TIDMRKW
RNS Number : 3334H
Rockwood Strategic PLC
23 November 2022
Rockwood Strategic Plc
("RKW or the "Company")
Interim results for the six months to 30 September 2022
Rockwood Strategic Plc (LSE: RKW) is pleased to announce its
unaudited results for the six months ended 30 September 2022 (the
"Period").
Highlights for the period:
-- Net Asset Value (NAV) Total Return in the Period of -10.4% to
1446.7p/share which compares to the FTSE Small Cap (ex-ITs) of
-20.3% and FTSE AIM All Share of -22.6%
-- Total Shareholder Return in the Period was -0.35%. At Period
end the Company traded at a discount of 2.2% to NAV
-- No. 2 ranked fund by Total Shareholder Return in the AIC UK
Small Companies sector over the last 6 and 12 months, achieving
0.9% positive performance whilst the FTSE Small Cap Index (ex-ITs)
fell 26.6% and the AIM All-share even more, down 35.2% (LTM)
-- NAV Total Return performance in the three years to 30
September 2022 of 44.3% which compares to the FTSE Small Cap
(ex-ITs) of 6%. The Total Shareholder Return in the same three year
period was 65%, ranked No.1 in the AIC UK Small Companies
sector
-- Investment gains realised in the Lakes Distillery Bond
delivered a 21.6% IRR and GBP3.1m cash
-- Net cash of GBP2.4m at the end of the Period (representing
6.6% of NAV)
-- Seven new investments were made across a range of industry
sectors
-- The Investment Manager is comfortable that overall the
portfolio is well financed. In summary 9 holdings have a net cash
position, 4 are lowly leveraged and 2 have elevated debt
Noel Lamb, Chairman of Rockwood Strategic Plc, commented:
"Remaining entirely immune to the tumultuous conditions in
markets is an impossible task for an active small companies
investment strategy. The Board is therefore pleased that the
portfolio is demonstrating relative resilience when compared to
peers and small company indices. We are reassured the multi-cycle
experience of the investment manager is clearly supporting a
proactive approach to identify opportunities to deliver future NAV
growth.
During the Period, shareholders overwhelmingly voted to re-start
actively investing in U.K. small companies under our differentiated
Investment Policy and also to transition from AIM to a premium
listing on the main market of the London Stock Exchange. The
Company was renamed, Paul Dudley joined the Board and a number of
service providers were transitioned to improved and lower cost
solutions. Despite the market challenges the period was one of
significant progress and change for the Company. We are confident
the strategy, portfolio and Investment Manager can continue to
navigate the environment well and deliver future value creation for
shareholders."
Richard Staveley, Fund Manager, Harwood Capital, commented:
" We are excited about the upside potential in the portfolio, a
lot of which, in our view, could be realised through corporate
activity in due course as trade buyers and private equity appraise
the significant undervaluation and profit potential of our
holdings. Our 'value' bias is serving shareholders well, providing
a 'margin of safety' and we are re-building the portfolio with
outstanding investment opportunities to drive NAV over the
medium-term. There is no doubt the economic environment will remain
challenging, but we observe highly depressed valuations, deeply
pessimistic assumptions and even greater inefficiency in our
broadly ignored target universe. We are comfortable our investments
in the overall portfolio remain well financed. This is an
attractive backdrop for investors with capital, patience and value
discipline. We have all three and are clearly aligned with
shareholders."
The full version of the RKW interim report will be available on
its website shortly at www.rockwoodstrategic.co.uk
For further information, please contact:
Rockwood Strategic Plc
Noel Lamb Chairman noellamb@finnebrogue.co.uk
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
About Rockwood Strategic Plc
RKW is an Investment Trust quoted on the London Stock Exchange
that invests in a focused portfolio of smaller UK public companies.
The strategy identifies undervalued shares, where the potential
exists to improve returns and where the company is benefitting, or
will benefit, from operational, strategic or management changes.
These unlock, create or realise shareholder value for investors
About Harwood
Harwood Capital LLP ("HC LLP") was incorporated in 2003 and is
the investment manager for Rockwood Strategic Plc, and of the
Harwood Private Equity funds and of Harwood Private Clients. It is
an investment adviser to North Atlantic Smaller Companies
Investment Trust Plc.
HC LLP is a wholly owned subsidiary of Harwood Capital
Management Limited and is authorised and regulated by the Financial
Conduct Authority ("FCA"), authorisation number 224915.
Led by Christopher Mills, the funds managed and advised by HC
LLP follow an active value approach towards the businesses in which
they invest.
Chairman's statement for the half year to 30 September 2022
There is a marked positive energy about Rockwood Strategic as it
enters a phase of rejuvenation. Following overwhelming shareholder
support at General Meetings in April and post-Period end in
September, our strategy has re-started actively investing for the
future. The team at our investment manager, Harwood Capital, is led
by the returning fund manager Richard Staveley. The Investment
Manager has been able to take advantage of weak markets to initiate
new positions and improve diversification.
Investment performance has been resilient against small cap
indices and better than the UK small companies peer group. The
on-going cost base has been reduced following a thorough review by
the Investment Manager, though some exceptional costs have been
incurred during the period due to the successful migration of the
Company from AIM to a premium listing on the Main Market of the
London Stock Exchange. As part of this transition, the Company also
put in place a placing programme, providing it with additional
flexibility to raise capital to finance future investments. This
move, supported by shareholders at the General Meeting in
September, will improve our tax efficiency and should widen the
potential investor base. The Board would like to build further
scale for the strategy, which would both cast the investment net
wider and improve our cost ratios. It is helpful, therefore, to
observe that the discount during the period narrowed markedly to
2.2% of NAV at the time of writing.
During the period, Graham Bird stepped down from the Board and
was replaced by Paul Dudley. I would like to thank Graham once more
for his service to the Company, welcome Paul to the Board and
express my gratitude to Ken for all his work over the transition
period and his source of corporate knowledge. The Board is also
pleased to observe the formation of Rockwood's Investment Advisory
Group. These highly experienced investors and financial
professionals will act as a sounding board and should enhance the
investment process for selection and holding of our larger
investments. Rockwood Strategic has had an energetic half year of
progress which we seek to build upon in the period ahead.
Noel Lamb
Chairman, Rockwood Strategic Plc, 23 November 2022
Investment Manager's report
Introduction
We were delighted to receive the support of shareholders to
re-start this successful investment strategy during the period. We
are fully aligned with you through our significant shareholding and
performance linked fee arrangement.
The structural benefits of Rockwood Strategic's closed-end
nature are much clearer to see during phases of market weakness
like the one we are experiencing. Many open-ended small cap fund
managers are being forced to generate liquidity to meet investor
redemption requests as risk appetite has waned and sentiment
towards the UK soured. Just when a medium-term investment horizon
is most needed, many are forced to sell thinly traded stocks;
generally a costly exercise prone to generating much future
regret.
The benefits of our differentiated style are also plain to see.
During the period we increased the number of holdings to a still
highly concentrated fifteen. Stock specific risk and hence stock
specific returns are the primary factors producing the NAV result.
This is not a widely diversified small cap fund delivering roughly
the average of an out of favour segment of the market. Crestchic, a
company we have been intimately involved with delivering
shareholder value from, is an excellent example and was up 63.6%
during the period, an 83.9% outperformance of the average FTSE
small cap share. Self-help, operational, management and strategic
improvements and international sales drown out any impact from the
revolving door of UK political leadership. It remains very
undervalued and we expect further outperformance uncorrelated with
market returns.
Our 'Value' bias, discipline and philosophy must be highlighted.
Your Investment Manager has been warning about the over-valuation
of 'growth' stocks for some time. The regime change underway in
monetary policy has provided the catalyst for change. Some
companies will indeed drive shareholder value through earnings
growth going forward. However, there is unlikely to be a return to
the heady valuation multiples of recent years for a long time. The
artificial tide of low interest rates which has lifted all growth
boats, irrespective of quality (or likelihood of long-term
sustainability), has well and truly gone out. Many market
participants are still adjusting to the implications for their
stated styles and holdings. We are excited about our free-cash flow
and rare value focused approach given the deep discounts to
intrinsic value we assess across our investments. We expect
accounting standards, balance sheet detail and the self-financing
capability of corporate strategies to come under enhanced scrutiny
more widely now. More companies in need of swimming trunks will be
exposed in the forthcoming period. The portfolio's holdings will
generate increased profitability through better operational
execution, either recovering a mean reversion in returns or
achieving the appropriate levels of margin validated by relevant
peers. Progress, if ignored, will inevitably lead to shareholder
value realisation via third party interest.
Market commentary
The world's central banks, led by the Federal Reserve, have
embarked on material interest rate rises for the first time in
decades. In the UK interest rates fell from 13.88% in October 1990
to 3.5% in July 2003 (-10.25% over 13 years). They then rose to
5.75% by July 2007 (+2.25% over 4 years). They were then cut to
0.5% in March 2009 (-5.25% over 2 years, back end loaded). In
February 2022 they were still 0.5%, 13 years later, but by the end
of this reporting period had been raised to 2.25%. They are clearly
going higher (and have been raised post period end to 3%). The key
point is, the scale and speed of interest rate rises has not been
experienced by a very large number of market participants either
ever or not for a very long time. Nor has the much changed world
economy and current financial system been tested using 'live fire'
for this level of stress.
Investors, and indeed consumers and businesses, are thus very
nervous and worried. Sentiment surveys of all three are already at
historical lows. The 'cost of money' drives all. It has driven the
'discount rate' which when low has inflated the valuations of
long-duration assets and 'growth' equities. It has driven the cash
interest coverage ratios and hence borrowing capability of
corporates, private equity deal structures, domestic mortgage
borrowers and the 'shadow finance' industry. It drives 'liquidity'
itself. This is being drained out of the financial system and hence
the economy, leading to an inevitable recession. This is actually
desired by the Central Banks whose mandates are dominated by
inflation targeting which has broken loose. Unemployment, reduced
demand and, as Jerome Powell called it, "pain" is needed to re-tame
inflation expectations after they were unleashed by massive
monetary and fiscal policy easing during the COVID-19 pandemic and
exacerbated by supply chain shortages and the Russian invasion of
Ukraine, in particular impacting energy markets.
UK unemployment is 3.6%, the lowest since 1974, so an increase,
whilst difficult for many, will represent a movement back to a
multi-decade mean. Inflation hit 10.1%, the highest since 1982.
Avoiding the destruction to real wealth across the whole
population, if this was to be sustained, is broadly agreed to be
worth the costs created to bring the rate under control. However,
society has not had its pain threshold tested to this extent for a
number of cycles as bail-outs, monetary policy largesse and fiscal
support has targeted periods of stress. Authorities are out of
ammunition whilst inflation remains high. It is likely pressure to
ease the situation will result in a higher level of accepted and
targeted inflation rate.
Crypto has not delivered inflation protection or safety as
billed by its wounded tribe of 'get rich quick' anti-establishment
protagonists. Bond owners must be embarrassed they didn not act in
the face of trillions of obviously overpriced negative yielding
debt and low grade corporate bonds. Equity markets have seen a
severe de-rating of high multiple stock; the "no-brainers" of
yesteryear. 2022 is likely to be the worst year for IPO issuance
for a very long time. Many investors are starting to properly
reflect on the relative attractiveness of low liquidity or leverage
enhanced specialist asset classes and bond-like equities whose main
calling card of a reasonable dividend yield in a world of very low
risk-free rates is now being undermined.
UK equities, dominated by a relatively small group of mega-cap
international businesses and a differentiated sector composition to
the US market, have been outperforming. The market is efficient
enough to know that the Dollar earning, inflation-linked, well
financed UK listed companies are not a fair read through to the
shambles which has been UK political leadership or its stagnant
economy. Moreover, UK equities are very good value when compared to
history, global equities or cash earnings.
We believe in a transparent communication of our appraisal of
markets. Surely sentiment and valuations alone suggest the market
bottom is near? We are not in the business of giving forecasts in
such matters. However, we would anticipate limited sustained market
recovery until 'core' inflation is demonstrably falling and the
market can have real confidence to anticipate the commencement of
monetary easing. One step at a time, though: central banks are
still tightening. We believe the portfolio holdings are deeply
undervalued, almost all are very well financed, all have
operational improvements and many strategic improvements too which
can drive shareholder value irrespective of the doom and gloom. We
do expect takeover interest to emerge for a number of our holdings
due to their attractive cash flow generation and market positions
and expect realisations to produce material NAV uplifts and cash
for re-investment. We do expect a recession and market profit
expectations to fall further and have built this backdrop into the
margin of safety we expect in our holding valuations and the extent
of profit recovery we are expecting from the businesses and their
management teams.
Portfolio performance
The portfolio is very concentrated and therefore it should be
expected that over any shorter period, such as a year, a dominant
stock or two will drive performance.
Performance (all H1 2022 1 year 3 year
indices are excluding
investment trusts)
------------------------ -------- ------- -------
RKW TSR -0.35% 0.9% 65.0%
-------- ------- -------
RKW NAV Total Return -10.4% -8.4% 44.3%
-------- ------- -------
FTSE Small Cap Total
Return (SMXX) -20.3% -26.6% 6.0%
-------- ------- -------
FTSE All Share Total
Return (ASX) -8.3% -4.0% 2.4%
-------- ------- -------
Source: Bloomberg and Company as at 30 September 2022
The NAV fell due to modest weakness across the portfolio despite
good financial results across almost all holdings, and exacerbated
by a profit warning at Pressure Technologies, offset by the very
strong performance of Crestchic.
Portfolio highlights & investment activity
The period ended with 15 holdings, of which the top 10
constitute 82% of NAV.
Seven new investments were made across a range of industry
sectors such as City Pub Group Plc within consumer, Argentex Group
Plc in FX services, Galliford Try Holdings PLC in construction, RM
Plc in educational services and Finsbury Food Group Plc in food
manufacturing. All trade at a deep discount to our assessment of
intrinsic value; all have material upside to historic or industry
profit margins; and all are highly cash generative. We have
identified catalysts to unlock, create or realise shareholder value
in each. We ended the period with net cash of GBP2.4m (representing
6.6% of NAV).
Investment gains were realised in the Lakes Distillery Bond
which delivered a 21.6% IRR and GBP3.1m cash. There were no
unlisted investments in the portfolio at period end. 9 holdings
have a net cash position, 4 are lowly leveraged and 2 have elevated
debt.
Top ten shareholdings (30 September GBPm Shareholding Portfolio
2022) in company NAV
------------------------------------- --------- ------------ ---------
Crestchic Plc GBP10.5m 14.0% 28.7%
--------- ------------ ---------
Flowtech Fluidpower Plc GBP3.7m 5.8% 10.2%
--------- ------------ ---------
Centaur Media PLC GBP3.7m 6.0% 10.1%
--------- ------------ ---------
M & C Saatchi Plc GBP2.9m 1.7% 7.7%
--------- ------------ ---------
Van Elle Holdings Plc GBP2.2m 5.5% 5.9%
--------- ------------ ---------
Smoove Plc GBP1.7m 8.1% 4.6%
--------- ------------ ---------
City Pub Group Plc GBP1.6m 2.8% 4.3%
--------- ------------ ---------
RM Plc GBP1.4m 6.0% 3.7%
--------- ------------ ---------
Bonhill Group GBP1.3m 19.4% 3.5%
--------- ------------ ---------
Galliford Try Holdings PLC GBP1.2m 0.8% 3.3%
--------- ------------ ---------
Other investments GBP4.1m - 11.4%
--------- ------------ ---------
Cash and other working capital items GBP2.4m - 6.6%
===================================== ========= ============ =========
Total NAV GBP36.7m 100%
--------- ------------ ---------
Crestchic Plc - 28.7%NAV, 14% shareholding, key contributor
Crestchic was formerly called Northbridge Industrial Solutions,
changing its name earlier this year. The business manufactures and
hires specialist electrical equipment, primarily 'loadbanks' which
test power reliability.
The company underwent management and Board evolution from 2020
onwards as Stephen Yapp joined the Board as NED, the CEO stepped
down and the Chairman, Peter Harris, took on an executive role and,
in early 2022, Nicholas Mills, of the Rockwood Investment Team was
also appointed an NED. During this period an experienced external
COO was also appointed.
The strategy was re-assessed leading to the sale of the poorly
performing Tasman Division, allowing focus on the Crestchic
business and removing material oil & gas exposure. The Group's
ROCE record had been patchy at best prior to 2020 and this has now
become a key focus for the company, with outstanding results.
Crestchic's markets have been undergoing structural change as
the requirements and impact of 'energy transition' are growing
end-market demand for Loadbanks. At the same time the Data Centre
market has continued to grow at pace and is now a rich source of
on-going customer demand from the behemoths in this sector. This
has created burgeoning order books for the business and supported a
material expansion of the manufacturing footprint with limited
risk. An international business, Crestchic is underrepresented in
the U.S. which offers a long-term growth opportunity, whilst new
European leadership is also having a positive effect on sales.
Despite the investment in the factory expansion and measured
on-going capital expenditure in the hire fleet, the company now has
a strong Balance Sheet and is returning to the dividend list
supported by prodigious free cash flow. The 'spot' valuation
multiples on market forecasts for Crestchic near term profitability
remain low, as there has been only a modest re-rating in the
context of very material profit upgrades. We believe the business
has a very strong future now the recovery phase has concluded and
anticipate further material upside to the shares.
Pressure Technologies Plc - 2.8% NAV, 13.8% shareholding, key
detractor
This has not been a successful investment for the strategy. We
believe the initial assessment of the company's financial position
and cashflow generation capabilities was incorrect and thus the
company has required material equity issuance to support the
business. Management appointed in late 2018 to deliver a turnaround
of the business has therefore had a very challenging situation to
address, which has been exacerbated by negative external
factors.
The core business 'Chesterfield Special Cylinders' is a highly
regarded business with a long-held reputation for quality and a
freehold manufacturing site in Sheffield of over 100,000 sq. ft.
This business makes mid-teen operating margins, when averaged
through the cycle, and has an outstanding client list in defence
where it provides manufactured cylinders of a critical nature to
the Bae Systems run Dreadnought submarine programme and other
allied navies. The problem is that these contracts are very lumpy
and very material and have not been behaving themselves with
regards to expected timelines and Pressure Technologies' accounting
periods. Within a large business this wouldn't be as much of an
issue as for the very small listed Plc that it is. Supply chain
disappointments have regularly caused problems too.
The business has one clearly defined piece of luck though. Its
capabilities are very well suited to the needs of the emergent
Hydrogen economy. Once a pipedream, this is now becoming reality.
Chesterfield cylinder sales into the Hydrogen economy are growing
strongly and may even double in size in the coming year given the
developing pipeline of orders and relationships from major
operators in this end-market.
The PMC division at Pressure Technologies is highly exposed to
oil & gas and was created by the prior management team via a
collection of acquisitions. End markets have been improving and
consequently profitability, aided by restructuring, is beginning to
emerge after many years of disappointment, however, we have long
argued this business should be exited.
Recently a combination of trading issues, working capital
cycles, delayed orders and low PMC profitability have led to
financial stress, again. We are heavily engaged with the company
and will update on progress at Rockwood's full year results. The
business is now capitalised at c.GBP10m, with sales estimated of
c.GBP26m and growth expected next year due to the next imminent
large submarine order and further hydrogen progress.
New Investments - cumulative 19.9% NAV
These were all classified by the manager as either
"springboards" or "opportunities" and as such each individual
investment did not exceed 4% of NAV at inception. We target
eventually 15-25 of these style holdings as Rockwood builds, we
currently have 8. The former are investments which meet our
investment criteria of being able to deliver 15% IRRs over a time
horizon of five years (thereby doubling in value) which have the
opportunity for, or are experiencing, operational, strategic and
management or Board changes which should deliver, unlock or create
shareholder value. Once identified, we ideally want to invest 5-15%
of NAV in order to have material exposure within the strategy and
also a stake in the company of similar size, ensuring an
influential voice with which we can engage with the company and
stakeholders. However, regularly the opportunity to establish such
a stake may not be initially available, hence a 'springboard'
position is purchased with a view to increase in time. The latter
set of 'opportunities' are stocks which meet our investment
criteria but are situations where we do not anticipate taking an
active lead role as a shareholder, often because another party
already is and where the appropriate changes to drive shareholder
value are already underway but the valuation still highly
attractive. These tend to have a higher level of stock liquidity
than the rest of the portfolio.
During the period 7 new positions were established. We will
highlight two at this Interim stage of the year.
City Pub Group
The list of woes befalling the British pub sector is lengthy. If
one goes back far enough it is possible to recall the impact of the
smoking ban, followed not long after with regulation about the use
of 'fruit machines', emptying the swaying wallets of lingering
customers. In recent years cost pressures around the minimum wage
have occurred whilst the competition by high street eateries vs
'good pub grub' intensified. Disruption to EU worker supply post
Brexit further complicated matters. COVID-19 lockdowns, social
distancing and staff absences severely compromised operations and
profitability despite various support packages, but to us, the
public's eagerness to get back to the pub as soon as possible with
friends and family, demonstrated the true value of the social,
tribal, community and entertainment experience the format means and
provides to millions of people. Just as the banging of pans slips
from memories they have entered a huge consumer spending squeeze,
alongside energy cost pressures. If candles and open fires are the
result, then the 'taverns' of old will have come full circle.
City Pub Group consists of 42 establishments and has been
created by Clive Watson. He has a track record of operational and
value delivery in the sector having built and then sold his prior
pub group successfully to Greene King. His growth ambitions were
significant at launch and received material investor support on IPO
in 2017 and consequently a premium valuation rating. The macro
events since have eradicated that and the pace of acquisition has
naturally slowed. Operations are clearly quality with impressive
sites in a range of sought after locations.
Despite the omicron variant of Covid, H1 2022 Ebitda margins
were 16.8%, these pubs are not JD Wetherspoons. A disposal of 4
pubs in March raised GBP17.1m putting the balance sheet in an
almost unleveraged position. The Board's most recent estimate of
the value of the largely Freehold estate based on an independent
valuation exercise was GBP150m. The shares are thus valued on a
deep discount to asset value and have long-term cash generative
capabilities.
We believe strategic evolution is underway. The company has a
minority stake in a small chain of pubs which it is likely to take
full control of at a discount to market values and the new opening
program has been carefully focused with c. 2-4 on the cards during
the next 18 months. A strong balance sheet and tumultuous end
market may provide the opportunity to acquire fantastic new sites
at discounted prices, but the Board has quite rightly observed that
their own shares are valued at even a greater discount and have
thus embarked on a buyback programme. The stock market will need to
start valuing the group fairly, or other avenues for value
realisation will inevitably be considered.
Argentex
This business is targeting a clear opportunity within a very
large market, the provision of Foreign Exchange services to small
and medium sized corporations, nearly 1400 of them most recently
reported. This should be done well by the large banks, but as with
so many services by these bureaucratic behemoths, burdened by
legacy technology, massive scale and huge regulation, it isn't.
Argentex are able to offer better value to their clients and better
service.
Their record speaks for itself with sales growing from GBP13m in
'18 to GBP22m '19, GBP29m in '20, GBP34m in '22, Full year
expectations, appear conservative after first half sales of
GBP27.4m, up 75% on the previous year. Ongoing growth appears
achievable, however it is not this which attracts us (despite the
addressable market being GBP6bn in the UK alone and they are just
getting going in the Netherlands and Australia). It is the
fantastic returns the company generates and the very low valuation.
ROCE in the last financial year was 25.1% up from 21.3% in '21. The
operating margins are comfortably in the 20s but should reach peers
levels of 40% with scale.
Argentex is not a holiday money, app-based FX service, most
transactions require discussion with the client, however technology
enabled services are provided and indeed this is an area that the
company has admittedly needed to improve in, thus making a highly
impressive and experienced senior hire to drive capabilities
forward. It also does not take direct FX risk itself and has a
strong balance sheet to support the service.
A short period of modest growth was not taken well by investors
and the company had allowed itself to have overly stretching IPO
profit forecasts which it subsequently missed. A co-founder
departed and with the general market malaise, a material de-rating
of the shares allowed us to establish a position. Advisers have
been replaced, a new FD also appointed and we expect a period of
delivery to lead to a material re-rating of this highly cash
generative business.
Portfolio Update
Flowtech Fluidpower is a distributor of hydraulic and pneumatic
components into a wide range of customers and industries. Roger
McDowell became Chair in 2020, formerly a NED of past portfolio
'winner' Augean and Jamie Brooke, a member of Rockwood's Investment
Advisory Group joined as a NED earlier this year. The business has
considerable scope to improve its operating performance and returns
as the critical asset turn ratio is markedly below target levels.
The business has spent a period integrating prior acquisitions and
modernising its e-commerce capabilities, however recent stock build
disappointed us and we anticipate a wind-down and strong cash
generation in H2 which would bring elevated debt back down to a
more conservative level. Their H1 produced sales growth of 4.1% and
mild gross margin improvement. We believe the business should be
capable of double-digit operating margins, offering material scope
for profit growth with market expectations of c.7.5% in the current
year. If achieved alongside some further modest growth, GBP12m of
earnings before interest and tax should be achievable, implying a
recovery EV/Ebit multiple of 6.5x, when industry transactions fo
distributors routinely occur in excess of 12x.
Centaur Media provides business training and consultancy,
information and premium content to the Marketing and Legal sectors.
Richard Staveley, of the Rockwood Investment Team, was appointed as
a NED earlier this year. The transformation of the business over
the last few years has almost completed. This involved the exiting
of print (now less than 1% of sale), selling various other assets
in other industry verticals and a material cost-restructuring
programme to build profitability. Management have been targeting a
23% Ebitda margin in 2023. In their H1 sales grew 8% and the Ebitda
margin improved further to 17%. Cash is therefore building, now
over GBP14m. The company offers growth, high levels of
profitability and free cash flow generation from its activities
which include the iconic brand 'The Lawyer'. The EV/Ebitda on
market forecasts for 2023 is c.4.5x. This is an exceptionally low
valuation for a business of this transformed quality.
M&C Saatchi is an internationally renowned advertising and
communications agency. There was considerable change to both
management and the Board in 2020 which coincided with weakness in
the shares due to accounting, financial and acquisition funding
issues. A recovery plan was put in place which was interrupted by
takeover approaches from two parties. These have both been rejected
by shareholders, including ourselves, since period end given their
offers grossly undervalue the business. This has proven a
time-consuming, distracting and expensive process for all, however
the underlying business had been resilient with 9.6% growth in H1
and improved profit margins of 14% (up 3.5%). The company has
reiterated its expectation of GBP31m of profit for the year with
material growth expected in 2023 and a cash balance of nearly
GBP40m. The company is valued at c. GBP165m. The company can now
re-engage with investors articulating its future potential.
Bonhill is an international B2B media business providing
Business Information, Events and Data & Insight propositions to
the global Financial Services community. Flagship brands include:
InvestmentNews, ESG Clarity, Portfolio Adviser, Fund Selector Asia,
Expert Investor Europe, UK Adviser and International Adviser.
Richard Staveley, of the Rockwood Investment Team, was appointed as
a NED earlier this year. During the period a new CEO has been
appointed, a diverse group of non-core smaller media assets have
been sold, unlocking cost savings and the business has entered a
formal sale process. Trading has been challenging, given market
conditions and the US business has undergone material personnel
change to support a turnaround in performance. On-going sales for
the year are expected to be over GBP14m. The business has modest
net cash and Rockwood has extended the company a short term loan
facility at 2% monthly compound interest, if needed, to finance any
near term cashflow needs. The company is clearly subscale for
public markets, yet has proven, established brands and excellent
blue chip clients. We await the outcome of the formal sale process
and note that the company has received a strong level of
interest.
Across the rest of the portfolio robust results were issued by
Galliford Try, ahead of market expectations. Their margins continue
to progress to industry averages whilst their extremely strong
balance sheet is now supporting a stock buy-back. Finsbury Food
also generated resilient results where huge industry cost pressures
were successfully offset through higher pricing and operating
efficiencies. Titon is starting the process of change with new CEO,
FD, and 2 new NEDs appointed during the period. Its current
operating performance is poor and the business has considerable
scope for improved returns, profitability and, we believe,
underappreciated asset value. Van Elle produced excellent results
also ahead of market expectations. 48% revenue growth led to much
over 100% Ebitda improvement, whilst the business retains a net
cash position for investment and enhancing bolt-on acquisitions.
Their market leading position in Rail infrastructure services will
benefit from entering an expected robust phase of industry spend,
not least on HS2. Seraphine has been struggling alongside all
internet based retailers with the huge increases in
customer-acquisition costs. Their stock position is elevated, but
the brand well positioned and gross margins holding firm. Having
listed at GBP150m valuation last year, we see potential to meet our
target returns from the current market value of GBP9m. Finally, we
have purchased RM Plc a leading educational supplies, service and
technology provider. The company has poorly executed an internal IT
project, alongside warehouse consolidation with a consequently
negative impact on financial performance. Rising debt and falling
profits have been punished by a risk averse market. We believe
there is a huge potential for value realisation from strategic and
operational change at the company and have since period end
acquired 7.9% of the company.
Conclusion
We remain confident in our assessment of a large undervaluation
of the portfolio holdings by the stock market. Identified measures
to build profitability should offset, and in many cases exceed,
negative impacts from a challenging external environment. Robust
balance sheets are in evidence, protecting the downside. We have
material influence through our large stakes and Board
representations to help ensure shareholder value remains a focus
and strategies evolve appropriately. We continue to identify new
investments to deliver on our investment objectives and our
pipeline is growing at pace.
Richard Staveley
Investment Manager, Rockwood Strategic Plc, 23 November 2022
Unaudited Condensed Statement of Comprehensive Income
for the six months ended 30 September 2022
Six months Six months
to to Year to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Notes Unaudited Unaudited Audited
--------------------------------------- ------ ----------- --------------------- ----------
(Loss)/gains on investments at
fair value through profit or loss 5 (3,850) 17,845 20,007
--------------------------------------- ------ ----------- --------------------- ----------
Revenue
Bank interest income 35 - 1
Loan note interest income 232 312 563
Portfolio dividend income 226 55 99
493 367 663
Administrative expenses
Investment management fees 10 (52) (562) (593)
Performance fees 6 - (2,567) (2,772)
Director fees and other staff costs 10 (48) (84) (173)
Other costs 11 (827) (612) (1,709)
--------------------------------------- ------ ----------- --------------------- ----------
Total administrative expenses (927) (3,825) (5,247)
--------------------------------------- ------ ----------- --------------------- ----------
(Loss)/profit before taxation (4,284) 14,387 15,423
Taxation 8 - (1,500) (1,580)
--------------------------------------- ------ ----------- --------------------- ----------
(Loss)/profit for the financial period/year (4,284) 12,887 13,843
----------------------------------------------- ----------- --------------------- ----------
Attributable to:
- Equity shareholders of the Company (4,284) 12,887 13,843
Basic and Diluted (loss)/earnings
per ordinary share for profit from
continuing operations and for profit
for the period/year (pence) 9 (168.58p) 370.23p 428.76p
--------------------------------------- ------ ----------- --------------------- ----------
There are no components of other comprehensive income for the
current period (30 September 2021: nil, 31 March 2022: nil), all
income arose from continuing operations.
Unaudited Condensed Statement of Financial Position
as at 30 September 2022
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Note Unaudited Unaudited Audited
----------------------------------- ----- ---------- ------------ ----------
Non-current assets
Investments at fair value through
profit or loss 5 34,318 67,987 31,609
----------------------------------- ----- ---------- ------------ ----------
34,318 67,987 31,609
Current assets
Trade and other receivables 125 105 1,019
Cash and cash equivalents 4,970 1,833 10,507
----------------------------------- ----- ---------- ------------ ----------
5,095 1,938 11,526
----------------------------------- ----- ---------- ------------ ----------
Total assets 39,413 69,925 43,135
----------------------------------- ----- ---------- ------------ ----------
Current liabilities
Trade and other payables (1,109) (849) (547)
Tax liability (1,580) (1,500) (1,580)
Performance fee payable - (2,567) -
----------------------------------- ----- ---------- ------------ ----------
Total liabilities (2,689) (4,916) (2,127)
----------------------------------- ----- ---------- ------------ ----------
Net current assets/(liabilities) 2,406 (2,978) 9,399
----------------------------------- ----- ---------- ------------ ----------
Net assets 36,724 65,009 41,008
----------------------------------- ----- ---------- ------------ ----------
Equity
Issued capital 1,281 1,751 1,281
Share premium 13,063 13,063 13,063
Revenue reserve 11,036 39,321 15,320
Capital redemption reserve 11,344 10,874 11,344
----------------------------------- ----- ---------- ------------ ----------
Total equity 36,724 65,009 41,008
----------------------------------- ----- ---------- ------------ ----------
The NAV per share on 30 September 2022 is 1,445.3 pence (30
September 2021: 1,867.6 pence, 31 March 2022: 1,613.8 pence).
These financial statements were approved and authorised for
issue by the Board of Directors on 23 November 2022. Signed on
behalf of the Board of Directors.
Noel Lamb Kenneth Lever
Chairman Director
Unaudited Condensed Statement of Cash Flows
for the six months ended 30 September 2022
Six months Six months
to to Year ended
30-Sep-22 30-Sep-21 31-Mar-22
Notes GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
------------------------------------- ------ ------------- ------------- -------------
Cash flow from operating
activities
Cash outflow from operations a (504) (3,233) (7,306)
Portfolio dividend income 169 43 99
------------------------------------- ------ ------------- ------------- -------------
Net cash outflow from operating
activities (335) (3,190) (7,207)
Cash flow from investing
activities
Purchase of investments 5-- (9,594) (1,457) (1,457)
Sale of investments 5-- 4,392 5,410 43,122
Net cash (outflow)/inflow from
investing activities (5,202) 3,953 41,665
Cash flow from financing
activities
Dividends paid 7 - (535) (535)
Return of Capital B Share
Scheme and Tender Offer - - (25,021)
------------------------------------- ------ ------------- ------------- -------------
Net cash outflow from financing
activities - (535) (25,556)
Change in cash and cash equivalents (5,537) 228 8,902
Opening cash and cash equivalents 10,507 1,605 1,605
------------------------------------- ------ ------------- ------------- -------------
Closing cash and cash equivalents 4,970 1,833 10,507
------------------------------------- ------ ------------- ------------- -------------
Note
a) Reconciliation of profit for the period/year to net cash outflow
from operations
GBP'000 GBP'000 GBP'000
------------------------------------- ------ ------------- ------------- -------------
(Loss)/profit for the period/year (4,284) 12,887 13,843
Rolled up interest (230) (164) (224)
Loss/(gain) on investments 5 3,850 (17,845) (20,007)
Portfolio dividend income (226) (55) (99)
Adjustment for accrued interest
on redemption/conversion - (48) (16)
--------------------------------------------- ------------- ------------- -------------
Operating loss (890) (5,225) (6,503)
Decrease/(increase) in trade and
other receivables 96 5 (65)
Increase/(decrease) in trade and
other payables 290 1,987 (738)
--------------------------------------------- ------------- ------------- -------------
Net cash outflow from operations (504) (3,233) (7,306)
------------------------------------- ------ ------------- ------------- -------------
--The purchase and sale of investments are the cash paid or
received during the period and excludes unsettled investments as at
30 September 2022.
Unaudited Condensed Statement of Changes in Equity
for the six months ended 30 September 2022
Six months to 30
September 2022
------------------------------ ---------- --------- --------- --------- --------- ----------- ---------
B shares D shares Ordinary Share Revenue Capital Total
Share Premium Reserve Redemption Equity
Capital Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- --------- --------- --------- --------- ----------- ---------
Balance at 31 March
2022 (audited) - 10 1,271 13,063 15,320 11,344 41,008
------------------------------ ---------- --------- --------- --------- --------- ----------- ---------
Loss and total comprehensive
Income for the period - - - - (4,284) - (4,284)
------------------------------ ---------- --------- --------- --------- --------- ----------- ---------
Total profit and
comprehensive income
for the period - 10 1,271 13,063 11,036 11,344 36,724
------------------------------ ---------- --------- --------- --------- --------- ----------- ---------
Contributions by
and distributions
to owners
Dividends paid - - - - - - -
------------------------------ ---------- --------- --------- --------- --------- ----------- ---------
Balance at 30 September
2022 (unaudited) - 10 1,271 13,063 11,036 11,344 36,724
------------------------------ ---------- --------- --------- --------- --------- ----------- ---------
Six months to 30
September 2021
------------------------- --------- --------- --------- --------- --------- ----------- ---------
B shares D shares Ordinary Share Revenue Capital Total
Share Premium Reserve Redemption Equity
Capital Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- --------- --------- --------- ----------- ---------
Balance at 31 March
2021 (audited) - 10 1,741 13,063 29,969 10,874 52,657
------------------------- --------- --------- --------- --------- --------- ----------- ---------
Profit and total
comprehensive
Income for the period - - - - 12,887 - 12,887
------------------------- --------- --------- --------- --------- --------- ----------- ---------
Total profit and comprehensive
income for the period 10 1,741 13,063 39,856 10,874 65,544
------------------------------------ --------- --------- --------- --------- ----------- ---------
Contributions by
and distributions
to owners
Dividends paid - - - - (535) - (535)
------------------------- --------- --------- --------- --------- --------- ----------- ---------
Balance at 30 September
2021 (unaudited) - 10 1,741 13,063 39,321 10,874 65,009
------------------------- --------- --------- --------- --------- --------- ----------- ---------
Year to 31 March
2022
------------------------- --------- --------- --------- --------- --------- ----------- ---------
B shares D shares Ordinary Share Revenue Capital Total
Share Premium Reserve Redemption Equity
Capital Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- --------- --------- --------- ----------- ---------
Balance at 31 March
2021 (audited) - 10 1,741 13,063 29,969 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 (audited) - 10 1,271 13,063 15,320 11,344 41,008
------------------------- --------- --------- --------- --------- --------- ----------- ---------
Notes to the Unaudited Condensed Interim Financial
Statements
1 - General information
Rockwood Strategic Plc (the "Company") is a company incorporated
in the UK and registered in England and Wales (registration number:
03813450). The information set out in these unaudited condensed
interim financial statements for the periods ended 30 September
2022 and 30 September 2021 does not constitute statutory accounts
as defined in section 435 of Companies Act 2006. Comparative
figures for 31 March 2022 are derived from the financial statements
for that year. The financial statements for the year ended 31 March
2022 have been delivered to the Registrar of Companies and contain
an unqualified audit report and did not contain a statement under
emphasis of matter or statements under section 498(2) or (3) of the
Companies Act 2006. These unaudited condensed interim financial
statements have been prepared in accordance with the AIM rules.
Rockwood Strategic Plc (AIM: RKW) had its entire issued share
capital admitted to listing on the premium segment of the Official
List maintained by the FCA and to trading on the premium segment of
the London Stock Exchange's Main Market on 29 September 2022.
Trading in the existing ordinary shares on AIM was cancelled
simultaneously.
2 - Basis of accounting
These interim financial statements for period ended 30 September
2022 have been prepared in accordance with UK adopted International
Accounting Standards.
The principal accounting policies adopted in the preparation of
the financial information in these unaudited condensed interim
financial statements are unchanged from those used in the Company's
financial statements for the year ended 31 March 2022 and are
consistent with those that the Company expects to apply in its
financial statements for the year ended 31 March 2023.
These unaudited condensed interim financial statements have been
prepared in accordance with IAS 34: Interim Financial Reporting.
They do not include all the information required for full annual
financial statements and should be read in conjunction with the
annual financial statements for the year ended 31 March 2022.
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:
-- IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies
-- IAS 8 - Definition of Accounting Estimates
-- IAS 12 - Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
3 - Estimates
The preparation of the unaudited condensed interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. The valuation of unquoted investments represents the key
estimate. Actual results may differ from these estimates.
In preparing these unaudited condensed interim financial
statements, the significant judgements made by management in
applying the Company's accounting policies and the key sources of
estimation were the same as those that applied to the Company
financial statements as at and for the year ended 31 March 2022.
The areas involving a high degree of judgement or complexity, or
areas where assumptions and estimates are significant to the
unaudited condensed interim financial statements are disclosed in
note 5 in relation to the valuation of unquoted investments.
4 - Financial risk management
The Company's financial risk management objectives and policies
are consistent with those disclosed in the Company financial
statements as at and for the year ended 31 March 2022.
Notes to the Unaudited Condensed Interim Financial Statements
(continued)
5 - Investments at fair value through profit or loss
The Company's investments are valued using the following
basis:
(a) Quoted investments are recognised on trading date and valued
at the closing bid price at the period 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 guidelines) and industry norms which include
calculations based on appropriate earnings or sales multiples.
The movements in the investments at fair value through profit or
loss are as follows:
Additions Revaluation Transfer
Value Disposal Gain between Value at
at on
1 April proceeds disposals levels* 30 September
2022 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- ---------- --------- ---------- ------------ --------- -------------
Investments
in quoted
companies
(Level 1) 28,692 9,865 (389) 104 (3,954) - 34,318
Other unquoted
investments
(Level 3) 2,917 230 (3,147) - - - -
Total investments
at fair value
through profit
or loss 31,609 10,095 (3,536) 104 (3,954) - 34,318
------------------- -------- ---------- --------- ---------- ------------ --------- -------------
-- The Lakes Distillery Company Plc Convertible Bond was
purchased on 20 June 2019. It was valued at fair value which
approximated to the bond issue amount plus rolled up "payment in
kind" notes and capitalised interest. The bond was fully matured on
18 July 2022.
Additions Gain Revaluation Transfer
on
Value Disposal disposals/ between Value at
at
1 April proceeds conversion levels* 30 September
2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- ---------- --------- ----------- ------------ ------------- -------------
Investments
in quoted
companies
(Level 1) 47,565 596 (3,428) 725 17,085 1,739 64,282
Other unquoted
investments
(Level 3) 6,323 1,019 (1,933) - 35 (1,739) 3,705
Total investments
at fair value
through profit
or loss 53,888 1,615 (5,361) 725 17,120 - 67,987
------------------- -------- ---------- --------- ----------- ------------ ------------- -------------
* Northbridge Convertible Bond was purchased on 10 April 2018,
and a further investment was made on 3 July 2018. 20% of
Northbridge Industrial Services Plc loan notes were converted into
equity shares and 80% were redeemed on 14 June 2021. The strike
price of each option was 90 pence for every GBP1 nominal value
converted into 433,207 ordinary shares. The accrued interest
(GBP32,045) and redemption premium (GBP389,886) on the loan notes
up to this period were paid at the time of redemption therefore no
further interest was accrued. As a result of this, there was a
transfer from Level 3 to Level 1 of GBP389,886 Northbridge loan
notes converted to equity shares.
* National World Plc Bond was purchased on 11 February 2021. It
was fully converted into 12,263,013 equity shares on 7 May 2021.
The conversion premium and accrued interest up to the date of
conversion were given in the form of equity shares and included in
the above. As a result of this, there was a transfer from Level 3
to Level 1 of GBP1,348,931 National World Plc loan notes converted
to equity shares
Investments in quoted companies have been valued according to
the quoted share price as at 30 September 2022.
Notes to the Unaudited Condensed Interim Financial Statements
(continued)
5 - Investments at fair value through profit or loss
(continued)
The revaluations and gains on disposals are included in the
statement of comprehensive income as gains on investments.
The following table analyses investment carried at fair value at
the end of the period, 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).
The fair value of the Company's investments is summarised as
follows:
30 September 31 March
2022 2022
GBP'000 GBP'000
--------- ------------- ---------
Level 1 34,318 28,692
Level 2 - -
Level 3 - 2,917
----------- ------------- ---------
34,318 31,609
--------- ------------- ---------
6 - Performance Fee
Under the terms of the restated Investment Management Agreement
(7 April 2022), 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 GBP100million, 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.
30 September 2022 30 September 2021 31 March 2022
GBP'000 GBP'000 GBP'000
----------------- ------------------- ------------------ --------------
Performance Fee - (2,567) (2,772)
------------------ ------------------ ------------------ --------------
- (2,567) (2,772)
------------------------------------- ------------------ --------------
7 - Dividends
The Directors have not recommended the payment of a final
dividend in respect of the year-ended 31 March 2022. A final
dividend for the year ended 31 March 2021 (GBP535,664) was paid on
30 September 2021.
8 - Taxation
The Company has no tax charge for the period ended 30 September
2022 (30 September 2021: GBP 1,500k, 31 March 2022: GBP
1,580k).
Notes to the Unaudited Condensed Interim Financial Statements
(continued)
9 - 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 period/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.
Six months Six months
to to Year to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ----------
Earnings
------------------------------------- ----------- ----------- ----------
(Loss)/profit for the period/year (4,284) 12,887 13,843
Number of shares ('000)
------------------------------------- ----------- ----------- ----------
Weighted average number of ordinary
shares in issue for basic EPS 2,541 3,481 3,229
------------------------------------- ----------- ----------- ----------
Weighted average number of ordinary
shares in issue for diluted EPS 2,541 3,481 3,229
------------------------------------- ----------- ----------- ----------
Earnings per share
------------------------------------- ----------- ----------- ----------
Basic and diluted (loss)/earnings
per share (168.58p) 370.23p 428.76p
------------------------------------- ----------- ----------- ----------
As at 30 September 2022, the total number of shares in issue was
2,541,046 (30 September 2021: 3,480,884, 31 March 2022: 2,541,046).
During the period, the Company cancelled nil Treasury shares (30
September 2021: nil, 31 March 2022: nil). No shares were bought
during the period (30 September 2021: nil, 31 March 2022: 939,838).
There are no share options outstanding at the end of the
period.
There are no dilutive or potentially dilutive instruments and
therefore basic and diluted earnings per share are the same.
10 - Related party transactions
The related parties of Rockwood Strategic Plc are its Directors,
persons connected with its Directors, its previous Investment
Manager,
Gresham House Asset Management (GHAM), former significant
shareholder, Gresham House Plc (Gresham), and its new Investment
Manager and significant shareholder Harwood Capital LLP
(Harwood).
The Directors' remuneration paid and payable in respect of each
Director who served during the financial period to 30 September
2022 were as follows:
As at As at 30 As at
31 September 2022 September 2021 31 March 2022
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------------- ---------------- ---------------
David Potter (Resigned on 11 June 2021) - 24 24
Charles Berry (Resigned on 22 November 2021) - 14 26
Kenneth Lever 14 14 28
Helen Sinclair (Resigned on 5 November 2021) - 22 41
Graham Bird (Resigned on 1 September 2022) 12 9 22
Simon Pyper (Resigned on 31 March 2022) - - 12
Noel Lamb 20 - 8
Paul Dudley (Appointed on 1 September 2022) 2 - -
Social security costs - 1 12
---------------------------------------------- ------------------- ---------------- ---------------
Total 48 84 173
---------------------------------------------- ------------------- ---------------- ---------------
The total maximum aggregate annual fees payable to Directors
under the Company's Articles of Association (Articles) is
GBP250,000. As per the Company's Articles, Directors are entitled
to be paid all reasonable expenses properly incurred in the
performance of their duties as Directors including their expenses
travelling to and from Board and Committee meetings.
Notes to the Unaudited Condensed Interim Financial Statements
(continued)
10 - Related party transactions (continued)
Details of related party transactions between the Company and of
non-salary related transactions involving Directors are detailed
below.
During the half year to 30 September 2022, Rockwood Strategic
Plc was charged management fees of GBP52k to Harwood (30 September
2021: GBP562k by GHAM, 31 March 2022: GBP593k by GHAM). The
management fees of GBP52k remain payable to Harwood as at 30
September 2022.
The total payable to GHAM is as follows:
Particulars As at 30 September 2022 As at 30 September 2021 As at 31 March 2022
Performance fee (including VAT) nil GBP2.57 million nil
------------------------ ------------------------ --------------------
Management fee nil GBP0.10 million nil
------------------------ ------------------------ --------------------
Other miscellaneous nil GBP0.00 million nil
------------------------ ------------------------ --------------------
Total nil GBP2.67 million nil
------------------------ ------------------------ --------------------
The performance fees charged and payable to GHAM were nil as at
30 September 2022 (30 September 2021: 2,566,903 31 March 2022:
nil).
As at 30 September 2022, the following shareholders of the
Company that are related to Harwood and GHAM had the following
interests in the issued shares of the Company:
As at 30 September 2022 As at 30 September 2021 As at 31 March 2022
A L Dalwood N/A* 36,302 Ordinary Shares 21,947 Ordinary Shares
------------------------ ------------------------ ------------------------
G Bird 17,462 Ordinary Shares 26,543 Ordinary Shares 17,462 Ordinary Shares
------------------------ ------------------------ ------------------------
Gresham House Holdings Ltd - 812,913 Ordinary Shares -
------------------------ ------------------------ ------------------------
R Staveley 25,689 Ordinary Shares - 25,689 Ordinary Shares
------------------------ ------------------------ ------------------------
Harwood Holdco Limited 734,000 Ordinary Shares - 734,000 Ordinary Shares
------------------------ ------------------------ ------------------------
*not a related party in the period
The Company signed a co-investment agreement with SPE Fund LP, a
sister fund to the Company launched by GHAM on 15 August 2016.
Under the agreement, the Company undertook to co-invest GBP7.5
million with the SPE Fund LP. This agreement ended after the
Investment Agreement with GHAM was terminated by the Board on 11
October 2021.
There are no other related party transactions of which we are
aware in the six months ended 30 September 2022.
11 - Other Costs
Profit for the year has been derived after taking the following
items into account:
Six months Six months
to to Year to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ----------- -----------
Auditors remuneration
Fees payable to the current auditor
for the audit of the
Company's annual financial statements 15 26 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 for review of interim report - - 3
Other services relating to taxation - 4 5
Under provision of tax fee - - 3
Recharge cost - - 1
Analysis of other costs:
Conversion to an Investment Trust
Company 451 - -
Strategic review expenses - 256 1,012
Stock Brokerage fees 66 68 144
Legal fees 64 57 14
Accounting fee 62 50 117
Filing and Regulatory fees 27 19 42
Depositary fees 18 18 36
Company secretarial 18 19 44
Custodian fees 11 15 24
Other professional fees 51 36 85
Other general expenses 44 44 124
---------------------------------------- ----------- ----------- -----------
827 612 1,709
---------------------------------------- ----------- ----------- -----------
12 - Subsequent events note
There were no material events after the statement of financial
position date that have a bearing on the understanding of these
unaudited interim financial statements.
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END
IR FIFFDLELVFIF
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