Caledonia exits AG Barr after 45 years

While 7IM remains the trust’s biggest holding in wake of sale rumours

Bladonmore - Caledonia Investments PLC website photos. Formal and informal photos of the staff. Board member, Matt Masters, formal portrait. Photograph by Amit Lennon Date: 20 January 2020


Despite profits before tax tumbling £246.8m in the six months to 30 September, down from £346.4m a year ago, Caledonia Investments CEO Mat Masters (pictured) credited the trust’s “diversified investment approach” in helping it record a “good return […] particularly compared to the broader market”.

In the first half of its 2023 financial year, the £2.8bn investment trust’s net asset value per share total return was 4.5%, a sharp reduction from 27.9% recorded on 31 March.

A net £98m in cash flowed out of the firm, which was primarily attributed to a £121m in final and special dividends paid out in August.

Killik & Co’s head of managed portfolio services, Mick Gilligan, described the interim set of results as “solid” in the face of “a difficult period for both public and private markets”.

He added: “The shares trade at a 19.5% discount to the 30 September 2022 NAV and a 23% discount to NAV adjusted for movement in global equities—MSCI World Index—since 30 September 2022. However, [Caledonia] shares have had a strong run into these numbers, with the share price up 28% since 30 September 2022.

“We continue to view [Caledonia] as a great long-term store of wealth, with a progressive dividend and the bonus of some special dividends from time to time. However, given the strength into the numbers we may see some moderation in the price in the short term.”

See also: ‘Magnificent seven’ trusts record 50 years of annual dividend hikes

Quoted equities fail to deliver

Caledonia organises its investments into three buckets: quoted equity (27% of NAV), private capital (29%) and funds (34%), with the remainder in cash.

Its funds portfolio, which is strongly tilted to US and Asia-based strategies, delivered the strongest return of the six-month period with 22.3%, which Caledonia attributed to a favourable exchange rate position and valuation growth of its US funds.

Meanwhile, the FTSE 250 trust’s private capital portfolio posted a 6.3% return. Its biggest holding, accounting for 6.6% of total net assets, is Seven Investment Management. Rumours were circulating earlier this year that Caledonia was looking to sell 7IM, but no mention was made in the results statement about any moves in that direction.

The investment manager’s AUM was “over £20bn at the end of August 2022, down from £21bn at the start of the calendar year, reflecting a mix of negative market movement and positive net fund inflows,” Caledonia stated. “The closing September valuation was £184.5m, a return of 8% for the first half of the year.”

Per Caledonia’s latest factsheet for October, however, 7IM’s valuation has slipped to £174.6m.

The fly in the ointment was the quoted equity bucket, which lost 9.5% over the period, which the firm said reflects the “broader trend in global equity markets, mitigated to some degree by favourable exchange rate movements”.

While trading activity during the first half was “relatively limited”, in line with Caledonia’s investment approach, it increased its holdings in Moody’s, Charter Communication and London Metric.

After 45 years as an investor, the trust disposed of its remaining holdings in soft drinks manufacturer AG Barr, along with Imperial Brands.

Masters said: “Our significant exposure to private assets and a weighting towards US dollar denominated assets were the key drivers of performance and more than offset the adverse impact of falling global public equity markets.

“The global economic outlook has become more challenging during the period, leading to increased volatility across markets. This will influence the short-term performance of our portfolio but we believe our long-term outlook and ethos of investment in high quality, well-financed and managed companies, leaves us well-placed to withstand pressures and deliver long-term returns in line with our aims.”

Caledonia also announced an interim dividend of 18.2p per share, up from 17.5p on 31 March.

The firm’s share price was down 1.54% for the day as of 11:30am.

See also: Caledonia looking to sell 7IM for £400m



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