TIDMRKW
RNS Number : 5068D
Rockwood Strategic PLC
22 June 2023
Rockwood Strategic plc
("RKW" or "the Company")
Full year results for the year ended 31 March 2023
21.4% NAV growth
Rockwood Strategic plc (AIM: RKW) is pleased to announce its
audited results for the year ended 31 March 2023.
Highlights
-- NAV Total Return performance in the twelve months to 31 March
2023 of 21.4% to 1959.56p per share which compares to declines in
the FTSE Small Cap (ex-ITs) of 15.7%. The positive Total
Shareholder Return of the Company in this period was 28.2%.
-- NAV Total Return performance in the three years to 31 March
2023 of 116.9% which compares to the FTSE Small Cap (ex-ITs) of
49.6%. The Company's Total Shareholder Return in this period was
139.4%
-- Successful migration from AIM to a Premium Listing on the
Main Market of the London Stock Exchange ("LSE").
-- The most active period of investing since the strategy was
conceived with 13 new investments made during the year, with the
majority of capital remaining in the top ten holdings.
-- Significant investment gains realised in Crestchic (GBP12.4m)
and material unrealised gains within portfolio.
-- RKW ended the year with net assets of GBP49.8million,
invested in 18 companies together with GBP10.5 million in cash.
-- Post period end, issued GBP2.4m of new equity at a premium to
NAV under a Block Listing which was approved by the FCA in December
2022
Noel Lamb, Chairman of Rockwood Strategic plc, commented:
"The portfolio has delivered another year of excellent NAV
growth whilst the Manager has been actively initiating new
investments to seed future returns. Since the period end the
discount to Net Asset Value has been eliminated for the very first
time and we have begun to grow the strategy through new share
issuance. This differentiated, active strategy is attracting
significant attention, generating sector and market leading
performance and offering investors a proven approach to delivering
returns despite a challenging external environment."
Richard Staveley, Fund Manager, Harwood Capital LLP said:
"We are delighted the strategy has navigated market conditions
so well. We believe this is due to our portfolio concentration, the
operational and strategic progress delivered by most of the
investee companies and recognition of the great value some of our
holdings represented. The vast majority of investments remain
deeply undervalued providing us with confidence regarding future
NAV growth potential. We remain heavily engaged with our investee
companies and have initiated a range of new investments during the
year which we expect to at least meet our 3-5 year target returns
and thus fulfil our objective of compounding wealth for Rockwood's
shareholders long-term."
The full version of the RKW 2023 Annual Report and Notice of AGM
has been published and will shortly be available on the Company's
website shortly at www.rockwoodstrategic.co.uk.
For further information, please contact:
Rockwood Strategic plc
Chairman Noel Lamb 020 7264 4444
Harwood Capital LLP Christopher
Investment Manager Hart 020 7640 3200
Singer Capital Markets Advisory James Maxwell
LLP Alex Bond
Broker James Fischer 020 7496 3000
CHAIRMAN'S STATEMENT
I am delighted to be reporting on a year of significant progress
at Rockwood Strategic plc ("RKW"). Investment performance has been
excellent, and we successfully moved to a Premium Listing on the
Main Market of the London Stock Exchange on 29(th) September 2022
(from AIM). As explained last year, this process ensures tax
efficiency with Value Added Tax no longer being applied to
investment management fees and performance fees, and from next
year, Corporation Tax will no longer be chargeable on realised
investment gains. This process incurred one-off costs of
approximately GBP470,000. However on-going expenses (including
Administration and Custody fees) have been materially lowered and
the tax efficiency is compelling.
Net Asset Value ("NAV") Total Return performance in the twelve
months to 31 March 2023 was +21.4% which compares to declines in
the FTSE Small Cap (ex-ITs) of -15.7% (1) . The Total Shareholder
Return in this period was +28.2%. Management fees are charged at a
fixed fee of GBP120,000 per annum while assets are below GBP60m and
we are pleased that the excellent absolute performance of the
portfolio during a period of falling UK smaller company prices has
enabled us to pay a performance fee to the Manager. This is
calculated as 10% of returns generated over a hurdle of 6% per
annum (subject to a high watermark) and is achieving its purpose by
incentivising the manager to deliver excellent outcomes for
shareholders. RKW was the best performing UK small companies fund
according to Association of Investment Companies data for the year
ended 31(st) March 2023.
Our Investment Manager has clearly been busy, the Board is aware
of a range of initiatives that occurred both during the year and
are in progress to engage actively with our investments to help
them create, unlock or realise value for all shareholders.
Furthermore, a number of new investments have been established
which the manager believes have sown the seeds of future growth in
our NAV. The Board shares the view of the manager that the UK small
companies market continues to provide a significant opportunity,
due to the inefficient pricing of poorly researched or understood
companies trading at historically low valuations. The Investment
Manager is using its decades of investing experience and specialist
insight to identify a small number of the very best
opportunities.
The differentiated, stock-specific driven approach of the
strategy has shown that positive returns are possible despite
negative macroeconomic and market conditions or wider geo-political
developments. Our portfolio's underlying companies have been
steadily growing shareholder value and having that value better
recognised by the wider stock market. Performance in any short
period under review will be primarily due to the individual
performances of a handful of our holdings and in this regard the
success of the investment in Crestchic Plc should be highlighted,
an excellent case-study for our differentiated investment approach,
discussed in the Investment Manager's report.
We welcomed Paul Dudley to the Board during the year. His
background in corporate finance, accounting and the financing of
listed companies is already proving valuable. Post year end, we
achieved another milestone with the share price rising above GBP20.
With the aim of increasing marketability and liquidity the Board is
recommending a 10 for 1 stock split. Growing the NAV remains a
clear priority for the Company. This will open up a wider set of
investment opportunities in the targeted part of the UK small cap
market where the manager can purchase significant investee company
ownership stakes. We have put in place a block-listing facility to
enable share issuance above NAV. Subsequent to year end, I am
delighted to report that the discount to NAV has been eliminated
entirely and we have begun to issue new shares. This is a
significant achievement, given the market backdrop and alongside
sustained performance and on-going marketing initiatives we hope to
continue to attract new investors to the strategy.
The Board believes that, until the Company has gained greater
scale, it will retain the maximum capital allowable to maximise the
compounding of NAV growth. As such there will be no dividend
proposed this year. Our AGM will be held on 12(th) September for
those that would like to meet the Board and Manager in person.
Yours sincerely
Noel Lamb, Chairman
INVESTMENT MANAGER'S REPORT
Highlights
- NAV Total Return performance in the twelve months to 31 March
2023 of 21.4% to 1,959.56p per share which compares to declines in
the FTSE Small Cap (ex-ITs) of 15.7%. The positive Total
Shareholder Return of the Company in this period was 28.2%.(2)
- NAV Total Return performance in the three years to 31 March
2023 of 116.9% which compares to the FTSE Small Cap (ex-ITs) of
49.6% (3) . The Company's Total Shareholder Return in this period
was 139.4%
- Successful migration from AIM to a Premium Listing on the Main
Market of the London Stock Exchange ("LSE")
Market backdrop
The period was very challenging for UK smaller company
investors. The FTSE Small Cap (ex-ITs) fell 3 of out of four
quarters with a modest rally in Q4 of 2022, mainly because
sentiment had got so negative that a slight improvement in mood
regarding the direction of US interest rates prompted a rally.
Against this backdrop, investor money flow data and surveys
indicated continued reductions to UK equities. It is difficult to
pinpoint the rationale to this seemingly entrenched pessimism;
partly structural such as the desire to allocate to "Global"
equities rather than UK; partly aversion due to concerns about the
post-Brexit economy; possibly partly due to the lack of flag-waving
UK fund managers with attractive performance to highlight. It may
just be the political shambles that characterised most of the
period, firstly with the departure of Boris Johnson, second through
the disastrous and record-breaking short tenure of his replacement,
Liz Truss. There is little doubt though that with UK Debt to GDP
ratios the highest since World War II, the tax burden at
generational highs and a general lack of support for public service
cost-cutting, the UK's political leaders have wafer thin room to
manoeuvre fiscal policy. The lower valuation of UK equities
relative to global equities and compared with historical levels,
seems to have been spotted given the increasing number of takeover
approaches for UK companies by Private Equity Funds who have record
amounts of capital to deploy.
UK unemployment hit its lowest level of 3.4% since 1974 and
retail inflation reading 14%, the highest since 1980. Inflation is,
in our view, the most important current determinant in both the
outlook for markets and also the source of broader corporate,
investor and central bank behaviour. During the year interest rates
rose markedly around the world in an attempt to tame inflation,
with the UK official Bank Rate up from 0.75% to 4.25%. Jerome
Powell, Chairman of the Federal Reserve, earlier in the year, made
it clear "pain" was inevitable, he was still raising interest rates
to new highs as Rockwood's financial year came to a close. This is
an era-defining regime change and should benefit 'value'
investments over long-duration 'growth' investments and unleveraged
asset classes over ones relying on debt to juice returns. Both of
these characteristics should benefit Rockwood Strategic's
approach.
The impact of higher interest rates characterised other key
developments: noticeably the emergence of banking stress in our
final quarter leading to the distressed sales of Silicon Valley
Bank, Credit Suisse and First Republic Bank to better capitalised
rivals. A credit squeeze commenced and is, alongside the cost of
living squeeze on consumers, feeding into measly economic growth,
teetering on recession in major economies, other than China where
extreme lock-down conditions post Covid-19 were lifted. This is
easing supply-chain blockages, and noticeably causing a
normalisation of freight rates. Gold and, begrudgingly, Crypto
coins performed subsequently well given this backdrop. Housing and
property markets began to weaken. The Ukrainian conflict sadly
rumbles on with little evidence to suggest a resolution is in
sight. However, the sourcing of gas and oil away from Russia has
been impressive in Europe and almost everyone will be pleased
energy prices have been moderating. The effectiveness of an
inverted yield curve providing an early warning signal of impending
recession is being tested.
Outlook
We have provided a 'market-backdrop' section above, but as we
have previously stated, over the medium-term, market factors will
not be the primary determinant of Rockwood's returns, it will be
stock-specific risk and return. Our results this year demonstrate
that Rockwood shareholders can have a smile on their faces when
almost everyone else hasn't. Some of the factors mentioned above
such as the seemingly on-going outflows from UK equities to other
asset classes or geographies are in fact positive for our strategy.
We are not faced with outflows, we can choose to buy when others
are forced to sell.
We are confident in the upside potential of the portfolio with a
range of good trading updates during recent months. We have
exciting strategic investment theses for all the holdings and
expect our 'engaged' style will lead to the un--locking of material
shareholder value. Many holdings have depressed levels of
profitability relative to history with clear plans for recovery
independent of macro-economic conditions. Overall, the portfolio
holdings are well-financed too with strong balance sheets in almost
all cases or the ability to de-leverage quickly in the remainder.
We finished the year with GBP10.5m of cash, 21.2% of NAV. We see
'core' inflation being quite sticky and sense the market is too
hopeful on the speedy reversal of interest rates and thus is prone
to further volatility which is likely to accompany weakening of
general economic conditions further. We remain confident the
'value' factor will perform well and provide support for our
portfolio and investment style. Our pipeline of new investments
remains busy with due diligence finished on some where we wait
patiently for an optimised entry point and is on-going on others
where we feel no rush to execute until we have sufficient clarity
on the 'margin of safety'.
We expect the pickup in trade buyer acquisition activity and
public-to-private transactions to accelerate in the coming years
for our targeted part of the UK stock market. If the stock market
doesn't fairly value or provide growth capital to UK listed small
companies then other solutions will emerge. This dynamic should
deliver material, absolute NAV growth for the current portfolio
holdings as it did during the year.
As signalled a year ago we were able to increase the number of
holdings and we expect this to continue during the current year. We
ended with 8 'Core' holdings and 10 'Springboard Opportunities'
with the top ten holdings accounting for 64.1% of NAV at year
end.
Investment Philosophy
- 'Value' investor mindset and free cash flow focused
- Seek proven businesses, identifiable assets
- Establish mean reversion potential (profitability, balance
sheet and valuation re-rating)
- Identify catalysts for change
- Develop exit thesis to mitigate illiquidity risks (3-5-year time horizon)
- Engage with all stakeholders to de-risk and add value
We believe that investment returns are generated by purchasing a
share for less than the intrinsic worth of the company, (a 'value'
philosophy), which is enhanced by identifying companies which can
increase their fundamental intrinsic worth over time, thus avoiding
'value traps'. We seek to optimise the IRR by identifying
'catalysts' which will un-lock the share's discount to the
business's worth or accelerate value creation. For 'core'
investments we ourselves may be the 'catalyst' through the
provision of capital, insight and personnel through constructive
engagement with the Board, management and other stakeholders.
Top 5 Investment Portfolio Holdings
RM Plc 11.1% Net Assets, 9.2% of their Issued Share Capital
Cost: GBP2.85m, Value as at 31st March 2023, GBP5.53m, IRR to
period end date 450%
The company is an established and leading supplier to the
education market. It has three divisions: firstly an educational
supplies business which reaches 90% of UK Primary schools selling
everything from basic supplies to bespoke teaching aids, often
encouraged by the curriculum. The second is a leading assessment
business which marks exams from the International Baccalaureate to
A-levels both in the UK and abroad. The final division provides
outsourced technology services to groups of schools. During the
year financial stress arose due to a poorly executed implementation
of a new group software system which lead to operational problems
and a need to ease banking covenants. This has led to the CEO being
replaced alongside an Interim CFO. Fortunately, the business has a
long history of cash generation and also some surplus assets which
were able to be sold at short notice easing stress. We believe that
the shares have a "sum-of-the-parts" valuation materially above the
current share price and expect the company and the new CEO to focus
on the creation and realisation of shareholder value through a
well-managed divisional disposal process once the business has been
stabilised.
Centaur Media Plc 8.5% Net Assets, 6% of their Issued Share
Capital
Cost: GBP3.44m, Value as at 31st March 2023, GBP4.25m, IRR to
period end date 10%
The company has two divisions providing business information,
consultancy, training, premium media and events content in the
Marketing and Legal sectors. The legal business is focused on the
market leading publication The Lawyer whilst the marketing
activities span a number of high quality brands such as
Econsultancy, Influencer Intelligence, Marketing Week and Festival
of Marketing. The business has also developed a fast growing
e-learning solution called MiniMBA. The holding was made in 2017 at
50p, however in late 2019-20 the investment was quadrupled in size
at an average price of 31p.The company has gone through extensive
restructuring in the last few years and disposed of a number of
other divisions, converting activities from print to digital and
increasing subscription content. Management have therefore been
improving profitability markedly, with 23% EBITDA margins targeted
for 2023. The business has significant cash balances. During the
period Richard Staveley (member of the Investment Team) joined the
Board as a Non-Executive Director and in January 2023 and March
2023 the company announced two material special dividends for
investors. The investment team continue to identify a material
discount in the share price to intrinsic value despite a
transformed level of profitability, quality of earnings, and
stronger balance sheet (than previous years).
M&C Saatchi 8.0% Net Assets, 1.7% of their Issued Share
Capital
Cost: GBP1.72m, Value as at 31st March 2023, GBP3.99m, IRR to
period end date 38%
The company is one or the world's best known global advertising
and communications advice agencies with clients stretching from
governments to supra-national organisations (e.g. the World Health
Organisation) to the world's leading brands (e.g. McDonalds) and
social media sites (e.g. TikTok). In more recent times the company
has been in turmoil with the original Founders leaving, accounting
errors and a poorly structured incentive scheme. The investment was
initiated in late 2020 as management and Board changes started to
take effect. The balance sheet has net cash and a new strategy to
grow the business markedly and improve margins to over 17%
(currently 13%). During COVID the business had no material client
losses indicating the strength of their relationships.
Opportunistic takeover approaches by former Board Director Vin
Murria and Next Fifteen Plc were rejected by shareholders during
the period. We believe the company has considerable further
recovery potential and is grossly undervalued. Many of its services
are counter-cyclical and its highest margin activities are growing
the fastest.
Flowtech Fluidpower 7.3% Net Assets, 5.8% of their Issued Share
capital
Cost: GBP2.56m, Value as at 31st March 2023, GBP3.63m, IRR to
period end date 14%
The company primarily distributes Fluidpower components to a
diverse range of customers with a strong bias to parts used for
repair or maintenance reasons. The investment was initiated in 2020
since then there has been Board evolution, importantly the
appointment of the highly regarded Roger McDowell as Chairman
(Roger was previously a Non-Executive Director at Augean plc).
During the period Jamie Brooke, a member of the Rockwood Strategic
Plc Investment Advisory Group ("IAG"), joined the Board also as a
Non-Executive Director and shortly after year-end a new CEO was
appointed, Mike England, formerly COO of FTSE 100 RS Group Plc. The
company has been addressing the lack of integration amongst its
various acquisitions, driving scale and synergies and has been
investing in its on-line capabilities. The business is still
producing sub-par operating margins and has a stock-turn well below
that targeted by management and achieved by peers. We expect this
to improve and thus improve returns, profitability and in-turn a
valuation re-rating.
Pressure Technologies 6.9% Net Assets, 20.5% of Issued Share
capital
Cost: GBP4.26m, Value as at 31st March 2023, GBP3.41m, IRR to
period end -8%
The company has two divisions; the industry leading Chesterfield
Special Cylinders which manufactures and services a range of
high-end industries and customers including the Ministry of
Defence, and the Precision Machined Components division ("PMC"),
which manufactures high specification parts primarily for the oil
& gas industry. The investment was initiated in early 2019,
however cash generation has not been as expected and in both late
2020 and 2022 further equity issuance was needed to support the
company's ambitions. Similar to Crestchic we see strategic logic in
focusing the company into one division (Chesterfield). The PMC
division should benefit from an improved oil & gas pricing
environment resulting in higher activity levels. Whilst
Chesterfield has significant orders in defence and elsewhere, there
are opportunities in the emergent Hydrogen economy. During the
period, we corner-stoned the fund raise, Richard Staveley was
announced as becoming a NED, a new Chief Financial Officer was
appointed, and the company announced advisors had been engaged to
explore a sale of PMC.
Portfolio Activity
This was the most active period of investing since the strategy
was conceived with 13 new investments made during the year.
The main feature was Crestchic Plc (formerly Northbridge
Industrial Services) which started the period at 15.8% of NAV. We
are delighted that our engagement efforts supported the company and
ultimately rewarded all shareholders with a material increase in
shareholder value which was realised into cash. Crestchic was a
proven business, asset-rich with an excellent international client
base. Our engagement since late 2019 included getting the company
to report and focus on Return on Capital Employed metrics, the
evolution of management with the appointment of Peter Harris as
Executive Chairman, the appointment of two NEDS, one a direct
representative of Harwood Capital, the development of an
appropriate incentivisation scheme, the sale of the company's
loss-making second division, the re-investment into the business
and improved Investor Relations narrative and approach. Rockwood
owned a material stake in the company and "ran our winner" with the
% of NAV reaching c. 31% prior to the company being successfully
taken over by Aggreko (Private Equity backed). The realisation
generated an IRR of 30.4%, a Money Multiple of 4.8x and a gain of
GBP12.4m.
There were only three other, much smaller, exits during the
year:
Lakes Distillery Convertible Loan Note - realised IRR 21.6%
The Lakes Distillery has been building its English whisky and
spirits brand carefully and successfully over recent years, despite
a number of external challenges. The business model requires a lot
of capital, whilst growing, to support the working-capital in laid
down casks. We were delighted to see some well-deserved awards for
their whisky but were happy to realise our maturing Convertible
Loan note into cash during the period allowing new investors to
take the company through to its next phase of growth.
Seraphine - realised IRR -6%
Our target holding period for investments is three to five
years. This relates to the usual time we have observed it
historically takes for a turnaround in a company's profitability
and valuation rating when accompanied by the usual Board,
management, operational and strategic changes to catalyse the
recovery. Over excited 'Growth' investors backed a series of
over-valued IPOs in the run-up to the regime change caused by the
normalisation of interest rates. Seraphine, a mainly on-line,
successful, international retailer of maternity apparel had listed
at c. GBP150 million market capitalisation and had collapsed to
c.GBP20m. We initiated a 'Springboard' 2% weighting, however
subsequent key online platform changes to advertising rates
affected all retailer's customer acquisition costs hitting
profitability, alongside the accelerating cost of living pressures
and poor consumer confidence. We accepted a Private Equity takeover
approach for the company, at approximately the value we paid for
our holding (our 'margin of safety' protected us), as the risks to
our medium-term thesis had materially increased post purchase.
Bonhill Loan - realised IRR 65.4%
Bonhill, the financial services B2B media publishing and events
business, has also been a volatile investment since initiation in a
rescue fund raise in the first couple of months of lockdown in
2020. There is no doubt the collapse in physical events was highly
disruptive for the relationship between their brands and customers,
however operationally management was found wanting and changes were
necessary. The inability of the US business to generate cashflow,
some marginal brands creating organisational cost and complexity,
inadequate technology systems and limited integration led to one
conclusion: the business was sub-scale for a listing and had no
mandate for further acquisitions. Having taken a NED Board
position, we helped refinance again during the year increasing our
holding to 19.5%, and the Board then initiated a formal sales
process of the business with UK and Asian assets and the small
titles sold during the period. During this process further
financing was required and Rockwood Strategic provided a "bridging"
loan to Bonhill to help them through to completion of asset sales.
Although modest in terms of a cash return (relative to NAV) it
delivered an excellent IRR. Post year end the US assets were sold
and the company initiated a full return of realised capital to
shareholders. A good illustration of the flexibility of our
mandate.
As a result of the above exits the strategy did not have any
non-listed or private instruments in the portfolio at the end of
the year.
New holdings
The Investment Team have an exciting short list of potential
investments and have been actively deploying capital during these
depressed market conditions to seed returns for shareholders over
the medium term, most notably to date being RM Plc. None of the
other new positions exceeded 5% of NAV at the year end and are not
deemed 'core' but 'Springboards/Opportunities' at this date. Below
we highlight a few through a brief summary of the opportunity. A
small number of holdings are still in the process of being built to
target weightings and thus we look forward to updating shareholders
on these in the Interim Report. The Board notes that for new
holdings, we display NAV, IRR and Market Capitalisation as set out
for the below. None of which are designated as 'core' investments
to date.
Finsbury Food Group 4.0% NAV, IRR to date 39%, Market
capitalisation GBP124m
A significant UK manufacturer of cakes and Bread products with
particularly high market share in branded 'celebration' cakes such
as Birthday cakes branded Disney, Minions, Mary Berry etc. Sales
are over GBP350million and the long-standing proven management team
have delivered a successful recovery of the business since 2010
alongside allocating capital well including some smart bolt-on
acquisitions. With strong customer relationships and stable c.5%
margins over a long period we anticipate a phase of improving
profitability as the fruits of new systems investment, automation
in the factories and other efficiency measures take effect, a lot
of which has been obscured by the exceptional input cost food price
inflation in recent months. We see the combination of these factors
as creating a step-change in operational effectiveness and thus
profitability, when delivered. The company has large debt
facilities available and the scope and ambition for material, even
transformative, M&A activity in this large sector, however they
are somewhat constrained by a seemingly inappropriately low stock
market multiple. We believe Private Equity could achieve a lot with
this team, balance sheet and business, particularly if higher
levels of leverage were taken on.
Galliford Try 4.1% NAV, IRR to date 8%, Market capitalisation
GBP185m
Construction Services are generally hated by institutional
investors as many bear the scars of former investments in companies
such as Carillion. However, we have recognised a change in risk
management in the larger players in the sector and have identified
that Galliford Try's chosen markets, primarily being regulated
industries or public sector clients as being much lower risk. With
huge sales of over GBP1.4billlion, the wave of infrastructure
requirements across schools, hospitals, roads, energy, water and
rail mean the current order book is over GBP3.5billion. This is
diverse with the average job value GBP25m, indeed 90% of work is
now on 'framework' contracts with much lower risk contract terms
than yester-year. However, shareholders also benefit from the
ownership of approximately GBP46m of Public & Private
Partnership ("PPP") Investments which produce a very stable and
inflation linked income stream and a massive cash balance which on
average has been around GBP154m giving considerable scope for
M&A, dividends and buybacks. The new management team have been
re-building profitability (now 2.3% operating margin) which we
expect to continue alongside an emerging market re-appraisal of the
defensiveness of the construction infrastructure sector's growth
drivers when compared to many other Companies in this sector.
City Pub Company 4.8% NAV, IRR to date 11%, Market
capitalisation GBP86m
Having survived the travails of Covid-19, the company entered a
new suite of external pressures including the cost-of-living
squeeze on consumers and cost inflation (energy, food, wages). What
is clear is that management are first rate operationally, indeed
they are also proven to investors as Founder Clive Watson built up
another pub group and sold it successfully to Greene King
previously. Here he has helped carefully curate an estate of 52
units in the South of England in high 'quality' locations,
dominated by Freehold ownership. Headwinds are all starting to
abate, whilst critical mass is emerging meaning improved overhead
recovery and much improved profits for shareholders. Of course
central costs wouldn't be needed at all to larger trade buyers of
the group, some of whom we suspect are eyeing the GBP160m
Director's valuation of the estate, a material premium to the stock
market valuation. We expect accretive strategic developments and
further operational improvements after some recent senior
leadership evolution.
Trifast 4.1% NAV, very high IRR to date not relevant to due
short holding period, Market capitalisation GBP106m
The company is an international manufacturer (30%) and
distributor (70%) of fasteners (nuts 'n' bolts) and has been
established for a number of decades. With 34 locations, of which 7
are high volume manufacturing sites, 15bn parts are sold per year,
1200+ employees. Sales exceed GBP245m with a long history of
profitability and cash generation. The company has material net
assets and is well invested in plant and machinery. However,
returns have fallen and ROCE is poor. The operating margin is
depressed vs its long history and a management and Board evolution
is underway alongside a restructuring program to deliver savings.
This follows a new ERP system roll-out finally completing (after a
GBP17.5m investment). 75% of sales are customer-specific branded
products, 18-year average tenure of top ten customers, the largest
<7.5% sales. Net Debt has become elevated not least due to a
bulging inventory position of over GBP100m. We can identify a
significant multi-year turnaround and recovery opportunity with
scope to materially increase cash generation (reduce leverage),
improve returns and profits leading to a normalisation of the
valuation rating.
The investments discussed above aggregate to 58.8% of the
portfolio's NAV, cash is 21.1% with the remainder of the portfolio
spread across a mix of holdings. Some, as mentioned above, were
only initiated just before yearend and we are still building our
investment, others are in a known realisation phase such as Bonhill
or Smoove, currently subject to a takeover approach. Other notable
positions would be Argentex (Cost GBP1.08m, Value GBP1.58m, IRR to
date 100%) and Van Elle (Cost GBP2.1m, Value GBP2.6m, IRR to date
9%) both of which are steadily recovering profitability and remain
on very low valuations.
Conclusion
Christopher Mills (Harwood Capital) and I have made material
personal investments in the shares of Rockwood Strategic and the
investment management contract rewards success in alignment with
Total Shareholder Returns for the Company's shareholders. We see a
real opportunity to compound wealth for all shareholders over the
long-term and a vibrant, inefficient stock market full of
opportunities to deliver our target returns.
This year was a pleasing one where the portfolio and strategy
delivered, despite difficult market conditions and losses across
almost all other sector participants. We continue to identify value
and businesses which we think will be attractive to off-market
participants if the UK stock market remains out of favour. Often
'self-help' is driving higher levels of profitability, reducing
financial leverage and resulting, for the "patient", a higher
ultimate valuation. We have a robust portfolio cash position, but
will carefully wait for the 'fat pitch', as Mr Buffett would call
it, to deploy our cash. We would call it a 'slow, over-pitched ball
outside off-stump' where the chances of clearing the boundary are
excellent. To stretch the analogy further, we see Rockwood's
approach to investment as very much the 'Test' game and not the
'short form' version; long-term, requiring patience, consistency,
adaptability, mental fortitude and sustained periods of both attack
and defence. We thank our shareholders for their consistent and
long-term support.
Richard Staveley
Statement of Comprehensive Income for the year ended 31 March
2023
for the year ended 31 March 2023
Year ended Year
31 March ended
Notes 2023 31 March
GBP'000 2022
GBP'000
--------------------------------------------- ------- -------------- -------------
Gains on investments 8 8,991 20,007
--------------------------------------------- ------- -------------- -------------
Revenue
Bank interest income 109 1
Loan note interest income 274 563
Portfolio dividend income 925 99
Other income 40 -
--------------------------------------------- ------- -------------- -------------
1,348 663
Administrative expenses
Directors fees and other staff costs 3 (102) (173)
Performance fee 11 (625) (2,772)
Other costs 4 (1,182) (2,302)
--------------------------------------------- ------- -------------- -------------
Total administrative expenses (1,909) (5,247)
--------------------------------------------- ------- -------------- -------------
Profit before taxation 8,430 15,423
Taxation 5 (1) (1,580)
--------------------------------------------- ------- -------------- -------------
Profit for the financial year 8,429 13,843
--------------------------------------------- ------- -------------- -------------
Attributable to:
- Equity shareholders of the Company 8,429 13,843
Basic and Diluted earnings per ordinary
share for profit from continuing operations
and for profit for the year (pence) 6 331.72p 428.76p
--------------------------------------------- ------- -------------- -------------
There are no components of other comprehensive income for the
current year (2022: None), all income arose from continuing
operations.
Statement of Financial Position as at 31 March 2023
as at 31 March 2023
31 March 31 March
Notes 2023 2022
GBP'000 GBP'000
----------------------------------------- ------- ---------- ----------
Non-current assets
----------------------------------------- ------- ---------- ----------
Investments at fair value through profit
or loss 8 39,255 31,609
Current assets
Cash and cash equivalents 11,631 10,507
Trade and other receivables 9 73 1,019
----------------------------------------- ------- ---------- ----------
11,704 11,526
----------------------------------------- ------- ---------- ----------
Total assets 50,959 43,135
----------------------------------------- ------- ---------- ----------
Current liabilities
Trade and other payables 10 (541) (547)
Tax liability - (1,580)
Performance fee payable 11 (625) -
----------------------------------------- ------- ---------- ----------
Total liabilities (1,166) (2,127)
Net current assets/(liabilities) 10,538 9,399
----------------------------------------- ------- ---------- ----------
Net assets 49,793 41,008
----------------------------------------- ------- ---------- ----------
Represented by:
Issued capital 12 1,281 1,281
Share premium 13,063 13,063
Revenue reserve 14 24,105 15,320
Capital redemption reserve 11,344 11,344
----------------------------------------- ------- ---------- ----------
Total equity 49,793 41,008
----------------------------------------- ------- ---------- ----------
The NAV per share on 31 March 2023 is
1,959.6 pence (2022: 1,613.8 pence).
These financial statements were approved and authorised for
issue by the Board of Directors on 21 June 2023. Signed on behalf
of the Board of Directors.
Noel Lamb Kenneth Lever
Chairman Director
Statement of Cash Flows for the year ended 31 March 2023
for the year ended 31 March 2023
Year ended Year ended
31 March 31 March
Notes 2023 2022
GBP'000 GBP'000
--------------------------------------------------------- ------- --------------------------- --------------
Cash flow from operating activities
Cash flow from operations a (670) (7,306)
Portfolio dividend income received 862 99
--------------------------------------------------------- ------- --------------------------- --------------
Corporation tax paid (1,581) -
--------------------------------------------------------- ------- --------------------------- --------------
Net cash outflow from operating activities (1,389) (7,207)
Cash flows from investing activities
Purchase of investments 8* (20,015) (1,457)
Sale of investments 8* 22,528 43,122
--------------------------------------------------------- ------- --------------------------- --------------
Net cash inflow from investing activities 2,513 41,665
Cash flows from financing activities
Dividends paid 7 - (535)
Return of Capital B Share Scheme and Tender
Offer - (25,021)
--------------------------------------------------------- ------- --------------------------- --------------
Net cash outflow from financing activities - (25,556)
Change in cash and cash equivalents 1,124 8,902
Opening cash and cash equivalents 10,507 1,605
--------------------------------------------------------- ------- --------------------------- --------------
Closing cash and cash equivalents 11,631 10,507
--------------------------------------------------------- ------- --------------------------- --------------
Note
a) Reconciliation of profit for the year
to net cash outflow from operations
GBP'000 GBP'000
--------------------------------------------------------- ------- --------------------------- --------------
Profit for the year 2 8,429 13,843
Rolled up interest - (224)
Gains on investments 8 (8,991) (20,007)
Portfolio dividend income (925) (99)
Adjustment for accrued interest on redemption/conversion - (16)
--------------------------------------------------------- ------- --------------------------- --------------
Operating loss (1,487) (6,503)
Decrease/(increase) in trade and other
receivables 153 (65)
Decrease/(decrease) in trade and other
payables 664 (738)
--------------------------------------------------------- ------- --------------------------- --------------
Net cash outflow from operations (670) (7,306)
--------------------------------------------------------- ------- --------------------------- --------------
* The purchase and sale of financial investments are the cash
paid or received during the year and exclude unsettled investments
as at 31 March 2023.
Statement of Changes in Equity for the year ended 31 March
2023
for the year ended 31
March 2023
Ordinary Capital
Share Share Revenue Redemption Total
B shares D shares Capital Premium Reserve Reserve Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Balance at 31 March 2021 - 10 1,741 13,063 26,969 10,874 52,657
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Profit and total comprehensive
income for the year - - - - 13,843 - 13,843
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Total profit and comprehensive
income for the year - 10 1,741 13,063 40,812 10,874 66,500
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Contributions by and
distributions to owners
Share buy back - - (470) - - 470 -
Dividends paid - - - - (535) - (535)
Return of unclaimed special
dividends and capital
payments - - - - 64 - 64
Tender Offer - - - - (14,578) - (14,578)
Issue of B Shares 10,443 - - (10,443) - - -
Redemption of B Shares (10,443) - - 10,443 (10,443) - (10,443)
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Balance at 31 March 2022 - 10 1,271 13,063 15,320 11,344 41,008
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Profit and total comprehensive
income for the year - - - - 8,429 - 8,429
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Total profit and comprehensive
income for the year - 10 1,271 13,063 23,749 11,344 49,437
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Contributions by and
distributions to owners
Return of unclaimed special
dividends and capital
payments - - - - 356 - 356
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Balance at 31 March 2023 - 10 1,271 13,063 24,105 11,344 49,793
------------------------------- -------- -------- --------- -------- --------- ------------ --------
Notes to the Financial Statements
1. Basis of preparation and significant accounting policies
Rockwood Strategic Plc (the Company) is a company incorporated
in the UK and registered in England and Wales (registration number:
03813450). The accounting policies applied are consistent with the
prior year.
Basis of preparation
These financial statements for year ended 31 March 2023 have
been prepared in accordance with UK adopted International
Accounting Standards.
The financial statements are prepared on a historical cost basis
except for the revaluation of certain financial instruments stated
at fair value. Standards and interpretations applied for the first
time have had no material impact on these financial statements.
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Directors' Report and Investment Manager's
Report. The key risks facing the business and management's policy
and practices to manage these are further discussed in note 13.
The functional and presentational currency of the Company is
Pounds Sterling and has been determined on the basis of the
currency of the Company's share capital and the currency in which
dividends and expenses are paid. The Financial Statements are
presented to the nearest thousand (GBP'000).
Going concern
In assessing the Company as a going concern, the Directors have
considered the market valuations of the portfolio investments, the
current economic outlook and forecasts for Company costs.
The Board convened a general meeting for Shareholders to vote on
a proposal to change its investment strategy from the realisation
strategy to instead enable the Company to continue as a going
concern and to make new investments (the Proposal).
Shareholders voted in favour of the resolution to re-start
active investing in UK small companies at a general meeting on 25
April 2022.
The Company is in a net asset position of GBP49.8 million (2022:
GBP41.0 million) and 100% of the Company's portfolio of Investments
consist listed equities which, should the need arise, can be
liquidated to settle liabilities. There are no other contractual
obligations other than those already in existence and which are
predictable.
The Company's forecasts and projections, taking into account the
current economic environment and other factors, including
reasonably possible changes in performance, show that the Company
is able to operate within its available working capital and
continue to settle all liabilities as they fall due for the
foreseeable future. The Company has consistent, predictable ongoing
costs and major cash outflows, such as for the payment of
dividends, are at the full discretion of the Board.
Therefore, the Directors taking into the consideration the above
assessment are satisfied that the Company's ability to continue as
a going concern and are satisfied that the Company has adequate
resources to continue in operational existence for a period of at
least 12 months from the date when these financial statements were
approved.
Financial instruments:
Trade debtors and creditors
Trade debtors and creditors are held at amortised cost and are
accounted for at fair value when an asset or liability is incurred
as these are short term in nature.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks and other short-term highly liquid investments
with original maturity of 3 months or less that are readily
convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
1. Basis of preparation and significant accounting policies (continued)
Investments at fair value through profit or loss
Investments are included at valuation on the following
basis:
(a) Quoted investments are recognised on trading date and valued
at the closing bid price at the year end.
(b) Unquoted Investments are valued according to the to the
Directors' best estimate of the Company's share of that
investment's value. This value is calculated in accordance with the
International Private Equity and Venture Capital Valuation
Guidelines (the IPEV of December 2018 and the special valuation
guidance issued in March 2020) and industry norms which include
calculations based on appropriate earnings or sales multiples.
The core principles of the IPEV guidelines are:
-- Fair Value should be estimated at each Measurement Date (each
time Fair Value based Net Asset Value (NAV) is reported to
investors (LPs)).
-- The Price of a Recent Investment (if deemed Fair Value)
should be used to calibrate against the alternative valuation
methodologies.
-- Calibration is required by accounting standards.
-- Market Participant perspectives should be used to estimate
Fair Value at each Measurement Date.
After considering individual facts and circumstances and
applying these Guidelines, it is possible that Fair Value at a
subsequent Measurement Date is the same as Fair Value as at a prior
Measurement Date. This means that Fair Value may be equal to the
Price of a Recent Investment; however, the Price of a Recent
Investment is not automatically deemed to be Fair Value.
For measurement purposes, investments, including equity, loan
and similar instruments, are designated at fair value through
profit and loss, and are valued in compliance with IFRS 9
'Financial Instruments', IFRS 13 'Fair Value Measurement' and the
IPEV Guidelines as recommended by the British Venture Capital
Association.
The Directors consider that a substantial measure of the
performance of the Company is assessed through the capital gains
and losses arising from the investment activity of the Company.
Gains and losses on the realisation of investments are
recognised in the statement of comprehensive income for the year
and taken to retained earnings. The difference between the market
value of financial investments and book value to the Company is
shown as a gain or loss for the year and taken to the statement of
comprehensive income.
Revenue
Dividends receivable on unquoted equity shares are brought into
account when the Company's right to receive payment is established
and there is no reasonable doubt that payment will be received.
Dividends receivable on quoted equity shares are brought into
account when the right to receive payment is established and the
amount of the dividend can be measured reliably.
Interest receivable is included on an effective interest rate
basis.
Taxation
The tax expense included in the statement of comprehensive
income comprises of current and deferred tax. Current tax is the
expected tax payable based on the taxable profit for the year,
using tax rates that have been enacted or substantially enacted by
the reporting date. Deferred tax is recognised on differences
between the carrying amounts of assets and liabilities in the
accounts and the corresponding tax bases used in the computation of
taxable profit and are accounted for using the statement of
financial position liability method.
Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial
recognition of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit. The
carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are enacted or substantively
enacted at the balance sheet date when the liability is settled, or
the asset is realised. Deferred tax is charged or credited in the
statement of comprehensive income, except when it relates to items
charged or credited directly to equity or other comprehensive
income, in which case the deferred tax is also recognised in equity
or other comprehensive income.
1. Basis of preparation and significant accounting policies (continued)
Performance fee
Under the terms of the Investment Management Agreement (7 April
2022) with Harwood Capital LLP, the Company will pay the Investment
Manager a performance fee equal to 10 per cent. of outperformance
over the higher of a 6 per cent. per annum total return hurdle and
the high watermark. The 6 per cent. per annum compounds weekly and
the performance fee is calculated annually. Provided that the
Company's average NAV is at or below
GBP100 million, performance fees in any performance fee period
are capped at 3 per cent. of the Company's average NAV for the
relevant performance fee period. In such instance, performance fees
in excess of the 3 per cent. cap will not be paid and will instead
be deferred into the next performance fee period. If the average
NAV exceeds GBP100 million, the performance fee shall be further
limited such that the combined investment management and
performance fees shall not exceed 3 per cent. of the Company's
average NAV. In such instance, performance fees in excess of the
cap will not be deferred and will not become payable at any future
date.
The performance fee is calculated annually for each performance
fee period, which is aligned with the Company's accounting year. It
is accounted for on an accrual basis and is recognised in the
statement of comprehensive income once a performance fee is
triggered during the performance fee period.
Foreign exchange
Transactions denominated in foreign currencies are translated
into the functional currency at the rate ruling at the dates of the
transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are retranslated at the
rates ruling at that date. These translation differences are
recognised in the statement of comprehensive income.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported
period. It also requires Management to exercise their judgement in
the process of applying the accounting policies. The main area of
estimation is in the inputs used in determination of the valuation
of the unquoted investments in Note 8. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
The majority of the portfolio is valued on bid price which
factors in the anticipated impact of climate and ESG related issues
on the portfolio companies, therefore these are incorporated into
the valuations.
Management believes that the underlying assumptions are
appropriate and that the Company's financial statements are fairly
presented.
Segmental analysis
There is only one operating segment of the business - investment
activities. The performance measure of investment activities
considered by the Board is profitability and is disclosed on the
face of the statement of comprehensive income.
New Standards issued but not yet effective
Standards and amendments will be effective for annual reporting
periods beginning on or after 1 January 2023 and which have not
been early- adopted by the Company include:
-- IFRS Practice Statement 2 - Disclosure of Accounting Policies;
-- Amendment to IAS 12, Income taxes effective from 1 January 2023;
-- Amendment to IAS 8, change in definition of accounting
estimates, effective from 1 January 2023.
These standards and amendments are not expected to have a
significant impact on the financial statements in the period of
initial application and therefore detailed disclosures have not
been provided.
2. Statement of comprehensive income
The Company's profit for the year was GBP8.429 million (2022:
profit of GBP13.843 million).
The Company has recognised gains on investments through the
statement of comprehensive income of GBP8.991 million (2022: income
of
GBP20.007 million).
3. Information regarding Directors
and employees Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
----------------------------------- ------------ ------------
Directors' remuneration summary
Basic salaries 95 161
Social security costs 7 12
----------------------------------- ------------ ------------
102 173
----------------------------------- ------------ ------------
Year ended 31 March 2023 Year ended 31 March
2022
------------------------------
Social Social
Security Security
------------------------------
Emoluments costs Total Emoluments costs Total
------------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- --------- ------- ---------- ---------- -------------------
Analysis of Directors'
remuneration
C Berry (Resigned on 22
November 2021) - - - 25.9 - 25.9
D Potter (Resigned on 11
June 2021) - - - 24.4 - 24.4
H Sinclair (Resigned on
5 November 2021) - - - 41.3 - 41.3
K Lever 27.5 - 27.5 27.5 - 27.5
G Bird (Appointed 10 June
2021, resigned on
30 August 2022) 11.5 - 11.5 22.2 - 22.2
S Pyper (Resigned on 31
March 2022) - - - 11.4 - 11.4
N Lamb (Appointed on 20
January 2022) 40.0 - 40.0 8.3 - 8.3
P Dudley (Appointed on
1 September 2022) 16.0 - 16.0 - - -
Social security costs - 6.6 6.6 - 12.0 12.0
------------------------------ ---------- --------- ------- ---------- ---------- -------------------
95.0 6.6 101.6 161.0 12.0 173.0
------------------------------ ---------- --------- ------- ---------- ---------- -------------------
The Company has no employees.
Year ended Year
ended
31 March
2023
No. 31 March
2022
No.
------------------------------ ------------------------------------------------------ -------------------
Directors
Investment and related
administration 3 3
------------------------------ ------------------------------------------------------ -------------------
3 3
------------------------------ ------------------------------------------------------ -------------------
As at 31 March 2023, the Board comprises 1 Chairman and 2
Non-executive Directors (2022: 1 Chairman and 2 Non-executive
Directors).
4. Other costs
Profit for the year has been derived after taking
the following items into account:
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------------------------- ------------- ------------
Auditors remuneration
Fees payable to the current auditor for the audit
of the Company's annual financial statements 37 40
Fees payable to the Company's current auditor and
its associates for other services:
Fees for agreed upon procedures in relation to financial
information - 10
Fees for agreed upon procedures for performance fee - 5
Fees paid for review of interim report - 3
Other services relating to taxation - 5
Under provision of tax fee - 3
Recharge cost - 1
Analysis of other costs:
Professional fees* 420 1,539
Investment Trust Company conversion costs 470 -
Management fee 112 593
Other general overheads 76 103
------------------------------------------------------------- ------------- ------------
1,182 2,302
------------------------------------------------------------- ------------- ------------
* The company's corporate activity during the year
to March 2022 led to significant costs, with professional
fees totalling GBP0.67m and legal fees totalling GBP0.37m.
5. Taxation
Year ended Year ended
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------------------------- ------------- ------------
UK corporation tax
Corporation tax liability at 19% (2022: 19%) 1 1,580
------------------------------------------------------------- ------------- ------------
1 1,580
Current tax 1 1,580
------------------------------------------------------------- ------------- ------------
Tax on profit from ordinary activities 1 1,580
------------------------------------------------------------- ------------- ------------
Factors affecting the tax charge for the current period
The tax assessed for the year is different than that resulting
from applying the standard rate of corporation tax in the UK: 19%
(2022: 19%).
The differences are explained below:
Year ended Year ended
-----------------------------------------
31 March 31 March
-----------------------------------------
2023 2022
GBP'000 GBP'000
----------------------------------------- -------------- --------------
Current tax reconciliation
Profit before taxation 8,430 15,423
----------------------------------------- -------------- --------------
Current tax charge at 19% (2022:
19%) 1,602 2,930
Effects of:
Non-taxable income (227) (553)
Non-deductible expenditure 103 21
Chargeable gains (1,341) (27)
Deferred tax not recognised (136) (791)
----------------------------------------- -------------- --------------
Tax on profit on ordinary activities 1 1,580
----------------------------------------- -------------- --------------
5. Taxation (continued)
Deferred tax
There remains an unrecognised deferred tax asset in respect of
tax losses and other temporary differences. The unrecognised
deferred tax asset
is GBP34 million (2022: GBP34 million) for the Company. The
increase in the balance for unrecognised deferred tax is due to the
rate of corporation tax being raised to 25% with effect from 1
April 2023. The assessed loss on which no deferred tax has been
recognised amounts to GBP136 million (2022: GBP136 million).
An estimated deferred tax liability on the unrealised gains in
the portfolio at year end is nil and therefore no liability has
been recognised.
The movement in the year is taken to the statement of
comprehensive income.
6. Earnings per share
Basic earnings per share is calculated by dividing the
profit/loss attributable to ordinary shareholders by the weighted
average number of Ordinary Shares during the year. Diluted earnings
per share is calculated by dividing the profit/loss attributable to
shareholders by the adjusted weighted average number of Ordinary
Shares in issue.
Year ended Year ended
--------------------------------------
31 March 31 March
--------------------------------------
2023 2022
GBP'000 GBP'000
-------------------------------------- ---------- ----------
Earnings
Profit for the year 8,429 13,843
-------------------------------------- ---------- ----------
Number of shares ('000)
Weighted average number of ordinary
shares in issue for basic EPS 2,541 3,229
-------------------------------------- ---------- ----------
Weighted average number of ordinary
shares in issue for diluted EPS 2,541 3,229
Earnings per share
Basic EPS 331.72p 428.76p
-------------------------------------- ---------- ----------
Diluted EPS 331.72p 428.76p
-------------------------------------- ---------- ----------
As at 31 March 2023, the total number of shares in issue was
2,541,046 (2022: 2,541,046). No shares were bought back by the
Company (2022: 939,838). There are no share options outstanding at
the end of the year.
7. Dividends
The Company paid no dividend to shareholders in the year ended
31 March 2023 (2022: GBP534,664). Unclaimed historic dividends
amounting to
GBP355,855 were reclassified to revenue reserve during the year
(2022: GBP63,834).
8. Investments at fair value through profit or loss
Year ended 31 March 2023
Value Transfer Value
at 1 April Disposal Gain between at 31
on March
2022 Additions proceeds disposals Revaluation levels 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ----------------- ----------- ----------- ---------- ------------ ------------ -------------
Investments in
quoted
companies
(Level 1) 28,692 19,120 (17,548) 12,673 (3,682) - 39,255
Other unquoted
investments
(Level 3) 2,917 1,207 (4,124) - - - -
------------------ ----------------- ----------- ----------- ---------- ------------ ------------ -------------
Total investments
at fair value
through
profit or loss 31,609 20,327 (21,672) 12,673 (3,682) - 39,255
------------------ ----------------- ----------- ----------- ---------- ------------ ------------ -------------
Year ended 31 March 2022
Value Transfer Value
at 1 April Disposal Gain between at 31
on March
2021 Additions proceeds disposals Revaluation levels 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ----------------- ----------- ----------- ---------- ------------ ------------ -------------
Investments in
quoted
companies
(Level 1) 47,565 596 (41,173) 15,667 4,298 1,739 28,692
Other unquoted
investments
(Level 3) 6,323 1,079 (2,788) - 42 (1,739) 2,917
------------------ ----------------- ----------- ----------- ---------- ------------ ------------ -------------
Total investments
at fair value
through
profit or loss 53,888 1,675 (43,961) 15,667 4,340 - 31,609
------------------ ----------------- ----------- ----------- ---------- ------------ ------------ -------------
For the year ended 31 March 2023, there were no transfers of the
investments between the fair value hierarchy levels.
For the year ended 31 March 2022, there was a transfer from
Level 3 to Level 1 of GBP389,886 Northbridge loan notes converted
to equity shares and National World amounting to GBP1,348,931
converted to equity shares as a result of its admission to AIM.
The revaluations and gains on disposal above are included in the
statement of comprehensive income as gains on investments.
Year ended Year ended
--------------------------------------------
31 March 31 March
--------------------------------------------
2023 2022
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Opening valuation 31,609 53,888
Acquisitions 20,327 1,675
Unrealised and realised gains on investment 8,991 20,007
Disposals (21,672) (43,961)
-------------------------------------------- ---------- ----------
Closing valuation 39,255 31,609
-------------------------------------------- ---------- ----------
The following table analyses investment carried at fair value at
the end of the year, by the level in the fair value hierarchy into
which the fair value measurement is categorised. The different
levels are defined as follows:
(i) level one measurements are at quoted prices (unadjusted) in
active markets for identical assets or liabilities;
(ii) level two measurements are valuations techniques with all
material inputs observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices); and
(iii) level three measurements are valuations not based on
solely observable market data (that is, the measurement requires
significant unobservable inputs).
8. Investments at fair value through profit
or loss (continued)
-----------
The fair values of the Company's investments
is summarised as follows:
-----------
31 March
-------------------- -----------
2023 2022
GBP'000 GBP'000
--------------------------------------------- -------------------- -----------
Level 1 39,255 28,692
Level 2 - -
Level 3 - 2,917
--------------------------------------------- -------------------- -----------
39,255 31,609
--------------------------------------------- -------------------- -----------
Fair values of financial assets and financial liabilities
Financial assets and liabilities are carried in the statement of
financial position at either their fair value (investments), or the
statement of financial position amount is a reasonable
approximation of the fair value (dividends receivable, accrued
income, accruals, and cash at bank).
As at 31 March 2023 and 31 March 2022, all investments, except
for the investments in the table below, fall into the category
'Level 1' under IFRS 7 fair value hierarchy.
A summary of the level 3
investment are as follows:
31 March 2023 31 March 2022
---------------------------------- -------- --------------------------------- -------
Investments GBP'000 Investments included GBP'000
included
---------------------------- ---------------------------------- -------- --------------------------------- -------
The Lakes Distillery
Fair value None - Company 2,917
---------------------------- ---------------------------------- -------- --------------------------------- -------
- 2,917
------------------------------------------- -------------------------------------------------------------- -------
Valuation policy: Every three months, the investment manager
within Harwood Capital LLP is asked to revalue the investments that
he looks after and submit his valuation recommendation to the
Valuation and Pricing ("V&P") Committee. The V&P Committee
considers the recommendation made, and approves or adjust the
valuation as required.
Level 3 investments have been valued in accordance with the IPEV
guidelines.
Investments in quoted companies (Level 1) have been valued
according to the quoted bid price as at 31 March 2023.
At the year-end, the Company held 20.50% of the aggregate
nominal value of voting equity of Pressure Technologies, in
ordinary share capital. Pressure Technologies is incorporated in
the UK and at its year end 30th September 2022 had capital and
reserves of GBP12.10 million and had made a revenue loss of GBP4.04
million. .
9. Trade and other receivables
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------- -------- ---------------
Other debtors 63 1,001
Prepayments 10 18
------------------------------- -------- ---------------
73 1,019
------------------------------- -------- ---------------
10. Trade and other payables
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------- -------- ---------------
Due to Brokers 312 -
Unclaimed historic special dividends
and capital payments - 356
Trade creditors 229 186
Social security - 5
------------------------------------- -------- ---------------
541 547
------------------------------------- -------- ---------------
There were no other creditors as at 31 March 2023 (2022:
none).
The unclaimed special dividends and capital payments amounting
to GBP420k between the periods of 2009 to 2014 were returned to the
company in 2021, out of which GBP356k (2022: GBP64k) was
reclassified to revenue reserves during the year as its reclaim
period has lapsed.
11. Performance fees payable
31 March 31 March
2023 2022
GBP'000 GBP'000
--------------------------------------------------- -------- ---------------
Performance fees payable 625 -
--------------------------------------------------- -------- ---------------
625 -
--------------------------------------------------- -------- ---------------
12. Issued capital
31 March 31 March
2023 2022
GBP'000 GBP'000
--------------------------------------------------- -------- ---------------
Called up, allotted and fully paid:
2,541,046 (2022: 2,541,046) Ordinary Shares
of 50 pence (2022: 50 pence) 1,271 1,271
2,000,000 (2022: 2,000,000) D shares of
0.50 pence (2022: 0.50 pence) 10 10
--------------------------------------------------- -------- ---------------
1,281 1,281
--------------------------------------------------- -------- ---------------
As at 31 March 2023, the total number of
shares in issue were 2,541,046 (2022: 2,541,046).
The average share price of Rockwood Strategic Plc quoted
Ordinary Shares in the year-ended was 1,547.47 pence. In the year,
the share price reached a maximum of 1,955.00 pence and a minimum
of 1,370.00 pence. The closing share price on 31 March 2023 was
1,820.0 pence.
The Company's shares are listed on the premium segment of the
Main Market on the London Stock Exchange under reference RKW.
13. Financial instruments and financial risk management
The Company invests in quoted and unquoted companies in
accordance with the investment policy. In addition to investments
in smaller listed companies in the UK, the Company maintains
liquidity balances in the form of cash held for follow-on financing
and debtors and creditors that arise directly from its operations.
As at 31 March 2023, GBP39.3 million of the Company's net assets
were invested in quoted investments, GBPnil in unquoted investments
and GBP11.7 million in liquid balances (31 March 2022: GBP28.7
million in quoted investments, GBP2.9 million in unquoted
investments and
GBP11.5 million in liquidity).
In pursuing its investment policy, the Company is exposed to
risks that could result in a reduction in the value of net assets
and consequently funds available for distribution by way of
dividend or for re-investment.
The main risks arising from the Company's financial instruments
are due to fluctuations in market prices (market price risk),
credit and liquidity risk and cash flow interest rate risk; credit
risk and liquidity risk are also discussed below. The Board
regularly reviews and agrees policies for managing each of these
risks and they are summarised below. These have been in place
throughout the current and preceding years.
13. Financial instruments and financial risk management (continued)
All financial assets with the exception of investments, which
are held at fair value through profit or loss, are categorised as
financial assets at amortised cost and all financial liabilities
are categorised as amortised cost, amortised cost is a reasonable
approximation of its fair value..
a) Market risk
i) Price risk
Market price risk arises from uncertainty about the future
valuations of financial instruments held in accordance with the
Company's investment objectives. These future valuations are
determined by many factors but include the operational and
financial performance of the underlying investee companies, as well
as market perceptions of the future of the economy and its impact
upon the economic environment in which these companies operate.
This risk represents the potential loss that the Company might
suffer through holding its investment portfolio in the face of
market movements, which was a maximum of GBP39.3 million (2022:
GBP31.6 million).
The investments in fixed interest stocks of unquoted companies
that the Company holds are not traded and as such the prices are
more uncertain than those of more widely traded securities.
The Board's strategy in managing the market price risk is
determined by the requirement to meet the Company's investment
objective. Risk is mitigated to a limited extent by the fact that
the Company holds investments in several companies. At 31 March
2023, the Company held interests in 18 companies (2022: 9
companies). The Directors monitor compliance with the investment
policy, review and agree policies for managing this risk and
monitor the overall level of risk on the investment portfolio on a
regular basis.
Market price risk sensitivity
The Board considers that the value of investments in quoted
equity instruments is ultimately sensitive to changes in quoted
share prices. The value of investments in CLN, where the valuation
methodology is to estimate the value of the conversion option of
the instrument, is similarly linked to quoted share prices. The
table below shows the impact on the return and net assets if there
were to be a 25% (2022: 25%) movement in overall share prices.
As at 31 March
2023 +25% - 25%
---------------- ----------- ------------- ------------
Impact per Impact per
Impact share Impact share
Security Valuation basis Fair value GBP'000 (in pence) GBP'000 (in pence)
------------------- ------------------------ ---------- ---------------- ----------- ------------- ------------
Latest share
Quoted investments price 39,255 9,814 386.21 (9,814) (386.21)
------------------- ------------------------ ---------- ---------------- ----------- ------------- ------------
As at 31 March
2022 +25% - 25%
---------------- ----------- ------------- ------------
Impact per Impact per
Impact share Impact share
Security Valuation basis Fair value GBP'000 (in pence) GBP'000 (in pence)
------------------- ------------------------ ---------- ---------------- ----------- ------------- ------------
Latest share
Quoted investments price 28,692 7,173 282.29 (7,173) (282.29)
------------------- ------------------------ ---------- ---------------- ----------- ------------- ------------
The impact of a change of 25% (2022: 25%) has been selected as
this is considered reasonable given the current level of
volatility, observed both on a historical basis, and market
expectations for future movement.
A sensitivity has not been performed for the other unquoted
investments held by the Company at 31 March 2022, there were none
at 31 March 2023, as at 31 March 2022 there is no exposure to
market price risk in the valuation methodology applied for these
investments. Interest rates are less volatile than market prices;
therefore, the company has deemed it inappropriate to consider a
25% upward or downward move in interest rates. Interest rates are
determined by monetary policy and have been kept historically low
due to quantitative easing and therefore we do not believe that
interest rates will be as volatile as share prices.
ii) Currency risk
The Company does not hold any significant assets or liabilities
denominated in a currency other than sterling, the functional
currency. The transactions in foreign currency for the Company are
highly minimal. Therefore, currency risk sensitivity analysis was
not performed as the results would not be significantly affected by
movements in the value of foreign exchange rates.
iii) Cash flow interest rate risk
As the Company has no borrowings, it only has limited interest
rate risk. The impact is on income and operating cash flow and
arises from changes in market interest rates. Some of the Company's
cash resources are placed in an interest paying current account to
take advantage of preferential rates and are subject to interest
rate risk to that extent.
13. Financial instruments and financial risk management (continued)
b) Credit risk
Credit risk is the risk that a counterparty will fail to
discharge an obligation or commitment that it has entered into with
the Company.
The Company's maximum exposure to credit risk
is:
31 March 31 March
2023 2022
GBP'000 GBP'000
------------------------------------------------------- -------------------- ---------------
Loan stock investments - 2,917
Cash and cash equivalents* 11,631 10,507
Trade and other receivables 73 1,019
------------------------------------------------------- -------------------- ---------------
11,704 14,443
------------------------------------------------------- -------------------- ---------------
* GBP7.02m held in "on notice" term deposit accounts
accruing interest at 4.18% (as at 31 March 2023)
paid daily.
Credit risk relating to loan stock investments
in unquoted companies is considered to be part
of market risk.
The Company's cash balances at 31 March 2023 and 2022 were held
in institutions currently rated A or better by Fitch. Given these
ratings, the Company does not expect any counterparty to fail to
meet its obligations and therefore, no allowance for impairment is
made for bank deposits.
c) Liquidity risk
The Directors consider that there is no significant liquidity
risk faced by the Company. The Company maintains sufficient
liquidity in cash and liquid investments to pay accounts payable
and accrued expenses. All liabilities are current and repayable
upon demand.
14. Capital disclosures
The Company's objective has been to maximise shareholder value
from all assets, which in recent years has been to realise its
portfolio at the most advantageous time and reinvest the proceeds
to grow shareholder value per share over the long-term.
The capital subscribed to the Company has been managed in
accordance with the Company's objectives. The available capital at
31 March 2023 is
GBP49.8 million (31 March 2022: GBP41.0 million) as shown in the
statement of financial position, which includes the Company's share
capital and reserves.
The total amount of revenue reserve for the year is GBP24.105
million (2022: GBP15.32 million) which is fully distributable and
can be utilised for any
future dividends.
The Company has no borrowings and there are no externally
imposed capital requirements other than the minimum statutory share
capital requirements for public limited companies.
15. Related party transactions
The related parties of Rockwood Strategic Plc are its Directors,
persons connected with its Directors and its Investment Manager and
significant shareholder Harwood Capital LLP (Harwood).
The total payable to Harwood
is as follows:
31 March 2023 31 March 2022
---------------------------- --------------- ---------------
Performance fee GBP0.63 million GBP2.77 million
Management fee GBP0.11 million GBP0.59 million
---------------------------- --------------- ---------------
Total GBP0.74 million GBP3.36 million
---------------------------- --------------- ---------------
15. Related party transactions (continued)
As at 31 March 2023, the following shareholders of the Company
that are related to Harwood had the following interests in the
issued shares of the Company as follows:
31 March 2023 31 March 2022
---------------------- ----------------- ----------------
Harwood Holdco Limited 734,000 Ordinary 734,000 Ordinary
Shares Shares
R Staveley 25,689 Ordinary 25,689 Ordinary
Shares Shares
---------------------- ----------------- ----------------
The Directors' remuneration and their interest in the Company
are disclosed in the Director's remuneration review in the annual
report.
There are no other material related party transactions of which
we are aware in the year ended 31 March 2023.
Investment Management Fees:
A monthly management fee of GBP10,000 (inclusive of VAT, if any)
until the company's NAV equals GBP60 million or higher (NAV
threshold).
Once the NAV Threshold has been met, Harwood will be entitled to
a management fee of 1/12th of an amount equal to 1 per cent. of the
Net Asset Value before deduction of that month's Investment
Management Fee and before deduction of any accrued Performance
Fees.
Performance Fees:
Harwood will also be entitled to a performance fee equal to 10
per cent. of outperformance over the higher of a 6 per cent. per
annum total return hurdle and the high watermark. The 6 per cent.
per annum compounding weekly and the performance fee will be
calculated annually.
Provided that the Company's average NAV is at or below GBP100
million, performance fees in any performance fee period will be
capped at 3 per cent. of the Company's average NAV for the relevant
performance fee period. In such instance, performance fees in
excess of the 3 per cent. cap will not be paid and will instead be
deferred into the next performance fee period.
Share Issues:
The Company issued for cash 116,852 ordinary shares of 50 pence
each in May / June 2023 from its block listing facility.
-- 23 May 2023 - 50,000 at a price of 2,064.1 pence per share.
-- 25 May 2023 - 15,000 at a price of 2,065.00 pence per share.
-- 31 May 2023 - 15,000 at a price of 2,059.60 pence per share.
-- 6 June 2023 - 10,000 at a price of 2,061.00 pence per share
-- 8 June 2023 - 21,852 at a price of 2,028.67 pence per share
-- 9 June 2023 - 5,000 at a price of 2,046.00 pence per share
Alternative performance Measures (APMs)
APMs are often used to describe the performance of investment
companies although they are not specifically defined under FRS 102.
The Directors assess the Company's performance against a range of
criteria which are viewed as relevant to both the Company and its
market sector. APM calculations for the Company are shown
below.
Total Return
A measure of performance that includes both income and capital
returns. This takes into account capital gains and reinvestment of
dividends paid out by the Company into its Ordinary Shares on the
ex-dividend date. This is calculated for both the Share Price and
the Net Asset Value.
Premium/(Discount)
The amount, expressed as a percentage, by which the share price
is more/(less) than the Net Asset Value per Ordinary Share.
Ongoing Expenses
A measure, expressed as a percentage of the average daily net
asset values during the year, of the regular, recurring annual
costs of running an investment company. This includes the
Investment Management fee and excludes any variable performance
fees. In the last two years there have been exceptional expenses,
which will not be ongoing, associated in 2022 with the Strategic
Review and its related Extraordinary Meetings and in 2023
associated with moving from the AIM to the Main Market of the
London Stock Exchange.
Footnotes
[1] - These are considered to be Alternative performance
Measures (APMs). See APMs within the announcement.
[2] - These are considered to be APMs. See APMs within the
announcement.
[3] - These are considered to be APMs. See APMs within the
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR NKDBDOBKDKAB
(END) Dow Jones Newswires
June 22, 2023 02:00 ET (06:00 GMT)
Rockwood Strategic (LSE:RKW)
Graphique Historique de l'Action
De Mai 2024 à Juin 2024
Rockwood Strategic (LSE:RKW)
Graphique Historique de l'Action
De Juin 2023 à Juin 2024