Caledonia placates shareholders with divi hike

Investment trust Caledonia Investments has announced a big increase in its dividend as it seeks to mollify shareholders after five years of under-performance.

In the 12 months to the end of March the firm saw its net asset value (NAV) drop 9.9% to £1.134bn. NAV per share at the end of March was 1977p, down from 2,165p a year earlier.

Over the year, its NAV total return was -7%, while over the last five years, the NAV return has been -4.6%.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

At the beginning of the financial year, the value of Caledonia's investment portfolio (including derivatives) was £1,183.2m. This increased marginally to £1,184.0m at the year end, primarily reflecting the re-investment in the year of net cash realised during the previous year.

The Chief Executive, Will Wyatt, admits the under-performance over five years is "disappointing" - most shareholders would agree; Caledonia is 14.1% behind its benchmark, the FTSE All-Share, since 2007.

Investment income in the 12 months to March 31st was up just £0.1m from the year before at £33.3m. By virtue of an accounting quirk, which requires the company to reflect the change in the fair value of its investments in its revenue figure, total revenue was negative at £85.7m, compared to positive revenue of £104.9m the year before.

Those same paper losses on the change in the value of its investments tipped the company into negative territory at the pre-tax level, with a loss of £95.6m versus a profit the previous year of £85.5m. Stripping out capital losses and focusing just on cash revenue, the investment trust made a profit before tax of £21.0m, down from £24.3m the previous year.

Diluted earnings per share were either positive at 39.9p (2011: 40.5p) or negative at -161.8p (2011: 145.5p), depending on whether you include the paper losses on its portfolio or not.

Recently the company has been repositioning its portfolio to secure more income - that change has resulted in a 20% hike in the final dividend to 31.2p per share, with the potential of more to come. The full year pay-out is up 15.6% to 42.9p from 37.1p the year before.

The news has gone down reasonably well, by 09:28, Caledonia shares had risen 1%, reducing the share's discount to NAV, which ended the financial year at an eye-popping 25%.