Interim Results
Caledonia Investments PLC
23 November 2000
INTERIM RESULTS ANNOUNCEMENT
'Continuing to build shareholder value'
Caledonia Investments plc, the diversified trading and investment
company, today announces its interim results for the six months ended
30 September 2000. The salient features are:
Key Financial Results
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2000 1999 2000
£m £m £m
Total operating profit 25.7 23.5 45.2
Profit before taxation 27.9 31.3 51.8
Shareholders funds 837.6 801.8 764.3*
Basic earnings per ordinary
share 24.0p 28.9p 46.1p
Adjusted basic earnings per
ordinary share 24.3p 18.2p 37.0p
Dividends per ordinary
share - Annual 7.8p 7.5p 23.0p
- Special - - 70.0p
Net asset value per ordinary
share 1055p 961p 960p*
Adjusted net asset value per
ordinary share 1314p 1068p 1189p*
* After provision for the special dividend of 70 pence per ordinary share
* Adjusted basic earnings per ordinary share rose 33.5% from 18.2
pence to 24.3 pence.
* Total operating profit increased by 9.4% from £23.5m to £25.7m.
* Interim dividend up 4.0% from 7.5 pence to 7.8 pence per ordinary share.
* £59m spent on new and follow-up investments.
* Since 31 March 2000, net asset value per ordinary share has risen
almost 10% to 1055 pence and 10.5% to 1314 pence when adjusted to
reflect the market value of the group's quoted associate companies.
Business Highlights
Profits and earnings
The profit before taxation of £27.9m includes a further profit from
the sale of development land of £4.1m and a £2.5m uplift in income
from investments partly offset by lower interest receivable and higher
overheads. Share of profits from associates was boosted by a
substantial £5.9m increase in the contribution from Close Brothers.
The comparative profit before taxation of £31.3m included a profit of
£8.5m of the dilution of our stake in Close Brothers, whereas, for the
period under review, a £4.0m profit from the disposal of a US
associate of Amber was largely offset by a provision against a loan.
Adjusted earnings per share rose by 33.5% from 18.2 pence to 24.3
pence.
Dividend
Notwithstanding the substantial special dividend of 70 pence per share
paid in respect of last year, Caledonia continues to follow the aim of
steadily increasing dividends and the directors have declared an
increased interim dividend of 7.8 pence per share in respect of the
year ending 31 March 2001 (2000 - 7.5 pence).
Close Brothers
Close Brothers achieved its 25th year of successive profit growth with
an 85% improvement in earnings per share and a 56% increase in
dividends. The continuity of sound management throughout this period
has been a key factor in this success. A period of quite exceptional
stock market activity added super-profits to an otherwise strong
result from Winterflood Securities. Good progress from many other
aspects of the group together with the benefits from recent
acquisitions combined to produce a substantial uplift of £5.9m in the
Close Brothers contribution for Caledonia.
Investment activity
During the six months under review, some £59m has been deployed in new
and follow-on investments, particularly in the technology sector.
Foremost in this category was the £20m investment in the Amerindo
Internet Fund referred to in last year's annual report which has made
a good start since inception.
Caledonia was also pleased to become involved as the institutional
partner in Brian Ashford-Russell's start-up fund management venture
specialising in the technology sector.
Commenting on the results and outlook, Peter Buckley said:
'We are delighted to report a 33.5% increase in adjusted earnings
per share and a 10.5% uplift in the adjusted net asset value per
share for the period under review. We also realised a £58m capital
gain on our Robert Fleming and Newscom holdings. With £59m spent on
new investments and £55m distributed by way of special dividend our
aggregate cash resources have reduced to £29m but we have liquidity
available and ample scope to borrow.
'Our willingness to back sound management and to take a longer term
view continues to provide us with a flow of interesting
opportunities in this increasingly volatile world. Our
determination to pursue this investment strategy remains
undiminished.'
Enquiries:
Caledonia Investments plc: 020 7481 4343
Peter Buckley, Chairman and Chief Executive
Citigate Dewe Rogerson: 020 7638 9571
Bill Trelawny / Charles Vivian
REVIEW OF OPERATIONS
FINANCIAL
Caledonia's interests in this sector have all made significant
progress during the period under review.
Close Brothers Group (19% associate)
Close Brothers Group announced its 25th successive year of profit
growth with an 85% improvement in earnings per share and a 56%
increase in dividends. This outstanding result included a period of
quite exceptional activity on the stock market between November 1999
and March 2000 which, in addition to the otherwise strong growth in
the profits of Winterflood, produced an element of super-profit which
may not recur. However, good progress was made with many other aspects
of the business following the acquisitions made in the late summer of
1999 and other start up initiatives. 25 years of compound annual
profits growth in excess of 25% under the same management leadership
is a remarkable testament to its skills.
Rathbone Brothers (12% investment)
Rathbone Brothers announced continuing good results for its first six
months trading to 30 June. Earnings per share and dividends were up
20% and 25% respectively and the management are encouraged by the
recent recruitment of business producers who have yet to contribute
fully.
Friends Ivory & Sime (8% investment)
Friends Ivory & Sime recently announced an increase in earnings per
share and dividend of 22% and 14% respectively at the interim stage.
Funds under management now total £38 billion and further progress is
expected.
As recently announced, Caledonia is pleased to have reached agreement
in principle to become a 20% shareholder in a new investment
management company specialising in the technology sector to be headed
by Brian Ashford-Russell and his two colleagues.
INDUSTRIAL AND SERVICES
Amber Industrial Holdings (100% subsidiary)
Amber Industrial Holdings reported a shortfall in its traditional UK
industrial consumables division compared with last year, partially
offset by continuing growth in the group's US silicone business. In
the first half, the sale of American Silicones Inc, in which Amber had
a 49% interest, and which no longer fitted with Amber's strategy in
the silicones sector, yielded a profit of almost £4m from an original
outlay of £0.2m.
Edinburgh Crystal (89% subsidiary)
Edinburgh Crystal's trading results slipped during the period. The
marketplace remains challenging and the company has recently announced
a downsizing of its hot end production facility, together with further
capital expenditure to upgrade its cutting process. These measures
should result in improved competitiveness in the overall production
process.
Sterling Industries (100% subsidiary)
Sterling Industries has had a disappointing first half. Trading for
the hydraulic valves division has remained competitive and the thermal
process division's results have fallen short of expectations and have
suffered from a difficult contract in the Far East. The second six
months should show recovery towards the profit levels of the previous
year but this still calls for improvement.
AHL Services (11% investment)
AHL Services reported an 18% increase in revenues for the three
quarters to 30 September at $683m. Cumulative earnings for the same
period have suffered from a one-off trading provision and currency
movements. Third quarter earnings were in line with expectations as
the company focuses on profitable growth businesses, which has
resulted in a recent strengthening of the share price.
Wallem (74% investment)
Wallem has continued its recovery and its results for the current year
are expected to be buoyant.
Offshore Logistics (6% investment)
Offshore Logistics, which incorporates Caledonia's interest in Bristow
Helicopters, has benefited from the improvement in the oil price which
has at last flowed through to improved demand for the service
providers. This, coupled with management action in reducing costs,
provides a brighter outlook for the worldwide activities of these
businesses.
INVESTMENT FUNDS
English & Scottish Investors (31% associate)
English & Scottish Investors continued its record of better
performance for its interim six months to 31 July and the discount of
the share price to underlying net asset value has shown an improving
trend. A continuation of the share buy back programme has increased
Caledonia's shareholding from 30% to just over 31%.
British Empire Securities and General Trust (18% associate)
British Empire Securities and General Trust has recently announced
excellent results for its year to 30 September. Net asset value rose
27%, well ahead of its comparator indices, and its share price has
recorded a 90% increase over its past two financial years. Its
manager's investment style of seeking growth assets at a discount
seems particularly appropriate at this time when there are quality
asset situations which are unloved by the markets.
Amerindo Internet Fund (5% investment)
Amerindo Internet Fund was launched as a £400m investment trust in
early April. Caledonia, in line with its strategy of participating in
the technology sector on a collective basis, took a 5% shareholding
and has board representation. Although market conditions in the US
technology sector have been turbulent, Amerindo's well-experienced
managers view the present time as an opportunity to accumulate
holdings in the foremost companies in this sector.
Caledonia also includes a number of smaller investments in other
collective technology funds under this heading.
LEISURE AND MEDIA
The Sloane Club (100% subsidiary)
The Sloane Club continues an improving trend.
Radio Investments (49% associate)
Radio Investments has seen the values of radio properties continuing
to soar during the period under review, with the big UK players
seeking to position themselves advantageously ahead of anticipated
regulatory changes. Caledonia expects this situation to continue and
Radio Investments can be expected to benefit from further development
and consolidation within the sector.
Sun International Hotels (21% investment)
Sun International Hotels completed its tender offer to buy in 15% of
its outstanding shares after the offer by Sun International
Investments Ltd had failed to receive the necessary endorsements to
purchase all of the 45% minority not owned. Trading on Paradise Island
continued to improve and sales of house plots round the re-landscaped
golf course have gone well. The Mohegan Sun operations in Connecticut
continued to flourish but the revenue sharing participation negotiated
in lieu of the management contract made a lower contribution as
expected. This should improve appreciably when the Mohegan Tribe's
near $1 billion expansion begins to come on stream late next year and
in early 2002. Atlantic City showed improved results but the outlook
remains challenging and agreement has been reached, subject to a
number of conditions, to sell the property. The Mauritius and Dubai
operations continue to perform well.
PROPERTY AND GENERAL
Subsidiaries
St Lawrence Properties successfully realised the remaining 3 acres of
its development land in Oxford, referred to in last year's annual
report, at a profit of £4.1m.
Quintain Estates (7% investment)
Quintain Estates has continued to build value for shareholders with
growth of 16% in net asset value per share for its year to 31 March
2000.
At present, Caledonia includes a number of direct technology
investments under this heading although, as explained, it has made
most of its commitment to this sector through collective funds and has
continued to make additions via unlisted collective funds.
SUMMARY OF RESULTS BY CLASS OF BUSINESS
Attributable Book Valuation
profits value
£m £m £m
------------------------------------------------------------------
Financial 17.3 211.6 439.6
Industrial and services 2.2 114.9 118.0
Investment funds 2.9 272.8 248.5
Leisure and media 0.5 112.7 110.8
Property and general 6.7 129.4 130.3
Cash and deposits* 2.6 13.5 13.5
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32.2 854.9 1,060.7
Other items (6.5)
Unallocated net liabilities (17.3) (17.3)
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25.7 837.6 1,043.4
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* Excludes net cash held in subsidiaries of £15.1m.
The table above presents a summary of the results of the group by
class of business. Attributable profits are the group's share of
operating profit of subsidiaries and associates and dividends and
interest receivable from investments. The book value is the group's
share of net assets of subsidiaries and associates, including
capitalised goodwill, and a valuation of investments. The valuation
column overlays the book value with the market value of listed
associates, whilst subsidiaries are shown at book value throughout.
If the group had realised its investments at 30 September 2000 at the
stated valuation, it is calculated that tax of some £99m would have
arisen.
UNAUDITED GROUP PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2000 1999 2000
£m £m £m
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Group turnover 68.1 42.3 90.2
Trading profit 6.7 6.9 12.2
Income from investments 6.4 3.9 7.7
Interest receivable 2.3 2.6 4.6
Amounts written off current
assets (3.8) - -
Other income 0.3 0.4 0.7
Group overheads (3.6) (2.7) (6.2)
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Group operating profit 8.3 11.1 19.0
Share of operating profit of
associates 17.5 12.5 26.4
Amortisation of goodwill on
acquisition of associates (0.1) (0.1) (0.2)
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Total operating profit 25.7 23.5 45.2
Profit on sale of operations 4.0 9.3 9.8
Interest payable (1.8) (1.5) (3.2)
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Profit on ordinary
activities before taxation 27.9 31.3 51.8
Tax on profit on ordinary
activities (8.4) (6.6) (13.2)
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Profit on ordinary
activities after taxation 19.5 24.7 38.6
Minority interests (equity) (0.6) (0.8) (0.9)
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Profit for the financial period 18.9 23.9 37.7
Dividends (6.1) (6.2) (73.7)
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Profit retained for the
financial period 12.8 17.7 (36.0)
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Earnings per ordinary share
Basic 24.0p 28.9p 46.1p
Diluted 23.9p 28.8p 46.0p
Adjusted basic 24.3p 18.2p 37.0p
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Dividends per ordinary share
Annual 7.8p 7.5p 23.0p
Special - - 70.0p
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UNAUDITED GROUP RESERVE MOVEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000
TOTAL RECOGNISED GAINS AND LOSSES
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2000 1999 2000
£m £m £m
------------------------------------------------------------------
Profit for the financial period 18.9 23.9 37.7
Realised gains and losses on
sale of investments 58.2 5.3 23.1
Provision against investments (1.5) 1.1 (5.0)
Movement in revaluation
reserve (1.7) (27.4) (15.8)
Tax on sale of investments (12.3) (1.5) (3.3)
Exchange differences 9.9 (3.4) 0.6
Share of reserve movements
of associates
Realised gains and losses
on sale of investments 11.4 7.7 15.5
Movement in revaluation
reserve (1.7) 5.6 16.1
Tax on sale of investments - - (0.1)
Exchange differences (0.1) (0.2) 0.1
Other movements - - 0.6
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Total recognised gains and
losses 81.1 11.1 69.5
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RECONCILIATION OF SHAREHOLDERS' FUNDS
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2000 1999 2000
------------------------------------------------------------------
£m £m £m
Total recognised gains and
losses 81.1 11.1 69.5
Dividends (6.1) (6.2) (73.7)
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75.0 4.9 (4.2)
Issue of shares - - 39.2
Purchase of own shares (1.6) - (9.6)
Reclassification of share capital - - (56.7)
Goodwill on disposals
written back - 3.6 3.8
Share of goodwill movements
of associates (0.1) - (1.5)
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Net movement in shareholders'
funds 73.3 8.5 (29.0)
Opening balance of
shareholders' funds 764.3 793.3 793.3
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Closing balance of
shareholders' funds 837.6 801.8 764.3
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UNAUDITED GROUP BALANCE SHEET
AT 30 SEPTEMBER 2000
30 Sep 30 Sep 31 Mar
2000 1999 2000
£m £m £m
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Fixed assets
Intangible assets 11.5 7.2 11.1
Tangible assets 48.0 38.7 48.6
Investments
Investment in associates 279.9 257.4 256.6
Other investments 494.9 397.4 425.0
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834.3 700.7 741.3
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Current assets
Stocks 17.7 12.3 18.2
Debtors 39.7 31.4 47.5
Short term deposits 23.8 117.1 108.5
Cash at bank and in hand 18.5 18.5 16.0
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99.7 179.3 190.2
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Creditors falling due within
one year
Short term borrowings (13.0) (9.6) (13.7)
Other creditors (37.6) (33.0) (117.6)
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(50.6) (42.6) (131.3)
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Net current assets 49.1 136.7 58.9
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Total assets less current
liabilities 883.4 837.4 800.2
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Creditors falling due after
more than one year
Long term borrowings (6.1) (0.6) (5.6)
Other creditors (1.5) (3.9) -
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(7.6) (4.5) (5.6)
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Provision for liabilities
and charges
Deferred taxation (36.4) (29.4) (28.4)
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839.4 803.5 766.2
Minority interests (equity) (1.8) (1.7) (1.9)
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837.6 801.8 764.3
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Capital and reserves
Called up share capital 4.4 4.2 4.4
Share premium account 1.3 1.3 1.3
Capital redemption reserve 0.8 0.7 0.8
Revaluation reserve 189.0 181.9 191.2
Profit and loss account 642.1 613.7 566.6
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Shareholders funds (equity) 837.6 801.8 764.3
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Net asset value per ordinary
share 1055p 961p 960p
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UNAUDITED GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2000
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2000 1999 2000
£m £m £m
------------------------------------------------------------------
Net cash inflow from
operating activities 17.4 4.7 15.4
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Dividends from associates 2.4 3.4 8.2
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Servicing of finance
Interest paid (0.2) - -
Dividends paid to minority
shareholders (0.7) - -
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(0.9) - -
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Taxation (2.9) (5.6) (20.3)
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Capital expenditure and
financial investment
Purchase of intangible fixed
assets - - (0.1)
Purchase of tangible fixed assets (1.3) (0.8) (2.8)
Sale of tangible fixed assets 0.1 0.3 0.3
Purchase of investments (52.8) (30.7) (50.5)
Sale of investments 31.1 17.4 58.3
Repayment of loan to associates 0.1 - -
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(22.8) (13.8) 5.2
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Acquisitions and disposals
Purchase of operations (0.5) (1.4) (17.5)
Net cash acquired with operations - - 12.3
Dividends paid to subsidiary's
former shareholders - - (10.6)
Investment in associates (6.0) (3.0) (7.8)
Sale of operations - (0.7) (0.8)
Sale of interests in associates 0.2 - -
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(6.3) (5.1) (24.4)
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(13.1) (16.4) (15.9)
Equity dividends paid (67.5) (12.4) (18.6)
Management of liquid resources 84.9 30.7 39.7
Financing (1.1) (0.1) (10.1)
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Increase in cash in the period 3.2 1.8 (4.9)
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RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
6 mths 6 mths Year
30 Sep 30 Sep 31 Mar
2000 1999 2000
£m £m £m
------------------------------------------------------------------
Group operating profit 8.3 11.1 19.0
Depreciation and amortisation 2.8 1.6 3.6
Provision against own shares 0.1 - -
Profit on sale of fixed assets - (0.1) (0.1)
Investment income and
interest accruals increase (1.6) 1.2 2.8
Stocks decrease 0.8 (0.3) 0.6
Debtors decrease 8.9 (14.2) (14.7)
Creditors decrease (1.9) 5.4 4.2
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17.4 4.7 15.4
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SUPPLEMENTARY INFORMATION
EXCEPTIONAL ITEM
The amounts written off current assets of £3.8m related to the write
off of a loan.
TAXATION
Taxation charged to the profit and loss account included £5.3m (1999 -
£3.6m) in respect of associated companies.
DIVIDENDS
The interim dividend of 7.8 pence per ordinary share will be payable
on 11 January 2001 to shareholders registered on 8 December 2000.
EARNINGS PER ORDINARY SHARE
The calculation of basic earnings per ordinary share was based on the
78,901,000 (1999 - 82,804,000) weighted average number of ordinary
shares in issue during the period. Diluted earnings per ordinary share
took into account the 88,000 (1999 - 101,000) dilutive potential
ordinary shares from employee share option schemes.
Adjusted basic earnings per ordinary share, before the loan write off
noted above, sale of operations, amortisation of goodwill and other
items, is considered to provide a more consistent indication of
underlying operating performance.
ANALYSIS OF CHANGES IN NET FUNDS
31 Mar Exchange 30 Sep
2000 differences Cash flow 2000
£m £m £m £m
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Cash at bank and in hand 16.0 - 2.5 18.5
Bank overdrafts (13.5) - 0.7 (12.8)
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2.5 - 3.2 5.7
Short term deposits 108.5 0.2 (84.9) 23.8
Debt due within one year (0.2) - - (0.2)
Debt due after more
than one year (5.6) - (0.5) (6.1)
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105.2 0.2 (82.2) 23.2
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BASIS OF PREPARATION AND ISSUE OF INTERIM REPORT
The interim report has been prepared on the basis of the accounting
policies set out in the 2000 group accounts and is unaudited.
The interim report was approved by the board on 23 November 2000. The
results for the year ended 31 March 2000 do not constitute the
company's statutory accounts. The statutory accounts for that period,
which received an unqualified audit report, have been filed with
the Registrar of Companies.
Copies of this statement are available at the company's registered
office, Cayzer House, 1 Thomas More Street, London E1W 1YB.