
132
Company performance record
Glossary of terms and alternative
performance measures
Information for investors
93
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Independent auditor’s report
Independent
auditor’s report
to the members of Caledonia Investments plc
94
Caledonia Investments plc Annual Report 2021 2 Key audit matters: our assessment of risks of
material misstatement
2 Key audit matters: our assessment of risks of
material misstatement
Key audit m atters are those m atters that, in our professional
judgem ent, were of m ost significance in the audit of the
financial statem ents and include the m ost significant
assessed risks of m aterial m isstatem ent (whether or not due
Key audit m atters are those m atters that, in our professional
to fraud) identified by us, including those which had the
judgem ent, were of m ost significance in the audit of the
greatest effect on: the overall audit strategy; the allocation of
financial statem ents and include the m ost significant
resources in the audit; and directing the efforts of the
assessed risks of m aterial m isstatem ent (whether or not due
engagem ent team . We sum m arise below the key audit
to fraud) identified by us, including those which had the
m atter in arriving at our audit opinion above, together with our
greatest effect on: the overall audit strategy; the allocation of
key audit procedures to address this m atter and our findings
resources in the audit; and directing the efforts of the
from those procedures in order that the Com pany's m em bers,
engagem ent team . We sum m arise below the key audit
as a body, m ay better understand the process by which we
m atter in arriving at our audit opinion above, together with our
arrived at our audit opinion. This m atter was addressed, and
key audit procedures to address this m atter and our findings
our findings are based on procedures undertaken, in the
from those procedures in order that the Com pany's m em bers,
context of, and solely for the purpose of, our audit of the
as a body, m ay better understand the process by which we
financial statem ents as a whole, and in form ing our opinion
arrived at our audit opinion. This m atter was addressed, and
thereon, and consequently are incidental to that opinion, and
our findings are based on procedures undertaken, in the
we do not provide a separate opinion on this m atter.
context of, and solely for the purpose of, our audit of the
financial statem ents as a whole, and in form ing our opinion
thereon, and consequently are incidental to that opinion, and
we do not provide a separate opinion on this m atter.
In the prior year we reported a key audit m atter in respect of
the im pact of uncertainties due to the UK exiting the
European Union. Following the trade agreem ent between the
UK and the EU, and the end of the EU-exit im plem entation
In the prior year we reported a key audit m atter in respect of
period, the nature of these uncertainties has changed. We
the im pact of uncertainties due to the UK exiting the
continue to perform procedures over m aterial assum ptions in
European Union. Following the trade agreem ent between the
forward looking assessm ents such as going concern,
UK and the EU, and the end of the EU-exit im plem entation
however we no longer consider the effect of the UK’s
period, the nature of these uncertainties has changed. We
departure from the EU to be a separate key audit m atter.
continue to perform procedures over m aterial assum ptions in
forward looking assessm ents such as going concern,
however we no longer consider the effect of the UK’s
departure from the EU to be a separate key audit m atter.
1. Our opinion is unmodified
1. Our opinion is unmodified
We have audited the financial statem ents of Caledonia
Investm ents plc (“the Com pany”) for the year ended 31 March
2021 which com prise the Group statem ent of com prehensive
incom e, statem ent of financial position for Group and
We have audited the financial statem ents of Caledonia
Com pany, statem ent of changes in equity for Group and
Investm ents plc (“the Com pany”) for the year ended 31 March
Com pany, statem ent of cash flows for Group and Com pany,
2021 which com prise the Group statem ent of com prehensive
and the related notes, including the accounting policies on
incom e, statem ent of financial position for Group and
pages 106 to 110.
Com pany, statem ent of changes in equity for Group and
Com pany, statem ent of cash flows for Group and Com pany,
and the related notes, including the accounting policies on
— the financial statem ents give a true and fair view of the
pages 106 to 110.
state of the Group’s and of the parent Com pany’s affairs as
at 31 March 2021 and of the Group’s profit for the year
then ended;
In our opinion:
In our opinion:
— the financial statem ents give a true and fair view of the
— the Group financial statem ents have been properly
state of the Group’s and of the parent Com pany’s affairs as
prepared in accordance with international accounting
at 31 March 2021 and of the Group’s profit for the year
standards in conform ity with the requirem ents of the
then ended;
Com panies Act 2006;
— the Group financial statem ents have been properly
— the parent Com pany financial statem ents have been
prepared in accordance with international accounting
properly prepared in accordance with international
standards in conform ity with the requirem ents of the
accounting standards in conform ity with the requirem ents
Com panies Act 2006;
of, and as applied in accordance with the provisions of, the
Com panies Act 2006; and
— the parent Com pany financial statem ents have been
properly prepared in accordance with international
— the financial statem ents have been prepared in accordance
accounting standards in conform ity with the requirem ents
with the requirem ents of the Com panies Act 2006 and, as
of, and as applied in accordance with the provisions of, the
regards the Group financial statem ents, Article 4 of the IAS
Com panies Act 2006; and
Regulation to the extent applicable.
Basis for opinion
Basis for opinion
— the financial statem ents have been prepared in accordance
with the requirem ents of the Com panies Act 2006 and, as
We conducted our audit in accordance with International
regards the Group financial statem ents, Article 4 of the IAS
Regulation to the extent applicable.
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the
audit evidence we have obtained is a sufficient and appropriate
We conducted our audit in accordance with International
basis for our opinion. Our audit opinion is consistent with our
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
report to the audit com m ittee.
We were first appointed as auditor by the shareholders on 27
Our responsibilities are described below. We believe that the
October 2011. The period of total uninterrupted engagem ent
audit evidence we have obtained is a sufficient and appropriate
is for the 10 financial years ended 31 March 2021. We have
basis for our opinion. Our audit opinion is consistent with our
fulfilled our ethical responsibilities under, and we rem ain
report to the audit com m ittee.
We were first appointed as auditor by the shareholders on 27
independent of the Group in accordance with, UK ethical
October 2011. The period of total uninterrupted engagem ent
requirem ents including the FRC Ethical Standard as applied to
is for the 10 financial years ended 31 March 2021. We have
listed public interest entities. No non-audit services prohibited
fulfilled our ethical responsibilities under, and we rem ain
by that standard were provided.
independent of the Group in accordance with, UK ethical
requirem ents including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
Overview
Materiality:
group financial
statem ents as a
Overview
whole
Materiality:
Coverage
group financial
statem ents as a
whole
£18.1m (2020:£16.4m )
0.8% (2020: 0.9%) of total assets
£18.1m (2020:£16.4m )
100% (2020:100%) of group profit
before tax
0.8% (2020: 0.9%) of total assets
Key audit matters vs 2020
Coverage
Recurring risks
100% (2020:100%) of group profit
before tax
Valuation of unquoted
Investm ents
Key audit matters vs 2020
Recurring risks
Valuation of unquoted
Investm ents
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Independent auditor’s report (continued)
2.2 Key audit matters: our assessment of risks of material misstatement
The risk
Our resp onse
1. Our opinion is unmodified
Our procedures included:
2 Key audit matters: our assessment of risks of
material misstatement
Control op eration: We obtained an understanding of the Group’s
processes to determ ine the fair value of unquoted investm ents. We
Key audit m atters are those m atters that, in our professional
docum ented and assessed the design and im plem entation of the
judgem ent, were of m ost significance in the audit of the
unquoted investm ent valuation processes and controls.
financial statem ents and include the m ost significant
Control ob servation: Attendance at bi-annual Valuations Com m ittee
assessed risks of m aterial m isstatem ent (whether or not due
m eetings and Audit Com m ittee m eetings where we assessed the Audit
to fraud) identified by us, including those which had the
Com m ittee’s and Valuations Com m ittee’s challenge and approval of
greatest effect on: the overall audit strategy; the allocation of
unquoted investm ent valuations;
resources in the audit; and directing the efforts of the
engagem ent team . We sum m arise below the key audit
We perform ed the tests below rather than seeking to rely on any of the
m atter in arriving at our audit opinion above, together with our
Group’s controls because the nature of the balance is such that we
key audit procedures to address this m atter and our findings
would expect to obtain audit evidence prim arily through the detailed
from those procedures in order that the Com pany's m em bers,
procedures described.
as a body, m ay better understand the process by which we
Historical Comp arisons: Assessm ent of investm ent realisations in the
arrived at our audit opinion. This m atter was addressed, and
period, com paring actual investm ent sales proceeds to prior year-end
our findings are based on procedures undertaken, in the
valuations to understand the reasons for significant variances and
context of, and solely for the purpose of, our audit of the
determ ine whether they are indicative of bias and error in the group’s
financial statem ents as a whole, and in form ing our opinion
approach to valuations;
thereon, and consequently are incidental to that opinion, and
we do not provide a separate opinion on this m atter.
Methodology choice: In the context of observed industry best practice
and the provisions of the Internal Private Equity and Venture Capital
In the prior year we reported a key audit m atter in respect of
Valuation Guidelines, we challenged the appropriateness of the valuation
the im pact of uncertainties due to the UK exiting the
basis selected;
European Union. Following the trade agreem ent between the
Our valuations exp erience: Challenging the investm ent m anager on key
UK and the EU, and the end of the EU-exit im plem entation
period, the nature of these uncertainties has changed. We
judgem ents affecting investee com pany valuations, such as discount
factors, the choice of benchm ark for earnings m ultiples and where
continue to perform procedures over m aterial assum ptions in
forward looking assessm ents such as going concern,
applicable the reasonableness of execution discounts applied to
indicative offers received by m anagem ent. We com pared key underlying
however we no longer consider the effect of the UK’s
departure from the EU to be a separate key audit m atter.
financial data inputs to external sources such as financial inform ation of
com parable businesses, the investee com pany audited accounts and
m anagem ent inform ation as applicable. We challenged the assum ptions
around sustainability of earnings based on the plans of investee
com panies and whether these are achievable and we obtained an
understanding of existing and prospective investee com pany cash flows
to understand whether borrowings can be serviced or refinancing m ay be
required. Our work included consideration of events which occurred
subsequent to the year end up until the date of this audit report. We
perform ed an assessm ent of whether an understatem ent of the valuation
of certain unquoted investm ents identified through these procedures
was m aterial.
Comp aring valuations: Where a recent transaction has been used to
value any holding, we obtained an understanding of the circum stances
surrounding the transaction and whether it was considered to be on an
arm ’s-length basis and suitable as an input into a valuation. We also
assessed whether subsequent changes or events such as m arket or
entity specific factors would im ply a change in value. For the valuation of
fund interests, we obtained and agreed the latest reported net asset
values from the fund m anagers.
Assessing transp arency: Consideration of the appropriateness, in
accordance with relevant accounting standards, of the disclosures in
respect of unquoted investm ents and the disclosure of changing one or
m ore inputs to reasonably possible alternative valuation assum ptions.
Our findings: We found the resulting valuations of the unquoted
investm ents to be m ildly cautious (2020 finding: balanced). We found
the disclosure of related assum ptions and sensitivities to be balanced
(2020 finding: balanced.)
— the Group financial statem ents have been properly
Sub jective valuation:
Valuation of unquoted
We have audited the financial statem ents of Caledonia
investments for the
65% (2020: 58%) of the group’s
Investm ents plc (“the Com pany”) for the year ended 31 March
group and for the
total assets (by value) and 48 %
2021 which com prise the Group statem ent of com prehensive
comp any
(2020: 58%) of the Parent
incom e, statem ent of financial position for Group and
Group and Parent
com pany’s total assets (by value)
Com pany, statem ent of changes in equity for Group and
com pany: £1,454.3m ;
are held in investm ents where no
Com pany, statem ent of cash flows for Group and Com pany,
(2020: £1,057.8m )
quoted m arket price is available.
and the related notes, including the accounting policies on
Unquoted investm ents com prise the
pages 106 to 110.
Private Capital pool and the Funds
pool.
In our opinion:
Of which Private Capital
Pool £826.8m (2020:
— the financial statem ents give a true and fair view of the
£611.3 ) and the Funds
Pool are £627.5m (2020:
£ 437.4m )
state of the Group’s and of the parent Com pany’s affairs as
at 31 March 2021 and of the Group’s profit for the year
then ended;
As these investm ents are unquoted
and illiquid, the fair value is
determ ined through the application
of valuation techniques. The
application of valuation techniques
involves the exercise of significant
judgem ent by the Group in relation
to the choice of valuation technique
em ployed and assum ptions into the
respective m odels (e.g. earnings
m ultiples).
prepared in accordance with international accounting
standards in conform ity with the requirem ents of the
Com panies Act 2006;
Basis for opinion
Refer to page 65 (Audit
Com m ittee Report), page
— the parent Com pany financial statem ents have been
106 (accounting policy) and
properly prepared in accordance with international
page 113 (financial
accounting standards in conform ity with the requirem ents
disclosures.
of, and as applied in accordance with the provisions of, the
Com panies Act 2006; and
During the year, the Group and the
Parent com pany’s investm ent
— the financial statem ents have been prepared in accordance
portfolio has continued to be
with the requirem ents of the Com panies Act 2006 and, as
im pacted by COVID-19, although
regards the Group financial statem ents, Article 4 of the IAS
there is less uncertainty com pared
Regulation to the extent applicable.
to prior year due to the Group’s
experience of the last 12 m onths
and the availability of observable
We conducted our audit in accordance with International
data from actual perform ance of
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
portfolio com panies and com parable
Our responsibilities are described below. We believe that the
com panies over the last 12 m onths.
audit evidence we have obtained is a sufficient and appropriate
The im pact on individual portfolio
basis for our opinion. Our audit opinion is consistent with our
com panies varies. This has
report to the audit com m ittee.
increased the level of judgem ent
We were first appointed as auditor by the shareholders on 27
required to be exercised by the
October 2011. The period of total uninterrupted engagem ent
Group, in particular as a result of the
is for the 10 financial years ended 31 March 2021. We have
volatility in com parable com pany
fulfilled our ethical responsibilities under, and we rem ain
m ultiples and earnings.
independent of the Group in accordance with, UK ethical
requirem ents including the FRC Ethical Standard as applied to
The effect of these m atters is that,
listed public interest entities. No non-audit services prohibited
as part of our risk assessm ent, we
by that standard were provided.
determ ined that the valuation of
certain unquoted investm ents, as
detailed above, has a high degree of
estim ation uncertainty, with a
potential range of reasonable
outcom es greater than our
m ateriality for the financial
statem ents as a whole, and possibly
0.8% (2020: 0.9%) of total assets
m any tim es that am ount. The
financial statem ents (note 22)
disclose the sensitivities estim ated
100% (2020:100%) of group profit
by the Group and the Parent
before tax
com pany.
Materiality:
group financial
statem ents as a
whole
£18.1m (2020:£16.4m )
Overview
Coverage
Key audit matters vs 2020
Recurring risks
Valuation of unquoted
Investm ents
96
[We continue to perform procedures over [identify key audit m atter]. However, following [explain why risk is less significant this
year], we have not assessed this as one of the m ost significant risks in our current year audit and, therefore, it is not separately
identified in our report this year.]
Caledonia Investments plc Annual Report 2021 3. Our application of materiality and an
overview of the scope of our audit
Group total Assets
£2,274m (2020: £1,823m)
Materiality
£18.1m (2020: £16.4m)
1. Our opinion is unmodified
Materiality for the Group financial statem ents as a
whole was set at £18.1m (2020: £16.4m ),
determ ined with reference to a benchm ark of group
We have audited the financial statem ents of Caledonia
total assets, of which it represents 0.8% (2020:
Investm ents plc (“the Com pany”) for the year ended 31 March
0.9%). Materiality for the parent com pany financial
2021 which com prise the Group statem ent of com prehensive
statem ents as a whole was set at £18.1m (2020:
incom e, statem ent of financial position for Group and
£16.4m ), determ ined with reference to a
Com pany, statem ent of changes in equity for Group and
benchm ark of parent com pany total assets, lim ited
Com pany, statem ent of cash flows for Group and Com pany,
to be less than m ateriality for group m ateriality as a
and the related notes, including the accounting policies on
whole.
pages 106 to 110.
In our opinion:
— the financial statem ents give a true and fair view of the
state of the Group’s and of the parent Com pany’s affairs as
at 31 March 2021 and of the Group’s profit for the year
then ended;
In line with our audit m ethodology, our procedures
on individual account balances and disclosures
were perform ed to a lower threshold, perform ance
m ateriality, so as to reduce to an acceptable level
the risk that individually im m aterial m isstatem ents
in individual account balances add up to a m aterial
am ount across the financial statem ents as a whole.
— the Group financial statem ents have been properly
Perform ance m ateriality for the group and parent
com pany was set at 75% (2020: 65%) of
m ateriality for the financial statem ents as a whole,
which equates to £13.6m (2020: £10.7m ) for both
— the parent Com pany financial statem ents have been
the group and parent com pany. We applied this
properly prepared in accordance with international
percentage in our determ ination of perform ance
accounting standards in conform ity with the requirem ents
m ateriality because we did not identify any factors
of, and as applied in accordance with the provisions of, the
indicating an elevated level of risk.
Com panies Act 2006; and
prepared in accordance with international accounting
standards in conform ity with the requirem ents of the
Com panies Act 2006;
— the financial statem ents have been prepared in accordance
with the requirem ents of the Com panies Act 2006 and, as
regards the Group financial statem ents, Article 4 of the IAS
Regulation to the extent applicable.
We agreed to report to the Audit Com m ittee any
corrected or uncorrected identified m isstatem ents
exceeding £0.9m (2020: £0.5m ), in addition to other
identified m isstatem ents that warranted reporting
on qualitative grounds.
Basis for opinion
The Group team perform ed the audit of the Group
as if it was a single aggregated set of financial
inform ation. The audit was perform ed using the
m ateriality levels set out above and covered 100%
of total group revenue, group profit before tax and
total group assets.
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the
audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our
report to the audit com m ittee.
We were first appointed as auditor by the shareholders on 27
October 2011. The period of total uninterrupted engagem ent
is for the 10 financial years ended 31 March 2021. We have
fulfilled our ethical responsibilities under, and we rem ain
independent of the Group in accordance with, UK ethical
requirem ents including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
2 Key audit matters: our assessment of risks of
material misstatement
£18.1m
Whole financial
statements materiality (2020:
£16 .4m)
£13.6m
Whole financial
statements performance
materiality (2020: £10.7m)
Key audit m atters are those m atters that, in our professional
judgem ent, were of m ost significance in the audit of the
financial statem ents and include the m ost significant
assessed risks of m aterial m isstatem ent (whether or not due
to fraud) identified by us, including those which had the
greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the
engagem ent team . We sum m arise below the key audit
m atter in arriving at our audit opinion above, together with our
key audit procedures to address this m atter and our findings
from those procedures in order that the Com pany's m em bers,
as a body, m ay better understand the process by which we
£0.9m
arrived at our audit opinion. This m atter was addressed, and
Misstatements reported to the
our findings are based on procedures undertaken, in the
audit committee (2020: £0.5m)
context of, and solely for the purpose of, our audit of the
financial statem ents as a whole, and in form ing our opinion
thereon, and consequently are incidental to that opinion, and
Group p rofit b efore tax
we do not provide a separate opinion on this m atter.
Group Total Assets
Materiality
Group revenue
In the prior year we reported a key audit m atter in respect of
the im pact of uncertainties due to the UK exiting the
European Union. Following the trade agreem ent between the
UK and the EU, and the end of the EU-exit im plem entation
period, the nature of these uncertainties has changed. We
continue to perform procedures over m aterial assum ptions in
forward looking assessm ents such as going concern,
however we no longer consider the effect of the UK’s
departure from the EU to be a separate key audit m atter.
100%
100%
(2 02 0:100%)
(2 02 0:100%)
Group total assets
100%
(2 02 0:100%)
Overview
Materiality:
group financial
statem ents as a
whole
Coverage
£18.1m (2020:£16.4m )
0.8% (2020: 0.9%) of total assets
100% (2020:100%) of group profit
Key:
before tax
Full scope for group audit purposes 2021
Key audit matters vs 2020
Recurring risks
Valuation of unquoted
Investm ents
Full scope for group audit purposes 2020
97
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction — the related statem ent under the Listing Rules set out on
pages 60 - 63 is m aterially consistent with the financial
statem ents and our audit knowledge.
detect
2 Key audit matters: our assessment of risks of
material misstatement
Iden tifying an d responding to risks of m aterial m isstatement
due to fraud
To identify risks of m aterial m isstatem ent due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to com m it fraud or provide an opportunity
to com m it fraud. Our risk assessm ent procedures included:
However, as we cannot predict all future events or conditions
and as subsequent events m ay result in outcom es that are
inconsistent with judgem ents that were reasonable at the tim e
they were m ade, the above conclusions are not a guarantee
Key audit m atters are those m atters that, in our professional
that the Group or the Com pany will continue in operation.
judgem ent, were of m ost significance in the audit of the
financial statem ents and include the m ost significant
assessed risks of m aterial m isstatem ent (whether or not due
to fraud) identified by us, including those which had the
5. Fraud and breaches of laws and regulations – ability to
greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the
engagem ent team . We sum m arise below the key audit
m atter in arriving at our audit opinion above, together with our
key audit procedures to address this m atter and our findings
from those procedures in order that the Com pany's m em bers,
as a body, m ay better understand the process by which we
arrived at our audit opinion. This m atter was addressed, and
our findings are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the
- Enquiring of the Audit and Risk Com m ittee and Executive
financial statem ents as a whole, and in form ing our opinion
m anagem ent as to the Group’s high-level policies and
thereon, and consequently are incidental to that opinion, and
procedures to prevent and detect fraud and the Group’s
we do not provide a separate opinion on this m atter.
channel for “whistleblowing”, as well as whether they have
knowledge of any actual, suspected or alleged fraud.
In the prior year we reported a key audit m atter in respect of
the im pact of uncertainties due to the UK exiting the
European Union. Following the trade agreem ent between the
- Considering rem uneration incentive schem es and
UK and the EU, and the end of the EU-exit im plem entation
perform ance targets for m anagem ent and directors.
period, the nature of these uncertainties has changed. We
continue to perform procedures over m aterial assum ptions in
forward looking assessm ents such as going concern,
however we no longer consider the effect of the UK’s
departure from the EU to be a separate key audit m atter.
We com m unicated identified fraud risks throughout the audit
team and rem ained alert to any indications of fraud throughout
the audit.
- Reading board, audit, valuation, rem uneration com m ittee and
annual general m eetings m inutes.
As required by auditing standards, and taking into account
possible pressures to m eet perform ance targets, we perform
procedures to address the risk of m anagem ent override of
controls, in particular the risk that Group m anagem ent m ay be
in a position to m ake inappropriate accounting entries and the
risk of bias in accounting estim ates and judgem ents such as
the valuation of unquoted investm ent portfolio. On this audit
we do not believe there is a fraud risk related to revenue
recognition because there are few judgem ental aspects and
there is lim ited opportunity for m anipulation due to the nature
of the revenue m eaning there is available data which can be
verified to external sources.
We also identified an additional fraud risk over the valuation of
private capital portfolio investm ents. Further detail in respect of
valuation of unquoted investm ents is set out in the key audit
m atter disclosures in section 2 of this report.
We also perform ed procedures including:
- Com paring journal entries to supporting docum entation for a
selection based on risk, for exam ple, post-close journals,
those posted by senior finance m anagem ent, those posted
to unusual accounts or those containing unusual journal
descriptions; and
- Assessing significant accounting estim ates, including
valuation of unquoted investm ents, for any indicators of
m anagem ent bias.
Independent auditor’s report (continued)
4. Going concern
1. Our opinion is unmodified
The Directors have prepared the financial statem ents on the
going concern basis as they do not intend to liquidate the Group
or the Com pany or to cease their operations, and as they have
concluded that the Group’s and the Com pany’s financial position
We have audited the financial statem ents of Caledonia
m eans that this is realistic. They have also concluded that there
Investm ents plc (“the Com pany”) for the year ended 31 March
are no m aterial uncertainties that could have cast significant
2021 which com prise the Group statem ent of com prehensive
doubt over their ability to continue as a going concern for at least
incom e, statem ent of financial position for Group and
a year from the date of approval of the financial statem ents (“the
Com pany, statem ent of changes in equity for Group and
going concern period”).
Com pany, statem ent of cash flows for Group and Com pany,
and the related notes, including the accounting policies on
pages 106 to 110.
We used our knowledge of the Group, its industry, and the
general econom ic environm ent to identify the inherent risks to its
business m odel and analysed how those risks m ight affect the
Group’s and Com pany’s financial resources or ability to continue
operations over the going concern period. The risk that we
state of the Group’s and of the parent Com pany’s affairs as
considered m ost likely to adversely affect the Group’s and
at 31 March 2021 and of the Group’s profit for the year
Com pany’s available financial resources and m etrics relevant to
then ended;
debt covenants over this period was:-
— the financial statem ents give a true and fair view of the
In our opinion:
— the Group financial statem ents have been properly
prepared in accordance with international accounting
standards in conform ity with the requirem ents of the
Com panies Act 2006;
- Potential im pact of COVID-19 on the Group’s private equity
funds (Fund Pool investm ents), and uncertainty of the tim ing
when uncalled com m itm ents m ade by the Group to these entities
would be called due.
— the parent Com pany financial statem ents have been
We considered whether these risks could plausibly affect the
properly prepared in accordance with international
liquidity or covenant com pliance in the going concern period by
accounting standards in conform ity with the requirem ents
assessing the Directors’ sensitivities over the level of available
of, and as applied in accordance with the provisions of, the
financial resources and covenant thresholds indicated by the
Com panies Act 2006; and
Group’s financial forecasts taking account of severe, but plausible
adverse effects that could arise from these risks individually and
collectively.
— the financial statem ents have been prepared in accordance
with the requirem ents of the Com panies Act 2006 and, as
regards the Group financial statem ents, Article 4 of the IAS
Regulation to the extent applicable.
Our procedures also included:
• Critically assessing assum ptions in base case and downside
Basis for opinion
scenarios relevant to liquidity and our knowledge of the Group
and the sector in which it operates.
• We also com pared past budgets to actual results to assess
• We inspected the confirm ation from the lender of the level of
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the
the directors' track record of budgeting accurately;
audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our
com m itted financing, and the associated covenant
report to the audit com m ittee.
requirem ents;
We were first appointed as auditor by the shareholders on 27
October 2011. The period of total uninterrupted engagem ent
• We considered whether the going concern disclosure in note
is for the 10 financial years ended 31 March 2021. We have
1 to the financial statem ents gives a full and accurate
fulfilled our ethical responsibilities under, and we rem ain
description of the Directors’ assessm ent of going concern.
independent of the Group in accordance with, UK ethical
requirem ents including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
by that standard were provided.
— we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statem ents is
appropriate;
Our conclusions based on this work:
— we have not identified, and concur with the directors’
Overview
£18.1m (2020:£16.4m )
assessm ent that there is not, a m aterial uncertainty related to
events or conditions that, individually or collectively, m ay cast
significant doubt on the Group’s or Com pany's ability to
0.8% (2020: 0.9%) of total assets
continue as a going concern for the going concern period;
Materiality:
group financial
statem ents as a
whole
— we have nothing m aterial to add or draw attention to in
Coverage
relation to the directors’ statem ent on page 106 of the
accounting policies to the financial statem ents on the use of
the going concern basis of accounting with no m aterial
uncertainties that m ay cast significant doubt over the Group
and Com pany’s use of that basis for the going concern period,
and we found the going concern disclosure on page 106 of the
accounting policies to be applicable; and
100% (2020:100%) of group profit
before tax
Key audit matters vs 2020
Valuation of unquoted
Investm ents
Recurring risks
98
Caledonia Investments plc Annual Report 2021 Iden tifying an d responding to risks of m aterial m isstatement
due to n on-compliance with laws an d regulations
1. Our opinion is unmodified
We identified areas of laws and regulations that could
reasonably be expected to have a m aterial effect on the
financial statem ents from our general com m ercial and sector
We have audited the financial statem ents of Caledonia
experience and through discussion with m anagem ent and those
Investm ents plc (“the Com pany”) for the year ended 31 March
charged with governance (as required by auditing standards),
2021 which com prise the Group statem ent of com prehensive
and discussed with m anagem ent the policies and procedures
incom e, statem ent of financial position for Group and
regarding com pliance with laws and regulations. As the Group
Com pany, statem ent of changes in equity for Group and
is regulated, our assessm ent of risks involved gaining an
Com pany, statem ent of cash flows for Group and Com pany,
understanding of the control environm ent including the entity’s
and the related notes, including the accounting policies on
procedures for com plying with regulatory requirem ents. We
pages 106 to 110.
com m unicated identified laws and regulations throughout our
In our opinion:
team and rem ained alert to any indications of non-com pliance
throughout the audit.
— the financial statem ents give a true and fair view of the
The potential effect of these laws and regulations on the
financial statem ents varies considerably.
state of the Group’s and of the parent Com pany’s affairs as
at 31 March 2021 and of the Group’s profit for the year
then ended;
Firstly, the Group is subject to laws and regulations that directly
— the Group financial statem ents have been properly
affect the financial statem ents including financial reporting
prepared in accordance with international accounting
legislation (including related com panies legislation), distributable
standards in conform ity with the requirem ents of the
profits legislation and as the Group is an Investm ent Trust,
Com panies Act 2006;
taxation legislation including section 1158 of the Corporation
— the parent Com pany financial statem ents have been
Tax Act 2010 as am ended by the Investm ent Trust (Approved
properly prepared in accordance with international
Com pany) (Tax) Regulations 2011. We assessed the extent of
accounting standards in conform ity with the requirem ents
com pliance with these laws and regulations as part of our
of, and as applied in accordance with the provisions of, the
procedures on the related financial statem ent item s.
Com panies Act 2006; and
Basis for opinion
— the financial statem ents have been prepared in accordance
Secondly, the Group is subject to m any other laws and
with the requirem ents of the Com panies Act 2006 and, as
regulations where the consequences of non-com pliance could
regards the Group financial statem ents, Article 4 of the IAS
have a m aterial effect on am ounts or disclosures in the financial
Regulation to the extent applicable.
statem ents, for instance through the im position of fines or
litigation. We identified the following areas as those m ost likely
to have such an effect: health and safety, anti-bribery,
We conducted our audit in accordance with International
em ploym ent law, regulatory capital and liquidity and certain
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
aspects of com pany legislation recognising the financial and
Our responsibilities are described below. We believe that the
regulated nature of the Group’s activities and its legal form .
audit evidence we have obtained is a sufficient and appropriate
Auditing standards lim it the required audit procedures to
basis for our opinion. Our audit opinion is consistent with our
identify non-com pliance with these laws and regulations to
report to the audit com m ittee.
We were first appointed as auditor by the shareholders on 27
enquiry of the directors and other m anagem ent and inspection
October 2011. The period of total uninterrupted engagem ent
of regulatory and legal correspondence, if any. Therefore if a
is for the 10 financial years ended 31 March 2021. We have
breach of operational regulations is not disclosed to us or
fulfilled our ethical responsibilities under, and we rem ain
evident from relevant correspondence, an audit will not detect
independent of the Group in accordance with, UK ethical
that breach.
requirem ents including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited
Con text of th e ability of th e audit to detect fraud or breach es
by that standard were provided.
of law or regulation
Owing to the inherent lim itations of an audit, there is an
unavoidable risk that we m ay not have detected som e m aterial
m isstatem ents in the financial statem ents, even though we
have properly planned and perform ed our audit in accordance
with auditing standards. For exam ple, the further rem oved non-
com pliance with laws and regulations is from the events and
0.8% (2020: 0.9%) of total assets
transactions reflected in the financial statem ents, the less likely
the inherently lim ited procedures required by auditing standards
would identify it.
Materiality:
group financial
statem ents as a
whole
£18.1m (2020:£16.4m )
Overview
Coverage
Key audit matters vs 2020
100% (2020:100%) of group profit
In addition, as with any audit, there rem ained a higher risk of
before tax
non-detection of fraud, as these m ay involve collusion, forgery,
intentional om issions, m isrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
m aterial m isstatem ent. We are not responsible for preventing
Valuation of unquoted
non-com pliance or fraud and cannot be expected to detect non-
Investm ents
com pliance with all laws and regulations.
Recurring risks
2 Key audit matters: our assessment of risks of
material misstatement
Key audit m atters are those m atters that, in our professional
judgem ent, were of m ost significance in the audit of the
financial statem ents and include the m ost significant
assessed risks of m aterial m isstatem ent (whether or not due
to fraud) identified by us, including those which had the
greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the
engagem ent team . We sum m arise below the key audit
m atter in arriving at our audit opinion above, together with our
key audit procedures to address this m atter and our findings
from those procedures in order that the Com pany's m em bers,
as a body, m ay better understand the process by which we
arrived at our audit opinion. This m atter was addressed, and
our findings are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the
financial statem ents as a whole, and in form ing our opinion
thereon, and consequently are incidental to that opinion, and
we do not provide a separate opinion on this m atter.
In the prior year we reported a key audit m atter in respect of
the im pact of uncertainties due to the UK exiting the
European Union. Following the trade agreem ent between the
UK and the EU, and the end of the EU-exit im plem entation
period, the nature of these uncertainties has changed. We
continue to perform procedures over m aterial assum ptions in
forward looking assessm ents such as going concern,
however we no longer consider the effect of the UK’s
departure from the EU to be a separate key audit m atter.
99
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Independent auditor’s report (continued)
We are also required to review the viability statem ent, set
out on page 45 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures
are m aterially consistent with the financial statem ents and
2 Key audit matters: our assessment of risks of
our audit knowledge.
material misstatement
Corporate govern ance disclosures
Based on those procedures, we have concluded that each
of the following is m aterially consistent with the financial
statem ents and our audit knowledge:
Our work is lim ited to assessing these m atters in the
context of only the knowledge acquired during our financial
statem ents audit. As we cannot predict all future events or
Key audit m atters are those m atters that, in our professional
conditions and as subsequent events m ay result in
judgem ent, were of m ost significance in the audit of the
outcom es that are inconsistent with judgem ents that were
financial statem ents and include the m ost significant
reasonable at the tim e they were m ade, the absence of
assessed risks of m aterial m isstatem ent (whether or not due
anything to report on these statem ents is not a guarantee
to fraud) identified by us, including those which had the
as to the Group’s and Com pany’s longer-term viability.
greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the
engagem ent team . We sum m arise below the key audit
We are required to perform procedures to identify whether
m atter in arriving at our audit opinion above, together with our
there is a m aterial inconsistency between the directors’
key audit procedures to address this m atter and our findings
corporate governance disclosures and the financial
from those procedures in order that the Com pany's m em bers,
statem ents and our audit knowledge.
as a body, m ay better understand the process by which we
arrived at our audit opinion. This m atter was addressed, and
our findings are based on procedures undertaken, in the
context of, and solely for the purpose of, our audit of the
financial statem ents as a whole, and in form ing our opinion
thereon, and consequently are incidental to that opinion, and
annual report and financial statem ents taken as a whole
we do not provide a separate opinion on this m atter.
is fair, balanced and understandable, and provides the
inform ation necessary for shareholders to assess the
In the prior year we reported a key audit m atter in respect of
Group’s position and perform ance, business m odel and
the im pact of uncertainties due to the UK exiting the
strategy;
European Union. Following the trade agreem ent between the
— the section of the annual report describing the work of
UK and the EU, and the end of the EU-exit im plem entation
the Audit Com m ittee, including the significant issues
period, the nature of these uncertainties has changed. We
that the audit com m ittee considered in relation to the
continue to perform procedures over m aterial assum ptions in
financial statem ents, and how these issues were
forward looking assessm ents such as going concern,
addressed; and
however we no longer consider the effect of the UK’s
— the section of the annual report that describes the
departure from the EU to be a separate key audit m atter.
review of the effectiveness of the Group’s risk
m anagem ent and internal control system s.
— the directors’ statem ent that they consider that the
We are required to review the part of the Corporate
Governance Statem ent relating to the Group’s com pliance
with the provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review. We have
nothing to report in this respect.
6. We have nothing to report on the other information
in the Annual Report
1. Our opinion is unmodified
The directors are responsible for the other inform ation
presented in the Annual Report together with the financial
statem ents. Our opinion on the financial statem ents does
We have audited the financial statem ents of Caledonia
not cover the other inform ation and, accordingly, we do not
Investm ents plc (“the Com pany”) for the year ended 31 March
express an audit opinion or, except as explicitly stated
2021 which com prise the Group statem ent of com prehensive
below, any form of assurance conclusion thereon.
incom e, statem ent of financial position for Group and
Our responsibility is to read the other inform ation and, in
Com pany, statem ent of changes in equity for Group and
doing so, consider whether, based on our financial
Com pany, statem ent of cash flows for Group and Com pany,
statem ents audit work, the inform ation therein is m aterially
and the related notes, including the accounting policies on
m isstated or inconsistent with the financial statem ents or
pages 106 to 110.
our audit knowledge. Based solely on that work we have
In our opinion:
not identified m aterial m isstatem ents in the other
inform ation.
— the financial statem ents give a true and fair view of the
Strategic report an d directors’ report
state of the Group’s and of the parent Com pany’s affairs as
at 31 March 2021 and of the Group’s profit for the year
then ended;
Based solely on our work on the other inform ation:
— we have not identified m aterial m isstatem ents in the
— the Group financial statem ents have been properly
strategic report and the directors’ report;
— in our opinion the inform ation given in those reports for
prepared in accordance with international accounting
standards in conform ity with the requirem ents of the
the financial year is consistent with the financial
Com panies Act 2006;
statem ents; and
— the parent Com pany financial statem ents have been
— in our opinion those reports have been prepared in
properly prepared in accordance with international
accounting standards in conform ity with the requirem ents
of, and as applied in accordance with the provisions of, the
Com panies Act 2006; and
accordance with the Com panies Act 2006.
Directors’ rem uneration report
In our opinion the part of the Directors’ Rem uneration
Report to be audited has been properly prepared in
accordance with the Com panies Act 2006.
— the financial statem ents have been prepared in accordance
with the requirem ents of the Com panies Act 2006 and, as
regards the Group financial statem ents, Article 4 of the IAS
Regulation to the extent applicable.
Disclosures of em erging and prin cipal risks an d longer-
term viability
Basis for opinion
We are required to perform procedures to identify whether
We conducted our audit in accordance with International
there is a m aterial inconsistency between the directors’
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
disclosures in respect of em erging and principal risks and
Our responsibilities are described below. We believe that the
the viability statem ent, and the financial statem ents and
audit evidence we have obtained is a sufficient and appropriate
our audit knowledge.
basis for our opinion. Our audit opinion is consistent with our
Based on those procedures, we have nothing m aterial to
report to the audit com m ittee.
add or draw attention to in relation to:
We were first appointed as auditor by the shareholders on 27
October 2011. The period of total uninterrupted engagem ent
— the directors’ confirm ation within the viability statem ent
is for the 10 financial years ended 31 March 2021. We have
on page 45 that they have carried out a robust
fulfilled our ethical responsibilities under, and we rem ain
assessm ent of the em erging and principal risks facing
independent of the Group in accordance with, UK ethical
the Group, including those that would threaten its
requirem ents including the FRC Ethical Standard as applied to
business m odel, future perform ance, solvency and
listed public interest entities. No non-audit services prohibited
liquidity;
by that standard were provided.
— the Principal Risks disclosures describing these risks
and how em erging risks are identified, and explaining
how they are being m anaged and m itigated; and
Materiality:
group financial
statem ents as a
whole
— the directors’ explanation in the viability statem ent of
how they have assessed the prospects of the Group,
Overview
over what period they have done so and why they
considered that period to be appropriate, and their
statem ent as to whether they have a reasonable
expectation that the Group will be able to continue in
operation and m eet its liabilities as they fall due over the
period of their assessm ent, including any related
disclosures drawing attention to any necessary
qualifications or assum ptions.
100% (2020:100%) of group profit
before tax
0.8% (2020: 0.9%) of total assets
£18.1m (2020:£16.4m )
Coverage
Key audit matters vs 2020
Recurring risks
Valuation of unquoted
Investm ents
100
Caledonia Investments plc Annual Report 2021 7. We have nothing to report on the other matters on
9. The purpose of our audit work and to whom we owe
our responsibilities
This report is m ade solely to the Com pany’s m em bers, as a
body, in accordance with Chapter 3 of Part 16 of the
Com panies Act 2006 and the term s of our engagem ent by
the Com pany. Our audit work has been undertaken so that
9. The purpose of our audit work and to whom we owe
we m ight state to the Com pany’s m em bers those m atters
our responsibilities
we are required to state to them in an auditor’s report, and
This report is m ade solely to the Com pany’s m em bers, as a
the further m atters we are required to state to them in
body, in accordance with Chapter 3 of Part 16 of the
2 Key audit matters: our assessment of risks of
accordance with the term s agreed with the Com pany, and
Com panies Act 2006 and the term s of our engagem ent by
material misstatement
for no other purpose. To the fullest extent perm itted by
the Com pany. Our audit work has been undertaken so that
law, we do not accept or assum e responsibility to anyone
we m ight state to the Com pany’s m em bers those m atters
other than the Com pany and the Com pany’s m em bers, as a
Key audit m atters are those m atters that, in our professional
we are required to state to them in an auditor’s report, and
body, for our audit work, for this report, or for the opinions
judgem ent, were of m ost significance in the audit of the
the further m atters we are required to state to them in
we have form ed.
financial statem ents and include the m ost significant
accordance with the term s agreed with the Com pany, and
assessed risks of m aterial m isstatem ent (whether or not due
for no other purpose. To the fullest extent perm itted by
to fraud) identified by us, including those which had the
law, we do not accept or assum e responsibility to anyone
greatest effect on: the overall audit strategy; the allocation of
other than the Com pany and the Com pany’s m em bers, as a
resources in the audit; and directing the efforts of the
body, for our audit work, for this report, or for the opinions
engagem ent team . We sum m arise below the key audit
we have form ed.
m atter in arriving at our audit opinion above, together with our
key audit procedures to address this m atter and our findings
from those procedures in order that the Com pany's m em bers,
as a body, m ay better understand the process by which we
Thomas Brown (Senior Statutory Auditor)
arrived at our audit opinion. This m atter was addressed, and
our findings are based on procedures undertaken, in the
for and on b ehalf of KPMG LLP, Statutory Auditor
context of, and solely for the purpose of, our audit of the
Chartered Accountants
financial statem ents as a whole, and in form ing our opinion
15 Canada Square
thereon, and consequently are incidental to that opinion, and
London E14 5GL
we do not provide a separate opinion on this m atter.
Thomas Brown (Senior Statutory Auditor)
26 May 2021
for and on b ehalf of KPMG LLP, Statutory Auditor
In the prior year we reported a key audit m atter in respect of
Chartered Accountants
the im pact of uncertainties due to the UK exiting the
European Union. Following the trade agreem ent between the
15 Canada Square
UK and the EU, and the end of the EU-exit im plem entation
London E14 5GL
period, the nature of these uncertainties has changed. We
26 May 2021
continue to perform procedures over m aterial assum ptions in
forward looking assessm ents such as going concern,
however we no longer consider the effect of the UK’s
departure from the EU to be a separate key audit m atter.
which we are required to report by exception
Under the Com panies Act 2006, we are required to report
to you if, in our opinion:
7. We have nothing to report on the other matters on
— adequate accounting records have not been kept by the
parent Com pany, or returns adequate for our audit have
not been received from branches not visited by us; or
which we are required to report by exception
Under the Com panies Act 2006, we are required to report
— the parent Com pany financial statem ents and the part
to you if, in our opinion:
1. Our opinion is unmodified
of the Directors’ Rem uneration Report to be audited
are not in agreem ent with the accounting records and
— adequate accounting records have not been kept by the
We have audited the financial statem ents of Caledonia
returns; or
parent Com pany, or returns adequate for our audit have
Investm ents plc (“the Com pany”) for the year ended 31 March
not been received from branches not visited by us; or
— certain disclosures of directors’ rem uneration specified
2021 which com prise the Group statem ent of com prehensive
by law are not m ade; or
— the parent Com pany financial statem ents and the part
incom e, statem ent of financial position for Group and
of the Directors’ Rem uneration Report to be audited
— we have not received all the inform ation and
Com pany, statem ent of changes in equity for Group and
are not in agreem ent with the accounting records and
explanations we require for our audit.
Com pany, statem ent of cash flows for Group and Com pany,
returns; or
and the related notes, including the accounting policies on
pages 106 to 110.
We have nothing to report in these respects.
— certain disclosures of directors’ rem uneration specified
8. Respective responsibilities
by law are not m ade; or
In our opinion:
8. Respective responsibilities
— we have not received all the inform ation and
Directors’ respon sibilities
— the financial statem ents give a true and fair view of the
explanations we require for our audit.
— the Group financial statem ents have been properly
state of the Group’s and of the parent Com pany’s affairs as
As explained m ore fully in their statem ent set out on page
We have nothing to report in these respects.
at 31 March 2021 and of the Group’s profit for the year
[A], the directors are responsible for: the preparation of the
then ended;
financial statem ents including being satisfied that they give
a true and fair view; such internal control as they determ ine
prepared in accordance with international accounting
Directors’ respon sibilities
is necessary to enable the preparation of financial
standards in conform ity with the requirem ents of the
statem ents that are free from m aterial m isstatem ent,
As explained m ore fully in their statem ent set out on page
Com panies Act 2006;
whether due to fraud or error; assessing the Group and
[A], the directors are responsible for: the preparation of the
— the parent Com pany financial statem ents have been
parent Com pany’s ability to continue as a going concern,
financial statem ents including being satisfied that they give
properly prepared in accordance with international
disclosing, as applicable, m atters related to going concern;
a true and fair view; such internal control as they determ ine
accounting standards in conform ity with the requirem ents
and using the going concern basis of accounting unless
is necessary to enable the preparation of financial
of, and as applied in accordance with the provisions of, the
they either intend to liquidate the Group or the parent
statem ents that are free from m aterial m isstatem ent,
Com panies Act 2006; and
Com pany or to cease operations, or have no realistic
whether due to fraud or error; assessing the Group and
alternative but to do so.
— the financial statem ents have been prepared in accordance
parent Com pany’s ability to continue as a going concern,
with the requirem ents of the Com panies Act 2006 and, as
Auditor’s respon sibilities
disclosing, as applicable, m atters related to going concern;
regards the Group financial statem ents, Article 4 of the IAS
and using the going concern basis of accounting unless
Our objectives are to obtain reasonable assurance about
Regulation to the extent applicable.
they either intend to liquidate the Group or the parent
whether the financial statem ents as a whole are free from
Com pany or to cease operations, or have no realistic
m aterial m isstatem ent, whether due to fraud or error, and
alternative but to do so.
to issue our opinion in an auditor’s report. Reasonable
We conducted our audit in accordance with International
assurance is a high level of assurance, but does not
Auditor’s respon sibilities
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
guarantee that an audit conducted in accordance with ISAs
Our responsibilities are described below. We believe that the
Our objectives are to obtain reasonable assurance about
(UK) will always detect a m aterial m isstatem ent when it
audit evidence we have obtained is a sufficient and appropriate
whether the financial statem ents as a whole are free from
exists. Misstatem ents can arise from fraud or error and are
basis for our opinion. Our audit opinion is consistent with our
m aterial m isstatem ent, whether due to fraud or error, and
considered m aterial if, individually or in aggregate, they
report to the audit com m ittee.
to issue our opinion in an auditor’s report. Reasonable
could reasonably be expected to influence the econom ic
We were first appointed as auditor by the shareholders on 27
assurance is a high level of assurance, but does not
decisions of users taken on the basis of the financial
October 2011. The period of total uninterrupted engagem ent
guarantee that an audit conducted in accordance with ISAs
statem ents.
is for the 10 financial years ended 31 March 2021. We have
(UK) will always detect a m aterial m isstatem ent when it
fulfilled our ethical responsibilities under, and we rem ain
exists. Misstatem ents can arise from fraud or error and are
A fuller description of our responsibilities is provided on the
independent of the Group in accordance with, UK ethical
considered m aterial if, individually or in aggregate, they
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
requirem ents including the FRC Ethical Standard as applied to
could reasonably be expected to influence the econom ic
listed public interest entities. No non-audit services prohibited
decisions of users taken on the basis of the financial
by that standard were provided.
statem ents.
Basis for opinion
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Overview
Materiality:
group financial
statem ents as a
whole
Coverage
£18.1m (2020:£16.4m )
0.8% (2020: 0.9%) of total assets
100% (2020:100%) of group profit
before tax
Key audit matters vs 2020
Recurring risks
Valuation of unquoted
Investm ents
101
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Group statement of comprehensive income
for the year ended 31 March 2021
Note
Revenue
£m
2021
Capital
£m
Total
£m
Revenue
£m
Revenue
Investment income
Other income
Net gains and losses on fair value investments
Net gains and losses on fair value property
Total revenue
Management expenses
Profit/(loss) before finance costs
Treasury interest receivable
Finance costs
Exchange movements
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Other comprehensive income items never to be
reclassified to profit or loss
Re-measurements of defined benefit pension schemes
Tax on other comprehensive income
Total comprehensive income
Basic earnings per share
Diluted earnings per share
1
1
8
9, 10
2
3
4
5
24
5
7
7
44.6
0.1
–
–
44.7
(18.9)
25.8
0.1
(2.7)
(0.8)
22.4
7.4
29.8
–
0.8
437.0
3.2
441.0
(7.6)
433.4
–
–
–
433.4
2.8
436.2
44.6
0.9
437.0
3.2
485.7
(26.5)
459.2
0.1
(2.7)
(0.8)
455.8
10.2
466.0
53.4
–
–
–
53.4
(17.2)
36.2
0.6
(2.1)
(0.9)
33.8
0.8
34.6
2020
Capital
£m
–
–
(206.3)
–
(206.3)
0.6
(205.7)
–
–
–
(205.7)
(1.8)
(207.5)
Total
£m
53.4
–
(206.3)
–
(152.9)
(16.6)
(169.5)
0.6
(2.1)
(0.9)
(171.9)
(1.0)
(172.9)
–
–
29.8
2.3
(0.7)
437.8
2.3
(0.7)
467.6
–
–
34.6
1.1
(0.7)
(207.1)
1.1
(0.7)
(172.5)
54.3p
795.0p
849.3p
63.1p
-378.1p
-315.0p
53.6p
784.2p
837.8p
62.6p
-378.1p
-315.0p
The total column of the above statement represents the group’s statement of comprehensive income, prepared in accordance with IFRSs
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The revenue and capital columns are supplementary to the group’s statement of comprehensive income and are prepared under guidance
published by the Association of Investment Companies.
The profit for the year and total comprehensive income for the year is attributable to equity holders of the parent.
The accounting policies and notes on pages 106 to 129 are an integral part of these financial statements.
102
Caledonia Investments plc Annual Report 2021 Statement of financial position
at 31 March 2021
Non-current assets
Investments held at fair value through profit or loss
Investments in subsidiaries held at cost
Investment property
Property, plant and equipment
Deferred tax assets
Employee benefits
Non-current assets
Current assets
Trade and other receivables
Current tax assets
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Employee benefits
Deferred tax liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Capital reserve
Retained earnings
Own shares
Total equity
Undiluted net asset value
Diluted net asset value
Group
2021
£m
2020
£m
Company
2021
£m
2020
£m
Note
8
8
9
10
11
24
12
5
13
14
24
15
24
11
16
2,194.0
–
1,656.7
–
2,198.9
0.9
1,658.1
0.9
13.3
29.0
8.4
8.7
28.0
1.0
–
–
6.1
–
–
–
4.0
2,248.7
5.1
1,699.5
–
2,205.9
–
1,659.0
3.4
7.3
14.2
24.9
2,273.6
6.6
2.6
114.7
123.9
1,823.4
37.7
7.3
14.5
59.5
2,265.4
(26.4)
(2.6)
(29.0)
(15.0)
(2.9)
(1.4)
(30.0)
(0.9)
(30.9)
–
(5.2)
–
(34.9)
–
(34.9)
(15.0)
–
–
36.4
2.6
112.6
151.6
1,810.6
(30.0)
–
(30.0)
–
–
–
(19.3)
(48.3)
2,225.3
(5.2)
(36.1)
1,787.3
(15.0)
(49.9)
2,215.5
–
(30.0)
1,780.6
3.2
1.3
1.3
1,979.1
254.3
(13.9)
2,225.3
3.2
1.3
1.3
1,541.3
255.5
(15.3)
1,787.3
3.2
1.3
1.3
1,979.5
243.8
(13.9)
2,215.5
3.2
1.3
1.3
1,543.2
246.9
(15.3)
1,780.6
17
17
4055p
4000p
3259p
3236p
The Company profit for the year ended 31 March 2021 was £464.5m (2020: £175.3m loss).
The financial statements on pages 102 to 129 were approved by the board and authorised for issue on 26 May 2021 and were signed on
its behalf by:
Will Wyatt
Chief Executive
Tim Livett
Chief Financial Officer
The accounting policies and notes on pages 106 to 129 are an integral part of these financial statements.
103
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Statement of changes in equity
for the year ended 31 March 2021
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Capital
reserve
£m
Retained
earnings
£m
Own
shares
£m
Total
equity
£m
Group
Balance at 31 March 2019
Total comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments
Transfer of shares to employees
Own shares purchased
Dividends paid
Total transactions with owners
Balance at 31 March 2020
Total comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments
Transfer of shares to employees
Own shares purchased
Dividends paid
Total transactions with owners
Balance at 31 March 2021
Company
Balance at 31 March 2019
Loss and total comprehensive income
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments
Transfer of shares to employees
Own shares purchased
Dividends paid
Total transactions with owners
Balance at 31 March 2020
Profit and total comprehensive income
Transactions with owners of the company
Contributions by and distributions to owners
Share-based payments
Transfer of shares to employees
Own shares purchased
Dividends paid
Total transactions with owners
Balance at 31 March 2021
3.2
1.3
1.3
1,748.4
292.4
(44.6)
2,002.0
–
–
–
–
–
–
–
–
3.2
–
–
–
–
–
–
–
–
3.2
3.2
–
–
–
–
–
–
3.2
–
–
–
–
–
–
3.2
–
–
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
–
1.3
1.3
–
–
–
–
–
–
1.3
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
–
1.3
(207.5)
0.4
(207.1)
–
–
–
–
–
1,541.3
436.2
1.6
437.8
–
–
–
–
–
1,979.1
34.6
–
34.6
(1.5)
(37.2)
–
(32.8)
(71.5)
255.5
29.8
–
29.8
5.5
(2.8)
–
(33.7)
(31.0)
254.3
–
–
–
(172.9)
0.4
(172.5)
–
37.2
(7.9)
–
29.3
(15.3)
–
–
–
–
2.8
(1.4)
–
1.4
(13.9)
(1.5)
–
(7.9)
(32.8)
(42.2)
1,787.3
466.0
1.6
467.6
5.5
–
(1.4)
(33.7)
(29.6)
2,225.3
1.3
–
1,754.2
(211.0)
282.7
35.7
(44.6)
–
1,998.1
(175.3)
–
–
–
–
–
1.3
–
–
–
–
–
–
1.3
–
–
–
–
–
1,543.2
436.6
–
–
–
–
–
1,979.8
(1.5)
(37.2)
–
(32.8)
(71.5)
246.9
27.9
5.5
(2.8)
–
(33.7)
(31.0)
243.8
–
37.2
(7.9)
–
29.3
(15.3)
–
–
2.8
(1.4)
–
1.4
(13.9)
(1.5)
–
(7.9)
(32.8)
(42.2)
1,780.6
464.5
5.5
–
(1.4)
(33.7)
(29.6)
2,215.5
The accounting policies and notes on pages 106 to 129 are an integral part of these financial statements.
104
Caledonia Investments plc Annual Report 2021 Statement of cash flows
for the year ended 31 March 2021
Group
2021
£m
Note
Operating activities
Dividends received
Interest received
Cash received from customers
Cash paid to suppliers and employees
Taxes received
Taxes paid
Group tax relief received
Group tax relief paid
Net cash flow from operating activities
Investing activities
Purchases of investments
Proceeds from disposal of investments
Purchases of property, plant and equipment
Net cash flow from/(used in) investing activities
Financing activities
Interest paid
Dividends paid to owners of the company
Proceeds from bank borrowings
Repayment of bank borrowings
Loan receipts from subsidiaries
Loan payments to subsidiaries
Purchases of own shares
Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at year start
Cash and cash equivalents at year end
42.3
2.3
0.1
(17.8)
0.1
(0.1)
0.9
–
27.8
(240.2)
142.7
(3.5)
(101.0)
(3.1)
(33.7)
65.0
(50.0)
–
(4.1)
(1.4)
(27.3)
(100.5)
114.7
14.2
13
2020
£m
48.8
1.7
–
(23.3)
0.2
(0.1)
3.7
(0.1)
30.9
Company
2021
£m
2020
£m
42.3
2.3
–
(14.4)
0.1
(0.1)
0.7
(0.2)
30.7
48.8
1.7
–
(28.7)
0.2
(0.1)
3.7
–
25.6
(383.1)
(240.2)
(383.1)
397.2
(2.7)
11.4
(1.7)
(32.8)
10.0
(10.0)
2.5
–
(7.9)
(39.9)
2.4
112.3
114.7
142.2
–
(98.0)
(2.9)
(33.7)
65.0
(50.0)
–
(7.8)
(1.4)
(30.8)
(98.1)
112.6
14.5
399.6
–
16.5
(1.6)
(32.8)
10.0
(10.0)
2.5
(1.0)
(7.9)
(40.8)
1.3
111.3
112.6
The accounting policies and notes on pages 106 to 129 are an integral part of these financial statements.
105
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Significant accounting policies
Caledonia Investments plc is an investment trust company
General information
domiciled in the United Kingdom and incorporated in England in
1928, under number 235481. The address of its registered office
is Cayzer House, 30 Buckingham Gate, London SW1E 6NN.
The ordinary shares of the company are premium listed on
the London Stock Exchange.
These financial statements were authorised for issue by the
directors on 26 May 2021.
These financial statements are presented in pounds sterling,
as this is the currency of the primary economic environment
in which Caledonia operates.
Critical accounting judgements and estimates
Significant accounting policies
Critical judgements
In the course of preparing the financial statements, one judgement
has been made in the process of applying the group’s accounting
policies, other than those involving estimations, that has had a
significant effect on the amounts recognised in the financial
statements as follows:
1. Assessment as an investment entity
The board has concluded that the company continues to meet
the definition of an investment entity, as its strategic objective
of investing in a portfolio of investments for the purpose of
generating returns in the form of income and capital
appreciation remains unchanged.
Critical estimates
In addition to this significant judgement the directors have made
two estimates, which they deem to have a significant risk of
resulting in a material adjustment to the amounts recognised in
the financial statements within the next financial year. The details
of these estimates are as follows:
1. Fair values of private equity financial instruments
For directly owned private investments (Private Capital
investments), totalling £826.8m (2020 - £611.3m) valuation
techniques using a range of internally and externally developed
unobservable inputs are used to estimate fair value. Valuation
techniques make maximum use of market inputs, including
reference to the current fair values of instruments that are
substantially the same (subject to appropriate adjustments).
Private Capital assets have been disaggregated into categories
and sensitised according to the degree of uncertainty attached
to their estimation in note 22.
For private equity fund investments (unlisted Funds Pool
investments), totalling £627.5m (2020 - £437.4 m) held through
externally managed fund vehicles, the estimated fair value is
based on the most recent valuation provided by the external
manager, usually received within 3-6 months of the relevant
valuation date. Where required, valuations are adjusted for
investments and distributions between the valuation date
and the reporting date. These valuations depend upon the
reasonableness of the fair value estimation made by third-party
managers, which are assumed to be reliable in the absence of
contrary information.
106
Fair value estimates for the above private assets 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 and therefore cannot be determined
with precision.
Other judgement
Management has exercised judgement in determining the
classification of money market investments held by the group
as cash equivalents under IFRS 7. In arriving at this judgement
management has noted that it uses money market funds to
manage day-to-day working capital requirements, and that all
such funds are highly liquid Low Volatility Net Asset Value products
with a minimum credit rating of AAAm, and a maximum weighted-
average maturity of 60 days. They have therefore judged that the
risk of changes in value is insignificant and investments can be
readily converted to a known amount of cash upon redemption,
and therefore classification as cash equivalents is appropriate.
They note that, although remote, there is not a zero risk of
significant change in value and that therefore this classification
is judgemental.
Going concern
The group balance sheet shows net current liabilities of £4.1m,
as a result of trade payables due within 12 months. As at 31 March
2021 the group holds £730m of liquid assets and has access to
£235m of undrawn committed banking facilities, £97.5m of which
expires in July 2022 and £137.5m of which expires in May 2025.
The Directors therefore believe the group will be able to meet
these current liabilities as they fall due for at least 12 months from
the date of approval of the financial statements.
The group has conducted a going concern assessment which
considered future cash flows, the availability of liquid assets and
debt facilities, banking covenant requirements (see note 15) and
consideration of the risks arising from the Covid-19 pandemic over
at least 12 months from the date of approval of these financial
statements. In making this assessment a number of stress
scenarios were developed. A severe but plausible scenario
assumed (a) reduction in income from quoted equities and
privately held investments, (b) a significant fall in distributions
from private equity funds and (c) continued investment into private
businesses. A stress scenario used the above assumptions and
additionally assumed that (d) all outstanding private equity fund
commitments are drawn (see note 20).
Under these scenarios the group would have a range of mitigating
actions available to it, including usage of banking facilities, disposal
of some liquid assets and reduction in discretionary spend which
would enable it to meet all of its liabilities as they fall due and still
hold significant liquid assets over the assessment period.
As a result of this assessment the directors are confident that the
company will have sufficient funds to continue to meet its liabilities
as they fall due for at least 12 months from the date of approval of
the financial statements and therefore have prepared the financial
statements on a going concern basis. For further details on
assessment of going concern and viability please refer to page 45.
Caledonia Investments plc Annual Report 2021 Basis of accounting
These financial statements have prepared in accordance with
international financial reporting standards (‘IFRSs’) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. 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.
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 2017
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 Statement of comprehensive income of the company has
been omitted from these financial statements in accordance with
section 408 of the Companies Act 2006.
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.
After reviewing the company’s performance projections for a
period of at least 12 months, the directors are satisfied that in
taking account of reasonably possible downsides including the
potential impact of Covid-19, the company has adequate access
to resources to enable it to meet its obligations as they fall due
for at least 12 months from the date of approval of the financial
statements. Accordingly, the directors have adopted the going
concern basis in preparing these financial statements.
Adopted IFRSs and IFRSs not yet applied
In the current year, the group has not adopted any new standards
or interpretations.
At the date of approval of these financial statements, the following
standard, which has not been applied in these financial statements,
was in issue but not yet effective.
» IFRS 17 Insurance Contracts
The directors anticipate that the adoption of the standard in future
periods in its issued form will have no material impact on the
financial statements.
Assessment as investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to account for most investments in controlled
entities as held at fair value through profit or loss. Subsidiaries
that provide investment related services or engage in permitted
investment related activities with investees continue to be
consolidated unless they are also investment entities. The board
has concluded that the company meets the definition of an
investment entity.
Basis of consolidation
In accordance with the IFRS 10/IAS 28 Investment entities
amendments, the consolidated financial statements include the
financial statements of the company and service entities controlled
by the company made up to the reporting date. Control is achieved
where the company has the power over the potential investee as
a result of voting or other rights, has rights to positive or negative
variable returns from its involvement with the investee and has the
ability to use its power over the investee to affect significantly the
amount of its returns.
Foreign currencies
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. 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 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.
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. 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.
Rental income is recognised on a straight-line basis over the
lease term.
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.
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Significant accounting policies (continued)
Expenses
All expenses are accounted for on an accrual basis. In the financial
statements, ongoing management expenses are included in
revenue reserves, whereas performance fees and share-based
payment expenses – costs relating to compensation schemes
that are linked directly to investment performance – are included
in capital 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.
Leases
On commencement of a contract which gives the group the right
to use assets for a period of time in exchange for consideration,
the group recognises a right-of-use asset and a lease liability, unless
the lease qualifies as a ‘short-term’ lease (that is, the term is twelve
months or less with no option to purchase the lease asset) or a
‘low-value’ lease. Payments associated with short-term leases
are recognised on a straight-line basis as an expense in the
income statement.
Employee benefits
Pension schemes
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.
Re-measurement gains and losses are recognised in full in the
period in which they occur in other comprehensive income.
Past service cost is recognised immediately in the period of a
plan amendment.
The retirement benefit obligation recognised in the Statement
of financial position represents the present value of the defined
benefit obligations as reduced by the fair value of scheme assets.
Any asset resulting from this calculation is limited to the present
value of available refunds and reductions in future contributions
to the plan.
Profit sharing and bonus plans
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 created
a constructive obligation.
Share-based payments
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 the number of shares that will eventually vest.
As part of the share-based payment arrangements, the group pays
a cash amount to employees on exercise of options, equating to
the dividend entitlement on the option shares between grant and
vesting dates. This payment is treated as a cash-settled share-
based payment and is expensed on a straight-line basis over the
vesting period, based on the group’s estimate of the number of
shares that will eventually vest and a re-estimate of the fair value
of the dividend entitlement.
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
intercompany balance with the parent. In addition, the parent
recognises an increase in equity and an increase in intercompany
balance for the amount of the share-based payment transaction.
An employee share trust is used for distributing shares awarded
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 exercise.
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 IFRS 10, 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 treasury shares.
National Insurance on share-based payment awards
National Insurance payable on the exercise of share awards has
been charged as an expense spread over the respective vesting
periods of the awards. The charge is based on the difference
between the market value of the estimated number of shares that
will vest and on the vested but unexercised awards at the reporting
date, less any consideration due, calculated at the latest enacted
National Insurance rate.
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 future 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.
108
Caledonia Investments plc Annual Report 2021 The carrying amount of deferred tax assets is reviewed at each
reporting date and adjusted to the extent that it is probable that
sufficient future taxable profits will be available to allow all or part
of the assets to be recovered.
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.
Investments
Investments are recognised and derecognised on the date when
their purchase or sale is subject to a relevant contract and the
associated risks and rewards have been transferred. Where a
purchase or sale is made under a contract whose terms require
delivery within the timeframe established by the market
concerned, transactions are recognised on the trade date.
Investments held as part of the group’s business of investing in
financial assets are designated as held at fair value through profit
or loss in both the consolidated financial statements and the
company financial statements.
Investments designated as held at fair value through profit or loss
are measured at subsequent reporting dates at fair value. Gains or
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.
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 Valuation
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 pages 42 to 44.
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.
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.
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
» fees and share-based payment expenses linked to investment
performance
» expenses and finance costs incurred directly in relation to capital
transactions
» actuarial gains and losses on defined benefit pension schemes
» taxation on items recognised in the capital reserve.
Investment property
Investment properties are properties which are held either to earn
rental income or for capital appreciation or for both. Investment
properties are stated at fair value.
The valuations are prepared by considering the aggregate of the
net annual rents receivable from the properties and where
relevant, associated costs. A yield which reflects the specific risks
inherent in the net cash flows is then applied to the net annual
rentals to arrive at the property valuation.
Any gain or loss arising from a change in fair value is recognised in
profit or loss. Rental income is recognised on a straight-line basis
over the lease term.
Property, plant and equipment
Property is measured at fair value. Gains arising from changes in
the fair value are included in other comprehensive income for the
period in which they arise and losses included in profit or loss.
To the extent gains represent the reversal of cumulative losses
previously recognised they are included in profit or loss.
Plant and equipment is measured at cost less accumulated
depreciation and any accumulated impairment loss.
Assets in course of construction are measured at cost less any
accumulated impairment loss.
Depreciation is calculated to write off the fair value or cost of items
of property, plant and equipment less their estimated residual
values using the straight-line method over their estimated useful
lives. Land and assets in course of construction are not
depreciated.
The estimated useful lives of property, plant and equipment are
as follows:
Buildings
25 and 50 years
Fixtures and fittings
5-10 years
Office equipment
3-5 years
Accumulated depreciation on revalued property is eliminated
against the gross carrying amount of the asset.
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.
109
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Significant accounting policies (continued)
Share capital
Equity instruments issued by the company are recorded as
the proceeds received, net of direct issue costs.
Where The Caledonia Investments plc Employee Share Trust
purchases the company’s equity share capital, 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 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.
Operating segments
Operating segments are based on the financial information
reported to the chief operating decision maker.
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.
Receivables
Receivables do not carry any interest and are stated at their
nominal value as reduced by expected credit losses (‘ECL’) arising
from an annual ECL assessment of recoverable amounts.
Cash and cash equivalents
Cash comprises cash in 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. Cash is reduced by ECL
losses arising from an annual ECL assessment of recoverable
amounts.
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.
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 financial statements, provisions recognised for investments
are included in the Statement of comprehensive income as a
capital return.
110
Caledonia Investments plc Annual Report 2021 Notes to the financial statements
Investment income
1. Revenue
Income from portfolio investments
Dividends from UK listed companies
Dividends from overseas listed companies
Dividends from unlisted companies
Distributions from limited partnerships
Interest on loan facilities
Income from non-portfolio investments
Dividends from unlisted companies
Other income
Income statement revenue column
Property income
Income statement capital column
US limited partnerships tax refunds
Management expenses
2. Expenses
Income statement revenue column
Personnel expenses
Depreciation
Auditor’s remuneration
Other administrative expenses
Directors’ fees and disbursements recharged
Management fees and recharges
Income statement capital column
Personnel expenses
Transaction costs
2021
£m
10.8
6.3
20.8
0.7
2.0
40.6
4.0
44.6
2020
£m
15.8
6.6
26.6
2.4
2.0
53.4
–
53.4
2021
£m
2020
£m
0.1
0.8
–
–
2021
£m
11.6
1.1
0.3
7.2
(1.0)
(0.3)
18.9
7.3
0.3
7.6
26.5
2020
£m
9.5
1.2
0.3
8.4
(1.5)
(0.7)
17.2
(3.4)
2.8
(0.6)
16.6
Further information
Auditor’s remuneration
Fees payable to KPMG LLP in respect of services to Caledonia
Investments plc were as follows:
Audit services
Annual report
Other services
Other assurance
2021
£m
2020
£m
0.3
–
0.3
0.2
0.1
0.3
Fees payable to KPMG LLP in respect of services to Caledonia
Investments plc non-consolidated subsidiaries were as follows:
Audit services
Annual report1
Other services
Other assurance, due diligence and tax compliance
2021
£m
2020
£m
0.4
–
0.4
0.5
0.1
0.6
1. Included £0.1m (2020 – £0.1m) payable to KPMG Channel Islands Ltd.
Personnel expenses
Income statement revenue column
Wages and salaries
Compulsory social security contributions
Contributions to defined contribution plans
Defined benefit pension plans expense (note 24)
Income statement capital column
Share-based payments (note 23)
National Insurance on share awards
2021
£m
9.0
1.6
1.0
–
11.6
6.3
1.0
7.3
18.9
2020
£m
7.2
1.3
0.9
0.1
9.5
(2.4)
(1.0)
(3.4)
6.1
The average number of employees, including executive directors,
throughout the year was as follows:
Average number of employees
2021
No
61
2020
No
59
Total directors’ remuneration expensed for the year was £3.2m
(2020 – £2.9m), as follows:
Short term employee benefits
Gains on exercise of share awards
2021
2.5
0.7
3.2
2020
1.8
1.1
2.9
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Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
3. Treasury interest receivable
Interest on bank deposits and liquidity funds
2021
£m
0.1
2020
£m
0.6
4. Finance costs
Interest on bank loans and overdrafts
2021
£m
2.7
2020
£m
2.1
Recognised in comprehensive income
5. Taxation
Current tax income
Current year
Adjustments for prior years
Deferred tax income/(expense)
Origination and reversal of temporary differences
Total tax income/(expense)
2021
£m
2020
£m
3.3
0.2
3.5
6.7
10.2
1.5
(0.6)
0.9
(1.9)
(1.0)
Adjustments for prior years represented settlement of prior year
tax loss relief surrendered to group companies, finalised in the year.
Reconciliation of effective tax expense
Profit/(loss) before tax
Tax (expense)/credit at the domestic rate of 19%
Non-deductible expenses
Losses arising in the year not recognised
Recognition of losses previously not recognised
Non-taxable gains/(losses) on investments1
Non-taxable dividend income
Other temporary differences
Adjustments for prior years
Tax income/(expense)
2021
£m
455.8
(86.6)
0.5
(0.1)
5.4
83.0
8.0
0.2
(0.2)
10.2
2020
£m
(171.9)
32.7
(0.2)
(2.8)
–
(39.2)
9.3
(0.3)
(0.5)
(1.0)
1. The Company is exempt from UK corporation tax on capital gains as it
meets the HM Revenue & Customs criteria for an investment company set
out in Section 1158 of the Corporation Tax Act 2010.
Recognised in other comprehensive income
Deferred tax expense
On re-measurements of defined benefit
pension schemes
On share options and awards
2021
£m
2020
£m
(0.7)
–
(0.7)
(0.2)
(0.5)
(0.7)
Amounts recognised as distributions to owners of the company in
6. Dividends
the year were as follows:
Final dividend for the year
ended 31 March 2020 (2019)
Interim dividend for the year
ended 31 March 2021 (2020)
2021
2020
p/share
£m
p/share
£m
44.5
24.4
43.2
23.7
17.0
61.5
9.3
33.7
16.6
59.8
9.1
32.8
Amounts proposed after the year end and not recognised in the
financial statements were as follows:
Proposed final dividend for
the year ended 31 March
2021
45.9
25.2
The proposed final dividend for the year ended 31 March 2021
was not included as a liability in these financial statements.
This dividend, if approved by shareholders at the annual general
meeting to be held on 21 July 2021, will be payable on 5 August
2021 to holders of shares on the register on 2 July 2021. The
ex-dividend date will be 1 July 2021. The deadline for elections
under the dividend reinvestment plan offered by Link Group will
be the close of business on 15 July 2021.
For the purposes of section 1158 of the Corporation Tax Act 2010
and associated regulations, the dividends payable for the year
ended 31 March 2021 are the interim and final dividends for that
year, amounting to £34.5m (2020 – £33.5m).
Basic and diluted earnings per share
7. Earnings per share
The calculation of basic earnings per share of the group was based
on the profit/(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 profit/(loss) attributable to shareholders (basic and diluted)
was as follows:
Revenue
Capital
Total
2021
£m
29.8
436.2
466.0
2020
£m
34.6
(207.5)
(172.9)
The weighted average number of shares was as follows:
The Company is exempt from UK corporation tax on capital gains
as it meets the HM Revenue & Customs criteria for an investment
company set out in Section 1158 of the Corporation Tax Act 2010.
Current tax assets
Current tax assets of £7.3m in both the group and company
represented tax loss relief surrender for settlement (2020 – £2.6m
in both the group and company).
Issued shares at the year start
Effect of shares held by the employee share trust
Basic weighted average number of shares in
the year
Effect of performance shares, share options and
deferred bonus awards
Diluted weighted average number of shares in
the year
112
2021
000’s
55,374
(507)
2020
000’s
55,374
(490)
54,867
54,884
754
388
55,621
55,272
Caledonia Investments plc Annual Report 2021 Group
2021
£m
Company
2020
£m
2021
£m
2020
£m
9. Investment property
Cost
Balance at 31 March 2019
Acquisitions
Balance at 31 March 2020
Acquisitions
Balance at 31 March 2021
Revaluation
Balance at 31 March 2019
Revaluation in the year
Balance at 31 March 2020
Revaluation in the year
Balance at 31 March 2021
Carrying amounts
At 31 March 2019
At 31 March 2020
At 31 March 2021
8. Investments
Investments held at fair value
through profit or loss
Investments listed on a
recognised stock exchange
Unlisted investments
Investments held at cost
Service subsidiaries
719.4
577.6
577.6
1,474.6 1,079.1 1,479.5 1,080.5
2,194.0 1,656.7 2,198.9 1,658.1
719.4
–
0.9
2,194.0 1,656.7 2,199.8 1,659.0
0.9
–
The movements in non-current investments were as follows:
Listed
equity
£m
Unlisted
equity1
£m
Unlisted
debt
£m
Total
£m
Group
Balance at 31 March 2019
Transfer
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2020
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2021
Company
Balance at 31 March 2019
Transfer
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2020
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2021
4.9
147.8
(238.6)
(25.4)
–
688.9 1,136.6
(4.9)
235.3
(145.1)
(182.2)
4.1
577.6 1,043.8
208.0
37.9
(83.5)
(54.4)
279.4
158.3
(7.4)
–
719.4 1,440.3
4.9
147.8
(238.6)
(25.4)
–
688.9 1,141.7
(4.9)
237.7
(147.5)
(185.0)
4.1
577.6 1,046.1
208.0
37.9
(83.5)
(54.4)
282.9
158.3
(7.4)
–
719.4 1,446.1
34.5 1,860.0
–
–
383.4
0.3
(384.9)
(1.2)
(206.3)
1.3
4.5
0.4
35.3 1,656.7
246.3
0.4
(138.4)
(0.5)
437.0
(0.7)
(7.6)
(0.2)
34.3 2,194.0
34.5 1,865.1
–
–
385.8
0.3
(387.3)
(1.2)
(209.1)
1.3
0.4
4.5
35.3 1,659.0
246.3
0.4
(138.4)
(0.5)
440.5
(0.7)
(0.2)
(7.6)
34.3 2,199.8
1. Unlisted equity included limited partnership and open ended fund
investments, including a loan facility to a wholly owned investment
subsidiary investing in US PE funds. It also included £14.0m (2020 –
£21.3m) of non-pool investments.
Freehold
property
£m
13.9
2.3
16.2
3.2
19.4
(7.2)
(0.3)
(7.5)
1.4
(6.1)
6.7
8.7
13.3
At 31 March 2021, the group held one property classified as
investment property, comprising that part of its head office
building developed for lease to a third party.
The fair value of the investment property was determined by
Tuckerman, an external, independent property valuer, holding
recognised and relevant professional qualifications and with
recent experience in the location and category of the property
being valued. The valuation conforms to the Royal Institution of
Chartered Surveyors (‘RICS’) Valuation Professional Standards.
Fees paid to the valuer are based on a fixed price contract.
As the property is currently being redeveloped, it was valued
on the basis of its development potential, considering the gross
development value of the completed scheme based upon
assumptions of capital value, rental value and yields that would
be created through the implementation of the development.
Deduction is then made for anticipated costs to complete, before
arriving at a valuation. In addition, the rent per square foot used as
an input by the valuer was updated by the Group in order to reflect
more up-to-date information on ongoing rental negotiations not
available to the external valuer. This resulted in a downward
revaluation of £0.6m.
The investment property held by the group is classified as Level 3.
113
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
Market
value
£m
13.3
Property
Buckingham
Gate
Valuation
technique
Residual
development
value
Key unobservable
inputs
Construction
costs
Rent per sq ft pa
Rent-free period
Capitalisation rate
Purchaser’s costs
Range
(weighted
average)
£1.0m
£36.19–
£74.79
(£69.40)
2.0 yrs
4.5%
6.8%
An increase in the estimated construction costs of 10% would
result in a decrease in the asset valuation of £0.1m and a decrease
of 10% would result in an increase in the asset valuation of £0.1m.
An increased capitalisation rate of 0.25% would result in a
decreased asset valuation of £0.9m and a decrease of 0.25%
would result in an increased asset valuation of £0.9m. Conversely,
an increase in the estimated rent by 5% would result in an increase
in the asset valuation of £0.7m and a decrease of 5% would result
in a decrease in the asset valuation of £0.7m. The above inputs
are interdependent and partially determined by market conditions.
The impact on the valuation could be mitigated by the inter-
relationship between these inputs.
The prior year sensitivity to inputs was as follows:
Market
value
£m
8.7
Property
Buckingham
Gate
Valuation
technique
Residual
development
value
Key unobservable
inputs
Construction
costs
Rent per sq ft pa
Rent-free period
Capitalisation rate
Purchaser’s costs
Range
(weighted
average)
£4.2m
£36.25–
£72.50
(£66.55)
2.5 yrs
4.5%
6.8%
An increase in the estimated construction costs of 10% would
result in a decrease in the asset valuation of £0.4m and a decrease
of 10% would result in an increase in the asset valuation of £0.4m.
An increased capitalisation rate of 0.25% would result in a
decreased asset valuation of £0.7m and a decrease of 0.25% would
result in an increased asset valuation of £0.8m. Conversely, an
increase in the estimated rent by 5% would result in an increase
in the asset valuation of £0.6m and a decrease of 5% would result
in a decrease in the asset valuation of £0.6m. The above inputs are
interdependent and partially determined by market conditions.
The impact on the valuation could be mitigated by the inter-
relationship between these inputs.
Group
10. Property, plant and equipment
Cost
Balance at 31 March 2019
Acquisitions
Disposals
Balance at 31 March 2020
Acquisitions
Disposals
Balance at 31 March 2021
Depreciation
Balance at 31 March 2019
Depreciation charge
Eliminate depreciation
Disposals
Balance at 31 March 2020
Depreciation charge
Eliminate depreciation
Disposals
Balance at 31 March 2021
Revaluation
Balance at 31 March 2019
Revaluation in the year
Eliminate depreciation
Balance at 31 March 2020
Revaluation in the year
Eliminate depreciation
Balance at 31 March 2021
Carrying amounts
At 31 March 2019
At 31 March 2020
At 31 March 2021
Property
£m
32.1
0.2
–
32.3
0.1
–
32.4
–
(0.6)
0.6
–
–
(0.6)
0.6
–
–
(6.6)
0.3
(0.6)
(6.9)
1.8
(0.6)
(5.7)
25.5
25.4
26.7
Office
equip-
ment
£m
4.6
0.3
(0.7)
4.2
0.2
(0.1)
4.3
(1.7)
(0.6)
–
0.7
(1.6)
(0.5)
–
0.1
(2.0)
–
–
–
–
–
–
–
2.9
2.6
2.3
Total
£m
36.7
0.5
(0.7)
36.5
0.3
(0.1)
36.7
(1.7)
(1.2)
0.6
0.7
(1.6)
(1.1)
0.6
0.1
(2.0)
(6.6)
0.3
(0.6)
(6.9)
1.8
(0.6)
(5.7)
28.4
28.0
29.0
Property is measured at fair value and comprised freehold land and
buildings.
Property was revalued at 31 March 2021 by an independent valuer.
Had the property been carried under the cost model, the carrying
amount would have been £26.3m (2020 – £26.7m).
The fair value of the property was determined by Tuckerman,
an external, independent property valuer, holding recognised
and relevant professional qualifications and with recent experience
in the location and category of the property being valued.
The valuation conforms to the Royal Institution of Chartered
Surveyors (‘RICS’) Valuation Professional Standards. Fees paid
to the valuer are based on a fixed price contract.
The external valuations were prepared by considering the
aggregate of the net annual rents receivable from the property and
where relevant, associated costs. A yield which reflects the specific
risks inherent in the net cash flows is then applied to the net annual
rentals to arrive at the property valuation.
The property held by the group is classified as Level 3.
114
Caledonia Investments plc Annual Report 2021 Property
Buckingham
Gate
Market
value
£m
26.7
Valuation
technique
Rental
yield
Key unobservable
inputs
Rent per sq ft pa
Capitalisation rate
Purchaser’s costs
Range
(weighted
average)
£37.50–
£77.50
(£70.15)
4.5%
6.8%
An increased capitalisation rate of 0.25% would result in a
decreased asset valuation of £1.6m and a decrease of 0.25%
would result in an increased asset valuation of £1.7m. An increase
in the estimated rent by 5% would result in an increase in the asset
valuation of £1.4m and a decrease of 5% would result in a decrease
in the asset valuation of £1.4m. The above inputs are
interdependent and partially determined by market conditions.
The impact on the valuation could be mitigated by the inter-
relationship between these inputs.
The prior year sensitivity to inputs was as follows:
Property
Buckingham
Gate
Market
value
£m
25.4
Valuation
technique
Rental
yield
Key unobservable
inputs
Rent per sq ft pa
Capitalisation rate
Purchaser’s costs
Range
(weighted
average)
£36.25–
£72.50
(£66.22)
4.5%
6.8%
An increased capitalisation rate of 0.25% would result in a decreased
asset valuation of £1.4m and a decrease of 0.25% would result in an
increased asset valuation of £1.7m. An increase in the estimated rent
by 5% would result in an increase in the asset valuation of £1.4m and
a decrease of 5% would result in a decrease in the asset valuation
of £1.4m. The above inputs are interdependent and partially
determined by market conditions. The impact on the valuation could
be mitigated by the inter-relationship between these inputs.
Deferred tax assets and liabilities were attributable to the
11. Deferred tax
following:
Group
2021
Employee benefits
Tax losses
2020
Employee benefits
Company
2021
Tax losses
Assets
£m
Liabilities
£m
2.3
6.1
8.4
1.3
(1.4)
–
(1.4)
(0.3)
Net
£m
0.9
6.1
7.0
1.0
Assets
£m
6.1
Movement in temporary differences during the year
Group
2021
Employee benefits
2020
Employee benefits
Balance at
year start
£m
Compre-
hensive
income
£m
Other
compre-
hensive
income
£m
Balance at
year end
£m
1.0
3.6
6.7
(0.7)
(1.9)
(0.7)
7.0
1.0
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply to the period when the asset is realised or
the liability settled, based on rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax balances are calculated on all temporary differences
using a tax rate of 19% (2020 – 19%).
In the 3 March 2021 Budget it was announced that the UK tax
rate will increase to 25% from 1 April 2023. This will have a
consequential effect on the group’s future tax charge. If this rate
change had been substantively enacted at the current balance
sheet date the deferred tax asset would have increased by £2.7m.
Group and company
Unrecognised deferred tax assets
Deferred tax assets were not recognised in respect of the following
items:
Tax losses
Group
Company
2021
£m
7.9
2020
£m
12.9
2021
£m
7.6
2020
£m
11.9
A deferred tax asset was not recognised in respect of the tax losses
as, given the composition of the Company’s portfolio and the
restrictions on the utilisation of brought forward tax losses, it is
not likely that this asset will be utilised in the foreseeable future.
The unrecognised deferred tax assets do not have an expiry date.
Given the Company’s status as an investment trust company and
the intention to continue meeting the conditions required to obtain
approval, the Company has not provided for deferred tax on any
capital gains or losses arising on the revaluation or disposal of
investments held by the Company itself.
Group
12. Trade and other receivables
2021
£m
1.7
Trade receivables
Non-trade receivables and
prepayments
Other receivables
1.7
–
3.4
2020
£m
5.8
0.8
–
6.6
Company
2021
£m
1.3
0.7
35.7
37.7
2020
£m
4.5
0.1
31.8
36.4
Other receivables included short-term lending to subsidiaries,
expected to be recovered within twelve months.
We estimate expected credit losses on the Group and Company’
receivables to be under £0.1m and therefore not disclosed further
(2020: less than £0.1m).
An aged analysis of group trade receivables is disclosed below.
2021
2020
Total
£m
1.7
5.8
Within
terms
£m
0.1
0.1
0-1
month
£m
0.5
0.5
1-2
months
£m
0.9
3.0
>2
months1
£m
0.2
2.2
1. Receivables more than 2 months overdue in 2020 includes £1.2m relating
to fees and other income due from Private Capital investees temporarily
deferred due to the Covid-19 pandemic which have subsequently been
recovered.
115
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
16. Share capital
Balance at 31 March 2019,
2020 and 2021
Ordinary
shares
£m
Deferred
ordinary
shares
£m
Share
premium
£m
Total
£m
2.8
0.4
1.3
4.5
The number of fully paid shares in issue was as follows:
Balance at the year start and end
Ordinary shares
Deferred
ordinary shares
2021
000’s
55,374
2020
000’s
55,374
2021
000’s
8,000
2020
000’s
8,000
The company had outstanding performance share scheme and
deferred bonus awards (note 23).
As at 31 March 2021, the issued share capital of the company
comprised 55,373,734 ordinary shares (2020 – 55,373,734)
and 8,000,000 deferred ordinary shares (2020 – 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 subsidiaries, 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 Ltd, a wholly-owned group company.
13. Cash and cash equivalents
Bank balances
Short-term deposits
Cash and cash equivalents
Group
Company
2021
£m
0.5
13.7
14.2
2020
£m
0.7
114.0
114.7
2021
£m
1.2
13.3
14.5
2020
£m
1.0
111.6
112.6
In light of the credit ratings applicable to the Group’s cash and
cash equivalents and deposits, (see note 22 for further details),
we estimate expected credit losses on the Group and Company’s
receivables to be under £0.1m and therefore not disclosed further
(2020: less than £0.1m).
14. Trade and other payables
Trade payables
Non-trade payables and
accrued expenses
Other payables
Group
Company
2021
£m
0.1
1.7
24.6
26.4
2020
£m
0.4
1.0
28.6
30.0
2021
£m
4.4
7.1
23.4
34.9
2020
£m
–
1.2
28.8
30.0
Other payables included short-term borrowing from subsidiaries.
15. Interest-bearing loans and borrowings
Group
2021
£m
2020
£m
Company
2021
£m
2020
£m
Non-current liabilities
Unsecured bank loans
15.0
–
15.0
–
As at 31 March 2021 the group had undrawn committed facilities
totalling £235m (2020 - £250m), comprising £97.5m from ING
Group expiring in July 2022 and £137.5m from RBSI expiring in May
2025. The facilities are in place to ensure the group has sufficient
liquid funds to meet its working capital and investment
requirements, most notably drawdown notices from private equity
funds, whose exact timing can be unpredictable.
Covenants attached to the group loan facilities asses borrowing
levels against the net assets of Caledonia plc and sub-categories
of assets held therein, adjusted to take account of liquidity, asset
concentration and the markets in which they are invested. As at
31 March 2021, Caledonia plc had remaining borrowing capacity
under the covenants of £336m, considerably in excess of undrawn
facilities. Compliance with covenants is tested monthly.
During the year, the group and company utilised £65m (2020:
£10m) of an available £250m of bank revolving credit facilities.
116
Caledonia Investments plc Annual Report 2021 The group’s undiluted net asset value is based on the net assets of
17. Net asset value
the group at the year end and on the number of ordinary shares i
n issue at the year end less ordinary shares held by The Caledonia
Investments plc Employee Share Trust. The group’s diluted net
asset value assumes the calling of performance share and deferred
bonus awards.
Net
assets
£m
2,225.3
–
2,225.3
2021
Number
of shares1
000’s
54,882
754
55,636
NAV
p/share
Net
assets
£m
4055 1,787.3
(55)
–
4000 1,787.3
2020
Number
of shares1
000’s
54,839
388
55,227
NAV
p/share
3259
(23)
3236
Undiluted
Share awards
Diluted
1. Number of shares in issue at the year end is stated after the deduction of
491,716 (2020: 535,092) ordinary shares held by the Caledonia
Investments plc Employee Share Trust.
Net asset value total return is calculated in accordance with AIC
guidance, as the change in NAV from the start of the period,
assuming that dividends paid to shareholders are reinvested at NAV
at the time the shares are quoted ex-dividend.
Diluted NAV at year start
Diluted NAV at year end
Dividends payable in the year
Reinvestment adjustment2
NAVTR over the year
2021
Revenue
Non-current assets
2020
Revenue
Non-current assets
2021
p
3236
4000
62
11
4073
25.9%
2020
p
3582
3236
60
(6)
3290
-8.1%
Quoted Equity
Private Capital
Funds
Investment portfolio
Other investments
Total revenue/investments
Cash and cash equivalents
Other items
Reportable total
Total assets
Profit/(loss) before tax
2020
2021
2020
£m
£m
£m
574.0
716.1
(1.7)
611.3
826.8
(128.5)
(13.6)
450.1
637.1
(143.8) 2,180.0 1,635.4
21.3
14.0
(152.9) 2,194.0 1,656.7
114.7
14.2
0.6
52.0
(19.6)
65.4
1,823.4
(171.9) 2,273.6
2021
£m
174.0
150.0
165.9
489.9
(4.2)
485.7
0.1
(30.0)
455.8
(9.1)
Geographical segments
In presenting information on the basis of geographical segments,
segment revenue is based on the currency of primary listing for
listed securities, or country of residence for unquoted investments,
and segment assets are based on the geographical location of the
assets. Non-current assets below comprise investment property
and property, plant and equipment (notes 9-10).
UK
£m
US
£m
Other
£m
Total
£m
102.3
42.3
230.1
–
153.3
–
485.7
42.3
(161.7)
36.7
9.6
–
(0.8)
–
(152.9)
36.7
2. The reinvestment adjustment is the gain or loss resulting from reinvesting
the dividends in NAV at the ex-dividend date.
The chief operating decision maker has been identified as the
18. Operating segments
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.
The performance of operating segments is assessed on a measure
of group 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 group’s
total assets. Cash and cash equivalents and other items are not
identifiable operating segments.
‘Other investments’ comprise subsidiaries not managed as part
of the investment portfolio.
Reportable segments are identified with reference to investment
‘pools’ which are used by management to organise the asset
allocation and performance measurement of the business.
The pools are quoted equity, private companies (Private Capital)
and private equity funds (Funds), with each pool exposed to
different risks, and operated by different teams according to
distinct investment criteria and subject to different internal
performance targets.
Identity of related parties
19. Related parties
The group and company had related party relationships with its
subsidiaries (note 27) and associates (note 26) and with its key
management personnel, being its directors.
Transactions with key management personnel
Certain directors of the company and their immediate relatives had
significant influence in The Cayzer Trust Company Ltd, which held
34.8% of the voting shares of the company as at 31 March 2021
(2020 – 34.8%).
During the year, the group invoiced and received £0.1m (2019 –
£0.1m) in rent and administration fees from The Cayzer Trust
Company Ltd.
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 in the Directors’
remuneration report on page 80.
The key management personnel compensation was as follows:
Short-term employee benefits
Gains on exercise of share awards
Group
2021
£m
2.5
2.0
4.5
2020
£m
1.8
(2.2)
(0.4)
Total remuneration of directors is included in ‘Personnel expenses’
(note 2).
117
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Notes to the financial statements (continued)
Other related party transactions
Subsidiaries
Transactions between the company and its subsidiaries were as
follows:
2021
2020
Amount
of trans-
actions
£m
Balance at
year end
£m
Amount
of trans-
actions
£m
Balance at
year end
£m
21.9
1.6
–
(26.6)
0.7
(0.1)
98.0
17.9
–
3.8
4.0
–
–
–
(6.6)
–
–
–
137.1
–
35.5
(24.8)
16.3
1.2
2.1
(15.6)
3.7
–
18.8
92.3
4.4
0.1
(1.6)
–
–
–
(3.7)
–
–
–
122.7
–
31.7
(28.8)
Comprehensive income items
Dividends receivable on
equity shares
Interest receivable
Capital distributions
receivable
Management fees payable
Taxation received
Taxation paid
Financial position items
Equity subscribed
Investment loans
Capital contributions
Loans receivable
Loans payable
Associates and joint ventures
Transactions between the company and group and associates and
joint ventures were as follows:
2021
2020
Amount
of trans-
actions
£m
0.1
Balance at
year end
£m
–
Amount
of trans-
actions
£m
0.1
Balance at
year end
£m
–
0.7
–
1.1
–
Directors fees1
Dividends receivable on
equity shares
1. Transactions with subsidiary.
At the reporting date, the group and company had entered into
20. Capital commitments
unconditional commitments to limited partnerships, committed
loan facility agreements and a conditional loan and purchase
agreement, as follows:
Investments
Contracted but not called
Conditionally contracted
Group
2021
£m
Company
2020
£m
2021
£m
2020
£m
285.9
75.6
361.5
305.2
75.6
380.8
290.4
75.6
366.0
313.5
75.6
389.1
Amounts are callable within the next twelve months. The group
has conducted a going concern assessment which considered
future cash flows, the availability of liquid assets and debt facilities,
and consideration of the risks arising from the Covid-19 pandemic
over the 12 month period required. In making this assessment
a number of stress scenarios were developed. The most severe
scenario included all outstanding private equity fund commitments
being drawn. Under this severe scenario the group would have
a range of mitigating actions available to it, including usage of
banking facilities, disposal of some liquid assets and reduction
in discretionary spend which would enable it to meet all of its
liabilities and still hold significant liquid assets. For further details on
assessment of going concern and viability please refer to page 45.
The company has provided guarantees capped at £6.5m, £9.0m
21. Contingencies
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.
Management have not set out a maturity analysis in relation to
the pensions guarantees totalling £20.5m on the grounds that
management are unable to accurately allocate to the earliest
period in which the guarantee could be called due to the conditions
of this guarantee.
118
Caledonia Investments plc Annual Report 2021 Financial instruments comprise securities and other investments,
22. Financial instruments
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 term.
Risk analysis
The main types of financial risk to which the group is exposed are
market risk (which encompasses price risk, currency risk and fair
value interest rate 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 company’s
objectives, which are to outperform the RPI by 3% to 6% in the short
term and the FTSE All-Share Total Return index over rolling five year
periods. Investments are made in a range of instruments, including
listed and unlisted equities, debt and investment funds, in a range
of sectors and regions.
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. Factors affecting instruments
traded in the market could include changes in market prices
whether driven by market sentiment, information specific to
individual investments, or the movements in foreign currency
relative to the group’s functional currency of Sterling.
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
affect portfolio asset prices.
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 and fund
interests were as follows:
Increase in prices
Decrease in prices
Group
Company
2021
£m
215.9
(215.9)
2020
£m
162.1
(162.1)
2021
£m
216.6
(216.6)
2021
£m
162.3
(162.3)
The sensitivity to equity and fund investments has increased during
the year due to investment portfolio gains in the year, increasing the
portfolio value at the year end.
Currency risk
The group’s currency risk is attributable to monetary items which
are denominated in currencies other than the group’s functional
currency of Sterling. This excludes the impact of foreign currency
movements on equity instruments which carry price risk (see price
risk section above). 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 monetary
items and gains and losses thereon are reviewed regularly by the
directors and the currency risk is managed by the directors within
the overall asset allocation strategies.
The fair values of the monetary items that have foreign currency
exposure were as follows:
Investments in debt
instruments
Forward currency contracts
Cash and cash equivalents
Group
2021
£m
4.3
–
0.6
4.9
2020
£m
5.1
(7.8)
8.6
5.9
Company
2021
£m
4.3
–
0.6
4.9
2020
£m
5.1
(7.8)
8.4
5.7
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.
Sterling depreciates (weakens)
Sterling appreciates
(strengthens)
Group
Company
2021
£m
0.4
2020
£m
0.5
2021
£m
0.4
2020
£m
0.5
(0.4)
(0.4)
(0.4)
(0.4)
Group
2021
£m
Company
2020
£m
2021
£m
2020
£m
The exposure to foreign currency has decreased in the year due
to a reduction in foreign denominated cash and cash equivalents
and the closing out of all foreign currency contracts in the year.
Investments held at fair value
through profit or loss
2,159.0
1,621.3
2,164.6
1,622.7
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.
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 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 held fixed rate,
interest-bearing financial assets, with maturities of up to five years.
119
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Notes to the financial statements (continued)
The exposure to interest rate risk on financial assets and liabilities
was as follows:
Fixed rate
Interest-bearing loans to
non-consolidated subsidiaries
Floating rate
Investments in debt
instruments
Cash and cash equivalents
Group
2021
£m
Company
2020
£m
2021
£m
2020
£m
4.4
35.4
4.4
35.4
30.0
14.2
–
114.7
30.0
14.5
–
112.6
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
Group
Company
2021
£m
–
–
2020
£m
(1.3)
1.3
2021
£m
–
–
2020
£m
(1.3)
1.3
The group’s sensitivity to interest rates has reduced over the year
due to a reduction in fixed interest loans, at a relatively higher rate
of interest, than floating rate investments and lower cash balances.
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 monitored regularly.
The exposure to credit risk in financial assets was as follows:
Investments in debt
instruments
Operating and other
receivables
Cash and cash equivalents
Group
2021
£m
Company
2020
£m
2021
£m
2020
£m
34.4
35.4
34.4
35.4
3.4
14.2
52.0
6.6
114.7
156.7
37.7
14.5
86.6
36.4
112.6
184.4
The group’s credit risk is primarily attributable to its cash and cash
equivalents, trade receivables and debt investments. For an aged
analysis of trade receivables see note 12. A group analysis of credit
ratings for cash and cash equivalents is presented below. All other
financial assets are unrated.
Credit rating
AAAm1
A+ A-1
Group
2021
£m
13.7
0.5
14.2
2020
£m
114.0
0.7
114.7
1. The group holds £13.7m (2020 - £114.0m) in Low Volatility Net Asset Value
money market funds which all hold a AAAm rating from Standard & Poors
and £0.5m (2020- £0.7m) of cash in current accounts with two commercial
banks with credit ratings from Standard & Poors of A+ and A-.
Debt instruments relate to loans to investees within the Private
Capital pool totalling £34.4m (2020- £35.4m). 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 assess the credit risk relating to these instruments
as part of an overall ongoing monitoring of its debt and equity
positions in each relevant investee.
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 liquidity 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 rating agencies Moody’s and Fitch, or banks specifically
approved by the board. These credit ratings are reviewed regularly.
At the year end, the group and company had money market
liquidity funds of £13.7m and £13.3m respectively (2020 – group
£114.0m and company £111.6m).
At the year end, the group and company had £6.1m invested in the
Aberdeen Liquidity Fund (Lux) GBP, £4.2m in the GBP Liquidity Fund
Institutional Cash Series plc Institutional Sterling Liquidity fund from
BlackRock and £3.0m in the HSBC Global Liquidity Funds plc US
Dollar Liquidity Fund. In addition, the group had £0.4m invested
in the HSBC Global Liquidity Funds plc Sterling Liquidity Fund.
At the prior year end, the group and company had £15.9m and
£13.5m, respectively, invested in the HSBC Global Liquidity Funds
plc Sterling Liquidity Fund. The group and company had £25.0m
invested in each of the Aberdeen Liquidity Fund (Lux) GBP and
the Insight Liquidity Funds plc GBP Liquidity Fund. In addition,
the group and company had £20.0m invested in each of the
Goldman Sachs Sterling Liquid Reserves Fund and the Institutional
Cash Series plc Institutional Sterling Liquidity fund from BlackRock.
In addition, the group and company had $5m invested in each of
the HSBC Global Liquidity Funds plc US Dollar Liquidity Fund and
the Institutional Cash Series plc Institutional US Dollar Liquidity
fund from BlackRock.
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.
Fair value
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.
120
Caledonia Investments plc Annual Report 2021 Liquidity risk
Liquidity risk arises as a result of the possibility that the group and
company may not be able to meet its obligations as they fall due.
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, including the level of undrawn
committed bank facilities.
Bank facilities were drawn at 31 March 2021 by £15m (2020:
undrawn).
Capital management policies and procedures
The group’s capital management objectives are:
» to ensure that the group and company will be able to continue
as a going concern
» to maximise the income and capital return to the company’s
shareholders, principally through the use of equity capital,
although the group will maintain appropriate borrowing facilities,
to be used for short-term working capital or bridging finance,
currently £250m (2020 – £250m).
The group’s total capital at 31 March 2021 was £2,240.3m (2020
– £1,787.3m) and comprised equity share capital and reserves of
£2,225.3m and borrowings of £15m (2020: £nil). The group had
drawn borrowings of £15m at the year end (2020 – ungeared) and
had a further £235m (2020: £250m) of undrawn committed bank
facilities.
The board monitors and reviews the broad structure of the group’s
and company’s capital on an ongoing basis. This review includes:
» the planned level of gearing, which takes into account planned
investment activity
» the possible buy-back of equity shares for cancellation, which
takes account of the discount of the share price to net asset value
per share
» the annual dividend policy.
The group’s objectives, policies and processes for managing capital
are unchanged from the preceding year.
The parent 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 parent company has complied with these requirements, which
are unchanged since the previous year end.
Fair value hierarchy
The company measures fair values using the following fair value
hierarchy, reflecting the significance of the inputs used in making
the measurements:
Level 1
Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments.
Level 2
Inputs other than quoted prices included in Level 1 that
are observable either directly or indirectly.
Level 3
Inputs that are unobservable.
The table below analyses financial instruments held at fair value
according to level in the fair value hierarchy into which the fair
value measurement is categorised:
Investments held at fair value
Level 1
Level 2
Level 3
Group
2021
£m
Company
2020
£m
2021
£m
2020
£m
719.4
6.3
577.6
1.3
1,468.3 1,077.8
2,194.0 1,656.7
577.6
719.4
1.3
6.3
1,473.2
1,079.2
2,198.9 1,658.1
The following table shows a reconciliation from the opening
balances to the closing balances for fair value measurements in
Level 3 of the fair value hierarchy:
Group
Company
Balance at the year start
Transfer from Level 2
Transfer to Level 1
Purchases1
Disposal proceeds
Gains and losses on
investments sold in the year
Gains and losses on
investments held at the
year end1
Accrued income
Balance at the year end
2021
£m
1,077.8
–
–
208.4
(84.3)
2020
£m
2021
£m
1,092.1 1,079.2
–
–
208.4
(84.3)
7.8
(7.1)
238.2
(86.1)
2020
£m
1,091.5
7.8
–
238.2
(85.5)
(65.5)
24.0
(31.0)
23.7
339.5
(7.6)
(195.6)
4.5
1,468.3 1,077.8
308.5
(7.6)
1,473.2
(201.0)
4.5
1,079.2
1. 2021 purchases includes a £22m investment in Buzz Bingo as part of
a company voluntary arrangement re-financing, and £36m in relation
to new equity acquired in Liberation Group to support the group’s
acquisition of a portfolio of pubs and other capital accretive projects
across its estate. 2021 Losses on investments sold includes a loss of £69m
on disposal of Buzz Bingo. Caledonia chose not to participate in a
fundraising and sold its shareholding in Buzz for a nominal amount.
The following table provides information on significant
unobservable inputs used at 31 March 2021 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
121
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
The table below sets out information about significant
unobservable inputs used at the prior year end, 31 March 2020
in measuring financial instruments categorised as Level 3 in the
fair value hierarchy. The valuation techniques applied in the prior
period included one-off risk-based adjustments to reflect the very
significant uncertainty over the potential impact of Covid-19
present at the time the valuations were prepared (see section
below entitled ‘Private capital companies valuation - prior period’
for more detail). The current year valuations contained no such
adjustments. The differences in techniques used year-on-year
are reflected in the above sensitivity tables.
Description /
valuation method
Observable input
Internally developed
Private companies
Earnings – very high risk
EBITDA multiple
Covid-19 adjustment
Earnings – high risk
EBITDA multiple
Covid-19 adjustment
Earnings – medium risk
EBITDA multiple
Covid-19 adjustment
Earnings – low risk
EBITDA multiple
Covid-19 adjustment
Net assets
Covid-19 adjustment
Transaction
Covid-19 adjustment
Non-pool companies
Net assets
Externally developed
Private equity fund interests
Net assets – high risk
Covid-19 adjustment
Net assets – medium risk
Covid-19 adjustment
Net assets – low risk
Covid-19 adjustment
Net assets – cash, etc
Fair value
£m
Weighted
average
input
Input
sensit-
ivity
+/-
Change
in valu-
ation
+/- £m
41.0
230.8
122.6
89.5
105.4
22.0
611.3
29.1
29.1
207.2
95.1
95.3
39.8
437.4
1,077.8
3.3x
35.0%
8.1x
6.6%
10.3x
10.0%
10.4x
–
25%
50%
20%
40%
15%
30%
10%
20%
12.0%
20%
10.0%
20%
30.8
11.0
56.7
6.5
23.3
4.1
8.0
–
2.9
0.5
143.8
41.2%
20%
15.5
27.9%
15%
17.9%
10%
1.8
0.1
17.4
161.2
Private company assets have been disaggregated into categories
as follows: Assets in the large, earnings based category have
an Enterprise Value of >£150m, and benefit from a reasonable
number of comparative data points, as well as having sufficient
size to make their earnings reliable and predictable. The asset in
the medium, earnings based category has an Enterprise Value
of £50-£100m and has a more limited universe of comparable
businesses available. Assets in the smaller, earnings based category
have an Enterprise value of <£50m. Their smaller size results in
fewer data points due to a lack of available listed comparators,
and makes them generally more vulnerable than larger assets
to changes in economic conditions. The asset in the large, leisure
category is Liberation Group, which operates in a sector subject
to significant uncertainty as at 31 March 2021. Manager valuations
are used for assets where the net asset method is employed.
For private company assets we have chosen to sensitise and
disclose EBITDA multiple or tangible asset multiple inputs because
their derivation involves the most significant judgements when
estimating valuation, including which data sets to consider and
prioritise. Valuations also include other unobservable inputs,
including earnings and tangible assets, which are based on historic
and forecast data and are less judgmental. For each asset category,
inputs were sensitised by a percentage deemed to reflect the
relative degree of estimation uncertainty, and valuation
calculations re-performed to identify the impact.
Private equity fund assets are each held in and managed by the
same type of fund vehicle, valued using the same method of
adjusted manager valuations, and subject to broadly the same
economic risks. They are therefore subject to a similar degree of
estimation uncertainty. They have been sensitised at an aggregated
level by 5% to reflect a degree of uncertainty over managers’
valuations which form the basis of their fair value.
Fair value
£m
Unobser-
vable input
Weighted
average
input
Input
sensit-
ivity
+/-
Change
in valu-
ation
+/- £m
21.9
95.6
434.9
EBITDA
multiple
EBITDA
multiple
EBITDA
multiple
127.7 Tangible
assets
multiple
146.7 Multiple
826.8
14.0
840.8
13.3x 10.0% 42.9 /
(45.8)
13.0x 12.5% 10.2 /
(11.4)
2.4 /
(2.4)
1 17.5% 25.8 /
(27.6)
3.9x 15.0%
1
0.1x
14.7 /
(14.7)
96.0 /
(101.9)
627.5 Manager
NAV
1
1,468.3
5% 31.4 /
(31.4)
127.4 /
(133.3)
Description /
valuation method
Internally developed
Private companies
Large, earnings
Medium, earnings
Small, earnings
Large, Leisure,
tangible assets
Net assets /
manager valuation
Non-pool companies
Total internal
Externally developed
Private equity fund
Net asset value
122
Caledonia Investments plc Annual Report 2021
Private capital companies
Valuation approach
For each asset management consider a range of valuation methods
and select those which are considered most appropriate for each
asset, taking into consideration the quantity and quality of data
points available with each method. Methods include inter alia:
In arriving at valuations for the Private Capital portfolio the directors
have conducted a portfolio analysis, examining company and sector
specific vulnerabilities, the quantity and quality of data available,
as well as considering operating and financial leverage and liquidity.
They have classified the investments into five categories based on
a combination of enterprise value, valuation technique and sector
as shown below.
Indicative offers. We regularly receive indications of interest from
potential acquirers for our private capital assets either as part of
a structured sale process or in the form of a direct approach.
Where we judge it appropriate, the insight gained from such
approaches is incorporated into the data sets used in arriving at
valuations. Where there is an offer from credible buyer or buyers,
and there is an intention to advance discussions, our practice is
to consider fair values derived from an indicative enterprise value
based on offers received with an appropriate discount applied.
Discounts aim to reflect the unique uncertainty associated with
the execution of each transaction, and are normally in a range
of 5-20%.
Multiples. This method involves the application of an earnings
multiple to the maintainable earnings of the business, most
commonly earnings before interest, tax, depreciation and
amortisation (“EBITDA”) multiples, and is likely to be appropriate
for investments in established businesses with an identifiable
ongoing earnings stream. Such multiples are derived from (i)
comparable public companies based on geographic location,
industry, size, target markets and other factors that management
considers to be reasonable and (ii) reported mergers and
acquisitions transactions involving comparable companies.
EBITDA multiples ranged from 4x to 14x (2020: 5x to 12x),
weighted average 12.7x (2020: 8.4x). Earnings are obtained
from portfolio company statutory and management accounts
and forecast management accounts. Maintainable earnings
are estimated by adjusting reported and forecast earnings
for non-recurring items (for example restructuring expenses),
for significant corporate actions, and, in exceptional cases,
run-rate adjustments.
Net assets. This method is likely to be appropriate for businesses
whose value derives principally from the underlying value of its
assets rather than its ongoing earnings. A third-party valuation
may be used to derive the fair value of a particular asset or group
of assets, most commonly property assets.
Having selected an appropriate method, management then
consider a range of data relevant to each asset. The data selected
and the assumptions used are in each case examined by the
Valuation Committee and Audit Committee to ensure sufficient
challenge and reflection has been made on the decisions made
to arrive at valuations.
Due to the unusual nature of the pandemic and the continually
evolving situation, it should be noted that there is a greater than
usual degree of uncertainty in forming valuations for our Private
Capital companies as at 31 March 2021.
Investment
Deep Sea
Electronics
Category
Large, internally
developed
Liberation
Group
Seven
Investment
Stonehage
Fleming
Cobehold
Cooke
Optics
Bioagilytix
Other
investments
Large, internally
developed,
Leisure
Large, internally
developed
Large, internally
developed
Utilise external
valuation
Medium, internally
developed
Utilise external
valuation
Smaller
EV Range
£m
>150m
Valuation
technique
Earnings
Valuation
£m
193.0
>150m
>150m
Tangible
fixed
assets
Earnings
127.7
126.4
>150m
Earnings
115.5
N/A
Net assets
112.3
50-100m
Earnings
N/A
Net assets
<50m
95.6
26.2
30.1
826.8
The valuation of Private Capital companies has also been informed
by offers we have received from interested parties in the year
ended 31 March 2021.
More details on the valuation process for individual assets within
these categories is outlined below.
Large, internally developed
Deep Sea Electronics’ valuation primarily uses an earnings multiple
method with earnings based on trading over historic, current and
forecast periods. Trading market multiples were judged to be
elevated by strong share price recovery of comparable listed
businesses, whilst comparable earnings remained depressed due
to Covid-19 impacting trading performance, which was factored
into the valuation range considered.
Seven Investment Management uses an earnings multiple method
with earnings derived from trading over historic, current and
forecast periods, with recent acquisitions of Partners Wealth
Management and Find a Wealth Manager being integrated into
earnings. A particularly high quality set of comparator companies
was identified when arriving at an appropriate multiple.
Stonehage Fleming uses an earnings multiple method with earnings
derived from trading over historic, current and forecast periods.
A particularly high quality set of comparator companies was
identified. Management judged that comparable trading
multiples were inflated due to Covid-19 adversely impacting
earnings combined with recent market price increases and this
was factored into the valuation range considered.
123
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
Medium, internally developed
Cooke Optics uses an earnings multiple method with earnings
derived from trading over historic, current and forecast periods.
A multiple was arrived at after considering a basket of sector
specific transactions and sector specific multiples. Cooke Optics
is a market-leading company operating in a niche sector so
the quantity of available suitable comparable publicly quoted
comparators is low.
Large, internally developed, Leisure
Liberation Group is Private Capital’s only consumer facing business
and has therefore been placed in its own category even though
it has an enterprise value of >£150m. Given the significant volatility
and uncertainty experienced in the pub and restaurant sector in
the last year, and the continued unpredictability associated with it,
there is a greater degree of uncertainty over the fair value of this
asset than other similarly -sized assets in the Private Capital pool.
When considering the valuation of Liberation, identifying
maintainable earnings was challenging due to lower levels of
earnings in the most recent financial year due to Covid-19 trading
restrictions; comparator earnings multiples were also skewed
for the same reason. Management therefore selected an industry
specific method of using a multiple of tangible fixed assets to
arrive at a valuation, derived from a range of tangible fixed asset
multiples from comparable leisure groups.
Utilise external valuation
Cobehold’s fair value is derived from the valuation prepared by
Cobepa which reflects the net asset value of the group as at 31
December 2020, Cobehold’s year end.
BioAgilytix ‘s valuation utilises the valuation prepared by Cobepa,
the majority shareholder of BioAgilytix, as at 31 December 2020.
Other investments
Other investments comprise businesses with an enterprise value
of less than £50m whose valuations are derived internally on an
earnings multiple basis, and in one case a net assets basis where
the largest component of the value is derived from a third-party
property valuation.
Private capital companies valuation – prior period
For the comparative period 31 March 2020, private capital
investments were assigned a risk category and, where deemed
appropriate, included Covid-19 adjustments based upon that risk
category, to reflect the impact of Covid-19 on multiples and
earnings, which would not otherwise have been factored into
valuations. Valuations in the current period do not need to apply
this method due to the fact that inputs used already factor in the
impact of Covid-19 on the underlying businesses.
Non-pool companies
Non-pool companies comprise principally cash or group company
receivables held in subsidiary investment entities.
Private equity funds
Private equity fund interests are valued on a net assets basis,
estimated based on the managers’ NAVs. Manager’s NAVs apply
valuation techniques consistent with IFRS and are normally subject
to audit. Managers’ NAVs are usually published quarterly, two
to four months after the quarter end. Consequently, the fund
valuations included in these financial statements were based
principally on the 31 December 2020 managers’ NAVs, which
would be expected to include the economic impact of Covid-19.
For the comparative period 31 March 2020, private equity
fund interests were based principally upon manager NAVs as at
31 December 2019, which would not be expected to include the
economic impact of Covid-19. Consequently, fund interests were
grouped by region and sector and risk categories of high, medium
and low were assigned accordingly. The value of underlying
holdings were then reduced by a factor of 100%, 50% or zero
of the movements on an appropriate small cap index for high,
medium and low risk holdings respectively to arrive at a directors’
estimate of fair value at 31 March 2020.
124
Caledonia Investments plc Annual Report 2021 The company has a performance share scheme that entitles senior
23. Share-based payments
executives to receive options over the company’s shares, which
are exercisable subject to service and performance conditions.
For nil-cost option awards granted in 2013 and 2014, half of the
shares comprised in the awards may be exercised after three years
and half after five years. For nil-cost option awards granted in 2015
onwards, one-third of the shares comprised in the awards may be
exercised after three years and two-thirds after five years.
The company also has a deferred bonus 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.
All performance share awards have a life of ten years and all
deferred bonus awards have a life of four 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, awards 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.
The weighted average share price at the date of exercise of share
awards during the year was as follows:
The terms and conditions of the grants outstanding were as follows,
whereby all grants are settled by physical delivery of shares:
Weighted average share price
Entitlement
Grant date
Performance share scheme awards
12.06.13
27.11.14
26.06.15
26.05.16
21.07.17
30.05.18
31.05.19
04.08.20
Award grant to senior staff
Award grant to senior staff
Award grant to senior staff
Award grant to senior staff
Award grant to senior staff
Award grant to senior staff
Award grant to senior staff
Award grant to senior staff
Deferred bonus awards to senior staff
30.05.18
31.05.19
04.08.20
Compulsory award
Compulsory award
Compulsory award
Employee expenses were as follows:
Years ended 31 March
Performance share awards granted in 2015
Performance share awards granted in 2016
Performance share awards granted in 2017
Performance share awards granted in 2018
Performance share awards granted in 2019
Performance share awards granted in 2020
Performance share awards granted in 2021
Deferred bonus awards for 2017
Deferred bonus awards for 2019
Vesting
conditions
Number
of shares
Note 1
Note 2
Note 4
Note 4
Note 4
Note 4
Note 4
Note 4
Note 3
Note 3
Note 3
2,747
5,433
8,894
125,195
129,026
219,068
221,080
261,369
972,812
493
41,386
5,229
47,108
1. Three/five years of service and 50% vest if NAV total return outperforms
the FTSE All-Share Total Return over five years and/or 50% vest if NAV
total return outperforms the FTSE Actuaries UK Index-linked Gilts (all
stocks) Total Return over three years, in each case with vesting on a
straight-line basis from 10% to 100% on outperformance of 0.5% to 3.5%.
2. Three/five years of service with vesting on a graduated basis from 10% to
100% for annualised NAV total return of 3% to 10% and (for investment
executives) annualised pool total returns in a range of 4% to 15%, in each
case measured over three years for one-half of the award and five years
for the other half of the award. Investment executives’ awards are
measured as to 80% by reference to pool total returns and 20% by
reference to NAV total return, other than Mr Cayzer-Colvin’s awards,
which are 60% and 40% respectively.
3. Three years of service.
4. Three/five years of service with vesting on a graduated basis from 10% to
100% for annualised NAV total return of 3% to 10% and (for investment
executives) annualised pool total returns in a range of 4% to 15%, in each
case measured over three years for one-third of the award and five years
for the remaining two-thirds of the award. Investment executives’ awards
are measured as to 80% by reference to pool total returns and 20% by
reference to NAV total return, other than Mr Cayzer-Colvin’s awards,
which are 60% and 40% respectively.
2021
p
2620
2020
p
3061
2021
£m
–
0.1
0.7
0.8
1.5
1.3
1.3
0.2
0.4
6.3
2020
£m
0.2
(1.3)
(0.6)
(1.2)
(0.5)
0.1
–
0.5
0.4
(2.4)
125
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Notes to the financial statements (continued)
Group
24. Employee benefits
Non-current assets
Defined benefit pension asset
Current liabilities
Profit sharing bonus
Non-current liabilities
Defined benefit pension obligations
National Insurance on performance shares and
deferred bonus awards
Dividends payable on performance shares and
deferred bonus awards
Total employee liabilities
2021
£m
2020
£m
4.0
5.1
(2.6)
(0.9)
(0.3)
(3.8)
(1.5)
(0.8)
(1.1)
(2.9)
(5.5)
(0.6)
(5.2)
(6.1)
Defined benefit pension obligations
The group makes contributions to three (2020 – three) plans in the
UK that provide pension benefits for employees. The schemes are
approved by HMRC for tax purposes and operated separately
from the group being managed by an independent set of trustees,
whose appointment is determined by the schemes’ documentation
and legislation. The schemes are subject to UK funding regulations,
which require the group and the trustees to agree a funding
strategy and contribution schedule where necessary. Two (2020 –
two) of the schemes were in surplus on an IAS 19 basis, which
is recognised in full as the company considers there is an
unconditional right to a refund under IFRIC 14. Two schemes were
effectively closed to new members in April 1996 and the other
scheme in April 1997. New employees joining after that date were
offered alternative defined contribution pension arrangements.
Caledonia Group Services Ltd, a wholly owned subsidiary of
Caledonia Investments plc, is the Sponsoring Employer for
all Schemes.
Present value of funded obligations
Fair value of plan assets
Present value of net assets
2021
£m
72.4
(76.1)
(3.7)
2020
£m
67.9
(69.2)
(1.3)
Changes in the present value of defined benefit obligations were
as follows:
Balance at the year start
Service cost
Interest cost
Actuarial loss/(gain) from changes:
– in demographic assumptions
– in financial assumptions
– experience gains
Actual benefit payments
Balance at the year end
2021
£m
67.9
0.1
1.5
–
6.6
(0.6)
(3.1)
72.4
2020
£m
74.0
0.1
1.7
0.3
(2.9)
(1.5)
(3.8)
67.9
126
Changes in the fair value of plan assets were as follows:
Balance at the year start
Interest income
Return on plan assets less interest income
Employer contributions
Actual benefit payments
Balance at the year end
2021
£m
69.2
1.6
8.3
0.1
(3.1)
76.1
2020
£m
73.9
1.7
(3.0)
0.4
(3.8)
69.2
Amounts recognised in management expenses in the Statement of
comprehensive income were as follows:
Service cost
Interest on obligations
Interest on plan assets
2021
£m
0.1
1.5
(1.6)
–
2020
£m
0.1
1.7
(1.7)
0.1
Amounts recognised in other comprehensive income were
as follows:
Actuarial (losses)/gains arising from
financial assumptions
Actuarial losses arising from demographic
assumptions
Actuarial gains from experience adjustments
Return on plan assets less interest income
Re-measurement gains in the year
2021
£m
2020
£m
(6.6)
2.9
–
0.6
8.3
2.3
(0.3)
1.5
(3.0)
1.1
An analysis of plan assets at the end of the year was as follows:
Equities
Bonds
Cash
2021
£m
40.0
25.3
10.8
76.1
2020
£m
31.7
22.5
15.0
69.2
The analysis of plan assets above included an underlying asset
allocation of investment funds.
Principal actuarial assumptions at the reporting date (expressed
as weighted averages) were as follows:
Discount rate at the year end
Future salary increases
Future pension increases
RPI price inflation
2021
%
1.9
4.4
3.4
3.4
2020
%
2.3
3.0
2.9
2.9
Mortality rates are assumed to follow the Self-Administered
Pension Schemes ‘Series 2’ Light tables applicable to each
member’s year of birth, projected to calendar year 2012 in line
with the core CMI scale of improvements. Allowance has also
been made for further improvements in line with CMI core
projections with a long term trend of 1.5% pa. Life expectancy
on retirement in normal health is assumed to be 27.0 years (2020
– 26.9 years) for males and 27.5 years (2020 – 27.4 years) for
females who are currently 62 years of age.
Expected contributions to group post-employment benefit plans
for the year ending 31 March 2022 were £0.1m (2021 – £0.1m).
Caledonia Investments plc Annual Report 2021 In the UK, the funding is set on the basis of a triennial funding
valuation by the actuaries for which the assumptions may differ
from those above. IAS 19 requires ‘best estimate’ assumptions
to be used whereas the funding valuation uses ‘prudent’
assumptions. As a result of these valuations, the group and the
scheme trustees agree a Schedule of Contributions, which sets
out the required contributions from the employer and employees
for current service. Where the scheme is in deficit, the Schedule
of Contributions also includes required contributions from the
employer to eliminate the deficit. The most recent triennial
valuations were completed in 2019 and 2018. A summary of the
recent funding obligations and weighted average duration of the
defined benefit obligations was as follows:
Amber Industrial Holdings Pension Scheme
Caledonia Pension Scheme
Sterling Industries Pension Scheme
Weighted
average
duration
at 31 Mar
2021
years
14
15
Obligations
at 31 Mar
2018
£m
12.5
31.7
At 30 Sep
2019
£m
25.8
At 31 Mar
2021
years
13
Sensitivities
The calculation of the defined benefit obligation is sensitive to
the assumptions set out above. The following table summarises
the estimated increase in defined benefit obligations to a change
in individual actuarial assumptions, while holding all other
assumptions constant. This sensitivity analysis may not be
representative of the actual change in the defined benefit
obligation as it is unlikely that the change in an assumption would
occur in isolation, as some of the assumptions may be correlated.
Reduction in the discount rate of 0.25%
Increase in inflation of 0.25%
Increase in life expectancy of one year
2021
£m
2.7
1.8
3.8
2020
£m
2.4
1.4
3.1
Risks
The pension schemes typically expose the group to risks such as:
» Investment risk – the schemes hold their investments in equities
and bonds, the value of which fluctuates, whether caused by
factors specific to an individual investment, its issuer or factors
affecting all instruments traded in the market.
» Interest rate risk – the schemes’ liabilities are assessed using
market rates of interest, based on corporate bond yields,
to discount the liabilities and are therefore subject to any
volatility in the movement of the market rate of interest.
The net interest income or expense recognised in profit or
loss is calculated using the market rate of interest.
» Inflation risk – a significant proportion of the benefits under the
schemes is linked to inflation. Although the schemes’ assets are
expected to provide a good hedge against inflation over the long
term, movements over the short term would increase the
schemes’ net deficit.
» Mortality risk – in the event that members live longer than
assumed, the liabilities may turn out to have been understated
originally and a deficit may emerge if funding has not been
adequately provided for the increased life expectancy.
» Inflation risk – a significant proportion of the benefits under the
schemes is linked to inflation. Although the schemes’ assets are
expected to provide a good hedge against inflation over the long
term, movements over the short term would increase the
schemes’ net deficit.
» Mortality risk – in the event that members live longer than
assumed, the liabilities may turn out to have been understated
originally and a deficit may emerge if funding has not been
adequately provided for the increased life expectancy.
There were no post balance sheet events.
25. Post balance sheet events
Company
26. Interests in associates
Sterling Thermal Technology Holdings Ltd
Class
Ordinary
Holding % Registered office
25.0 Brunel Road, Rabans Lane Industrial Area, Aylesbury, Buckinghamshire
HP19 8TD
Sports Information Services (Holdings) Ltd
Stonehage Fleming Family & Partners Ltd
Ordinary
Preference
22.5 Unit 1/2 Whitehall Avenue, Kingston, Milton Keynes MK10 0AX
36.0 Nerine House, St George’s Place, St Peter Port,
The company is an investment trust company and, accordingly,
does not equity account for associates that are designated as
investments held at fair value through profit or loss.
Guernsey GY1 3ZG
Aggregated amounts relating to associates, extracted on a 100%
basis, were as follows:
Assets
Liabilities
Equity
Revenues
Profit
2021
£m
226.0
(124.0)
102.0
333.7
3.5
2020
£m
246.8
(101.7)
145.1
347.1
14.9
127
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
27. Subsidiaries
Class
Subsidiaries
Ordinary
Amber 2010 Ltd
Buckingham Gate Ltd2
Ordinary
Caledonia CCIL Distribution Ltd Ordinary
Holding %
100.01
100.01
100.01
Key to
Registered
office
3
3
3
Caledonia Financial Ltd
Ordinary
Caledonia Group Services Ltd2 Ordinary
Ordinary
Caledonia Ireland ICAV
Caledonia Land & Property Ltd Ordinary
Ordinary
Caledonia Treasury Ltd2
100.01
100.01
100.01
100.01
100.01
3
3
4
3
3
BioAgilytix
Caledonia Precision Blocker Inc Common
100.01
6
Bloom Engineering
Bloom Combustion (India)
Private Ltd
Bloom Combustion Products
(Shanghai) Co Ltd
Bloom Engineering (China) LLC Member
Ordinary
Ordinary
100.0
100.0
100.0
7
8
9
3
Brookshire
Brookshire Capital LLP
Cooke Optics
Chaplin Bidco Ltd
Chaplin Midco Ltd
Chaplin Topco Ltd
Cooke Americas Ltd
Cooke Brasil Serviços De
Assistência Técnica LTDA
Deep Sea Electronics
Caledonia Quint Bidco Ltd
Member
70.01
Ordinary
100.0
13
Ordinary
A Ordinary
B Ordinary
C Ordinary
A Growth
B Growth
C Growth
Ordinary
Ordinary
100.0
100.01
79.61
92.51
52.61
59.61
100.01
100.0
100.0
13
13
14
15
Ordinary
100.0
17
Caledonia Quint Midco Ltd
Caledonia Quint Topco Ltd
Deep Sea Electronics Inc
Ordinary
Ordinary
B Growth
Common
100.0
99.01
7.31
100.0
Liberation Group
A.E. Smith & Son Ltd
A.S.B.M. Ltd
A.S.B.O. Ltd
A.S.B.T. Ltd
Aurora Hotel Ltd
Bath Street Wine Cellar Ltd
Brasserie du Centre Ltd
Bucktrout & Company Ltd
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Deferred
Ordinary
Preference
Ordinary
Butcombe Brewery (EBT) Ltd
Butcombe Brewery Ltd
Ordinary
Butcombe Brewing Company Ltd Ordinary
Ordinary
Caesarea Hotel (Jersey) Ltd
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
17
17
18
20
20
20
20
20
20
20
21
22
22
22
20
Café de Paris (Jersey) Ltd
Ordinary
100.0
20
128
Company
Caledonia US Investments Ltd Ordinary
Caledonia Venus Holdings Ltd
Crewkerne Investments Ltd
Class
Easybox Self-Storage Ltd
Edinmore Investments Ltd
Sterling Crewkerne Ltd
Sterling Industries Ltd
The Union-Castle Mail
Steamship Co Ltd
Key to
Registered
office
Holding %
100.01 3
100.01 5
3
50.5
100.0
100.01 3
100.01 3
100.01 3
100.01 3
3
100.01
100.01
A Ordinary
A Ordinary
B Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
A Ordinary
Bloom Engineering (Europa)
GmbH
Bloom Engineering Co Inc
Ordinary
100.0
10
Common
100.0 11
Bloom Engineering Holdings Inc. Common
96.41 12
Brookshire Trading Ltd
Ordinary
100.0
3
Cooke (Shanghai) Optics
Technology Co Ltd
Cooke Optics Group Ltd
Cooke Optics Holdings Ltd
Ordinary A
100.0
16
Ordinary
Ordinary
100.0 13
13
100.0
Cooke Optics Ltd
Cooke Optics TV Ltd
Ordinary
Ordinary
100.0 13
100.0 13
Deep Sea Electronics India
Pte Ltd
Deep Sea Electronics Ltd
DSE Development Ltd
Ordinary
100.0 19
Ordinary
Ordinary
100.0 17
100.0 17
La Rocque Enterprises Ltd
La Rocque Inn (Jersey) Ltd
Lapwing (Trading) Ltd
Le Hocq Hotel Ltd
Les Garcons Ltd
Longueville Distributors Ltd
M Still Catering Ltd
Marais Hall Ltd
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Mary Ann Products (Jersey) Ltd Ordinary
Ordinary
Mitre Hotel (Jersey) Ltd
Ordinary
Nightbridge Ltd
Ordinary
Old Court House Hotel
(St Aubin) 1972 Ltd
Parade Hotel (Jersey) Ltd
Ordinary
100.0 20
100.0 20
100.0 20
100.0 20
100.0 21
100.0 20
100.0 22
23
100.0
100.0 20
100.0 20
100.0 20
100.0 20
100.0 20
Caledonia Investments plc Annual Report 2021
Subsidiaries
Caledonia TLG Bidco Ltd
Caledonia TLG Ltd
Class
Ordinary
Ordinary A
Ordinary B
Ordinary C
Preference
Ordinary
Ordinary
Ordinary
Key to
Registered
office
Holding %
100.0 22
100.01 20
25.31
67.21
100.01
100.0 20
100.0 21
20
100.0
100.0 20
100.0 20
100.0 20
100.0 21
100.0 20
100.0 20
Caledonia TLG Midco Ltd
Captains Holdings Ltd
Channel Wines & Spirits
(Jersey) Ltd
Ordinary
Citann Ltd
Cosy Corner (Jersey) Ltd
Ordinary
Craig Street Brewing Company Ltd Ordinary
Ordinary
Divette Holdings Ltd
Ordinary
Don Inn (Jersey) Ltd
Ordinary
Evenstar Ltd
Exeter Hotel (Jersey) Ltd
Ordinary
100.0 20
Farmers Inn Ltd
Five Oaks Hotel Ltd
Foresters Arms (Jersey) Ltd
Ordinary
Ordinary
Ordinary
100.0 20
100.0 20
100.0 20
Gimbels (Jersey) Ltd
Ordinary
100.0 20
Glo'ster Vaults Ltd
Ordinary
Great Union Hotel (Holdings) Ltd Ordinary
Ordinary
Great Western Hotel Ltd
Ordinary
Guernsey Leisure Company Ltd
Ordinary
Guppy's Holdings Ltd
Ordinary
Guppy's of Guernsey Ltd
Ordinary
Hautville Ltd
Ordinary
Horse & Hound (Jersey) Ltd
Ordinary
John Tregear Ltd
Ordinary
La Cave des Vins Ltd
100.0 20
100.0 20
100.0 20
100.0 21
100.0 21
100.0 21
100.0 21
100.0 20
100.0 20
100.0 20
Seven Investment Management
7IM Holdings Ltd
7IM Investment and Retirement
Solutions Ltd
7IM Ltd
7IM Trustees Ltd
Caledonia Thames Acquisitions
(Jersey) Ltd
Ordinary
Preference
Ordinary
24
100.0
100.0
100.0 24
Ordinary
Ordinary
Ordinary
100.0 24
100.0 24
100.0 25
Company
Peirson (1971) Ltd
Puffin NewCo Ltd
Class
Ordinary
Ordinary
Key to
Registered
office
Holding %
100.0 20
20
100.0
Red Lion Ltd
Robin Hood (Jersey) Ltd
S.L. Ltd
Ship Holdings Ltd
Square Ltd
St John's Hotel Ltd
Stag Hotel (Jersey) Ltd
Sussex Hotel Ltd
The Guernsey Brewery Co
(1920) Ltd
The Independent Brewing
Company Ltd
The Liberation Group Ltd
The Liberation Group UK Ltd
The Liberation Pub Company
(Guernsey) Ltd
The Liberation Pub Company
(Jersey) Ltd
The Post Horn Ltd
The Royal Oak Inn Trading Ltd
Trafalgar Hotel (Jersey) Ltd
Union Inn (Jersey) Ltd
Victor Hugo Ltd
Victoria (Valley) Ltd
Victoria Hotel (Jersey) Ltd
Wellington Hotel Ltd
Wests Cinemas Ltd
White Hart Ltd
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Preference
Ordinary
Ordinary
Ordinary
Ordinary
100.0 20
100.0 20
100.0 20
100.0 21
100.0 20
100.0 20
100.0 20
100.0 20
21
100.0
100.0
100.0
20
100.0 20
100.0 22
21
100.0
Ordinary
100.0
20
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100.0 20
100.0 22
100.0 20
100.0 20
100.0 20
100.0 20
100.0 20
100.0 20
100.0 20
100.0 21
100.0
25
93.01 25
100.0 26
95.0 27
95.0 24
Ordinary
Caledonia Thames Group
(Jersey) Ltd
Caledonia Thames Holdings
(Jersey) Ltd
Find a Wealth Manager Ltd
Ordinary
Partners Wealth Management LLP Member
Member
Seven Investment
Management LLP
Ordinary
1. Directly held by the company.
2.
Included in the consolidation.
3. Cayzer House, 30 Buckingham Gate, London SW1E 6NN
4. 32 Molesworth Street, Dublin 2, D02 Y512, Ireland
5.
1st Floor 7 Castle Quay, Castle Boulevard, Nottingham, Nottinghamshire,
NG7 1FW
Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801,
USA
6.
7. 410 Yusuf Building, Veer Nariman Road, Fort, Mumbai 400001, India
8. 1383 Gu Gao Road, Pudong District, Shanghai 201209, China
9.
PHS Corporate Services Inc, 1201 Market Street, Suite 1600, Wilmington,
DE 19801, USA
10. Büttgenbachstraße 14, D-40549 Düsseldorf 11, Germany
11. 5460 Horning Road, Pittsburgh, PA 15236, USA
12. 1313N. Market Street, Suite 5100, Wilmington, Delaware 19801, New
Castle County, USA
13. 1 Cooke Close, Thurmaston, Leicester LE4 8PT
14. 264 Morris Avenue, Mountain Lakes, NJ 07046, USA
15. Rua Cardeal Arcoverde, n.17.495, 6o andar, cj.67, Pinheiros, CEP 05.
407-002 Sao Paolo, Brazil
16. Rooms 503/504, No 1 Building, No 908 Xiuwen Road, Minhang District,
Shanghai, China
17. Highfield House, Hunmanby Industrial Est, Hunmanby YO14 0PH
18. 3230 Williams Avenue, Rockford, IL 61101, USA
19. 405/406 Pride Gateway, Baner Rune 411045, Maharastra, India
20. 19 Royal Square, St Helier, Jersey JE2 4WA
21. Hougue Jehannet, Vale, Guernsey GY3 5UF
22. Butcombe Brewery, Cox’s Green, Wrington, Bristol BS40 5PA
23. Marais Hall, Marais Square, St Anne, Alderney GY9 3TS
24. 55 Bishopsgate, London EC2N 3AS
25. 44 Esplanade, St Helier, Jersey JE4 9WG
26. Sterling House Fulbourne Road, Walthamstow, London, E17 4EE
27. 15 Bowling Green Lane, London, EC1R 0BD
129
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
The ten year record of the company’s financial performance is as follows:
Company performance record
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Profit/
(loss) for
the year
£m
(93.2)
206.8
183.1
207.7
41.1
290.1
26.5
198.2
(172.5)
467.6
Diluted
earnings
per share
p
(161.8)
361.9
327.4
371.1
73.1
518.4
47.4
354.7
(315.0)
837.8
Annual
dividend
p
42.9
47.2
49.1
50.6
52.6
54.8
57.0
59.3
61.1
62.9
Net
assets
£m
1,134
1,299
1,446
1,627
1,644
1,899
1,837
2,002
1,787
2,225
Diluted
NAV per
share
p
1977
2299
2593
2906
2890
3395
3285
3582
3236
4000
Rolling ten years annualised
FTSE
All-Share
Total Return
%
5.2
10.7
8.6
7.7
4.7
5.7
6.7
11.1
4.4
6.0
Total share-
holder return
%
8.2
13.6
8.9
7.5
3.8
5.2
5.3
11.6
6.7
7.1
Share
price
p
1486
1840
1923
2281
2285
2750
2650
2980
2435
2645
1. Profits, earnings and net assets from 2014 were from the group results, prepared in accordance with IASB Investment Entities amendments to IFRS 10
Consolidated Financial Statements. Pre-2014, they were from the company results.
2. Annual dividends are stated in relation to the year’s results from which they were paid. Dividends for 2017 exclude the special dividend of 100.0p.
Glossary of terms and alternative
performance measures
APMs are not prescribed by accounting standards but are industry
Alternative performance measure (‘APM’)
specific performance measures which help users of the annual
accounts and financial statements to better interpret and
understand performance.
Terms in this glossary identified as APMs
have been highlighted by the symbol:
APM
Ordinary shares are quoted on the stock market and can trade at
Discount
a discount to the NAV of the company. The following discount
applied to the shares:
Dividend cover is the ratio of net revenue (as defined below) to the
Dividend cover
annual dividend payable to shareholders out of profits for the year.
It helps to indicate the sustainability of annual dividends.
Net revenue (b)
Dividend payable (a)
Dividend cover ((b)/a)
(expressed as a percentage)
31 Mar 2021
£m
29.8
34.5
31 Mar 2020
£m
34.6
33.5
86%
103%
Share price (b)
NAV (a)
Discount ((a-b)/a)
(expressed as a percentage)
31 Mar 2021
£m
2645p
4000p
31 Mar 2020
£m
2435p
3236p
The date immediately preceding the record date (as described
Ex-dividend date
below) for a given dividend. Shareholders who acquire their shares
on or after the ex-dividend date will not be eligible to receive the
relevant dividend.
33.9%
24.8%
APM
Distributable profits include profits distributable under the
Distributable profits
Companies Act 2006 and include distributable reserves, being
realised revenue and capital profits, less any unrealised losses
in excess of unrealised profits.
Retained earnings
Distributable capital gains and losses
31 Mar 2021
£m
243.8
1,744.9
1,988.7
31 Mar 2020
£m
246.9
1,527.9
1,774.8
Investment and pool returns
The company uses the modified Dietz method as a measure of the
performance of an investment or investment pool over a period.
This method divides the gain or loss in value plus any income,
less any capital cash flows, by the average capital invested over
the period of measurement. Average capital takes into account
the timing of individual cash flows.
Net assets provides a measure of the value of the company
Net assets
to shareholders and is taken from the IFRS group net assets.
130
Caledonia Investments plc Annual Report 2021 NAV is a measure of the value of the company, being its assets –
Net asset value (‘NAV’)
principally investments made in other companies and cash held –
minus any liabilities. NAV per share is calculated by dividing net
assets by the number of shares in issue, adjusted for shares held
by the company’s Employee Share Trust and for dilution by the
exercise of vested share awards. NAV takes account of dividends
payable on the ex-dividend date.
See financial statements note 17.
APM
NAV total return (‘NAVTR’)
NAVTR is a measure of how the NAV per share has performed over
a period, considering both capital returns and dividends paid to
shareholders. NAVTR is calculated as the increase in NAV per share
between the beginning and end of the period, plus accretion from
the assumed dividend reinvestment in the period. We use this
measure as it enables comparisons to be drawn against an
investment index in order to benchmark performance. The result
is plotted on page 13 and the calculation follows the method
prescribed by the Association of Investment Companies (‘AIC’).
See financial statements note 17.
Closing NAV per share (p)
Dividends paid out (p)
Effect of re-investing dividends (p)
Adjusted NAV per share (p)
Opening NAV per share (p)
NAV total return (%)
31 Mar
2021
4000p
62p
11p
4073p
3236p
25.9%
31 Mar
2020
3236p
60p
-6p
3290p
3582p
-8.1%
a
b
c
d=a+b+c
e
=(d/e)-1
Net revenue comprises income from investments less
Net revenue
management expenses, financing costs and tax. Net revenue
comprises the revenue column presented in the Group statement
of comprehensive income on page 102 and differs from total
comprehensive income in excluding gains and losses on
investments and other items of a capital nature. The separation
of revenue and capital profits and losses is required by the AIC
SORP as of fundamental importance to shareholders and other
users of the financial statements of investment trust companies.
APM
Ongoing charges
The total of investment management fees and other expenses as
shown in the income statement, as a percentage of the average
monthly net asset value, following the guidance provided by the
Association of Investment Companies
Expense items included in the ongoing charges calculation
comprise recurring costs relating to the operation of the company.
Ongoing charges exclude transaction costs, external performance
fees and share-based payment expenses, which are directly linked
to investment performance, and re-measurement of defined
benefit pension schemes, also linked to market movements.
Share-based payments comprise awards under the company’s
performance share scheme, which vest subject to achieving NAVTR
targets, as well as service requirements, plus deferred bonus
awards which arise from annual bonus awards over 50% of basic
salary, which also relate to the company’s investment performance.
Management expenses (a)
Annualised average net assets (b)
Ongoing charges (a) / (b)
(expressed as a percentage)
Annualised average net assets -
31 Mar 2021 £m
1826.8
Apr-20
1870.4
May-20
1862.0
Jun-20
1837.5
Jul-20
1834.4
Aug-20
1959.6
Sep-20
1947.9
Oct-20
1978.3
Nov-20
1983.2
Dec-20
1970.2
Jan-21
1919.5
Feb-21
2225.3
Mar-21
1934.6
Average
31 Mar 2021
£m
18.9
1934.6
31 Mar 2020
£m
17.2
2033.3
0.98%
0.85%
Annualised average net assets -
31 Mar 2020 £m
2023.5
Apr-19
2045.3
May-19
2046.2
Jun-19
2073.2
Jul-19
2067.7
Aug-19
2076.5
Sep-19
2042.3
Oct-19
2069.1
Nov-19
2062.9
Dec-19
2071.3
Jan-20
2034.5
Feb-20
1787.3
Mar-20
2033.3
Average
The cut-off date on which a shareholder needs to be beneficially
Record date
entitled to a share on the company’s share register in order to
qualify for a forthcoming dividend.
TSR measures the return to shareholders through the movement in
Total Shareholder Return (‘TSR’)
the share price and dividends paid during the measurement period.
131
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction The company’s ordinary shares are premium listed on the London
Share price information
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 ISIN for Caledonia’s ordinary shares is GB0001639920.
The company releases a net asset value announcement and
Monthly net asset value
publishes a factsheet shortly after each month end. These can
be found on the company’s website at www.caledonia.com.
Investment and pension scams are often sophisticated and difficult
Boiler room and other scams
to spot. Shareholders are advised to be wary of any unexpected
offers received by email, post or telephone and to check the
Financial Conduct Authority’s Warning List if any unsolicited
communication is received. Visit www.fca.org.uk/scamsmart
for more information.
Information for investors
Our Registrar is:
Registrar
Link Group (‘Link’)
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Shareholder enquiries: (open 9.00am to 5.30pm)
0371 664 0300 or +44 371 644 0300 if calling from overseas
Share dealing service: (open 8.00am to 4.30pm)
0371 664 0445 or +44 371 664 0445 if calling from overseas
Dividend reinvestment plan: (open 9.00am to 5.30pm)
0371 664 0381 or +44 371 664 0381 if calling from overseas
(UK calls cost 12p per minute plus your phone company’s access
charge. Calls from outside the UK will be charged at the applicable
international rate. Lines are open Monday to Friday, excluding UK
public holidays.)
Link also provides an online service, Signal Shares, through which
you can view your shareholding details, transaction and dividend
histories, change your address, bank mandate and electronic
communication preference and use the online proxy voting service.
Signal Shares is available at www.signalshares.com.
Final dividend ex-dividend date
Financial calendar
Final dividend record date
Annual General Meeting
Final dividend payment date
Half-year results announcement
1 July 2021
2 July 2021
21 July 2021
5 August 2021
November 2021
Anticipated interim dividend payment date
January 2022
2022 annual results announcement
2022 annual report publication
May 2022
June 2022
You may elect to receive communications from the company
Electronic communications
electronically via its website as an alternative to receiving
hard copy accounts and circulars. If you would like to change
your communication preference, you may do so at
www.signalshares. com or by writing to Link at FREEPOST SAS,
Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds,
LS1 4DL (if you are a UK based shareholder) or to SAS, Link Group,
10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL
(if you are based overseas). No stamp is required for letters from
UK shareholders.
132
Caledonia Investments plc Annual Report 2021 Directors and advisers
David C Stewart2,3
Chairman
William P Wyatt (Chief Executive)2
Executive directors
Timothy J Livett (Chief Financial Officer)
Jamie M B Cayzer-Colvin
Stuart J Bridges1,2,4
Non-executive directors
The Hon Charles W Cayzer2
Guy B Davison1,2,4
Claire L Fitzalan Howard2,3
Shonaid C R Jemmett-Page1,2,3,4
1. Member of the Audit Committee
2. Member of the Nomination Committee
3. Member of the Remuneration Committee
4. Member of the Governance Committee
Richard Webster
Secretary
Cayzer House
Registered office
30 Buckingham Gate
London SW1E 6NN
KPMG LLP
Auditor
15 Canada Square
Canary Wharf
London E14 5GL
Link Group
Registrar
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
J.P. Morgan Cazenove
Brokers
25 Bank Street
Canary Wharf
London E14 5JP
Winterflood Securities Ltd
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
Registered in England no 235481
Registered number
Freshfields Bruckhaus Deringer LLP
Solicitors
100 Bishopsgate
London EC2P 2SR
ShareGift We support ShareGift, the charity share donation scheme (registered charity number 1052686). Through ShareGift, shareholders who have only
a small number of shares, which might be considered uneconomic to sell, are able to donate them to charity. Donated shares are aggregated and sold by
ShareGift, the proceeds being passed on to a wide range of UK charities. See sharegift.org or call +44 20 7930 3737 for further details.
This report is printed on paper certified in accordance with the FSC® (Forest Stewardship Council®) and is recyclable and acid-free.
Pureprint Ltd is FSC certified and ISO 14001 certified showing that it is committed to all round excellence and improving environmental
performance is an important part of this strategy. Pureprint Ltd aims to reduce at source the effect its operations have on the environment
and is committed to continual improvement, prevention of pollution and compliance with any legislation or industry standards.
Designed and produced by www.designmotive.co.uk
Caledonia Investments plc
Cayzer House
30 Buckingham Gate
London SW1E 6NN
tel
+44 20 7802 8080
email enquiries@caledonia.com
web www.caledonia.com