Caledonia Regulatory News (CLDN)

Caledonia Investments plc

Portfolio update

On 7 July 2020, Caledonia Investments plc ("Caledonia") announced its unaudited diluted net asset value per share ("NAV") as at 30 June 2020, calculated on a cum-income basis, of 3367p. This represented an increase of 5.4% over the previous quarter, before adjustment for the final dividend of 44.5p per share which, subject to shareholder approval at our forthcoming annual general meeting, is payable on 6 August 2020. This announcement provides a further update on trading, particularly within Caledonia's Private Capital portfolio, in light of the continued easing of government imposed restrictions in response to the Covid-19 pandemic.

Summary

The growth in NAV to 30 June was driven by the strong performance of the Quoted Equity pool, reflecting the recovery in global public equity markets since March and the construction of the portfolio, and some limited positive valuation movement for investments in the Funds pool. Businesses within the Private Capital portfolio are revalued biannually, with the next valuation review taking place on 30 September 2020.

The NAV reported at the end of March incorporated valuation adjustments to the unlisted assets in the Private Capital and Funds portfolios to take into account the potential impact of Covid-19 via the application of an additional discount where considered appropriate. The Covid-19 pandemic continues to evolve and, while its impact on some investee companies and fund holdings is becoming clearer, a degree of uncertainty remains. However, for investee companies operating in the consumer leisure sector in the UK and Channel Islands, the relaxation of government imposed restrictions is enabling a gradual re-opening.

Liquidity remains strong, totaling £328m as at 30 June 2020, comprising £78m in cash and £250m of undrawn committed bank facilities. £137.5m of these facilities were renewed in May 2020 for a five-year term with the balance of £112.5m expiring in July 2022.

This announcement should be read in conjunction with the factsheet dated 30 June 2020 and released on 7 July 2020, a copy of which is available on Caledonia's website.

Performance for the first quarter is summarised in the table below:

Caledonia pool performance

Net asset value

Quarter to 30 June 2020

Caledonia Quoted Equity - Capital and Income portfolios (36% of NAV)

The total return of the Quoted Equity portfolio was 16.2% during the first quarter. This very strong performance reflected the notable rebound in the global public equity markets and careful stock selection within both the Capital and Income portfolios. There was little trading activity during the quarter in line with Caledonia's strategy of owning high quality companies that compound their earnings over the long term.

Caledonia Private Capital (33% of NAV)

Our diverse Private Capital portfolio includes significant positions in six UK based businesses and one private European investment company. These seven investments represent over 90% of the value of the Private Capital portfolio. Investee companies are revalued in March and September each year. However, there has been significant management activity across the portfolio to support investee company businesses and their employees, each affected to varying degrees, in dealing with the current trading environment. In particular, the focus for the consumer leisure businesses most impacted by Covid-19 has been to meet the challenge of re-opening safely following the gradual relaxation of government imposed restrictions in the UK and Channel Islands.

Buzz Bingo, the UK's biggest omni-channel bingo business, is planning the phased reopening of its retail venues from August 2020. However, due to Covid-19, management anticipate a reduced customer attendance on reopening which will result in a number of clubs being unable to operate profitably. To enact a financially supportable restructuring to protect the long-term prospects of the business, Buzz has commenced a company voluntary arrangement ("CVA") process that, if approved, will result in the closure of 26 of its 117 retail clubs. The majority of positions for Buzz's 3,400 employees are expected to be secured as part of the planned restructuring although, sadly, around 570 redundancies are anticipated. Subject to the CVA becoming effective, Caledonia intends to participate in the restructuring process with the provision of £22m in new equity. The nascent online business (www.buzzbingo.com) has traded well during the lockdown period, reporting growth in both players and net gaming revenue.

Liberation Group, a pub, restaurant and drinks business, with operations in the Channel Islands and the south west of the UK, started to reopen some of its pubs in the Channel Islands during the week commencing 14 June 2020. A phased reopening of UK based pubs commenced on 8 July 2020 within Government guidelines for social distancing. The UK brewery has continued to sell beer to trade and online customers throughout the lockdown period, with the wholesale businesses in Jersey and Guernsey remaining operational and trading profitably. The business has preserved liquidity and kept cash burn to a minimum. A requirement for new capital is not anticipated.

A more detailed update on the trading and valuation of all investee companies within the Private Capital portfolio will be provided in Caledonia's half year results announcement in November 2020.

Caledonia Funds (26% of NAV)

Caledonia's fund investments are principally in third party managed private equity funds operating in the US and in Asia. Regular contact is maintained with the fund managers to understand the performance of their investee businesses and the impact of Covid-19 on their respective portfolios. There is a natural delay in reporting from these funds, with the most recent fund valuations dated December 2019 or March 2020, which do not yet reflect fully the potential impact of Covid-19 on trading. Therefore, Caledonia has maintained the discount applied to managers' valuations as at 31 March 2020, which represented a reduction of £86.1m (16%), updated for cash movements, until reports dated June 2020 are available. Caledonia anticipates receiving these ahead of its half year results announcement in November 2020.

During the quarter, £33.1m was invested and £9.2m of distributions were received. The Funds pool total return for the quarter was 3.1%.

Company contacts

Caledonia Investments plc  +44 20 7802 8080

Will Wyatt,

Chief Executive

Tim Livett,

Chief Financial Officer

Media contacts

Tulchan Communications  +44 20 7353 4200

Tom Murray

Lisa Jarrett-Kerr

caledonia@tulchangroup.com

15 July 2020

Notes

Valuation approach and methodology

The valuation approach utilised for each asset portfolios is summarised below.

Caledonia Quoted Equity: all listed companies are valued based on the closing bid price on the relevant exchange as at 30 June 2020.

Caledonia Private Capital: the holdings are valued biannually, on an LTM EBITDA x market multiple basis where appropriate (in line with the latest IPEV guidelines). This approach was applied to the majority of the portfolio at 31 March 2020 (and these valuations are maintained at 30 June 2020), with the following amendments:

A. For Buzz Bingo and Liberation Group net debt was adjusted further to reflect likely cash burn impact during the anticipated period of retail venue closures arising from Covid-19.

B. We utilise valuation multiples from a mix of quoted market comparable businesses and relevant transactions. In some cases, the public market equity valuations fell swiftly to reflect the impact of Covid-19 and these valuation multiples were used in the calculations. However, where this was not the case, a further equity valuation reduction was applied based on the anticipated severity of impact (zero for low impact, 10% for medium impact, 20% for high impact and 35% for very high impact).

Caledonia Funds: the normal approach is to utilise the most recent valuations provided by the fund managers, subject to cash movements from the valuation date. In light of the uncertainty created by the Covid-19 pandemic, year-end valuations have been maintained, based on December 2019 fund managers' NAVs, plus a Covid-19 adjustment, based on sector and region, to deal with the potential valuation impact of the pandemic. These valuations have been adjusted for cash movements between the valuation date and the end of June.

Caledonia Investments plc

Caledonia is a self-managed investment trust company. Its aim is to grow net assets and dividends paid to shareholders, whilst managing risk to avoid permanent loss of capital. This is achieved by investing in proven well-managed businesses that combine long term growth characteristics with an ability to deliver increasing levels of income. Investments are held in both listed and private markets, a range of sectors and, particularly through the fund investments, a global reach.

For additional information on Caledonia, please visit www.caledonia.com.

END