Caledonia Investments Plc (CALEF) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance with a 4.4% NAV total return, significant shareholder returns, and a robust share buyback by Oracle. The Q&A section reveals a positive outlook for Oracle and strategic investments during market volatility. Despite some concerns about market challenges and regulatory approvals for Stonehage, the overall sentiment is positive, bolstered by strong returns from public and private capital investments. The absence of negative factors such as weak guidance or declining margins further supports a positive stock price prediction.
Key Financial Performance
NAV total return 4.4% for the half year, with a year-over-year impact of a 2% reduction due to the pound strengthening against the dollar.
Total shareholder return 8.5% for the half year, driven by strong public companies and private capital performance.
Public company strategy return 9.9%, primarily driven by Oracle, Microsoft, and Alibaba benefiting from demand for cloud-based services, including AI.
Private capital total return 7.7% for the half year, driven by the agreed sale of a minority stake in Stonehage Fleming and strong performance from AIR-serv.
AIR-serv valuation GBP 193 million as of 30th September, delivering an 11% return for the half year due to strong revenue and profit growth.
Stonehage Fleming valuation GBP 259.7 million as of 30th September, with an expected exit proceeds of GBP 288 million, representing a 3.2x multiple on cost of investment.
Funds pool NAV GBP 884 million, with a 4.3% growth in local currency but a 1.8% reduction in sterling due to currency fluctuations.
Cash on balance sheet GBP 105 million, with liquidity of GBP 430 million including an undrawn revolving credit facility.
Investment income GBP 47 million for the half year, including a GBP 25 million dividend from AIR-serv.
Management expenses GBP 17 million for the half year, slightly up due to investment in teams.
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Operating Highlights
New Position in Charles Schwab: Initiated a new position in Charles Schwab, a U.S.-listed brokerage business with $10 trillion in client assets, focusing on its scale and cost-efficiency.
Oracle Investment Gains: Realized gains by selling 3/4 of Oracle holdings after its share price doubled, achieving a 5.4x return on investment.
Stonehage Fleming Sale: Agreed to sell a minority stake in Stonehage Fleming to Corient Wealth, expected to deliver cash proceeds of GBP 288 million, representing a 3.2x multiple on cost.
AIR-serv Performance: AIR-serv delivered an 11% return driven by strong revenue and profit growth, paying a GBP 24.5 million dividend.
NAV Growth: Achieved a NAV total return of 4.4%, growing NAV to over GBP 3 billion, despite a GBP 59 million FX loss due to currency fluctuations.
Dividend Policy Update: Rebalanced interim dividend to 50% of the prior year's total, improving income visibility and accessibility for shareholders.
Focus on Long-Term Investments: Continued emphasis on long-term investments in high-quality businesses across public and private markets, leveraging permanent capital and disciplined capital allocation.
Share Buybacks: Allocated GBP 14 million to share buybacks, contributing to a 7.44p NAV per share accretion.
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Risk or Challenges
Foreign Exchange Impact: The strengthening of the pound against the dollar reduced NAV by approximately 2%, resulting in a GBP 59 million FX loss.
Economic Uncertainty: Economic uncertainty has reduced investment and realization activity, particularly in the funds pool, impacting returns and cash flows.
Regulatory Approvals: The sale of Stonehage Fleming is subject to regulatory approvals, which could delay or complicate the transaction.
Market Volatility: Market volatility, such as the downturn around Liberation Day, impacts investment timing and valuation.
Capital Market Flows in Asia: Reduced capital market flows in Asia have impacted fundraising and exits, suppressing returns in the region.
Operational Costs: Management expenses increased slightly, with expectations of further increases over the next 12 months.
Discount to NAV: The discount to NAV remains at 33%, which undervalues the portfolio and could affect shareholder perception.
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Guidance & Outlook
Revenue Expectations: The company expects to complete the sale of Stonehage Fleming in Q2 2026, which will deliver cash proceeds of approximately GBP 288 million, representing a 3.2x multiple on the cost of investment.
Market Trends: The ultra-high net worth market, which is the fastest-growing segment of the wealth market, is expected to drive growth for Stonehage Fleming. Additionally, North American lower mid-market buyouts and Asian buyout, growth, and venture investments are expected to benefit from domestic consumption, supply chains, aging populations, growing middle class, and tech adoption.
Capital Allocation: The company has liquidity of GBP 430 million, including cash and undrawn revolving credit facilities, and plans to continue appraising investment opportunities on their merits. The sale of Stonehage Fleming will further enhance liquidity.
Dividend Policy: The interim dividend has been reprofiled to 50% of the prior year's total dividend, equating to 3.68p per share, to be paid on January 8, 2026.
Operational Changes: The company has completed a 10-for-1 share split and rebalanced the dividend profile to improve income visibility and accessibility for shareholders.
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Shareholder Return Plan
Dividend Consistency: Caledonia Investments has consistently increased its dividend for over half a century.
Interim Dividend Announcement: An interim dividend of 3.68p per share was announced, reflecting a change in dividend payment profile to 50% of the prior year's annual total dividend. This dividend will be paid on 8th January 2026.
Dividend from AIR-serv: AIR-serv paid Caledonia a dividend of GBP 24.5 million during the period.
Share Buyback Program: Caledonia allocated GBP 14 million to share buybacks during the 6-month period, increasing the total since March 2024 to GBP 78 million. This has delivered a 7.44p NAV per share accretion.
Oracle Share Buyback: Oracle undertook a massive share buyback, purchasing $120 billion of its shares, reducing the share count by 38%.
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Key Q&A
Q:What is the valuation discount of Stonehage mentioned in the statement and presentation?
A:The total discount relative to the expected proceeds is approximately 10%, comprising a 5% discount for execution risk and a 5% discount for the time value of money.
Q:When do you expect to receive the proceeds from Stonehage?
A:The proceeds are expected upon completion of all regulatory approvals, which will take several months. The deal is anticipated to complete towards the back end of the first half of calendar 2026.
Q:How is the portfolio positioned after the recent market volatility?
A:The portfolio is positioned for long-term growth. Investments were made during market sell-offs, such as adding Charles Schwab, and the portfolio is risk-managed for medium and long-term prospects.
Q:What is the maturity profile of the funds portfolio and recent trends in private equity realization activity?
A:The weighted average life of the portfolio has increased due to reduced realization and investment activity in the last 6 months. While there is noise of increased activity, it has not yet translated into significant returns, and the recovery speed remains cautious.
Q:What is the view and future prospects for Oracle holdings?
A:Oracle has a promising future, with growth in its forward order book, particularly in AI-related areas. The position has been trimmed due to changes in rating risk, but the medium and long-term outlook remains positive.
Q:Are the proceeds from Stonehage contingent on anything?
A:Yes, completion is conditional on regulatory approval in multiple jurisdictions. There is a deferred element payable in two tranches, subject to adjustments based on a closing balance sheet audit.
Q:What are the most attractive areas for new investment?
A:The company scans 300-350 opportunities annually, focusing on financial services, business services, and technology-driven industrial businesses. However, the market is challenging, with high prices for quality assets and slower sales for less desirable ones.
Q:What plans are there to reduce the large discount in stock value?
A:The company focuses on investing in a high-quality portfolio, communicating with investors, and tactical measures like share splits and dividend rebalancing. Buybacks are seen as an investment opportunity rather than a discount control mechanism.
Q:Do you hedge against U.S. dollar weakness?
A:No, the company does not hedge against currency fluctuations as it focuses on long-term value creation. Hedging is only done for specific cash flows.
Q:Is there a policy for paying special dividends?
A:There is no formal policy for paying special dividends, though they have been paid occasionally in the past. No announcements have been made about a special dividend currently.
Q:What is the view on equity market valuations?
A:Equity market valuations vary globally. The company focuses on investing in good quality companies for the long term, avoiding concerns about macroeconomic factors.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about equity market valuations, stating it is a difficult question to address and focusing instead on their strategy of investing in good quality companies for the long term.
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Earnings Word Cloud
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MAZE Transcript
Caledonia Investments Plc (CALEF) Q2 2026 Earnings Call Transcript
Positive11-25
The earnings call highlights strong financial performance with a 4.4% NAV total return, significant shareholder returns, and a robust share buyback by Oracle. The Q&A section reveals a positive outlook for Oracle and strategic investments during market volatility. Despite some concerns about market challenges and regulatory approvals for Stonehage, the overall sentiment is positive, bolstered by strong returns from public and private capital investments. The absence of negative factors such as weak guidance or declining margins further supports a positive stock price prediction.
Maze Therapeutics, Inc. (MAZE) Presents at Jefferies London Healthcare Conference 2025 Prepared Remarks Transcript
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