C
a
l
e
d
o
n
i
a
I
n
v
e
s
t
m
e
n
t
s
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Annual Report 2022
Year ended 31 March 2022
Introduction
Welcome to Caledonia
Group overview
Performance highlights
Chairman’s statement
Chief Executive’s report
1
2
3
4
6
10 Our business model
14 Section 172 statement
18 Business review
20
Investment review
24 Quoted Equity
28 Private Capital
32 Funds
36 Financial review
40 Valuation methodology
42 Risk management
46 Going concern and viability
48 Sustainability
60 Directors' report
62 Board of directors
64 Corporate governance report
68 Nomination Committee report
70 Audit Committee report
73 Governance Committee report
74 Directors’ remuneration report
91 Other governance matters
95 Responsibility statements
Financial statements
Independent auditor’s report
96
98
104 Financial statements
108 Significant accounting policies
113 Notes to the financial statements
132 Other information
132 Company performance record
132 Glossary of terms and alternative performance measures
134
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 £2.8bn.
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 55 years
of increasing annual dividends.
NAV total return growth since 1987
2,400
Caledonia NAV TR
FTSE All-Share TR
1997
2002
2007
2012
2017
2022
2,000
1,600
1,200
800
400
0
1987
Find out more
www.caledonia.com
Sources: Caledonia Investments
plc and FTSE International Limited
(‘FTSE’) © FTSE 2022. ‘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 £2.8bn. 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 2022.
we have global reach.
Group NAV
(31 March 2021 £2,225m)
£2,783m
Quoted Equity
Private Capital
Funds
Other
£830m
£782m
£794m
£377m
Top 10 investments
1 Seven Investment Management
2 Cobehold
3 Stonehage Fleming
4 Liberation Group
5 Cooke Optics
6 Aberdeen US PE funds
7 Axiom Asia funds
8 Microsoft
9 Watsco
10 Oracle
Quoted Equity
Further detail
Private Capital
Further detail
Funds
Further detail
Turn to page 24
Turn to page 28
Turn to page 32
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 £50m
to £125m provides a meaningful
Target 14% total return
presence and growth capital.
and 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 and income
Capital portfolio:
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
on cost
2
Caledonia Investments plc Annual Report 2022
For the year ended 31 March 2022
Performance highlights
» Net asset value per share total return of 27.9%
» Annual dividend per share up 3% to 64.8p
» 55th consecutive year of annual dividend increases
» Special dividend per share of 175p
Results summary
31 March
2022
31 March
2021
Change
%
NAV total return1
NAV per share
Net assets
Annual dividend per share
Special dividend per share
27.9%
5041p
25.9%
4000p
£2,783m
£2,225m
64.8p
175.0p
62.9p
–
26.0
25.1
3.0
1. Alternative performance measure - see page 132 for details.
APM
Performance summary
1 year
%
3 years
%
5 years
%
10 years
%
NAV total return1
Annualised:
NAV total return1
Total shareholder return
FTSE All-Share total return
27.9
47.8
66.2
215.1
27.9
36.5
13.0
13.9
10.7
8.1
5.3
8.1
4.7
12.2
11.9
7.2
1. Alternative performance measure - see page 132 for details.
APM
1
Pools – annualised returns
Value
£m
1 year
return %
3 years
return %
5 years
return %
Quoted Equity
Private Capital
Funds
Cash and other
Net assets
14.1
54.7
38.3
14.0
16.1
21.9
11.0
12.8
17.6
830
782
794
377
2,783
27.9
13.9
10.7
1. Investment and pool returns are an alternative performance measure
APM
- see page 132 for details.
3
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Chairman’s statement
David Stewart
Chairman
Caledonia’s long-term approach
to investment has produced strong
returns from each part of the
portfolio this year. These results
provide good capital growth
and support our progressive
dividend approach.
The NAV total return for the year ended 31 March 2022
Results
was 27.9%. The performance included positive returns
from all parts of our portfolio. Returns from our private
assets were particularly strong; Private Capital delivered
two successful portfolio company exits, plus healthy
returns from the remaining investee companies; the
Funds portfolio benefitted from strong valuation growth in
private equity markets and favourable exits in its portfolio.
Our balance sheet remains strong with total liquidity of
£591m available at 31 March 2022, reflecting our banking
facilities and £341m of cash.
Investment income (revenue account) grew 14% to
Income and dividend
£51.0m and net income was £39.3m. It is worth noting
that we expect investment income to reduce gradually in
the coming years. While it remains a relatively low-income
environment, our focus will be on total returns rather
than pure income from our portfolio. The board is
recommending a final dividend of 47.3p per share, which
represents a full year dividend of 64.8p, an increase of
3.0% when compared to the previous year. This would
represent the 55th consecutive year of increases in our
annual dividend.
The company has recommended special dividends in the
Special dividend
past where either cash levels are high or there has been
a significant disposal. Following the disposals of Deep Sea
Electronics and BioAgilytix during the year, the board is
recommending a special dividend of 175p per share at a
cost of £95m. This provides a considerable enhancement
to the long-term yield that Caledonia has delivered to
shareholders which, on a ten year basis, is over 3%.
4
Caledonia Investments plc Annual Report 2022 Caledonia’s medium and long-term NAV total return
Outlook
performance remains ahead of target and of relevant
markets. However, following an improved short-term
outlook as economies emerged from the worst effects
of the pandemic, new challenges have appeared. Russia’s
invasion of Ukraine has significantly increased geopolitical
risks and has exacerbated inflationary pressures. Interest
rates are moving to levels not seen for many years and
there are justifiable concerns that central banks remain
somewhat behind the curve.
We anticipate significantly higher levels of volatility as
markets adapt to interest rate increases and support from
central banks is reduced as quantitative easing policies are
unwound. However, the portfolio is well diversified and
we remain confident that the long-term prospects for
the underlying investments remain strong.
David Stewart
Chairman
As previously announced, Will Wyatt retires as Chief
Board and staff
Executive at the company’s annual general meeting in
July 2022. On behalf of the board, I would like to thank
Will for his outstanding service to Caledonia over the past
twelve years. Under his leadership, Caledonia’s strategy
has successfully evolved whilst the ethos, culture and
values of the business have been carefully nurtured.
In financial terms, NAV has grown strongly with an
annualised NAV total return of 12.2%, significantly
outperforming the annualised FTSE All-Share total return
of 7.2% over this period. Subject to shareholder approval
I am delighted that he will continue to serve on the board
as a non-executive director enabling us to continue to
benefit from his experience.
Will is to be succeeded by Mathew Masters, currently
Head of Caledonia Quoted Equity, who was appointed to
the board as Chief Executive Officer Designate on 1 April
2022. Mathew joined Caledonia from Grant Thornton in
2006, initially as an investment executive. He became
Head of the Capital portfolio in 2010, before taking on
broader responsibility for the Income strategy in 2019
when he was promoted to Head of Quoted Equity. I would
also like to welcome Mathew to the board in his role as
CEO. The board and I look forward to working with him in
the years ahead as he builds on his impressive track record
from leading the Quoted Equity portfolio and develops
Caledonia’s investment strategy.
During the year, Caledonia welcomed Lynn Fordham and
Anne Farlow as independent non-executive directors.
Anne will succeed Shonaid Jemmett-Page as Chairman
of the Remuneration Committee in June 2022 and Lynn
will succeed Stuart Bridges as Chairman of the Audit
Committee in July 2022. Shonaid Jemmett-Page has
decided to step down from the board as an independent
non-executive director before the expiry of her third term
in office in 2024. We are most grateful for her input and
wish her well for the future. As part of our succession
planning activities, a search for Shonaid’s successor was
scheduled to commence next year once Lynn, Anne and
Mathew have each had the opportunity to settle into their
new roles in the board. This activity will instead commence
shortly. The board has therefore asked Stuart to delay
his planned retirement from the board for up to one
year whilst we recruit a replacement for Shonaid.
The AGM is an important part of our shareholder
AGM
communications programme and we look forward
to holding a physical meeting later in the year.
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 59
comprise the Strategic report of the company. The Strategic report
was approved by the board on 25 May 2022 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 NAV total return for the year of 27.9% built on the
Results for the year
previous year’s outturn of 25.9%, once again with all three
parts of the portfolio producing strong positive returns.
Strength in western stock markets was a helpful backdrop
to the year. Caledonia’s large allocation to private equity
assets, which have witnessed high levels of liquidity
and pricing uplifts, particularly in growth companies,
has also been beneficial, though asset and manager
selection remains critical to success. Shareholders should
be reassured by the current high levels of cash. While
bond and equity markets look vulnerable to falls, cash
provides an appropriate cushion to market reversals and
optionality when opportunities arise, despite the high
level of inflation.
Caledonia has particularly low stock turnover relative to
other investment companies, though we do operate an
active approach to portfolio management. New or
follow-on investments of £216.8m were made during the
year, £110.5m of which was invested in the Funds pool.
Divestments totalled £588.7m, dominated by the disposals
of Deep Sea Electronics (‘DSE’) and BioAgilytix by the
Private Capital pool. It was particularly pleasing to witness
the increasing maturity of the Funds pool which benefitted
from elevated levels of fund distributions, receiving
£178.0m during the year.
Investment income was £51.0m, an increase of 14.3% over
the previous year. Net income for the year was £39.3m,
up 31.8% which was flattered by the one-off recognition of
£8.5m of historic tax losses. Total comprehensive income,
which includes changes in the valuation of investments
during the year, totalled £611.3m (2021: £467.6m). The
group balance sheet NAV of £2.78bn is at an all time high.
Maintenance of a strong balance sheet is central to our
strategy, particularly with Caledonia’s sizeable exposure
to illiquid assets. Currency also moved favourably during
the year, positively impacting capital gains on investments
and thus the annual return by £59m, or around
3 percentage points.
Total liquidity remains healthy with cash of £341m plus
undrawn bank facilities of £250m at the year end.
Caledonia’s £250m banking facilities include £137.5m
expiring in May 2025, with the balance of £112.5m
expiring in July 2022. Discussions are well advanced with
ING to renew the latter facility for a further three years.
Will Wyatt
Chief Executive
Our strategy of investing in a
diversified portfolio of high-quality
holdings in listed equities, directly
owned private companies and funds
has generated significant value over
the last year and makes us well placed
to respond to the challenges posed
by inflation, supply constraints and
potentially lower GDP growth. We
remain confident that our approach
and high-quality portfolio will
continue to deliver our aims of
growing net assets and dividends
over the long term.
6
Caledonia Investments plc Annual Report 2022
The company made a series of share buy-backs
throughout the year, with over 710,000 shares being
purchased and cancelled for £24m at attractive levels
of discount to NAV.
We aim to grow NAVTR by 3-6% ahead of inflation over
Investment performance
the short term, leading to results over the long term that
exceed the FTSE All-Share index. However, management
and the investment teams are incentivised 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. Results
continue to be ahead of both short-term and long-term
targets. The decision to increase exposure to non-UK
assets over the past decade has resulted in Caledonia
significantly outperforming the FTSE All-Share index,
which, whilst not used as a benchmark, provides a
useful reference point for UK-based investors.
Years to 31 March
NAVTR APM
FTSE All-Share
NAVTR v FTSE All-Share TR
Annualised performance
NAVTR APM
RPI
NAVTR v RPI
FTSE All-Share TR
NAVTR v FTSE All-Share TR
1 year
%
27.9
13.0
+14.9
27.9
9.0
+18.9
13.0
+14.9
3 years
%
47.8
16.8
+31.0
5 years
%
66.2
25.8
+40.4
10 years
%
215.1
99.5
+115.6
13.9
4.3
+9.6
5.3
+8.6
10.7
3.7
+7.0
4.7
+6.0
12.2
3.0
+9.2
7.2
+5.0
APM
Alternative performance measure – further information on page 132.
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
2022
%
29.8
28.1
28.6
13.5
100.0
2021
%
32.2
37.2
28.6
2.0
100.0
Strategic
allocation
%
35-50
35-45
20-30
+/-10
The strategic allocation ranges shown in the table above
are a guide to ensure that the portfolio remains
proportionately balanced. The two large exits from the
Private Capital pool have resulted in its allocation being
below its target range. Quoted Equity is below target due
to the rapid valuation growth of other asset pools in the
year. New investments are individually made on merit,
not simply to address short-term allocation imbalances.
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
£50m 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
35-50%
35-45%
12.5% total return
20-30%
1 year
%
Pool performance - NAVTR
Years to 31 March
Pool name
Quoted Equity
Capital portfolio
Income portfolio
Private Capital
Funds
Portfolio
14.1
14.6
13.7
54.7
38.3
29.9
3 years
%
5 years
%
10 years
%
48.2
57.8
28.5
56.3
81.2
55.5
68.6
97.9
19.5
82.7
125.0
82.7
189.3
244.9
92.1
319.8
412.8
271.0
Caledonia Quoted Equity
The total return for the Quoted Equity pool was 14.1%
over the year. This strong performance reflected the
positive movement in global public equity markets and
our stock selection within both the Capital and Income
portfolios, delivering total returns of 14.6% and 13.7%
respectively. Performance was driven by good returns
from a broad range of sectors and across markets in the
UK, Continental Europe and North America. Six holdings
- Microsoft, Thermo Fisher, National Grid, Diageo, London
Metric and Big Yellow - delivered returns of over 30%
during the year.
Trading activity was relatively limited in the first half of
the year, in line with our long-term investment approach.
However, the more volatile market backdrop arising
during the second half of the year created some buying
opportunities, though portfolio performance was pared
back. Positions in Alibaba, the prominent Chinese
e-commerce and cloud-computing company, and in
Moody’s, a leading global provider of credit ratings,
financial data and analytics, have been added to the
Capital portfolio. Over the year there has been an increase
in our holding in Philip Morris International and a reduction
in our holdings in AG Barr and Polar Capital. Other activity
was restricted to refining positions in existing investments.
7
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Chief Executive’s report (continued)
Caledonia Private Capital
Caledonia’s Private Capital portfolio is dominated by
significant positions in four UK-centric businesses, one
US co-investment and one private European investment
company. These six investments represent over 95% of
the portfolio value. Investee companies are revalued in
March and September each year. The portfolio generated
a total return of 54.7% for the year.
On 1 June 2021, Caledonia announced that portfolio
company DSE, a leading provider of backup power control
systems, had been acquired by Generac Holdings Inc.
(‘Generac’). Generac is a leading global designer and
manufacturer of energy technology solutions and other
power products. DSE had grown strongly since its
acquisition by Caledonia in October 2018. Caledonia
received net proceeds of £242m in cash, net of fees,
for the sale of its 84.2% fully diluted stake. This included
a pre-disposal dividend of £12.6m. DSE was valued at
£193m in Caledonia’s accounts at 31 March 2021.
On 17 November 2021, Caledonia announced that the
shareholders of portfolio company BioAgilytix, a leading
provider of bioanalytical testing for large molecule
research and development, had agreed terms of a majority
investment in the company by international private equity
firm Cinven. Caledonia co-invested in BioAgilytix in
February 2019 alongside Cobepa. Since then, the business
had grown strongly via a mix of impressive organic growth
and acquisitions in the US and Australia, expanding its
geographic reach and capabilities. The transaction
completed on 22 December 2021 delivering gross
proceeds of US$183m, net of fees. The BioAgilytix
co-investment was valued at US$36m in Caledonia’s
accounts at 31 March 2021. The sizeable valuation uplift
reflected the strong growth in the business, good levels
of profitability and the attractiveness of the sector.
Caledonia agreed to re-invest US$42m alongside
Cinven and a consortium of investors including Cobepa,
for a minority investment in BioAgilytix. This holding
in BioAgilytix was valued at cost of US$42m (£32m)
at 31 March 2022, reflecting the recent closing of
the transaction.
Seven Investment Management (‘7IM’), a vertically
integrated multi-asset class investment manager, continues
to perform well. The successful integration of the Partners
Wealth Management business has been a major
contributor to performance, alongside growth in 7IM’s
platform business. Assets under management continue
to grow strongly through a mix of positive investment
performance and net new fund inflows of c.£1.6bn during
the year. The valuation at 31 March 2022 was £174m,
a return of 41% for the year.
8
Cobepa, the Belgian-based investment company,
owns a diverse portfolio of private global investments.
The businesses within its portfolio have delivered healthy
performances which, coupled with two notable exits,
has resulted in a significant valuation increase for the year.
As noted above, Cobepa was the majority owner of
BioAgilytix, which was sold to Cinven, and it has also
recently completed the disposal of its largest asset,
Hillebrand, to Deutsche Post DHL Group at an equity
value of €1.5bn. The impact of these transactions is
largely included in the valuation of Caledonia’s holding in
Cobehold (the holding company of Cobepa) which was
£159m at 31 March 2022, a return of 44% for the year.
Stonehage Fleming, the international multi-family office,
continues to deliver good growth, both organically and
through successful acquisitions. In summer 2020, the
business acquired Cavendish Asset Management which
has now been fully integrated, and in January 2022
completed the acquisition of the private client business of
the Maitland Group, a global advisory, administration and
family office firm. The Maitland private client business is
highly complementary to Stonehage Fleming’s existing
operations. The acquisition was funded from existing cash
resources and additional term debt. The valuation at
31 March 2022 was £140m, a return of 25% for the year.
Liberation Group, a pub, restaurant and drinks business
with operations in the Channel Islands and the South West
of the UK has traded well through the year, despite the
adverse impact of the Omicron variant of Covid-19 during
the busy December to early January trading period.
The business has proved to be financially robust with an
estate focused on destination pubs, a strong food offering,
large outdoor spaces and, in several sites, good quality
accommodation. Summer trading saw better than
expected levels of demand return as consumers
responded to a relaxation of Coronavirus restrictions,
supported by the popularity of UK-based holidays.
The pubs recently acquired from Wadworth & Co. are
performing well following a programme of investment.
The valuation at 31 March 2022 was £136m, a return
of 6% for the year.
Cooke Optics, a leading manufacturer of cinematography
lenses, has also traded well over the last twelve months.
The business has faced a number of challenges over the
past two years but is now delivering improved financial
performance. The recently launched range of full frame
cine lenses has been positively received by the market with
a healthy initial order book. The market is strong as global
demand for both streaming and cinema content remains
elevated. The valuation at 31 March 2022 was £118m,
including £30m of term debt, an equity return of 34%
for the year.
Caledonia Investments plc Annual Report 2022 Caledonia Funds
The total return for the Funds portfolio was 38.3% for the
year. This reflects strong underlying fund performance,
including an increased level of distributions, from across
our maturing portfolio. Caledonia’s valuation policy is to
utilise the latest valuations reported by the managers of
the funds in which we invest, adjusted for any cash
movements to our reporting date. 20% of NAV is based
on valuations dated 31 March 2022 and 71% dated
31 December 2021, both primarily the directly owned
funds. The remainder, mostly fund of funds holdings, are
dated 30 September 2021. Further details of the process
by which we assess the reasonableness of these valuations
can be found in the Financial review and Valuation
methodology sections which follow.
Caledonia Funds’ investments are principally in third
party managed private equity funds operating in North
America and Asia. The level of return during the year has
been very strong, reflecting the outcome of a consistent,
planned approach to selecting and committing to funds
over the last ten years, which mature to deliver valuation
growth and generate cash distributions as underlying
holdings are realised. Almost all of our managers have
recorded good growth this year, across both geographies.
Our investments with fund of funds managers - Aberdeen
US Private Equity funds, Axiom Asia funds and Asia
Alternatives funds - have shown particularly healthy returns.
The strategy for the Funds portfolio involves committing
between US$100m and US$150m per annum to new fund
opportunities. During the year, £111m was drawn down
and £169m was distributed by the funds; we also received
£9m from the sale of a fund position in the secondary
market. The level of distributions remains positive,
with a notable bias towards our North American funds,
reflecting merger, acquisition and IPO activity in broader
private equity markets.
We have a particularly engaged style of interaction and
Responsible investment
stewardship of our investee companies. Our staff sit on
the boards of all of our Private Capital companies and
often serve on the advisory boards of the private equity
funds in which we invest. Despite usually being only a
small shareholder in listed companies, we are often given
privileged access to their management teams. We are
therefore well positioned to both monitor and effect
change to the approach investee companies take to ESG
matters. We are midway through a project to ensure that
such factors are fully incorporated into our investment
decision making process.
The Western world appears to have come through the
Outlook
worst of the Covid-19 pandemic, absent further mutations.
This is not the case in Asia where China’s zero-Covid policy
remains firmly in place. Further geopolitical events have
unsettled markets, particularly in commodities, and have
exacerbated supply side constraints. The prospect of
increasing interest rates to combat unhealthily strong
inflation makes the old market adage of ‘don’t fight the
Fed’ look ominously prescient this year. Bond yields have
already risen strongly and, with equities at lofty valuations,
investors are thinking carefully about allocation to
alternative assets.
Caledonia’s portfolio is comprised of high-quality
businesses and funds, many of which have the ability to
respond to the challenges posed by inflation, supply
constraints and recent forecasts of lower growth in GDP.
The strong balance sheet, with ample liquidity, leaves us
in a good position to resist these headwinds, although
Caledonia’s portfolio will not be immune to falls in
valuations. However, our long-term mindset, outstanding
management team and current allocation gives us a good
platform from which to continue to achieve the aims of
growth in 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 in pages 10 to 59
comprise the Strategic report of the company. The Strategic report
was approved by the board on 25 May 2022 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.
Quoted Equity
Capital portfolio
Income portfolio
Further information
Turn to page 24
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
Private Capital
Seven Investment Management
Cobehold
Stonehage Fleming
Liberation Group
Cooke Optics
BioAgilytix
Funds
North American funds
Asian funds
Further information
Turn to page 28
Further information
Turn to page 32
Caledonia Investments plc Annual Report 2022
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.
Further information
Turn to pages 18, 60 and 96
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 64
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 42
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 48
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.
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
10.7%
6.7%
12.2%
6.0%
Generate total returns that
outperform the FTSE All-Share
index over ten years
NAVTR
TSR
FTSE All-Share TR
Annual dividend per share 64.8p
Annualised growth over:
1 year
5 years
10 years
NAV per share 5041p
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
12.2%
11.9%
7.2%
3.0%
3.4%
4.2%
26.0%
8.2%
9.8%
Caledonia Investments plc Annual Report 2022
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%
March 2012
2%
0%
March 2012
March 2012
0%
March 2012
Further information on the definition and calculation of the performance measures referred to below can be found
Performance measures
on pages 132 and 133.
Performance trend
Metric
NAVTR annualised 10 year rolling performance
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
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.
March 2014
March 2014
March 2014
March 2016
March 2016
March 2016
March 2018
March 2018
March 2018
March 2020
March 2020
March 2020
March 2022
March 2022
March 2022
March 2014
TSR annualised 10 year rolling performance
March 2016
March 2018
March 2020
March 2022
16%
16%
14%
16%
14%
12%
16%
14%
12%
10%
14%
12%
10%
8%
12%
10%
8%
6%
10%
8%
6%
4%
8%
6%
4%
2%
6%
4%
2%
0%
4%
2%
0%
March 2012
2%
0%
March 2012
March 2012
0%
March 2012
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
March 2014
March 2014
March 2014
March 2016
March 2016
March 2016
March 2018
March 2018
March 2018
March 2020
March 2020
March 2020
March 2022
March 2022
March 2022
March 2014
March 2016
March 2018
March 2020
March 2022
Annual dividend/share over 10 years (p)
70.0
70.0
60.0
70.0
60.0
70.0
50.0
60.0
50.0
60.0
40.0
50.0
40.0
50.0
40.0
30.0
30.0
40.0
20.0
30.0
20.0
30.0
10.0
20.0
10.0
20.0
10.0
0
0
10.0
0
2013
2013
2013
2014
2014
2014
2015
2015
2015
2016
2016
2016
2017
2017
2017
0
2013
2014
2015
2016
2017
2018
2018
2018
2018
2019
2019
2019
2019
2020
2020
2020
2020
2021
2021
2021
2021
2022
2022
2022
2022
6,000
6,000
NAV/share over 10 years (p)
6,000
5,000
5,000
6,000
5,000
4,000
4,000
5,000
4,000
3,000
3,000
4,000
3,000
2,000
2,000
3,000
2,000
1,000
1,000
2,000
1,000
0
0
1,000
0
2013
2013
2013
2014
2014
2014
2015
2015
2015
0
2013
2014
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
2022
2022
2022
2022
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 64 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.
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 to keep shareholders apprised of performance.
Caledonia’s AGM is an important part of our shareholder communications programme.
In response to UK Government restrictions related to the Covid-19 pandemic and mindful
that some shareholders could remain wary of travelling to our office for the meeting,
arrangements were made for shareholders to listen to the AGM remotely online, hear from
our directors 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 67.
Employees
Building a team
of engaged and
experienced
employees who share
our values and culture
is central to delivering
Caledonia’s purpose.
Caledonia has a small number of employees which enables regular formal and informal
access to board directors, irrespective of seniority. Following the cessation of the
Government’s work from home guidance, staff have largely returned to our office, albeit
on a more flexible basis than prior to the pandemic. Frequent colleague involvement in
board and committee meetings continues.
Formal periodic reports on staff-related matters, including any instances of concerns or
grievances raised and suggestions received for improvements to the 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 50.
14
Caledonia Investments plc Annual Report 2022 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.
Suppliers
Community
We value long-term
supplier relationships
built on transparency,
reliability and quality
to support our
investment activities.
We have established an
ongoing commitment
to the wider community
via The Caledonia
Investments Charitable
Foundation and also
to foster further
employee involvement
in the community.
We have continued
efforts to advance
greater talent diversity
in our sector.
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 in the Income
and Capital portfolios. With Covid-19 travel restrictions being eased, staff have returned
to face-to-face meetings with management teams as part of our ongoing stewardship
activities, supplemented by ongoing use of virtual conferencing. We continue to make
considered use of our voting rights at all shareholder meetings.
Private Capital
Our employees serve as non-executive directors on the boards of portfolio companies in
which Caledonia holds a significant investment, providing oversight and helping to ensure
that our board is kept apprised of key developments and the views of a broader group
of stakeholders.
Whilst the pandemic once again prevented planned board visits to portfolio companies,
directors received deep-dive presentations from the Chief Executives of 7IM and Liberation
Group during the year in addition to other regular reporting. This programme of regular
presentations from the leadership of investee companies provided directors additional
insight to assist with investment 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. Our Funds team has welcomed the return to in-person meetings to enable
us to gain real insight into the management of our portfolio.
Further details on our stewardship activities can be found on page 48.
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, during the year
we paid more than 94% (2021: 95%) of our supplier invoices within 30 days and benefit
from good relationships often built over many years with suppliers who share our values.
Charitable giving
The Caledonia Investments Charitable Foundation was initially established to provide
grants to eligible applicants closely connected to our investee companies who faced
financial hardship due to the Coronavirus pandemic. Grants of around £260,000 were
made in the previous financial year, reducing to around £13,000 in pandemic-related
payments this year. The Foundation is now the focus for Caledonia’s charitable activity.
£230,000 was contributed to charities in the year. The Cornwall Community Foundation,
the Maritime Volunteer Service, the Queen’s Green Canopy, #10000BlackInterns and
Guy’s and St Thomas’ Foundation to support research into long-Covid were the principal
beneficiaries. Other donations have supported the charitable activities of employees.
Diversity and inclusion
Caledonia will continue its partnership with #10000BlackInterns in 2022 following the
success of last year’s internship programme. #10000BlackInterns is an initiative designed
to help transform the horizons and prospects of young black people in the UK, offering
paid work experience.
Further details on our community activities can be found on page 50.
15
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Section 172 statement (continued)
How stakeholder interests have influenced decision making
Will Wyatt, as part of long-term succession planning, informed the board in November 2021
Succession planning
of his intention to retire as Chief Executive at the company’s AGM in July 2022. Subject to
re-election by shareholders, the board invited him to continue to serve as a non-executive
director. Will is to be succeeded as Chief Executive by Mathew Masters, who joined the board
as Chief Executive Officer Designate on 1 April 2022.
In making its decision to promote Mathew, the board considered the excellent returns for
shareholders he and his team had made as Head of the Capital portfolio and, since taking on
broader responsibility for the Income strategy in 2019, his performance as Head of Quoted Equity.
They also considered his experience in both listed and private markets and stakeholder feedback.
The board, cognisant of the expectation of shareholders set out in the UK Corporate Governance
Code that at least half of its members, excluding the Chairman, should be considered independent,
commenced a search process for an additional non-executive director.
Deep Sea Electronics (‘DSE’), a leading provider of backup power control systems, was purchased
Deep Sea Electronics
from Caledonia by Generac Holdings Inc., a leading global designer and manufacturer of energy
technology solutions and other power products, during the year.
The board carefully considered the offer received from Generac, noting that it was compelling
and provided a significant premium and was in the best interests of Caledonia’s shareholders.
The opportunities created for DSE’s employees and the ongoing development of its industry-
leading products were also considered.
In making its decisions regarding the 2021 final dividend and 2022 interim dividend the board
Dividends
considered 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
succession planning
Turn to page 68
Further details on
Deep Sea Electronics
Turn to page 28
Further details on dividends
Turn to page 39
16
Caledonia Investments plc Annual Report 2022
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 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
18
Caledonia Investments plc Annual Report 2022 Business
review
20
Investment review
Quoted Equity
Private Capital
Funds
Financial review
Valuation methodology
24
28
32
36
40
42
46 Risk management
48 Going concern and viability
Sustainability
19
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Investment review
Performance and analysis
All parts of the portfolio delivered
strong returns, reflecting strong
performance in both public and
private equity markets during
the year.
NAV total return for the year ended 31 March 2022
Performance
was 27.9% (2021: 25.9%). This reflects valuation growth
in the period in both public and private equity markets.
Over the medium and longer term, Caledonia’s NAV
total return has been in the range of 10% to 12% on
an annualised basis, comfortably outperforming the
FTSE All-Share over these periods.
Total cumulative return (%)
Caledonia NAVTR
FTSE All-share
NAVTR v FTSE All-Share
Annualised returns (%)
Caledonia NAVTR
FTSE All-share
NAVTR v FTSE All-Share
1 year
27.9
13.0
14.9
3 years
47.8
16.8
31.0
5 years
66.2
25.8
40.4
10 years
215.1
99.5
115.6
1 year
27.9
13.0
14.9
3 years
13.9
5.3
8.6
5 years
10.7
4.7
6.0
10 years
12.2
7.2
5.0
Group performance was driven by positive returns from
each pool within the portfolio. The Quoted Equity pool
delivered an annual return of 14.1%, benefitting from
exposure to high quality growth stocks in the US. The
Private Capital portfolio generated a return of 54.7%
following the biannual revaluation of its holdings. All
principal investee companies are progressing well and,
coupled with the previously announced sales of Deep Sea
Electronics (‘DSE’) in early June 2021 and BioAgilytix in
December 2021, delivered excellent returns for the year.
The Funds pool returned 38.3% driven by strong valuation
growth, based on the most recent valuations received
from fund managers, and also generated net cash inflows
over the year, reflecting the growing maturity of its
fund holdings.
20
Caledonia Investments plc Annual Report 2022 Annualised investment pool returns
60%
50%
40%
30%
20%
10%
0%
During the year £110.5m of investments were made
Investment activity
into the Funds pool, continuing an ongoing programme
of drawdown commitments. The Private Capital pool
made a US$42m reinvestment into BioAgilytix as part
of a consortium of investors. Two new Quoted Equity
positions were initiated and several were increased
in response to attractive pricing.
Realisations in the year totalled £588.7m, with the
Private Capital pool contributing the largest proportion,
primarily through its sales of DSE and BioAgilytix.
The Funds pool received distributions of £168.9m,
primarily from maturing US funds plus £9.1m following
the secondary sale of an existing fund position.
Investment income for the year was up 25.3% at £55.8m
driven by dividend increases across Quoted Equity
holdings, together with dividend distributions from
Asian private equity funds.
Quoted Equity
Private Capital
Funds
1 year
3 years
5 years
10 years
Pool
Quoted Equities
Private Capital
Funds
Total pools
Non-pool3
Total investments
Net cash/(debt)
Other net assets
Net assets
Investments
£
Realisations
£
Accrued
income2
£
Gains/
(losses)
£
72.6
33.7
110.5
216.8
10.1
226.9
(36.0)
(374.7)
(178.0)
(588.7)
(14.6)
(603.3)
–
0.8
–
0.8
–
0.8
77.4
295.1
224.8
597.3
(30.2)
567.1
March
2021
£
716.1
826.8
637.1
2,180.0
14.0
2,194.0
(0.8)
32.1
2,225.3
Income
£
Return1
%
14.1%
54.7%
38.3%
29.9%
23.3
26.9
5.6
55.8
–
55.8
March
2022
£
830.1
781.7
794.4
2,406.2
(20.7)
2,385.5
341.1
56.1
2,782.7
1. Returns for investments are calculated using the Modified Dietz methodology.
2. Private Capital valuations at 31 March 2022 included accrued income of £1.7m (2021: £0.9m).
3. Non-pool investments comprise legacy investments, cash and receivables and deferred tax liabilities (see note 11 to the financial statements)
in subsidiary investment entities.
21
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Investment review (continued)
The following chart shows the distribution of net assets
Geography
at 31 March 2022 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 2022 by asset class. Listed securities represented
30% of net assets at the year end and unlisted investments
(direct investments and funds) accounted for 56%.
Geography by region
Asset class
United Kingdom
Channel Islands
Europe
North America
Asia
Cash and other
16%
16%
7%
35%
12%
14%
Listed equities
Private companies
Private equity funds
Cash and other
30%
28%
28%
14%
Over the year there has been a decrease in exposure
to UK assets and a corresponding increase in cash,
following Private Capital divestments.
The following chart estimates geographic analysis
at 31 March 2022 by revenue generation: this
demonstrates a highly diverse geographic exposure
across our investments.
Geography by revenue generation
The sale of large direct unlisted investments has resulted
in a switch in asset class between private companies
and cash.
The following chart analyses net assets at 31 March 2022
Currency
by currency exposure, based on the currencies in which
investments or cash and other assets are denominated or
traded. During the year, Sterling weakened by 5% against
the US dollar, positively impacting the annual return by 3%.
Currency exposure
United Kingdom
Europe
North America
Asia
Other countries
Cash and other
17%
17%
30%
20%
2%
14%
Pound sterling
US dollar
Euro
Other currencies
47%
45%
6%
2%
22
Caledonia Investments plc Annual Report 2022 Holdings over 1% of net assets 31 March 2022
Investments summary
Pool
Private Capital
Private Capital
Private Capital
Private Capital
Private Capital
Funds
Funds
Quoted Equity
Quoted Equity
Quoted Equity
Quoted Equity
Funds
Quoted Equity
Quoted Equity
Quoted Equity
Funds
Quoted Equity
Quoted Equity
Funds
Funds
Quoted Equity
Private Capital
Quoted Equity
Funds
Quoted Equity
Funds
Funds
Quoted Equity
Geography1
Jersey
Belgium
Guernsey
Jersey
UK
US
Asia
US
US
US
US
Asia
US
US
UK
US
US
US
Asia/US
Asia
UK
US
UK
Asia
US
Asia
US
UK
Business
Investment management
Investment company
Family office services
Pubs & restaurants
Cine lens manufacturer
Funds of funds
Funds of funds
Software
Ventilation products
Software
Semiconductors
Funds of funds
Pharma & life science services
Tobacco & vaping
Tobacco & vaping
Private equity funds
Industrial supplies
Cable communications
Private equity funds
Funds of funds
Steam engineering
Bioanalytical testing
Infrastructure
Private equity funds
Medical technology
Private equity funds
Private equity funds
Chemicals
Name
Seven Investment Management
Cobehold
Stonehage Fleming
Liberation Group
Cooke Optics
Aberdeen US PE funds
Axiom Asia funds
Microsoft
Watsco
Oracle
Texas Instruments
Asia Alternatives funds
Thermo Fisher Scientific
Philip Morris
British American Tobacco
Stonepeak funds
Fastenal
Charter Communications
Decheng funds
Unicorn funds
Spirax-Sarco
BioAgilytix
Hill & Smith
LYFE fund
Becton Dickinson
PAG Asia fund
AE Industrial
Croda International
Other investments
Investment portfolio
Non-pool investments2
Cash and other
Net assets
Value
£m
173.7
159.2
140.1
135.7
117.8
117.3
87.6
62.4
62.2
58.6
54.8
49.8
45.0
41.9
41.6
41.5
40.6
37.7
35.9
34.3
33.6
31.9
31.6
30.0
29.5
29.1
27.8
26.6
628.4
2,406.2
(20.7)
397.2
2,782.7
Net
assets
%
6.2
5.7
5.0
4.9
4.2
4.2
3.1
2.2
2.2
2.1
2.0
1.8
1.6
1.5
1.5
1.5
1.5
1.4
1.3
1.2
1.2
1.1
1.1
1.1
1.1
1.0
1.0
1.0
22.7
86.4
(0.7)
14.3
100.0
1. Geography is based on the country of listing, country of domicile for unlisted investments and underlying regional analysis for funds.
2. Non-pool investments comprise legacy investments, cash and receivables and deferred tax liabilities (see note 11 to the financial statements)
in subsidiary investment entities.
23
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
The Quoted Equity pool provides Caledonia with exposure
Strategy
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 to
drive returns, rather than by trading them. 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 deploy and
redeem capital when markets provide good opportunities
for us. Our thoughtful approach allows us to deploy 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 six stocks that are held 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 portfolio is expected to deliver against these aims
over the longer term. The Capital portfolio has no dividend
target, is unconstrained and as a consequence should
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 14.1%, with the Capital and Income strategies
returning 14.6% and 13.7% respectively. The portfolios
benefitted from exposure to high-quality US listed stocks,
though increased volatility in the final quarter of the
financial year saw returns reduce from earlier in the year.
The portfolio managers are very focused on ensuring that
the companies we invest in have good pricing power. This
gives the portfolio some ability to mitigate the impacts of
inflation, which has increased significantly in the last year.
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
14.6
13.7
14.1
3 years
16.4
8.7
14.0
5 years
14.6
10 years
13.2
3.6
11.0
6.7
11.2
Geography by region
Sector
United Kingdom
Europe
North America
Asia
Other countries
16%
16%
42%
19%
7%
Basic materials
Consumer staples
Financials
Healthcare
Industrials
Real estate
Retailers
Technology
Telecommunications
Utilities
16%
18%
6%
9%
15%
3%
2%
21%
5%
5%
24
Caledonia Investments plc Annual Report 2022 “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
Mathew Masters
with our shareholders’ money.”
Head of Caledonia Quoted Equity
Quoted Equity
Find out more
of net assets at
31 March 2022
29.8%
www.caledonia.com/quot
25
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Quoted Equity (continued)
Capital portfolio
The Capital portfolio delivered a 14.6% total return during
Performance
the year to March 2022 (2021: 35.9%). The portfolio is
highly concentrated with only 20 holdings and so is not
explicitly managed with a benchmark in mind. However
the portfolio has outperformed the FTSE All-Share over
one, three and five year periods by 1.6%, 11.1% and 9.9%
(annualised) respectively.
Operating performance was generally strong across the
portfolio. The strongest performers in terms of returns
were Microsoft (40.2%), Thermo Fisher Scientific (35.9%)
and Fastenal (26.1%). Quarterly earnings over the two
years to March 2022 saw these companies grow their
revenues in the range of 10-20%. Not only did they prove
very resilient through the Covid-19 pandemic (and made
strong health and societal contributions towards coping
with it), they are also dealing with the early stages of an
unusually high inflationary environment very well.
Those that fared less well in the year were Alibaba
(-28.7%), Ecolab (-13.0%) and Unilever (-11.4%).
We initiated our position in Alibaba, the China
headquartered internet retail and cloud services company,
after the share price had approximately halved from its
peak. The price has since declined further, serving as a
reminder of the risks of investing in that market. We take
a cautious approach with investing in this area but aim to
take a long-term view of the company and its prospects,
and believe it has solid fundamentals.
Ecolab is a company that provides cleaning products and
services into the restaurant market. It has taken longer
than other holdings to recover from the impact of the
pandemic. Unilever has endured a series of headwinds
including extreme commodity cost inflation and missteps
around the proposed acquisition of GSK Consumer
Healthcare which has since been abandoned.
In keeping with our long-term buy and hold approach,
Investment activity
activity in the year was minimal. We initiated two new
positions in Alibaba and Moody’s Corporation. We had
been following Moody’s for a long time and were able
to prioritise allocating to it as the markets sold off at
the start of 2022.
Quoted Capital
Opening value
Investments
Realisations
Gains/losses
Closing value
Investment income
Annualised pool returns - Capital
£m
530.7
52.5
(36.0)
62.1
609.3
11.1
20%
15%
10%
5%
0%
1 year
3 years
5 years
10 years
Business
Software
Software
Ventilation products
Biotech development
Semiconductors
Cable communications
Steam engineering
Tobacco & vaping
Infrastructure
Medical technology
Industrial supplies
Tobacco & vaping
Geography
US
US
US
US
US
US
UK
US
UK
US
US
UK
First
invested
2014
2014
2017
2015
2018
2017
2011
2011
2011
2015
2020
2015
Value
£m
62.4
58.6
45.2
45.0
40.0
37.7
33.6
31.7
31.6
29.5
29.1
27.8
137.1
609.3
Pool
%
10.2
9.6
7.4
7.4
6.6
6.2
5.5
5.2
5.2
4.8
4.8
4.6
22.5
100.0
Return
%
40.2
25.5
25.4
35.9
3.7
(7.4)
15.7
14.9
2.2
16.0
26.1
23.7
Significant pool investments
Name
Microsoft
Oracle
Watsco
Thermo Fisher Scientific
Texas Instruments
Charter Communications
Spirax-Sarco
Philip Morris
Hill & Smith
Becton Dickinson
Fastenal
British American Tobacco
Other investments
26
Caledonia Investments plc Annual Report 2022 Income portfolio
The Income portfolio delivered a 13.7% total return during
Performance
the year to March 2022 (2021: 17.5%). Like the Capital
portfolio, the Income portfolio is highly concentrated,
comprising 17 holdings. The portfolio has outperformed
the FTSE All-Share over one and three year periods by
0.6% and 3.4% respectively, and underperformed it by
1.1% over a five year period.
The strongest performers in terms of returns this year
were mostly purchased during the Covid-19 sell-off when
high quality stocks were re-priced and became eligible for
the Income portfolio. These included Big Yellow (43.7%),
Diageo (33.2%) and London Metric (33.9%). There was
some weaker performance from DS Smith (-21.1%) and
Unilever (-11.4%).
in urban logistics and has increasingly orientated itself
towards high-demand assets in that area.
Activity in the year consisted of initiating a position
Investment activity
in Philip Morris, and topping-up existing holdings in
response to price movements.
Quoted Income
Opening value
Investments
Realisations
Gains/losses
Closing value
Investment income
Annualised pool returns - Income
£m
185.4
20.1
–
15.3
220.8
12.2
Big Yellow and LondonMetric are both UK based, asset
backed property businesses and are superbly managed
by teams who think like owners rather than managers.
We are delighted to be invested alongside them in these
companies. Big Yellow is a self-storage business focused
in areas where supply is low and demand is high. The
business performed well throughout the pandemic
(although the share price did not) and is now moving from
strength to strength. LondonMetric was an early investor
15%
10%
5%
0%
Significant pool investments
Name
Watsco
Fortis
Reckitt Benckiser
National Grid
Diageo
Texas Instruments
Big Yellow Group
SGS
British American Tobacco
Unilever
Sabre Insurance
Other investments
Business
Ventilation products
Utilities
Consumer goods
Electricity
Alcoholic drinks
Semiconductors
Self-storage
Testing & certification
Tobacco & vaping
Consumer goods
Motor insurance
Geography
US
US
UK
UK
UK
US
UK
Europe
UK
UK
UK
1 year
3 years
5 years
10 years
First
invested
2017
2020
2020
2015
2020
2018
2020
2020
2015
2015
2017
Value
£m
17.0
16.2
15.7
15.4
14.9
14.9
14.4
14.2
13.8
12.9
12.2
59.2
220.8
Pool
%
7.7
7.3
7.1
7.0
6.8
6.7
6.5
6.4
6.3
5.8
5.5
26.9
100.0
Return
%
25.4
23.4
(6.7)
43.0
33.2
3.7
43.7
6.9
23.7
(11.4)
(2.5)
27
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
54.7
3 years
16.1
5 years
12.8
10 years
15.4
28
The Private Capital pool comprises a small number of
Rationale
direct investment holdings in private companies,
predominantly in the mid-market. We focus on cash
generative businesses with strong growth potential. Unlike
many private equity investors, as a balance sheet investor
we are not constrained by the finite life of a private equity
fund, which allows us to take a truly long-term approach
to managing and realising value from our investments.
During the year the Private Capital pool produced a return
Performance and activity
of 54.7%.
Caledonia’s Private Capital portfolio is dominated by
significant positions in four UK centric businesses, one
US co-investment and one private European investment
company. These six investments represent over 95% of
the portfolio value. Investee companies are revalued in
March and September each year.
On 1 June 2021, Caledonia announced that portfolio
company DSE, a leading provider of backup power control
systems, had been acquired by Generac Holdings Inc.
DSE had grown strongly since its acquisition by Caledonia
in October 2018. Caledonia received net proceeds of
£242m in cash, net of fees, for the sale of its 84.2% fully
diluted stake. This included a pre-disposal dividend of
£12.6m. DSE was valued at £193m in Caledonia’s accounts
at 31 March 2021.
On 17 November 2021, Caledonia announced that the
shareholders of portfolio company BioAgilytix, a leading
provider of bioanalytical testing for large molecule research
and development, had agreed terms of a majority
investment in the company by international private equity
firm Cinven. Caledonia co-invested in BioAgilytix in
February 2019 alongside Cobepa. Since then, the business
had grown strongly via a mix of impressive organic growth
and acquisitions in the US and Australia, expanding its
geographic reach and capabilities. The transaction
completed on 22 December 2021 delivering gross proceeds
of US$183m, net of fees. Caledonia agreed to re-invest
US$42m alongside Cinven and a consortium of investors
including Cobepa, for a minority investment in BioAgilytix.
Seven Investment Management (‘7IM’), a vertically
integrated multi-asset class investment manager continues
to perform well. The successful integration of the Partners
Wealth Management business has been a major
contributor to performance, alongside growth in 7IM’s
platform business. Assets under management continue
to grow strongly through a mix of positive investment
performance and net new fund inflows of c.£1.6bn during
the year. The valuation at 31 March 2022 was £174m,
a return of 41% for the year.
Caledonia Investments plc Annual Report 2022 “We work closely with our portfolio
companies, providing enduring
capital and enduring support - this
approach has generated growth and
value for all our stakeholders this
Tom Leader
year as well as over the longer term.”
Head of Caledonia Private Capital
Private Capital
Find out more
of net assets at
31 March 2022
28.1%
www.caledonia.com/pcap
29
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Private Capital (continued)
30
Caledonia Investments plc Annual Report 2022 Cobepa, the Belgian based investment company, owns
a diverse portfolio of private global investments. The
businesses within its portfolio have delivered healthy
performances which, coupled with two notable exits,
has resulted in a significant valuation increase for the
year. As noted above, Cobepa was the majority owner
of BioAgilytix, which was sold to Cinven, and it has also
recently completed the disposal of its largest asset,
Hillebrand, to Deutsche Post DHL Group at an equity
value of €1.5bn. The impact of these transactions is
largely included in the valuation of Caledonia’s holding
in Cobehold (the holding company of Cobepa) which was
£159m at 31 March 2022, a return of 44% for the year.
Stonehage Fleming, the international multi-family office,
continues to deliver good growth, both organically and
through successful acquisitions. In summer 2020, the
business acquired Cavendish Asset Management which
has now been fully integrated, and in January 2022
completed the acquisition of the private client business
of the Maitland Group, a global advisory, administration
and family office firm. The Maitland private client business
is highly complementary to Stonehage Fleming’s existing
operations. The acquisition was funded from existing
cash resources and additional term debt. The valuation at
31 March 2022 was £140m, a return of 25% for the year.
Liberation Group, a pub, restaurant and drinks business
with operations in the Channel Islands and the South West
of the UK has traded well through the year, despite the
adverse impact of the Omicron variant of Covid-19 during
the busy December to early January trading period.
The business has proved to be financially robust with an
estate focused on destination pubs, a strong food offering,
large outdoor spaces and, in several sites, good quality
accommodation. Summer trading saw better than
expected levels of demand return as consumers
responded to a relaxation of Coronavirus restrictions,
supported by the popularity of UK-based holidays.
The pubs recently acquired from Wadworth & Co. are
performing well following a programme of investment.
The valuation at 31 March 2022 was £136m, a return
of 6% for the year.
Cooke Optics, a leading manufacturer of cinematography
lenses, has also traded well over the last twelve months.
The business has faced a number of challenges over the
past two years but is now delivering improved financial
performance. The recently launched range of full frame
cine lenses has been positively received by the market
with a healthy initial order book. The market is strong as
global demand for both streaming and cinema content
remains elevated. The valuation at 31 March 2022 was
£118m, including £30m of term debt, an equity return
of 34% for the year.
Private Capital
Opening value
Investments
Realisations
Gains/losses
Accrued income
Closing value
Investment income
Annualised pool returns - Private Capital
£m
826.8
33.7
(374.7)
295.1
0.8
781.7
26.9
60%
50%
40%
30%
20%
10%
0%
Significant pool investments
1 year
3 years
5 years
10 years
Business
Name
Seven Investment Management Investment management
Cobehold
Stonehage Fleming
Liberation Group
Cooke Optics
Other investments
Investment company
Family office services
Pubs & restaurants
Cine lens manufacturer
Geography
Jersey
Belgium
Guernsey
Jersey
UK
First
invested
2015
2004
2019
2016
2018
Equity
held %
81.8
5.2
33.8
96.8
93.6
Book cost
£m
113.4
32.3
89.3
139.7
97.8
48.5
521.0
Value
£m
173.7
159.2
140.1
135.7
117.8
55.2
781.7
Revenue
£m
5.4
2.1
4.0
0.8
1.2
13.4
26.9
Pool
Capital
%
£m
22.2
45.8
20.4
46.9
17.9
24.6
17.4
7.1
15.1
22.3
148.4
7.0
295.1 100.0
Income
Return
%
40.5
44.3
25.3
6.2
24.8
31
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
38.3
3 years
21.9
5 years
17.6
10 years
17.8
Fund type
Geography by region
Private equity funds
Funds of PE funds
Quoted market funds
63%
36%
1%
North America
Asia
United Kingdom
Europe
55%
42%
2%
1%
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 for Caledonia
to access directly. North American fund investments focus
on buyout funds in the lower mid-market. Asia 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 2022 was
well diversified, representing 64 funds managed by
40 managers.
During the year the Funds pool produced a return of
Performance
38.3%. Over the longer term, annualised five and ten
year returns for the pool were 17.6% and 17.8%.
The North American portfolio grew from £321m to
£416m in the year and now comprises 51% of the pool
NAV. The largest fund manager exposure in the North
American portfolio is Aberdeen US PE funds, with funds of
funds totalling £117m. Aberdeen’s funds invest in a diverse
range of lower mid-market US businesses and delivered a
return for the year of 57.7%. Funds with particularly strong
performance were Boyne Capital (112.4%) and JF Lehman
(82.0%). Boyne focuses on North American small and
mid-size buyout opportunities and distributions included
the sale of a fire protection solutions company. JF Lehman
successfully exited a number of businesses across its
portfolio in the year generating returns of 82.0%.
The Asia portfolio grew from £300m to £375m in the
year and now comprises 48% of the pool NAV. The largest
fund manager exposure in the Asia portfolio is Axiom Asia,
with funds of funds totalling £88m. Axiom’s funds invest in
businesses across Asia including China, Australia, Japan
and South Korea, and include underlying holdings in
technology, media and telecommunications, retail,
consumer, media and technology and healthcare.
Funds with notably strong performance included Ince
Capital (46.9%) and LYFE Capital (32.5%). Ince Capital
focuses on early stage consumer-facing companies in
China. LYFE Capital invests in China’s healthcare industry
and returns were driven by successful exits from medical
technology companies.
32
Caledonia Investments plc Annual Report 2022 “Caledonia has developed
relationships with some of the
world’s most talented private equity
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 2022
28.6%
www.caledonia.com/funds
33
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Funds (continued)
34
Caledonia Investments plc Annual Report 2022 The group invested £111m over the year across 56 funds.
Investment activity
During the year we committed US$171m (£130m) to
ten new funds, encompassing North American lower
mid-market funds and funds investing in the Asia region.
Total undrawn commitments at the year end were £331m.
Opening value
Investments
Realisations
Gains/(losses)
Closing value
Investment income
Funds £m
637.1
110.5
(178.0)
224.8
794.4
5.6
The largest distributions in the year came from North
American funds of funds Aberdeen (£40m) and North
American fund JF Lehman (£27m). The latter fund’s
distributions included exits from businesses focusing
on sensor technology, commercial and industrial
deconstruction, nuclear services and marine and
industrial applicators.
Annualised pool returns - Funds
40%
35%
30%
25%
20%
15%
10%
5%
0%
1 year
3 years
5 years
10 years
Significant pool investments
Name
Aberdeen US PE funds
Axiom Asia funds
Asia Alternatives funds
Stonepeak funds
Decheng funds
Unicorn funds
LYFE fund
PAG Asia fund
Other investments
Business
Funds of funds
Funds of funds
Funds of funds
Private equity funds
Private equity funds
Funds of funds
Private equity funds
Private equity funds
Geography
US
Asia
Asia
US
Asia/US
Asia
Asia
Asia
First
invested
2013
2012
2012
2015
2015
2017
2018
2015
Book cost
£m
66.6
38.5
20.2
31.7
16.5
21.0
6.0
15.6
232.2
448.3
Value
£m
117.3
87.6
49.8
41.5
35.9
34.3
30.0
29.1
368.9
794.4
Income
Revenue
£m
0.0
0.0
0.0
0.0
0.0
0.0
0.3
4.3
1.0
5.6
Capital
£m
46.8
20.3
14.5
7.1
4.3
9.3
8.6
3.4
110.5
224.8
Pool
%
14.8
11.0
6.3
5.2
4.5
4.3
3.8
3.7
46.4
100.0
Return
%
57.7
28.4
38.0
21.3
13.9
44.2
32.5
32.7
38.3
35
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 strong
valuation growth from each part
of the portfolio. Two major
transactions in the Private Capital
portfolio boosted returns and led to
a marked uplift in our cash position.
The unprecedented levels of government and central bank
support for economies around the globe has supported
strong public equity markets through most of the year
but growing inflationary pressures created uncertainty
as we moved into the final quarter of our financial year.
Our balanced exposure to 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 27.9%, compared
with the FTSE All-Share total return of 13.0%.
Caledonia’s net assets increased to £2,782.7m at 31 March
2022, from £2,225.3m at the start of the year, largely due
to strong capital gains across the portfolio as positive
valuation movements continued and, particularly for our
private assets, converted into transaction events which led
to significant cash inflows. In addition, with approximately
53% of the investment assets denominated in US dollars,
the weakening of Sterling by 5% over the year positively
impacted the annual return by £59m, included within
the capital return, or around three percentage points.
Change in net assets
£m
3,000
2,800
2,600
2,400
2,200
2,000
Opening
balance
Revenue
return
Capital
return
Annual
dividend
Share
buyback
Other
Closing
balance
The company seeks to generate total profits from
Total comprehensive income
both investment income and capital growth. For the
year ended 31 March 2022, the total comprehensive
income was £611.3m (2021: £467.6m), of which £39.3m
(2021: £29.8m) derived from income and £572.0m
(2021: £437.8m) from capital.
36
Caledonia Investments plc Annual Report 2022 Income statement
Investment & other income
Net gains on investments and property
Management expenses
Net finance costs
Exchange movements
Profit before tax
Taxation and other
Total comprehensive income
Investment and other income in the year of £51.6m was
Revenue performance
15% higher than last year’s £44.7m. Dividend income from
the holdings in the Quoted Equity portfolios increased to
£18.5m compared to £17.1m in the prior year; this small
increase reflected a more stable trading environment
following the declines seen in the previous year when
some businesses were impacted severely by the Covid-19
pandemic. Dividend income from the Private Capital
businesses of £25.4m was £4.6m higher than the prior
year. The pre-sale dividend from DSE of £12.6m was £3.5m
above the prior year and the dividend from Stonehage
Fleming increased by £3.3m. Cooke Optics was down
£0.7m reflecting the decision to retain cash ahead of the
launch of a new lens range in early 2022, and Liberation
was £1.1m lower, in contrast to the remaining 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%,
the same level as last year.
Overall, the company’s revenue management expenses
were 11% higher than last year at £21.0m (2021: £18.9m).
This reflected an increase in personnel expenses of £1.3m:
the dominant factor being an increase in annual bonus
cost, where the strong profit performance in 2022 had a
direct impact, partly offset by a lower salary base. Other
costs increased due to investment in systems and
technology to support business operations. Fees and
recharges also declined following the disposal of Buzz
Bingo in the prior year and DSE in the current year,
although this was largely offset by savings in legal and
professional fees.
Total return derived from income and shown in the
revenue column was £39.3m, including a taxation credit
of £11.0m primarily relating to the use of tax losses for
group relief; last year’s comparative figures were total
return of £29.8m and a taxation credit of £7.4m.
£m Revenue
51.6
–
(21.0)
(2.2)
(0.1)
28.3
11.0
39.3
2022
Capital
4.8
570.7
(11.8)
–
–
563.7
8.3
572.0
Total
56.4
570.7
(32.8)
(2.2)
(0.1)
592.0
19.3
611.3
Revenue
44.7
–
(18.9)
(2.6)
(0.8)
22.4
7.4
29.8
2021
Capital
0.8
440.2
(7.6)
–
–
433.4
4.4
437.8
Total
45.5
440.2
(26.5)
(2.6)
(0.8)
455.8
11.8
467.6
Valuation net gains on investments were £567.1m (2021:
Capital performance
£437.0m), including a loss of £30.2m in non-pool assets
principally relating to the tax liability in Caledonia US
Investments Ltd, a subsidiary holding US private equity
funds. 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
£77.4m, Funds investments a net gain of £224.8m and
Private Capital investments a net gain of £295.1m. In
addition to gains on investments, there was also a gain of
£3.6m on investment property following the successful
redevelopment and letting of 29 Buckingham Gate and
£4.8m of investment income arising from the dividend
distribution by Pennon, following the disposal of its
Viridor waste management business.
Change in pool investments value
£m
2,900
2,700
2,500
2,300
2,100
1,900
1,700
Opening
balance
Quoted
Equity
Private
Capital
Funds
Net
divestment
Closing
balance
The gain of £77.4m on Quoted Equity investments
reflected the positive movement in global public equity
markets and our stock selection within both the Capital
and Income portfolios. Performance was driven by good
returns from a broad range of sectors and across UK,
Continental European and North American markets.
37
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Financial review (continued)
The underlying capital gains in the private equity funds
portfolio were strong throughout the year. The headline
gains of £224.8m reflect the outcome of a consistent,
planned approach to selecting and committing to funds
over the last ten years, which mature to deliver valuation
growth and cash distribution as underlying holdings are
realised. The gains were positively impacted by the 5%
strengthening of the US dollar against Sterling, in a
portfolio principally comprising US dollar assets.
The Private Capital portfolio delivered strong gains of
£295.1m, reflecting good progress at the principal investee
companies coupled with the two significant disposals
during the year. Half of the valuation gain was generated
by the sales of DSE (£37m) and BioAgilytix (£111m), a
co-investment with Cobepa. The balance included major
contributions from Cobehold, the holding company of
Cobepa (gain of £47m), Seven Investment Management
(gain of £46m), Stonehage Fleming (gain of £25m), Cooke
Optics (gain of £22m) and Liberation Group (gain of £8m):
all the businesses continue to develop and are progressing
well, both from a growth and profitability perspective.
The company’s capital management expenses were
£11.8m (2021: £7.6m), an increase of £4.2m year on year.
This primarily reflected an increase in personnel expenses:
£11.4m in the year compared with £7.3m in 2021,
reflecting the higher levels of expected vesting of the
performance share awards in a year of strong investment
returns. Transaction costs of £0.4m (2021: £0.3m) were
incurred, mainly linked to due diligence work on new
private equity fund investments.
Total return derived from capital was a gain of £572.0m
(2021: £437.8m). The movement was generated by the
higher levels of capital gains achieved by our investments
in Funds and Private Capital compared to the prior 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 40 to 41. 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
38
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.
Fund managers’ NAV reports are received some time
after the reporting date, typically two or three months,
but sometimes up to six months. This delay creates a risk
of changes or events occurring between the NAV and
reporting dates which could impact valuations. This risk
is carefully monitored. The increased level of volatility in
public equity markets during the first calendar quarter of
2022, principally reflecting concerns about increasing rates
of inflation, rising interest rates and the conflict in Ukraine,
led to a review of this pricing risk. Our review determined
the public market movements between 31 December
2021 and 31 March 2022 for the relevant market indices
were not out of line with historic precedent, the impact
of inflation was not deemed to be material for the
underlying holdings within our fund investments and that
there was no material exposure to the conflict in Ukraine.
We also reviewed the underlying valuation methodologies
adopted by our fund managers and were satisfied that the
techniques utilised were appropriate. The NAV of the
Funds pool comprised 20% of NAV based on valuations
dated 31 March 2022, 71% of NAV based on valuations
dated 31 December 2021 with the remainder, mostly
funds of funds holdings, dated 30 September 2021.
The following chart summarises the source of valuations
across the portfolio, illustrating that 74% 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
34%
40%
20%
6%
Caledonia allocates expenses between revenue and
Expenses
capital 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 viewed as an expense against gains on
investments included in capital.
Caledonia Investments plc Annual Report 2022 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 0.84% (2021:
0.98%). 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 133. 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.
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 55 consecutive years.
We paid an interim dividend of 17.5p per share on 6
January 2022 and have proposed a final dividend of 47.3p
and a special dividend of 175.0p. The total annual dividend
for the year of 64.8p is an increase of 3.0% on last year.
Including the proposed final dividend, the dividends to be
paid out of revenue earnings for the year ended 31 March
2022 total £35.1m, which was more than covered by
net revenue for the year of £39.3m. The special dividend
payment of £94.9m will be attributed to the capital reserve.
Over the year we generated significant cash receipts from
Cash flows, liquidity and facilities
the sales of DSE (£242m, including pre-sale dividend) and
BioAgilytix (£105m – net of re-investment). We continued
to invest into private equity funds, but strong distributions
from our US funds resulted in a notable net cash inflow
from our Funds pool for the first time since commencing
this strategy. There was a small net investment in stocks
for the Quoted Equity pool as a couple of new positions
were established.
We closed the year with £341.1m of cash (2021: £14.2m)
and bank borrowings of nil (2021: £15m). This movement
was broadly accounted for by £602.2m received from
realisations and £36.1m generated by operating activities,
partly offset by £226.9m paid for investment purchases
and dividends paid in the year totalling £34.6m. The bank
borrowing of £15m was repaid and £27.5m was used for
purchasing our own shares.
The total cash flows over the year were analysed by
pool as follows:
Net cash movement
£m
400
300
200
100
0
-100
Quoted
Equity
Private
Capital
Funds
Dividend
Share
purchases
Other
At 31 March 2022, the company had no borrowings and
£250m of undrawn committed facilities; the total facilities
comprised £112.5m from ING Group and £137.5m from
RBSI expiring in May 2025, including £25m in our treasury
subsidiary. Discussions with ING are well advanced to
renew the existing facilities for a further three-year
term to July 2025, with a one-year potential extension.
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 updated, reviewed and approved by the
board this year. 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 63% of the investment assets are non-sterling
denominated. This risk is fully recognised by the
business and considered carefully within our risk
management approach.
Tim Livett
Chief Financial Officer
25 May 2022
39
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction 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 an
Unquoted companies
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:
1. determine the enterprise value using an appropriate
valuation technique
2. adjust the enterprise value for factors that a market
participant would take into account, such as surplus
assets, excess liabilities and other contingencies
3. deduct the value of instruments ranking ahead
of those held to derive the attributable value
4. apportion the attributable value between the
remaining financial instruments
5. allocate the amounts derived according to the
holding in each financial instrument.
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.
40
Caledonia Investments plc Annual Report 2022
Open-end 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-end 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. 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. Adjustment may also be necessary for
features of the fund agreement not captured in the
valuation report, such as performance fees or carried
interest. The timing of fund NAV reports creates a risk of
changes or events occurring between the fund NAV and
reporting dates which impacts valuation. This issue is
monitored carefully and, if of a material nature, can lead
to adjustments either at the specific fund level or more
broadly across the relevant funds affected by the identified
change or event. If a decision has been made to sell the
fund interest or portion thereof, the expected sale 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.
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
a 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.
41
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction 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
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 approach and specifically reviews our
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 good practice guidance from other advisers, provides
input to the board as a whole on the status of the risk
management programme.
The board has considered a robust assessment of the
Principal risks
principal risks facing Caledonia, including those that would
threaten its business model, future performance, solvency
or liquidity. Principal risks are defined as those that have
the potential to materially impact the delivery of our
strategic objectives. We periodically review additions
or deletions from our list of principal risks, reflecting new
and emerging risks arising from changes in the external
environment or from within our own business. During
the financial year the risk associated with successful
integration of ESG and climate change issues into our
investment activity was incorporated into a new principal
risk, reflecting growing stakeholder interest and
importance of this area. Separate risks in relation to the
EU/UK trading relationship and global pandemic (Covid-19)
were removed as principal risks. We recognise that the
impact of Covid-19 is still significant but our mitigating
actions, both operationally and for our Private Capital
investee businesses, have largely been successful.
However, we note that the repercussions of the global
pandemic will be widespread and lengthy, including
the impact on government finances and world trade,
and we will ensure that this issue continues to be fully
considered in our investment management activities.
We have identified seven principal risks, described in more
detail on pages 44 and 45, which can be considered in the
following three groups.
42
Caledonia Investments plc Annual Report 2022 Strategic risks
As an investment business, 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. The principal risks covering our strategic approach
and investment decision making are fundamental to the
execution of our business model. The newly added ESG
and climate change risk is critical to the successful
implementation of our strategy.
External risks
The principal risks associated with the market, liquidity
and regulatory and legal matters capture the key external
risks which impact our business.
Operational risks
Our operational risks, which include business continuity,
attracting and retaining talent, cyber security and fraud
risk form the final group.
We have assessed the change in risk status for each of our
principal risks over the last year and concluded that, with
the exception of market risk, the level of risk is unchanged.
The increase in market risk reflects a heightened level of
volatility in public markets since the start of 2022, driven
by concerns about sustained higher levels of inflation
and the uncertainty arising from the conflict in Ukraine.
Caledonia operates a number of interrelated activities,
Caledonia risk management activities
illustrated here, to deliver an integrated approach to risk
management which is overseen by the board, the
executive and the Investment Approvals Committee.
Caledonia manages and reports risk via Operational and
Risk management reporting
Investment Risk Dashboards.
The Operational Risk Dashboard considers risks associated
with Caledonia’s wider business environment and includes
business continuity, IT and cyber security, regulatory, legal
and financial controls. Caledonia manages business risk
through a number of integrated processes to provide risk
visibility to both the board and the executive.
The Investment Risk Dashboard focuses on investment
portfolio risks arising from Caledonia’s investment strategy.
It is considered by the board biannually and it is supported
by detailed portfolio analysis which considers risks such as
asset allocation and performance, investment volatility,
value at risk, diversification, liquidity and concentration.
Strategic review
• Board review of investment
pool strategies and approval
of overall asset allocation
• Approval of strategic
objectives
Investment decisions
• Investment Approvals
Committee implements
investment strategy and
approves individual
investments
• Board approval required for
investments above certain
parameters
Sustainability
• Responsible Investment Policy
will define approach taken by
Caledonia
• Long-term assessment of
sustainability will be one key
criteria in investment decision
making process
External influences
• Regular monitoring of market,
economic and geopolitical
developments
• Analysis of key external trends
that underpin performance of
investee businesses & funds
Ongoing risk monitoring
• Biannual investment pool
reviews
• Regular updates to the board
and Audit Committee
• Rigorous valuation process
for private assets
Risk mitigation framework
and analysis
• Biannual risk dashboard
review by the Audit
Committee
• Assessment of principal, new
and emerging risks
• Testing of viability and going
concern scenarios
Our purpose
• Grow net
asset value
• Pay increasing
dividends
• Manage risk
43
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Movement in risk
status in year to
31 March 2022
Risk management (continued)
Principal risks
Risks in relation to the
appropriateness of the business
Strategic
model to deliver long-term growth
in capital and income.
Strategic risks include the allocation
of capital between public and private
equity, and in relation to geography,
sector, currency, yield, liquidity.
Mitigation and management
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.
Risk of losses in value of investments
arising from sudden and significant
Market
movements in market prices,
particularly in highly volatile markets.
Adds to the risk associated with
private asset valuations.
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.
Risk that liabilities cannot be met or
new investments made due to a lack
Liquidity
of liquidity. Such risk can arise from
not being able to sell an investment
due to lack of a market or from
not holding cash or being able
to raise debt.
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. Portfolio construction,
including use of private assets, provides
some mitigation.
Detailed cash forecasting for the year
ahead is updated and reviewed quarterly,
including the expected drawdown of capital
commitments. A weekly cash update is
produced focused on the short-term
cash forecast.
Loan facilities are maintained to
provide appropriate liquidity headroom.
The liquidity of the portfolio is reviewed
regularly.
Key developments
Overall strategic asset allocation review
underway led by Chief Executive Designate,
supported with input from the board.
Review of strategy for each investment pool
in progress – addressing approach, yield and
return targets, forecast cash impact and
resourcing.
Private Capital approach amended to focus on
sourcing new investments, building in revised
yield objectives, following two successful
disposals in the year.
Recruitment to increase investment team
resources across all three pools.
Increased focus on quality due diligence pre
investment, particularly given high market
prices, as we seek to increase the rate of
new investment across our private assets –
both companies and funds.
ESG factors to be integrated into key
investment processes (see ESG & climate
change section).
Market volatility has increased in recent
months, reflecting increased inflationary
pressures and the uncertainty arising from
the conflict in Ukraine.
The Quoted Equity team remains alert to
market movements, taking advantage of
recent market falls to add target stocks to
the portfolio, whilst remaining determinedly
long term focused.
Foreign exchange exposure remains a live
issue for periodic review.
Discussions well advanced with ING to renew
existing £112.5m facility for a further three
years to July 2025.
New counterparties for money market funds,
all AAA rated, added to limit maximum
exposure to £50m with each counterparty
and limit associated risk.
44
Caledonia Investments plc Annual Report 2022
Movement in risk
status in year to
31 March 2022
N/A
Included for the
first time
Principal risks
Risks in relation to the successful
incorporation of ESG and climate
ESG & climate change
change impacts into our investment
approach.
Identifying opportunities to drive
our policy objectives, deliver strong
returns and manage the risks to meet
evolving stakeholder expectations.
Risks arising from exposure to
litigation or fraud or failure to
Regulatory & legal
adhere to the tax and regulatory
environment.
Caledonia operates across a number
of jurisdictions and in an industry
that is subject to significant
regulatory oversight.
Mitigation and management
Caledonia is building ESG knowledge,
particularly on climate change, and
developing policy and processes
to integrate ESG matters into our
investment approach. We anticipate
that the assessment of new and existing
investments will fully incorporate ESG/
climate change risks and opportunities.
Reporting will be introduced to
demonstrate the impact our approach
to ESG matters has on our investment
portfolio.
Caledonia has internal resources to
consider regulatory and tax matters as they
arise. Professional advisers are engaged,
where necessary, to supplement internal
knowledge in specialised areas or when
new regulations are introduced. Activities
supported by regular staff training.
Caledonia is a member of the Association
of Investment Companies and operates in
line with industry standards.
Risks arising from inadequate or
failed processes, people and systems
Operational
or from external factors.
Systems and control procedures are
developed and reviewed regularly. They
are tested to ensure effective operation.
Operational risks arise from the
recruitment, development and
retention of staff, systems and
procedures and business disruption.
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. This includes
a specific focus on cyber security.
Key developments
Approach and commitment to ESG and
climate change being developed with a plan
to fully integrate into corporate strategy
and investment activity.
Responsible investment policy drafted with
external support. Review activity underway
internally and with the board.
Climate change reporting prepared, with third
party support from consultants, to set out our
climate change commitments and disclose our
approach to managing this risk.
Continued health and safety protocols
maintained to ensure safe working in
response to the Covid-19 pandemic.
New process introduced for new suppliers
to mitigate fraud risk.
US PE fund investments structuring refined to
ensure ongoing investment trust compliance.
Business continuity plan being refreshed.
New approach to information technology
disaster recovery implemented in April 2022.
IT department structure and staffing
refreshed, providing broader range of skills
and increased cover.
Cyber security focus maintained, with
training refresh to address human factor risk
from phishing, enhanced password policy
implemented and new technology deployed
to improve e-mail security (inbound and
outbound) and prevent potential data loss.
New Enfusion system, covering public equity
trading activity and investment accounting
activity for the business, successfully
implemented on 1 April 2022 providing
a robust, well-supported platform for
key business processes.
Note: Principal risks identified in last year’s annual report also included Global pandemic (Covid-19) and EU/UK trade (following UK
departure from the EU). We have concluded that the potential impact of these particular risks has lessened significantly over the
last 12 months and have concluded that they are no longer represent principal risks.
45
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
The directors have assessed the viability of the group over
Viability statement
the period to May 2025 (three years from the date of
signing the accounts), having determined that this 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.
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 model, its ability to operate 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 2025.
In making this assessment, the directors took comfort
from the results of two stress tests that considered the
impact of significant market downturn conditions. The first
stress test considered four discrete scenarios: a reduction
of 10% in the value of the US dollar against Sterling
throughout the plan period; a fall in investment income
of 20% versus plan; a 25% decrease versus plan in the
value of distributions from private equity fund
investments; and a 25% fall in the anticipated value of
realisations in the Private Capital portfolio versus plan.
A further scenario combined all of these four scenarios.
The second stress test built on the combination of all the
scenarios from the first stress test and applied a full call of
all of our outstanding private equity fund commitments
at any point during period, creating a number of discrete
scenarios. Through our stress testing, 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.
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. This 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.
These scenarios were applied to a detailed three-year
financial plan produced in January 2022. The plan was
extended to cover the period to May 2025 to support
the viability assessment.
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, current cash holdings of £341m, undrawn banking
facilities of £250m and readily realisable assets of £830m
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.
46
Caledonia Investments plc Annual Report 2022 47
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, we
Introduction
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.
Acting responsibly is a key part of our investment
Our investments
philosophy. As an investment company, our purpose is
to grow capital value and income over the long term,
creating an increasing store of generational wealth for
our shareholders. We believe that a responsible approach
towards the businesses in which we invest is essential to
our continued success and is closely aligned with the risk
management considerations of a long-term investor.
We believe that responsible investment and business
success go hand in hand. We are embedding the
consideration of Environmental, Social and Governance
(‘ESG’) factors into all stages of our investment journey.
We remain committed to constructive, long-term focused
engagement with the companies and funds in which we
invest and believe that careful stewardship is a key tool to
address ESG risks and drive positive change. We expect to
invest in businesses which will grow, provide employment
and generate economic benefit in an environmentally
and socially responsible way, both during and after our
ownership. We aim to invest in companies and funds that
take a responsible approach towards the environment
and society, built on good governance practices.
48
Caledonia Investments plc Annual Report 2022 Historically our stewardship activities have focused
primarily on governance matters, most notably in our
majority owned investee businesses which we seek to
operate in line with industry good practice. However,
we continue to build on this approach by 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 investment criteria. We will expect our investment
managers to consider these issues fully in proposing
new additions to our portfolio holdings.
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 developing our future approach
to responsible investment to augment our existing
stewardship activities. We have developed a draft of our
new ESG policy which has been debated by the board.
We have appointed an experienced consultancy to
provide comprehensive training for board directors and
our investment professionals, to support us with further
development of our ESG policy and the formulation of
a comprehensive implementation plan to fully integrate
ESG considerations into our investment decision making,
ongoing monitoring and reporting processes.
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 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.
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 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.
Climate change
We recognise the challenges of climate change and the
potential material risk this poses for the investments which
we make, potentially from regulation, adjustments in
consumer preferences or pressure to reduce carbon
emissions and address broader environmental issues.
We have set a new expectation that the businesses in
which we invest should target net zero emissions by 2050.
We recognise that the pace of planning and delivery of
this commitment will vary across the businesses in our
investment portfolio and we anticipate that many
businesses will achieve this target more swiftly. We will
keep this commitment under review as we gain confidence
in the ability of our underlying holdings to achieve this
target more rapidly. We plan to implement suitable
monitoring and reporting to enable us to track progress.
We intend to use our position as an investor to encourage
progress on reaching net zero. Where we own listed
securities, we will use our influence through engagement
and voting to encourage companies to prepare and
demonstrate the actions they have taken to address
climate risks and opportunities. For the private businesses
where we own significant positions, we will seek to ensure
that these companies understand and manage their own
environmental impacts, and that they invest in suitable
technology to improve energy efficiency and make a
successful transition to renewable energy and a low
carbon future. We expect our fund managers to consider
the risks and opportunities presented by climate change
in their investment selection process and to promote
initiatives to reduce emissions from the businesses
within their funds.
49
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Sustainability (continued)
Task Force 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 Task Force on Climate-Related
Financial Disclosures (‘TCFD’) and have provided a set
of disclosures in this report on pages 54 to 59.
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 as at 31 March 2022, together
with comparator data for the previous financial year.
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.
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, underpinned by modern parental leave
policies and health and wellbeing support. 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
50
Board
Senior managers
All employees and board
Female number (%)
Male number (%)
2021
2021
2022
2 (22%)
7 (78%)
7 (64%)
13 (68%) 14 (70%)
6 (30%)
33 (50%) 34 (52%) 33 (50%) 32 (48%)
2022
4 (36%)
6 (32%)
Also set out below is the gender split across our
investment and support staff, excluding non-executive
directors.
Investment staff
number (%)
Support staff
number (%)
Female
Male
Total
2022
2021
2022
5 (28%)
6 (30%) 24 (60%) 24 (60%)
13 (72%) 14 (70%) 16 (40%) 16 (40%)
18
2021
20
40
40
Caledonia operates a flatter management structure than
is often found in many other companies. Consequently,
53% (2021: 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, we
introduced a formal internship programme with the
support of an independent facilitator. Six of our twelve
interns were welcomed from the #10000BlackInterns
initiative, which seeks to help transform the horizons
and prospects of young black people in the UK, to join the
business for three weeks to learn more about Caledonia,
the investment management industry and build skills for
their future careers. We will repeat the internship
programme in 2022 as part of our commitment to
diversity and inclusion and to play our part in developing
future talent for our sector.
Charitable activity
The Caledonia Investments Charitable Foundation was
initially established to provide grants to eligible applicants
closely connected to our investee companies who faced
financial hardship due to the Covid-19 pandemic. The fund
supported many individuals, particularly those working for
our consumer-facing businesses which were more severely
impacted by the pandemic and Government imposed
trading restrictions. The Foundation is now the focus
of Caledonia’s charitable activity, providing support to a
small number of causes each year and helping to foster
employee involvement in the community. Further details
can be found in the Section 172 statement on page 15.
Caledonia Investments plc Annual Report 2022
51
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Sustainability (continued)
52
Caledonia Investments plc Annual Report 2022 This approach is mirrored in our newly completed
adjacent building in Buckingham Gate which has now
been occupied by tenants on a long-term lease.
Our electricity supply during the year was sourced
from 100% renewable energy.
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 (‘SECR’). The data is
included within our TCFD reporting on pages 54 to 59.
Environment
Caledonia’s direct environmental impact is limited,
although we continue to take steps to mitigate this.
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 have begun to see a return
to business travel during the year to 31 March 2022
to support good investment decision making and
proactive stewardship.
Caledonia operates from its refurbished Buckingham Gate
property. This office continues to offer lower electrical
consumption due to modern electrical and mechanical
plant. The building and associated IT infrastructure has
been designed with a number of features to 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.
53
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Sustainability (continued)
Task Force on Climate-related Financial Disclosures
Caledonia is committed to reporting in alignment with the
Introduction
recommendations of the Task Force on Climate-related
Financial Disclosures (‘TCFD’), building on the initial
disclosures in our 2021 annual report. Consistent with
our sustainability reporting, we have set out below
an explanation of our progress on the assessment,
management and governance of climate-related risks and
opportunities for both our business and our investment
portfolio. This progress is described in accordance with
each of the four TCFD reporting pillars – Governance,
Strategy, Risk Management and Metrics and Targets.
Caledonia seeks to invest in long-term, sustainable
businesses which will grow, provide employment and
generate economic benefit responsibly. With investment
assets of £2.8bn, we have influence and opportunity to
make a positive impact across our portfolio. We recognise
the importance of understanding the impact of climate
change on and by our portfolio and are in the early stages
of collecting all of the relevant inputs to enable us to
make a full assessment. We expect that our disclosure
will develop markedly over time as we work towards
extending our TCFD-aligned disclosures to our non-
consolidated investment portfolio.
Our business operates from a small London office with
fewer than 60 UK based colleagues and therefore has
limited direct climate-related impact or exposure, based
on scale and workplace improvement actions taken over
many years. Consequently, we have sought to take a
proportionate approach to the impact of climate-related
risks and opportunities on our business operations.
We set out below an overview of our progress to date,
together with our plans for the future, as required by
Listing Rule 9.8.6R (8).
Caledonia’s governance around climate-related risks
Governance
and opportunities.
In this TCFD reporting pillar we have described:
a. the board’s oversight of climate-related risks
and opportunities
b. management’s role in assessing and managing
climate-related risks and opportunities.
54
Overview
Caledonia’s board sets strategy and oversees its
implementation, which includes our approach to ESG
matters and, more specifically, the climate-related risks
and opportunities associated with the operation of our
business, as well as the impact on our investment strategy.
The board considers deep-dive reviews of the activity
and performance of each of the three investment pools
at least biannually, led by the relevant pool leadership.
In future, we plan to incorporate into these regular
assessments of new and existing investments relevant
climate-related risks and opportunities ensuring that
the board has improved visibility. We plan to adopt this
approach from the second half of our 2023 financial year.
Risks associated with our investment portfolio,
which include a specific climate change risk section,
are reported by management to the board for debate
at least biannually. The Audit Committee also reviews
investment and operational risks, including those that
are climate-related.
Over the previous twelve months, board and management
have participated in training and knowledge building
sessions on ESG, including climate change, to improve
understanding of the potential impact on our investment
portfolio and business operations. This training is now
being cascaded to our investment team.
The board reviews and approves our approach to TCFD-
aligned disclosures alongside other reporting, supported
by the work of the Audit Committee.
Our investments
The Chief Executive, supported by the Investment
Approvals Committee (‘IAC’), is responsible for
implementing our investment strategy and the
day-to-day management of the risks and opportunities
in our portfolio, including those linked to climate change.
The IAC consists of the Chief Executive, the heads of the
three investment pools, the Chief Financial Officer and
the Company Secretary.
The IAC considers and formally approves new investments
and proposed realisations, taking into account a broad
range of risks and opportunities, including those which
are climate-related. New investment proposals are now
expected to include a section on ESG-related factors.
The IAC also monitors performance and risk across the
three investment pools. The Chief Executive reports
formally to each board meeting, which includes key
decisions made by the IAC and highlights any key risks
and mitigations which have been identified.
Caledonia Investments plc Annual Report 2022 Our business operations
Day-to-day accountability for the sustainable management
of our business, including the impact of climate change,
is held by the Chief Executive, supported by the key
functional managers responsible for business operations:
the Company Secretary, the Chief Financial Officer and the
Facilities Manager. This group has devoted significant time
over the previous year to develop an understanding and
consider the climate-related risks and opportunities
relevant to our business operations. The key areas of focus
are the efficient operation of our building, business travel
and the provision of IT services, together with business
resilience. These activities are reviewed by the senior
management team and reported to the board.
We have made good progress in developing our capability
Strategy
to identify and assess the actual and potential impacts of
climate-related risks and opportunities on our business,
strategy and financial planning where such information
is material. We have set out below a description of our
status toward:
a. identifying the climate-related risks and opportunities
over the short, medium and long term
b. assessing the impacts of these climate-related risks
and opportunities on our businesses, strategy and
financial planning.
We are working to develop the technical capabilities
needed to enable us to undertake more detailed
assessments of these risks, opportunities and impacts,
as well as the resilience of our strategy, taking into
consideration different climate-related scenarios,
including a 2°c or lower scenario. We are aiming to
achieve full disclosure of these matters by the time
of publication of our 2024 annual report.
Overview
We seek to create value through disciplined investment
and careful stewardship of the assets within our portfolio.
We believe that responsible investment and business
success go hand in hand, and have started to take steps
to ensure that ESG factors, including those linked to
climate change, are fully considered in all stages of
our investment journey.
Our investments
As a long-term investor, we make a small number of new
investments each year across our three investment pools
to achieve our purpose and appropriately manage risk.
We do not have a sustainability-driven investment
strategy, nor is it our intention to do so, but we believe
that our approach, including the principle of being
environmentally responsible, is important in driving
sustainable long-term investment returns. We plan to
use our influence as an investor to ensure investee
businesses and funds have a cautious and responsible
approach to environmental management of their business
operations and, in making new investments, we seek to
avoid investment in businesses that cause material harm
to the environment, unless they have a clear strategy to
positively address their impact in a reasonable time period.
We invest across a wide range of businesses but have
limited exposure to those that create high levels of
emissions such as energy, resources and transportation.
The following categories of climate-related risks and
opportunities that may impact investments within
our portfolio have been identified:
Opportunities:
» Sustainable business opportunities (both
Risks:
existing and new).
» Technology to provide lower emission energy
solutions for running specific businesses.
» Market, regulation, reputational and
physical risks.
We are heavily dependent upon the disclosures provided
by the companies within our Quoted Equity pool and the
managers of the private equity funds we invest in to
develop a full and detailed understanding of how individual
companies within our portfolio will be impacted either
by the issues we have identified or by issues which are
more specific to a particular business.
In the short term we anticipate the key risks to our
portfolio businesses will be driven by regulation and
changing customer behaviour. Businesses that do not
behave responsibly are likely to be at greater risk. In the
medium term, we expect a number of our investee
businesses will develop sustainable business opportunities.
In the long term, we expect all of our investee businesses
to achieve net zero emissions no later than 2050; we
anticipate that this will be a key element of any successful
business model by this point in time.
55
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Sustainability (continued)
The identification of climate change opportunities and
risks is being integrated into our evaluation of likely returns
throughout the investment lifecycle. This is a rapidly
developing area, so we continue to ensure that our
investment teams keep abreast of evolving practice
with appropriate training and resources to support their
activities. We intend to use our stewardship activities
to support the sustainable transition to a low carbon
economy and, in the case of the investee companies in
our Private Capital portfolio, we will use our ownership
position to underpin this commitment.
Our investment strategy will remain focused on investing
in quality businesses with a long-term approach; the
choice of individual assets may be influenced by the
climate-related risks and opportunities that we identify as
we review both new and existing investments. Our core
business is unlikely to change but our financial planning
will adjust to address the choice of assets within the
portfolio and the likely returns we expect to achieve.
We currently hold around 30 public equity stocks in our
Quoted Equity pool, mainly in large businesses, around
60 private equity fund positions in our Funds pool and
have significant holdings in four UK private businesses
and one European private fund in our Private Capital pool.
Each pool has a different set of issues to consider when
evaluating the resilience of the individual business, or in
the case of funds multiple businesses, to different climate-
related scenarios. We are not yet in a position, due to our
ongoing development of capabilities to collect information
from a number of these businesses, to perform a suitably
detailed analysis. However, we do recognise that climate
change is likely to affect many of our investments through,
for example, regulation, changes in consumer preference
and stakeholder pressure. We anticipate that our
knowledge and understanding of the impact of climate-
related on the businesses within each pool will continue
to improve and this will enable us to undertake a
resilience assessment.
Our business operations
We expect technology to provide opportunities to further
reduce our energy usage. We are looking for initiatives to
operate our building more efficiently, to reduce the need
for our staff to travel, to enable staff to work remotely and
decrease commuting, and to manage waste by cutting
consumption and improve recycling. We anticipate that
the major risk will be the costs associated with a net
zero transition.
During 2021 we moved our electricity supply to 100%
renewable sources and will explore future opportunities
to move away from the use of gas for heating. Measures
to mitigate the impact of emissions associated with
international air travel will also continue to be assessed.
We have built our technology solutions to facilitate remote
working and will continue to move to externally hosted
applications to drive additional greenhouse gas (‘GHG’)
reductions whilst improving operational resilience. We
expect the efficiency of our technology to improve over
time, further reducing our energy usage and associated
emissions, allowing us to operate our business more
efficiently, but not to the extent that there would be
a change in strategy or a material impact on our
financial planning.
We have considered the resilience of our business to
different climate-related scenarios. Based on our desktop
review, we believe our operational approach is resilient
and will not be adversely impacted where global warming
is limited to 2°c or lower. We plan to undertake further
work to validate this initial assessment.
In this TCFD pillar we provide information about how we
Risk management
identify, assesses and manage climate-related risks by
describing both our current and future plans as to:
a. processes for identifying and assessing climate-
related risks
b. processes for managing climate-related risks
c. how processes for identifying, assessing and managing
climate-related risks are integrated into our overall risk
management.
Overview
Caledonia operates a structured risk management process.
Risks are formally identified and assessed through a risk
dashboard, capturing the most significant risks impacting
our investment portfolio and documenting the actions
required to achieve an acceptable level of risk. The risk
dashboard is reviewed by the Audit Committee at least
biannually. The identification, assessment and management
of climate-related risks and opportunities for our
investments and our business operations has been
embedded into this process. This is co-ordinated by the Risk
Manager who has a regular dialogue with the investment
teams to identify and document principal and emerging
risks, along with the agreed plan of mitigating actions.
56
Caledonia Investments plc Annual Report 2022
Our investments
The process of identifying and assessing the climate-
related risks of investee companies and funds is gradually
being developed. We rely on a mix of information from
the companies, third-party data and analysis, and our
own internal processes. We expect an increasing number
of listed companies in our Quoted Equity pool to report
under the TCFD framework which will facilitate a more
granular assessment of exposure to climate-related risks.
Reporting from the private businesses in our Private
Capital portfolio where we hold significant shareholdings
is also expected to develop under our stewardship in
line with relevant regulation. However, we anticipate
that investments in our Funds pool will take longer to
provide data. We intend to increase our disclosure as
the quality of reporting and data gathering from our
investments improves.
When issues or risks are identified we plan to address
them either through engagement activity or, in the case
of majority-owned private businesses, through our
board representation, with the objective of ensuring
that appropriate mitigating action is planned and
implemented. We expect to monitor risks through to
mitigation. In extremis, we will have the option to divest
if we do not believe that climate-related risks have been
appropriately addressed by a company or fund.
Our business operations
Our business operations, as previously described, are
relatively straightforward with a small number of
employees based in a single central London head office.
We have not undertaken a detailed review of climate-
related risks that would impact our business operations
but, based on a review of currently identified physical
and transition risks, we do not believe that we are
exposed to any material climate-related risks. We
will continue to keep this area of risk under review.
Should we identify a material climate-related risk to our
business operations, we would put in place a mitigation
plan to either resolve the issue or devise an alternative
solution to enable us to continue to operate.
In this TCFD reporting pillar we provide information about
Metrics and targets
the metrics and targets currently used to assess and
manage relevant climate-related risks and opportunities
where such information is material, as well as our plans
to further develop our capabilities to do so in future years.
We have done this by:
a. disclosing the metrics we use, and may use in the
future, to assess climate-related risks and opportunities
in line with our strategy and risk management process
b. disclosing Scope 1, Scope 2 and, where appropriate,
Scope 3 GHG emissions and the related risks
c. describing the targets we use to manage climate-
related risks and opportunities and our performance
against them.
Our investments
We have not yet defined specific metrics to apply across
the investment portfolio to assess climate-related risks
and opportunities. We are reviewing information available
from the companies and funds in which we are invested
and, in the case of public equities, from third-party data
providers. Identifying such metrics will be a priority as
our investment team implements processes to integrate
climate-related issues into our investment appraisal and
monitoring activities.
We recognise that there are potentially significant Scope 3
GHG emissions associated with our investment portfolio.
We have yet to access this information for all elements of
our portfolio as the majority of our private assets do not
currently report this data. The data which is available is
neither comprehensive nor consistent. We will work with
all the businesses within the portfolio to facilitate data
collection in line with appropriate global standards, to
enable us to develop metrics and report these emissions
(where appropriate) in the future.
We expect the businesses in which we invest to target
net zero emissions by 2050. We recognise that the pace
of planning and delivery of this commitment will vary
across sectors and geographies with some expected to
reach this target more swiftly. As we build knowledge
and understanding of the plans of our portfolio businesses,
we intend to set short and medium-term targets in line
with our long-term target, alongside a separate framework
for each investment pool. We plan to implement suitable
monitoring and reporting to enable us to track progress.
57
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
We have established absolute greenhouse gas emission
targets for future Scope 1 and Scope 2 emissions,
aiming to achieve net zero emissions by 2030 through
the elimination of gas used for heating, further energy
efficiency initiatives particularly in areas such as lighting,
cooling and IT equipment, and continuing to ensure
that all electricity is procured from renewable sources.
Our Scope 3 emissions are principally related to business
travel which we will continue to disclose, with international
air travel the major component. We are dependent on
technological advances to address emissions from aviation.
We do not currently plan to use carbon offsets.
Sustainability (continued)
We will assess the forward-looking alignment of our
portfolio businesses by monitoring the number that make
a commitment to achieving net zero emissions, the timing
for delivery of this objective and those that underpin their
commitment with science-based targets. This will enable
us to track progress on a prospective basis.
Our business operations
The key metric used to monitor our progress towards
reducing the environmental impact of our business
operations is carbon emissions. Data has been prepared
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 opposite are from companies
directly involved in managing our investment activity and
included in our consolidated financial statements.
The level of our GHG emissions has been impacted by
the exceptional circumstances arising from the Covid-19
pandemic since early 2020. The move to home working
and restrictions on international travel resulted in a
significant, but artificial, reduction in our overall emissions.
We continue to believe that our business benefits from
staff returning to some office-based working and from
travel to assess and monitor our investments in the
UK and overseas. Whilst GHG emissions are therefore
projected to increase from current levels, we do expect
to see a sustained reduction when compared to
pre-pandemic levels.
58
Caledonia Investments plc Annual Report 2022 Scope
Scope 1
(direct emissions)
Scope 2
Location based
(indirect emissions)
Scope 2
Market based
(indirect emissions)
Scope 3
(indirect emissions)
Total – location based
Total – market based
KPI – location based
KPI – market based
Emissions and associated energy usage – Year ended 31 March
Source of GHG emissions
» Combustion of fuel and operation of facilities
» Air conditioning refrigerant loss
» Company car use
» Electricity purchased for own use
Tonnes CO2e
Quantity used
2022
21
2021
19
2022
110
2021
99
Unit
KWh(k)
45
47
214
199
KWh(k)
» Electricity purchased for own use
47
214
199
KWh(k)
» Business travel
Total emissions per full time employee
Total emissions per full time employee
94
160
115
2.6
1.9
7
73
73
1.2
1.2
8
332
332
4
302
302
KWh (k)
KWh (k)
Notes:
1. Comparative restated to report in kWh only and exclude kWh for Scope 3 emissions in line with current year.
2. The conversion factors used for 2022 have been updated to the latest UK Government GHG Factors for Company Reporting.
3. Caledonia consumes water, with all its waste water currently being returned to the sewer. The resultant CO2 emission from its use of water is <1 tonne.
4. Caledonia has a mix of recycled and general waste; the related Scope 3 GHG emission data is not included in the table above and is assumed to be an
immaterial emissions source.
5. Location-based method reflects the average emissions intensity of grids on which energy consumption occurs (using mostly grid-average emission
factor data). The market-based method reflects emissions from the 100% renewable sourced electricity that we have chosen to purchase from.
6. 100% of our reported emissions are in the UK, involving business travel primarily departing or arriving in the UK. Accordingly, this table does not
include a column indicating the yearly UK proportion of global emissions.
7. The sources of GHG emissions shown in the table above are from the companies included in the consolidated financial statements. Under the SECR
regime we are not required to report any emissions from companies that are not included in our consolidated financial statements.
59
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
60
Caledonia Investments plc Annual Report 2022 Directors’
report
62
64
68
70
73
74
91
95
Board of directors
Corporate governance report
Nomination Committee report
Audit Committee report
Governance Committee report
Directors’ remuneration report
Other governance matters
Responsibility statements
61
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Board of directors
David
Stewart
1
Chairman
N R
Will
Wyatt
2
Mathew
Masters
3
Tim
Livett
4
Jamie
Cayzer-Colvin
5
Stuart
Bridges
6
Chief Executive
N
Chief Executive
Officer Designate
Chief Financial
Officer
Executive Director
Independent
Non-Executive
A G N
Director
David Stewart
Tim Livett
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 and Chairman of Hermes Investment Management
and 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
Will joined the Caledonia group in 1997 from Close Brothers Corporate
Chief Executive
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 a trustee of the Rank Foundation and Chairman of
Real Estate Investors and Newmarket Racecourses.
Will brings to the board corporate finance and investment expertise,
broad senior management experience and team leadership skills,
which have enabled him to provide effective leadership of Caledonia’s
management team in executing the board’s strategy. These skills will
be of continued value to the board as he moves to a non-executive
role following this year’s AGM.
Mathew Masters
Mathew joined Caledonia in 2006 with a broad role across the investment
Chief Executive Officer Designate
portfolio. He became Head of the Capital portfolio in 2010, before taking
on increased responsibility for the Income strategy in 2019 when he was
promoted to Head of Quoted Equity. Appointed as Chief Executive Officer
Designate in April 2022, he succeeds Will Wyatt as Chief Executive Officer
in July.
Mathew specialised in corporate finance before joining Caledonia,
helping small and mid-sized companies access private equity finance.
He has served on numerous private and public company boards.
A qualified accountant, he brings to the board investment expertise,
senior management, international business experience and leadership
skills to enable him to execute the board’s strategy.
1
2
3
62
4
5
6
7
Tim was appointed as Caledonia’s Chief Financial Officer in March 2019,
Chief Financial Officer
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
Jamie joined the Caledonia group in 1995, initially working at its Amber
Executive Director
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 Caledonia
Investments Charitable Foundation, the RHS Pension Scheme and Heritage
of London Trust and a non-executive director of Polar Capital Holdings and
Polar Capital Funds. He served as Chairman of The Henderson Smaller
Companies Investment Trust until October 2021.
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.
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.
The Hon Charles Cayzer
Having gained experience of merchant banking, commercial banking and
Non-Executive Director
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
Caledonia Investments plc Annual Report 2022
Committee membership key
A
Audit Governance Nomination Remuneration Committee chair
N
G
R
The Hon
Charles Cayzer
7
Guy
Davison
8
Anne
Farlow
9
Claire
Fitzalan Howard
10
Lynn
Fordham
11
Non-Executive
Director
N
Senior Independent
Non-Executive
A G N
Director
Independent
Non-Executive
A G N R
Director
Independent
Non-Executive
G N
Director R
Independent
Non-Executive
A G N
Director
Shonaid
Jemmett-Page
12
Independent
Non-Executive
A G N R
Director
companies, mostly in the property and hotels sectors. He is currently
Chairman of The Cayzer Trust Company and the Bedford Estates.
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.
Guy Davison
8
Appointed a non-executive director of Caledonia in January 2018, Guy is
Senior Independent Non-Executive Director
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.
Anne Farlow
9
Appointed a non-executive director of Caledonia in 2022, Anne is a
Independent Non-Executive Director
member of the Audit, Governance, Nomination and Remuneration
Committees. She will become Chairman of the Remuneration
Committee from 1 June 2022.
Anne is an experienced private equity professional and non-executive
director. She was a director at Electra Partners in London and Hong Kong
from 1992 to 2000, before joining Providence Equity Partners where
she was a London-based director until 2005. She has worked with
both established and early-stage companies during her private equity
and investment career across a range of different sectors and
jurisdictions. Based in Hong Kong since 2007, she is currently non-
executive chair of Pershing Square Holdings and a non-executive
director of Blue River Acquisition Corp.
Anne brings to the board extensive private equity and investment
experience in Europe, North America and Asia, enabling her to provide
constructive challenge across a broad range of the company’s
investments.
Claire Fitzalan Howard
10
Appointed a non-executive director of Caledonia in July 2019, Claire is a
Independent Non-Executive Director
member of the Governance, 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 held 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.
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.
Lynn Fordham
11
Appointed a non-executive director of Caledonia in 2022, Lynn is
Independent Non-Executive Director
a member of the Audit, Governance and Nomination Committees.
She will become Chairman of the Audit Committee on 27 July 2022.
Lynn, a chartered accountant, was most recently Managing Partner of
private investment firm Larchpoint Capital LLP, a position she held from
2017 to 2021. Prior to joining Larchpoint, Lynn was CEO of SVG Capital
for eight years having previously served as CFO. Before that she held
senior finance, risk and strategy positions at Barratt Developments,
BAA, Boots, ED&F Man, BAT and Mobil Oil. She also served as a
non-executive director of Fuller, Smith & Turner for seven years
until 2018, chairing its Audit Committee. Until recently she was a
Supervisory Board Member of Varo Energy BV and is currently
Chair of RMA-The Royal Marines Charity and a non-executive
director of Dominos Pizza Group and Enfinium.
Lynn brings to the board wide-ranging listed company, private
equity and finance experience across a range of sectors, the latter
being of particular importance to her future role as Chairman of the
Audit Committee.
Shonaid Jemmett-Page
12
Appointed a non-executive director of Caledonia in 2015, Shonaid is
Independent Non-Executive Director
Chairman of the Remuneration Committee and a member of the Audit,
Governance and Nomination Committees. She will step down from the
board at the end of May. 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 non-executive Chairman of Greencoat
UK Wind and Cordiant Digital Infrastructure and a non-executive
director of QinetiQ Group, Clearbank and Aviva.
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.
63
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Corporate governance report
The board considers that the company has complied with the UK
Statement of compliance
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 results, 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
Membership and attendance
and an additional two meetings were called at short notice.
Attendance of the directors was as follows:
Director
D C Stewart
W P Wyatt1
T J Livett
J M B Cayzer-Colvin
S J Bridges
Hon C W Cayzer2
G B Davison3
M A Farlow4
L R Fordham5
C L Fitzalan Howard
S C R Jemmett-Page6
Meetings
attended
10
9
10
10
10
9
9
1
2
10
9
Meetings
eligible
to attend
10
10
10
10
10
10
10
1
2
10
10
1. Mr Wyatt recused himself from one meeting at which his succession
was discussed.
2. The Hon C W Cayzer was unable to attend one meeting, which was
called at short notice when he had a pre-existing commitment.
3. Mr Davison recused himself from one meeting due to a potential
conflict of interest in respect of the matter to be discussed.
4. Ms Farlow was appointed as a director on 28 March 2022.
5. Ms Fordham was appointed as a director on 1 January 2022.
6. Mrs Jemmett-Page was unable to attend one board meeting, which
was called at short notice when she had a pre-existing commitment.
64
Caledonia Investments plc Annual Report 2022
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 for 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 62 and 63.
Following the appointment of Mr Masters as Chief Executive
Officer Designate on 1 April 2022, the board currently comprises
twelve directors. Excluding the Chairman, four of the directors are
executive and seven are non-executive. The board considers all
of the non-executive directors to be independent, other than
The Hon C W Cayzer, who was an executive director prior to
becoming non-executive.
The board will recommend the election of Mr Wyatt as a non-
independent non-executive director at this year’s AGM. Following
the resignation of Mrs Jemmett-Page before the expiry of her
third term in office in 2024, the board has asked Mr Bridges, an
independent non-executive director, to extend his tenure beyond
this year’s AGM. This will enable a search for a new independent
non-executive director to be completed without unnecessary time
pressure and give Ms Farlow, Ms Fordham and Mr Masters the
opportunity to fully settle into their new roles on the board and to
benefit from Mr Bridges’ experience before further changes are
made. The board recognises that service over nine years is one of
the circumstances set out in the Code that is considered likely to,
or could appear to, impair independence. However, following a
careful assessment, including feedback obtained as part of the
recent board evaluation process, the board has concluded that Mr
Bridges remains strongly independent in character and judgement.
It therefore believes that a short time bound extension of
his tenure until no later than the company’s AGM in 2023 is
appropriate. This will also enable the board to continue to satisfy
the expectation in the Code that at least half of the board’s
members, excluding the Chairman, are considered independent.
The board consulted Caledonia’s largest shareholders and major
investor representative bodies regarding this arrangement.
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 68 to 90.
The terms of reference of each committee are reviewed annually
and are available on the company’s website.
The board conducts an annual evaluation of its performance
Board performance evaluation
and that of its committees and, in accordance with good practice,
engages an independent third party facilitator to assist in this
process every three years. For the year ended 31 March 2022,
the evaluation of the board as a whole and of its committees was
undertaken internally, led by the Chairman, and was conducted
by inviting individual board members to complete questionnaires
regarding the operation and effectiveness of the board and its
committees, the analysis from which was collated by the
Company Secretary. The Chairman discussed this analysis
separately with each director.
The evaluation of the performance of the Chairman was led
by the Senior Independent Director and involved individual
discussions with the other members of the board, before
being discussed in a meeting of the non-executive directors.
The Chairman considered the performance of the non-executive
directors. The performance of the executive directors was
reviewed by the Chairman and the non-executive directors.
The results of the 2022 evaluation process were considered
by the board. The conclusion was that the board continued
to function well in an atmosphere of open and constructive
debate with a good breadth of skills, experience and viewpoints,
although it was agreed that:
»
»
»
further work to fully embed the company’s investment
approach to environmental, social and governance matters
was needed, building on the momentum already achieved
continued focus on succession planning activities was
necessary, including the successful delivery of the search
for a new independent non-executive director following
the resignation of Mrs Jemmett-Page
the refreshed strategy, following the appointment of
Mr Masters as Chief Executive Officer Designate, should
be concluded early into his tenure.
65
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 page 14.
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 for the board as a whole, as follows:
The Disclosure and Delegation 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. It also considers potential disclosure
matters as required. The Disclosure and Delegation Committee
meets when required and typically 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
other 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. 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
Head of Financial Planning & Analysis.
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 BDO LLP.
»
»
»
»
»
»
66
Caledonia Investments plc Annual Report 2022 As at 25 May 2022, 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 48.9% 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 25 May 2022, 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
25 May 2022
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
13
48
14
64
65
64
62
65
65
68
70
42
74
76
83
67
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Nomination Committee report
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
candidates to fill board vacancies as and when they arise,
using external search consultants where necessary, making
recommendations to the board in relation thereto and keeping
under review the leadership needs of the company, both executive
and non-executive.
The Committee reviews the time that is required of non-executive
directors and ensures they receive formal letters of appointment
setting out clearly the time commitment, committee service and
involvement outside board meetings that is expected from them.
Caledonia’s policy is to appoint candidates to roles based on merit
Diversity and inclusion
and against objective criteria. The Nomination Committee seeks
to ensure that directors bring a diverse mix of skills, experience,
perspectives, opinions and knowledge to the board, which facilitate
discussion and debate and enable the successful delivery of
strategy. It is committed to increasing diversity and inclusion
over time.
Whilst Caledonia has not adopted any measurable diversity
and inclusion objectives to date, external search consultants are
required to put forward diverse candidates for new positions.
The Nomination Committee also remains focused on achieving
the board composition targets set by the FTSE Women Leaders
Review and the Parker Review.
Detailed gender diversity analysis in respect of the board and
Caledonia more broadly is provided on page 50.
The Nomination Committee met on three occasions during the
Work of the Nomination Committee
year and the work undertaken included:
» consideration of a detailed skills, experience and diversity
matrix which sought to identify recruitment priorities based on
identified gaps and industry expectations and good practice
» facilitating a more diverse list of potential candidates during
the search for two non-executive directors by setting clear
objectives for the external search consultants and ensuring a
clear articulation of the company’s ongoing commitment to
improving diversity in role specifications
» consideration of the contributions and effectiveness of the
non-executive directors seeking re-election at the 2021 annual
general meeting, prior to giving recommendations to the board
and shareholders for their re-elections
» the renewal of Mr Davison’s and Mrs Jemmett-Page’s letters
of appointment, extending their terms of office to 2024
» the appointment of Mrs Fitzalan Howard as a member of the
Governance Committee
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
M A Farlow1
L R Fordham1
C L Fitzalan Howard
S C R Jemmett-Page2
W P Wyatt3
Meetings
attended
3
3
3
3
-
-
3
2
1
Meetings
eligible
to attend
3
3
3
3
-
-
3
3
3
1. No meetings took place in the period following the appointment
of Ms Farlow and Ms Fordham as members of the Committee on
28 March and 1 January 2022 respectively.
2. Mrs Jemmett-Page was unable to attend one committee meeting,
which was convened at short notice, due to a pre-existing commitment.
3. Mr Wyatt recused himself from two committee meetings at which his
own succession was discussed.
Further information on the Nomination
Committee’s terms of reference
www.caledonia.com
68
Caledonia Investments plc Annual Report 2022
The Committee engaged Odgers, Nurole and Lutyens Advisory
External consultants
in connection with the two non-executive director searches
conducted during the year. The appointments of Ms Fordham and
Ms Farlow were completed by Odgers and Lutyens respectively.
Odgers has advised the company regarding previous senior
appointments. None of the firms had had any other connection.
David Stewart
Chairman of the Nomination Committee
25 May 2022
» the implementation of the company’s medium and long-term
executive succession plan, which seeks to promote internal
talent and led to the selection of Mr Masters as Mr Wyatt’s
successor as Chief Executive
» the appointment of Mr Wyatt as a non-independent non-
executive director following his retirement as Chief Executive
» two new non-executive director searches, which concluded
with the appointment of Ms Fordham and Ms Farlow
» the appointment of Ms Fordham as a member of the Audit,
Governance and Nomination Committees and as chairman
elect of the Audit Committee ahead of Mr Bridges stepping
down from the role
» the appointment of Ms Farlow as a member of the Audit,
Governance, Nomination and Remuneration Committees.
Since the year end, the Nomination Committee considered the
extension of Stuart Bridges’ tenure as an independent non-
executive director, beyond nine years for an additional period of
up to twelve months following the decision of Mrs Jemmett-Page
to step down ahead of the end of her third term of office in 2024.
This extension was deemed to be important to:
» enable the search for a suitable replacement for Mrs Jemmett-
Page to be conducted without unnecessary time pressure
and, importantly, ensure that at least half the board remains
independent
» give an appropriate period of time for Ms Fordham, Ms Farlow
and Mr Masters to become fully embedded on the board and
to benefit from Mr Bridges’ experience before further changes
are made.
The Nomination Committee and board recognises that service over
nine years is one of the circumstances set out in the UK Corporate
Governance Code that is considered likely to, or could appear to,
impair independence. However, following a careful assessment,
including feedback obtained as part of the 2022 board evaluation
process, the board concluded that Mr Bridges remains strongly
independent in character and judgement. A short time bound
extension of his tenure until no later than the company’s annual
general meeting in 2023 was therefore recommended by the
Nomination Committee. The extension of Mr Bridges’ tenure will
mean that the representation of women on the board will fall to
27 per cent, slightly below the expected one-third, for a time.
Caledonia’s largest shareholders and investor representatives
were consulted.
69
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction 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
M A Farlow1
L R Fordham2
S C R Jemmett-Page
Meetings
attended
3
3
1
1
3
Meetings
eligible
to attend
3
3
1
1
3
1. Ms Farlow was appointed as a member on 28 March 2022.
2. Ms Fordham was appointed as a member on 1 January 2022.
Further information on the Audit
Committee’s terms of reference
www.caledonia.com
70
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 and sector
experience, met three times in the year ended 31 March 2022,
in May and November 2021 and in March 2022. After the year
end, it met in May 2022 in respect of matters relating to the 2022
annual report and financial statements.
Lynn Fordham and Anne Farlow were appointed as members
of the Audit Committee on 1 January 2022 and 28 March 2022
respectively. Lynn Fordham will succeed Stuart Bridges as chair
of the Committee on 27 July 2022.
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, BDO LLP
(‘BDO’) also attended all meetings. KPMG LLP (‘KPMG’), the
company’s former external auditor, attended the May 2021
meeting. Members of the Audit Committee held a separate
discussion with KPMG’s audit partner at the end of this meeting
without management present. Following BDO’s appointment as
independent auditor in July 2022, the Committee also held a
separate discussion with BDO’s audit partner at the end of each
meeting without management participation. 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 2021 was the 2021
annual report and financial statements and the 2022 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 2021 the Audit Committee considered management’s
planned approach to meeting the requirements of the European
Single Electronic Format.
The March 2022 meeting considered BDO’s audit plan and strategy
for the 2022 annual report and considered the accounting
treatment of deferred tax.
During its May 2022 meeting, the Audit Committee reviewed
the form and content of the 2022 annual report and financial
statements, including reporting in respect of the Task Force on
Climate-related Financial Disclosures. 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
Caledonia Investments plc Annual Report 2022
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 and, as
requested by the board, compliance with the annual report’s ‘fair,
balanced and understandable’ provisions of the UK Corporate
Governance Code. The Audit Committee recommended approval
of the 2022 annual report to the board.
The significant issue the Audit Committee considered in relation
to the 2022 financial statements was the valuation of unlisted
investments. The key inputs into the valuation of Private Capital
businesses were considered, including the broad range of factors
impacting market multiples utilised in the valuation process.
Private equity fund valuations were also debated, with particular
focus on the potential impact of current inflationary pressures and
the conflict in Ukraine, both of which have contributed to increased
volatility in public markets, on valuations reported by third party
private equity fund managers on, or before, 31 December 2021.
This resulted in the Committee seeking additional supporting
information from management on the composition of assets
within the Funds pool, with particular focus on the processes used
to assess the reasonableness of fund manager valuations and the
methodologies applied. In addition, following feedback from the
Committee, the company’s March NAV and portfolio update
announcement was enhanced to give greater prominence to
the dates of fund manager valuations.
Unlisted valuations
The Audit Committee recognises that unlisted investments are
a significant component of the company’s assets and that their
valuation is subject to considerable judgement and uncertainty.
The Chairman of the Audit Committee, together with BDO’s audit
partner, attended the Valuation Committee meetings and reported
to the Audit Committee on the quality of the review, adherence
to the company’s valuation policy and consistency of valuation
methodologies over time. Lynn Fordham, who will succeed
Stuart Bridges as Committee chair, also attended the Valuation
Committee meeting at which unlisted investments as at 31 March
2022 were considered to ensure an orderly transition.
Going concern and viability
The directors are required to make a statement in the annual report
as to going concern and 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 going concern and viability statements. This report was
based on the group’s base case of forecast liquidity over three years
to May 2025, developed from the corporate financial plan. The base
case was subject to two stress tests. The first stress test included
four scenarios: a 10% reduction in the value of the US dollar against
Sterling; a 20% reduction in investment income; a 25% reduction
in the level of distributions from fund investments; and a 25% fall in
the anticipated value of realisations in the Private Capital portfolio.
A combination of all four of these scenarios was also applied.
The second stress test built on the combination of all the scenarios
from the first stress test and applied the early settlement of all
outstanding 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 going
concern and viability statements 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 46.
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 95, should be signed accordingly.
Internal control and risk management
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.
During the year the Audit Committee reviewed the Investment
and Operational Risk Dashboards prepared by management
identifying the principal business risks impacting the company,
together with the mitigating controls in operation and actions
identified for continuous improvement.
The Audit Committee considered the effectiveness of the
company’s internal control environment and the structure in
place to resolve identified weaknesses. BDO’s internal control
observations arising from its interim review, together with
management’s responses, were also assessed. The Audit
Committee reviewed reports on internal controls, including an
appraisal of accounting processes associated with the company’s
general ledger and bank reconciliations and a report from
management regarding an attempted supplier fraud. The approach
to governance and the control environment of investee companies
within the Private Capital pool was also subject to review.
A comprehensive update on cyber security, disaster recovery
and information technology matters was also provided to the
Committee which included improvements made during the year
and the planned roadmap for further developments during the
next twelve months.
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, with each business operating its own risk
management processes. The company closely monitors
its control environment and those of its private company
investments. The Audit Committee recommended to the
board that an internal audit function was not required.
71
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Auditor
BDO was appointed auditor in 2021, replacing KPMG following
the conclusion of a comprehensive tender process. The lead
audit partner is required to rotate every five years and
other key audit engagement partners every seven years.
No contractual obligations restrict the Audit Committee’s
choice of external auditor.
BDO’s transition planning activities were reviewed in detail
by the Audit Committee in the year ended 31 March 2021.
To facilitate an orderly transition, BDO shadowed KPMG during
its audit of the company’s 2021 annual report and financial
statements. BDO completed a comprehensive knowledge
gathering exercise, providing regular updates to the Committee.
Resolutions to re-appoint BDO 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 27 July 2022.
Private meetings
During the year, the Chairman of the Audit Committee met
separately and privately with the Chief Financial Officer, KPMG
and BDO.
Statement of compliance
This report has been prepared in compliance with the Competition
and Markets Authority 2014 Order on statutory audit services for
large companies.
Stuart Bridges
Chairman of the Audit Committee
25 May 2022
Audit Committee report (continued)
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 external auditor’s staff
»
»
the appropriateness of the planned audit methodology
as applied to Caledonia’s business activity
the level of challenge and professional scepticism displayed,
together with the quality of reporting to the Audit Committee.
The effectiveness of the audit is assessed throughout the year
using several measures, including but not limited to:
»
review and approval of the scope of the planned audit and
delivery against plan
»
the identification of control improvements
»
the monitoring of the independence of the external auditor.
At the November 2021 meeting, the Audit Committee discussed
the Financial Reporting Council’s (‘FRC’) Audit Quality Inspection
and Supervision Report of BDO, published in July 2021, and sought
assurances from the audit partner regarding BDO’s response to
the findings.
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 and its successor BDO, 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 2019. Certain non-audit services are prohibited.
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 2022, the total fees for
non-audit services were £148,000 (24.9% of the total audit fees),
the majority of which related to BDO’s independent review of the
company’s half-year report. The balance was incurred by Seven
Investment Management in connection with regulatory reporting
requirements and a covenant compliance report. These services
were closely related to the work performed by BDO during the
audit or required by law or regulation. Further analysis is provided
in note 2 to the financial statements on page 113.
72
Caledonia Investments plc Annual Report 2022 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
M A Farlow1
C L Fitzalan Howard2
L R Fordham3
S C R Jemmett-Page
Meetings
attended
2
2
-
1
-
2
Meetings
eligible
to attend
2
2
-
1
-
2
1. Ms Farlow was appointed as a member on 28 March 2022.
2. Mrs Fitzalan Howard was appointed as a member on 21 July 2021.
3. Ms Fordham was appointed as a member on 1 January 2022.
Further information on the Governance
Committee’s terms of reference
www.caledonia.com
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 included:
»
»
»
»
the review and approval of the Corporate governance and
Governance Committee reports for the year ended 31 March
2021
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 67, 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
»
its membership and terms of reference.
Guy Davison
Chairman of the Governance Committee
25 May 2022
73
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 2022.
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)
M A Farlow1
C L Fitzalan Howard
D C Stewart
Meetings
attended
3
-
3
3
Meetings
eligible
to attend
3
-
3
3
1. Ms Farlow was appointed as a member on 28 March 2022.
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 76 to
82 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 remains cognisant of debate within the investor
community around executive pay and regularly monitors good
practice.
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. Regular reporting
to the board also provides us with wide-ranging staff analysis
including attrition rates, promotion decisions and training and
development. We continue to review gender pay gap analysis to
ensure Caledonia maintains equal pay for work of equal value.
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 88 and 89.
As announced in November 2021, Will Wyatt retires as Caledonia’s
Changes to the board during the year
Chief Executive at the annual general meeting on which date his
employment will cease. He will be succeeded by Mathew Masters,
who joined the board as Chief Executive Officer Designate on
1 April 2022. The board has invited Will to serve as a non-
independent non-executive director of the company, subject
to his re-election as a director by shareholders.
Will Wyatt’s service agreement provides for a twelve month
notice period. The Committee has agreed with Will that he will not
receive a payment in lieu of any unserved notice period, have no
entitlement to a pro-rated bonus to reflect his employment during
the 2023 financial year or receive a further performance share plan
award. The Committee has determined that he will be a ‘good
leaver’ under the performance share scheme and deferred bonus
plan rules on his retirement, meaning that he will be entitled to
retain his unvested long term incentive awards subject to applicable
performance conditions, albeit reduced to reflect the proportion of
such performance periods that he is in employment. Due to Will’s
‘good leaver’ status under the company’s share plans, his bonus for
the 2022 financial year will be paid in cash with no compulsory
deferral. Full details of the arrangements for Will’s retirement are
set out in this year’s Annual report on directors’ remuneration.
74
Caledonia Investments plc Annual Report 2022 The Committee has approved a base salary of £450,000 for
Mathew Masters. Mat, who has an existing service contract dated
15 May 2008, will also receive a maximum bonus opportunity of
100% of salary (of which any amount in excess of 50% of salary
will be compulsorily deferred for three years under the company’s
deferred bonus plan), an annual award of 150% of basic salary
under the company’s performance share scheme and, consistent
with all Caledonia’s staff, a pension entitlement of 15% of salary.
The terms of both Will’s retirement and Mat’s promotion are in
accordance with the company’s remuneration policy.
The annual report on directors’ remuneration set out on pages
Remuneration for the year ended 31 March 2022
83 to 90 describes in detail how our remuneration policy has
been applied for the year ended 31 March 2022. 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 27.9% outperforming the increase in the Retail Prices
Index (‘RPI’), taken for bonus purposes as the higher of actual RPI
over the bonus year (being 9%) or 3.0%. This triggered the
maximum bonus in respect of company performance. The Funds
pool achieved a total return over the year of 32.1% 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 100% of basic salary. Half of
the bonuses paid to Tim Livett and Jamie Cayzer-Colvin will be
deferred into shares for a period of three years.
Performance share scheme awards
The performance share scheme awards granted in 2017 (measured
over five years) and the first one-third of the awards granted in
2019 (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 10.7% for the 2017 awards and
13.9% for the 2019 awards, giving full vesting. The Funds pool’s
annualised total return (relevant for 60% of Jamie Cayzer-Colvin’s
awards) for the five and three year periods was 17.6% and 21.9%,
meaning that this portion of his 2017 and 2019 awards also vested
in full. Further details of the vesting scales for these awards can be
found on page 87. The Remuneration Committee considers that
these performance outcomes are appropriate.
The remaining two-thirds of the 2019 performance share scheme
awards will be tested in March 2024.
Looking ahead to the 2023 financial year, Tim Livett’s and Jamie
Remuneration for the year ending 31 March 2023
Cayzer-Colvin’s basic salaries have been increased with effect from
1 April 2022 by 5%, broadly in line with inflation, which was the
same as the standard increase given to all of the company’s staff.
Will Wyatt, who will step down as Chief Executive at the company’s
annual general meeting in July, has not received a pay increase.
The Chairman’s and the non-executive directors’ fees have been
unchanged since 2017 and 2014 respectively. The Chairman’s fee
with effect from 1 April 2022 has been increased by 10%, with the
basic non-executive directors’ fee increased by 12.8%. These
increases remain below the compounded inflationary increase
applied to staff salaries since they were last reviewed and remain
below relevant benchmark data. Increases have also been made
to the fees paid to the chairs and members of the Audit and
Remuneration Committees due to the notable increase in time
commitment required by service on these committees since the
fees were last reviewed.
We plan to make performance share plan awards to Mathew
Masters, Tim Livett and Jamie Cayzer-Colvin following the release
of our 2022 full year results, in line with our normal grant cycle.
These awards will be subject to the same performance measures
used for the 2021 award grants, which are summarised in the notes
to the remuneration policy table on page 87. Compulsory deferred
bonus awards for Mat, Tim and Jamie for the 2022 bonus received
in excess of 50% of base salary will also be made at the same time.
Remuneration Committee membership
Anne Farlow, an independent non-executive, joined the
Remuneration Committee in March 2022. Anne will succeed me as
Chairman when I step down from the board at the end of May, ably
supported by David Stewart and Claire Fitzalan Howard, who have
served as members of the Committee since March 2015 and July
2019 respectively.
Shonaid Jemmett-Page
Chairman of the Remuneration Committee
25 May 2022
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’s staff and are consistent with Caledonia’s purpose,
values and strategy.
75
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 2022 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 the
Objectives
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
76
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 2022 financial year were: W P Wyatt: £540,000;
T J Livett: £390,250; J M B Cayzer-Colvin: £349,000.
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 2022
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
77
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
78
Caledonia Investments plc Annual Report 2022 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.
79
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 £600,000.
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 2022
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
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.
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
80
Caledonia Investments plc Annual Report 2022
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
M S D Masters1
T J Livett
J M B Cayzer-Colvin
Date of
contract
2 Jun 2005
15 May 2008
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
12 months
12 months
1. Mr Masters was appointed as a director and Chief Executive Officer
Designate on 1 April 2022.
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.
81
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
82
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 2022 Directors’ remuneration report
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 2022
and describes how Caledonia’s remuneration policy will be implemented for the 2023 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 2022
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
2022
£’000
540
22
71
633
540
1,120
1,660
2,294
2021
£’000
540
23
71
634
459
803
1,262
1,896
T J Livett
2022
£’000
2021
£’000
390
7
51
449
390
247
638
1,087
384
7
51
442
346
–
346
788
J M B Cayzer-Colvin
2022
£’000
349
24
46
419
349
684
1,033
1,452
2021
£’000
344
22
45
411
309
526
835
1,246
Due to rounding, individual rows do not necessarily add up to the total.
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:
W P Wyatt
2021
2022
£’000
£’000
T J Livett
2022
£’000
2021
£’000
J M B Cayzer-Colvin
2021
£’000
2022
£’000
–a
540
540
189
270
459
154
195
195
192
390 346
175
175
350
137
172
309
Compulsorily
deferred
Cash
Totalb
a. Mr Wyatt’s 2022 bonus will not be subject to compulsory deferral as
any award made to him would vest and be exercisable on his retirement
on 27 July 2022 in any event.
b. Due to rounding, individual rows do not necessarily add up to the total.
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
2022 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 well 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 succession
planning, 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 27.9% over the year against an increase in RPI
(for bonus purposes) of 9%, giving a 100% payment for company performance.
The Funds pool’s return over the year was 32.1% on a constant currency basis
(38.3% 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% of salary for attainment of pool objectives. It further
decided that Mr Cayzer-Colvin’s team leadership and broader 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 succession planning,
development of approach to responsible investment, shareholder
engagement, development and execution of the board’s strategy, the
ongoing development of systems and controls (including those with respect
to information technology), reporting improvements, 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
50
n/a
50
n/a
50
n/a
50
n/a
n/a
50
100
n/a
50
100
n/a
50
100
n/a
50
100
25
25
35
15
100
25
25
35
15
100
83
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 2017
under the performance share scheme and one-third of the awards granted
under that scheme in 2019. 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 2022
and the previous year were as follows:
Fees
2022
£’000
150
46
45
47
–
42
11
47
2021
£’000
150
46
45
47
–
42
–
47
Taxable
expenses4
2022
£’000
–
–
–
–
–
–
–
–
2021
£’000
–
–
–
–5
–
–
–
–
Total6
2022
£’000
150
46
45
47
–
42
11
47
2021
£’000
150
46
45
48
–
42
–
47
D C Stewart
S J Bridges
Hon C W Cayzer1
G B Davison
M A Farlow2
C L Fitzalan Howard
L R Fordham3
S C R Jemmett-Page
1. The Hon C W Cayzer receives an additional fee of £5,000 per annum in
respect of his services as a trustee of the Caledonia Pension Scheme.
2. Ms Farlow was appointed as a director on 28 March 2022. No fee was
payable in March.
3. Ms Fordham was appointed as a director on 1 January 2022.
4. 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.
5. Mr Davison incurred a taxable expense during the year in connection
with travel to a meeting with a total cost, including tax, of £225.
6. Due to rounding, amounts stated 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
2022
£
–
–
2021
£
–
–
Total
Cash supplement
2021
£
2022
£
2021
£
71,178 71,178 71,178 71,178
51,439 50,668 51,439 50,668
2022
£
–
– 46,002 45,303 46,002 45,303
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.
The 2017 and 2019 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 2017 performance share scheme awards measured over the five
years to 31 March 2022, Caledonia’s annualised NAVTR over the period was
10.7%, resulting in 100% vesting. For Mr Cayzer-Colvin’s award measured by
reference to his pool’s performance, the Funds pool delivered an annualised
total return of 17.6% over the period, resulting in 100% vesting.
For the 2019 performance share scheme awards measured over the three
years to 31 March 2022, Caledonia’s annualised NAVTR over the period was
13.9%, resulting in 100% vesting. For Mr Cayzer-Colvin’s award measured by
reference to his pool’s performance, the Funds pool delivered an annualised
total return of 21.9% over the period, resulting in 100% vesting.
The awards granted in 2017, following performance testing, will vest on
21 July 2022. The awards granted in 2019, also following performance testing,
will vest on 30 May 2022. The values, as reflected in the 2022 long term
incentives column above, are calculated using the three-month average share
price to 31 March 2022 of 3654p, 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:
Estimated
value of
long-term
incentive
awards at
vesting
£
1,014,570
235,427
619,718
Value of
dividend
equivalents
at vesting
£
105,897
11,900
64,410
Estimated
total
at vestinga
£
1,120,467
247,327
684,128
W P Wyatt
T J Livett
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 2017 and 2019, based on the three-month average share price to
31 March 2022, was £220,075 for Mr Wyatt, £47,936 for Mr Livett and
£134,358 for Mr Cayzer-Colvin. No discretion was exercised by the
Remuneration Committee in respect of share price appreciation.
The 2021 figures shown in the long-term incentives and total columns above
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 £734,753 for Mr Wyatt and £481,717
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
£
732,724a
480,523b
Value of
dividend
equivalents
at vesting
£
70,061
45,816
Total
at vestingc
£
802,784
526,339
W P Wyatt
J M B Cayzer-Colvin
a. 15,665 shares granted in 2016 vested on 26 May 2021. The mid closing
price was 3018p per share. 8,585 shares granted in 2018 vested on
30 May 2021. The mid closing price on 28 May 2021, being the last
dealing date before vesting, was 3028p.
b. 10,197 shares granted in 2016 vested on 26 May 2021. The mid closing
price on this date was 3018p per share. 5,706 shares granted in 2018
vested on 30 May 2021. The mid closing price on 28 May 2021,
being the last dealing date before vesting, was 3028p.
c. Due to rounding, individual columns do not necessarily add up
to the total column.
84
Caledonia Investments plc Annual Report 2022
The table below sets out the awards made to each executive director during the year under the performance share scheme
Scheme interests awarded during the financial year (audited)
and deferred bonus plan.
Scheme
W P Wyatt
Performance Share Scheme
Deferred Bonus Plan
Total scheme interests awarded
T J Livett
Performance Share Scheme
Deferred Bonus Plan
Total scheme interests awarded
J M B Cayzer-Colvin
Performance Share Scheme
Deferred Bonus Plan
Type of award
Basis of award
Nil-cost option 150% of salary
% of bonus in
Compulsory
excess of 50%
award, nil-
of salary
cost option
Nil-cost option 150% of salary
% of bonus in
Compulsory
excess of 50%
award, nil-
of salary
cost option
Nil-cost option 150% of salary
% of bonus in
Compulsory
excess of 50%
award, nil-
of salary
cost option
Face
value of
award
£’000
Share
price at
grant
Shares
comprised
in award
number1
Date of
grant
Receivable if
minimum
performance
achieved
%2
End of
performance
period
04.06.21
04.06.21
810 3102.5p
189 3102.5p
26,108
6,092
10
100
31.03.26
31.03.24
999
04.06.21
04.06.21
585 3102.5p
154 3102.5p
739
04.06.21
04.06.21
523 3102.5p
137 3102.5p
32,200
18,868
4,956
23,824
16,873
4,431
10
100
31.03.26
31.03.24
10
100
31.03.26
31.03.24
Total scheme interests awarded
660
21,304
1. The number of shares comprised in the awards under the performance share scheme and the deferred bonus plan 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 87.
Compulsory awards under the deferred bonus plan are subject to a continued service condition only.
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
Position
Non-executive director,
Premier Marinas Holdings
J M B Cayzer-Colvin1 Non-executive Chairman,
The Henderson Smaller
Companies Investment Trust
1. Mr Cayzer-Colvin retired from this position on 1 October 2021.
Fees
2022
£’000
37.5
2021
£’000
37.5
19.3
35.0
Mr King exercised all of the vested 2016 and 2018 performance
share scheme awards over 5,987 and 1,367 shares respectively on
3 June 2021. Both awards were subject to performance testing as
at 31 March 2021 and vested in May 2021, at a total pre-tax value
of £252,062, including £23,352 in respect of dividend equivalents.
Mr King’s pro-rated entitlement to a performance share scheme
award made in 2017 was subject to performance testing as at
31 March 2022. 4,418 shares will vest on 21 July 2022.
85
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Statement of directors’ shareholdings and scheme
Statement of directors’ minimum shareholding guidelines
interests (audited)
Executive directors’ minimum shareholding guidelines are set out
on page 82. Both Mr Wyatt and Mr Cayzer-Colvin have attained the
minimum guideline shareholding as at 31 March 2022. Mr Livett,
who joined the company in 2019, has begun to meet the
guidelines. The values of the relevant shareholdings of each
executive director as at 31 March 2022, calculated by reference
to Caledonia’s closing share price on that date of 3540p, and the
percentage level by which the value of the minimum guideline
shareholding has been achieved were as follows:
W P Wyatt
T J Livett
J M B Cayzer-Colvin
Value of
shareholding
£m
41.9
0.6
9.3
Attainment
of guideline
%
3883
36
1785
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 2022 were as follows:
Beneficial
Non-beneficial
D C Stewart
W P Wyatt1
T J Livett
J M B Cayzer-Colvin1
S J Bridges
Hon C W Cayzer1
G B Davison
M A Farlow2
L R Fordham3
C L Fitzalan Howard
S C R Jemmett-Page
2022
number
4,072
2021
number
4,072
1,163,152 1,149,317
–
374,913
5,309
41,092
8,100
n/a
n/a
2,000
1,000
–
250,024
5,309
41,092
8,100
–
–
2,000
1,000
2022
number
–
91,467
–
203,384
–
15,500
–
–
–
–
–
2021
number
–
80,038
–
150,273
–
15,500
–
n/a
n/a
–
–
1. Mr Wyatt’s beneficial interests included 1,009,898 shares (2021:
1,009,898 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 (2021: 1,000 shares). His non-beneficial interests
included 14,500 shares (2021: 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 (2021: 5,200 shares) in which Mr Wyatt
and Mr Cayzer-Colvin had non-beneficial interests.
2. Ms Farlow was appointed as a director on 28 March 2022.
3. Ms Fordham was appointed as a director on 1 January 2022.
There have been no changes in the directors’ interests shown
above notified up to the date of this report.
Directors’ remuneration report (continued)
Annual report on directors’ remuneration
William Wyatt will retire as Chief Executive at the Company’s
Payments for loss of office (audited)
annual general meeting on 27 July 2022 on which date his
employment will cease. The board has invited him to serve
as a non-independent non-executive director subject to
re-election by shareholders.
Mr Wyatt is employed under a service agreement dated
2 June 2005 which provides for a twelve month notice period.
The Committee has agreed with him that he will not receive
a payment in lieu of any unserved notice period, have no
entitlement to a pro-rated bonus to reflect his employment
during the 2023 financial year or receive a performance share
plan award for the 2023 financial year.
Mr Wyatt’s award under the deferred bonus plan, being
compulsorily granted in 2021 over 6,092 shares, will vest in full
on his retirement date. Share awards under the performance
share scheme outstanding on 27 July 2022 will continue and be
capable of vesting on the scheduled vesting dates, subject to their
applicable performance conditions, but will be reduced to reflect
the proportion of such performance period that Mr Wyatt was in
employment. The two-year holding period will continue to apply
to the portion of performance share scheme awards granted
in 2020 and 2021 that are subject to three year performance.
Mr Wyatt’s bonus for the 2022 financial year will be paid in cash
with no compulsory deferral as any award made to him under the
terms of the deferred bonus plan would vest and be exercisable
on his retirement on 27 July 2022 in any event.
Any amounts received by Mr Wyatt in respect of future exercises
of deferred bonus plan and performance share scheme awards,
will be disclosed in the Annual report on directors’ remuneration
for the year in which the exercise occurs.
In line with Caledonia’s post-cessation shareholding requirements,
Mr Wyatt will continue to hold the minimum guideline
shareholding for two years.
There were no other payments made for loss of office during
the year.
86
Caledonia Investments plc Annual Report 2022 Directors’ share scheme interests
The interests of directors as at 31 March 2022 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 21.07.17 (nil-cost)
Granted 30.05.18 (nil-cost)
Granted 30.05.19 (nil-cost)
Granted 04.08.20 (nil-cost)
Granted 04.06.21 (nil-cost)
Performance share scheme total
Deferred bonus plan – compulsory awards4
Granted 30.05.19 (nil-cost)
Granted 04.06.21 (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
2837p
2705p
2910p
2640p
3102.5p
2910p
3102.5p
–
19,963
18,557
30,682
26,108
95,310
–
–
–
95,310
18,488
–
9,278
–
–
27,766
–
6,092
6,092
33,858
–
–
–
–
–
–
7,560
–
7,560
7,560
Total
18,488
19,963
27,835
30,682
26,108
123,076
7,560
6,092
13,652
136,728
During the year, Mr Wyatt exercised performance share scheme awards over a total of 24,250 shares at a pre-tax gain of £826,925 plus an additional sum of
£70,061 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)
Granted 04.06.21 (nil-cost)
Performance share scheme total
Deferred bonus plan – compulsory awards4
Granted 04.06.21 (nil-cost)
Deferred bonus plan total
Total share scheme interests
Performance share scheme awards
Granted 21.07.17 (nil-cost)
Granted 30.05.18 (nil-cost)
Granted 30.05.19 (nil-cost)
Granted 04.08.20 (nil-cost)
Granted 04.06.21 (nil-cost)
Performance share scheme total
Deferred bonus plan – compulsory awards4
Granted 30.05.19 (nil-cost)
Granted 04.06.21 (nil-cost)
Deferred bonus plan total
Total share scheme interests
2910p
2640p
3102.5p
3102.5p
2837p
2705p
2910p
2640p
3102.5p
2910p
3102.5p
12,887
21,841
18,868
53,596
–
–
53,596
–
12,088
11,520
19,528
16,873
60,009
–
–
–
60,009
6,443
–
–
6,443
4,956
4,956
11,399
11,200
–
5,760
–
–
16,960
–
4,431
4,431
21,391
–
–
–
–
–
–
–
–
–
–
–
–
–
5,619
–
5,619
5,619
19,330
21,841
18,868
60,039
4,956
4,956
64,995
–
11,200
12,088
17,280
19,528
16,873
76,969
5,619
4,431
10,050
87,019
During the year, Mr Cayzer-Colvin exercised performance share scheme awards over a total of 15,903 shares at a pre-tax gain of £542,292 plus an additional sum
of £45,816 in respect of dividend equivalents.
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 30 May 2018, 30 May 2019,
4 August 2020 and 4 June 2021, 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 21 July 2017, shown as vested but
unexercised, were performance tested against their relevant target as at
31 March 2022 and achieved a vesting level of 100% 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 2019, 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 100% 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.
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.
87
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 2022. 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
360
320
280
240
200
160
120
80
2012
2014
2016
2018
2020
2022
The table below shows the total remuneration received by the
Chief Executive in each of the ten years to 31 March 2022,
prepared on the same basis as in the single total figure in the table
on page 83, and the percentage of the maximum potential short
and long-term incentives received in those years.
Years ended
31 March
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
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
1,077
1,196
2,285
1,648
1,799
1,795
1,864
805
1,8961
2,294
Short-term
%
100.0
100.0
100.0
45.0
100.0
40.0
90.7
–
85.0
100.0
Long-
term %
–
10.1
100.0
100.0
85.0
84.7
94.7
20.9
87.9
100.0
The per capita percentage increase in basic salary for staff shown
in the table is higher than the standard award of 1.5% from 1 April
2021 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 2022 financial year. The increase in respect of Ms Fordham’s
fees reflect service during her first year since appointment.
Further details can be found on page 84. 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 each awarded
bonuses of 100%, based on company performance and individual
objectives, compared with bonuses of 85%, 90% and 90%
respectively 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.
2022
Taxable
benefits/
expenses
%
Basic
salary/
fees
%
Short-
term
incentives
%
Basic
salary/
fees
%
2021
Taxable
benefits/
expenses
%
Short-
term
incentives
%
8.9
–
–
–
–
–
1.5
(4.1)
22.8
Executive directors
W P Wyatt
T J Livett
J M B
1.5
Cayzer-Colvin
Chairman and non-executive directors
D C Stewart
S J Bridges
Hon C W
Cayzer
G B Davison
M A Farlow
L R Fordham
C L Fitzalan
Howard
S C R
Jemmett-Page
Staff per capita (excluding directors)
–
(100)
–
–
–
–
–
100
–
–
–
–
17.7
12.8
12.8
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4.0
7.5
22.9
–
2.5
2.5
–
–
6.6
3.5
n/a
n/a
43.8
2.2
7.4
12.9
23.6
6.2
–
–
–
100
n/a
n/a
–
–
100
100
100
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
5.2
157.5
1. Restated from last year’s single total figure table to reflect the company’s
share price on the vesting date of the 2016 and 2018 performance share
scheme awards.
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 2022 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.
Pay ratio information in relation to the total remuneration
With fewer 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 83, against the lower
quartile, median and upper quartile total remuneration of the
company’s employees as at 31 March 2022. 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
88
Caledonia Investments plc Annual Report 2022 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.
Year
2019
2020
2021
2022
Pay ratios
P25
(lower
quartile)
32:1
13:1
14:1
12:1
30:1
12:1
42.1
12.1
P50
(median)
13:1
6:1
9:1
7:1
15:1
7:1
19.1
7.1
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)
6.1 Total remuneration (£’000)
4.1 Salary only (£’000)
Methodology
Option A
Salary only
Option A
Salary only
Option A
Salary only
Option A
Salary only
Remuneration values
Chief
Executive
1,864
540
814
540
1,828
540
2,294
540
P25
(lower
quartile)
58
42
57
46
61
46
54
45
P50
(median)
140
88
94
73
122
78
122
76
P75
(upper
quartile)
403
150
217
144
329
138
392
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
2022
2021
£m
80
60
40
20
0
27.5%
76.9%
£92.8m
£62.1m
£35.1m
£24.1m
£18.9m
£38.2m
Personnel expenses
Dividends/share purchases
Statement of implementation of remuneration policy
The company expects to operate the remuneration policy as
in the 2023 financial year
described on pages 76 to 82 without any changes in the financial
year ending 31 March 2023.
Basic salaries of executive directors
In respect of the 2023 financial year, the Remuneration Committee
has awarded an inflation-based increase in basic salary of 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 2023 financial year are
as follows:
W P Wyatt1
M S D Masters2
T J Livett
J M B Cayzer-Colvin
Salary for year to 31 March
2022
£
540,000
n/a
390,250
349,000
2023
£
540,000
450,000
410,000
366,500
1. Mr Wyatt retires as Chief Executive on 27 July 2022.
2. Mr Masters was appointed as a director and Chief Executive Officer
Designate on 1 April 2022.
89
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
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, 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.
At the annual general meeting of the company held on 21 July
Statement of voting at general meetings
2021, the votes lodged for the resolution relating to directors’
remuneration were as follows.
Number
%
To approve the 2021 Directors’ remuneration
report (other than the directors’
remuneration policy)
Votes in favour
Votes against
Total votes cast
Votes withheld
35,602,646
65,040
35,667,686
113,434
99.8
0.2
The votes lodged for the most recently approved remuneration
policy, being at the annual general meeting held on 29 July 2020
were as follows:
To approve the remuneration policy
Votes in favour
Votes against
Total votes cast
Votes withheld
Number
34,981,912
67,692
35,049,604
20,016
%
99.8
0.2
This report was approved by the board on 25 May 2022 and signed
on its behalf by:
Shonaid Jemmett-Page
Chairman of the Remuneration Committee
Directors’ remuneration report (continued)
Annual report on directors’ remuneration
Chairman’s and non-executive directors’ fees
The Chairman’s and the non-executive directors’ fees, which have
been unchanged since 2017 and 2014 respectively, have been
increased with effect from 1 April 2022. The Chairman’s fee has
been increased by 10% and the basic non-executive directors’ fee
had been increased by 12.8%. These increases remain below the
compounded inflationary increase applied to staff salaries since
they were last reviewed and remain below relevant benchmark
data. Increases have also been made to the fees paid to the chairs
and members of the Audit and Remuneration Committees due to
the notable increase in time commitment required by service on
these committees since the fees were last reviewed.
The fees are 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 year to 31 March
2022
2023
£
£
165,000 150,000
39,900
45,000
5,600
10,000
2,300
2,500
4,900
8,000
1,600
2,000
6,000
5,100
No additional fees are paid for membership of the Governance and
Nomination Committees.
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
2023 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.
Consideration by the directors of matters relating to
The current members of the Remuneration Committee are Shonaid
directors’ remuneration
Jemmett-Page (Chairman), Anne Farlow, Claire Fitzalan Howard and
David Stewart.
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.
90
Caledonia Investments plc Annual Report 2022 Other governance matters
The registered office of the company is at: Cayzer House,
Registered office and number
30 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 55 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 has historically aimed for the annual dividend to be fully
covered by net revenue for the relevant financial year in a period
of normal trading. However, in light of the growing scale of the
private equity funds portfolio and potentially a lower target yield
from Private Capital investee businesses, the board is evaluating
whether to move away from a fully covered annual dividend, with
appropriate risk mitigation controls, in future periods. The company
has available distributable reserves of £2,208m, broadly equivalent
to 63 years’ payment of the current annual dividend and following
the deduction of the recommended special dividend, which may
be used to smooth a net revenue shortfall in any particular year.
An interim dividend of 17.5p per share (2021: 17p) was paid on
2022 dividend distributions
6 January 2022 and the board has recommended a final dividend
of 47.3p per share (2021: 45.9p), giving total annual dividends for
the year of 64.8p per share (2021: 62.9p).
In addition, the directors have recommended a special dividend
of 175p per share (2021: nil).
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 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 2022, 54,663,662 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 2022,
3,000 shares were held by a group company. As stated above,
all voting rights are suspended on these shares.
During the year, the company purchased 710,072 of its ordinary
shares at a total cost of £24.0m. These shares had a nominal value
of £35,504, represented 1.28% of the issued ordinary share capital
as at 31 March 2021 and were immediately cancelled. These shares
were purchased to take advantage of the wide discount of the
company’s share price to its net asset value. No further purchases of
ordinary shares have been made since the year end and accordingly
the company’s issued share capital as at 25 May 2022, being the
latest practicable date prior to signature of these accounts, was
54,663,662 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 2022, 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
19,292,364
Percentage
of voting
rights
35.03%a
a. Percentage holding based on total voting rights at 6 August 2021.
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 2022, the trust held 452,645 ordinary shares,
representing 0.83% of the total issued voting share capital.
91
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Other governance matters (continued)
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 21 July
Authority to allot and purchase shares
2021, 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 21 October 2022 or, if earlier, the
conclusion of the next annual general meeting.
At the annual general meeting held on 21 July 2021, 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 21 October 2022 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 21 October 2022
or, if earlier, the conclusion of the next annual general meeting.
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 company’s shares.
Change of control rights
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.
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 third annual general meeting of the company will be
Annual general meeting
held at Cayzer House, 30 Buckingham Gate, London SW1E 6NN
on Wednesday, 27 July 2022 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.
The directors of the company are shown on pages 62 and 63.
Directors
All of the directors served throughout the year other than Ms L R
Fordham and Ms M A Farlow who were appointed on 1 January
and 28 March 2022 respectively. Mr M S D Masters was appointed
following the year end on 1 April 2022.
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.
The appointment and removal of directors is governed by the
Appointment and removal of directors
company’s articles of association and prevailing company law.
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
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
92
Caledonia Investments plc Annual Report 2022
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.
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.
In accordance with the requirements of section 414C (11) of the
Information included in the Strategic Report
Companies Act 2006, the following information required to be
included in the Directors’ report has been included in the Strategic
report: information on exposure to liquidity risk page 44; likely
future developments in the business pages 5 and 9 and
greenhouse gas emissions page 59.
There were no post balance sheet events.
Post balance sheet events
The reports on pages 62 to 95 comprise the Directors’ report of
the company. The Directors’ report was approved by the board
on 25 May 2022 and signed on its behalf by:
Richard Webster
Company Secretary
To comply with Listing Rule 9.8.4 C, the following table provides references to where relevant information required to be disclosed
Cross references to information required to be disclosed by Listing Rule 9.8.4 R
under 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 91.
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
64. 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.
93
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction 94
Caledonia Investments plc Annual Report 2022 Responsibility statements
Statement of directors’ responsibilities in respect of the
The directors are responsible for preparing the annual report and
annual report and the financial statements
financial statements in accordance with UK adopted international
accounting standards and 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 UK adopted international accounting standards. 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 and prudent
» state whether they have been prepared in accordance with
UK adopted international accounting standards, subject to
any material departures disclosed and explained in the
financial statements
» prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
company will continue in business
» prepare a directors’ report, a strategic report and directors’
remuneration report which comply with the requirements
of the Companies Act 2006 (the ‘Act’).
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 comply with the Act.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for ensuring that the annual report
financial statements, taken as a whole, are fair, balanced, and
understandable and provide the information necessary for
shareholders to assess the group’s performance, business
model and strategy.
The directors are responsible for ensuring the annual report and
Website publication
financial statements are made available on a website.
Financial statements are published on the company’s website in
accordance with legislation in the UK governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the company’s website is the responsibility of the directors.
The directors’ responsibility also extends to the ongoing integrity
of the financial statements contained therein.
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 62 and 63 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 59 and Directors’
report contained on pages 62 to 95 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
25 May 2022
25 May 2022
95
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
96
Caledonia Investments plc Annual Report 2022 Financial
statements
98
104
108
113
Independent auditor’s report
Financial statements
Significant accounting policies
Notes to the financial statements
Other information
132
132
134
Company performance record
Glossary of terms and alternative
performance measures
Information for investors
97
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Independence
Following the recommendation of the audit committee,
we were appointed by the board of directors and subsequently
by the shareholders at the AGM on 21 July 2021 to audit the
financial statements for the year ending 31 March 2022 and
subsequent financial periods. The period of total uninterrupted
engagement including retenders and reappointments is one
year, covering the year ending 31 March 2022. We remain
independent of the Group and the Parent Company in accordance
with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with
these requirements. The non-audit services prohibited by that
standard were not provided to the Group or the Parent Company.
In auditing the financial statements, we have concluded that
Conclusions relating to going concern
the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group and
the Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
» Obtaining the Directors’ assessment of the going concern
status and long term viability of the Company;
» Checking the accuracy of the underlying models used in the
Directors’ assessment;
» Evaluating management’s method of assessing going concern
in light of market volatility and the present uncertainties,
such as the impact of the ongoing conflict in Ukraine;
» Challenging management’s assumptions and judgements
made with regards to stress-testing forecasts; and
» Assessing the appropriateness of disclosures in the
financial statements.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group
and the Parent Company’s ability to continue as a going concern
for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections
of this report.
Independent auditor’s report
to the members of Caledonia Investments plc
Statutory Auditor
BDO LLP
25 May 2022
In our opinion:
Opinion on the financial statements
» the financial statements give a true and fair view of the state of
the Group’s and of the Parent Company’s affairs as at 31 March
2022 and of the Group’s profit for the year then ended;
» the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
» the Parent Company financial statements have been properly
prepared in accordance with UK adopted international
accounting standards and as applied in accordance with the
provisions of the Companies Act 2006; and
» the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Caledonia Investments
Plc (the ‘Parent Company’) and its consolidated subsidiaries
(the ‘Group’) for the year ended 31 March 2022 which comprise
the Group statement of comprehensive income, the Group and
Company Statement of financial position, the Group and Company
Statement of changes in equity, the Group and Company
Statement of cash flows and notes to the financial statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is
applicable law and UK adopted international accounting standards
and as regards the Parent Company financial statements, as
applied in accordance with the provisions of the Companies
Act 2006.
We conducted our audit in accordance with International
Basis for opinion
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion. Our audit opinion is consistent with the additional
report to the audit committee.
98
Caledonia Investments plc Annual Report 2022 Overview
Coverage
100% of Group profit before tax
100% of Group revenue
100% of Group total assets
Key audit matters
2022
Valuation of unquoted private capital investments
Valuation of fund investments
Valuation and ownership of listed investments
Revenue recognition
Materiality
Group financial statements as a whole
£41.5m based on 1.5% of Net Assets
Our Group audit was scoped by obtaining an understanding of
An overview of the scope of our audit
the Group and its environment, including the Group’s system of
internal control, and assessing the risks of material misstatement
in the financial statements. We also addressed the risk of
management override of internal controls, including assessing
whether there was evidence of bias by the Directors that may
have represented a risk of material misstatement.
We consider that the valuation of the private
capital investments is one of the audit areas
subject to a significant risk of material
misstatement. The main risk factor in the
investment valuations, relates to the lack of
observable inputs on the basis that these
investments are ‘Level 3’, as well as the level
of estimation uncertainty involved in valuing
these investments. We therefore consider
this area to be a key audit matter.
Key audit matter
Overview
Valuation of
unquoted private
capital investments
Significant accounting
policies (Investments)
and Note 8
The unquoted private
capital investments
total £781.7m (2021:
£826.8), representing
32.5% (2021: 37.9%)
of the total value of
investments at Fair
Value through
Profit and Loss.
All components of the Group were identified as significant.
The Group consisted of the following components:
» Caledonia Investments plc
» Caledonia Group Services Ltd
» Caledonia Treasury Ltd
» Buckingham Gate Ltd
The Group team performed the audit of the Group as if it was a
single aggregated set of financial information. The audit was
performed using the materiality levels set out above and covered
100% of total group revenue, group profit before tax and total
group assets.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, 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 engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
How the scope of our audit addressed the key audit matter
We have responded to this matter by testing the valuation of 99% of
the portfolio of unquoted private capital investments. We performed
the following procedures:
» Considered the appropriateness of the valuation methodology under
the International Private Equity and Venture Capital Valuation (“IPEV”)
Guidelines;
» Discussed valuations with management and understood
management’s assumptions included in the valuations and assessed
whether the assumptions applied were appropriate in terms of the
context of the group as well as market conditions;
» Challenged and corroborated the inputs to the valuation with reference
to management information provided by investee companies, market
data and our own understanding and assessed the impact of the
estimation uncertainty concerning these assumptions;
» Assessed changes in valuation inputs which drove the movements
in valuations between 31 March 2021 and 31 March 2022;
» Considered the economic environment in which the investment
operates to identify factors that impacted the investment valuation,
particularly in relation to the current economic circumstances and
the ongoing crisis in Ukraine and any related sanctions;
» Consulted with our internal valuation experts on the appropriateness
of methodology, assumptions and inputs; and
» Gained comfort on ownership through direct confirmation, available
third party documentation such as share purchase agreements, share
certificates, annual accounts and companies house documentation,
where relevant.
Key observations:
Based on our procedures performed we did not identify any material
exceptions with regards to valuation of unquoted private capital
investments. We deem the assumptions and judgements applied
by management in the valuation of unquoted private capital
investments to be reasonable.
99
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Independent auditor’s report (continued)
There is a level of estimation uncertainty involved
in the underlying general partner valuations and
as such, there is a significant risk over the
valuation of investments. There is a risk of ‘stale
pricing’ due to the availability of NAV statements,
which is heightened due to the impact of
economic conditions since December 2021
as well as the ongoing crisis in Ukraine.
We therefore consider this area to be a
key audit matter.
We consider the valuation and ownership of
listed investments to be an audit area subject to
a significant risk of material misstatement as the
listed investments represent one of the most
significant balances in the financial statements
and underpin the principal activity of the entity.
We therefore consider this area to be a key
audit matter.
How the scope of our audit addressed the key audit matter
We performed the following procedures:
» Considered the appropriateness of the overall valuation methodologies
followed by underlying GP fund managers in line with the International
Private Equity and Venture Capital Valuation (“IPEV”) Guidelines;
» Agreed fund valuations to the most recent NAV statements received;
» Tested cash roll forwards on a sample basis;
» Agreed a sample of GP statements to audited accounts for the
coterminous period to check for accuracy;
» Understood and considered whether any adjustments made to GP
valuations above our materiality threshold were appropriate;
» Considered the economic environment in which the investee operates
to identify factors that could impact the investment valuation,
particularly in respect of the impact on ‘stale pricing’ caused by changes
in economic conditions and the ongoing crisis in Ukraine and related
sanctions since 31 December 2021;
» Inspected whether final NAV statements received over the course of
the review period up to the date of approving the financial statements
had a material impact on the valuations of fund investments; and
» Gained comfort over ownership by agreeing a sample of funds
ownership to external confirmation.
Key observations:
Based on our procedures performed, we consider the judgements
applied by management to be appropriate. We consider the valuation
of fund investments to be reflective of fair value as at year end.
We have responded to this matter by testing the valuation and
ownership of 100% of the portfolio of investments. We performed
the following procedures:
» Confirmed that bid price has been used by agreeing to externally
quoted prices;
» Checked that there were no contra indicators, such as liquidity
considerations, to suggest bid price was not the most appropriate
indication of fair value by considering the realisation period for
individual holdings; and
» Agreed ownership of investments to the period-end statement
received directly from the custodian.
Key observations:
We confirmed that bid prices were appropriate indications of fair value.
We determined that the Group had appropriate title over all listed
investments.
Revenue comprises investment income and
interest receivable on the portfolio of
investments held, including private capital,
fund of funds distributions and quoted
investments as well as cash and property income.
We have responded to this matter by performing the following procedures:
For the private capital portfolio:
» We formed an independent expectation of income on the basis of
the holding and third party evidence and agreed a sample of revenue
through to supporting documentation.
Investment income is one of the key drivers of
total returns to investors and is often a key
factor in demonstrating the performance of
the portfolio. Judgement is also required in the
allocation of income to revenue or capital. We
determined that revenue recognition is an audit
area subject to a significant risk of material
misstatement and have considered this to
be a key audit matter.
For the fund of funds portfolio distributions:
» For existence of revenue, we agreed a sample of income to distributions
on GP statements. We also confirmed completeness of revenue by
inspecting distributions made on the GP’s statements in the valuations
work as well as reviewing significant variances from the previous year
that could indicate missing revenue in the current year.
For the listed portfolio:
» We utilised data analytics to test 100% of the portfolio. We derived an
independent expectation of income based on the investment holding
and distributions obtained from independent sources. We also inspected
dividend yields and challenged if these have been appropriately
accounted for as income or capital
Key observations:
Based on our procedures performed we determined that revenue was
recognised appropriately. We also concluded that revenue from listed
investments were appropriately split between revenue and capital.
Key audit matter
Valuation of fund
investments
Significant accounting
policies (Investments)
and Note 8
The unquoted fund
investments total
£794.4m (2021: £637.1),
representing 33.0%
(2021: 29.2%) of the
total value of
investments at Fair
Value through Profit
and Loss.
Valuation and
ownership of listed
investments
Significant accounting
policies (Investments)
and Note 8
The listed investments
total £830.1m (2021:
£716.1m), representing
34.5% (2021: 32.8%) of
the total value of
investments at Fair
Value through Profit
and Loss.
Revenue Recognition
Note 1
100
Caledonia Investments plc Annual Report 2022 We apply the concept of materiality both in planning and
Our application of materiality
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude
by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken
on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that
any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing
needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account
of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect
on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance
materiality as follows:
Key audit matter
Materiality
Basis for
determining
materiality
Group financial
statements
2022
£41.5m
1.5% of Net Assets
Parent company
financial statements
2022
£39.4m
1.5% of Net Assets
(Limited to 95% of
Group materiality)
Rationale for the
benchmark applied
As an investment trust, the net asset value is
the key measure of performance.
Performance
materiality
Basis for
determining
performance
materiality
£27.0m
£25.6m
65% of Materiality based on our risk
assessment and consideration of the control
environment. We also considered the
aggregation effect of planned nature of testing
and the overall size complexity of the entity,
as well as the fact that this is our first year
as auditors.
Specific materiality
We also determined that for items impacting revenue return,
a misstatement of less than materiality for the financial statements
as a whole, specific materiality, could influence the economic
decisions of users. As a result, we determined materiality for these
items of £1.4m, based on 5% of the revenue return before tax.
We further applied a performance materiality level of 65% of
specific materiality being £0.9m to ensure that the risk of errors
exceeding specific materiality was appropriately mitigated.
Component materiality
We set materiality for each component of the Group based
on a percentage of between 1% and 95% of Group materiality
dependent on the size and our assessment of the risk of material
misstatement of that component. Component materiality ranged
from £0.3m to £39.4m. In the audit of each component, we further
applied performance materiality levels of 65% of the component
materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of £1m. A specific reporting
threshold was set for items impacting revenue return, being £35k.
We also agreed to report differences below this threshold that,
in our view, warranted reporting on qualitative grounds.
The directors are responsible for the other information. The other
Other information
information comprises the information included in the annual report
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
The Listing Rules require us to review the Directors’ statement in
Corporate governance statement
relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the parent company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit.
Going concern
and longer-term
viability
Other Code
provisions
» The Directors’ statement with regards to the
appropriateness of adopting the going
concern basis of accounting and any material
uncertainties identified; and
» The Directors’ explanation as to their
assessment of the Group’s prospects, the
period this assessment covers and why the
period is appropriate
» Directors’ statement on fair, balanced and
understandable;
» Board’s confirmation that it has carried out
a robust assessment of the emerging and
principal risks;
» The section of the annual report that describes
the review of effectiveness of risk management
and internal control systems; and
» The section describing the work of the
audit committee.
101
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Independent auditor’s report (continued)
In preparing the financial statements, the Directors are responsible
for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
Our objectives are to obtain reasonable assurance about whether
financial statements
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Extent to which the audit was capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud
is detailed below.
We gained an understanding of the legal and regulatory framework
applicable to the Group and industry in which the Group operates,
and considered the risk of acts by the Group which were contrary
to applicable laws and regulations, including fraud. These included
but were not limited to compliance with Companies Act 2006, the
FCA listing and DTR rules, the principles of the UK Corporate
Governance Code, industry practice represented by the SORP and
UK adopted IFRS. We also considered the Company’s qualification
as an Investment Trust under UK tax legislation.
We assessed the susceptibility of the financial statements to
material misstatement, including fraud and considered the fraud
risk areas to be management override of controls, valuation and
ownership of investments, revenue recognition and the valuation
of the defined benefit pension scheme.
Our tests included, but were not limited to:
» agreement of the financial statement disclosures to underlying
supporting documentation;
» obtaining an understanding of the control environment in
monitoring compliance with laws and regulations;
» enquiries of management and those charged with governance of
any known, reported or indications of fraud or non-compliance
with laws and regulations occurring within the Group and
its operations;
Based on the responsibilities described below and our work
Other Companies Act 2006 reporting
performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain
opinions and matters as described below.
Strategic report
and Directors’
report
Directors’
remuneration
Matters on which
we are required
to report by
exception
In our opinion, based on the work undertaken
in the course of the audit:
» the information given in the Strategic report
and the Directors’ report for the financial
year for which the financial statements are
prepared is consistent with the financial
statements; and
» the Strategic report and the Directors’ report
have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding
of the Group and Parent Company and its
environment obtained in the course of the audit,
we have not identified material misstatements
in the strategic report or the Directors’ report.
In our opinion, the part of the Directors’
remuneration report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report
to you if, in our opinion:
» adequate accounting records have not been
kept by the Parent Company, or returns
adequate for our audit have not been received
from branches not visited by us; or
» the Parent Company financial statements and
the part of the Directors’ remuneration report
to be audited are not in agreement with the
accounting records and returns; or
» certain disclosures of Directors’ remuneration
specified by law are not made; or
» we have not received all the information
and explanations we require for our audit.
As explained more fully in the Statement of directors’
Responsibilities of Directors
responsibilities in respect of the annual report and the financial
statements, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
102
Caledonia Investments plc Annual Report 2022 » testing the appropriateness of a sample of the journal entries in
the general ledger by agreeing to supporting documentation and
adjustments made in the preparation of the financial statements,
reviewing and assessing the accounting estimates for possible
bias and obtaining an understanding of the business rationale of
significant transactions that are outside the normal course of the
business for the Group and those that appear to be unusual;
» challenging management on judgemental areas in relation to
the recognition of defined benefit pension scheme assets;
» review of minutes of board meetings throughout the period
for any indications of possible fraud; and
» the procedures set out in the Key Audit Matters section above.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk
of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements,
the less likely we are to become aware of it.
A further description of our responsibilities is available on the
Financial Reporting Council’s website at: www.frc.org.uk/auditors
responsibilities. This description forms part of our
auditor’s report.
This report is made solely to the Parent Company’s members, as
Use of our report
a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the Parent Company’s members those matters we are
required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Parent Company
and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Peter Smith
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
25 May 2022
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
103
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Group statement of comprehensive income
for the year ended 31 March 2022
Total
£m
Revenue
£m
Note
Revenue
£m
2022
Capital
£m
2021
Capital
£m
Revenue
Investment income
Other income
Net gains on fair value investments
Net gains on fair value property
Total revenue
Management expenses
Profit before finance costs
Treasury interest receivable
Finance costs
Exchange movements
Profit before tax
Taxation
Profit 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
25
5
7
7
51.0
0.6
–
–
51.6
(21.0)
30.6
0.1
(2.3)
(0.1)
28.3
11.0
39.3
4.8
–
567.1
3.6
575.5
(11.8)
563.7
–
–
–
563.7
8.2
571.9
55.8
0.6
567.1
3.6
627.1
(32.8)
594.3
0.1
(2.3)
(0.1)
592.0
19.2
611.2
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
Total
£m
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
–
–
39.3
(1.4)
1.5
572.0
(1.4)
1.5
611.3
–
–
29.8
2.3
(0.7)
437.8
2.3
(0.7)
467.6
72.1p 1049.3p 1121.4p
70.8p 1030.7p 1101.5p
54.3p
53.6p
795.0p
849.3p
784.2p
837.8p
The total column of the above statement represents the group’s statement of comprehensive income, prepared in accordance with IFRSs
adopted in the United Kingdom.
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 108 to 131 are an integral part of these financial statements.
104
Caledonia Investments plc Annual Report 2022
Statement of financial position
at 31 March 2022
Note
Group
2022
£m
2021
£m
Company
2022
£m
2021
£m
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
Other receivables
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 tax liabilities
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
8
8
9
10
11
12
25
12
5
13
14
25
15
25
11
16
2,385.4
–
2,194.0
–
2,394.6
0.9
2,198.9
0.9
16.0
29.2
24.2
–
13.3
29.0
8.4
–
–
–
18.1
37.3
–
–
6.1
35.7
2.3
2,457.1
4.0
2,248.7
–
2,450.9
–
2,241.6
7.5
8.9
341.1
357.5
2,814.6
3.4
7.3
14.2
24.9
2,273.6
(22.4)
(3.6)
(0.1)
(26.1)
–
(4.7)
(1.1)
(26.4)
(2.6)
–
(29.0)
(15.0)
(2.9)
(1.4)
3.8
9.8
341.0
354.6
2,805.5
(35.6)
–
(0.1)
(35.7)
–
–
–
2.0
7.3
14.5
23.8
2,265.4
(34.9)
–
–
(34.9)
(15.0)
–
–
(5.8)
(31.9)
2,782.7
(19.3)
(48.3)
2,225.3
–
(35.7)
2,769.8
(15.0)
(49.9)
2,215.5
3.1
1.3
1.4
2,527.0
263.2
(13.3)
2,782.7
3.2
1.3
1.3
1,979.1
254.3
(13.9)
2,225.3
3.1
1.3
1.4
2,526.0
251.3
(13.3)
2,769.8
3.2
1.3
1.3
1,979.8
243.8
(13.9)
2,215.5
17
17
5133p
5041p
4055p
4000p
The Company profit for the year ended 31 March 2022 was £608.2m (2021: £464.5m)
The financial statements on pages 104 to 131 were approved by the board and authorised for issue on 25 May 2022 and were
signed on its behalf by:
Will Wyatt
Chief Executive
Tim Livett
Chief Financial Officer
The accounting policies and notes on pages 108 to 131 are an integral part of these financial statements.
105
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Statement of changes in equity
for the year ended 31 March 2022
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 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
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 and cancelled
Own shares purchased
Dividends paid
Total transactions with owners
Balance at 31 March 2022
Company
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
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 and cancelled
Own shares purchased
Dividends paid
Total transactions with owners
Balance at 31 March 2022
3.2
1.3
1.3
1,541.3
255.5
(15.3)
1,787.3
–
–
–
–
–
–
–
–
3.2
–
–
–
–
–
(0.1)
–
–
(0.1)
3.1
3.2
–
–
–
–
–
–
3.2
–
–
–
(0.1)
–
–
(0.1)
3.1
–
–
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
–
–
1.3
1.3
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
1.3
–
–
–
–
–
–
–
–
1.3
–
–
–
–
–
0.1
–
–
0.1
1.4
436.2
1.6
437.8
–
–
–
–
–
1,979.1
571.9
0.1
572.0
–
–
(24.1)
–
–
(24.1)
2,527.0
29.8
–
29.8
5.5
(2.8)
–
(33.7)
(31.0)
254.3
39.3
–
39.3
8.2
(4.0)
–
–
(34.6)
(30.4)
263.2
–
–
–
466.0
1.6
467.6
–
2.8
(1.4)
–
1.4
(13.9)
–
–
–
–
4.0
–
(3.4)
–
0.6
(13.3)
5.5
–
(1.4)
(33.7)
(29.6)
2,225.3
611.2
0.1
611.3
8.2
–
(24.1)
(3.4)
(34.6)
(53.9)
2,782.7
1.3
–
1,543.2
436.6
246.9
27.9
(15.3)
–
1,780.6
464.5
–
–
–
–
–
1.3
–
–
–
0.1
–
–
0.1
1.4
–
–
–
–
–
1,979.8
570.3
–
–
(24.1)
–
–
(24.1)
2,526.0
5.5
(2.8)
–
(33.7)
(31.0)
243.8
37.9
8.2
(4.0)
–
–
(34.6)
(30.4)
251.3
–
2.8
(1.4)
–
1.4
(13.9)
–
–
4.0
–
(3.4)
–
0.6
(13.3)
5.5
–
(1.4)
(33.7)
(29.6)
2,215.5
608.2
8.2
–
(24.1)
(3.4)
(34.6)
(53.9)
2,769.8
The accounting policies and notes on pages 108 to 131 are an integral part of these financial statements.
106
Caledonia Investments plc Annual Report 2022
Statement of cash flows
for the year ended 31 March 2022
Group
2022
£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 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
52.9
1.7
0.5
(20.4)
0.1
(0.1)
1.4
–
36.1
(226.9)
602.2
(0.4)
374.9
(2.6)
(34.6)
–
(15.0)
(4.4)
(27.5)
(84.1)
326.9
14.2
341.1
13
2021
£m
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
Company
2022
£m
2021
£m
52.9
1.7
–
(21.0)
0.1
(0.1)
1.4
–
35.0
42.3
2.3
–
(14.4)
0.1
(0.1)
0.7
(0.2)
30.7
(226.9)
(240.2)
602.2
–
375.3
(2.3)
(34.6)
–
(15.0)
(4.4)
(27.5)
(83.8)
326.5
14.5
341.0
142.2
–
(98.0)
(2.9)
(33.7)
65.0
(50.0)
(7.8)
(1.4)
(30.8)
(98.1)
112.6
14.5
The accounting policies and notes on pages 108 to 131 are an integral part of these financial statements.
107
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 25 May 2022.
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:
Fair values of private equity financial instruments
For directly owned private investments (Private Capital
investments), totalling £781.7m (2021 - £826.8m) 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 23.
For private equity fund investments (unlisted Funds Pool
investments), totalling £788.1m (2021: £627.5m) 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.
108
This delay in manager NAV receipts creates a risk of changes or
events occurring between the NAV and reporting dates which
could impact valuations. The increased level of volatility in public
equity markets during the first calendar quarter of 2022, principally
reflecting concerns about increasing rates of inflation, rising
interest rates and the conflict in Ukraine, led to a review of this
pricing risk. Our review determined the public market movements
between 31 December 2021 and 31 March 2022 for relevant
indices were in line with historic precedent, the impact of inflation
was not deemed material for underlying holdings within the funds
pool, and there was no material exposure to the conflict in Ukraine.
We also reviewed the underlying valuation methodologies adopted
by our fund managers and were satisfied that the techniques
utilised were appropriate.
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 judgment 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
As at 31 March 2022 the group holds £1,171m of liquid assets
and has access to £250m of undrawn committed banking facilities,
£112.5m of which expires in July 2022 (renewal discussions for a
further three-year term are well advanced) and £137.5m of which
expires in May 2025. The Directors therefore believe the group will
be able to meet its 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,
war in Ukraine and the inflationary environment 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, factoring in (a) adverse foreign exchange movements,
(b) reduction in investment income, (c) reduction in distributions
received from private equity funds and drawdown of all existing
private equity fund commitments, (d) a delay and reduction
in disposals of directly owned private equity investments,
and (e) the cumulative impact of the above.
Caledonia Investments plc Annual Report 2022 Under these scenarios the group would have a range of mitigating
actions available to it, including sales of liquid assets, and usage of
banking facilities, which would provide sufficient funds 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 46.
Basis of accounting
These Group and parent company financial statements were
prepared in accordance with UK adopted international accounting
standards in conformity with the requirements of the Companies
Act 2006. 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 October
2019 is consistent with the requirements of UK adopted
international accounting standards, 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 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. Amendments to IFRS adopted in the year have
not had a material impact on the group.
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.
Having considered the following, the board has concluded that
the company meets the definition of an investment entity.
An investment entity is one which:
» obtains funds from investors for the purpose of providing
them with investment management services
» invests funds solely for returns from capital appreciation
and/or investment income, and
» measures and evaluates the performance of substantially
all of its investments on a fair value basis.
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.
The following subsidiaries are deemed service entities and are
consolidated in the group financial statements:
» Caledonia Group Services Ltd
» Caledonia Treasury Ltd
» Buckingham Gate Ltd
Other associated entities and subsidiaries are disclosed in notes 27
and 28 to the financial statements and are not consolidated in the
group financial statements, being held at fair value through profit
or loss.
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.
109
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Significant accounting policies (continued)
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.
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 collectibility of an amount
already included in income, the uncollectible amount or the
amount in respect of which the recovery has ceased to be
probable, is recognised as an expense. When the uncertainty
over collectability is removed, normally on receipt, the income
is recognised in the Statement of comprehensive income.
Expenses
All expenses are accounted for on an accrual basis. In the 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
Lessor
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-
line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised on a
straight-line basis.
Benefits provided as an incentive to enter into an operating lease
are also spread on a straight-line basis over the lease term.
Lessee
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.
110
Caledonia Investments plc Annual Report 2022 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.
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 40 to 41.
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.
Service subsidiaries are either designated as held at fair value
through profit or loss or held at amortised cost in the company
financial statements.
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.
111
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Significant accounting policies (continued)
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.
Payables
Payables, are stated based on the amounts which are considered
to be payable in respect of goods or services received up to the
balance sheet date. Financial liabilities are recognised at amortised
cost in accordance with IFRS 9.
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.
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.
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.
Impairment of assets
At each reporting date, the group reviews the carrying amounts
of its tangible 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.
112
Caledonia Investments plc Annual Report 2022
Notes to the financial statements
Investment income
1. Revenue
Further information
Auditor’s remuneration
Fees payable to BDO LLP (2021: KPMG LLP) in respect of services
to Caledonia Investments plc were as follows:
Income statement revenue column
Income from pool 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-pool investments
Dividends from unlisted companies
Income statement capital column
Dividends from UK listed 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
2022
£m
2021
£m
11.2
7.2
25.4
5.6
1.6
51.0
–
51.0
4.8
55.8
10.8
6.3
20.8
0.7
2.0
40.6
4.0
44.6
–
44.6
2022
£m
2021
£m
0.6
–
0.6
0.1
0.8
0.9
2022
£m
12.7
1.2
0.3
7.6
(0.7)
(0.1)
21.0
11.4
0.4
11.8
32.8
2021
£m
11.6
1.1
0.3
7.2
(1.0)
(0.3)
18.9
7.3
0.3
7.6
26.5
Audit services
Annual report
Other services
Other assurance
2022
£m
2021
£m
0.2
0.1
0.3
0.3
–
0.3
Fees payable to BDO LLP (2021: KPMG LLP) in respect of services
to Caledonia Investments plc non-consolidated subsidiaries were
as follows:
Audit services
Annual report
Other services
Other assurance, due diligence and tax compliance
Personnel expenses
Income statement revenue column
Wages and salaries
Compulsory social security contributions
Contributions to defined contribution plans
Defined benefit pension plans expense (note 25)
Income statement capital column
Share-based payments (note 24)
National Insurance on share awards
2022
£m
2021
£m
0.3
0.1
0.4
2022
£m
10.4
1.5
0.7
0.1
12.7
9.0
2.4
11.4
24.1
0.4
–
0.4
2021
£m
9.0
1.6
1.0
–
11.6
6.3
1.0
7.3
18.9
The average number of employees, including executive directors,
throughout the year was as follows:
Average number of employees
2022
No
60
2021
No
61
Total directors’ remuneration expensed for the year was £3.9m
(2021: £3.2m), as follows:
Short-term employee benefits
Gains on exercise of share awards
Group
2022
£m
2.5
1.4
3.9
2021
£m
2.5
0.7
3.2
113
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
3. Treasury interest receivable
Interest on bank deposits and liquidity funds
2022
£m
0.1
2021
£m
0.1
4. Finance costs
Interest on bank loans and overdrafts
2022
£m
2.3
2021
£m
2.7
Recognised in profit for the year
5. Taxation
Current tax income
Current year
Adjustments for prior years
Deferred tax income
Origination and reversal of temporary differences
Adjustments for prior years
Total tax income
2022
£m
2021
£m
3.0
1.6
4.6
17.1
(2.5)
14.6
19.2
3.3
0.2
3.5
17.1
–
6.7
10.2
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 before tax
Tax expense 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 on investments1
Non-taxable dividend income
Other temporary differences
Adjustments for prior years
Tax income
2022
£m
592.0
(112.5)
(0.5)
–
14.4
109.5
8.3
0.9
(0.9)
19.2
2021
£m
455.8
(86.6)
0.5
(0.1)
5.4
83.0
8.0
0.2
(0.2)
10.2
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 income/(expense)
On re-measurements of defined benefit
pension schemes
On share options and awards
2022
£m
2021
£m
0.5
1.0
1.5
(0.7)
–
(0.7)
Current tax assets
Current tax assets of £8.8m in the group and £9.7m in the
company represented tax loss relief surrender for settlement
(2021: £7.3m in both the group and company).
114
Amounts recognised as distributions to owners of the company
6. Dividends
in the year were as follows:
Final dividend for the year
ended 31 March 2021 (2020)
Interim dividend for the year
ended 31 March 2022 (2021)
2022
2021
p/share
£m
p/share
£m
45.9
25.1
44.5
24.4
17.5
63.4
9.5
34.6
17.0
61.5
9.3
33.7
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 2022
Proposed special dividend for
the year ended 31 March 2022
47.3
25.6
175.0
222.3
94.9
120.5
The proposed final and special dividends for the year ended
31 March 2022 were not included as liabilities in these financial
statements. These dividends, if approved by shareholders at the
annual general meeting to be held on 27 July 2022, will be payable
on 4 August 2022 to holders of shares on the register on 1 July
2022. The ex-dividend date will be 30 June 2022. The deadline
for elections under the dividend reinvestment plan offered by
Link Group will be the close of business on 14 July 2022.
For the purposes of section 1158 of the Corporation Tax Act 2010
and associated regulations, the dividends payable for the year
ended 31 March 2022 are the interim and final dividends for
that year, amounting to £130.0m (2021: £34.4m).
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 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 attributable to shareholders (basic and diluted)
was as follows:
Revenue
Capital
Total
2022
£m
39.3
571.9
611.2
2021
£m
29.8
436.2
466.0
The weighted average number of shares was as follows:
Issued shares at the year start
Effect of shares cancelled
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
2022
000’s
55,374
(404)
(468)
2021
000’s
55,374
–
(507)
54,502
54,867
987
754
55,489
55,621
Caledonia Investments plc Annual Report 2022 Group
2022
£m
Company
2021
£m
2022
£m
2021
£m
9. Investment property
Cost
Balance at 31 March 2020
Acquisitions
Balance at 31 March 2021
Acquisitions
Balance at 31 March 2022
Revaluation
Balance at 31 March 2020
Revaluation in the year
Balance at 31 March 2021
Revaluation in the year
Balance at 31 March 2022
Carrying amounts
At 31 March 2020
At 31 March 2021
At 31 March 2022
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
830.1
719.4
719.4
1,555.3 1,474.6 1,564.5 1,479.5
2,385.4 2,194.0 2,394.6 2,198.9
830.1
–
0.9
2,385.4 2,194.0 2,395.5 2,199.8
0.9
–
The movements in non-current investments were as follows:
Group
Balance at 31 March 2020
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2021
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2022
Company
Balance at 31 March 2020
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2021
Purchases at cost
Disposal proceeds
Gains/losses on investments
Accrued income
Balance at 31 March 2022
Listed
equity
£m
Unlisted
equity1
£m
Unlisted
debt
£m
Total
£m
577.6 1,043.8
208.0
37.9
(83.5)
(54.4)
279.4
158.3
(7.4)
–
719.4 1,440.3
145.1
72.5
(550.3)
(39.5)
489.4
77.7
0.8
–
830.1 1,525.3
577.6 1,046.1
208.0
37.9
(83.5)
(54.4)
282.9
158.3
(7.4)
–
719.4 1,446.1
145.1
72.5
(550.3)
(39.5)
493.7
77.7
0.8
–
830.1 1,535.4
35.3 1,656.7
246.3
0.4
(138.4)
(0.5)
437.0
(0.7)
(0.2)
(7.6)
34.3 2,194.0
226.9
9.3
(603.4)
(13.6)
567.1
–
0.8
–
30.0 2,385.4
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
226.9
9.3
(603.4)
(13.6)
571.4
–
0.8
–
30.0 2,395.5
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 -£20.7m
(2021: £14.0m investments) of non-pool provisions.
Freehold
property
£m
16.2
3.2
19.4
0.3
19.7
(7.5)
1.4
(6.1)
2.4
(3.7)
8.7
13.3
16.0
At 31 March 2022, the group held one property classified as
investment property, comprising that part of its head office
building occupied by a third party tenant.
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 was let to a third party tenant during the year,
it was valued on the basis of the terms of the lease and current
rent payable.
In the prior year, as the property was still 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 was 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 as these rental negotiations
were 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.
115
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
Market
value
£m
16.0
Property
Buckingham
Gate
Valuation
technique
Residual
development
value
Key unobservable
inputs
Cost
retention
Rent per sq ft pa
Rent-free period
Capitalisation rate
Purchaser’s costs
Range
(weighted
average)
£0.2m
£38.00–
£85.00
(£73.78)
0.5 yrs
4.5%
6.8%
An increase in the cost retention of 10% would result in a decrease
in the asset valuation of £nil and a decrease of 10% would result in
an increase in the asset valuation of £nil. 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 £1.0m. Conversely, an increase in the estimated
rent by 5% would result in an increase in the asset valuation of
£0.8m and a decrease of 5% would result in a decrease in the
asset valuation of £0.8m. 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:
The investment property held by the group is classified as Level 3.
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.
Group
10. Property, plant and equipment
Cost
Balance at 31 March 2020
Acquisitions
Disposals
Balance at 31 March 2021
Acquisitions
Balance at 31 March 2022
Depreciation
Balance at 31 March 2020
Depreciation charge
Eliminate depreciation
Disposals
Balance at 31 March 2021
Depreciation charge
Eliminate depreciation
Balance at 31 March 2022
Revaluation
Balance at 31 March 2020
Revaluation in the year
Eliminate depreciation
Balance at 31 March 2021
Revaluation in the year
Eliminate depreciation
Balance at 31 March 2022
Carrying amounts
At 31 March 2020
At 31 March 2021
At 31 March 2022
Property
£m
32.3
0.1
–
32.4
–
32.4
–
(0.6)
0.6
–
–
(0.6)
0.6
–
(6.9)
1.8
(0.6)
(5.7)
1.2
(0.6)
(5.1)
25.4
26.7
27.3
Office
equip-
ment
£m
4.2
0.2
(0.1)
4.3
0.2
4.5
(1.6)
(0.5)
–
0.1
(2.0)
(0.6)
–
(2.6)
–
–
–
–
–
–
–
2.6
2.3
1.9
Total
£m
36.5
0.3
(0.1)
36.7
0.2
36.9
(1.6)
(1.1)
0.6
0.1
(2.0)
(1.2)
0.6
(2.6)
(6.9)
1.8
(0.6)
(5.7)
1.2
(0.6)
(5.1)
28.0
29.0
29.2
Property is measured at fair value and comprised freehold land
and buildings.
Property was revalued at 31 March 2022 by an independent valuer.
Had the property been carried under the cost model, the carrying
amount would have been £25.7m (2021: £26.3m).
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.
116
Caledonia Investments plc Annual Report 2022 Property
Buckingham
Gate
Market
value
£m
27.3
Valuation
technique
Rental
yield
Key unobservable
inputs
Rent per sq ft pa
Capitalisation rate
Purchaser’s costs
Range
(weighted
average)
£38.50–
£82.50
(£71.94)
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 £1.3m. 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
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.
Deferred tax assets and liabilities were attributable to the
11. Deferred tax
following:
Group
2022
Employee benefits
Tax losses
Other timing differences
2021
Employee benefits
Tax losses
Company
2022
Tax losses
2021
Tax losses
Assets
£m
Liabilities
£m
5.9
18.1
0.2
24.2
2.3
6.1
8.4
(0.8)
–
(0.3)
(1.1)
(1.4)
–
(1.4)
Net
£m
5.1
18.1
(0.1)
23.1
0.9
6.1
7.0
Assets
£m
18.1
6.1
Movement in temporary differences during the year
Group
2022
Employee benefits
Tax losses
Other timing differences
2021
Employee benefits
Tax losses
Balance at
year start
£m
Compre-
hensive
income
£m
Other
compre-
hensive
income
£m
Balance at
year end
£m
0.9
6.1
–
7.0
1.0
–
1.0
2.7
12.0
(0.1)
14.6
0.6
6.1
6.7
1.5
–
–
1.5
(0.7)
–
(0.7)
5.1
18.1
(0.1)
23.1
0.9
6.1
7.0
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 25% (2021: 19%).
Group and company
Unrecognised deferred tax assets
Deferred tax assets were not recognised in respect of the
following items:
Tax losses
Group
Company
2022
£m
3.7
2021
£m
7.9
2022
£m
3.7
2021
£m
7.6
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.
12. Trade and other receivables
2022
£m
Group
Company
2021
£m
2022
£m
2021
£m
–
Non-current assets
Other receivables
Other receivables includes loans to group companies expected to be
recovered after 12 months
Current assets
Trade receivables
Non-trade receivables and
prepayments
37.3
1.7
3.1
3.6
–
35.7
3.9
7.5
1.7
3.4
0.7
3.8
1.3
0.7
2.0
We estimate expected credit losses on the Group and Company
receivables to be under £0.1m (2021: less than £0.1m). Our ECL
assessment included a review of recoverability of the Trade
receivables which comprise quoted investment income and private
capital sales balances to confirm amounts were received within
one month of the reporting date.
117
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
An aged analysis of group trade receivables is disclosed below.
2022
2021
Total
£m
3.6
1.7
Within
terms
£m
3.5
0.1
0-1
month
£m
0.1
0.5
1-2
months
£m
–
0.9
>2
months
£m
–
0.2
16. Share capital
Balance at 31 March 2020
and 2021
Shares cancelled
Balance at 31 March 2022
Ordinary
shares
£m
Deferred
ordinary
shares
£m
Share
premium
£m
2.8
(0.1)
2.7
0.4
–
0.4
1.3
–
1.3
Total
£m
4.5
(0.1)
4.4
Company
The number of fully paid shares in issue was as follows:
2021
£m
1.2
13.3
14.5
2021
£m
4.4
7.1
23.4
34.9
Balance at the year start
Shares purchased and cancelled
Balance at the year end
Ordinary shares
2022
000’s
55,374
(710)
54,664
2021
000’s
55,374
–
55,374
Deferred
ordinary shares
2022
000’s
8,000
–
8,000
2021
000’s
8,000
–
8,000
The company had outstanding performance share scheme and
deferred bonus awards (note 24).
As at 31 March 2022, the issued share capital of the company
comprised 54,663,662 ordinary shares (2021: 55,373,734)
and 8,000,000 deferred ordinary shares (2021: 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.
Group
13. Net cash and cash equivalents
Bank balances
Short-term deposits
Cash and cash equivalents
2022
£m
10.8
330.3
341.1
2021
£m
0.5
13.7
14.2
2022
£m
11.1
329.9
341.0
14. Trade and other payables
Trade payables
Non-trade payables and
accrued expenses
Other payables
Group
Company
2022
£m
0.7
1.4
20.3
22.4
2021
£m
0.1
1.7
24.6
26.4
2022
£m
11.8
13.4
10.4
35.6
Other payables included short-term borrowing from subsidiaries.
15. Interest-bearing loans and borrowings
Group
2022
£m
2021
£m
Company
2022
£m
2021
£m
Non-current liabilities
Unsecured bank loans
–
15.0
–
15.0
As at 31 March 2022 the group had undrawn committed facilities
totalling £250m (2021: £235m), comprising £112.5m from ING
Group expiring in July 2022 (renewal discussions for a further
three-year term are well advanced) 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 assess 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 2022, Caledonia plc had remaining borrowing
capacity under the covenants of £521m (2021: £336m),
considerably in excess of undrawn facilities. Compliance
with covenants is tested monthly.
During the year the group and company utilised £15m (2021:
£65m) of an available £250m of bank revolving credit facilities.
118
Caledonia Investments plc Annual Report 2022 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
in 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
2,782.7
–
2,782.7
2022
Number
of shares1
000’s
54,211
987
55,198
Undiluted
Share awards
Diluted
NAV
p/share
Net
assets
£m
5133 2,225.3
–
5041 2,225.3
(92)
2021
Number
of shares1
000’s
54,882
754
55,636
NAV
p/share
4055
(55)
4000
1. Number of shares in issue at the year end is stated after the deduction
of 452,645 (2021: 491,716) 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.
Quoted Equity
Private Capital
Funds
Investment portfolio
Other investments1
Total revenue/investments
Cash and cash equivalents
Other items
Reportable total
Total assets
Profit/(loss) before tax
2021
2022
2021
£m
£m
£m
716.1
830.1
174.0
826.8
781.7
150.0
165.9
637.1
794.4
489.9 2,406.2 2,180.0
14.0
(20.7)
485.7 2,385.5 2,194.0
14.2
341.1
0.1
(30.0)
65.4
88.0
455.8 2,814.6 2,273.6
2022
£m
100.7
322.0
230.4
653.1
(26.0)
627.1
0.1
(35.2)
592.0
(4.2)
1. Other investments included -£20.7m (2021: £14.0m investments)
of non-pool provisions.
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).
Diluted NAV at year start
Diluted NAV at year end
Dividends payable in the year
Reinvestment adjustment2
NAVTR over the year
2022
p
4000
5041
63
12
5116
27.9%
2021
p
3236
4000
62
11
4073
25.9%
2022
Revenue
Non-current assets
2021
Revenue
Non-current assets
UK
£m
US
£m
Other
£m
Total
£m
198.2
45.2
102.3
42.3
373.5
–
230.1
–
55.4
–
153.3
–
627.1
45.2
485.7
42.3
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 28) and associates (note 27) 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 35.3% of the voting shares of the company as at
31 March 2022 (2021: 34.8%).
During the year, the group invoiced and received £0.1m (2021:
£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 74.
The key management personnel compensation was as follows:
Short-term employee benefits
Equity compensation benefits
Group
2022
£m
2.8
2.1
4.9
2021
£m
2.5
2.0
4.5
Total remuneration of directors is included in ‘Personnel expenses’
(note 2).
119
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:
2022
2021
Amount
of trans-
actions
£m
Balance at
year end
£m
Amount
of trans-
actions
£m
Balance at
year end
£m
18.4
1.5
4.4
(33.0)
1.3
–
1.9
(60.0)
9.2
–
4.5
–
–
–
(13.0)
–
–
–
77.1
–
35.5
(20.3)
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)
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
Leases as lessor
20. Operating leases
The group leases out its investment property under operating
leases (note 9). The future minimum lease receipts under non-
cancellable leases were as follows:
Less than one year
Between one and five years
2022
£m
0.5
2.7
3.2
2021
£m
0.1
–
0.1
During the year ended 31 March 2022, £0.6m (2021: £0.1m) was recognised
as income in the statement of comprehensive income in respect of
operating leases.
At the reporting date, the group and company had entered into
21. Capital commitments
unconditional commitments to limited partnerships, committed
loan facility agreements and a conditional loan and purchase
agreement, as follows:
Group
Company
2022
£m
2021
£m
2022
£m
2021
£m
331.1
–
331.1
285.9
75.6
361.5
331.1
4.5
335.6
290.4
75.6
366.0
Associates
Transactions between the company and group and associates
were as follows:
Investments
Contracted but not called
Conditionally contracted
2022
2021
Amount
of trans-
actions
£m
0.1
Balance at
year end
£m
–
Amount
of trans-
actions
£m
0.1
Balance at
year end
£m
–
4.0
–
0.7
–
Directors fees1
Dividends receivable on
equity shares
1. Transactions with subsidiary.
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 46.
The company has provided guarantees capped at £6.5m, £9.0m
22. 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.
120
Caledonia Investments plc Annual Report 2022 Financial instruments comprise securities and other investments,
23. 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 ten 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:
Group
2022
£m
Company
2021
£m
2022
£m
2021
£m
Investments held at fair value
through profit or loss
2,355.4
2,159.0
2,364.6
2,164.6
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.
Increase in prices
Decrease in prices
Group
Company
2022
£m
235.5
(235.5)
2021
£m
215.9
(215.9)
2022
£m
236.5
(236.5)
2021
£m
216.6
(216.6)
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
Cash and cash equivalents
Group
Company
2022
£m
2021
£m
2022
£m
2021
£m
–
0.6
0.6
4.3
0.6
4.9
–
0.6
0.6
4.3
0.6
4.9
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
2022
£m
0.9
2021
£m
0.4
2022
£m
0.9
2021
£m
0.4
(0.8)
(0.4)
(0.8)
(0.4)
The exposure to foreign currency has increased in the year due
to an increase in foreign denominated cash and cash equivalents
more than offsetting the reduction in foreign denominated
debt investments.
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. In the prior year, the group also
held fixed rate, interest-bearing financial assets, with maturities
of up to five years.
121
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
Company
2022
£m
2021
£m
2022
£m
2021
£m
–
4.4
–
4.4
30.0
341.1
30.0
14.2
30.0
341.0
30.0
14.5
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
2022
£m
(1.5)
1.5
2021
£m
–
–
2022
£m
(1.5)
1.5
2021
£m
–
–
The group’s sensitivity to interest rates has increased over the
year due to an increase in 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
Company
2022
£m
2021
£m
2022
£m
2021
£m
30.0
34.4
30.0
34.4
7.5
341.1
378.6
3.4
14.2
52.0
41.1
341.0
412.1
37.7
14.5
86.6
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
2022
£m
330.3
10.8
341.1
2021
£m
13.7
0.5
14.2
1. The group holds £330.3m (2021: £13.7m) in Low Volatility Net Asset
Value money market funds which all hold a AAAm rating from Standard
& Poors and £10.8m (2021: £0.5m) 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 £30.0m (2021: £34.4m). 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 instrument
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 £330.3m and £329.9m respectively (2021: group
£13.7m and company £13.3m).
At the year end, the group and company had £50m invested in
the Aberdeen Liquidity Fund (Lux) GBP, £48m invested in LGIM
Liquidity Fund GBP, £40m in each of the Institutional Sterling
Liquidity fund from Blackrock, the Sterling Liquidity fund from
Aviva Investors, the ILF GBP liquidity fund from Insight, the
JP Morgan GBP liquidity fund and £36.9m invested in Sterling liquid
reserves fund from Goldman Sachs. In addition the company and
group had £35m and £35.4m invested respectively in the HSBC
Global Liquidity Funds plc Sterling Liquidity Fund.
At the prior 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.
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.
122
Caledonia Investments plc Annual Report 2022 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 undrawn at 31 March 2022 (2021: drawn
by £15m).
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 (2021: £250m).
The group’s total capital at 31 March 2022 was £2,782.7m (2021:
£2,240.3m) and comprised equity share capital and reserves of
£2,782.7m (2021: £2,225.3m) and no borrowings (2021: £15m).
The group was ungeared at the year end (2021: drawn borrowings
of £15m) and had £250m (2021: £235m) 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:
Group
Company
2022
£m
2021
£m
2022
£m
2021
£m
Investments held at fair value
Level 1
Level 2
Level 3
719.4
6.3
830.1
6.2
719.4
6.3
1,549.1 1,468.3 1,558.3 1,473.2
2,385.4 2,194.0 2,394.6 2,198.9
830.1
6.2
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
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
2022
£m
2022
£m
2021
£m
1,468.3 1,077.8 1,473.2 1,079.2
208.4
(84.3)
154.4
(561.2)
154.4
(561.2)
208.4
(84.3)
247.6
(65.5)
247.6
(31.0)
239.2
0.8
308.5
(7.6)
1,549.1 1,468.3 1,558.3 1,473.2
339.5
(7.6)
243.5
0.8
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 2022 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
123
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
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. 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.
The table below sets out information about significant
unobservable inputs used at the prior year end, 31 March 2021
in measuring financial instruments categorised as Level 3 in the
fair value hierarchy.
At 31 March 2021
Description /
valuation method
Internally developed
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
Fair
value £m
Unobser-
vable
input
Weighted
average
input
Input
sensit-
ivity
+/-
Change
in valu-
ation
+/- £m
21.9
434.9
95.6
EBITDA
multiple
EBITDA
multiple
EBITDA
multiple
127.7 Tangible
assets
multiple
146.7 Multiple
13.3x 10.0%
13.0x 12.5%
3.9x 15.0%
1 17.5%
1
0.1x
826.8
14.0
840.8
627.5 Manager
NAV
1
5%
1,468.3
42.9 /
(45.8)
10.2 /
(11.4)
2.4 /
(2.4)
25.8 /
(27.6)
14.7 /
(14.7)
96.0 /
(101.9)
31.4 /
(31.4)
127.4 /
(133.3)
Fair
value £m
Unobser-
vable
input
Weighted
average
input
Input
sensit-
ivity
+/-
Change
in valu-
ation
+/- £m
23.3
313.8
117.8
EBITDA
multiple
EBITDA
multiple
EBITDA
multiple
135.7 Tangible
assets
multiple
191.1 Multiple
781.7
(20.7)
761.0
13.5x 10.0% 28.2
8.5x 10.0-
15.0%
4.6x 15.0%
10.4
1.6
1.14x 10.0% 15.4
1
0.1x
19.1
74.7
788.1 Manager
NAV
1,549.1
1
5% 39.4
114.4
At 31 March 2022
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
124
Caledonia Investments plc Annual Report 2022 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:
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 (2021: 4x to 14x), weighted
average 12.6x (2021: 12.7x). 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.
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.
At 31 March 2022, the investments were classified as follows:
Investment
Seven
Investment
Cobehold
Stonehage
Fleming
Liberation
Group
Category
Large, internally
developed
Utilise external
valuation
Large, internally
developed
Large, internally
developed, Leisure
EV Range
£m
>150m
Valuation
technique
Earnings
Valuation
£m
173.7
N/A
Net assets
159.2
>150m
Earnings
140.1
>150m
Tangible
fixed
assets
Earnings
Cooke Optics Medium, internally
50-100m
developed
Utilise external
valuation
Smaller
Bioagilytix
Other
investments
N/A
Cost
<50m
135.7
117.8
31.9
23.3
781.7
At 31 March 2021, the investments were classified as follows:
Investment
Deep Sea
Electronics
Liberation
Group
Seven
Investment
Stonehage
Fleming
Cobehold
Category
Large, internally
developed
Large, internally
developed, Leisure
Large, internally
developed
Large, internally
developed
Utilise external
valuation
EV Range
£m
>150m
>150m
>150m
Valuation
technique
Earnings
Tangible
fixed
assets
Earnings
Valuation
£m
193.0
127.7
126.4
>150m
Earnings
115.5
N/A
Net assets
112.3
Cooke Optics Medium, internally
50-100m
Earnings
developed
Utilise external
valuation
Smaller
Bioagilytix
Other
investments
N/A
Earnings
<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 2022.
More details on the valuation process for individual assets within
these categories is outlined below.
125
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Notes to the financial statements (continued)
Large, internally developed
Seven Investment Management 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 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.
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.
Management 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 (the manager) which reflects the net asset value of the
group as at 31 December 2021, Cobehold’s year end.
Other investments
Other investments comprise businesses with an enterprise value
of less than £50m whose valuations are derived internally on an
earnings multiple basis.
Non-pool companies
Non-pool companies comprise principally cash or group company
receivables or payables 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. The below table analyses the
fund valuations with reference to manager NAV dates used at
31 March 2022.
Manager NAV date
30 September 2021
31 December 2021
31 March 2022
£m
70.7
567.5
156.2
794.4
This delay in manager NAV receipts creates a risk of changes or
events occurring between the NAV and reporting dates which
could impact valuations. The increased level of volatility in public
equity markets during the first calendar quarter of 2022, principally
reflecting concerns about increasing rates of inflation, rising
interest rates and the conflict in Ukraine, led to a review of this
pricing risk. Our review determined the public market movements
between 31 December 2021 and 31 March 2022 for relevant
indices were in line with historic precedent, the impact of inflation
was not deemed material for underlying holdings within the funds
pool, and there was no material exposure to the conflict in Ukraine.
We also reviewed the underlying valuation methodologies adopted
by our fund managers and were satisfied that the techniques
utilised were appropriate.
126
Caledonia Investments plc Annual Report 2022
The company has a performance share scheme that entitles
24. Share-based payments
senior 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 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.
The terms and conditions of the grants outstanding were as follows,
whereby all grants are settled by physical delivery of shares:
Entitlement
Grant date
Performance share scheme awards
27.11.14
26.06.15
26.05.16
21.07.17
30.05.18
31.05.19
04.08.20
04.06.21
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
31.05.19
04.08.20
04.06.21
Compulsory award
Compulsory award
Compulsory award
Vesting
conditions
Number
of shares
Note 1
Note 3
Note 3
Note 3
Note 3
Note 3
Note 3
Note 3
Note 2
Note 2
Note 2
2,075
1,418
9,694
127,901
145,533
211,873
257,708
193,716
949,918
31,927
5,229
44,662
81,818
1. 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.
2. Three years of service.
3. 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.
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.
The weighted average share price at the date of exercise of share
awards during the year was as follows:
Weighted average share price
Employee expenses were as follows:
Years ended 31 March
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
Performance share awards granted in 2022
Deferred bonus awards for 2017
Deferred bonus awards for 2019
Deferred bonus awards for 2021
2022
p
3346
2021
p
2620
2022
£m
–
–
1.6
1.5
2.4
1.6
1.1
–
0.4
0.4
9.0
2021
£m
0.1
0.7
0.8
1.5
1.3
1.3
–
0.2
0.4
–
6.3
127
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
Notes to the financial statements (continued)
Group
25. 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
2022
£m
2021
£m
2.3
4.0
(3.6)
(2.6)
–
(0.3)
(3.3)
(1.5)
(1.4)
(4.7)
(8.3)
(1.1)
(2.9)
(5.5)
Defined benefit pension obligations
The group operates three plans in the UK that provide pension
benefits for employees and makes contributions to three
(2021: two) of the plans. 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. Three (2021: two) of the
schemes were in surplus on an IAS 19 basis. One scheme surplus
was recognised in full as the company considers there is an
unconditional right to a refund under IFRIC 14, one scheme
surplus was capped at the economic benefit of reduced future
contributions and one scheme surplus was unrecognised. 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
Change in irrecoverable surplus
2022
£m
(68.4)
78.9
10.5
(8.2)
2.3
2021
£m
(72.4)
76.1
3.7
–
3.7
Changes in the present value of defined benefit obligations were
as follows:
2022
£m
72.4
0.1
1.4
0.7
(3.3)
0.1
(3.0)
68.4
2021
£m
67.9
0.1
1.5
–
6.6
(0.6)
(3.1)
72.4
Balance at the year start
Service cost
Interest cost
Actuarial loss/(gain) from changes:
- in demographic assumptions
- in financial assumptions
- experience loss/(gain)
Actual benefit payments
Balance at the year end
128
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
2022
£m
76.1
1.4
4.3
0.1
(3.0)
78.9
2021
£m
69.2
1.6
8.3
0.1
(3.1)
76.1
Amounts recognised in management expenses in the Statement of
comprehensive income were as follows:
Service cost
Interest on obligations
Interest on plan assets
2022
£m
0.1
1.4
(1.4)
0.1
2021
£m
0.1
1.5
(1.6)
–
Amounts recognised in other comprehensive income were
as follows:
Actuarial gains/(losses) arising from financial
assumptions
Actuarial losses arising from demographic
assumptions
Actuarial (losses)/gains from experience
adjustments
Return on plan assets less interest income
Increase in irrecoverable surplus
Re-measurement (losses)/gains in the year
2022
£m
2021
£m
3.3
(6.6)
(0.7)
(0.1)
4.3
(8.2)
(1.4)
–
0.6
8.3
–
2.3
An analysis of plan assets at the end of the year was as follows:
Equities
Bonds
Cash
2022
£m
38.3
25.5
15.1
78.9
2021
£m
40.0
25.3
10.8
76.1
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
2022
%
2.6
4.9
3.9
3.9
2021
%
1.9
4.4
3.4
3.4
Mortality rates are assumed to follow the Self-Administered Pension
Schemes ‘Series 3’ very light/light tables (for males/females
respectively) applicable to each member’s year of birth, with future
improvements in longevity in line with CMI 2020 core projections
model from 2013. 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 27.7 years (2021: 27.0 years) for males and 28.6 years
(2021: 27.5 years) for females who are currently 62 years of age.
Expected contributions to group post-employment benefit plans
for the year ending 31 March 2023 were £0.1m (2022: £0.1m).
Caledonia Investments plc Annual Report 2022 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 2021 and 2020. 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
2022
years
14
15
Obligations
at 31 Mar
2021
£m
13.0
31.7
At 30 Sep
2019
£m
25.8
At 31 Mar
2022
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
2022
£m
2.3
1.6
3.5
2021
£m
2.7
1.8
3.8
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.
There were no post balance sheet events.
26. Post balance sheet events
Company
27. Interests in associates
Sterling Thermal Technology Holdings Ltd
Class
Ordinary
Holding % Registered office
25.0 Brunel Road, Rabans Lane Industrial Area, Aylesbury, Buckinghamshire
Sports Information Services (Holdings) Ltd
Stonehage Fleming Family & Partners Ltd
Ordinary
Preference
22.5 Unit 1/2 Whitehall Avenue, Kingston, Milton Keynes MK10 0AX
36.1 Nerine House, St George’s Place, St Peter Port,
HP19 8TD
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
2022
£m
251.3
(139.5)
111.8
261.0
13.1
2021
£m
226.0
(124.0)
102.0
333.7
3.5
129
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Notes to the financial statements (continued)
28. Subsidiaries
Company
Caledonia Investments
Amber 2010 Ltd
Buckingham Gate Ltd2
Class
Holding %
Ordinary
Ordinary
100.01
100.01
Caledonia CCIL Distribution Ltd Ordinary
100.01
Ordinary
Caledonia Financial Ltd
Caledonia Group Services Ltd2 Ordinary
Ordinary
Caledonia Ireland ICAV
(in liquidation)
Caledonia Land & Property Ltd Ordinary
Ordinary
Caledonia Treasury Ltd2
Bloom Engineering
Bloom Combustion (India)
Private Ltd3
Bloom Combustion Products
(Shanghai) Co Ltd3
Bloom Engineering (China) LLC3 Member
Ordinary
Ordinary
Key to
Registered
office
Company
Class
Holding %
Key to
Registered
office
7
7
7
7
7
8
7
7
10
11
12
16
16
16
17
18
19
19
19
19
19
19
19
20
21
21
19
19
21
19
19
20
19
19
19
19
Caledonia US Investments Ltd
Caledonia Venus Holdings Ltd
(in liquidation)
Crewkerne Investments Ltd
Easybox Self-Storage Ltd
Edinmore Investments Ltd
Sterling Crewkerne Ltd
Sterling Industries Ltd
The Union-Castle Mail
Steamship Co Ltd
Ordinary
A Ordinary
A Ordinary
B Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
A Ordinary
100.01
100.01
50.5
100.0
100.01
100.01
100.01
100.01
100.01
100.01
Bloom Engineering (Europa)
GmbH3
Bloom Engineering Co Inc3
Ordinary
100.0
Common
100.0
Bloom Engineering Holdings Inc. Common
97.41
Cooke Optics Group Ltd4
Cooke Optics Holdings Ltd4
Cooke Optics Ltd4
Ordinary
Ordinary
Ordinary
100.0
100.0
100.0
7
9
7
7
7
7
7
7
13
14
15
16
16
16
Cooke Optics TV Ltd4
Ordinary
100.0
16
Ordinary
La Rocque Inn (Jersey) Ltd5
Ordinary
Lapwing (Trading) Ltd5
Ordinary
Le Hocq Hotel Ltd5
Ordinary
Les Garcons Ltd5
Ordinary
Longueville Distributors Ltd5
Ordinary
M Still Catering Ltd5
Marais Hall Ltd5
Ordinary
Mary Ann Products (Jersey) Ltd5 Ordinary
Mitre Hotel (Jersey) Ltd5
Nightbridge Ltd5
Old Court House Hotel
(St Aubin) 1972 Ltd5
Parade Hotel (Jersey) Ltd5
Peirson (1971) Ltd5
Puffin NewCo Ltd5
Red Lion Ltd5
Robin Hood (Jersey) Ltd5
S.L. Ltd5
Ship Holdings Ltd5
Square Ltd5
St John’s Hotel Ltd5
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
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
100.0
100.0
100.0
100.0
100.0
100.0
19
19
19
20
19
21
22
19
19
19
19
19
19
19
19
19
19
20
19
19
100.01
100.01
100.01
100.01
100.01
100.0
100.0
100.0
100.0
100.0
100.01
75.31
98.61
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Ordinary
Ordinary
A Ordinary
B Ordinary
C Ordinary
Ordinary
Ordinary A
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Deferred
Ordinary
Preference
Ordinary
Ordinary
Ordinary
100.0
Ordinary
Ordinary
Ordinary A
Ordinary B
Ordinary C
Preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100.0
100.0
100.01
31.61
75.41
100.01
100.0
100.0
100.0
100.0
100.0
100.0
Cooke Optics
Chaplin Bidco Ltd4
Chaplin Midco Ltd4
Chaplin Topco Ltd
Cooke Americas Ltd4
Cooke (Shanghai) Optics
Technology Co Ltd4
Liberation Group
A.E. Smith & Son Ltd5
A.S.B.M. Ltd5
A.S.B.O. Ltd5
A.S.B.T. Ltd5
Aurora Hotel Ltd5
Bath Street Wine Cellar Ltd5
Brasserie du Centre Ltd5
Bucktrout & Company Ltd5
Butcombe Brewery Ltd5
Butcombe Brewing Company
Ltd5
Caesarea Hotel (Jersey) Ltd5
Café de Paris (Jersey) Ltd5
Caledonia TLG Bidco Ltd5
Caledonia TLG Ltd
Caledonia TLG Midco Ltd5
Captains Holdings Ltd5
Channel Wines & Spirits
(Jersey) Ltd5
Citann Ltd5
Cosy Corner (Jersey) Ltd5
Craig Street Brewing
Company Ltd5
130
Caledonia Investments plc Annual Report 2022
Company
Divette Holdings Ltd5
Don Inn (Jersey) Ltd5
Evenstar Ltd5
Class
Ordinary
Ordinary
Ordinary
Holding %
100.0
100.0
100.0
Key to
Registered
office
20
19
19
Exeter Hotel (Jersey) Ltd5
Ordinary
100.0
Farmers Inn Ltd5
Five Oaks Hotel Ltd5
Foresters Arms (Jersey) Ltd5
Ordinary
Ordinary
Ordinary
100.0
100.0
100.0
Gimbels (Jersey) Ltd5
Ordinary
100.0
Glo’ster Vaults Ltd5
Ordinary
Great Union Hotel (Holdings) Ltd5 Ordinary
Great Western Hotel Ltd5
Ordinary
Guernsey Leisure Company Ltd5 Ordinary
Ordinary
Guppy’s Holdings Ltd5
Ordinary
Guppy’s of Guernsey Ltd5
Ordinary
Hautville Ltd5
Ordinary
Horse & Hound (Jersey) Ltd5
Ordinary
John Tregear Ltd5
Ordinary
La Cave des Vins Ltd5
Ordinary
La Rocque Enterprises Ltd5
Seven Investment Management
7IM Holdings Ltd6
7IM Investment and Retirement
Solutions Ltd6
7IM Ltd6
7IM Trustees Ltd6
Ordinary
Preference
Ordinary
Ordinary
Ordinary
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
100.0
Caledonia Thames Acquisitions
(Jersey) Ltd6
Ordinary
100.0
19
19
19
19
19
19
19
19
20
20
20
20
19
19
19
19
23
23
23
23
24
Company
Stag Hotel (Jersey) Ltd5
Sussex Hotel Ltd5
The Guernsey Brewery Co
(1920) Ltd5
The Independent Brewing
Company Ltd5
The Liberation Group Ltd5
The Liberation Group UK Ltd5
The Liberation Pub Company
(Guernsey) Ltd5
The Liberation Pub Company
(Jersey) Ltd5
The Post Horn Ltd5
The Royal Oak Inn Trading Ltd5
Trafalgar Hotel (Jersey) Ltd5
Union Inn (Jersey) Ltd5
Victor Hugo Ltd5
Victoria (Valley) Ltd5
Victoria Hotel (Jersey) Ltd5
Wellington Hotel Ltd5
Wests Cinemas Ltd5
White Hart Ltd5
Class
Ordinary
Ordinary
Ordinary
Preference
Ordinary
Ordinary
Ordinary
Ordinary
Holding %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Ordinary
100.0
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Caledonia Thames Group
(Jersey) Ltd6
Caledonia Thames Holdings
(Jersey) Ltd
Find a Wealth Manager Ltd6
Partners Wealth Management
LLP6
Seven Investment Management
LLP6
Ordinary
100.0
Ordinary
A1 Ordinary
Preference
Ordinary
Member
91.71
28.81
100.01
100.0
95.0
Member
95.0
Key to
Registered
office
19
19
20
19
21
21
20
19
19
21
19
19
19
19
19
19
19
20
24
24
25
26
23
1. Directly held by the company.
2.
Included in the consolidation.
3. Subsidiary of Bloom Engineering Holdings Inc.
4. Subsidiary of Chaplin Topco Ltd
5. Subsidiary of Caledonia TLG Ltd
6. Subsidiary of Caledonia Thames Holdings (Jersey) Ltd
Registered office addresses
7. Cayzer House, 30 Buckingham Gate, London SW1E 6NN
8. 13-18 City Quay, Dublin 2, Ireland
9. MAZARS LLP, 1st Floor Two Chamberlain Square, Birmingham, B3 3AX
10. 410 Yusuf Building, Veer Nariman Road, Fort, Mumbai 400001, India
11. 1383 Gu Gao Road, Pudong District, Shanghai 201209, China
12. PHS Corporate Services Inc, 1201 Market Street, Suite 1600,
Wilmington, DE 19801, USA
13. Büttgenbachstraße 14, D-40549 Düsseldorf 11, Germany
14. 5460 Horning Road, Pittsburgh, PA 15236, USA
15. 1313N. Market Street, Suite 5100, Wilmington, Delaware 19801,
New Castle County, USA
16. 1 Cooke Close, Thurmaston, Leicester LE4 8PT
17. 264 Morris Avenue, Mountain Lakes, NJ 07046, USA
18. Rooms 503/504, No 1 Building, No 908 Xiuwen Road,
Minhang District, Shanghai, China
19. 19 Royal Square, St Helier, Jersey JE2 4WA
20. Hougue Jehannet, Vale, Guernsey GY3 5UF
21. Butcombe Brewery, Cox’s Green, Wrington, Bristol BS40 5PA
22. Marais Hall, Marais Square, St Anne, Alderney GY9 3TS
23. 55 Bishopsgate, London EC2N 3AS
24. 44 Esplanade, St Helier, Jersey JE4 9WG
25. Alpha House, 100 Borough High Street, London SE1 1LB
26. 20 St Andrew Street, London EC4A 3AG
131
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction
The ten year record of the company’s financial performance is as follows:
Company performance record
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Profit/
(loss) for
the year
£m
206.8
183.1
207.7
41.1
290.1
26.5
198.2
(172.5)
467.6
611.3
Diluted
earnings
per share
p
361.9
327.4
371.1
73.1
518.4
47.4
354.7
(315.0)
837.8
1101.5
Annual
dividend
p
47.2
49.1
50.6
52.6
54.8
57.0
59.3
61.1
62.9
64.8
Net
assets
£m
1,299
1,446
1,627
1,644
1,899
1,837
2,002
1,787
2,225
2,783
Diluted
NAV per
share
p
2299
2593
2906
2890
3395
3285
3582
3236
4000
5041
Rolling ten years annualised
FTSE
Total share-
All-Share
holder
Total Return
return
%
%
10.7
13.6
8.6
8.9
7.7
7.5
4.7
3.8
5.7
5.2
6.7
5.3
11.1
11.6
4.4
6.7
6.0
7.1
7.2
11.9
Share
price
p
1840
1923
2281
2285
2750
2650
2980
2435
2645
3540
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 and 2022 exclude the special dividend
of 100.0p and 175.0p.
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.
Dividend cover is the ratio of net revenue (as defined below)
Dividend cover
to the annual dividend payable (excluding special dividends) to
shareholders out of profits for the year. It helps to indicate the
sustainability of annual dividends.
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
Discount
at a discount to the NAV of the company. The following discount
applied to the shares:
Share price (b)
NAV (a)
Discount ((a-b)/a)
(expressed as a percentage)
31 Mar 2022
£m
3540p
5041p
31 Mar 2021
£m
2645p
4000p
29.8%
33.9%
APM
Net revenue (b)
Dividend payable (a)
Dividend cover ((b)/a)
(expressed as a percentage)
31 Mar 2022
£m
39.3
35.1
31 Mar 2021
£m
29.8
34.5
112%
86%
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.
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 2022
£m
281.8
2,020.4
2,302.2
31 Mar 2021
£m
243.8
1,744.9
1,988.7
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.
132
Caledonia Investments plc Annual Report 2022
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
2022
5041p
63p
12p
5116p
4000p
27.9%
31 Mar
2021
4000p
62p
11p
4073p
3236p
25.9%
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 104 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 2022 £m
2227.5
Apr-21
2266.9
May-21
2370.4
Jun-21
2365.7
Jul-21
2458.0
Aug-21
2539.8
Sep-21
2544.6
Oct-21
2678.5
Nov-21
2669.7
Dec-21
2617.3
Jan-22
2586.6
Feb-22
2782.7
Mar-22
2509.0
Average
31 Mar 2022
£m
21.0
2509.0
31 Mar 2021
£m
18.9
1934.6
0.84%
0.98%
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
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.
133
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)
0871 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 provide 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/Special dividend ex-dividend date
Financial calendar
Final/Special dividend record date
Annual General Meeting
Final/Special dividend payment date
Half-year results announcement
30 June 2022
1 July 2022
27 July 2022
4 August 2022
November 2022
Anticipated interim dividend payment date
January 2023
2023 Annual results announcement
2023 Annual report publication
May 2023
June 2023
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. No stamp is required for letters from
UK shareholders.
134
Caledonia Investments plc Annual Report 2022 Directors and advisers
David C Stewart2,3
Chairman
William P Wyatt (Chief Executive)2
Executive directors
Mathew S D Masters (Chief Executive Officer Designate)
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
M Anne Farlow1,2,3,4
Claire L Fitzalan Howard2,3,4
Lynn R Fordham1,2,4
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
Registered in England no 235481
Registered number
BDO LLP
Auditor
55 Baker Street
London W1U 7EU
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
Freshfields Bruckhaus Deringer LLP
Solicitors
100 Bishopsgate
London EC2P 2SR
135
Business reviewDirectors’ reportFinancial statementsOther informationIntroduction Page intentionally blank
136
Caledonia Investments plc Annual Report 2022 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
C
a
l
e
d
o
n
i
a
I
n
v
e
s
t
m
e
n
t
s
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
2
Caledonia Investments plc
Cayzer House
30 Buckingham Gate
London SW1E 6NN
tel
+44 20 7802 8080
email enquiries@caledonia.com
web www.caledonia.com