Caledonia Investments Plc (CLDN) Earnings Call Transcript & Summary

Okay. Well, welcome, everybody, both online and in the room to our Half Year Results Presentation. I'm Mathew Masters, Chief Executive of Caledonia. And we'll be joined during his presentation by Tom Leader, who runs our Private Capital portfolio and then by Rob Memmott, who's just joined us as Finance Director. And what we're going to do is take you a little bit through the strategy. I'll give some highlights on the half year and then we'll go through the portfolio. There's been some activity in the Private Capital portfolio, hence, Tom joining us, and then Rob will take us through the finance section. So moving through the cautionary statement and on to the -- an overview and just a reminder of Caledonia, which we are a self-managed investment trust, and I'll come on to explain why that's special a bit later on. And our net assets are GBP 2.9 billion. And we're focused on delivering our shareholders real returns over the longer term. And you can see on the chart that we compare ourselves really against inflation. So we're aiming to beat consumer price, CPIH inflation over the medium and longer term. And then there's a reference point over a 10-year period, we're looking to outperform against the FTSE All-Share Index. But we're really focused on growing -- protecting and growing the real value of our shareholders' money and also the real value of the dividend over time, and that's our -- those are our principal objectives. And you can see our dividend track record also on this chart showing you how we've progressed that over years. It's 56 years of growing the dividend. And in fact, over the last 10 years, we've distributed by way of normal dividends and [ to ] special dividends, GBP 460 million to our shareholders, which sort of evidences the fact that we are not at all averse at returning money to our shareholders. And we think the most sort of fair way of doing that is through the dividend mechanism. We're -- the company was founded off the back of the Cayzer family's businesses. The history is dating back to the late 1800s. And we're very lucky to have the Cayzer family as a very long-term and supportive shareholder. It's an absolute underpin to the investment culture here and is an important part of the ecosystem. So we're a long-term investor. So to give you a bit more of a feel for how we approach job investing. I think there's not much beats investing in a company over a long period of time. The trouble is you know you need to know which one to invest in. So we have a portfolio of companies that we invest in. It's even better if you can pick out high-quality companies and high-quality investment opportunities in those companies. And that's what Caledonia is all about. It's investing in companies. We have focused strategies, which we'll come on to in a minute. I spend all the time researching and developing relationships so that we can pick from the very best opportunities that come our way within those strategies. So we're highly selective in picking from what we think is a high-quality opportunity set. And we have a robust selection process. Every single pound that's invested or committed goes through a central investment committee, which I chair, which is attended by the -- manned by the heads of the pools, the Finance Director and Company Secretary. And we -- every investment, every pound [ or dollar ] is carefully thought through. And included within that is what we would call being a responsible investor and what everyone else is sort of calling ESG is we consider just how sustainable are the things that we're investing because it's a long-term investor or a strong correlation between investing in sustainable things and delivering good long-term returns. That's always been in the DNA here and it's integrated into our investment process. So we're self-managed. We invest the money ourselves. We are totally aligned with the shareholders against absolute metrics rather than relative metrics. And what does that mean? So the investment teams here are only working for our shareholders, our present shareholders. We're not raising money. We're not working for separate funds elsewhere. We're only working for Caledonia. So we have a lot of control over what they're thinking about, how time is directed and all the learning is shared across the business. And there's very little time from the investment team spent selling Caledonia to try and drive AUM that there's none at all really. And we're really just focused on investing as best we can for our shareholders. And I think those ingredients are what's behind delivering very strong performance over time. This next slide gives you a snapshot of the 3 different strategies. We invest in public companies, and that is 30% to 40% of the net assets. We have quite a broad range for that. And that's a global portfolio, but it's mostly North America, Northern European headquartered companies where we're investing in companies that we understand, which are predictable and have pricing power. So these are strong companies. And we have 2 portfolios. We have a Capital portfolio and an Income portfolio. Capital portfolio is unconstrained in terms of income target, and we're targeting a 10% return there. And then the Income pool has a 7% target. And then we're looking for a 3.5% yield on cost rather than yield on valuation, and that keeps us as investors rather than traders and companies. And both portfolios are concentrated. We have about 15 companies in each portfolio. And so they are very well -- a lot of thought goes into those investments, and I'll talk you through one a bit later, so you can get a bit of insight into it. We have Private Capital. Tom will talk a bit more about that later on. This is directly investing into U.K. headquartered companies. We're aiming to have 6 to 8 significant U.K. companies that we're invested in, and we partner over the longer term with management and other shareholders sometimes to improve these businesses and grow them over time. The return target there is 14.5% and they have a 2.5% yield on cost. And you can see actually over 10 years, they've performed beyond the top end of the range, so we're pleased about that. And then we have Private Equity Funds, which invest behind proven managers, with a focus on North America, lower mid-market and also providing us very interesting exposure to new economies in Asia. And that has a 12.5% target return, and they are performing handsomely against their targets. So we're very pleased about all of that. This slide provides some information about the -- from a high level about the geographic and sector allocation of the portfolio. So just to let you understand that. Although Caledonia is built from the ground up, we invest in high-quality companies and funds. And so this sort of sector allocation is really something that is a result of all of that as opposed to an investment committee saying we want to have 10% in this that or the other. So it's really bottom-up process and people following where the quality is. This does provide you a window into our risk appetite and things we like and don't like. So we have noted that in financials, these are principally investments in platforms and investment managers. So I think 7IM and Stonehage Fleming. And so we're not taking balance sheet risk in our financials. So we don't really banks in there, for example. And then with energy, we have very little energy exposure. If you -- I hesitate to do this because I don't like comparing us to an index, but just to give some context, the FTSE All-Share, you'd be 12% of energy, which would be sort of BP and Shell, and we don't have -- we're not a big fan of capital-intense businesses which are cyclical. So it just gives you a sense of our approach. And then on to our performance. So we're primarily focused on the net asset total return and looking at that against inflation. We certainly wouldn't look at it over 6 months. So we haven't put that up for you. We really look at it over 3 months and then 5 months and 10 months, and we're really focused over the longer term because you do have to let things play out. And we're pleased that we're managing to keep the net asset value ahead of inflation over the 10-year period. We'll get asked lots of questions about discounts and things. And what I would point out is that over 10 years, we have returned to shareholders GBP 460 million in dividends. At the beginning of that period, our share would have cost GBP 18.39. You've had GBP 8.55 back in dividends. That's just under half your money back in dividends over that period. We have a long-term investment house. I would argue, I would encourage people to invest in us for the longer term. And the payment of dividends and special dividends over the longer period of term does help shareholders through this journey of discounts moving around over time. So moving on to the half year results. So over the half year, we delivered 3.7%. And we're pleased that all pools contributed towards this performance. I suppose we should call out the Private Capital pool, where we sold 7IM, and that was a good driver of performance for us. 7IM was sold at a 29% premium to what it was held in our books a year ago and a 23% premium to where it's held in our -- to the carrying value at the time. So we've got a nice uplift on sale. Over the period, foreign exchange did not have much impact on returns. And today, we're announcing a dividend of 18.93p per share, which is up 4% over last year. On the people side of things, delighted to be joined by Rob Memmott as Finance Director, and we'll hear more from him later on. And we wish Tim Livett, who I'm sure is watching well and look forward to catching up with him at his [ leaving do ]. So thanks very much to Tim. And hot off the press, Caledonia won Investment Trust of the Year within the flexible investment sector at the Investment Week Investment Company Awards. So that's I think the second year we won that in a row, I think. So we're obviously pleased about that. So I shall hand over to Tom Leader, who will take us through Private Capital.

Thanks, Mat. That said, my name is Tom Leader. I run the Private Capital team here, and I'm going to take you through a bit of a deeper dive on what we get up to. We are a team of 11 in total. We have a strategic allocation of 25% to 35% of the Caledonia balance sheet, targeting, as Mat said, a 14% return and a reasonably well-balanced portfolio of 6 to 8 similarly sized investments. What we look for are high-quality, well-established U.K.-centric businesses. We have a mid-market focus. That means a lot of things to a lot of people. But for us, we try and buy businesses when they are making profits of GBP 7 million to GBP 10 million EBITDA and take them on the journey of getting to GBP 20 million to GBP 30 million. So that's the area of the mid-market that we work in. And that means that we are typically deploying equity in check sizes of about GBP 100 million to GBP 120 million, and we're buying businesses with an enterprise value of GBP 150 million to GBP 250 million. So that's a sort of size deal that we focus on. We avoid turnarounds and carve-outs and all those sorts of things. And we are a low-volume investor, 1, maybe 2 deals per annum. So we are a long way from the Lloyds Development Capital and other high-volume shops. Some points of difference between what we do and Main Street private equity. We approach the world with a buy-to-own philosophy rather than a buy-to-sell philosophy. So we have -- as a balance sheet, invest a permanent capital. And we are not driven by the fundraising cycle and deployments that typical PE firms operate to. And that we believe generates a much better level of engagement with our management teams. It's not that we never sell assets, of course, we do, but we have a great deal of flexibility to pick at the moment working with our management partners to optimize the exit. And so we can and do hold things for 7 years, 8 years, 9 years, and I'll talk about 7IM in a second, which is a good casing point. The partnership approach we have with management manifests itself in 2 particular ways, which is very different from Main Street private equity. On the one hand, we have a very high degree of economic alignment with our management teams. We don't use loan notes, which are endemic in the private equity community, and we do use the reward of dividends even from our Private Capital portfolio of companies, some of which get shared with management teams. And the other dimension is that we have a very modest appetite for leverage. We typically would use gearing, but [ 2x, 3x ], sometimes a bit more than that times EBITDA, whereas Main Street private equity, they're looking at [ 5x or 6x ]. Obviously, that's slightly different now with interest rates where they are. But typically, our appetite leverage is considerably lower than you would see elsewhere in the market. So that's just a bit of background on what we're doing. At the half year, 30 September, we had a portfolio of 9 companies, 6 big ones and 3 comparatively speaking, minnows, total NAV of just over GBP 1 billion, and the top 6 represent 95% of the value in the pool. 2 big events during the first 6 months, the first back in April was the acquisition of a majority stake in AIR-serv Europe. And the second at the beginning of September was that we exchanged contracts to sell 7IM to Ontario Teachers' Pension Plan, and I'll come back to that in a bit more detail. Across the portfolio, trading has been reasonably solid despite the headwinds of inflation and interest rates and consumer confidence. And following the sale of 7IM, whilst we're roughly 36% of the NAV of the group at the moment, we will drop back to the mid-20s. So we will be a little underweight, not drastically, but a little underweight when that deal transaction completes. So we will be looking to add 1 or 2 new high-quality investments over the course of the coming years. A deeper dive on 7IM, which is a great example of what we do and how we do it. This was an investment first made in 2015, and it captured all of the 5 critical things that we typically look for when appraising a new investment. Yes. The first is we want the businesses to be operating in a growing market. And at 7IM with increasing amounts of U.K. household wealth, with an aging population, with a very significant advice gap in financial advice and the opening up of all sorts of pension freedoms, this was a market where there were lots of tailwinds and lots of growth opportunities to be had for agile firms. So good growing market. 7IM was very well positioned in that market. It was a pioneer in multi-manager risk profile funds. And at the heart of its intermediary offering was an award-winning tech platform, helping independent financial advisers, frankly, make their lives simpler. So it was well positioned in this growing market with a good management team with a caveat, the founders of 7IM were all getting to retirement stage. And so we knew we had to put through quite a complex succession plan, which took several years to do in an orderly manner. But a good team, which is another thing we look for and strong financial metrics in terms of operating margins and cash flow generation. So that's the fourth thing we seek to take off. And finally, lots of different growth levers. We had the opportunity to pull the organic growth lever, lots of white space in the market for 7IM to go at. We made multiple acquisitions, 4 in this case, to help pivot 7IM from being really a pure asset management business to a platform-led wealth management business and lots of growth CapEx opportunities, particularly in the platform area. So it captured all of those 5 things that we look for. And you can see in this chart at the bottom right that over our whole period, we nearly tripled AUM. So we went from just over GBP 7 billion to about GBP 21 billion by the time that we had finished the journey. So it's a great story. And I'm also pleased to say that in terms of returns, it also worked out here very satisfactorily. We have along the journey received about GBP 44 million in dividends from 7IM. And we've dealt with all of the turbulence of management change and integrating 4 acquisitions, COVID, a regulatory environment which gets more complex every day. But we've pulled up nearly GBP 50 million of dividends, and our expected returns when we -- when this deal closes, which we expect to be in Q -- calendar Q1 next year, we should make an IRR of about 15% over an 8-year period and 2.3x of our investment cost. So -- and it is -- it will be our single biggest cash gain at Caledonia. So a great story and very different. I hope you would agree from what you'll see from most private equity firms out there who don't have the term flexibility that we do. Picking up some of our other investments, the other big ones ranked pretty much in order. Our Stonehage Fleming will become our biggest operating company. So we have a 35% stake just under -- in Stonehage. It's a multifamily office focused on the ultra-high net worth market. And within Stonehage, there is a big investment management business. And just to give that some scale, it's about GBP 17 billion in AUM, so that's approximately 1/3 of the business in terms of revenues and profits, and the rest is a array of fiduciary and family office services. We have been growing this business also by acquisition. We've made 3 acquisitions over the course of the 4 years that we've owned a stake in it. And the key issue we're working on now is a planned succession of our CEO. AIR-serv is our newest investment, GBP 142.5 million invested in April this year. So we're 7 months in. We have -- the key achievements have been successfully separating it from its parent, CSC ServiceWorks, which is a U.S. corporation. We've put in a new non-Exec Chairman, Justin Tydeman. And I'm pleased to say that it has been trading ahead of plan every month since we bought it. So lots of good news there and plenty of encouragement from also incremental value creation opportunities, which were outside the original investment case. So that's going very nicely. Liberation, obviously is a sector which has been affected by the challenges of COVID and Brexit and consumer confidence and what have you. But the key focus that in Liberation is -- Liberation is on raising the standard and operating performance of the Cirrus pubs. We bought 21 pubs from Cirrus at the end of last year to the standard that we operate the rest of the group at. So that's the key mission of the management team here. The sector as a whole is definitely recovering. You may have seen that Young's agreed to buy City Pub Group just last week. So the animal spirits are returning to the sector, which I think bodes well for the future as and when we seek to realize Liberation. The next one I'll talk about is Cooke. Cooke is involved in the manufacturer of high-end cinematography lenses. It has been very heavily impacted by the Hollywood strikes. You would have seen in the press, the writer strike started at the beginning of May and the actor strike, which started at the beginning of July have more or less paralyzed film and movie production in the U.S. And in fact, it's had a ripple effect across many other non-U.S. markets. So this has heavily impacted revenues and profits at Cooke. The team have done a very good job in managing through that, and I'm pleased to say that both strikes are now over. And meanwhile, they have, in fact, launched a very new range of prosumer cinematography lenses, which are flying off the shelves. So we do expect Cooke to recover the gradient at which it recovers remains to be seen, but it has very low -- it has almost no external debt, Cooke. So it is -- it has got a robust balance sheet, and I'm sure it will bounce back in due course. And that brings us to our final big investment, which is a little different to the other 4 operating businesses. Cobepa is a Belgium-based private equity investment vehicle. It is private. So unlike Caledonia has no stock market listing, it has a total NAV of about EUR 4.5 billion, and they have an investment portfolio numbering nearly 20 different companies. They invest in Europe and the U.S. They have no U.K. operation. It's been a very long-term investment for us. We first invested back in 2004, and it's been extremely successful. It typically generates a return of between 11% and 13% per annum and pays us a dividend. We have a very close relationship with Cobepa and regularly look at deals together, [ look at ] investment opportunities, both in the U.S. and in Europe, including for those who've been shareholders for a while, are very successful investment in BioAgilytix. So Cobepa is slightly different from the rest of the portfolio, but an interesting and very profitable partnership over the years. So that's it from me. I'm going to hand back to Mat to talk to you about quoted pool and our investments in public companies.

Thanks, Tom. So moving on to our public companies' strategy, where we aim to invest in high-quality companies where long-term ownership is likely to be rewarded. And I've got an example coming up, which we'll show you what that all means. As I mentioned, there are about 15 companies within each portfolio, so very concentrated portfolios, which means the investment team understand the companies very well. And they also understand their investment opportunity set incredibly well. And we've got a culture here where we're not doing sort of short interval management of them. So things are allowed time to play through. I'll come on to why that's all very interesting in a second. During the 6 months, we've had a positive return in the Capital portfolio and a slightly negative return in the Income portfolio. A little bit of what we call top slicing and bottom slicing of positions. So we have core holdings. As things get expensive rating-wise, we'll sell a bit of them. And as they get cheaper rating-wise, we'll buy a bit of them, and that's just augments returns over time, and it also installs sort of value-orientated investment discipline within the team, which is very healthy. We added one new position in RELX, which is an information analytics business, a U.K. listed business and increased our holding in a couple of other positions. So here's the example, which is Oracle, which we invested in, in 2014, which is in fact when I was running the portfolio. So I should know a bit about it, but please don't test me too hard. So we invested at $40 in 2014. And when we worked it through, we saw a very persistent level of profit at Oracle. We spent time with the company, got to know it well and could see that the recurring level of profit was actually a lot higher than the recurring level of revenue. So it was an incredibly stable cash flow. But it had been caught up in the legacy tech. Have they missed the boat on cloud and SaaS sort of narrative. And so the rating was quite cheap. And so we got in at about the way we thought about it, a 7% sort of yield on the earnings, not a dividend yield, just on the earnings. So we thought we've got another really good, stable company at a good price with an amazing position in -- a potential position in cloud and SaaS, which they were telling people about, but it was very early days, and so nobody was rewarding them for it rating-wise. And it didn't do much for us for a long period of time because you've traveled from 2014 into 2017, and the share price hasn't really moved. But that's fine because we're following fundamentals of the company. We're very happy with how it's performing on a fundamental basis, not worried about the share price. And we can see it was making progress. So we were entirely comfortable with that journey. And then over time, as the cloud and SaaS parts of the business became more prominent and in fairness, the company became a bit more helpful with telling people about it, people could see the benefits for that and profit and cash flow grew and the share price has done magnificently well. And it's delivered so far a 16% annualized return for us over a long period of time, almost 10 years. The added benefit was that they bought back over the last 10 years, Oracle, which is an S&P 500 company, it's a massive company, bought back half of its shares. And that has sort of turbocharged the progress of the company through to the share price. And we were reasonably confident that, that would happen because when you have a big shareholder in a company telling you what they're going to do, then it pays to listen to them. And so we got into a business which was stable, we could accurately value we thought and we could give it time for the investment story to play out and for the value story to play out as well. So we're very, very pleased with that one. And that just gives you an example of how we think about investing in the Capital portfolio and also in the Income portfolio in Caledonia. The share price recently went what I believe they call parabolic, which is when it sheets up because they've managed to get on the end of artificial intelligence. And so we sold a few shares because it got very expensive, the rating went up, and it got quite big in the portfolio and so as risk management and sort of good housekeeping, we sold some of our holding. So we'll still maintain our core position in it. Moving on to our Private Equity Funds. As I mentioned before, we're investing behind proven managers in North America and Asia. Now unlike our other strategies, there are lots of companies in here. This is very fragmented. So there are 600 companies within under -- sort of underlying exposure here. And that's not including the investments in the fund of funds portfolio, which is harder to count. So it's lots of companies here. So there's very low idiosyncratic risk. Just under 60% of the net assets are in the U.S. lower mid-market, and I'll show you an example of that in a minute, which will bring that to life. These American -- North American lower mid-market funds, they tend to be about USD 500 million limited partner, LP funds. Usually, not always, but usually we're the only European investor or limited partner in these funds. So they are difficult to access if you're in the U.K. And we're on the advisory board to have a close relationship with 80% of these funds. So we're very fortunate to have this access and exposure. And it's a very -- it's proven to be a very good asset class. I'll come on to give an example about that in a minute. 48% is in our Asian portfolio. This is roughly split 50% between buyout type private equity activity and 50% sort of growth of venture capital activity in Asia, focusing on new economy, so growth areas in health care, consumer and technology. And we're highly selective in both markets. Both markets have large opportunity sets, which are visible, which we can easily pick from. For example, in North America, they're looking to find typically 2 new funds to invest in each year and then they typically re-up with 2 existing funds each year. So there's quite a lot of time spent doing research and evaluating what to do and then we just pick which ones we want to take action on. Over the 6 months, the -- this strategy gave us a 4.6% return. In local, in North America, it was 4%, and in Asia, it was more muted at 1%. As you can see, distributions have declined compared to the last few years. Both markets have -- are going through some -- reflecting the sort of liquidity issues of them at the moment, but we are obviously very close to those markets, and we're told especially in North America that the managers can see that things are improving. So here's an example to try and bring it to life. This is an American lower mid-market company called CenterOak. We've invested in 2 of their funds, Fund I and Fund II, we've committed USD 30 million to both of those funds. U.S., the mid-market is a core part of the investment strategy. We had been looking at the team from CenterOak for a little while. They worked at a previous house together for 15 years, and then they left that house to set up CenterOak. So this is a well-established team with a good track record behind them. So this wasn't a sort of fresh and scratch Fund I situation. And we like the fact that the team was led by Randall Fojtasek, who is an interesting character. He has been CEO of a family business, which has been through a couple of hands of private equity, and then he established a previous private equity house. So he had established a track record as an investor as well. So this is a great example of a great businessmen becoming a great investor. And so we were delighted to be able to have the opportunity to back him and his colleagues who we hold in high regard, and they've been -- as I said, been working together for a long time. They have a, as the Americans term it playbook of operational and strategic improvement, which apply to smaller companies. They make them more efficient, they make them more capable, so they can do more. They do bolt-ons. You'll see in a minute that they add quite a few companies to each of the businesses. And then you have this enormous home market in America for these companies to grow into. So let's look at some of our holdings. So these are regular businesses, plumbing, collision repair, lawn care and pest control, and they would have bought smaller business as an initial platform and then they make a series of add-ons to them. And you can see the sort of numbers there. It's a very powerful formula in America. It works very well. It's partnering to improve and grow these small businesses in this very large home market and then capitalizing on it, and the whole thing is sort of geared up for it. So it's a good formula for generating returns. It's not reliant on debt. They do use debt, but it's not -- they're not sort of maxing it. It's more about operational improvement, improving the strategy and improving how these businesses have run and then selling them on. And so with that, I shall hand over to Rob, who will take you through the financial review.

Thank you, Mat. Good morning, everybody. Before I take you through the numbers, I thought I would give you a few of the reasons as to why I joined Caledonia. The first is track record. Caledonia has delivered great returns to shareholders, 56 years of growing dividends, GBP 460 million returned to shareholders over the last 10 years by way of both ordinary and specials. And that annualized NAV growth over the same period 10 years of 11%. Second is the people and culture, which is transparent and nonhierarchical and with an incredibly skilled and capable team. And since joining, this has been reinforced daily. I particularly like the fact that the team and the people are focused on the current balance sheet and future opportunities are not distracted by the need to raise new funds. Long-term investment philosophy concentrating on operating cash flows and business improvement with low levels of leverage, Caledonia built a deep understanding of the companies and the funds which we invest in, forming strong relationships and that underpins the investment discipline as we appraise new opportunities and manage the current portfolio. Fourth one is robust balance sheet. Capital is allocated centrally, investing in a diverse range of quality businesses and funds. There's a cautious approach to asset valuation. I'll come on to talk about that in a moment. There's no structural debt at the Caledonia balance sheet level and with a good level of liquidity enabling us to invest when we want to act on quality investments. I'm therefore delighted to join Mat and the rest of the team in order to drive long-term shareholder value. Now one of my key areas of focus so far has been IR to ensure that our investment proposition is properly understood and also rated by the market. And hopefully, you've seen in the presentation some increased disclosure and found some of the case studies informative as to how we do what we do at Caledonia. And we'll continue to evolve this in future releases going forward. So to the numbers, what you've all been waiting for. The NAV at the end of the 6-month period to 30th of September has grown to GBP 2.9 billion, generating a total return of 3.7%. We're 100% invested in a diversified portfolio of listed privately held companies, private equity funds that have global reach. And as I said, we have 0 structural leverage at the balance sheet level. Portfolio has delivered 4.1% return, and this compares favorably to the FTSE All-Share, which was 1.4% over the same period. As you'll -- as Tom has talked through, we've recently agreed the sale of 7IM. That, combined with the facilities which we have, gives us GBP 485 million of pro forma liquidity. And then our interim dividend, we've announced that this will increase by 4% to 18.93p. This equates to GBP 10.3 million, which will be paid to shareholders on the 4th of January, which is my birth date, important date for the diary. So you'll see on the next few slides that I love a waterfall chart and a bridge. So I'll take you through 3 of them. The first one is the movement in the portfolio. Start over on the left-hand side at the start of the period, GBP 2.5 billion, GBP 2,535 million. The net cash invested into the portfolio of GBP 223 million, including GBP 143 million into AIR-serv, as Tom talked about within the pool -- within the Private Capital pool, GBP 50 million of net inflows or investments into the funds pool and GBP 60 million into the public companies, which included that new position in RELX. We received cash yield from investments of GBP 23 million in the period and then total return of GBP 120 million. That's 4.1%. And this includes GBP 51 million worth of uplift following the sale -- the agreed sale of 7IM and then a little bit of FX, GBP 18 million. On the right-hand side, the little pie shows the split of the assets, Private Capital, just over GBP 1 billion. That's 36%. That's slightly higher than our strategic allocation that we'll pay back, as Tom says once 7IM completes in the early new year. Since I've joined the business, I spent quite a bit of time looking at our portfolio valuation, in particular, the Private Capital assets. We follow the IPEV guidelines, that means that we account at fair value. These assets are cash generative, conservatively levered. The valuation multiples are typically between 9% and 14%, which is slightly down on prior periods. And overall, I'm comfortable that we're valued towards the conservative end of the range -- of the valuation range. And this is evidenced really by that sale of 7IM, where we've got a GBP 51 million uplift to the carrying value just before we sold it. On the table on the bottom right of the slide, you'll see the returns and yields by pool. Overall, 4.1% return, 3.5% yield with each of the pools contributing positively. Next little chart is the overall net assets moving from the left-hand side, GBP 2.8 billion at the start of the period, the net investment gains of GBP 120 million, management expenses of GBP 17 million, that takes us to GBP 2.9 billion. And then we paid the dividend last -- the prior year final dividend, which brings us back to just under GBP 2.9 billion. The pie chart on the right-hand side shows the breakdown of our net assets by currency, very much weighted 51% U.S. dollar, 39% sterling. And therefore, movements in the sterling-dollar exchange rate will impact on our in-year results in the period, GBP 18 million benefit. Net debt, net cash at the start of the period of GBP 222 million. We've effectively net invested all of that during this period, GBP 223 million net invested. There's a cash yield coming from the assets, GBP 23 million, management expenses, and there's a little bit of working capital also in that number of GBP 15 million, and then dividends paid, and that takes us to GBP 20 million of net debt at the end of the period. At the end of September, we had cash on balance sheet of GBP 15 million within that GBP 20 million, undrawn revolving credit facility of GBP 250 million, and we expect to receive in early 2024 calendar, GBP 255 million from 7IM, meaning that we've got pro forma liquidity of GBP 485 million, and this provides us with capital to invest in new assets and act quickly to invest in attractive opportunities that meet our criteria. Slide on share price performance, the charts over 3 years, 5 years and 10 years. And you'll see that, that performance is favorable relative to the FTSE All-Share total return. The discount over the 6 months has widened from 32.8% to 35.4%. And I suppose somebody coming into the organization, thinking about the discount, it being talked about as a liquidity discount. And when you think about the pools of the assets of the organization, the public companies where we invest, that pool is marked to cash every single day. You then think about, well, we've agreed the sale for 7IM, GBP 255 million. So combining those 2, we've got GBP 1.1 billion of net asset value, which is marked to cash currently within the balance sheet. And therefore, the private company assets are effectively trading at a 60% discount, which to me feels pretty excessive, particularly given my earlier comment when the valuation were towards the conservative end of the valuation range. I suppose one of the areas that we've been thinking within the -- from -- is the IR project, which I talked to. And that's very much about making sure that Caledonia is understood by the market, that it's rated by the market. And we're -- in addition, we're actively working with our broker advisers to widen the shareholder register with the objective of generating more marginal buys. So in summary then, Caledonia has built a diverse portfolio that is well placed to deliver long-term returns. We invest in quality businesses focused on free cash flow, meaning that we're -- the portfolio is very much capable of meeting the challenges that are currently posed by the macro. We've got a robust balance sheet with assets marked at the conservative end of the range, with a pro forma liquidity of GBP 485 million giving us that firepower should we want to act and invest on an attractive asset. The experienced team are 100% focused on continuing to invest and manage the portfolio of high-quality companies and private equity funds. Thank you. We're now going to take some questions. Initially, we'll take them from the room and then we'll go remotely and Richard will help deliver those to us. Laura, I think has got a microphone. And therefore, if you would like to ask a question, please raise your hand, and Mat will join me up here to cover those. So any questions?

On the 7IM sale, just wondering what the sort of trigger point for the sale and reassessment of that?

The trigger point for the sale on 7IM, what -- to make sure I understand your question. The first is that the conditionality in relation to the sale of 7IM is simply FCA approval of the change in control. So we're underway on that. Why did we sell it? Well, the financial services space is very fragmented. 7IM have made 4 acquisitions. There are plenty of additional opportunities for 7IM to grow by acquisition and deploy considerably more capital. And we felt that the time was right as did the team to pass the baton to a bigger and more well-resourced investor, OTPP, have got NAV of in excess of CAD 250 billion. So just a much, much bigger balance sheet than us, and we have a very ambitious team who plan to tap into that.

Mat, can you just give some more color on the Asian VC exposure? How much is it? And what parts of the VC market are you exposed to?

Yes. Sure, [ Alan ]. Thanks for the question. So the Asian portfolio is about 14% of Caledonia's NAV. And of that 14%, about half of it were characterized as buyout. So PAG, which is quite a big buyout house is one of the funds in that bit of the portfolio. We're investing in companies with billions of dollars of revenue and hundreds of millions of EBITDA buyout type opportunities. The other half is in growth and more venture, although not at the very, very early stage of venture. And that area is really focused on those new sectors, those growing sectors of health care, technology and consumer. So that's the sort of buyout versus venture split. Of the 14%, around half of it is in the ground in China, and then the other half is more widely invested in Asia. So to give you a sense of the geographic split. Does that help?

Yes.

Richard, should we...

Yes. So the first question is, are you considering any measures to close the current discount?

The discount question, so we -- yes, so I think the first thing about discount is sticking to the knitting of focusing on investing well so that we can grow -- keep growing less asset value on dividends, keeping the real value of those moving over time. So that's the primary focus of the organization. I think we've recognized that we can do a little more with Investor Relations activity, which Rob has talked about and being as I term a better partner to the secondary market. We're not looking to do any primary issuance in Caledonia, but we could help the secondary market understand us better and perhaps find a few more shareholders who are more -- who can help with the discount through that process. And also, we do have this track record of giving shareholders money back through dividends over time, reminding people about that.

And looking at the equity stake in Stonehage Fleming, this is perhaps for Tom. Are you content holding minority stakes in private companies?

Yes, we do have the flexibility to arrange to invest across minority and majority positions. Stonehage Fleming is far from our only minority investment. We've got -- we've obviously got a position in Cobepa, in Bloom and in SIS, a couple of our smaller investments or all minorities. So we do play both in control and non-control investments and, in fact, always have done.

And then there's 2 similar questions around the deployment of proceeds from 7IM and how they might be deployed?

So the money comes back into the bank at Caledonia and sits there, and we don't necessarily change the pace at which we're investing or doing things. We will just look to see what the next best opportunity is that comes along, be that in Private Capital, be that secondary somewhere or the listed markets giving us an opportunity.

And then in terms of the public equity holdings, is there a typical range of multiples that we look at or when we're looking to trim or add to those holdings?

So I suppose the word to answer that question is, because we're generally investing in very predictable companies, they also have quite predictable or consistent rating track records. And so you can sort of -- by doing the work, and there's a lot of work, we can see over the past when things are expensive and when things are cheaper against their particular rating track record, this is all about buying a good company at a reasonable price. That's what we're doing. And we'll amend that for the interest rate environment. So if interest rates are higher, we'll -- that will inform how that river works for us. So we'll build that into it. And so when things are at the lower end of that rating river, as we call it, we'll think about adding, and when things are at the upper end, and they are big and for their risk profile within the portfolio, we will then sell a bit of it. So that's the process for working out whether things are expensive or cheap.

Thank you. If there's any further questions?

Okay. Thank you. Right. Thank you, everybody, for those questions. Thank you for your attendance, and we'll see you in -- for the full year.